REGISTRATION NO. 33-____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
DVI RECEIVABLES CORP. VIII
(Exact name of registrant as specified in governing instruments)
Delaware 9999 25-1824149
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Number) Identification Number)
500 Hyde Park
Doylestown, Pennsylvania 18901
(215) 345-6600
(Address and telephone number of Registrant's principal executive offices)
LISA J. CRUIKSHANK
DVI Receivables Corp. VIII
500 Hyde Park
Doylestown, Pennsylvania 18901
(215) 345-6600
(Name, address and telephone number of agent for service)
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Copies to:
Stephen T. Whelan, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
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Approximate date of commencement of proposed sale to the public: From time
to time on or after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier 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. [ ]
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<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING AMOUNT PRICE OFFERING REGISTRATION
REGISTERED TO BE REGISTERED PER UNIT (1) PRICE (1) FEE
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<S> <C> <C> <C> <C>
Asset-Backed Notes $400,000,000 100% $400,000,000 $111,200
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(1) Estimated solely for the purpose of calculating the registration fee.
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EXPLANATORY NOTE
This Registration Statement includes (i) a basic prospectus and (ii) an
illustrative form of prospectus supplement for use in an offering of
Asset-Backed Notes.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS MARCH 22, 1999
ASSET BACKED SECURITIES ISSUABLE IN SERIES
DVI RECEIVABLES CORP. DVI FINANCIAL SERVICES
VIII INC.
COMPANY SERVICER
THE SECURITIES
The securities will be either notes or certificates, and will be issued by DVI
Receivables VIII or by another entity established by it to issue the securities.
The securities may be sold from time to time in one or more series, and each
series may include one or more classes. You can find information regarding each
class of securities of a series, and certain characteristics of the
contracts, in a supplement to this prospectus.
A class of securities:
o May be entitled to principal distributions, with disproportionate, nominal
or no interest distributions, or
o May be entitled to interest distributions, with disproportionate, nominal
or no principal distributions.
o May be senior or subordinate to the rights of one or more of the other
classes.
o May differ from other classes as to the timing, sequential order, priority
of payment, interest rate or amount of distributions of principal or
interest or both.
The notes of a given series represent obligations of the issuer only and the
certificates of a given series represent beneficial interests in the related
trust only and neither notes nor certificates represent interests in or
obligations of DVI or any of its
affiliates other than the issuer.
THE COLLATERAL
Each class of securities of any series will either represent indebtedness of the
issuer secured by a segregated pool of assets or
will evidence beneficial ownership in the pool of assets.
As specified in the related prospectus supplement, the pool of assets may
consist of:
o Finance leases, o Notes secured by equipment, or
o Fair market value leases, o Leveraged lease loans secured
o Lease receivable purchases, by a pledge of equipment finance
contracts and related equipment.
The pool of assets will also include payments and proceeds received relating to
each type of assets, and may also include interests in the underlying equipment,
together with the proceeds of the underlying equipment.
CREDIT ENHANCEMENT
If specified in the related prospectus supplement, credit enhancement with
respect to the pool of assets or any class of securities
may include:
o A financial guaranty insurance o Overcollateralization (the issuer's
policy issued by an insurance retained interest),
company, o A letter of credit,
o Subordination of one or more o A standby loan commitment from
classes of securities, a third party,
o A reserve account, o Cash deposits, or other
arrangements. UNDERWRITING
Offers of the securities may be made through one or more different
methods, including offerings through underwriters as more fully described under
"Plan of Distribution" herein and in the related prospectus supplement.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
IN THE RELATED PROSPECTUS SUPPLEMENT.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
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THE SECURITIES
DVI Financial Services Inc., a Delaware corporation, has formed DVI
Receivables Corp. VIII to assist with the issuance of securities described in
this Prospectus and each Prospectus Supplement. The securities can be either
notes or certificates. Notes are debt obligations issued under an indenture and
which are collateralized by a pool of equipment finance contracts originally
held by DVI, and by the rights of DVI in the equipment which is financed under
those contracts. Certificates are issued under a trust agreement and represent
of ownership of a portion of a trust which will acquire a pool of equipment
finance contracts originally held by DVI, and the rights of DVI in the equipment
which is financed under those contracts. In each case, the equipment is
principally medical diagnostic and therapeutic equipment. All of the collateral
for each series of notes, or the property held by the trust which will issue
certificates, will be described in this Prospectus and the Prospectus Supplement
for that particular series of notes or certificates.
The securities will be issued by either DVI Receivables Corp. VIII or a
special purpose entity formed by DVI Receivables Corp. VIII. A special purpose
entity can be a limited liability company, a trust, a partnership or a
corporation. The issuer of each series of notes or certificates will be
described in the Prospectus Supplement for that series of securities. To avoid
confusion, in this Prospectus we refer to DVI Financial Services Inc. as "DVI"
and DVI Receivables Corp. VIII as the "COMPANY." Whichever entity issues the
notes or certificates is called the "ISSUER." DVI either will have written the
equipment finance contract itself or acquired the contract from a third party,
in each case following its credit guidelines. Because of its involvement in
originating the contracts and its experience in handling collection of payments
from the contracts, DVI will be appointed the servicer of the contracts and
equipment for each series of securities. In nearly every case, DVI will
contribute to the Company all of its rights in the contracts and the equipment.
If there are tax, accounting or other reasons why the Company is not the most
appropriate entity to issue a series of securities, then the Company will create
a special purpose entity, called an "SPE," and transfer to the SPE all of the
Company's rights to that pool of contracts and equipment. Sometimes DVI will
arrange temporary financing of a pool of contracts and equipment by contributing
that pool to a different company. In that case, the entity to be the issuer of
securities described in a particular Prospectus Supplement will acquire the
contracts and equipment from that temporary financing entity.
THE TRUST PROPERTY
We refer to the property which is collateral for a series of notes, or
which is owned by a trust which issues certificates, as the "TRUST PROPERTY."
The Prospectus Supplement for each series of securities will describe what is
the
Trust Property for that series. Generally, the Trust Property will include:
-a pool of contracts and the monies payable under those contracts after a
particular date;
-the rights of the issuer in the equipment which is financed under those
contracts;
-amounts payable under any physical damage insurance policies for the
equipment;
-any proceeds from disposing of the equipment after the contract is
terminated;
-all amounts held in various accounts which will be created for each series
of securities;
-any credit enhancement for that series of securities.
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"CREDIT ENHANCEMENT" is a term used to describe any arrangement which
improves the likelihood that payment of principal and interest on any series of
securities will be made in full. Credit Enhancement could include a letter of
credit issued by a bank, an insurance policy issued by an insurance company, or
a guaranty or similar agreement issued by a creditworthy organization.
Sometimes, the issuer of securities establishes a special account called a
"RESERVE ACCOUNT" into which monies are deposited (1) on the date (the "CLOSING
DATE") when the securities are sold and (2) on monthly dates thereafter when
excess monies from the Trust Property otherwise would be paid to the issuer.
Usually, the securities are issued in classes, with the higher-ranking classes
entitled to be paid interest before the lower-ranking classes receive interest
payments, and with the same priority applying to payments of principal. The
subordination of the claims of the lower-ranking classes also is a form of
Credit Enhancement for the higher-ranking classes. The issuer is not entitled to
receive any amounts payable it, on any monthly payment date, until the holders
of notes or certificates have received the interest and principal to which they
are entitled on that date. This subordination of the issuer's retained interest
in the Trust Property is sometimes called overcollateralization.
Because the issuer of securities does not write the contracts in its
own name, there are three kinds of agreements under which an issuer will acquire
its rights in the contracts and the related equipment. A document called a
"CONTRIBUTION AND SERVICING AGREEMENT" will provide for DVI to contribute its
rights in the contracts and the equipment to the Company. If the Company wishes
to establish a special purpose entity to issue the securities, then it will
transfer its rights in the contracts and equipment pursuant to an agreement
called a "SUBSEQUENT CONTRACT TRANSFER AGREEMENT." If the issuer of securities
acquires the contracts and equipment from another DVI-owned entity, then it will
use a "SALE AGREEMENT" in substantially the same form as a Contribution and
Servicing Agreement. In every case, the Trust Property will include the rights
of the issuer, and the rights of any entity from which it acquired the contracts
and equipment, under every one of those agreements which were used to transfer
the contracts and equipment from DVI ultimately to the issuer. For simplicity,
we refer to the foregoing agreements, together with the indenture or trust
agreement that is used to issue the notes or certificates, as the "PRINCIPAL
TRANSACTION DOCUMENTS." Whoever is acting as the servicer under a contribution
and servicing agreement is referred to as the "Servicer."
USE OF PROCEEDS
The proceeds from the sale of the Securities of a given series will be
applied by the related Issuer to acquire the related Trust Property and for the
other purposes specified in the Prospectus Supplement for that Series.
THE ISSUER
For each series of Securities, the Company will either issue Notes or
establish a separate SPE that will issue Notes or Certificates. The Issuer will
not engage in any activity other than (i) acquiring, holding and managing the
Trust Property related to the series of Securities, (ii) issuing the series of
Securities, (iii) arranging for payments to be made on those Securities and (iv)
engaging in other activities that are necessary, suitable or convenient to
accomplish those
activities.
THE COMPANY
DVI Receivables Corp, VIII is a limited purpose corporation organized
under the laws of the State of Delaware in December 1998. All of the Company's
outstanding capital stock is owned by DVI. The Company's principal executive
office is located at 500 Hyde Park, Doylestown, Pennsylvania 18901. Its
telephone number is (215) 345-6600.
The Company has been formed and will be operated so that bankruptcy or
other insolvency of DVI will not result in consolidation of the assets and
liabilities of the Company or an SPE with those of DVI. However, there can be no
assurance whether or not a court might conclude that the assets and liabilities
of the Company or an SPE should be consolidated with those of DVI in a
proceeding under any Insolvency Law. For each series of Securities, the
Principal Transaction Documents will provide that the related Trustee, DVI, the
Company and all Securityholders agree not to institute against the Company or
any SPE any bankruptcy, reorganization or other proceeding under any federal or
state bankruptcy or similar law.
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Pursuant to the Company's Articles of Incorporation, the limitations so
imposed on the Company's business may only be altered upon the unanimous vote of
the stockholders and the unanimous affirmative vote of all of the Company's
directors, including the Independent Director. Each "INDEPENDENT DIRECTOR" of
the Company is not permitted to be a director, officer or employee of any direct
or ultimate parent or affiliate of the Originator, PROVIDED, HOWEVER, that such
Independent Director may serve in similar capacities for other limited purpose
corporations which are affiliated with the Originator. The Company will have at
least two Independent Directors. The Articles of Incorporation further prohibit
the Company, without the unanimous affirmative vote of its directors, from (1)
instituting or consenting to the institution of bankruptcy or insolvency
proceedings, (2) merging or consolidating with another corporation, (3)
incurring, assuming or guaranteeing any indebtedness other than as otherwise
provided in the Articles of Incorporation, or (4) engaging in any other actions
that would have a negative impact on whether the separate legal entity of the
Company and the Originator will be respected.
DVI will warrant to the Company in each Contribution and Servicing
Agreement that the transfer of the related pool of contracts and equipment by it
to the Company is a valid transfer to the Company and the Company will agree to
take all actions that are required to perfect the Company's ownership interest
in the Contracts. Notwithstanding the foregoing, DVI or others could later take
the position that the transfer of the Contracts to the Company is a pledge,
rather than a contribution, of such Contracts. If such a position were upheld in
court, the result could adversely affect Securityholders.
DVI FINANCIAL SERVICES INC.
DVI's principal office is located at 500 Hyde Park, Doylestown,
Pennsylvania 18901, and its telephone number is (215) 345-6600. The servicing
operations of DVI are located at 500 Hyde Park, Doylestown, Pennsylvania 18901,
and its telephone number is (215) 345-6600. DVI is a wholly owned direct
operating subsidiaries of DVI, Inc. DVI, on a consolidated basis, comprises the
bulk of the assets of DVI, Inc. DVI, Inc. is headquartered in Doylestown,
Pennsylvania, and its stock is traded on the New York Stock Exchange (symbol
"DVI").
DVI is engaged in the business of providing financing for users of
diagnostic imaging, therapeutic and other medical equipment. DVI focuses
primarily on financing technologically advanced medical equipment such as
computerized tomography, magnetic resonance imaging, nuclear medicine and
radiation therapy systems, as well as lower cost medical devices for a customer
base that consists principally of outpatient healthcare providers, physicians
and physician groups, medium-sized hospitals and shared service providers.
DVI's policy is to provide financing to its customers in transactions
which, with certain exceptions, take the form of direct financing leases and
loans. Most of DVI's equipment financing transactions have a term of
approximately 60 months and, in most cases, are full payout transactions that
allow DVI to recover all the costs of acquiring and financing the equipment
during the initial non-cancelable term. DVI's Equipment Finance Group will
finance equipment ranging in cost from $200,000 to $3,000,000. DVI also finances
small-ticket equipment ranging in cost from $5,000 to $200,000 through its
Vender Finance Group. For a description of the underwriting criteria applicable
to these Contracts see the next section, "Credit Underwriting and Review
Process."
CREDIT UNDERWRITING AND REVIEW PROCESS
DVI calls the entity which is responsible for making the periodic
rental or other payments under a contract the "OBLIGOR." DVI has established
specific credit guidelines that help identify and predict the ability of a
prospective Obligor to meet its financial obligations under a contract. DVI
believes these guidelines have contributed positively to its loss experience
since its inception in July 1986. The guidelines are flexible so as to recognize
the variables that are most relevant among different customer types within DVI's
targeted markets, E.G., providers of medical services which are not located in a
licensed hospital facility, physicians and multiple primary care physicians
which have grouped together to provide medical services, hospitals which contain
between 50 to 400 beds, which we call "MEDIUM-SIZED HOSPITALS" and entities
which acquire and provide medical equipment to multiple users on a per use or
time basis. Because of the relatively large size of DVI's equipment financing
transactions, each transaction is analyzed and reviewed
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on its own merits. Under DVI policy, DVI's Senior Credit Committee has the final
approval authority on all financial transactions.
DVI has historically focused most of its equipment financing efforts on
the non-hospital sector of the medical equipment marketplace, which DVI believes
requires a rigorous credit analysis and structuring discipline. From a credit
perspective, most outpatient medical facilities that operate high-cost equipment
such as magnetic resonance imaging systems, are businesses which have few
employees, minimal inventory and limited space requirements. Outpatient medical
facilities are facilities which provide medical service to patients who are not
admitted to a hospital, or provide various services to a hospital's inpatients
outside of the licensed hospital facility. They are normally characterized as
having a high proportion of fixed costs to total costs and, as a result, are
revenue driven. For these reasons, DVI's credit analysis is heavily focused on
understanding and substantiating the projected revenue sources of a project.
This process often takes from three to nine months and includes person-to-person
contact with identified patient referral sources, analysis of a physician's
patient referral history and a thorough analysis of actual and prospective
competition. Projected expenses are examined for thoroughness and compared
against the actual expenses of similar facilities financed by DVI.
The policy of the Equipment Finance Group is to become involved early
in the planning process of a project, as it then has the opportunity to
structure the transaction to the Equipment Finance Group's specific credit
guidelines. Among numerous factors, this process generally involves: (i)
prescribing minimum working capital and net worth requirements; (ii) requiring
outside financial support as needed in the form of cash equity, additional
collateral, guarantees or fee subordinations; (iii) ensuring that all key
parties are at risk; and (iv) establishing that the contractual relationship
with the user is well conceived and documented.
In evaluating Medium-Sized Hospital credits, the Equipment Finance
Group generally takes a similar approach, although in the case of financially
stronger hospitals a modified, somewhat less stringent approach may be applied.
Financially stronger hospitals are hospitals which in the Equipment Finance
Group's judgment have a consistent history of earnings, a sound capital
structure and generate sufficient cash flow to repay their short-term and
long-term obligations with an adequate margin of safety. The Equipment Finance
Group also has made the impact on each customer of the industry trend toward
managed care an increasingly important credit measurement for the past several
years. In addition, the Equipment Finance Group considers the ability of a
prospective Obligor to contract with managed care payors and providers to be
very important. At various stages in the structuring and credit approval
process, credit information is submitted by field sales personnel to DVI's sales
and credit personnel for discussion and structuring purposes. When fully
completed, a formal credit package is prepared and sent to the Senior Credit
Committee.
The underwriting criteria of the Vendor Finance Group are significantly
different from those of the Equipment Finance Group and will be used
prospectively by DVI on all transactions where the cost of equipment is under
approximately $200,000. The Vendor Finance Group's applications from Obligors
are analyzed for approval based upon a combination of the financial condition of
the applicant as well as the credit score of the applicant (for applicants who
are individuals), which is obtained from a national credit reporting
organization. Applications are filed with the credit department and screened for
repeat customers, in which case the previous file, credit and payment history
are also analyzed. Based on such information, an individual credit analyst
assigns status to the application (approved, declined, or request for further
information or change in acceptable terms). If the application is approved and
conditions and requirements of approval are met, an account manager or sales
support representative processes the file and issues a signed purchase order.
The account is then reviewed for completion of all requirements and signed for
authorization to book the transaction. In general, DVI completes UCC filings on
all transactions where the cost of equipment exceeds $20,000.
The Vendor Finance Group has established specific credit guidelines for
hospitals, group practices and sole- practitioners which generally require
Obligors to (1) be in business for a certain period of time (ranging from a
minimum of one year to over two years), (2) provide financial statements,
corporate resolutions and the appropriate purchase documents, (3) provide
personal guarantees under certain circumstances, (4) provide proof of medical
license and (5) meet a certain minimum TRW credit report score requirements.
Affiliated has imposed other requirements and certain circumstances and may
consider an obligors specialty in evaluating creditworthiness.
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The Vendor Finance Group may allow exceptions to the foregoing
requirements as warranted, in which event, the signatures of two credit officers
are required.
PORTFOLIO MONITORING AND CREDIT COLLECTIONS
Key members of the credit, sales, operations and accounting departments
meet regularly to discuss the contract portfolio delinquency report and the
status of delinquent borrowers. Delinquent Obligors are contacted immediately by
the collection and/or sales department, with other staff members intervening as
deemed necessary. The collection of large-balance delinquent accounts and
severely delinquent accounts is administered personally by DVI's Director of
Portfolio Management. Once DVI suspects that an Obligor may experience problems
in meeting its obligations. DVI acts to identify a new operator of the equipment
in the event that the Obligor defaults. Any repossessions are handled on an
individual transaction basis. Due to the relatively small number of Contracts in
DVI's portfolio, management possesses a high degree of familiarity with
virtually the entire Obligor base.
DVI 's Vendor Finance Group is in Chicago and handles collections and
other servicing of Contracts below approximately $200,000. The collection
department meets monthly to review and discuss the status of certain accounts
and any trends in performance. Invoices are generated on the 10th and 25th day
of each month with a nine-day grace period. Late accounts are sorted by region
and assigned by aging. For the accounts that are 10-30 days past due, an active
collection process is initiated by phone contact, and a reminder notice is sent
at 15 days past due. At 31 days past due, a final notice letter is sent and any
items $30,000 and over are included on an ongoing watch list which is reviewed
monthly with senior management. A demand letter for possession of collateral is
sent at 61-90 days past due, and accounts are reviewed with a supervisor on a
weekly basis. Contracts between $20,000 and $30,000 are included on an ongoing
watch list at 61 days, and along with all items at 91 days+ are reviewed monthly
with senior management. Any repossessed equipment is remarketed on a best effort
basis through the manufacturer and/or a network of independent distributors.
THE TRUSTEE
The Trustee for each series of Securities will be identified in the
related Prospectus Supplement. The Trustee's liability in connection with the
issuance and sale of the related Securities is limited solely to its express
obligations set forth in the related Principal Transaction Documents. Unless
otherwise provided in the related Prospectus Supplement, the Company will be
responsible for payment of the fees of the Trustee. Unless otherwise indicated
in the Prospectus Supplement, the Trustee will be appointed custodian for each
pool of Contracts by the Issuer and the Servicer.
With respect to each series of Securities, the Trustee cannot resign or
be removed until its successor has been appointed and accepted appointment. The
Trustee may resign for cause at any time by giving written notice to the Issuer
and by mailing notice of resignation by first class mail, postage prepaid, to
the Securityholders of such series at their addresses appearing on the Security
register. Any successor Trustee shall meet the financial and other standards for
qualifying as a successor Trustee under the Indenture or Trust Agreement. The
Trustee may be removed at any time by written notice of the holders of
Securities or certain Classes of Securities evidencing not less than 66-2/3% in
aggregate outstanding principal amount of such Securities, delivered to the
Trustee and the Issuer. The Issuer may remove the Trustee under certain
circumstances set forth in the applicable Principal Transaction Documents. If
there is a vacancy in the office of Trustee for any cause, the Issuer, with the
consent of the holders of Securities, or certain Classes of Securities of at
least 66-2/3% in aggregate outstanding principal amount of such Securities,
shall promptly appoint a successor Trustee. If a successor Trustee shall not
have accepted appointment within 30 days after notice of any occurrence of a
vacancy, the Trustee or any Securityholder of the affected series may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
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 Securityholders, as their
names and addresses appear in the Security register. Each notice shall include
the name of the successor Trustee and the address of its principal corporate
trust office.
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THE CONTRACTS
RECEIVABLE POOLS
Information with respect to the Contracts comprising Trust Property
will be set forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition of such Contracts and the distribution of such
Contracts by equipment type and current principal balance and/or Discounted
Contract Balance as of the applicable Cut-off Date. For each Series of
Securities, the Contracts shall have a Discounted Contract Balance specified in
the related Prospectus Supplement. The "DISCOUNTED CONTRACT BALANCE" of a
Contract as of any Cut-off Date is the present value of all the remaining
payments scheduled to be made with respect to such Contract, discounted at a
rate specified in the related Prospectus Supplement and the applicable Principal
Transaction Documents.
DELINQUENCIES, REPOSSESSIONS, AND NET LOSSES
Certain information concerning DVI's delinquency, repossession and net
loss experience with respect to equipment finance contracts it has originated or
acquired will be set forth in each Prospectus Supplement. Unless otherwise
specified in a Prospectus Supplement, this information will include the
experience with respect to all equipment lease contracts in DVI's portfolio
during certain specified periods, including contracts which may not meet the
criteria for any particular Trust Property. There can be no assurance that the
delinquency, repossession and net loss experience of the Trust Property related
to any Series of Securities will be comparable to DVI's prior experience.
MATURITY AND PREPAYMENT CONSIDERATIONS
Each Prospectus Supplement will specify if the related Contracts will
be prepayable at any time, although DVI's contracts generally may not be prepaid
at the option of the Obligors. Unless otherwise described in a Prospectus
Supplement, each Prepayment received will shorten the weighted average life of
the related Securities. The rate of Prepayments on the Contracts may be
influenced by a variety of economic, financial and other factors which are
unknown at this time. In addition, under certain circumstances, DVI will be
obligated to buy back Contracts as a result of breaches of representations and
warranties in the Contribution and Servicing Agreement. Any reinvestment risks
resulting from a faster or slower amortization of the related Securities which
results from Prepayments will be borne entirely by the related Securityholders.
The related Prospectus Supplement will set forth certain additional
information with respect to the maturity and Prepayment considerations
applicable to a particular pool of Contracts and the related series of
Securities.
DESCRIPTION OF THE SECURITIES
GENERAL
The Securities will be issued at various times and Securities issued at
the same time will be designated as belonging to a particular series. Each
series of Securities will be issued pursuant to an Indenture or a Trust
Agreement. The following summaries, together with additional summaries under
"Description of the Principal Transaction Documents" below, describe all
material terms and provisions relating to the Securities common to each series.
The summaries do not include all material information, and prospective investors
should read the related Prospectus Supplement for a more complete understanding.
The Securities offered pursuant to this Prospectus and the related
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more Rating Agencies.
The Securities may either represent beneficial ownership interests in
the Trust Property held by the related Trust or debt secured by Trust Property
of the related Issuer.
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Each series or Class of Securities offered pursuant to this Prospectus
may have a different Interest Rate, which may be a fixed or adjustable interest
rate. The related Prospectus Supplement will specify the Interest Rate for each
series or Class of Securities described therein, or the initial Interest Rate
and the method for determining subsequent changes to the Interest Rate.
GENERAL PAYMENT TERMS OF SECURITIES
As provided in the related Principal Transaction Documents and as
described in the related Prospectus Supplement, Securityholders will be entitled
to receive payments on their Securities on the specified Payment Dates. Payment
Dates with respect to the Securities will occur monthly, quarterly or
semi-annually, as described in the related
Prospectus Supplement.
The related Prospectus Supplement will describe the Record Date
preceding such Payment Date. Only Securityholders on the Record Date will be
entitled to receive payments on the next succeeding Payment Date. Unless
otherwise described in the related Prospectus Supplement:
(a) the Payment Date will be the same day in each month, or,
in the case of quarterly-pay Securities, the same day in every third
month; and in the case of semi-annual pay Securities, the same day in
every sixth month; or if such day is not a "BUSINESS DAY," which is a
day on which commercial banks in New York, New York and in the city in
which the Trustee's principal Corporate Trust Office is located are
required to be open for commercial banking business, the next following
Business Day, and
(b) the Record Date will be the close of business as of the
last day of the calendar month that precedes the calendar month in
which such Payment Date occurs.
Each Principal Transaction Document will describe a period called a
"COLLECTION PERIOD" prior to each Payment Date. For example, in the case of
monthly-pay Securities, the Collection Period may be the calendar month
preceding the month in which a Payment Date occurs. Unless otherwise provided in
the related Prospectus Supplement, collections received on or with respect to
the related Contracts held by an Issuer during a Collection Period will be
required to be remitted by the Servicer to the related Trustee prior to the
related Payment Date and will be used to fund payments to Securityholders on
such Payment Date. As may be described in a Prospectus Supplement, the related
Principal Transaction Documents may provide that all or a portion of the
payments collected from the related Trust Property may be applied by the related
Trustee to the acquisition of additional Contracts and equipment during a
specified period, rather than be used to fund payments of principal to
Securityholders during such period, with the result that the related Securities
will possess an interest-only period, also commonly referred to as a revolving
period, which will be followed by an amortization period. Any such interest only
or revolving period may, upon the occurrence of certain events to be described
in the related Prospectus Supplement, terminate prior to the end of the
specified period and result in amortization of the related Securities.
In addition, and as may be described in the related Prospectus
Supplement, the related Principal Transaction Documents may provide that all or
a portion of such collected payments may be retained by the Trustee (and held in
certain temporary investments, including additional contracts) for a specified
period prior to being used to fund payments of principal to Securityholders.
Such retention and temporary investment by the Trustee of such collected
payments may be required by the related Principal Transaction Documents for the
purposes of (a) slowing the amortization rate of the related Securities relative
to the rent payment schedule of the related Contracts, or (b) attempting to
match the amortization rate of the related Securities to an amortization
schedule established at the time such Securities are issued. Any such feature
applicable to any Securities may terminate upon the occurrence of events to be
described in the related Prospectus Supplement, resulting in distributions to
the specified Securityholders and an acceleration of the amortization of such
Securities.
Unless otherwise specified in the related Prospectus Supplement,
neither the Securities nor the underlying Receivables will be guaranteed or
insured by any governmental agency or instrumentality or the Company, DVI, the
Servicer, any Originator, any Trustee or any of their respective affiliates,
except for any applicable Credit Enhancement.
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BOOK-ENTRY REGISTRATION; DEFINITIVE SECURITIES
The Prospectus Supplement for each series of Securities will describe
whether the Securities will be issued in book entry form or whether
Securityholders will be entitled or required to receive securities registered in
their own name.
REPORTS TO SECURITYHOLDERS
On or prior to each Payment Date with respect to each series of
Securities, the Servicer will prepare and provide to the Trustee a statement or
statements with respect to the related Trust Property. The Trustee will forward
or cause to be forwarded to each holder of record of such Class of Securities
such statement or statements on or promptly after each Payment Date. Unless
otherwise specified in the related Prospectus Supplement, each such statement or
statements will set forth the information specifically described in the related
Principal Transaction Documents which generally will include, but not be limited
to, the following information:
(i) the amount of the payment for each Class
of Securities;
(ii) the amount of such payment allocable to
principal;
(iii) the amount of such payment allocable
to interest;
(iv) the Pool Balance, if applicable, as of
the close of business on the last day of the related Remittance
Period;
(v) the aggregate outstanding principal
balance and the Pool Factor for each Class of Securities after
giving effect to all payments reported under (ii) above on such
Payment Date;
(vi) the amount paid to the Servicer, if
any, with respect to the related Collection Period;
(vii) the amount of the aggregate purchase
amounts for Contracts that have been acquired, if any, for such
Collection Period;
(viii) the amount on deposit in any reserve
account and the amount of coverage, including any remaining
amount of coverage under any letter of credit, insurance policy
or other form of Credit Enhancement covering default risk as of
the close of business on the applicable Payment Date and a
description of any Credit Enhancement substituted therefor; and
(ix) the amount of unreimbursed Servicer
Advances.
Each amount set forth pursuant to subclauses (i), (ii), (iii)
and (v) with respect to the Securities of any series will be expressed as a
dollar amount.
Within the prescribed period of time for tax reporting purposes
after the end of each calendar year, the Servicer will provide, or cause to be
provided, to the Securityholders a statement containing the amounts described in
(ii) and (iii) above for that calendar year and any other information required
by applicable tax laws, for the purpose of the Securityholders' preparation of
federal income tax returns.
DESCRIPTION OF THE PRINCIPAL TRANSACTION DOCUMENTS
The following summary describes certain common provisions of
each of the Principal Transaction Documents pursuant to which each series of
Securities will be issued. This summary is not complete, and prospective
Securityholders should read the Prospectus Supplement for such Securities. In
addition, forms of the Contribution and
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Servicing Agreement, Subsequent Contract Transfer Agreement, Indenture and Trust
Agreement have been filed as exhibits to the Registration Statement of which
this Prospectus forms a part.
TRANSFER OF THE CONTRACTS PURSUANT TO CONTRIBUTION AND SERVICING AGREEMENT OR
SALE AGREEMENT
On the Closing Date for a series of Securities, the Company
will receive the related Contracts from the Originator pursuant to a
Contribution and Servicing Agreement. In some instances, the Company or the
Issuer may receive the related Contracts from an Affiliate of DVI pursuant to a
Sale Agreement substantially in the form of the Contribution and Servicing
Agreement. The Company will either transfer such Contracts to an SPE pursuant to
a Sale Agreement or will pledge the Company's right, title and interest in and
to such Contracts to a Trustee on behalf of Securityholders pursuant to an
Indenture. If the Trust Property is transferred to an SPE, it may either pledge
its Trust Property to a Trustee pursuant to an Indenture or issue Certificates
pursuant to a Trust Agreement. The obligations of the parties under all
Principal Transaction Documents will be specified in the related Prospectus
Supplement.
ACCOUNTS
With respect to each series of Securities, the Servicer will
establish and maintain one or more accounts, called a "LOCKBOX ACCOUNT", in the
name of the Trustee on behalf of the related Securityholders, into which all
payments made on or with respect to the related Contracts will be deposited. The
Trustee will establish and maintain a Collection Account, in the name of such
Trustee on behalf of such related Securityholders, in which amounts are
transferred from the Lockbox Account and, to the extent provided in the related
Prospectus Supplement, a Reserve Account or Distribution Account, for the
benefit of Securityholders. Other accounts will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account,
the Distribution Account, any Reserve Account and other accounts identified as
such in the related Prospectus Supplement, collectively, the "TRUST ACCOUNTS",
shall be invested as provided in the related Principal Transaction Document in
Eligible Investments. "ELIGIBLE INVESTMENTS" are generally limited to
investments acceptable to the Rating Agencies as being consistent with the
rating of such Securities. Subject to certain conditions, Eligible Investments
may include securities issued by DVI or its affiliates or other trusts created
by the Company or its affiliates. Except as described below or in the related
Prospectus Supplement, Eligible Investments are limited to obligations or
securities that mature not later than the business day immediately preceding the
next distribution. However, subject to certain conditions, funds in the reserve
account may be invested in securities that will not mature prior to the date of
the next distribution and will not be sold to meet any shortfalls. Thus, the
amount of cash in any reserve account at any time may be less than the balance
of such reserve account. If the amount required to be withdrawn from any reserve
account to cover shortfalls in collections on the related Contracts exceeds the
amount of cash in such reserve account, a temporary shortfall in the amounts
distributed to the related Securityholders could result, which could, in turn,
increase the average life of the Securities of such series. Except as otherwise
specified in the related Prospectus Supplement, investment earnings on funds
deposited in the applicable Trust Accounts, net of losses and investment
expenses, collectively, "INVESTMENT EARNINGS", shall be deposited in the
applicable Collection Account on each Payment Date and shall be treated as
collections of interest on the related Receivables.
The Trust Accounts will be maintained as Eligible Deposit
Accounts. "ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia, or any domestic branch of a foreign bank, having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution has a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade.
"ELIGIBLE INSTITUTION" means, with respect to an Issuer, (a)
the corporate trust department of the related Trustee, or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia, or any domestic branch of a
foreign bank, which (i)(A) has either (w) a long-term unsecured debt rating
acceptable to the Rating Agencies or (x) 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 (y) a long-term unsecured debt
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rating acceptable to the Rating Agencies or (z) a short-term unsecured debt
rating or certificate of deposit rating acceptable to the Rating Agencies and
(ii) whose deposits are insured by the Federal Deposit Insurance Corporation.
To the extent that DVI's unsecured debt ratings are acceptable
to the Rating Agencies, amounts deposited to any Trust Account may be commingled
with the Originator's general account moneys. No such rights to so commingle
moneys will arise unless described in the related Prospectus Supplement.
SERVICING PROCEDURE
The Servicer, initially, DVI under the Contribution and
Servicing Agreement for each series of Securities, will make reasonable efforts
to collect all payments due with respect to each Contract comprising the related
Trust Property and, unless the related Principal Transaction Documents provide
for a different standard, will continue such collection procedures as the
Servicer follows with respect to each particular type of Contract it services
for itself and others. Consistent with its normal procedures, the Servicer may,
in its discretion and on a case-by-case basis, arrange with the Obligor on a
Contract 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 Securities, may result in the
Servicer acquiring such Contract if such Contract becomes a defaulted Contract.
The Servicer may sell the Equipment related to a defaulted Contract, if any, at
a public or private sale, or take any other action permitted by applicable law.
PAYMENTS BY SERVICER
With respect to each series of Securities, all payments on the
related Contracts, from whatever source, and all proceeds of such Contracts
collected by the Servicer during each Collection Period specified in the related
Prospectus Supplement will be remitted to the Trustee or deposited into the
related Collection Account. Except where the related Prospectus Supplement and
the Contribution and Servicing Agreement provide otherwise, the Servicer will be
required to remit such amounts to the Trustee or deposit such amounts into the
related Collection Account within two (2) Business Days of receipt thereof. If
certain Rating Agency conditions are satisfied, the deposit of collections for a
particular month will be made within two (2) Business Days prior to the related
Payment Date. Pending deposit into the related Collection Account, collections
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.
SERVICING COMPENSATION
Unless otherwise specified in the Prospectus Supplement or the
Contribution and Servicing Agreement with respect to any series of Securities,
the Servicer will be entitled to receive a fee for each Collection Period called
the "SERVICING FEE", in an amount equal to the product of (i) one-twelfth, (ii)
a specified percentage per annum as set forth in the related Prospectus
Supplement, and (iii) the aggregate Discounted Contract Balance as of the
beginning of the previous Collection Period. Unless otherwise disclosed in the
related Prospectus Supplement and Contribution and Servicing Agreement, the
Servicing Fee, together with any portion of the Servicing Fee that remains
unpaid from prior Payment Dates, will be paid prior to the distribution to the
related Securityholders.
Unless otherwise disclosed in the related Prospectus Supplement
and Contribution and Servicing Agreement, the Servicer will also collect and
retain any late fees, 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 Contracts, and will be entitled to reimbursement for certain
liabilities. Payments by or on behalf of Obligors 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 receivables as an
agent for their beneficial owner, including collecting and posting all payments,
responding to inquiries of Obligors regarding the Contracts, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information to
Obligors, paying costs of collection and disposition of defaults and policing
the collateral. The Servicing Fee also will compensate the Servicer for
administering the Contracts, accounting for collections
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and furnishing statements to the applicable 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 Contracts.
DISTRIBUTIONS
On or prior to each Payment Date with respect to each series of
Securities, the Servicer will provide to the applicable 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 Securityholders of such series.
With respect to each series of Securities, beginning on the Payment Date
specified in the related Prospectus Supplement, distributions of principal and
interest, or, where applicable, of principal or interest only, on each Class of
such Securities entitled thereto will be made by the applicable Trustee to the
related Securityholders. The timing, calculation, allocation, order, source,
priorities of and requirements for each Class of Securities of such series will
be set forth in the related Prospectus Supplement.
With respect to each series of Securities, on each Payment
Date, collections on the related Contracts will be transferred from the
Collection Account to the applicable Distribution Account for distribution to
the related Securityholders, respectively, to the extent provided in the related
Prospectus Supplement. Credit Enhancement, such as a reserve account, may be
available to cover any shortfalls in the amount available for distribution on
such date, to the extent specified in the related Prospectus Supplement. As more
fully described in the related Prospectus Supplement, and unless otherwise
specified therein, distributions in respect of principal of a Class of
Securities of a given series will be subordinate to distributions in respect of
interest on such Class, and distributions in respect of the Certificates of such
series may be subordinate to payments in respect of the Notes of such series.
CREDIT ENHANCEMENT
The amounts and types of Credit Enhancement arrangements, if
any, and the provider thereof, if applicable, with respect to each Class of
Securities of a given series will be set forth in the related Prospectus
Supplement. If and to the extent provided in the related Prospectus Supplement,
Credit Enhancement may be in the form of subordination of one or more Classes of
Securities, a reserve account, over-collateralization, a letter of credit, an
insurance policy or surety bond, third party standby loan or purchase agreement,
guaranteed cash deposits or such other arrangements or any combination of two or
more of the foregoing as may be described in the related Prospectus Supplement .
If specified in the applicable Prospectus Supplement, Credit Enhancement for a
Class of Securities may cover one or more other Classes of Securities of the
same series, and Credit Enhancement for a series of Securities may cover one or
more other series of Securities.
The presence of Credit Enhancement for the benefit of any Class
or series of Securities is intended to enhance the likelihood of receipt by the
Securityholders or such Class or series of the full amount of principal and
interest due thereon and to decrease the likelihood that such Securityholders
will experience losses. Unless otherwise specified in the related Prospectus
Supplement, the Credit Enhancement for a Class or series of Securities will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any Credit Enhancement or which are not covered by any
Credit Enhancement, Securityholders of any Class or series will bear their
allocable share of deficiencies, as described in the related Prospectus
Supplement. In addition, if a form of Credit Enhancement covers more than one
series of Securities, Securityholders of any such series will be subject to the
risk that such Credit Enhancement will be exhausted by the claims of
Securityholders of other series.
RESIGNATION, LIABILITY AND MERGER OF SERVICER
With respect to each series of Securities, each Contribution
and Servicing Agreement will provide that DVI may not resign from its
obligations and duties as Servicer thereunder, except in connection with a
permitted assignment under such Contribution and Servicing Agreement or upon
determination that DVI's performance of such duties is no longer permissible
under applicable law. No such resignation will become effective until the
related Trustee
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or a successor servicer has assumed DVI's servicing obligations and duties under
such Contribution and Servicing Agreement.
Each applicable Contribution and 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 related
Issuer, Trustee or the related Securityholders for any action taken or not taken
in good faith pursuant to the terms of such Contribution and Servicing
Agreement; PROVIDED, HOWEVER, that neither the Servicer nor any such person will
be protected against any breach of representations or warranties made by the
Servicer or such person in such Contribution and Servicing Agreement or for any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, such
Contribution and 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 such Contribution and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability. The Servicer may, however, undertake any reasonable action that it
may deem necessary or desirable in respect of the Contribution and Servicing
Agreement and the rights and duties of the parties thereto and the interests of
the Securityholders thereunder.
Under the circumstances specified in any such Contribution and
Servicing Agreement, any corporation or other entity into which the Servicer may
be merged or consolidated, or any corporation or other entity resulting from any
merger or consolidation to which the Servicer is a party, or any corporation or
other 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
of the Servicer under such Contribution and Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus
Supplement, "SERVICER DEFAULT" under a Contribution and Servicing Agreement will
consist of (i) any failure by the Servicer to deliver to the applicable Trustee
for deposit in any of the related Trust Accounts any required payment or to
direct such Trustee to make any required distributions therefrom, which failure
continues unremedied beyond the period set forth in the Contribution and
Servicing Agreement; (ii) any failure by the Servicer duly to observe or perform
in any material respect any other covenant or agreement in such Contribution and
Servicing Agreement, which failure materially and adversely affects the rights
of the related Securityholders and which continues unremedied for a period of 30
days after the Servicer becomes aware of such failure or the giving of written
notice of such failure (1) to the Servicer by the applicable Trustee or (2) to
the Servicer, or the Company, if applicable, and the applicable Trustee by
holders of the related Securities, as applicable, evidencing not less than
66-2/3% of the aggregate outstanding principal amount of the related Securities;
and (iii) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings with respect to the Servicer and
certain actions by the Servicer indicating its insolvency, reorganization
pursuant to bankruptcy proceedings or inability to pay its obligations. Each of
the events described in (iii) above is an "INSOLVENCY EVENT".
RIGHTS UPON SERVICER DEFAULT
Unless otherwise provided in the related Prospectus Supplement,
as long as a Servicer Default under a Contribution and Servicing Agreement
remains unremedied, the applicable Trustee, upon the request of the holders of
Securities of the related series evidencing more than 66-2/3% of the aggregate
principal amount of such then outstanding Securities, shall terminate all the
rights and obligations of the Servicer, if any, under such Contribution and
Servicing Agreement, whereupon a successor servicer appointed by such Trustee or
such Trustee will succeed to all the responsibilities, duties and liabilities of
the Servicer under such Contribution and Servicing Agreement and will be
entitled to similar compensation arrangements. If, however, a bankruptcy trustee
or similar official has been appointed for the Servicer, and no Servicer Default
other than such appointment has occurred, such bankruptcy trustee or official
may have the power to prevent the applicable Trustee or such Securityholders
from effecting a transfer of servicing. In the event that the Trustee is
unwilling or unable to so act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor with a net worth of at least
$15,000,000 and whose regular business includes the servicing of a similar type
of receivables. Such Trustee may make such arrangements for compensation to be
paid, which
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in no event may be greater than the servicing compensation payable to the
Servicer under the related Contribution and Servicing Agreement.
EVENT OF DEFAULT UNDER THE PRINCIPAL TRANSACTION DOCUMENTS
The events of default under the Principal Transaction Documents
for each series of Securities and the application of any money collected by the
Trustee pursuant to the Principal Transaction Documents will be described in the
Prospectus Supplement for that series. Unless otherwise provided in a Prospectus
Supplement, the holders of Securities evidencing not less than 66-2/3% of the
aggregate outstanding principal amount of the related Securities, or certain
Classes of Securities may, on behalf of all the Securityholders of such related
Securities, waive any default by the Company or by any SPE in the performance of
its obligations under the related Principal Transaction Documents and the
consequences of such default, except a default in making any required deposits
to or payments from any of the Trust Accounts in accordance with the applicable
Principal Transaction Documents or a default in respect of a covenant or
provision under a Principal Transaction Document which cannot be modified or
amended without the consent of the holder of each outstanding Security affected.
No such waiver shall impair the Securityholders' rights with respect to
subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement,
each of the Principal Transaction Documents for a series of Securities may be
amended by written amendment by the parties thereto, without the consent of the
related Securityholders,
(i) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the
provisions of such Principal Transaction Documents or of
modifying in any manner the rights of such Securityholders
provided that such action will not, in the opinion of counsel
reasonably satisfactory to the applicable Trustee, materially
and adversely affect the interests of any such Securityholders,
(ii) to make any change to comply with
applicable laws, rules or regulations or
(iii) for the purpose of issuing other
Classes of Notes in accordance with the express terms of the
applicable Principal Transaction Document.
Unless otherwise specified in the related Prospectus Supplement, the Principal
Transaction Documents for a series of Securities may also be amended by the
parties with the consent of Securityholders holding at least a majority of the
voting rights of those Securities, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of such Principal
Transaction Documents or of modifying in any manner the rights of such
Securityholders; PROVIDED, HOWEVER, that no such amendment may (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Contracts or distributions that are
required to be made for the benefit of such Securityholders, (ii) reduce the
aforesaid percentage of the Securities of such series which are required to
consent to any such amendment, or (iii) release any of the Trust Property from
the lien of the Principal Transaction Documents (except as otherwise permitted
therein) or modify certain sections of the Principal Transaction Document,
without the consent of each affected Securityholder.
TERMINATION
The obligations of the Servicer, the Company and the applicable
Trustee pursuant to the related Principal Transaction Documents for a series of
Securities will terminate upon the earlier to occur of (i) the maturity or other
liquidation of the last related Contract and the disposition of any amounts
received upon liquidation of any such remaining Contract or (ii) the payment to
Securityholders of that series of all amounts required to be paid to them
pursuant to such Principal Transaction Documents. Each Prospectus Supplement may
specify the circumstances under which prepayment of a series of Securities may
occur, such as when the aggregate Discounted Contract Balance of the
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related Contracts is less than a specified percentage of the initial aggregate
Discounted Contract Balance. In connection with any such prepayment, the Trust
Property for that series will be purchased at a price equal to the entire
outstanding principal balance of the Securities to be redeemed, together with
accrued interest thereon at the applicable interest rate. The related Securities
will be redeemed following such purchase.
As more fully described in the related Prospectus Supplement,
any outstanding Securities of the related series will be redeemed concurrently
with either of the events specified above and the subsequent distribution to the
related Securityholders of all amounts required to be distributed to them
pursuant to the applicable Principal Transaction
Documents may effect the prepayment of the Securities of such series.
CERTAIN LEGAL MATTERS AFFECTING AN OBLIGOR'S RIGHTS AND OBLIGATIONS
Most states have adopted a version of Article 2A of the Uniform
Commercial Code, which is applicable to "true leases" such as Fair Market Value
Leases. Article 2A purports to codify many provisions of existing common law.
Although there is little precedential authority regarding how Article 2A will be
interpreted, it may, among other things, limit enforceability of any
"unconscionable" lease or "unconscionable" provision in a lease, provide a
lessee with remedies, including the right to cancel the lease contract, for any
lessor breach or default, and may add to or modify the terms of "consumer
leases" and leases where the lessee is a "merchant lessee." However, DVI will
represent that, to the best of its knowledge (i) no Contract is a "consumer
lease"; and (ii) each Obligor has accepted the Equipment leased to it and, after
reasonable opportunity to inspect and test, has continued to make scheduled
payments under the related Contract. Article 2A, moreover, recognizes typical
commercial lease "hell or high water" rental payment clauses and validates
reasonable liquidated damages provisions in the event of lessor or lessee
defaults. Article 2A also recognizes the concept of freedom of contract and
permits the parties in a commercial context a wide latitude to vary provisions
of the law.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The Prospectus Supplement for each series of Securities will
summarize, subject to the limitations stated therein, the anticipated material
federal income tax considerations relevant to the purchase, ownership and
disposition of such Securities.
ERISA CONSIDERATIONS
The Prospectus Supplement for each series of Securities will
summarize, subject to the limitations discussed therein, considerations under
ERISA relevant to the purchase of such Securities by employee benefit plans and
individual retirement accounts.
PLAN OF DISTRIBUTION
The Securities offered hereby and by the related Prospectus
Supplement will be offered in series through one or more methods, including firm
commitment or best efforts underwriting and competitive bid. The Prospectus
Supplement prepared for each series will describe the method of offering being
utilized for that series and will state the public offering or purchase price of
such series and the net proceeds to the Company from such sale.
If underwriters are used in a sale of any Securities, other
than in connection with an underwriting on a best efforts basis, such Securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. Such
underwriters may be broker-dealers affiliated with the Companies whose
identities and relationships to the Companies will be as set forth in the
related Prospectus Supplement. The managing underwrites or underwriters with
respect to the offer and sale of a particular series of Securities will be set
forth on the cover of the Prospectus Supplement relating to such series and the
members of the underwriting syndicate, if any, will be named in such Prospectus
Supplement relating to such series.
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In connection with the sale of the Securities, underwriters may
receive compensation from the Company or from purchasers of the Securities in
the form of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the Securities may be deemed to be
underwriters in connection with such Securities, and any discounts or
commissions received by them from the Company and any profit on the resale of
Securities by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933, as amended. The Prospectus Supplement will
describe any such compensation paid by the Company.
It is anticipated that the underwriting agreement pertaining to
the sale of any series of Securities will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Securities if any are
purchased, other than in connection with an underwriting on a best efforts
basis, and that, in limited circumstances, the Company will indemnify the
several underwriters and the underwriters will indemnify the Company against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or will contribute to payments required to be made in respect
thereof.
The Prospectus Supplement with respect to any series of
Securities offered by placements through dealers will contain information
regarding the nature of such offering and any agreements to be entered into
between the Company and purchasers of Securities of such series.
The Company anticipates that the Securities offered hereby will
be sold primarily to institutional investors. Purchasers of Securities,
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended, in connection with reoffers and sales by them of
Securities. Holders of Securities should consult with their legal advisors in
this regard prior to any such reoffer or sale.
LEGAL MATTERS
Certain legal matters relating to the issuance of the
Securities of any series will be passed upon for the Issuer and the Servicer by
the general counsel to the Originator, the Issuer and the Servicer, and by
Thacher Proffitt & Wood, New York, New York, special counsel to the
underwriters.
FINANCIAL INFORMATION
The Company has determined that its financial statements are
not material to the offering made hereby. However, any prospective purchaser who
desires to review financial information concerning the Company will upon request
be provided with a copy of the most recent financial statements of the Company.
See "Reports to Securityholders."
A Prospectus Supplement may contain the financial statements of
any related Credit Enhancer.
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus, together with the Prospectus Supplement for
each series of Securities, 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.
The DVI Receivables Corp. VIII has filed a registration
statement with the Securities and Exchange Commission, called the "COMMISSION"
under the Securities Act of 1933, as amended, with respect to the Securities
offered by this Prospectus. For further information, you should refer to the
Registration Statement which is available for inspection without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at the
15
<PAGE>
Northwestern Atrium, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of the Registration Statement may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
No person has been authorized to give any information or to
make any representation other than those contained in this Prospectus and any
related Prospectus Supplement and, if given or made, you must not rely on such
information or representations. This Prospectus and any related Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the Securities offered nor an offer of the
Securities 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 the information in this Prospectus is correct as of any time subsequent to
its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Documents may be filed by the Company or DVI Financial
Services, Inc. on behalf of an Issuer relating to any series of Securities
referred to in the accompanying Prospectus Supplement with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, after the date of this Prospectus and prior to the termination
of any offering of the Securities issued by the Company or a special purpose
entity. All documents filed in this way shall be deemed to be incorporated by
reference into this Prospectus and the related Prospectus Supplement and to be a
part of this Prospectus and the related Prospectus Supplement from the
respective dates of filing of such documents. Any statement continued here or in
another document which is incorporated or deemed to be incorporated by reference
here shall be deemed to be modified or superseded for purposes of this
Prospectus and the related Prospectus Supplement to the extent that a statement
contained here or in any other subsequently filed document which also is deemed
to be incorporated by reference here modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or the related Prospectus
Supplement.
16
<PAGE>
INDEX OF DEFINED TERMS
Set forth below is a list of the defined terms used in this
Prospectus and the pages on which the definitions
of such terms may be found herein.
Business Day ..........................................7
Closing Date ..........................................2
Collection Period ..........................................7
Commission .........................................15
Company ..........................................1
Contribution and Servicing Agreement..........................................2
Credit Enhancement ..........................................2
Discounted Contract Balance ..........................................6
DVI ..........................................1
Eligible Deposit Account ..........................................9
Eligible Institution ..........................................9
Eligible Investments ..........................................9
Independent Director ..........................................3
Insolvency Event .........................................12
Investment Earnings ..........................................9
Issuer ..........................................1
Lockbox Account ..........................................9
Medium-Sized Hospitals ..........................................3
Obligor ..........................................3
Principal Transaction Documents ..........................................2
Reserve Account ..........................................2
Sale Agreement ..........................................2
Senior Credit Committee ..........................................4
Servicer ..........................................2
Servicer Default .........................................12
Servicing Fee .........................................10
SPE ..........................................1
Subsequent Contract Transfer Agreement........................................2
Trust Accounts ..........................................9
Trust Property ..........................................1
17
<PAGE>
Prospectus Supplement dated __________ (to Prospectus dated March 22, 1999)
[DVI _____________________]
(ISSUER)
DVI RECEIVABLES CORP. VIII
([OWNER OF] ISSUER)
DVI FINANCIAL SERVICES INC.
(SERVICER)
o THE PUBLICLY OFFERED SECURITIES:
The issuer will issue $__________ _____% of Class A, $___________ ____% of Class
B, $__________ ____% of Class C and $_________ ____% of Class D asset-backed
notes, Series ______.
o THE CREDIT ENHANCEMENT FOR THE PUBLICLY OFFERED NOTES:
o The Privately Offered Securities
The issuer also anticipates issuing the following notes that are not being
offered to the public: $_________ of Class E asset-backed notes. The issuer will
not pay the interest or principal, respectively, on the privately offered notes
unless and until the interest or principal on the publicly offered notes are
paid first.
o The Reserve Account
The issuer will fund a reserve fund that can be used to pay certain shortfalls
in payments on the notes.
O The Retained Interest
The notes are senior to the issuer's retained interest, which represents the
excess of the future collections on the assets of the issuer over the required
payments on the publicly offered notes and the privately offered notes.
- --------------------------------------------------------------------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-10 OF THIS PROSPECTUS
SUPPLEMENT.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other
governmental agency.
The notes will represent obligations of the issuer only and will not represent
interests in or obligations of DVI Financial Services Inc. or any affiliate of
DVI Financial Services Inc.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
- --------------------------------------------------------------------------------
o THE UNDERWRITING:
The underwriters will offer to the public the Class A notes, the Class B notes,
the Class C notes and the Class D notes at the following prices:
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
NOTES NOTES NOTES NOTES
- -------------------------------------------------------------------------------
Price to Public1 _______% ______% ______% ______%
Underwriting Discount2 _____% ____% ____% ____%
Proceeds to Issuer3 ______% ______% ______%
- -------------------------------------------------------------------------------
1 Total price to public is approximately $____________.
2 Total underwriting discount is approximately $__________. The issuer has
indemnified the underwriters for certain liabilities that they may incur.
3 Total proceeds to issuer, before deducting expenses payable by issuer
estimated to be $_______, are approximately $________.
The notes are offered subject to receipt and acceptance by the underwriters, to
prior sale and to the underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify an order without notice. It is expected
that delivery of the notes will be made in book-entry form through the
facilities of The Depository Trust Company on or about _________________. You
should read "PLAN OF DISTRIBUTION" on page S-74 of this prospectus supplement
for further information.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE NOTES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
__________________
UNDERWRITER[S]
[NAME OF UNDERWRITER[S]]
<PAGE>
You can find a listing of the pages where capitalized terms used in the
prospectus supplement and the prospectus are defined under the respective
caption "INDEX OF DEFINED TERMS" beginning on page S-77 of this prospectus
supplement and page 18 of the prospectus.
-ii-
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY OF PROSPECTUS SUPPLEMENT.............................................S-1
RISK FACTORS................................................................S-10
DVI .......................................................................S-14
General................................................................S-14
Underwriting Criteria..................................................S-14
Portfolio Monitoring and Credit Collections............................S-16
THE SERVICER................................................................S-18
Servicing Obligations and Procedures...................................S-18
Servicing Compensation and Payment of Expenses.........................S-19
Evidence of Compliance by Servicer.....................................S-20
Other Servicing Procedures.............................................S-20
Resignation/Removal of the Servicer....................................S-21
Voluntary Termination of Servicer Duties...............................S-21
Year 2000 Computer Programming Compliance..............................S-21
DVI RECEIVABLES CORP. VIII..................................................S-21
THE ISSUER..................................................................S-21
THE TRUSTEE.................................................................S-22
THE CONTRACTS...............................................................S-22
Statistical Information for the Contracts..............................S-26
Substitute Contracts...................................................S-36
Eligibility Requirements for the Contracts.............................S-38
Eligibility Requirements for Substitute Contracts......................S-39
DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS................S-40
General................................................................S-40
Definitions Relating to the Notes......................................S-41
Conveyance of Trust Property...........................................S-44
DVI Repurchase Obligation for Contract Misrepresentations..............S-44
Indemnification........................................................S-44
Indenture Accounts; Investment of Funds................................S-45
Reserve Account........................................................S-45
Flow of Funds..........................................................S-47
Payment of Amounts From Distribution Sub-Accounts......................S-50
Reports to Noteholders.................................................S-51
Optional Redemption....................................................S-51
Indenture Events of Default and Acceleration.......................S-52
Remedies...............................................................S-53
Servicer Events of Default.............................................S-54
Termination of the Servicer............................................S-55
Duties and Immunities of the Trustee...................................S-56
Book-Entry Registration of the Notes...................................S-56
PREPAYMENT AND YIELD CONSIDERATIONS.........................................S-60
CERTAIN LEGAL MATTERS AFFECTING AN
OBLIGOR'S RIGHTS AND OBLIGATIONS.......................................S-61
General................................................................S-61
The Equipment..........................................................S-61
-iii-
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES....................................S-63
CERTAIN STATE, LOCAL AND OTHER TAX CONSIDERATIONS...........................S-70
CONSIDERATIONS FOR BENEFIT PLAN INVESTORS...................................S-70
LEGAL INVESTMENT............................................................S-74
RATINGS.....................................................................S-74
USE OF PROCEEDS.............................................................S-74
PLAN OF DISTRIBUTION........................................................S-74
LEGAL MATTERS...............................................................S-75
WHERE YOU CAN FIND MORE INFORMATION.........................................S-75
INDEX OF DEFINED TERMS......................................................S-77
-iv-
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
THE FOLLOWING IS JUST A SUMMARY. YOU NEED TO READ THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT FOR A MORE
COMPLETE UNDERSTANDING OF THE SECURITIES, THE TRUST PROPERTY AND OTHER ASPECTS
OF PURCHASING ANY OF THE NOTES.
CLOSING DATE.............. On or about _________________.
CUT-OFF DATE.............. _________________. The issuer owns all payments due
after the cut-off date on the contracts.
THE ISSUER................ The issuer of the notes is DVI ___________________,
a ____________ organized under the laws of the State
of __________.
For more information about the issuer, you should
read the section titled "THE ISSUER" on page S-21
of this prospectus supplement.
OWNER OF THE ISSUER........ The sole owner of the issuer is DVI Receivables
Corp. VIII, a Delaware corporation wholly owned by
DVI Financial Services Inc.
For more information about DVI Receivables Corp.
VIII, you should read the section titled "DVI
RECEIVABLES CORP. VIII" on page S-21 of this
prospectus supplement.
CONTRIBUTOR AND SERVICER DVI Financial Services Inc., a Delaware corporation,
is the sole owner of DVI Receivables Corp. VIII
For more information about DVI Financial Services
Inc., you should read "DVI" and "THE SERVICER" on
pages S-14 through S-21 of this prospectus
supplement.
TRUSTEE................... _________________, a national banking association.
For more information about the trustee, you should
read the section titled "THE TRUSTEE" on page S-22
of this prospectus supplement.
S-1
<PAGE>
THE TRUST PROPERTY
The trust property is all of the assets of the issuer. If an event of default
under the documents related to this transaction ever occurs then the trustee,
acting on your behalf, could claim, foreclose upon and sell the trust property.
Please read the section of this prospectus supplement titled "DESCRIPTION OF THE
NOTES AND THE PRINCIPAL TRANSACTION DOCUMENTS - EVENTS OF DEFAULT AND
ACCELERATION" starting at page S-40 of this prospectus supplement for a
description of those events.
The trust property consists of:
THE CONTRACTS. A pool of non-cancelable contracts, which may be of any one of
the following five types:
"FINANCE LEASES" -- contracts in the form of a lease that contains an end
of term purchase option for a nominal amount;
"FAIR MARKET VALUE LEASES" -- contracts in the form of a lease that contain
a purchase option based on either (a) a stated non-nominal percentage of the
original cost of the related equipment, or (b) the fair market value of the
related equipment at the expiration, or earlier termination, of the contract;
"LEVERAGED LEASE LOANS" -- contracts in the form of loans, each of which is
o made to a lessor of the related equipment which is leased under an
equipment lease with the obligor, and
o secured by a pledge by such lessor of all of its right, title and
interest to the underlying equipment lease and the related equipment;
"LEASE RECEIVABLE PURCHASES" -- contracts in the form of a purchase of the
lessor's right to scheduled payments under an equipment lease and that is
secured by the lessor's rights in the related equipment; and
"SECURED EQUIPMENT NOTES" -- contracts in the form of a loan to the user of
the related equipment secured by such equipment.
THE CONTRACT PAYMENTS. The contracts contain provisions which require the
obligor to make the periodic, scheduled payment of rent or other payments
thereunder on a periodic basis. These payments may be in arrears or advance.
SECURITY INTEREST IN EQUIPMENT. If an obligor defaults under its contract, the
servicer, on behalf of the trustee, will be able to repossess and release or
sell the related equipment to cover the remaining unpaid payments under such
contract.
THE INSURANCE POLICIES. The issuer owns DVI Financial Services Inc.'s rights
under any property insurance policies relating to the equipment financed under
the contracts.
COLLECTION ACCOUNT AMOUNTS. The trustee will establish a bank account that
collects funds to be paid to noteholders. The issuer owns any amounts deposited
from time to time in the collection account.
RESERVE ACCOUNT AMOUNTS. The trustee will also establish a bank account that
holds reserve funds. The issuer owns any amounts on deposit in the reserve
account.
CONTRIBUTION AND SERVICING AGREEMENT RIGHTS. The issuer owns DVI Receivables
Corp. VIII's rights and remedies under the Contribution and Servicing Agreement.
Initially, DVI Financial Services Inc. is the servicer of the trust property.
The servicer is responsible for servicing, making collections and advances on
and otherwise enforcing the contracts. The servicer must exercise the degree of
skill and care in performing these functions that it customarily exercises with
respect to similar assets owned by the servicer. On each payment date, the
servicer receives a monthly servicing fee from amounts on deposit in the
collection account. The servicer may resign or be removed, in which event the
trustee or another satisfactory company will be appointed as successor servicer.
EXCLUDED ASSETS
The trust property will not consist of either:
PURCHASE OPTION PAYMENTS. Any purchase option payments are specified in each
individual contract. In general, purchase option payments are any payment made
by the obligor under such
S-2
<PAGE>
contract to purchase the equipment covered thereby. A purchase option payment
would include any funds received in respect of any of the following:
o an end of term purchase option for $1,
o an end of term option to purchase the equipment at a stated percentage of
the original cost of the equipment,
o an option to purchase the equipment at the fair market value of the
equipment determined at the end of the contract term, or
o an end of term option to extend the term of the lease for one or more
immediately succeeding twelve month periods.
MISCELLANEOUS PAYMENTS. These are amounts included in the obligor's payments for
which the issuer is not the ultimate beneficiary, including, but not limited to,
property taxes, sales taxes, manufacturer's maintenance costs, insurance
premiums and supplies and transaction costs.
THE CONTRACTS
DVI Financial Services Inc. selects the contracts from its portfolio of
contracts based on the criteria specified in the section at page S-38 of this
prospectus supplement titled "THE CONTRACTS-ELIGIBILITY REQUIREMENTS FOR THE
CONTRACTS." DVI Financial Services Inc. either originates or acquires the
contracts from others in its ordinary course of financing activities. Some or
all of the contracts in the trust property were previously and indirectly sold
by DVI Financial Services Inc. to a special-purpose, bankruptcy-remote entity
that was wholly and directly or indirectly owned by DVI Financial Services Inc.
THE DISCOUNTED AGGREGATE CONTRACT BALANCE. The outstanding principal balance,
discounted at a rate of ____% per year, of the contracts included in the
statistical information presented in this prospectus supplement is
$______________ as of the cut-off date. We discounted the contract payments to
show what the value in today's dollars is of the total contract payments due
over time. We did not include purchase option payments or miscellaneous payments
in our calculations of discounted contract balances. For the purposes of future
calculations, except when calculating a repurchase price of a contract, we
assumed that the discounted contract balance of any defaulted contract is zero.
For a further discussion of discount rates and the contracts, you should read
the section titled "THE CONTRACTS" at page S-22 of this prospectus supplement.
OTHER POOL DATA. As of the cut-off date,
o the weighted average remaining term to maturity of the statistical pool of
contracts was approximately _____ months,
o the final scheduled payment date of the contract in the statistical pool
with the latest maturity is _______, ____, and
o the average outstanding principal balance of the contracts referenced in
the statistical pool was approximately $_________.
For more data about the contracts as of the cut-off date, you should read the
section titled "THE CONTRACTS" at page S-22 of this prospectus supplement.
THE EQUIPMENT. The equipment is principally non-invasive medical diagnostic and
therapeutic equipment.
The contracts require the obligor to assume all responsibility with respect to
the equipment, including the obligation to pay all costs relating to its
operation, maintenance, repair, insurance and taxes. Some equipment contracts
pledged as collateral for leveraged lease loans, however, may require the
related lessor to maintain and service the equipment. Some contracts may also
require payments for which the servicer is not the ultimate beneficiary thereof
and which are not part of the trust property.
THE OBLIGORS. The obligor is the person obligated to make payments under a
contract. The term obligor is used in this prospectus supplement to include any
guarantor. The obligors under the contracts are primarily hospitals,
non-hospital medical facilities, physician groups and physicians, businesses,
institutions, and professionals, all of which utilize the equipment under such
contract for commercial use. No affiliates of DVI Financial
S-3
<PAGE>
Services Inc. are obligors under any contracts. Each obligor has full personal
liability for its obligations under its contract.
MODIFICATIONS TO THE CONTRACTS. The terms of a contract may be modified or
adjusted by the servicer for administrative reasons. A lessee or a lessor may
also request a modification or adjustment to its contract. Such modifications or
adjustments may include either:
o changes to the equipment's acceptance date, cost or components; or
o corrections of information that occur when a contract enters the servicer's
administrative servicing system.
Such modifications and adjustments could result in changes to:
o the contract's commencement date, amount of monthly payment, timing of
monthly payment, or
o the equipment.
However, such changes will not:
o extend the stated maturity date of the notes,
o extend the scheduled termination date of such contract by more than __
months,
o have a material adverse effect on the weighted average life of any class of
notes,
o affect more than ________ percent of the initial aggregate principal
balance of the contracts, which are discounted at the actual discount rate
of _______%,
o be made to any contract that is ______ days or more delinquent,
o decrease the discounted principal balance of any contract being modified,
unless the issuer deposits an amount equal to such decrease in the
collection account.
TERMINATION OF CONTRACTS. Generally, obligors do not have the right to terminate
or prepay their contract. However, the servicer may allow either full or partial
prepayment of a contract by an obligor. In fact, the servicer historically has
permitted obligors to terminate contracts early or, in case of contracts
covering more than one item of equipment, to partially prepay contracts. This
could occur in connection with the execution of a new contract of replacement
equipment, or upon payment of a negotiated payoff amount, or both.
FULL PREPAYMENTS. The servicer may only permit a full prepayment if the obligor
pays an amount at least equal to the sum of:
(1) the discounted principal balance of the contract as of the first day
of the calendar month immediately preceding such prepayment, together
with one month of interest thereon at the actual discount rate of
_______%, and
(2) any unreimbursed amounts that the servicer advanced to the obligor as
permitted in the Contribution and Servicing Agreement, as described
in"THE CONTRACTS" on page S-22, and "THE SERVICER" on page S-18, of
this prospectus supplement, and
(3) any payments due and outstanding under such contract that constitute
trust property but were not the subject of a servicer advance.
PARTIAL PREPAYMENTS. The servicer may only permit an obligor to partially prepay
a contract if the obligor pays an amount equal to the difference between the
following (A) and (B).
(A) is the sum of (1) the difference between the discounted principal balance
of such contract before such prepayment is made and the discounted
principal balance of such contract after such prepayment is made and (2)
one month's interest on such difference, and
(B) is an amount equal to any of such contract payments actually received by
the servicer with respect to the prepaid portion of such contract for the
current calendar month on or before the date of such partial prepayment.
S-4
<PAGE>
LEGAL MATTERS AFFECTING AN OBLIGOR'S RIGHTS AND OBLIGATIONS
The issuer warrants that the pledge to the trustee is a valid pledge of a
security interest in the contracts. The issuer must take any action required to
perfect the noteholders' security interest in the contracts. The issuer warrants
that the trustee, on behalf of the noteholders, has a first priority perfected
security interest in the contracts, except for liens which have priority by
operation of law, and the proceeds.
PRINCIPAL AND INTEREST ON THE OFFERED NOTES
INTEREST. The trustee pays interest on the notes on the eleventh day of each
month to each noteholder; if such eleventh day is not a business day, it pays on
the next day that is a business day. The first payment date will be
_______________. To be considered a noteholder for such payment, the trustee
must have you registered on its records on the fifth business day immediately
preceding such payment date as a noteholder.
We accumulate the aggregate amount of any monthly interest not previously paid
to any noteholders. The issuer will pay the aggregate amount of such overdue
interest on the next payment date to the extent that sufficient funds are
available to make such payment. Overdue interest does not itself bear interest.
PRINCIPAL. Principal payments on the notes are required to be made on each
payment date to the extent funds are available for such payments. Principal
payments will be calculated based on the decline in the aggregate discounted
contract principal balance during the prior calendar month.
FLOW OF FUNDS
On each payment date, the trustee will disburse all funds deposited in the
collection account, including any investment income with respect to monies on
deposit in the collection account, in accordance with the servicer's monthly
report in the following order of priority:
FIRST, fees to the servicer, unreimbursed advances and other servicer advances
due to the servicer;
SECOND, to the Class A noteholders, all Class A interest
THIRD, to the Class B noteholders, all Class B interest
FOURTH, to the Class C noteholders, all Class C interest
FIFTH, to the Class D noteholders, all Class D interest
SIXTH, to the Class E noteholders, all Class E interest
SEVENTH,
IF no amortization event is happening, then :
o FIRST, to the Class A noteholders, all Class A principal
o SECOND, to the Class B noteholders, all Class B principal
o THIRD, to the Class C noteholders, all Class C principal
o FOURTH, to the Class D noteholders, all Class D principal
o FIFTH, to the Class E noteholders, all Class E principal
o SIXTH, to the reserve account, the amount needed to make the reserve
account meet its deposit requirements
BUT, if an amortization event is happening and has not been waived by the
noteholders, then
o FIRST, to the Class A noteholders, all of the Class A outstanding
principal balance
o SECOND, to the Class B noteholders, all of the Class B outstanding
principal balance
o THIRD, to the Class C noteholders, all of the Class C outstanding
principal balance
o FOURTH, to the Class D noteholders, all of the Class D outstanding
principal balance
S-5
<PAGE>
o FIFTH, to the Class E noteholders, all of the Class E outstanding
principal balance
in making the seventh group of payments outlined above if an amortization event
is happening, the trustee may also draw upon funds deposited in the reserve
account, but there still may not be enough funds in the collection account to
make all of such payments on any payment date,
EIGHTH, if the servicer is no longer DVI Financial Services Inc. and the
servicer's fee is deemed to be commercially unreasonable, the amount necessary
to make the servicing fee commercially reasonable and to cover the reasonable
costs in transferring the servicing obligations,
NINTH, any remaining funds on deposit in the collection account to the issuer.
For a more detailed description of how funds are paid to you, you should read
the section "DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS --
FLOW OF FUNDS" on page S-47 of this prospectus supplement.
CREDIT ENHANCEMENT. We have provided three forms of credit enhancement. First,
we have the subordination of the different classes of notes. Second, we have a
reserve account of funds to pay certain shortfalls in payments on the notes.
Third, we have the subordination of the issuer's right to receive retained
interest amounts, until noteholders have received all amounts then payable to
them.
SUBORDINATION. Subordination enhances the credit of each superior class of
notes. Notes that are subordinated in priority of payment to other classes of
notes have a lesser likelihood of receiving the regular distributions as
outlined in the "FLOW OF FUNDS" section on page S-47 of this prospectus
supplement. Similarly, if the trustee should ever foreclose upon the trust
property, each superior class of notes has a greater protection against
realizing losses than do notes that are subordinated.
Payments of interest on the Class E notes are subordinate to payments of
interest on the Class A, Class B, Class C and Class D notes, and payments of
principal on the Class E notes are subordinate to payments of principal on the
Class A, Class B, Class C and Class D notes.
Furthermore, the following note payments are subordinated as shown below.
S-6
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================================================================================
Note Payment Subordinated To The Full Payment Of:
- ------------ ------------------------------------
Class A interest Interest on the Class A notes is not
subordinated to any other note payments.
Class A principal All interest due and overdue on all classes of
notes.
Class B interest All interest due and overdue on the Class A
notes.
Class B principal If NO amortization event IS happening:
o all interest due and overdue on all classes
of notes
o all principal due and overdue on the Class A
notes
If an amortization event IS happening:
o all interest due and overdue on all classes
of the notes
o the entire outstanding principal amount due
on the Class A notes
Class C interest All interest due and overdue on the Class A
notes and the Class B notes.
Class C principal If NO amortization event IS happening:
o all interest due and overdue on all classes
of the notes
o all principal due and overdue on the Class A
notes and the Class B notes,
If an amortization event IS happening
o all interest due and overdue on all classes
of the notes
o the entire outstanding principal amount due
on the Class A notes and the Class B notes
Class D interest All interest due and overdue on the Class A
notes, the Class B notes and the Class C notes.
Class D principal If NO amortization event IS happening:
o all interest due and overdue on all classes
of the notes
o all principal due and overdue on the Class A
notes, the Class B notes, and the Class C
notes
If an amortization event IS happening:
o all interest due and overdue on all classes
of the notes
o the entire outstanding principal amount due
on the Class A notes, the Class B notes and
the Class C notes.
================================================================================
S-7
<PAGE>
RESERVE ACCOUNT
The reserve account is a segregated trust account in the name of the trustee.
The trustee funds the reserve account on the closing date by depositing an
amount from note proceeds, and thereafter by depositing amounts otherwise
distributable to the issuer. If a shortfall arises between available funds in
the collection account and principal or interest due on the notes, the trustee
will withdraw money from the reserve account to pay the affected noteholders.
However, noteholders can only be compensated to the extent that funds are
available in the reserve account. If amounts in the reserve account exceed the
amount required to be on deposit in the reserve account, then excess amounts on
deposit in the reserve account may also be paid to the issuer.
For more information about the reserve account, you should read the section
titled "DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS -- RESERVE
ACCOUNT" on page S-43 of this prospectus supplement.
RETAINED INTEREST
The amount of notes issued by the issuer is less than all of the cash flows that
the issuer expects to receive from the trust property. We refer to the
difference between the amount of notes issued and the anticipated cash flow as
the "retained interest".
POOL A CONTRACTS AND POOL B CONTRACTS
If the trust property is composed of two pools of contracts, there will be
contracts identified on the contract schedule attached to the Contribution and
Servicing Agreement as the pool A contracts or as the pool B contracts. The
servicer's rights with regard to substitution of contracts and purchase of all
contracts in a pool differ as between the pool A contracts and the pool B
contracts. The two pools shall comprise a single collateral pool from which
payments will be made for all of the notes.
For further information regarding the different rights of substitution and
replacement with respect to the pool A contract and the pool B contracts, you
should read the section titled "THE CONTRACTS -- SUBSTITUTE CONTRACTS" on page
S-36 of this prospectus supplement.
OPTIONAL REDEMPTION
The issuer may buy back either all of or some of the notes.
FULL REDEMPTION. The issuer may buy back all of, but not some of, the notes on
any payment date if:
o the issuer pays the redemption price that we have specified;
o the aggregate outstanding discounted contract balance of all of the
contracts in pool A is less than __% of the aggregate outstanding
discounted contract balance of all of the contracts in pool A on the
closing date; and
o the aggregate outstanding discounted contract balance of all of the
contracts in pool B is less than __% of the aggregate outstanding
discounted contract balance of all of the contracts in pool B on the
closing date.
PARTIAL REDEMPTION. The issuer may buy back any portion, but not all, of the
notes on a payment date if
o it pays the partial redemption price, and
o the aggregate outstanding discounted contract balance of all of the
contracts in pool B is less than __% of the aggregate outstanding
discounted contract balance of all of the contracts in pool B as of the
closing date.
For further information about the issuer's rights to buy back the notes, you
should read the section titled "DESCRIPTION OF THE NOTES AND PRINCIPAL
TRANSACTION DOCUMENTS -- OPTIONAL REDEMPTION" on page S-51 of this prospectus
supplement.
LIMITED REPURCHASE OBLIGATION
90 days following the discovery or receipt of notice of a breach in the
Contribution and Servicing Agreement, if the breach is material
S-8
<PAGE>
and has not been cured or waived as described therein, then DVI Financial
Services Inc. must either substitute or repurchase the contract causing the
breach from the issuer.
For further information about the issuer's mandatory repurchase obligations, you
should read the section titled "DESCRIPTION OF THE NOTES AND PRINCIPAL
TRANSACTION DOCUMENTS -- DVI REPURCHASE OBLIGATION FOR CONTRACT
MISREPRESENTATIONS" on page S-44 of this prospectus supplement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Under current law, special tax counsel to the underwriters is of the opinion
that the Class __ and __ notes will be treated as indebtedness for federal
income tax purposes.
For further information regard tax treatment of the notes, you should read the
section titled "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" at page S-63 in this
prospectus supplement.
CONSIDERATIONS FOR BENEFIT PLAN INVESTORS
If you are buying notes on behalf of an individual retirement account, Keogh
plan or employee benefit plan, special rules may apply to you. Buying Notes on
behalf of an employee benefit plan may result in a so-called "prohibited
transaction" unless you meet the requirements of certain exemptions. To assure
that exemptions are available for the benefit of all investors, you must make
certain representations when you acquire notes. See "CONSIDERATIONS FOR BENEFIT
PLAN INVESTORS" on page S-70 of this prospectus supplement for a description of
the rules and exemptions.
RATINGS
The issuer's issuance of the notes is subject to receipt by each of the
following classes of all of the ratings set forth next to such class.
CLASS [NAMES OF RATING AGENCIES]
- -------- ===============================
Class A
Class B
Class C
Class D
A rating on a security is not a recommendation to buy, sell or hold securities,
and may be subject to revision or withdrawal at any time by the assigning
entity. For further information about rating, you should read the sections of
this prospectus supplement entitled "PREPAYMENT AND YIELD CONSIDERATIONS" on
page S-60, and "RATINGS" at page S-74, of this prospectus supplement.
RISK FACTORS
For a discussion of factors that should be considered by prospective investors
in the notes, you should read the section titled "RISK FACTORS" on page S-10 of
this prospectus supplement.
PERMISSIBLE TRANSFER
The Class ___ notes are eligible for purchase by money market funds under the
Investment Company Act of 1940, as amended.
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<PAGE>
RISK FACTORS
Prospective noteholders should consider, among other things, the
following factors in connection with the purchase of the Notes.
RISKS AFFECTING COLLECTIBILITY OF THE TRUST PROPERTY
THE ISSUER, THE SERVICER OR DVI RECEIVABLES CORP. VIII COULD BREACH THEIR
OBLIGATIONS THAT ENABLE THE TRUSTEE TO HAVE, ON YOUR BEHALF, A PERFECTED FIRST
PRIORITY SECURITY INTEREST IN THE TRUST PROPERTY.
If any of the issuer, DVI Receivables Corp. VIII or the servicer
sells, pledges or causes the delivery of a contract in the trust property to a
person other than the trustee, then such other person would probably acquire an
interest in that contract. The interest of that other person may have priority
over the trustee's security interest. Anyone owed money by the owner of a
contract, if that debt is overdue, can foreclose upon and sell the contract.
Thus, if a person delivers a contract in the trust property to someone other
than the trustee, the trustee may not be in control of the decision concerning
whether or not to foreclose on the collateral.
In addition, the person with the highest-priority security interest
will be paid first from any payments under, or any proceeds of sale of, a
contract. Thus, if the person other than the trustee has a security interest
with higher priority than the trustee's, that person's interest in the contract
will be paid first. Only after the other person's interest is paid will the
trustee's interest be paid, and then only to the extent that there still are
sufficient funds available from the payments or proceeds.
THE OBLIGOR MAY HAVE RIGHTS THAT RESTRICT THE TRUSTEE'S ABILITY TO COLLECT ON
THE CONTRACTS FOR YOU.
An obligor might assert claims and defenses against DVI Financial
Services Inc., DVI Receivables Corp. VIII, the issuer or the trustee with
respect to the contracts or the related equipment. DVI Financial Services Inc.
warrants that, on the closing date, no such claims or defenses have been
asserted or threatened with respect to the contracts.
STATE LAWS CAN RESTRICT THE TRUSTEE'S ABILITY TO COLLECT ON THE CONTRACTS FOR
YOU.
State laws impose requirements and restrictions relating to
foreclosure sales of collateral. Such laws may also restrict the trustee's
ability to go to court and obtain a judgment that the issuer is deficient in the
payments it must make to you following such a foreclosure sale. The trustee may
not realize the full amount due on a contract, or may not realize the full
amount on a timely basis, because of the application of those requirements and
restrictions.
FAILURE TO TAKE CERTAIN ACTION, EQUIPMENT OBSOLESCENCE AND LEGAL COSTS MAY ALSO
RESTRICT THE TRUSTEE'S ABILITY TO COLLECT ON THE CONTRACTS FOR YOU.
In addition to the considerations mentioned above, other factors that
can hinder the trustee's ability to collect payments from contracts that it
foreclosed upon include:
o a failure to file UCC financing statements to perfect a
security interest,
o depreciation, obsolescence, damage or loss of any item
of equipment,
o the application of Federal and state bankruptcy and
insolvency laws,
o the expense of legal proceedings under a defaulted
contract
and other factors. If any of these circumstances occurs, the noteholders may be
subject to delays in payments and losses.
S-10
<PAGE>
EQUIPMENT OBSOLESCENCE.
If an obligor defaults on a contract, the only source of payment for
amounts due on the contract will be the income and proceeds from the related
equipment. However, the market value of our medical equipment generally declines
with age. In addition, some of our equipment may be subject to sudden,
significant declines in value because of technological advances. Because of
these factors, if the servicer or the trustee forecloses upon and sells the
equipment securing a defaulted contract, the servicer or trustee may not recover
the entire amount due on such contract.
RISKS RELATING TO THE STRUCTURE OF THE TRANSACTION
IF DVI FINANCIAL SERVICES INC. GOES BANKRUPT, A BANKRUPTCY COURT COULD TERMINATE
SOME OF THE CONTRACTS, AND YOU WOULD NOT GET ALL OF YOUR PAYMENTS.
DVI Financial Services Inc. believes that the transfer of the
contracts and the security interest in the related equipment to DVI Receivables
Corp. and the subsequent transfer to the issuer should be treated as an absolute
and unconditional transfer. However, if DVI Financial Services Inc. goes
bankrupt, a bankruptcy court could nonetheless attempt to recharacterize such
transfer as a borrowing. Such an attempt, even if unsuccessful, could result in
delays in payments on the notes.
If a bankruptcy court successfully recharacterizes the sale as a
borrowing, the court could then elect to accelerate payment of the notes and
liquidate the contracts. If an acceleration occurs, the trustee's recovery on
behalf of noteholders could be limited to the then-current value of the
contracts or the underlying equipment. In addition, if such attempt were
successful, bankruptcy law allows the bankruptcy trustee to reject leases that
it considers to be "true" leases, such as "fair market value" leases. The same
law allows the bankruptcy trustee to reject any other contract if the court
believes that any signatory to that contract has yet to finish performing its
duties thereunder. If a contract is rejected by a bankruptcy trustee for
whichever reason, the contract is terminated. An obligor would not owe any
further payments under a terminated contract. If the trust property contains a
contract that is terminated, you would then lose the right to some future
payments of interest and principal on the notes. If many contracts in the trust
property are terminated, your losses could be sizeable.
IF A LESSOR GOES BANKRUPT, A BANKRUPTCY COURT COULD REJECT AND TERMINATE ANY
FAIR MARKET VALUE CONTRACTS UNDER LEVERAGED LEASE LOANS OR OTHERWISE, AND YOU
WOULD NOT GET ALL OF YOUR PAYMENTS.
LEVERAGED LEASE LOANS. Some contracts represent leveraged lease loans
from DVI Financial Services Inc. to various lessors. Because leveraged lease
loans are secured by the lessor's pledge of its rights in equipment and of a
lease with the lessee of such equipment, rejection of the lease by that lessor
would terminate the lease, the obligor would not owe further contract payments,
and you might lose the right to some future payments of interest and principal
on the notes.
FAIR MARKET VALUE LEASES. Other contracts are fair market value leases
from DVI Financial Services, Inc. to various lessees. When DVI Financial
Services Inc. contributed these leases to DVI Receivables Corp. VIII, or an
affiliate of DVI Financial Services Inc., which affiliate then sold the leases
to DVI Receivables Corp. VIII, it also granted a security interest in the leased
equipment to such transferee, which in turn, assigned such security interest to
the issuer along with a first priority security interest in the lease between
DVI Financial Services Inc. and the lessee.
THE RISK OF REJECTION. If a lessor under either a leveraged lease loan
or fair market value lease were to seek protection under the Bankruptcy Code,
then the lessor, as debtor-in possession, or its bankruptcy trustee would have
the option of rejecting, assuming or assigning the underlying lease. If a
S-11
<PAGE>
lessor or bankruptcy trustee chooses to reject the lease, you could experience
delays in payment or losses on your investment.
SUBORDINATED NOTES HAVE LESS LIKELIHOOD OF BEING FULLY PAID THAN DO THE SUPERIOR
CLASSES OF NOTES.
Investors who purchase subordinated notes will not receive
distributions of interest or principal on any given payment date until after the
Class A notes and the classes of more senior subordinated notes receive their
respective distributions of interest or principal. The subordinated notes will
bear losses and delinquencies in reverse order of their priority. Depending upon
the timing of defaults and severity of losses, investors may realize less on
their investment than they originally anticipated. It may also take longer for
investors holding subordinated notes to earn a return on their investment. For
more information about subordinated notes, you should read the section titled
"DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS-- FLOW OF FUNDS"
on page S-47 of this prospectus supplement.
OTHER RISKS
PAYMENT OF PRINCIPAL AND INTEREST ON YOUR NOTE DEPENDS UPON THE UNPREDICTABLE
RATE OF PREPAYMENTS ON THE CONTRACTS.
The rate of payment of principal on the notes will depend, among other
things, on an unpredictable rate of prepayments on the contracts. Therefore, the
rate of payment of principal on the notes cannot be predicted. Prepayments on
the contracts include
o partial and full prepayments, to the extent not replaced with substitute
contracts, by the obligor on the contract,
o payments upon the liquidation of defaulted contracts,
o payments upon acquisitions by DVI Financial Services Inc. of contracts from
the related trust property on account of a breach of certain
representations and warranties in the Contribution and Servicing Agreement,
and
o payments upon an optional acquisition by DVI Financial Services Inc. of
contracts from the issuer.
The rate of early terminations of contracts due to prepayments and
defaults may be influenced by a variety of economic and other factors which are
unknown at this time. You will bear the risk of reinvesting distributions of the
principal of your note. No assurance can be given as to the level of prepayments
that the contracts will experience.
THE SERVICER OR THE ISSUER MAY SUBSTITUTE CONTRACTS IN THE TRUST PROPERTY,
CAUSING DIFFERENT PAYMENT AND PREPAYMENT RATES ON YOUR NOTE.
DVI Financial Services Inc. and the issuer have the right in certain
circumstances to replace prepaid or certain non-performing contracts. These
rights differ as between the pool A contracts and the pool B Contracts. For
further information about the servicer's rights of substitution, you should read
the section titled "THE CONTRACTS -- SUBSTITUTE CONTRACTS" at page S-36 of this
prospectus supplement. The payment flow on your notes will be different if a
substitution occurs, rather than if the issuer pays the proceeds of the
defaulted or prepaid contract through to you. The performance of such substitute
contracts could be different than the performance of the original contracts.
S-12
<PAGE>
THE RATE OF DELINQUENCIES OF DVI FINANCIAL SERVICES INC.'S PORTFOLIO OF
CONTRACTS IS NOT AN ASSURANCE OF THE PERFORMANCE OF THE CONTRACTS IN THE TRUST
PROPERTY.
We cannot assure you that the levels of delinquencies and losses
experienced in recent years by DVI Financial Services Inc. on its entire
equipment finance portfolio are indicative of the contracts in the trust
property. Delinquencies and losses on contracts could increase significantly for
various reasons, including changes in the federal income tax law, changes in the
local, regional or national economies or other events. You should not assume
that data from DVI Financial Services Inc.'s entire portfolio of contracts is or
will be indicative of the performance of the trust property.
CONTEMPLATED CHANGES IN FEDERAL HEALTH CARE REGULATIONS COULD HAVE AN ADVERSE
EFFECT ON YOUR NOTE PAYMENTS.
In recent years, the administration and Congress have considered
various changes in federal regulations and reimbursement policies relating to
health care delivery in the United States. Legislation adopted this year or
thereafter may affect the regulation and availability of, and the pricing and
reimbursement applicable to, health care products and services provided by an
obligor, or financing services provided by DVI Financial Services Inc. Such
regulations could affect the financial well-being of several obligors or DVI
Financial Services Inc. No one can accurately predict the effect, if any, that
any such legislation will have on the servicer or on the ability of an obligor
to satisfy its payment obligations.
THE RATINGS OF THE NOTES ARE NOT RECOMMENDATIONS AND MAY BE WITHDRAWN AT A LATER
DATE.
None of the ratings of the notes by any rating agency are
recommendations to purchase, hold or sell the notes. Ratings do not comment as
to market price or suitability for you. Moreover, the rating agencies do not
assure that the ratings will remain for any given period of time. Indeed,
whenever a rating agency that rates the notes believes that circumstances so
warrant, that rating agency may lower or withdraw its rating.
THERE MAY BE NO PURCHASER AVAILABLE IF YOU WISH TO SELL YOUR NOTE.
After the initial issuance of the notes on the closing date, the
underwriters intend to make a secondary market for the purchase of the notes. A
secondary market is one in which a noteholder sells a note to another person.
However, the underwriters have no obligation to make a secondary market. There
is no assurance that such a secondary market will develop or, if it develops,
that it will continue.
The secondary markets for asset-backed securities have experienced
periods of illiquidity in the past and can be expected to do so in the future.
Illiquidity means that you may not easily find another investor to buy your
note. Consequently, you may not be able to sell your note readily or at prices
that will enable you to realize the yield that you desire on your note.
The market values of the notes are also likely to fluctuate. These
fluctuations could be significant and result in sizable losses to you, depending
on where or when you resell your note.
REGISTERING THE NOTES IN BOOK-ENTRY FORMAT MAY MAKE IT MORE DIFFICULT TO RESELL
YOUR NOTES AND CAUSE DELAYS IN YOUR RECEIPT OF PAYMENT ON THE NOTES.
The notes are being issued in book-entry form. For more information
about book-entry form, you should read the section of this prospectus supplement
titled "DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS--GENERAL"
beginning at page S-40. Registering the notes in book-entry form may make it
more difficult for you to sell your note to another investor. For further
discussion of
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<PAGE>
liquidity on the secondary markets, you should read the section above on this
page titled "RISK FACTORS-- THERE MAY BE NO PURCHASER AVAILABLE IF YOU WISH TO
SELL YOUR NOTE". In most cases noteholders will only be able transfer the notes
through The Depository Trust Company or The Depository Trust Company's
participants. You may therefore have limited ability to pledge your note to a
person who does not participate in the Depository Trust Company system. Because
the trustee will first pay distributions on your note to Cede & Co., as nominee
of The Depository Trust Company, you could also experience some delay in receipt
of your note payments.
YEAR 2000 COMPUTER ERRORS COULD ADVERSELY AFFECT YOUR NOTE PAYMENTS.
The servicer believes, based on discussions with current systems
vendors, that its software applications and operational programs will properly
recognize calendar dates beginning in the year 2000. In addition, the servicer
is discussing with its customers and suppliers the possibility of any interface
difficulties relating to the year 2000 which may affect the servicer. To date,
no significant concerns have been identified; however, there can be no assurance
that there will not be any year 2000-related operating problems or expenses that
arise and affect the payments on your notes.
DVI
GENERAL
DVI Financial Services Inc., referred to as "DVI", is a Delaware
corporation with its national headquarters located at 500 Hyde Park, Doylestown,
Pennsylvania 18901. Its telephone number is (215) 345-6600. DVI comprises the
bulk of the assets of DVI, Inc., which owns all the stock of DVI. DVI, Inc. is
headquartered in Doylestown, PA, and its stock is traded on the New York Stock
Exchange as symbol "DVI". At ___________, DVI handled billing and collection of
approximately __ equipment finance contracts either owned by it or by companies
affiliated with it.
DVI is engaged in the business of providing financing for users of
diagnostic imaging, therapeutic and other medical equipment. DVI focuses
primarily on financing technologically advanced medical equipment such as
computerized tomography magnetic resonance imaging nuclear medicine and
radiation therapy systems, as well as lower cost medical devices, for a customer
base that consists principally of outpatient healthcare providers, physicians
and physician groups, medium-sized hospitals and shared service providers.
DVI's policy is to provide financing to its customers in transactions
which, with very limited exceptions, take the form of direct financing leases
and loans. Most of DVI's equipment financing transactions have a term of
approximately 60 months and, in most cases, are full payout transactions that
allow DVI to recover all the costs of acquiring and financing the equipment
during the initial non-cancelable term.
DVI's Equipment Finance Group will finance equipment ranging in cost
from $200,000 to $3,000,000. DVI also finances small-ticket equipment ranging in
cost from $5,000 to $200,000.
UNDERWRITING CRITERIA
DVI has established specific credit guidelines for transactions in
which the original equipment cost is in excess of $200,000. The guidelines help
identify and predict the ability of a prospective obligor to meet its financial
obligations to DVI. DVI believes these guidelines have contributed
S-14
<PAGE>
positively to its loss experience since its inception in July 1986. The
guidelines are flexible and recognize the variables that are most relevant among
different customer types within DVI's targeted markets. These customer types
include:
(1) "FACILITIES" which are providers of medical services not located in a
licensed hospital facility;
(2) "PHYSICIAN GROUPS", which are physicians and multiple primary care
physicians which have grouped together to provide medical services;
(3) "MEDIUM-SIZED HOSPITALS", which are hospitals containing between 50 to
400 beds; and
(4) "SHARED SERVICE PROVIDERS", which are entities which acquire and
provide medical equipment to multiple users on a per use or time
basis.
Because of the large size of DVI's transactions, each transaction is analyzed
and reviewed on its own merits. Pursuant to DVI policy, the Credit Manager of
DVI has approval authority for all transactions up to $500,000. The Vice
President of Credit has approval authority for all transactions up to $750,000.
The Chief Credit Officer - U.S., with any other member of the credit committee,
has approval authority up to $1 million. The credit committee has approval
authority for all transactions greater than $1 million. If a transaction causes
aggregate customer exposure to exceed $3 million, it must receive credit
committee approval, regardless of size.
DVI has historically focused most of its equipment financing efforts
on the non-hospital sector of the medical equipment marketplace. DVI believes
this sector requires a rigorous credit analysis and structuring discipline. From
a credit perspective, most Facilities that operate high-cost equipment, such as
MRI systems, are businesses which have few employees, minimal inventory and
limited space requirements. Facilities provide medical service to patients who
are not admitted to a hospital, or provide various services to a hospital's
inpatients outside of the licensed hospital facility. They normally have a high
proportion of fixed costs to total costs and, as a result, are dependent upon a
steady flow of revenues. For these reasons, DVI's credit analysis is heavily
focused on understanding and substantiating the projected revenue sources of a
project. DVI's credit analysis and structuring of a project often takes from
three to nine months and includes person-to-person contact with identified
patient referral sources, analysis of a physician's patient referral history and
a thorough analysis of actual and prospective competition. Projected expenses
are examined for thoroughness and compared against the actual expenses of
similar facilities financed by DVI.
DVI's intention is to become involved early in the planning process of
a financing project, as it then has the opportunity to structure the transaction
to DVI's specific credit guidelines. Among numerous factors, this process
generally involves:
(i) prescribing minimum working capital and net worth requirements;
(ii) requiring outside financial support as needed in the form of cash
equity, additional collateral, guarantees or fee subordinations;
(iii) ensuring that all key parties are at risk; and
(iv) establishing that the contractual relationship with the user is well
conceived and documented.
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In evaluating the creditworthiness of Medium-Sized Hospitals, DVI
generally takes a similar approach, although in the case of financially stronger
hospitals, a modified, somewhat less stringent approach may be applied.
"FINANCIALLY STRONGER HOSPITALS" are hospitals which in DVI's judgment have a
consistent history of earnings, a sound capital structure and generate
sufficient cash flow to repay their short-term and long-term obligations with an
adequate margin of safety.
DVI also has made the impact on each customer of the industry trend
toward managed care an increasingly important credit measurement for the past
several years. In addition, DVI considers the ability of a prospective Obligor
to contract with managed care payors and providers to be very important.
At various stages in the structuring and credit approval process,
credit information is submitted by field sales personnel to DVI's sales and
credit personnel for discussion and structuring purposes. When fully completed,
a formal credit package is prepared and sent to the appropriate approval body as
described above.
PORTFOLIO MONITORING AND CREDIT COLLECTIONS
DVI as Servicer will service all Contracts constituting trust property
for the notes, and will do so in the same manner as it handles billing and
collection for Contracts which it owns itself. For Contracts above approximately
$200,000, key members of the credit, sales, operations and accounting
departments meet regularly to discuss the contract portfolio delinquency report
and the status of delinquent borrowers. Delinquent obligors are contacted
immediately by the collection and/or sales department, with other staff members
intervening as deemed necessary. The collection of large-balance delinquent
accounts and severely delinquent accounts is administered personally by DVI's
Director of Portfolio Management. Once DVI suspects that an obligor may
experience problems in meeting its obligations, DVI acts to identify a new
operator of the equipment in the event that the obligor defaults. Any
repossessions are handled on an individual transaction basis. Because of the
relatively small number of contracts in DVI's portfolio, management has a high
degree of familiarity with virtually the entire obligor base. These procedures
will also be followed by DVI in its capacity as Servicer of the Contracts.
DVI's Vendor Finance Group is in Chicago and handles collections and
other servicing of Contracts below approximately $200,000. The collection
department meets monthly to review and discuss the status of certain accounts
and any trends in performance. Invoices are generated on the 10th and 25th day
of each month with a nine-day grace period. Late accounts are sorted by region
and assigned by aging. For the accounts that are 10-30 days past due, an active
collection process is initiated by phone contact, and a reminder notice is sent
at 15 days past due. At 31 days past due, a final notice letter is sent and any
items $30,000 and over are included on an ongoing watch list which is reviewed
monthly with senior management. A demand letter for possession of collateral is
sent at 61-90 days past due, and accounts are reviewed with a supervisor on a
weekly basis. Contracts between $20,000 and $30,000 are included on an ongoing
watch list at 61 days, and along with all items at 91 days+ are reviewed monthly
with senior management. Any repossessed equipment is remarketed on a best effort
basis through the manufacturer and/or a network of independent distributors.
DELINQUENCY EXPERIENCE
The following table describes DVI's delinquency experience:
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Delinquency Experience
----------------------
The following table sets forth some information with respect to the
delinquencies for the contracts originated or acquired by DVI, including
contracts held by DVI in its contract portfolio and contracts sold or otherwise
permanently funded, for the periods indicated.
<TABLE>
<CAPTION>
(dollars in thousands)
--------------------
As of June 30
-----------------------------------------------------------------------------------
As of
----- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Managed net
financed assets(2) $ $ $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
Delinquencies(1) % of % of % of % of % of % of
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-60 days $ $ $ $ $ $
61-90 days
91+ DAYS
- ---------- - - - -
Total
Delinquencies $ $ $ $ $ $
== = == == == =
</TABLE>
_________________
(1) Delinquencies as a percentage of total managed net financed assets.
Delinquencies reflects the entire outstanding balance on delinquent
contracts, excluding any international net financed assets.
(2) Managed net financed assets consists of gross financial receivables net of
unearned income, excluding any international net financed assets. Amounts
for ____ through ____ are based on servicing records for the entire
servicing portfolio. Amounts for ____ are based on financial statements and
may include additional assets.
LOSS EXPERIENCE
The following table sets forth information with respect to losses for contracts
originated or acquired by DVI, including contracts held by DVI in its portfolio
and contracts sold or otherwise permanently funded, for the periods indicated.
<TABLE>
<CAPTION>
Loss Experience
---------------
(dollars in thousands)
Year Ending June 30
Three Months --------------------------------------------------------
Ended _______ _____ _____ ______ ______ ____
--------------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Average managed net financed
assets (1)........................ $ $ $ $ $ $
Net charge-offs...................
Net charge-offs as a percentage
of average managed
net financed assets............... %(2) % % % % %
</TABLE>
(1) Presentation of amounts for ____ through ____ is based on averages of
quarterly period average balances for the entire servicing portfolio.
Presentation of amounts for ____ is based on averages of quarterly period
end balances from the financial statements and may include additional
assets.
(2) Annualized.
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<PAGE>
THE SERVICER
SERVICING OBLIGATIONS AND PROCEDURES
DVI as Servicer will service all Contracts constituting trust property
for the notes, and will do so in the same manner as it handles billing and
collection for Contracts which it owns itself. DVI will service the trust
property consistent with customary practices of other servicers in the medical
equipment finance industry, but in performing its duties as Servicer, DVI will
act 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 an Obligor. The Servicer shall at all times act in accordance with the
provisions of the Indenture and each Contract, and will comply with all
applicable requirements of law. Except as permitted by the terms of any Contract
following a default under such Contract, the Servicer shall not take any action
which would result in the interference with the Obligor's right to quiet
enjoyment of the Equipment during the term of the Contract.
Following each monthly Determination Date for determining payments on
the notes, the Servicer shall remit a Servicer Advance to the trustee, so that
the trustee will have immediately available funds by 11:00 a.m. New York time on
the second business day prior to the next Payment Date for the notes. Each
Servicer Advance must be sufficient to cover all amounts which were due and
unpaid on any Delinquent Contract on that Determination Date. The Servicer will
not be obligated to make a Servicer Advance for (a) any Defaulted Contract, (b)
any Contract that was finally liquidated on or prior to that Determination Date
or (c) any other Contract if the Servicer, in its good faith judgment, believes
that such Servicer Advance would be a Nonrecoverable Advance. If the Servicer
determines that any Servicer Advance it has made, or is contemplating making,
would be a Nonrecoverable Advance, the Servicer shall deliver to the trustee an
Officer's Certificate stating the basis for such determination. "OFFICER'S
CERTIFICATE" means a certificate delivered to the trustee and signed by the
Chairman, the President, a Vice President, the Treasurer, an Assistant
Treasurer, the Secretary, or an Assistant Secretary of the relevant entity.
The Servicer, for the benefit of the noteholders and the issuer, will
be responsible for managing, servicing and administering the trust property,
enforcing and making collections on the Contracts and for enforcing the rights
of the Issuer in any item of Equipment. The Servicer will be responsible, among
other duties, to:
(i) invoice each Obligor for all payments required to be paid by the
Obligor under the Contracts, which are called "CONTRACT PAYMENTS", in
the same manner as the Servicer does with respect to similar contracts
owned by it,
(ii) maintain for each Contract, each item of Equipment, each payment and
each Obligor, complete and accurate records in the same manner and to
the same extent as the Servicer does with respect to similar contracts
held for its own account, and
(iii) on behalf of DVI Receivables Corp. VIII, referred to as the
"TRANSFEROR", the Issuer and the trustee, see to it that there are
signed and filed all tax returns for sales, use, personal property and
other taxes, but not corporate income tax returns, and any and all
reports or licensing applications required to be filed in any
jurisdiction with respect to any Contract or any item of Equipment and
UCC financing statements necessary to perfect, or to maintain the
perfection of, the interest of the trustee in the trust property.
The terms of a Contract may be modified or adjusted by the Servicer at
the request of a lessee or a lessor. These modifications or adjustments may
include changes to the delivery date of Equipment, the
S-18
<PAGE>
cost of Equipment, the components of leased Equipment or corrections of
information that occur when a Contract enters the Servicer's administrative
servicing system. These modifications and adjustments may result in changes to
the acceptance date of the Contract, the amount of monthly payment under such
Contract, the monthly payment date of the Contract or changes to the Equipment.
However, none of these changes will:
(i) extend the Stated Maturity Date of the notes,
(ii) extend by more than __ months the Scheduled Termination Date of the
Contract,
(iii) materially shorten or lengthen the weighted average life of any class
of notes,
(iv) be done for Contracts representing more than ______ percent of the
Initial Aggregate Discounted Contract Balance of the Contracts,
(v) be done for any Contract that is ninety days or more delinquent,
(vi) decrease the Discounted Contract Balance of any Contract which is
modified in this way, unless the issuer deposits an amount equal to
that decrease in the Collection Account,
(vii) be inconsistent with the servicing standards set forth in Section
[4.01] of the Contribution and Servicing Agreement,
(viii) reduce or adversely affect the Obligor's obligation to maintain,
service, insure and care for the Equipment or permit the alteration of
any item of Equipment in any way which could adversely affect its
present or future value, or
(ix) otherwise adversely affect, individually or in the aggregate, the
interests of any of the Transferor, the issuer, the trustee or the
noteholders.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
As compensation to the Servicer for its servicing of the Contracts,
the Servicer will be entitled to receive on each Payment Date a servicing fee
from amounts on deposit in the Collection Account. This fee will equal the
product of (i) one-twelfth, or a smaller fraction for the initial Payment Date,
(ii) ____% and (iii) the Aggregate Discounted Contract Balance of all Contracts
at the beginning of the preceding Collection Period; this product is called the
"SERVICING FEE". The Servicing Fee, together with any portion of the Servicing
Fee that remains unpaid from prior Payment Dates, will be paid prior to
distribution of any amounts to the Noteholders.
In addition, the Servicer will be entitled to receive additional
compensation in the form of any late payment fees, the penalty portion of
interest paid on past due amounts, origination fees, documentation fees, other
administrative fees or similar charges allowed by applicable law for the
Contracts, and certain other similar fees paid by the Obligors; this additional
compensation is called "SERVICING CHARGES". The Servicer also is entitled to
receive all earnings from any eligible investments of amounts on deposit in the
Collection Account. Payments by or on behalf of Obligors will be allocated
between amounts then payable as 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 contracts, including
collecting and posting all payments, responding to inquiries
S-19
<PAGE>
of Obligors on the Contracts, investigating delinquencies, sending payment
coupons to Obligors, reporting tax information to Obligors, paying costs of
collection and disposition of defaults and policing the collateral for that
Contract. The Servicing Fee also will compensate the Servicer for administering
the Contracts, accounting for collections and furnishing statements to the
trustee. The Servicing Fee also will reimburse the Servicer for taxes,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the Contracts.
The Servicer will bear all costs of servicing the Contracts under the
Contribution and Servicing Agreement. The Servicer will be entitled to be
reimbursed for its actual out-of-pocket expenses paid to third parties
reasonably necessary to recover payments and proceeds from a Contract or
Equipment. This reimbursement will only come from amounts actually recovered for
any Contract or the related Equipment. In addition, the Servicer is entitled to
receive on each Payment Date any amounts previously paid by it as Servicer
Advances, where the Servicer has not been reimbursed and either the Contract has
become a Defaulted Contract or the amount has been determined to be a
Nonrecoverable Advance.
EVIDENCE OF COMPLIANCE BY SERVICER
The Contribution and Servicing Agreement requires that with each set
of financial statements delivered pursuant to the Contribution and Servicing
Agreement, the Servicer will deliver an Officer's Certificate stating:
(i) that the officer signing the Certificate has reviewed the activities
of the Servicer during the period covered by those financial
statements,
(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 to cure
the Event, and
(iii) that the officer has concluded that during that period the Servicer
has serviced the Contracts in compliance with the required procedures
or if not, then what were the instances of noncompliance.
OTHER SERVICING PROCEDURES
The third Business Day immediately preceding each Payment Date is
called a "DETERMINATION DATE". On each Determination Date, the Servicer shall
deliver a written report, called the "MONTHLY SERVICER REPORT", to each Rating
Agency and to the Trustee, who shall forward a copy to each noteholder.
The issuer, trustee or any noteholder is entitled to notify the
Servicer that an Obligor is in default under its Contract. If it receives that
notice, or if the Servicer otherwise learns that the Obligor is in default under
its Contract, the Servicer will take whatever action is appropriate to cause the
Obligor to cure its default. If the default can not be cured, the Servicer will
terminate or attempt to terminate the Contract and recover, or attempt to
recover, all damages suffered by the issuer or noteholders resulting from the
default. The Servicer will act in the same way as it does for its own contracts
and consistent with the customary practices of servicers in the medical
equipment finance industry.
The Servicer will use its best efforts to sell or re-lease any
Equipment under a Defaulted Contract or upon the expiration of any Contract
under which the Equipment is financed, in a timely manner
S-20
<PAGE>
and consistent with the Servicer's procedures for equipment owned by it, in
order to maximize the net proceeds from that Equipment, to the extent possible
under then prevailing market conditions.
RESIGNATION/REMOVAL OF THE SERVICER
The Contribution and Servicing Agreement will provide that the
Servicer may not resign from its obligations and duties as Servicer, except in
connection with an assignment permitted by the Contribution and Servicing
Agreement or upon a determination that the Servicer's performance of its duties
is no longer permissible under applicable law. No resignation will become
effective until the trustee or a successor servicer has assumed the Servicer's
servicing obligations and duties under the Contribution and Servicing Agreement.
The Servicer can only be removed if there has occurred a Servicer Event of
Default. See "DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS --
TERMINATION OF THE SERVICER" at page S-55 of this prospectus supplement.
VOLUNTARY TERMINATION OF SERVICER DUTIES
At the option of the Servicer, on any Payment Date on which the Pool A
Aggregate Discounted Contract Balance is less than __% of the Pool A Aggregate
Discounted Contract Balance as of the Closing Date, the Servicer can cause to be
deposited into the Collection Account the Repurchase Amount for each remaining
Contract, in which case the obligations and responsibilities of the Servicer
shall terminate.
The Servicer has the same option to terminate its obligations and
responsibilities for the Contracts in Pool B, on any Payment Date on which the
Pool B Aggregate Discounted Contract Balance is less than __% of the Pool B
Aggregate Discounted Contract Balance as of the Closing Date, so long as the
Servicer causes to be deposited into the Collection Account the Repurchase
Amount for each remaining Contract in Pool B.
YEAR 2000 COMPUTER PROGRAMMING COMPLIANCE
Based on its discussions with current systems vendors, the Servicer
believes that its software applications and operational programs will properly
recognize calendar dates beginning in the year 2000. In addition, the Servicer
is discussing with its customers and suppliers the possibility of any interface
difficulties relating to the year 2000 which may affect the Servicer. To date,
no significant concerns have been identified, but no one can be sure that any
year 2000-related operating problems or expenses will not arise with the
Servicer's computer systems and the software of its vendors, customers and
suppliers.
DVI RECEIVABLES CORP. VIII
DVI Receivables Corp. VIII, also called the "Transferor", is a
recently formed, limited purpose Delaware corporation. All of the Transferor's
outstanding capital stock is owned by DVI. The Transferor's principal executive
office is located at 500 Hyde Park, Doylestown, Pennsylvania, 18901. Its
telephone number is (215) 345-6600.
THE ISSUER
The Issuer is a ____________ organized under the laws of the State of
_________ in _______, 19__/20__. [DVI Receivables Corp. VIII is the sole owner
of the Issuer.]
S-21
<PAGE>
The Issuer will not engage in any business or investment activities
other than acquiring, owning, financing, transferring, receiving or pledging the
assets transferred to the Issuer and related activities set forth in its
organizational documents.
THE TRUSTEE
The trustee, ___________________, has its principal corporate trust
office at ______________.
The trustee's liability in connection with the issuance and sale of
the notes is limited solely to the express obligations of the trustee set forth
in the Indenture.
No resignation or removal of the trustee and no appointment of a
successor trustee shall become effective until the successor trustee has
accepted appointment. The trustee may resign at any time by giving written
notice of resignation to the Issuer and the noteholders. Any successor trustee
must meet the financial and other standards for qualifying as a successor
trustee under the Indenture. The trustee may be removed at any time by written
notice from the holders of Notes holding more than 50% of the Voting Rights. The
Issuer may remove the trustee under the limited circumstances set forth in
Section __ of the Indenture.
If the trustee resigns or is removed, the Issuer, with the consent of
the holders of Notes of the majority of the Voting Rights, shall promptly
appoint a successor trustee. If a successor trustee has not been appointed and
accepted appointment within 30 days after notice of resignation or removal, the
trustee or any noteholder may petition any court of competent jurisdiction for
the appointment of a successor trustee.
THE CONTRACTS
The Contracts consist of non-cancelable Finance Leases, Fair Market
Value Leases, Leveraged Lease Loans, Lease Receivable Purchases and Secured
Equipment Notes. The Obligors under the Contracts are primarily hospitals,
non-hospital medical facilities, physician groups and physicians, businesses,
institutions, and professionals who utilize the equipment under such Contract
for commercial use throughout the United States. No affiliates of DVI are or
will be Obligors under the Contracts. The Equipment is principally non-invasive
medical diagnostic and therapeutic equipment, as set forth on the table on page
S-30 of this prospectus supplement. The issuer will acquire most of the
Contracts, called the "INITIAL CONTRACTS", on the Closing Date. On the Closing
Date, the notes will be secured by the Initial Contracts, the other trust
property and the amounts on deposit in the Reserve Account.
The Initial Contracts will be purchased by the Issuer from the
Transferor pursuant to a Subsequent Contract Transfer Agreement, dated as of
____ (the "Subsequent Contract Transfer Agreement") between the Issuer and the
Transferor. The Transferor will have acquired the Initial Contracts from DVI
pursuant to a Contribution and Servicing Agreement, dated as of __ (the
"Contribution and Servicing Agreement") between DVI and the Transferor. The
Initial Contracts will be selected from all contracts owned by DVI based on the
selection criteria for eligible contracts specified in the Contribution and
Servicing Agreement and described in this prospectus supplement.
DVI believes that the Contracts are representative of all contracts
owned by DVI. The Contracts have been selected by DVI and will meet all the
criteria specified herein.
DVI shall deliver to the Trustee the original counterpart of each
Contract as well as copies of documents and instruments relating to each
Contract and evidencing the security interest in the Equipment
S-22
<PAGE>
securing each Contract All of these counterparts, documents and instruments are
called the "CONTRACT FILE". DVI, the Transferor and the Issuer will cause its
accounting records to be clearly and unambiguously marked to show that such
Contract has been transferred by DVI [to the Transferor, by the Transferor] to
the Issuer and pledged by the Issuer to the Trustee for the benefit of the
noteholders pursuant to the Indenture.
Some of the Contracts were originated by third parties known as
"BROKERS" and acquired by DVI through purchases in its usual course of business
from various entities to such entities. These purchases are called, "BROKERED
TRANSACTIONS". Contracts acquired by DVI in Brokered Transactions are purchased
by it using the same credit and equipment criteria that DVI applies to contracts
which it writes in its own name. Contracts acquired from Brokers are serviced by
DVI. See "DVI -- UNDERWRITING CRITERIA", at page S-14, of this prospectus
supplement and DVI FINANCIAL SERVICES, INC.--CREDIT UNDERWRITING AND REVIEW
PROCESS at page 4 of the prospectus, for a description of DVI's underwriting and
credit and collection policies. It is the policy of DVI to ensure that UCC
financing statements covering the underlying Equipment with respect to Contracts
acquired by DVI in Brokered Transactions are filed against the applicable
Obligors to the same extent as such financing statements would be filed if such
Contracts were originated by DVI and to arrange for such financing statements to
be assigned to DVI. In addition, DVI files financing statements against the
applicable Broker, to protect its interest in the Contracts and the other assets
transferred to it in Brokered Transactions.
The Contracts, other than the Leveraged Lease Loans, and the contracts
pledged as collateral for Leveraged Lease Loans are exclusively on a "net
basis", that is, the Obligor is responsible for all operating expenses,
including taxes and insurance premiums; except that some equipment leases
pledged as collateral for Leveraged Lease Loans may require the lessor to
maintain and service the Equipment. All Obligors are obligated to:
(1) remit all Contract Payments due;
(2) operate the Equipment in compliance with the manufacturers'
instructions;
(3) except for the Contracts described in the immediately preceding
sentence, maintain and service the Equipment; and
(4) insure the Equipment against casualty losses, liability for bodily
injury and against property damage.
Contract documentation also typically specifies that the Obligor is responsible
for compliance with all applicable laws and regulations applicable to operation
of the Equipment. Although the Contracts generally provide that the Obligor must
maintain the equipment, in some transactions the Obligor's rental or debt
service payments include fees for supplies and other transaction costs; these
fees are collected by DVI and remitted to the appropriate Broker or service
provider. These fees, as well as any other amounts included in an Obligor's
payments for which DVI is not the ultimate beneficiary, such as property taxes,
sales taxes, manufacturer's maintenance costs, insurance premiums and supplies
and transaction costs, do not constitute part of the trust property. Also not
included in the trust property are any Purchase Option Payments and any rights
of DVI in any accounts receivable of the Obligor which might be pledged to DVI
as collateral for other loans not part of the trust property.
The Contracts, other than the Leveraged Lease Loans and the equipment
leases pledged as collateral for a Leveraged Lease Loan, generally do not
provide for a right of the Obligor to prepay. However, under the Contribution
and Servicing Agreement, the Servicer is permitted to allow prepayment, in part
or in full, in an amount not less than the Prepayment Amount or Partial
Prepayment Amount, as applicable. In addition, in the event that an Obligor
requests an upgrade or trade-in of Equipment, the Servicer, after paying
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<PAGE>
the Prepayment Amount or substituting an Eligible Contract, may remove the
Equipment and related Contract from the trust property. The Servicer
historically has permitted obligors to terminate contracts early either in
connection with the execution of a new contract of replacement equipment, or
upon payment of a negotiated payoff amount, or both. Any Prepayment Amounts or
Partial Prepayment Amounts paid by the Servicer shall be deposited into the
Collection Account and shall be applied as a prepayment of the notes.
The Servicer will make reasonable efforts to collect all payments
under the Contracts, using the same collection procedures as the Servicer
follows with respect to the particular type of contract it services for itself
and others. Some of these other arrangements may result in the Servicer
acquiring a Defaulted Contract. The Servicer may sell the Equipment securing a
Defaulted Contract at a public or private sale, or take any other action
permitted by applicable law.
In describing the Contracts it is helpful to know the following
definitions:
"AGGREGATE DISCOUNTED CONTRACT BALANCE" means the sum of the
Discounted Contract Balances of all Contracts. The "DISCOUNTED CONTRACT BALANCE"
for any Contract, means, for the particular date on which that balance is
determined, an amount equal to the sum of :
(a) the present value of each remaining Contract Payment remaining due
under a Contract before the last day of the calendar month preceding
the Stated Maturity Date, discounted monthly, from the last day of the
Collection Period in which that Contract Payment is to become due, at
a rate equal to one-twelfth, or a smaller fraction for the initial
Payment Date, of the Discount Rate, and
(b) 100% of the unpaid balance, for that particular date of determination,
of Contract Payments remaining due under that Contract, but not
including any Contract Payment for which the Servicer had to make a
Servicer Advance; PROVIDED, HOWEVER, that, except for purposes of
computing the Repurchase Amount or for computing the Discounted
Contract Balance of a Predecessor Contract,
(x) on the date a Contract becomes a Defaulted Contract, the
Discounted Contract Balance for such Contract will be zero
and
(y) any purchase option payments will not be included in the
Discounted Contract Balance. For purposes of calculating the
Discounted Contract Balance of a Contract, any Contract
Payment for which the Contributor received on or prior to
the cut-off date a security deposit or an advance payment
shall be deemed to be zero.
"COLLECTION PERIOD" means, for a particular Payment Date, the entire
calendar month immediately preceding that Payment Date.
"DEFAULTED CONTRACT" means any Contract for which:
(i) any Contract Payment or portion thereof is delinquent for more
than 180 days as of the last day of the calendar month; or
(ii) the Servicer has not made a Servicer Advance to cover any
delinquent amounts, on the grounds that such advance would not be
recoverable; or
S-24
<PAGE>
(iii) any Contract which has been rejected in a bankruptcy proceeding
involving the obligor under that Contract; or
(iv) the lessor with respect to any Leveraged Lease Loan has rejected
the related lease in a bankruptcy proceeding involving that
lessor.
For purposes of clause (i), the delinquency of a Contract Payment is measured
using the Contract Payments required to be made during the term of such Contract
as it was written on the date that the Contract became part of the trust
property without taking into account any modifications, waivers or extensions
granted by the Servicer after that date, although modifications permitted
pursuant to Section [4.02] of the Contribution and Servicing Agreement will be
taken into account.
"DELINQUENT CONTRACT" means, as of any Determination Date, any
Contract, but not a Contract which became a Defaulted Contract prior to that
Determination Date, under which the Obligor has not paid all Contract Payments
which were due at the end of the prior calendar month. The delinquency of a
Contract Payment is measured based on the Contract Payments required to be made
during the term of that Contract as it was written on the date the Contract
became part of the trust property without taking into account any modifications,
waivers or extensions subsequently granted by the Servicer.
"DISCOUNT RATE" or "ACTUAL DISCOUNT RATE" means _______% per annum.
"INITIAL AGGREGATE DISCOUNTED CONTRACT BALANCE" means the initial
Aggregate Discounted Contract Balance, of the Initial Contracts, on the Cut-off
Date, calculated based on the actual Discount Rate of _______%, which we refer
to as the "ACTUAL DISCOUNT RATE".
"NONRECOVERABLE ADVANCE" means any Servicer Advance previously made
for a Delinquent Contract by the Servicer pursuant to the terms of the
Contribution and Servicing Agreement, which in the good faith judgment of the
Servicer and as certified by an officer of the Servicer, will not be ultimately
recoverable by the Servicer from payments by the Obligor, or disposition of the
Equipment, under that Contract.
"PARTIAL PREPAYMENT AMOUNT" means, for a particular Collection Period
and a Contract for which the Obligor wants to make a voluntary partial
prepayment and for which no Substitute Contract has been provided, an amount
equal to the excess, if any, of
(A) the difference between (i) the Discounted Contract Balance of
such Contract as of the first day of such Collection Period
together with one month of interest thereon at the Discount Rate
and (ii) the Discounted Contract Balance of such Contract as of
the first day of such Collection Period calculated based on the
amount of each Contract Payment payable by the Obligor after
giving effect to the reduction of such Contract Payment which
will result from such partial prepayment, minus
(B) any Contract Payments actually received by the Servicer with
respect to the prepaid portion of such Contract for the current
Collection Period on or before the date of such partial
prepayment.
"PAYMENT DATE" means the eleventh day of each month, or if such date
is not a business day, the immediately succeeding business day, commencing
________________.
"PREDECESSOR CONTRACT" means, for any Substitute Contract acquired by
the Transferor by substitution pursuant to Section [7] of the Contribution and
Servicing Agreement, the Contract or Contracts for which such Substitute
Contract has been substituted.
S-25
<PAGE>
"PREPAYMENT AMOUNT" means, with respect to any Contract, the sum of
(1) the Discounted Contract Balance as of the first day of the
Collection Period preceding such prepayment, together with
one month of interest thereon at the Discount Rate;
(2) any unreimbursed Servicer Advances with respect to such
Contract; and
(3) any Contract Payments due and outstanding under such
Contract that are not the subject of a Servicer Advance.
"REPURCHASE AMOUNT" means, for any Contract, the sum of (1) the
Discounted Contract Balance as of the first day of the Collection Period
preceding such repurchase, together with one month of interest thereon at the
Discount Rate and (2) any unreimbursed Servicer Advances with respect to such
Contract.
"SCHEDULED TERMINATION DATE" for a Contract means the date on which
the rights and obligations of the Obligor under a Contract will end.
"SERVICER ADVANCE" means an advance made for a Contract by the
Servicer in accordance with Section [5.01] of the Contribution and Servicing
Agreement.
"STATED MATURITY DATE" means for the Class B Notes, the Class C Notes,
the Class D Notes and the Class E Notes, the Payment Date occurring in
____________, and, for the Class A Notes, the Payment Date occurring in
_____________.
STATISTICAL INFORMATION FOR THE CONTRACTS
The statistical information presented in this prospectus supplement
concerning the contracts, referred to as the "STATISTICAL CONTRACTS", included
in the information in this prospectus supplement as of the cut-off date has been
calculated using an assumed discount rate of ____% per annum, called the
"ASSUMED DISCOUNT RATE". The Aggregate Discounted Contract Balance of the
Statistical Contracts as of the cut-off date is $______________ using the
Assumed Discount Rate. The Aggregate Discounted Contract Principal Balance of
the Initial Contracts as of the cut-off date is $______________ using the Actual
Discount Rate. The composition of the Initial Contracts as of the cut-off date
using the Actual Discount Rate will vary somewhat from the composition of the
Statistical Contracts as presented in this Prospectus Supplement. DVI does not
expect that any resulting variance will be material. In addition, some
Statistical Contracts included in the statistical information included in this
Prospectus Supplement may not meet the eligibility requirements as of the
cut-off date and will be removed from the Initial Contracts. Also, there may be
certain Initial Contracts that are not included as Statistical Contracts. As a
result, the composition as of the Closing Date for the final pool of Initial
Contracts will vary somewhat from the composition as presented in this
Prospectus Supplement. DVI does not expect that any resulting variance will be
material.
Detailed information for the Statistical Contracts is set forth below.
References in this Prospectus Supplement to percentages refer in each case to
the percentage of the aggregate Discounted Contract Balance calculated based on
the Assumed Discount Rate of the Statistical Contracts as of the cut-off date.
As of the cut-off date, the Statistical Contracts had remaining terms to
maturity of __to __ months. The final scheduled payment date of the Statistical
Contracts with the latest maturity will be in _____________. As of the cut-off
date, the Discounted Contract Balances of the Statistical Contracts range from
$_______ to $____________. No more than ____% of the Aggregate Discounted
Contract Balance of the Statistical Contracts is attributable to any one
Obligor, and the average Discounted Contract Balance of the Statistical
Contracts is approximately $_________.
S-26
<PAGE>
Information with respect to the Statistical Contracts is set forth in
the tables below. Figures may not add up exactly to the stated totals because of
rounding. All information has been calculated on the basis of the Assumed
Discount Rate.
The statistical information in this Prospectus Supplement does not
reflect any information regarding any Contracts that are Initial Contracts but
were not Statistical Contracts. Although the addition of these Contracts may
change relative data set forth in the tables below, all Initial Contracts must
satisfy particular conditions, including that they are Eligible Contracts. See
"ELIGIBILITY REQUIREMENTS FOR THE CONTRACTS" at page S-38 of this Prospectus
Supplement.
Any references in the tables below to (i) "NUMBER OF CONTRACTS" treat
separate equipment schedules to the same master contract as separate Contracts,
(ii) "ORIGINAL EQUIPMENT COST" means, with respect to Contracts acquired by DVI
from others, the amount recorded on DVI's records as paid by DVI to acquire that
Contract and the Broker's interest in the related Equipment, (iii) "DISCOUNTED
CONTRACT BALANCE" means that the statistical Discounted Contract Balances shown
have been calculated based on an Assumed Discount Rate of ____%. We believe that
the use of the Assumed Discount Rate does not materially alter the resulting
information in a way that would mislead prospective noteholders.
S-27
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF THE STATISTICAL
CONTRACT POOL BY EQUIPMENT LOCATION(1)
--------------------------------------
PERCENTAGE PERCENTAGE
PERCENTAGE OF OF
NUMBER OF AGGREGATE AGGREGATE
OF AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
CONTRA NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
LOCATION CTS CONTRACTS BALANCE BALANCE COST COST
- --------------- ------- ---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alaska % $ % $ %
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
District of
Columbia
Delaware
Florida
Georgia
Hawaii
Iowa
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Massachusetts
Maryland
Maine
Michigan
Minnesota
Missouri
Mississippi
Montana
North Carolina
Nebraska
New Hampshire
New Jersey
New Mexico
Nevada
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Vermont
Washington
Wisconsin
West Virginia
Wyoming ------- ---------- ---------- ---------- --------- -----------
Total ======= ==========% $========= =========% $======== ==========%
</TABLE>
(1) Based upon equipment addresses as reflected on the Servicer's records.
S-28
<PAGE>
DISTRIBUTION OF THE STATISTICAL
CONTRACT POOL BY REMAINING CONTRACT TERM
----------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
RANGE OF OF OF AGGREGATE OF AGGREGATE
REMAINING AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
TERMS NUMBER OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
(IN MONTHS) CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ----------- --------- --------- ---------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
% $ % $ %
---- ------ --------- -------- --------- ------
Total ==== ======% $======== ========% $========= =======%
</TABLE>
DISTRIBUTION OF THE STATISTICAL CONTRACT POOL BY ORIGINAL CONTRACT TERM
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
RANGE OF PERCENTAGE OF AGGREGATE OF AGGREGATE
ORIGINAL OF AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
TERMS NUMBER OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
(IN MONTHS) CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ----------- --------- ------------ ---------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
% $ % $ %
---- ------ -------- ------
Total ==== ======% $= ========% $= =======%
</TABLE>
S-29
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF THE STATISTICAL
CONTRACT POOL BY TYPE OF EQUIPMENT
----------------------------------
PERCENTAGE
PERCENTAGE OF AGGREGATE PERCENTAGE
NUMBER OF AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL OF AGGREGATE
OF NUMBER OF CONTRACT CONTRACT EQUIPMENT ORIGINAL
EQUIPMENT TYPE CONTRACTS CONTRACTS BALANCE BALANCE BALANCE EQUIPMENT COST
- -------------- --------- ------------ --------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Magnetic Resonance $
Imaging(1) % % $ %
Medical
Equipment(2)
Surgical(3)
Facilities(4)
Radiation Therapy(5)
Computer and
Peripherals(6)
Imaging System(7)
Computerized
Tomography(8)
Ultrasound(9)
Medical Devices
Physical Therapy(10)
Other
Laboratory
Mammography(11)
Optometry
Radiology(12)
X-Ray(13)
Furniture & Fixtures
Telecommunications
Urology
Dental Equipment
Patient Monitoring
--------- ------------ --------- ------------ --------- -------------
Total ========= ============% $======== ===========% $======== =============%
</TABLE>
__________________
(1) Magnetic Resonance Imaging "MRI" provides high resolution images of soft
tissues and is particularly useful for diagnosis of neurological disorders
of the spine, head and neck that would otherwise require risky exploratory
surgeries. More recently, MRI systems have become widely known for the
diagnosis of musculoskeletal injuries, most notably, knee and shoulder
problems related to sports injuries. MRI is based on the principle that
body tissues behave differently in response to the application of strong
but harmless magnetic fields which produce differentiated and contrasting
images of healthy versus diseased organs and tissues. MRI systems range in
selling price from $750,000 to $2,200,000.
(2) Medical Equipment represents all equipment located in a medical facility or
laboratory including, but not limited to, hyperbaric chambers, IV pumps,
teleradiology/telecardiology systems, blood gas analyzers, endoscopy
systems, and medical beds.
(3) Surgical equipment is patient treatment equipment used in surgical
procedures. Prices range from $5,000 to $1,000,000.
(4) Facilities are primarily specific improvements used to house MRI, CT and
Radiation Therapy units. The prices range from $50,000 to $500,000.
(5) Radiation Therapy equipment includes linear accelerators, radiation therapy
simulators and planning systems. These are used to provide radiation for
the treatment of patients diagnosed with cancer. Prices range from $100,000
to $1,500,000.
S-30
<PAGE>
(6) Computers and Peripherals are hardware and software used in practice
management, accounting, billing, patient management and research and
development within medical facilities. The cost of the computer systems
range from $5,000 to $2,000,000.
(7) Imaging Systems, excluding MRI and CT, are nuclear medicine systems that
generate metabolic or functional images to determine whether organs or
tissues function properly. Images are generated through the use of
short-lived radioactive isotopes which are ingested by or injected into
patients to study metabolic functions. As the isotopes decay, they emit
small doses of radioactivity which are detected by the nuclear medicine
camera to produce two-dimensional images. These systems range in selling
price from $50,000 to $500,000.
(8) Computerized Tomography, or "CT" is used to image tumors and for motion
sensitive, yet high contrast, diagnostic studies. It produces higher
contrast images than conventional X-ray. Computerized Tomography scanners
range in selling price from $300,000 to $800,000.
(9) Ultrasound is the preferred imaging modality for obstetrics, as well as
certain vascular and cardiac studies. Ultrasound systems emit ultrasonic
sound waves which are reflected by body tissues, then recorded and
processed into images by a computer. Selling prices for ultrasound systems
range from $50,000 to $750,000.
(10) Physical Therapy equipment is used in patient rehabilitation including
treadmill machines, fitness equipment and therapy simulators. Prices range
from $5,000 to $400,000.
(11) Mammography equipment is special equipment used in the detection of breast
cancer. Selling prices range from $30,000 to $500,000.
(12) Radiology equipment is used to determine the functional state of organs.
Prices range from $50,000 to $500,000.
(13) Conventional X-ray uses ionizing radiation to produce single-dimension
images on a sheet of transparent film. Other X-ray systems are used in
diagnostic imaging studies such as peripheral and coronary angiography.
Selling prices range from $5,000 to $500,000.
S-31
<PAGE>
DISTRIBUTION OF THE STATISTICAL
CONTRACT POOL BY DISCOUNTED CONTRACT BALANCE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
PERCENTAGE OF OF
OF AGGREGATE AGGREGATE
NUMBER AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
RANGE OF DISCOUNTED OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
CONTRACT BALANCES CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ------------------- --------- ---------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ - $ % $ % $ %
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
Over - - -------- ---
Total = =% $= ========% $= ===%
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF THE STATISTICAL
CONTRACT POOL BY ORIGINAL EQUIPMENT COST
----------------------------------------
PERCENTAGE PERCENTAGE
OF OF
PERCENTAGE AGGREGATE AGGREGATE
OF AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
RANGE OF ORIGINAL NUMBER OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
EQUIPMENT COSTS CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ------------------- --------- ------------ ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ - $ % $ % $ %
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
$ - $
--------- ------------ ---------- ------------ --------- ----------
Total ========= ===========% $========= ===========% $======== ==========%
</TABLE>
S-33
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF THE STATISTICAL
CONTRACT POOL BY TEN LARGEST OBLIGORS
-------------------------------------
PERCENTAGE PERCENTAGE
PERCENTAGE OF OF
OF AGGREGATE AGGREGATE
AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
NUMBER OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
OBLIGOR RANKING CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- --------------- --------- ------------ ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
% $ % $ %
Other --------- ------------ ---------- ----------- --------- ----------
Total ========= ============% $========= ==========% $======== =========%
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF THE STATISTICAL CONTRACT POOL BY CONTRACT TYPE
--------------------------------------------------------------
PERCENTAGE PERCENTAGE
OF OF
PERCENTAGE AGGREGATE AGGREGATE
OF AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
NUMBER OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
CONTRACT TYPE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- --------------- --------- ------------ ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Finance Leases % $ % $ %
Fair Market Value Leases
Leveraged Lease Loans
Secured Equipment Notes
Lease Receivables Purchases
Total --------- ------------ ---------- ----------- --------- ----------
========= ===========% $========= ==========% $======== =========%
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF THE STATISTICAL
CONTRACT POOL BY BUSINESS TYPE
------------------------------
PERCENTAGE PERCENTAGE
PERCENTAGE OF OF
OF AGGREGATE AGGREGATE
AGGREGATE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
NUMBER OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
BUSINESS TYPE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- --------------- --------- ------------ ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Multi-Modality Center % $ % $ %
MRI Only Center
MRI & Other Multiple
Center
Holding Company-Var.
Center
Dental Center
Hospital
Radiation Therapy Center
Physician Practices
Outpatient Surgery Center
Other Multiple Center
Internal Medicine
Chiropractor
Family/General Practice
Veterinarian
M.D. Clinic
Skilled Nursing Center/
Nursing Home
Hyperbaric Chambers
Optometrist
Gynecology & Obstetrics
Eye Clinics
Cardiovascular Disease
Osteopath
Phys. Pract. Mgt./Mgt. Serv.
Otolaryngology
Institutional Pharmacy
Other --------- ------------ ---------- ----------- --------- ----------
Total ========== ===========% $========= =========% $======== ==========%
</TABLE>
S-35
<PAGE>
SUBSTITUTE CONTRACTS
"POOL A" means the Contracts identified as constituting Pool A on the
schedule of Contracts attached to the Contribution and Servicing Agreement and
the Indenture. We call this the "CONTRACT SCHEDULE". "Pool A" also includes the
other trust property, such as the financed equipment related to the Pool A
Contracts. A "POOL A CONTRACT" means a Contract identified on the Pool A
Schedule, and an interest in the equipment under that Contract.
"POOL B" means the Contracts identified on the Contract Schedule as
constituting Pool B. "Pool B" also includes the other trust property such as the
financed equipment related to the Pool B Contract. A Pool B Contract is a
contract identified on the Pool B Schedule, and an interest in the equipment
under that contract.
"POOL A AGGREGATE DISCOUNTED CONTRACT BALANCE" means an interest in,
for any date of determination, the sum of the Discounted Contract Balances of
all Contracts in Pool A.
"POOL B AGGREGATE DISCOUNTED CONTRACT BALANCE" means, for any date of
determination, the sum of the Discounted Contract Balances of all Contracts in
Pool B.
Under some circumstances, the Servicer will have the right, but not
the obligation, at any time to substitute one or more Eligible Contracts and a
security interest in the Equipment under that Contract for a Pool A Contract. We
call this Eligible Contract and related rights a "SUBSTITUTE CONTRACT" and we
refer to this right of the Servicer as a "POOL A NON-PERFORMING CONTRACT
SUBSTITUTION"; this right can be exercised if:
(i) (A) any Contract Payment on the Pool A Contract is delinquent for
at least 60 consecutive days as of the most recent Determination
Date; or (B) a bankruptcy petition has been filed by or against
the Obligor or, with respect to a Leveraged Lease Loan, the
related lessor, under any Predecessor Contract; or (C) the Pool A
Contract became a Defaulted Contract for the first time during
the related Collection Period,
(ii) certain other conditions set forth in the Contribution and
Servicing Agreement have been satisfied and
(iii) the sum of (x) the Discounted Contract Balances of all
Substitute Contracts substituted pursuant to a Pool A
Non-Performing Contract Substitution and (y) amounts deposited by
the Servicer in the Collection Account in connection with all
such substitutions pursuant to a Pool A Non-Performing Contract
Substitution does not exceed __% of the Pool A Aggregate
Discounted Contract Balance as of the Closing Date.
In addition to the Servicer's Pool A Non-Performing Contract
Substitution rights, the Servicer will have the right, but not the obligation,
at any time to substitute one or more Substitute Contracts and a security
interest in the related Equipment for a Pool A Contract and a security interest
in the related Equipment. We call this right of the Servicer a "POOL A PREPAID
CONTRACT SUBSTITUTION"; this right can be exercised if:
(i) the Pool A Contract has been prepaid;
S-36
<PAGE>
(ii) certain conditions set forth in the Contribution and Servicing
Agreement have been satisfied; and
(iii) the sum of (x) the Discounted Contract Balance of all Substitute
Contracts substituted pursuant to a Pool A Prepaid Contract
Substitution and (y) amounts deposited by the Servicer in the
Collection Account in connection with all such substitutions
pursuant to a Pool A Prepaid Contract Substitution does not
exceed __% of the Pool A Aggregate Discounted Contract Balance as
of the Closing Date.
Under limited circumstances, the Servicer will have the right, but not
the obligation, to substitute Substitute Contracts and a security interest in
the related Equipment for a POOL B CONTRACT; we call this right a "POOL B
GENERAL CONTRACT SUBSTITUTION", which can be exercised if :
(i) certain conditions set forth in the Contribution and Servicing
Agreement have been satisfied; and
(ii) the sum of (x) the Discounted Contract Balances of all Substitute
Contracts substituted under this paragraph and (y) amounts
deposited by the Servicer in the Collection Account in connection
with all such substitutions under this paragraph does not exceed
__% of the Pool B Aggregate Discounted Balance as of the Closing
Date.
In addition to the Servicer's Pool B General Contract Substitution
rights, the Servicer will have the right, but not the obligation, at any time in
connection with the exercise by the Transferor of its substitution rights, to
substitute one or more Substitute Contracts and a security interest in the
related Equipment for a Pool B Contract and a security interest in the related
Equipment; we refer to this right as a "POOL B PREPAID CONTRACT SUBSTITUTION",
which can be exercised if:
(i) the Pool B Contract has been prepaid;
(ii) certain conditions set forth in the Contribution and Servicing
Agreement have been satisfied; and
(iii) the sum of (x) the Discounted Contract Balance of all Substitute
Contracts substituted pursuant to Pool B Prepaid Contract
Substitution and (y) amounts deposited by the Servicer in the
Collection Account in connection with all such substitutions
pursuant to Pool B Prepaid Contract Substitution does not exceed
__% of the Pool B Aggregate Discounted Contract Balance as of the
Closing Date. Unless each Rating Agency has given its prior
consent, the sum of clauses (iii)(x) and (iii)(y) in this
paragraph may not exceed __% of the Pool B Aggregate Discounted
Balance as of the Closing Date.
Unless each Rating Agency has given its prior consent, the sum of
clauses (iii)(x) and (iii)(y) in this paragraph may not exceed __% of the Pool B
Aggregate Discounted Balance as of the Closing Date.
S-37
<PAGE>
ELIGIBILITY REQUIREMENTS FOR THE CONTRACTS
Any Contract must meet detailed standards to be eligible for transfer
to the Issuer. We call a contract that meets these standards an "ELIGIBLE
CONTRACT". Among the standards that Eligible Contracts must satisfy are the
requirements that, as of the cut-off date and for the Initial Contracts taken as
a whole:
(A) the Discounted Contract Balance of any Contract will not include any
Purchase Option Payment under that Contract, or any Contract Payment
for which the Contributor or anyone else received a security deposit
on or before the cut-off date Date for that Contract;
(B) no item of Equipment under that Contract has been repossessed;
(C) no Contract is a refinancing of any delinquent amounts under a prior
lease, security agreement or loan with the same Obligor relating to
the same Equipment;
(D) the Obligor under each Contract has a place of business in, or is
organized under, the laws of any state or territory of the United
States of America;
(E) the rights and obligations of the Obligor under each Contract will
terminate no later than _______________;
(F) the Discounted Contract Balance of Contracts that have a "BALLOON
PAYMENT", which means a final Contract Payment that is significantly
larger than the other scheduled payments, is not more than ___% of the
Aggregate Discounted Contract Balance of all the Initial Contracts,
and any Balloon Payment must not be more than ___ times any other
Contract Payment;
(G) the Discounted Contract Balance of Contracts that have non-level
payments, excluding Contracts that have Balloon Payments, is not more
than ____% of the Aggregate Discounted Contract Balance of all the
Initial Contracts;
(H) as of the Closing Date, the sum of the Discounted Contract Balances of
all Contracts with Equipment located in any one State will not exceed
__% of the Aggregate Discounted Principal Contract Balance of all the
Initial Contracts, no single Obligor will have a Discounted Contract
Balance that exceeds ____% of the Aggregate Discounted Contract
Balance, and the sum of the Discounted Contract Balances of the
largest seven Obligors shall not exceed ____% of the Aggregate
Discounted Contract Balance;
(I) not more than ____% of the Aggregate Discounted Contract Balance of
the Initial Contracts will arise from Contracts which do not
constitute loans to manufacturers, wholesalers, and retailers of, and
to prospective purchasers of, specified merchandise, insurance and
services; and
(J) the Obligor under each Contract has made at least one Contract Payment
prior to the cut-off date for that Contract in addition to any payment
made at the time of the signing of the Contract, except that we allow
Contracts representing ___% of the Aggregate Discounted Contract
Balance of the Initial Contracts to provide for the initial Contract
Payment to be due within 30 days of the Payment Date occurring in
_____________.
S-38
<PAGE>
ELIGIBILITY REQUIREMENTS FOR SUBSTITUTE CONTRACTS
The Servicer will have the right, but not the obligation, at any time
to substitute a Substitute Contract for a Contract owned by the Issuer, if:
(i) the predecessor Contract has been prepaid on a Determination Date as
the result of the casualty to the related Equipment; or any Scheduled
Payment on the predecessor Contract is delinquent for at least sixty
consecutive days as of the most recent Determination Date; or a
bankruptcy petition has been filed by or against the Obligor under the
predecessor Contract; or the predecessor Contract became a Defaulted
Contract for the first time during the prior Collection Period;
(ii) the sum of (x) the aggregate Contract Principal Balances of all
Substitute Contracts so substituted and (y) amounts deposited by the
Servicer in the Collection Account in connection with all such
substitution does not exceed __% of the Aggregate Discounted Contract
Balance as of the Closing Date; and
(iii) other conditions, more specifically set forth in the Contribution and
Servicing Agreement have been satisfied.
To become a Substitute Contract, a Contract must meet all the criteria
of an Eligible Contract set forth above.
S-39
<PAGE>
DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS
The notes are described on the cover page of this prospectus
supplement and will be issued pursuant to the Indenture entered into between the
Issuer and the trustee. The following summary describes certain provisions of
the notes, the Indenture and the Contribution and Servicing Agreement, but is
not complete and prospective investors should read those agreements in their
entirety.
GENERAL
The notes are limited recourse obligations of the Issuer only, with
recourse limited to the extent of the trust property, and are nonrecourse to
DVI, the Servicer, the trustee or any other person. The Issuer will agree in the
Indenture and in the Notes to pay to the Class A Noteholders, the Class B
Noteholders, the Class C Noteholders, the Class D Noteholders and the Class E
Noteholders in the amounts and on the dates as are set forth in the Indenture,
(a) an amount of principal equal to the sum of (i) Monthly Principal for such
Class and (ii) Overdue Principal for such Class and (b) an amount of interest
equal to the sum of (i) the Monthly Interest for such Class and (ii) the Overdue
Interest for such Class. Interest accrues on the Notes from Payment Date to
Payment Date, and is payable, along with required principal, on the ________ of
each month, or if such day is not a business day, the immediately following
business day, except that with respect to the initial Payment Date, interest
accrues on the notes from the Closing Date to such Payment Date.
The Notes will be issued, maintained and transferred on the book-entry
records of The Depository Trust Company, called "DTC", and its participants.
Each note will be initially issued as a fully registered note in minimum
denominations of $500,000 and integral multiples of $1,000 above that amount,
except that one note of each Class may be issued in a different amount as may be
necessary so that the notes of that Class evidence the full initial principal
balance of that note. The notes will be represented by one or more certificates
registered in the name of "Cede & Co.", the nominee of DTC; notes so registered
are called "BOOK-ENTRY SECURITIES". A person acquiring an interest in the notes
is called a "BENEFICIAL OWNER" and will be entitled to receive a certificate
representing that person's interest, called a "DEFINITIVE NOTE", except as set
forth below under "BOOK-ENTRY REGISTRATION OF THE NOTES--DEFINITIVE SECURITIES"
at page S-52. Unless and until Definitive Securities are issued for the notes
under the limited circumstances described in this Prospectus Supplement, all
references to actions by noteholders with respect to the notes shall refer to
actions taken by DTC upon instructions from its Participants, and all references
in this Prospectus Supplement to distributions, notices, reports and statements
to noteholders with respect to the notes shall refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the notes,
for distribution to Beneficial Owners by DTC in accordance with DTC procedures.
Payments on the notes are required to be made by the trustee on each
Payment Date, to persons in whose names notes are registered on the Record Date
for that Payment Date. The first Payment Date for the notes will be
________________. Payments are required to be made by the trustee by wire
transfer of immediately available funds, to the registered holders of the Notes,
initially, Cede & Co., appearing in the Note Register on the Record Date; if no
account is specified for a noteholder, the trustee will mail a check to the
address for that noteholder appearing in the Note Register on that Record Date.
"NOTE REGISTER" means a register kept by the trustee in the Corporate Trust
Office in which the trustee shall provide for the registration of Notes and the
transfer of Notes. "PARTICIPANT" means a participating organization of DTC.
S-40
<PAGE>
DEFINITIONS RELATING TO THE NOTES
It will be helpful in reading this portion of the prospectus
supplement to refer to the following definitions:
"CLASS A MONTHLY INTEREST" means, for any Payment Date, the product of
(i) the fraction of which the numerator is the actual number of days elapsed
during the related month and the denominator of which is 360 days, (ii) the
Class A Note Rate and (iii) the Class A Note Balance on the immediately
preceding Payment Date, or, in the case of the first Payment Date, the Closing
Date, after giving effect to all principal payments on the Class A Notes on that
prior Payment Date. The Class A Monthly Interest shall be calculated based upon
a twelve month year of thirty days in each month, except for the first Payment
Date, for which interest shall accrue from the Closing Date to, but excluding,
such Payment Date.
"CLASS A MONTHLY PRINCIPAL" means, (A) for any Payment Date other than
the Class A Stated Maturity Date, the product of (a) the Class A Percentage and
(b) Monthly Principal and (B) on the Class A Stated Maturity Date, the entire
amount of the then Outstanding Note Balance.
"CLASS A OVERDUE INTEREST" means, for any Payment Date, the excess, if
any, of (a) the aggregate amount of Class A Monthly Interest payable on all
prior Payment Dates over (b) the aggregate amount of interest actually paid to
the Class A Noteholders on all prior Payment Dates.
"CLASS A OVERDUE PRINCIPAL" means, for any Payment Date, the excess,
if any, of (a) the aggregate amount of Class A Monthly Principal due on the
Class A Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class A Noteholders on all prior Payment Dates.
"CLASS A PERCENTAGE" means _____%.
"CLASS B MONTHLY INTEREST" means, for any Payment Date, the product of
(i) one-twelfth, (ii) the Class B Note Rate and (iii) the Class B Note Balance
on the immediately preceding Payment Date, or, in the case of the first Payment
Date, the Closing Date, after giving effect to all principal payments on the
Class B Notes on that prior Payment Date. The Class B Monthly Interest shall be
calculated based upon a twelve month year of thirty days in each month, except
for the first Payment Date, for which interest shall accrue from the Closing
Date to, but excluding, such Payment Date.
"CLASS B MONTHLY PRINCIPAL" means (A) on any Payment Date other than
the Class B Stated Maturity Date, the product of (x) the Class B Percentage and
(y) Monthly Principal, and (B) on the Class B Stated Maturity Date, the entire
amount of the then outstanding Class B Note Balance.
"CLASS B OVERDUE INTEREST" means, for any Payment Date, the excess, if
any, of (a) the aggregate amount of Class B Monthly Interest payable on all
prior Payment Dates over (b) the aggregate amount of interest actually paid to
the Class B Noteholders on all prior Payment Dates.
"CLASS B OVERDUE PRINCIPAL" means, for any Payment Date, the excess,
if any, of (a) the aggregate amount of Class B Monthly Principal due on the
Class B Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class B Noteholders on all prior Payment Dates.
"CLASS B PERCENTAGE" means ____%.
"CLASS C MONTHLY INTEREST" means, for any Payment Date, the product of
(i) one-twelfth, (ii) the Class C Note Rate and (iii) the Class C Note Balance
on the immediately preceding Payment Date,
S-41
<PAGE>
or, in the case of the first Payment Date, the Closing Date, after giving effect
to all principal payments on the Class C Note on that prior Payment Date. The
Class C Monthly Interest shall be calculated based upon a twelve month year of
thirty days in each month, except for the first Payment Date, for which interest
shall accrue from the Closing Date to, but excluding, such Payment Date.
"CLASS C MONTHLY PRINCIPAL" means, (A) on any Payment Date other than
the Class C Stated Maturity Date, an amount equal to the product of (x) the
Class C Percentage and (y) the Monthly Principal and (B) on the Class C Stated
Maturity Date, the entire amount of the then outstanding Class C Note Balance.
"CLASS C OVERDUE INTEREST" means, for any Payment Date, the excess, if
any, of (a) the aggregate amount of Class C Monthly Interest payable on all
prior Payment Dates over (b) the aggregate amount of interest actually paid to
the Class C Noteholders on all prior Payment Dates.
"CLASS C OVERDUE PRINCIPAL" means, for any Payment Date, the excess,
if any, of (a) the aggregate amount of Class C Monthly Principal due on the
Class C Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class C Noteholders on all prior Payment Dates.
"CLASS C PERCENTAGE" means ____%.
"CLASS D MONTHLY INTEREST" means, for any Payment Date, the product of
(i) one-twelfth, (ii) the Class D Note Rate and (iii) the Class D Note Balance
on the immediately preceding Payment Date, or in the case of the first Payment
Date, the Closing Date, after giving effect to all principal payments on the
Class D Notes on that prior Payment Date. The Class D Monthly Interest shall be
calculated based upon a twelve month year of thirty days in each month, except
for the first Payment Date, for which interest shall accrue from the Closing
Date to, but excluding, such Payment Date.
"CLASS D MONTHLY PRINCIPAL" means (A) on any Payment Date other than
the Class D Stated Maturity Date, the product of (x) the Class D Percentage and
(y) Monthly Principal, and (B) on the Class D Stated Maturity Date, the entire
amount of the then outstanding Class D Note Balance.
"CLASS D OVERDUE INTEREST" means, for any Payment Date, the excess, if
any, of (a) the aggregate amount of Class D Monthly Interest payable on all
prior Payment Dates over (b) the aggregate amount of interest actually paid to
the Class D Noteholders on all prior Payment Dates.
"CLASS D OVERDUE PRINCIPAL" means, for any Payment Date, the excess,
if any, of (a) the aggregate amount of Class D Monthly Principal due on the
Class D Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class D Noteholders on all prior Payment Dates.
"CLASS D PERCENTAGE" means ____%.
"CLASS E MONTHLY INTEREST" means, for any Payment Date, the product of
(i) one-twelfth, (ii) the Class E Note Rate and (iii) the Class E Note Balance
on the immediately preceding Payment Date, or in the case of the first Payment
Date, the Closing Date, after giving effect to all principal payments on the
Class E Note on that prior Payment Date. The Class E Monthly Interest shall be
calculated based upon a twelve month year of thirty days in each month, except
for the first Payment Date, for which interest shall accrue from the Closing
Date to, but excluding, such Payment Date.
"CLASS E MONTHLY PRINCIPAL" means, (A) on any Payment Date other than
the Class E Stated Maturity Date, an amount equal to the product of (x) the
Class E Percentage and (y) the Monthly
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Principal and (B) on the Class E Stated Maturity Date, the entire amount of the
then outstanding Class E Note Balance.
"CLASS E OVERDUE INTEREST" means, for any Payment Date, the excess, if
any, of (a) the aggregate amount of Class E Monthly Interest payable on all
prior Payment Dates over (b) the aggregate amount of interest actually paid to
the Class E Noteholders on all prior Payment Dates.
"CLASS E OVERDUE PRINCIPAL" means, as of any Payment Date, the excess,
if any, of (a) the aggregate amount of Class E Monthly Principal due on the
Class E Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class E Noteholders on all prior Payment Dates.
"CLASS E PERCENTAGE" means ____%.
"MONTHLY INTEREST" means as of any Payment Date, the sum of (i) the
Class A Monthly Interest, (ii) the Class B Monthly Interest, (iii) the Class C
Monthly Interest, (iv) the Class D Monthly Interest, and (v) the Class E Monthly
Interest.
"MONTHLY PRINCIPAL" means, for any Payment Date, an amount equal to
the excess of (a) the Aggregate Discounted Contract Balance at the close of
business on the last day of the second preceding Collection Period over (b) the
Aggregate Discounted Contract Balance at the close of business on the last day
of the immediately preceding Collection Period.
"NOTE BALANCE" means, on the Closing Date, $___________ for the Class
A Notes, $_________ for the Class B Notes, $_________ for the Class C Notes,
$_________ for the Class D Notes and $_________ for the Class E Notes and
thereafter shall equal the Note Balance for such class reduced by all principal
payments on such class of notes.
"NOTE RATE" the annualized rate of interest on the relevant class of
notes.
"OUTSTANDING" or "OUTSTANDING" means, when used with reference to the
notes and as of any particular date, any note theretofore and thereupon being
authenticated and delivered except:
(i) any note canceled by the trustee at or before said date;
(ii) any note, or portion thereof, for payment of redemption of
which monies equal to the principal amount or redemption price thereof, as the
case may be, with interest to the date of maturity or redemption, shall have
theretofore been irrevocably deposited with the trustee (whether upon or prior
to maturity or the redemption date of such note);
(iii) any note in lieu of or in substitution for which another
note shall have been authenticated and delivered; and
(iv) any note owned by the Transferor or any Affiliate of the
Transferor, except that, in determining whether the trustee shall be entitled to
rely upon any request, demand, authorization, direction, notice, consent or
waiver of noteholders under the Indenture, only notes which the trustee knows to
be so owned shall be disregarded.
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"OVERDUE INTEREST" means, for any Payment Date, the sum of (i) the
Class A Overdue Interest, (ii) the Class B Overdue Interest, (iii) the Class C
Overdue Interest, (iv) the Class D Overdue Interest and (v) the Class E Overdue
Interest.
CONVEYANCE OF TRUST PROPERTY
On the Closing Date, DVI will convey to the Transferor, the Transferor
will transfer to the Issuer, and the Issuer will pledge to the trustee, all of
its right, title and interest in and to the trust property. The trust property
does not include some amounts included in the Obligor's payments to which DVI is
not entitled, such as property taxes, sales, taxes, manufacturer's maintenance
costs, insurance premiums and supplies and transaction costs. Also not included
in the trust property are: any Purchase Option Payments; ownership of Equipment
that is subject to the Fair Market Value Leases that DVI originated, although
that trust property includes a first priority perfected security interest in
that equipment; or any rights of DVI in any accounts receivable of the Obligor
which have been pledged to DVI as collateral for loans other than that Obligor's
Contract.
A copy of the Contract Schedule has been delivered to the trustee for
the Initial Contracts. The Contract Schedule will include for each Contract, a
number identifying the Contract, the Obligor's name and address, the original
maturity of each Contract, the type of Equipment subject to each Contract, the
remaining maturity of each Contract, the Discounted Contract Balance as of the
cut-off date, the amount and scheduled due date of each Contract Payment due
under each of the Contracts and the original amount funded on each Contract.
DVI also will deliver to the trustee the Contract File for each
Contract. DVI and the Issuer each will mark its accounting records to show that
each Contract has been conveyed by DVI to the Transferor, and by the Transferor
to the Issuer, and pledged by the Issuer to the trustee for the benefit of the
noteholders.
DVI REPURCHASE OBLIGATION FOR CONTRACT MISREPRESENTATIONS
DVI will make representations and warranties in the Contribution and
Servicing Agreement, regarding the Contracts and the Equipment, for the benefit
of the trustee, the noteholders, the Issuer and the Transferor. DVI will be
obligated to repurchase or provide a substitute contract for any Contract where
any misrepresentation or breach of warranty materially and adversely affects the
interest of the noteholders in that Contract and the breach has not been cured
by DVI, or waived by the majority of noteholders' Voting Rights. The trustee
will be granted the right to enforce such representations and warranties
directly against DVI.
INDEMNIFICATION
The Contribution and Servicing Agreement provides that DVI, as
contributor, will defend and indemnify the Servicer, the trustee, the
Transferor, the Issuer and the noteholders against any and all losses, claims,
damages and liabilities suffered by any of those parties by reason of a breach
by DVI of its obligations under the Contribution and Servicing Agreement.
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 noteholders, for any action taken or not taken in good faith under the
Contribution and Servicing Agreement relating to any Contract, including any
Defaulted Contract, or the Equipment under that Contract. This exception from
liability shall not apply to: (a) any breach of warranties or representations
made by it in the Contribution and Servicing Agreement
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or in any certificate delivered in conjunction with the purchase of the notes or
(b) for any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of its duties under the
Contribution and Servicing Agreement or by reason of reckless disregard of its
obligations and duties under that Agreement.
INDENTURE ACCOUNTS; INVESTMENT OF FUNDS
The Servicer will establish one or more accounts, each called a
"LOCKBOX ACCOUNT", in the name of the trustee for the benefit of the
noteholders. Each Lockbox Account will be a segregated account initially
established and maintained with ________________or other bank , called the
"LOCKBOX BANK", as the Servicer may select. The Servicer will give the trustee
prior written notice of any change in the location of any Lockbox Account and
the Servicer will give at least 10 days' prior written notice of the new
location to each Obligor.
The trustee, pursuant to the Indenture, is required to establish and
maintain the "COLLECTION ACCOUNT", the "DISTRIBUTION ACCOUNT" and the "RESERVE
ACCOUNT", each in the name of the trustee and for the benefit of the noteholders
and the Issuer to the extent of their interest in those accounts. Each account
will be one or more segregated trust accounts held by the trustee. The
Collection Account shall be two trust accounts, which, for the purposes of the
Transaction Documents, shall be deemed one account and from which funds shall be
drawn equally to make the payments from the Collection Account pursuant to the
Indenture. In addition, the trustee will establish and maintain sub-accounts of
the Distribution Account for each Class of notes.
The Indenture permits the Servicer to instruct how amounts in the
Collection Account and the Reserve Account will be invested in certain types of
highly rated investments, which are called "ELIGIBLE INVESTMENTS". All amounts
invested in Eligible Investments and all investments made with those amounts,
including all income and other gain from the investments, will be held by the
trustee in the accounts as part of the trust property as provided in the
Indenture. Any net loss of principal, determined on a month-by-month basis,
resulting from the investment of the amounts in the Collection and Distribution
Accounts will be charged to the Issuer, and the Issuer shall reimburse such
account within three Business Days of being notified of a net loss of principal
by the trustee. The trustee shall not in any way be held liable because of any
insufficiency in the Collection and Distribution Accounts resulting from losses
on investments made in accordance with the Indenture except in its capacity as
obligor under an Eligible Investment. The trustee shall not be liable for any
investment made by it in accordance with the Indenture on grounds that it could
have made a more favorable investment.
All payments and proceeds of the Contracts collected in the Lockbox
Account, including any investment earnings, will be remitted to the trustee or
deposited into the Collection Account. Except under certain conditions, the
Servicer will be required to remit such amounts to the trustee or deposit such
amounts into the Collection Account within two Business Days of receipt. If
Rating Agency conditions are satisfied, however, the deposit of collections for
a particular Collection Period will be made by the Servicer within two Business
Days prior to the related Payment Date. Pending deposit into the Collection
Account, collections may be invested by the Servicer at its own risk and for its
own benefit, and will not be segregated from funds of the Servicer.
RESERVE ACCOUNT
The Reserve Account is a segregated trust account in the name of the
trustee and will be funded by deposit of the Reserve Account Deposit Amount from
amounts otherwise able to be distributed to the Issuer on the Closing Date or
any Payment Date. If there exists a shortfall between the Available
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Funds and interest or principal due on the Payment Date for any of the notes,
regardless of whether an Amortization Event has occurred and is continuing,
amounts on deposit in the Reserve Account will be available to make payments of
interest to, first, the Class A Noteholders, then, the Class B Noteholders, and
then to pay principal on, first, the Class A Notes, then, the Class B Notes, and
then to Classes C, D and E. If an Amortization Event has occurred and is
continuing, the principal due on each class shall be the entire Note Balance for
such class of Notes. Amounts on deposit in the Reserve Account may be paid to
the Issuer, if, and only to the extent that, such amounts in the Reserve Account
exceed the Reserve Account Required Amount.
The "RESERVE ACCOUNT REQUIRED AMOUNT" means, with respect to each
Payment Date after the initial Payment Date, the lesser of either (i) the
Initial Reserve Account Required Amount or (ii) the sum of (a) the Class A Note
Balance, (b) the Class B Note Balance, (c) the Class C Note Balance, (d) the
Class D Note Balance and (e) the Class E Note Balance. HOWEVER, if a Restricting
Event has occurred and is continuing, then the Reserve Account Required Amount
shall be equal to the sum of (i) the Reserve Account Required Amount on the
preceding Payment Date after any additions to or withdrawals from the Reserve
Account on such Payment Date and (ii) all amounts otherwise payable to the
Issuer.
A "RESTRICTING EVENT" means the condition that exists on any Payment
Date if: (i) a Delinquency Condition exists or (ii) an Indenture Event of
Default has occurred and is continuing.
Other useful definitions in this connection are:
A "DELINQUENCY CONDITION" will exist on any Determination Date if (x)
the quotient of (1) the sum of the Discounted Contract Balances of all Contracts
listed as more than 90 days delinquent as of the last day of the _____ preceding
calendar months, divided by (2) _____ exceeds (y) the product of (1) ____ and
(2) the quotient of (A) the sum of the Aggregate Discounted Contract Balance as
of the last day of the _____ preceding Collection Periods, divided by (B) _____.
"RESERVE ACCOUNT DEPOSIT AMOUNT" means, on any Payment Date, an amount
equal to the excess of (A) the Reserve Account Required Amount over (B) the
amount on deposit in the Reserve Account after giving effect to any Reserve
Account Draws on such Payment Date.
The "INITIAL RESERVE ACCOUNT REQUIRED AMOUNT", is $____________, which
equals ___% of the Initial Aggregate Discounted Contract Balance on the initial
Payment Date.
The obligation of the trustee to deposit amounts into the Reserve
Account shall be limited to the deposit of amounts then in the Collection
Account after payment of higher priority claims under Section [3.04(b)] of the
Indenture. The trustee shall not have any responsibility to determine the amount
or adequacy of funds on deposit in the Reserve Account, or the amount of any
deposits to or withdrawals from the Reserve Account. The Issuer agrees to treat
assets in the Reserve Account and all earnings on those assets as its assets and
earnings for federal, state and local tax purposes and not to sell, transfer or
otherwise dispose of its interest in those assets. Assets in the Reserve Account
are called the "RESERVE ACCOUNT PROPERTY".
On each Payment Date, the trustee shall, on the basis of the Monthly
Servicer Report, deposit in the Reserve Account, as set forth in Section
[3.04(b)] of the Indenture, an amount equal to the Reserve Account Deposit
Amount. If on any Payment Date, Available Funds are less than the Priority
Payments, the trustee shall withdraw from the Reserve Account the excess of the
Priority Payments over the Available Funds according to Section [3.04(c)] of the
Indenture. On each Payment Date, if the balance in the Reserve Account is
greater than the Reserve Account Requirement, the trustee shall release and, at
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the instruction of the Servicer, shall pay the amount of the excess to the
Issuer. The amount of the excess paid to the Issuer will be called a "RESERVE
ACCOUNT WITHDRAWAL". Amounts properly paid to the Issuer, either directly from
the Distribution Account without deposit in the Reserve Account or from the
Reserve Account, shall be deemed released from the trust property, and the
Issuer shall not be required to refund any such paid amounts.
With respect to the Reserve Account Property, the Issuer and the
trustee agree that any Reserve Account Property that is held in deposit accounts
shall be held solely in the name of the trustee, on behalf of the Noteholders.
Each such deposit account shall be subject to the exclusive custody and control
of the trustee, and the trustee shall have sole signature authority with respect
to those deposit accounts.
Upon termination of the Indenture, any amounts on deposit in the
Reserve Account, after payment of amounts due to the noteholders shall be paid
to the Issuer upon the Issuer's written request to the trustee.
FLOW OF FUNDS
The Servicer shall remit or cause the Lockbox Bank at which each
lockbox account is maintained to remit to the Collection Account all amounts
received by them for the trust property not later than the second business day
after receipt. However, if permitted by the Rating Agencies, the Servicer will
on or before the second Business Day prior to each Payment Date remit or cause
each Lockbox Bank to remit to the Collection Account all amounts received by it
on or in respect of the Contracts during such Collection Period. The trustee
shall deposit all other amounts received by it in respect of the Contracts
according to the Indenture.
Unless the Notes have been declared due and payable under the
Indenture and monies collected by the trustee are being applied accordingly, the
trustee on each Payment Date shall withdraw and pay or cause to be paid from the
excess of (i) all amounts on deposit in the Collection Account on the second
Business Day preceding such Payment Date over (ii) any portion thereof
representing Contract Payments due, or voluntary prepayments deposited in the
Collection Account, after the end of the related Collection Period, including
any investment income with respect to monies on deposit in the Collection
Account. This excess will be called the "AVAILABLE FUNDS", and will be applied
in the following order of priority:
(i) to the Servicer, the Servicing Fee due to the Servicer on
such Payment Date;
(ii) to the Servicer, any unreimbursed Nonrecoverable Advances or
Servicer Advances previously made with respect to Delinquent
Contracts;
(iii) to the Class A Distribution Sub-Account, in the following
order of priority, the sum of: (A) the Class A Monthly Interest; and
(B) the Class A Overdue Interest, if any;
(iv) to the Class B Distribution Sub-Account, in the following
order of priority, in the sum of: (A) the Class B Monthly Interest;
and (B) the Class B Overdue Interest, if any;
(v) to the Class C Distribution Sub-Account, in the following
order of priority, the sum of: (A) the Class C Monthly Interest; and
(B) the Class C Overdue Interest, if any;
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(vi) to the Class D Distribution Sub-Account, in the following
order of priority, in the sum of: (A) the Class D Monthly Interest;
and (B) the Class D Overdue Interest, if any;
(vii) to the Class E Distribution Sub-Account, in the following
order of priority, the sum of: (A) the Class E Monthly Interest; and
(B) the Class E Overdue Interest, if any;
(viii) PROVIDED that no Amortization Event shall have occurred
and be continuing, to the Class A Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class A Overdue Principal, if any;
(B) the Class A Monthly Principal;
(ix) PROVIDED that no Amortization Event shall have occurred and
be continuing, to the Class B Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class B Overdue Principal, if any; and
(B) the Class B Monthly Principal;
(x) PROVIDED that no Amortization Event shall have occurred and
be continuing, to the Class C Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class C Overdue Principal, if any; and
(B) the Class C Monthly Principal;
(xi) PROVIDED that no Amortization Event shall have occurred and
be continuing, to the Class D Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class D Overdue Principal, if any; and
(B) the Class D Monthly Principal;
(xii) PROVIDED that no Amortization Event shall have occurred and
be continuing, to the Class E Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class E Overdue Principal, if any; and
(B) the Class E Monthly Principal;
(xiii) PROVIDED that no Amortization Event shall have occurred
and be continuing, to the Reserve Account, the Reserve Account Deposit
Amount;
(xiv) if an Amortization Event shall have occurred and is
continuing and is not subject to a continuing waiver from Noteholders
evidencing not less than 662/3% of the Voting Rights, in the following
order of priority:
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FIRST, to the Class A Distribution Sub-Account the amount
necessary to reduce the Class A Note Balance to zero; and
SECOND, to the Class B Distribution Sub-Account the amount
necessary to reduce the Class B Note Balance to zero; and
THIRD, to the Class C Distribution Sub-Account the amount
necessary to reduce the Class C Note Balance to zero;
FOURTH, to the Class D Distribution Sub-Account the amount
necessary to reduce the Class D Note Balance to zero; and
FIFTH, to the Class E Distribution Sub-Account the amount
necessary to reduce the Class E Note Balance to zero;
(xv) if the Servicer is no longer DVI, and the Servicer has, in
its good faith and reasonable business judgment, deemed the Servicing
Fee to be commercially unreasonable, then, to the Servicer, the amount
agreed upon between the Servicer and the trustee, each in their good
faith and commercially reasonable judgment, as necessary to make the
Servicing Fee commercially reasonable and to cover the reasonable
costs in transferring the servicing obligations.
(xvi) any remaining Available Funds on deposit in the Collection
Account to the Issuer, or, if the Class F Instrument has been issued,
to the Class F Distribution Sub- Account.
The Available Funds on deposit in the Collection Account are the
"DEPOSITED AVAILABLE FUNDS". If on any Payment Date the Deposited Available
Funds are less than the sum necessary to make the payments required pursuant to
clauses (iii) through (xii) inclusive and (xiv), each as applicable, the sum of
these payments is called the "PRIORITY PAYMENTS", then the trustee shall
withdraw from the Reserve Account, to the extent that such funds are on deposit
in the Reserve Account and after taking into account payments to be made
pursuant to clauses (i) and (ii) above, and deposit into the Distribution
Account for payment on such Payment Date, funds equal to the amount of the
Priority Payments less any Deposited Available Funds for payment in accordance
with clauses (iii) through and including (xii) above, as applicable. Funds equal
to the amount of the Priority Payments less any Deposited Available Funds are
the Available Reserve Account Funds.
"SUBORDINATION DEFICIENCY EVENT" is when the Class A Note Balance is
greater than the Aggregate Discounted Contract Balance on the date of
determination.
"VOTING RIGHTS" means, the votes of Class A Noteholders, measured by
the amount then held by each of them of the Class A Note Balance outstanding at
that time. After all Class A Notes are no longer outstanding, "Voting Rights"
means the votes of Class B Noteholders, measured by the amount then held by each
of them of the Class B Note Balance outstanding at that time. Once all Class B
Notes are no longer outstanding, "Voting Rights" means the votes of the Class C
Noteholders, measured by the amount then held by each of them of the Class C
Note Balance outstanding at that time, and so on for the Class D Notes and then
the Class E Notes.
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An "AMORTIZATION EVENT" occurs when any one of the following events
occurs and when notice is given from noteholders evidencing not less than 662/3%
of the Voting Rights to the trustee declaring that the event shall constitute an
Amortization Event:
(i) a court with proper jurisdiction enters any kind of order
granting a so-called "involuntary" petition brought by third parties
against the Issuer under any applicable federal or state bankruptcy, etc.
law and that order remains in effect for a period of 90 consecutive days;
or
(ii) the Issuer commences or agrees to any kind of so-called
"voluntary" petition for relief under any federal or state bankruptcy, etc.
law.
(iii) As of any Determination Date, the quotient of (1) divided
by (2) exceeds the product of (3) and (4), where (1) equals the sum of the
Discounted Contract Principal Balances of all Contracts listed as more than
__ days delinquent as of the last day of the _____ immediately preceding
calendar months; (2) equals _____, (3) equals _____ and (4) equals the
quotient of (A) the sum of the Aggregate Discounted Contract Principal
Balance as of the last day of the _____ immediately preceding Collection
Periods, divided by (B) _____; or
(iv) As of any Determination Date, the sum of Discounted Contract
Balances of all Contracts that have been classified as Defaulted Contracts
since the Closing Date exceeds the product of (1) ____ and (2) the
Aggregate Discounted Contract Balance on the Closing Date. Discounted
Contract Balances will be determined immediately prior to the
classification as a Defaulted Contract.
Noteholders evidencing 662/3% or more of the Voting Rights shall have
the ability to waive or defer any Amortization Event. Upon the occurrence of any
Amortization Event, noteholders evidencing 662/3% or more of the Voting Rights
shall have the right to replace DVI as Servicer with a successor Servicer as
permitted under the Contribution and Servicing Agreement.
PAYMENT OF AMOUNTS FROM DISTRIBUTION SUB-ACCOUNTS
(a) On each Payment Date the trustee shall pay to the Class A
Noteholders the amounts then on deposit in the Class A Distribution Sub-Account.
Payments are to be made to the Class A Noteholders in the following order of
priority:
(i) the Class A Monthly Interest;
(ii) the Class A Overdue Interest, if any;
(iii) the Class A Overdue Principal, if any;
(iv) the Class A Monthly Principal; and
(v) additional principal payable under the Indenture;
(b) On each Payment Date the trustee shall pay to the Class B
Noteholders the amount then on deposit in the Class B Distribution Sub-Account.
Payments to the Class B Noteholders shall be made in the following order of
priority:
(i) the Class B Monthly Interest;
(ii) the Class B Overdue Interest, if any;
(iii) the Class B Overdue Principal, if any;
(iv) the Class B Monthly Principal; and
(v) additional principal payable under the Indenture.
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(c) On each Payment Date the trustee shall pay to the Class C
Noteholders the amount then on deposit in the Class C Distribution Sub-Account.
Payments to the Class C Noteholders shall be made in the following order of
priority:
(i) the Class C Monthly Interest;
(ii) the Class C Overdue Interest, if any;
(iii) the Class C Overdue Principal, if any;
(iv) the Class C Monthly Principal; and
(v) additional principal payable under the Indenture.
(d) On each Payment Date the trustee shall pay to the Class D
Noteholders the amount then on deposit in the Class D Distribution Sub-Account.
Payments to the Class D Noteholders shall be made in the following order of
priority:
(i) the Class D Monthly Interest;
(ii) the Class D Overdue Interest, if any;
(iii) the Class D Overdue Principal, if any;
(iv) the Class D Monthly Principal; and
(v) additional principal payable under the Indenture.
(e) On each Payment Date the trustee shall pay to the Class E
Noteholders the amount then on deposit in the Class E Distribution Sub-Account.
Payments to the Class E Noteholders shall be made in the following order of
priority:
(i) the Class E Monthly Interest;
(ii) the Class E Overdue Interest, if any;
(iii) the Class E Overdue Principal, if any;
(iv) the Class E Monthly Principal; and
(v) additional principal payable under the Indenture.
REPORTS TO NOTEHOLDERS
Following each payment to the noteholders, the trustee shall mail to
the Issuer, Cede & Co., the Rating Agencies and make available to each
noteholder the Monthly Servicer Report furnished to the trustee by the Servicer
on the related Determination Date. If the report has not been received, a
written statement including similar information to the Monthly Servicer Report.
The trustee shall deliver to the Servicer, and within two business days after
the request of the Issuer, deliver to the Issuer, a written statement setting
forth the amount on deposit as of such Payment Date in the Collection Account
and the Reserve Account, in each case after giving effect to all of the
withdrawals and applications or transfers required on the Payment Date under the
Indenture.
OPTIONAL REDEMPTION
The notes may be redeemed by the Issuer, in whole but not in part, at
the Redemption Price on any Payment Date on which the Pool A Aggregate
Discounted Contract Balance is less than __% of the Pool A Aggregate Discounted
Contract Balance on the Closing Date and the Pool B Aggregate Contract Balance
is less than __% of the Pool B Aggregate Contract Balance on the Closing Date.
In the event that the notes are redeemed in full, an amount equal to the sum of
(i) the entire outstanding principal balance of the notes and (ii) accrued
interest on the outstanding principal balance at the Class A Note Rate, Class B
Note Rate, Class C Note Rate, Class D Note Rate or Class E Note Rate, as
applicable, will be required to be paid to the noteholders of each such Class.
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The notes may be redeemed in part by the Issuer at the Partial
Redemption Price on any Payment Date on which the Pool B Aggregate Discounted
Contract Balance is less than __% of the Pool B Aggregate Discounted Contract
Balance as of the Closing Date. In the event that the notes are redeemed in
part, an amount equal to the sum of (i) the product of (A) the quotient of (x)
the Aggregate Discounted Contract Balance of the Contracts in Pool B, divided by
(y) the Aggregate Discounted Contract Balance and (B) the entire outstanding
principal balance of the notes, and (ii) accrued interest on the outstanding
principal balance at the Class A Note Rate, Class B Note Rate, Class C Note
Rate, Class D Note Rate or Class E Note Rate, as applicable, will be required to
be paid to the noteholders of each such Class on that Payment Date.
INDENTURE EVENTS OF DEFAULT AND ACCELERATION
"INDENTURE EVENT OF DEFAULT" means any one of the following events:
(i) default in the payment of (A) any interest when due on any
outstanding class of notes, (B) any principal on the Stated Maturity
Date for any outstanding class of notes, or (C) any other payment of
principal on any outstanding note when it becomes due and payable and
sufficient Available Funds are on deposit in the Collection Account
and sufficient Available Reserve Account Funds are on deposit in the
Reserve Account;
(ii) default in the performance, or breach, of any covenant set
forth in Sections [8.04, 8.07(c) or 8.08] of the Indenture;
(iii) default in the performance, or breach, of any other
covenant of the Issuer in the Indenture, the notes, the Contribution
and Servicing Agreement or the other transaction documents and
continuance of such default or breach for a period of 30 days after
the earliest of (A) any officer of the Issuer first acquiring
knowledge of that default or breach, (B) the trustee's giving written
notice of default or breach to the Issuer or (C) the holder of any
note giving written notice of default or breach to the Issuer;
(iv) if any representation or warranty of the Issuer, the
Transferor or DVI made in the Indenture, the Subsequent Contract
Transfer Agreement, the Contribution and Servicing Agreement,
respectively, or any other writing provided to the Noteholders in
connection with the foregoing documents shall prove to be incorrect in
any material respect as of the time when the representation or
warranty is made; PROVIDED, HOWEVER, that the breach of any
representation or warranty made by DVI in Section [2.03 or 2.04] of
the Contribution and Servicing Agreement with respect to any of the
Contracts or the security interest in the related Equipment shall not
constitute an Indenture Event of Default if DVI, in accordance with
the Contribution and Servicing Agreement, substitutes one or more
Substitute Contracts and the security interest in the related
Equipment for the affected Contract and Equipment or repurchases the
affected Contract and related Equipment;
(v) a court with proper jurisdiction enters any kind of order
granting a so-called "involuntary" petition brought by third parties
against the Issuer under any applicable federal or state bankruptcy,
etc. law and that order remains in effect for a period of 90
consecutive days; or
(vi) the Issuer commences or agrees to any kind of so-called
"voluntary" petition for relief under any federal or state bankruptcy,
etc. law.
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If an Indenture Event of Default occurs and is continuing, then the
trustee with the consent of the holders of the notes evidencing not less than
662/3% of the Voting Rights, may declare the unpaid principal amount of all the
notes to be due and payable immediately, by a notice in writing to the Issuer,
and to the trustee if the noteholders make the declaration, and automatically
the entire principal amount shall become immediately due and payable together
with all accrued and unpaid interest on the notes.
REMEDIES
If an Indenture Event of Default occurs and is continuing, the trustee
shall give notice to each noteholder as set forth in the Indenture. The trustee
shall then take whatever action, if any, is directed by the holders of notes
evidencing not less than 662/3% of the Voting Rights. Following any acceleration
of the notes, the trustee shall have all the rights, powers and remedies with
respect to the trust property as are available to secured parties under the
Uniform Commercial Code or other applicable law.
Any money collected by the trustee under the Indenture following an
Indenture Event of Default, and any moneys that may then be held or thereafter
received by the trustee, shall be applied in the following order, at the date or
dates fixed by the trustee and, in case of the distribution of the entire amount
due on account of principal or interest, upon presentation and surrender of the
Notes;
FIRST, to the payment of all costs and expenses of collection incurred
by the trustee, including the reasonable fees and expenses of its
counsel, and all other amounts due the trustee under the Indenture;
SECOND, to the payment of all unreimbursed Servicer Advances due to
the Servicer;
THIRD, only in the event that DVI is no longer the Servicer, and the
Servicer has, in its good faith and reasonable business judgment,
deemed the Servicing Fee to be commercially unreasonable, then, to the
Servicer, the amount agreed upon between the then Servicer and the
trustee, each in their good faith and commercially reasonable
judgment, as necessary to make the Servicing Fee commercially
reasonable and to cover the reasonable costs in transferring the
servicing obligations;
FOURTH, to pay all accrued and unpaid interest on each outstanding
Class A note, pro rata, without giving any preference or priority to
any Class A Noteholder;
FIFTH, to pay all accrued and unpaid interest on each outstanding
Class B note, pro rata, without giving any preference or priority to
any Class B Noteholder;
SIXTH, to pay all accrued and unpaid interest on each outstanding
Class C note, pro rata, without giving any preference or priority to
any Class C Noteholder;
SEVENTH, to pay of all accrued and unpaid interest on each outstanding
Class D note, pro rata, without giving any preference or priority to
any Class D Noteholder;
EIGHTH, to pay of all accrued and unpaid interest on each outstanding
Class E note, pro rata, without giving any preference to any Class E
Noteholder;
NINTH, to pay the entire outstanding Class A Note Balance, and any
other amounts due to the Class A Noteholders, pro rata, without giving
preference or priority to any Class A Noteholder;
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TENTH, to pay the entire outstanding Class B Note Balance, and any
other amounts due to the Class B Noteholders, pro rata, without giving
preference or priority to any Class B Noteholder;
ELEVENTH, to pay the entire outstanding Class C Note Balance, and any
other amounts due to the Class C Noteholders, pro rata, without giving
preference or priority to any Class C Noteholder;
TWELFTH, to pay the entire outstanding Class D Note Balance, and any
other amounts due to the Class D Noteholders, pro rata, without giving
preference or priority to any Class D Noteholder;
THIRTEENTH, to pay the entire outstanding Class E Note Balance, and
any other amounts due to the Class E Noteholders, pro rata , without
giving preference or priority to any Class E Noteholder;
FOURTEENTH, to pay all accrued and unpaid interest on any outstanding
Class F Instruments, ratably to each Holder of the Class F Instruments
without giving preference or priority to any Class F Noteholder;
FIFTEENTH, in the event that DVI is the Servicer, to pay all
unreimbursed Servicing Fees due to the Servicer; and
SIXTEENTH, to the payment of the remainder, if any, to, or at the
order of, the Issuer.
SERVICER EVENTS OF DEFAULT
Any of the following acts or occurrences shall constitute a "SERVICER
EVENT OF DEFAULT" by the Servicer under the Contribution and Servicing
Agreement:
(i) failure by the Servicer, or for so long as DVI is the
Servicer, the Transferor, to (A) remit any payment to the trustee within
the time period required or (B) make any Servicer Advance;
(ii) failure to pay to the trustee on or before the date when
due, any deposit required to be made by the Servicer under the Contribution
and Servicing Agreement;
(iii) failure on the part of either the Servicer, or for so long
as DVI is the Servicer, the Transferor, duly to observe or perform in any
material respect any other of their respective covenants or agreements in
the Contribution and Servicing Agreement, such as failure of the Servicer
to deliver a Monthly Servicer Report on the date required or the delivery
of a Monthly Servicer Report which is materially incorrect, if this failure
materially and adversely affects the rights of the noteholders and
continues unremedied for a period of 30 days after the Servicer becomes
aware of such failure or receives written notice of such failure;
(iv) if any representation or warranty of the Servicer (a) made
in the Contribution and Servicing Agreement or in any certificate or other
document delivered under any transaction documents or (b) made by any
successor Servicer in connection with its assumption
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of the duties of the Servicer, shall prove to be incorrect in any material
respect as of the time when it was made;
(v) a court with proper jurisdiction enters any kind of order
granting a so-called "involuntary" petition brought by third parties
against the Servicer, or for so long as DVI is the Servicer, the
Transferor, under any applicable federal or state bankruptcy, etc. law, or
if this type of order remains in effect for a period of 90 consecutive
days;
(vi) the Servicer, or for so long as DVI is the Servicer, the
Transferor, commences or agrees to any kind of so-called "voluntary"
petition for relief under any federal or state bankruptcy, etc. law;
(vii) any non-permitted assignment by the Servicer, or any
non-permitted attempt by the Servicer to assign its duties or rights under
the Contribution and Servicing Agreement;
(viii) (A) the failure of the Servicer to make one or more
payments with respect to aggregate recourse indebtedness for borrowed money
exceeding $_________ or (B) the occurrence of any other event or the
existence of any other condition, the effect of which event or condition is
to cause more than $_________ of aggregate recourse indebtedness for
borrowed money of the Servicer to become due before its or their stated
maturity or before its or their regularly scheduled dates of payment, and
the failure, event or condition described in either clause (A) or (B) shall
be continuing and shall not have been waived by the person or persons
entitled to performance;
(ix) the rendering against the Servicer of a final judgment,
decree or order, all possible appeals having been exhausted, for the
payment of money in excess of $_________ which is uninsured, and the
continuance of this judgment, decree or order unsatisfied and in effect for
any period of 60 consecutive days without a stay of execution; or
(x) so long as DVI is the Servicer, the occurrence of an
Amortization Event.
TERMINATION OF THE SERVICER
If a Servicer Event of Default shall have occurred and be continuing,
the trustee shall, upon the request of the holders of notes evidencing more than
662/3% of the Voting Rights, give written notice to the Servicer of the
termination of all of the rights and obligations of the Servicer under the
Contribution and Servicing Agreement; any termination will not release DVI from
its obligations as Contributor under that Agreement. Once the Servicer receives
that notice, all of its rights and obligations under the Contribution and
Servicing Agreement will terminate and be transferred to the trustee pursuant to
the "back-up servicer" provisions of the Contribution and Servicing Agreement
and the Indenture.
The Servicer agrees to cooperate with the trustee or any other
successor Servicer in transferring the responsibilities and rights of the
Servicer to the successor Servicer, including, transferring to the successor
Servicer its records, correspondence and documents relating to the Contracts and
other trust property. The trustee shall give prompt written notice of their
termination and transfer of servicing to each holder of the notes.
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DUTIES AND IMMUNITIES OF THE TRUSTEE
The trustee will make no representations as to the validity or
sufficiency of the Indenture, the notes or of any Contract or related document,
and will not be accountable for the use or application by the Issuer or DVI of
any funds paid to DVI in consideration of the sale of the notes to the
investors. The trustee will be required to perform only those duties
specifically required of it under the Indenture.
No recourse is available based on any provision of the Indenture, the
notes or any Contract against the trustee, in its individual capacity, and the
trustee has no personal obligation, liability or duty whatsoever to any
noteholder or any other person with respect to any claim, except for any
liability as is determined to have resulted from the trustee's own negligence or
willful misconduct.
The Servicer agrees (a) to pay to the trustee from time to time
compensation for all services rendered by it under the Indenture as the Servicer
and the trustee have agreed in writing prior to the Closing Date. This payment
is to be made independent of the other payment obligations of the Servicer and,
except as otherwise expressly provided in the Indenture, (b) to reimburse the
trustee upon its request for all reasonable expenses, disbursements, and
advances incurred or made by the trustee in accordance with any provision of the
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 the trustee's negligence or bad faith.
BOOK-ENTRY REGISTRATION OF THE NOTES
GENERAL. Beneficial Owners that are not participants of DTC or
intermediaries but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, the Class A Notes, Class B Notes, Class C Notes and Class
D Notes may do so only through participants, either directly or indirectly. The
Class A, Class B, Class C and Class D Notes are together called the "OFFERED
NOTES". In addition, Beneficial Owners will receive all distributions of
principal of and interest on the Offered Notes from the paying agent through DTC
and participants. Accordingly, Beneficial Owners may experience delays in their
receipt of payments. Until definitive Securities are issued for the Offered
Notes, it is anticipated that the only registered Noteholder of the Offered
Notes will be Cede, as nominee of DTC. Beneficial Owners will not be recognized
by the trustee or the Servicer as noteholders, as the term is used in the
Contribution and Servicing Agreement, and Beneficial Owners will be permitted to
receive information furnished to noteholders and to exercise the rights of
noteholders only indirectly through DTC, its Participants and intermediaries.
The rules, regulations and procedures creating and affecting DTC and
its operations are referred to as the "RULES". Under the Rules, DTC is required
to make book-entry transfers of Offered Notes among participants and to receive
and transmit distributions of principal of, and interest on, such Offered Notes.
Participants and intermediaries with which Beneficial Owners have accounts
relating to the Offered Notes also are required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective Beneficial
Owners. As a result, although Beneficial Owners will not possess physical
certificates evidencing their interests in the Offered Notes, the Rules provide
a mechanism by which Beneficial Owners, through their participants and
intermediaries, will receive distributions and will be able to transfer their
interests in the Offered Notes.
None of the Issuer, the Servicer, the Transferor or the trustee will
have any liability for any actions taken by DTC or its nominee or Cedel or
Euroclear, including, without limitation, actions for any aspect of the records
relating to or payments made on account of beneficial ownership interests in the
Offered Notes held by Cede, as nominee for DTC, or for maintaining, supervising
or reviewing any records
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relating to the beneficial ownership interests. For additional information
regarding DTC and the Offered Notes, see the prospectus.
DEFINITIVE SECURITIES. Definitive Securities will be issued to
Beneficial Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the Prospectus.
Upon the occurrence of that kind of event, the trustee is required to
notify, through DTC, participants who have ownership of Offered Notes as
indicated on the records of DTC of the availability of definitive Securities for
their Offered Notes. Upon surrender by DTC of the definitive certificates
representing the Offered Notes and upon receipt of instructions from DTC for
re-registration, the trustee will reissue the Offered Notes as definitive
Securities issued in the respective principal amounts owned by individual
Beneficial Owners, and thereafter the trustee and the Servicer will recognize
the holders of the definitive Securities as Noteholders under the Contribution
and Servicing Agreement.
BOOK-ENTRY FACILITIES. Beneficial Owners may choose to hold their
interests in the Book- Entry Securities through DTC in the United States or
through Cedel or Euroclear in Europe, if they are participants of such systems,
or indirectly through organizations which are participants in such systems. The
Book-Entry Securities of each class will be issued in one or more certificates
which equal the Outstanding Note Balance of such class and will initially be
registered in the name of Cede, the nominee of DTC. Cedel and Euroclear will
hold omnibus positions on behalf of their participants through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositories which in turn will hold such positions in customers'
securities accounts in the depositories' names on the books of DTC.
Because of time zone differences, credits of securities received in
Cedel or Euroclear as a result of a transaction with a Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during processing will be reported to the relevant Euroclear
participants or Cedel participants on that business day. Cash received in Cedel
or Euroclear as a result of sales of securities by or through a Cedel
participant or Euroclear participant to a participant will be received with
value on the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in DTC.
Transfers between participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear participants will
occur in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
participants or Euroclear participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the institution acting as a depositary for Cedel or
Euroclear, which is called a "RELEVANT DEPOSITORY" and together, the "EUROPEAN
DEPOSITORIES"; however, such cross market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines in European time. The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to the Relevant Depositary to take action to
effect final settlement on its behalf by delivering or receiving securities in
DTC, and making or receiving payment in accordance with normal procedures for
same day funds settlement applicable to DTC. Cedel participants and Euroclear
participants may not deliver instructions directly to the European Depositories.
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DTC, which is a New York-chartered limited purpose trust company,
performs services for its participants, some of which, and/or their
representatives, own DTC. In accordance with its normal procedures, DTC is
expected to record the positions held by each DTC participant in the Book-Entry
Securities, whether held for its own account or as a nominee for another person.
In general, beneficial ownership of Book-Entry Securities will be subject to the
rules, regulations and procedures governing DTC and its participants.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participant organizations and
facilitates the clearance and settlement of securities transactions between
Cedel participants through electronic book-entry changes in accounts of Cedel
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedel in any of 28 currencies,
including United States dollars. Cedel provides to its Cedel participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary Institute.
Cedel participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to Cedel
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 32 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York under contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation. All operations are conducted by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York, not Euroclear
Clearance Systems S.C. Euroclear Clearance Systems S.C. establishes policy for
Euroclear on behalf of Euroclear participants. Euroclear participants include
banks, including central banks, securities brokers and dealers and other
professional financial intermediaries. Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear participant, either directly or indirectly.
The Brussels, Belgium office of Morgan Guaranty Trust Company is the
Belgian branch of a New York banking corporation which is a member bank of the
Federal Reserve System. As such, it is regulated and examined by the Board of
Governors of the Federal Reserve System and the New York State Banking
Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Brussels,
Belgium office of Morgan Guaranty Trust Company are governed by the Terms and
Conditions Governing Use of Euroclear and the related Operating Procedures of
the Euroclear System and applicable Belgian law, which are referred to here as
"TERMS AND CONDITIONS". The Terms and Conditions govern transfers of securities
and cash within Euroclear, withdrawals of securities and cash from Euroclear,
and receipts of payments with respect to securities in Euroclear. All securities
in Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Brussels, Belgium
office of Morgan
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Guaranty Trust Company acts under the Terms and Conditions only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions on the Book-Entry Securities will be made on each
Distribution Date by the trustee to DTC. DTC will be responsible for crediting
the amount of those payments to the accounts of the applicable participants in
accordance with DTC's normal procedures. Each participant will be responsible
for disbursing those payments to the Beneficial Owners of the Book-Entry
Securities that it represents and to each intermediary for which it acts as
agent. Each intermediary will be responsible for disbursing funds to the
Beneficial Owners of the Book-Entry Securities that it represents.
Under a book-entry format, Beneficial Owners of the Book-Entry
Securities may experience some delay in their receipt of payments, since those
payments will be forwarded by the trustee to Cede. Since transactions in the
Book-Entry Securities will be effected only through DTC, participating
organizations, indirect participants and certain banks, the ability of a
Beneficial Owner to pledge Offered Notes to persons or entities that do not
participate in the DTC system, or otherwise to take actions in respect of the
Offered Notes, may be limited due to lack of a physical certificate representing
the Offered Notes. In addition, issuance of the Book-Entry Securities in
book-entry form may reduce the liquidity of the Offered Notes in the secondary
market since certain potential investors may be unwilling to purchase Offered
Notes for which they cannot obtain physical certificates.
DTC has advised the Issuer and the trustee that, unless and until
Definitive Securities are issued, DTC will take any action permitted to be taken
by the holders of the Book-Entry Securities under the Agreement only at the
direction of one or more Participants to whose DTC accounts the Book-Entry
Securities are credited, to the extent that such actions are taken on behalf of
intermediaries whose holdings include such Book-Entry Securities. DTC may take
actions, at the direction of the related Participants, with respect to some
Offered Notes which conflict with actions taken with respect to other Offered
Notes.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of Offered Notes among Participants of DTC, it is under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
DTC management is aware that some computer systems for processing data
that are dependent upon calendar dates, including dates before, on, and after
January 1, 2000, may encounter so-called "Year 2000 problems". DTC has informed
its participants and other members of the financial community that it has
developed and is implementing a program so that its systems continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed later this year.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. DTC has informed the financial community that
it is contacting third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being year 2000 compliant; and
(ii) determine the extent of their efforts to make their services year 2000
compliant. In addition, DTC is in the process of developing appropriate
contingency plans.
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According to DTC, the foregoing information with respect to DTC has
been provided to the financial community for information purposes only and is
not intended to serve as a representation, warranty, or contract modification of
any kind.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the notes will be directly related
to the scheduled rate of principal payments on the underlying Contracts. If
purchased at a price of other than par, the yield to maturity will also be
affected by the rate of principal payments. The extent to which the yield to
maturity of a note is sensitive to the rate of principal payments will depend,
in part, upon the degree to which the note is purchased at a discount or a
premium. If the purchaser of a note purchased at a discount from its initial
principal balance calculates its anticipated yield to maturity based on an
assumed rate of payment of principal that is faster than that actually
experienced on such note, the actual yield to maturity will be lower than that
so calculated. Conversely, if the purchaser of a note purchased at a premium
calculates its anticipated yield to maturity based on an assumed rate of payment
of principal that is slower than that actually experienced on the note, the
actual yield to maturity will be lower than that so calculated.
The principal payments on such Contracts may be in the form of
scheduled principal payments or liquidations due to default, casualty and the
like. These kinds of payments will result in payments to noteholders of amounts
which would otherwise have been paid over the remaining term of the Contracts.
Generally, prepayments on the Contracts will tend to shorten the weighted
average lives of the notes, whereas delays in payments on the Contracts and
modifications extending the maturity of the Contract will tend to lengthen the
weighted average lives of the notes. Any changes in weighted average lives may
adversely affect the yield to noteholders. 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 Contracts from the pool and the deposit of the related Prepayment Amount
or Partial Prepayment Amount, as applicable, into the Collection Account.
The Contracts generally do not provide for the right of the Obligor to
prepay. However, under the Contribution and Servicing Agreement, the Servicer is
permitted to allow prepayments in an amount not less than the Prepayment Amount
or Partial Prepayment Amount, as applicable. In addition, in the event that an
Obligor requests an upgrade or trade-in of Equipment, the Servicer may remove
the Equipment and related Contract from the trust property, but only upon
payment of the Prepayment Amount or Partial Prepayment Amount, as applicable. In
either case, DVI may also replace such Contracts with Substitute Contracts. See
"THE CONTRACTS -- SUBSTITUTE CONTRACTS" on page S-36 of this prospectus
supplement. Any such Prepayment Amounts or Partial Prepayment Amounts paid shall
be remitted by the Servicer to the trustee or deposited into the Collection
Account and shall be applied as a prepayment of the notes. The Servicer
historically has permitted Obligors to terminate contracts early, or, in case of
contracts covering more than one item of equipment, to partially prepay
contracts, either in connection with the execution of a new contract of
replacement equipment, or upon payment of a negotiated premium, or both.
The effective yield to noteholders will depend upon, among other
things, the price at which the notes are purchased, the amount of and rate at
which principal, including both scheduled and nonscheduled payments thereof, is
paid to the noteholders.
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CERTAIN LEGAL MATTERS AFFECTING AN
OBLIGOR'S RIGHTS AND OBLIGATIONS
GENERAL
The Contracts are either "accounts," "instruments" or "chattel paper"
as defined in the Uniform Commercial Code in effect generally throughout the
United States. Pursuant to the Uniform Commercial Code for most purposes, a sale
of accounts or chattel paper is treated in a manner similar to a transaction
creating a security interest in accounts or chattel paper. DVI, the Transferor
and the Issuer will cause the filing of appropriate UCC-1 financing statements
to be made with the appropriate governmental authorities in the Commonwealth of
Pennsylvania to give notice of DVI's transfer of the Contracts to the
Transferor, of the Transferor's transfer of the Contracts to the Issuer and of
the pledge of the Contracts to the trustee. Under the Contribution and Servicing
Agreement, the Servicer will be obligated from time to time to take such actions
as are necessary to protect and perfect the trustee's interests in the Contracts
and their proceeds.
A 1993 decision of the United States Court of Appeals for the Tenth
Circuit states that, among other things, accounts sold by an entity remain
property of that entity's bankruptcy estate in the event of its reorganization
or bankruptcy proceedings subsequent to the sale. Even though that decision
addressed "accounts" rather than "chattel paper" such as the Contracts, if a
court in any bankruptcy proceedings of DVI were to adopt the reasoning of the
Tenth Circuit reflected in that 1993 decision, then the Contracts would be
included in the bankruptcy estate of DVI and delays in payment of collections on
or in respect of the Contracts could occur. In addition, such a court, among
other remedies, could elect to accelerate payment of the notes and liquidate the
Contracts and the Equipment, with the noteholders entitled to the then
outstanding Aggregate Discounted Contract Balance and interest on that balance
at the applicable Note Rate to the date of payment from the proceeds of such
liquidation. Thus, the noteholders could lose the right to future payments of
interest and might incur reinvestment losses.
THE EQUIPMENT
DVI will transfer to the Transferor, by grant or assignment, a
security interest in the Equipment, the Transferor will transfer such security
interest to the Issuer, and the Issuer will pledge such security interest to the
trustee. In the event of a default by the Obligor under a Contract, the Servicer
on behalf of the trustee may take action to enforce that defaulted Contract and
the related security interest by repossession and resale of the leased
Equipment. Under the Uniforn Commercial Code, known as the "UCC" in most states,
a creditor such as DVI, the Transferor, the Issuer or the trustee can, without
prior notice to the Obligor, repossess assets securing the Obligor's obligations
under a defaulted Contract by the Obligor's voluntary surrender of such assets
or by "self-help" repossession that does not involve a breach of the peace or by
judicial process.
In the event of a default by the Obligor, some jurisdictions require
that the Obligor 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 Obligor 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
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such sale be conducted in a commercially reasonable manner. The Contribution and
Servicing Agreement will require the Servicer to sell promptly any repossessed
Equipment.
Under most state laws, an Obligor has the right to redeem any
collateral for its obligations, prior to a foreclosure sale of that property, by
paying the secured party the unpaid balance of the obligations plus interest and
the secured party's 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 under the Contracts generally declines with age and because of
obsolescence, the net disposition proceeds of leased Equipment at any time
during the term of the Contract may be less than the outstanding balance on the
Contract principal balance which it secures. Because of this, and because other
creditors may have rights in the related Equipment superior to those of the
trustee, the Servicer may not be able to recover the entire amount due on a
Defaulted Contract in the event that the Servicer elects to repossess and sell
the related Equipment under those circumstances.
Under the UCC and laws applicable in most states, a creditor is
entitled to obtain a so called "deficiency judgment" from an Obligor for any
shortfall between the unpaid balance of that Obligor's Contract and the net
proceeds received from any collateral for that Contract. However, some states,
including those where some of the Obligors may be located, 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 (minimize) its
damages in the event of an Obligor'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 disposition against its claim. In addition, an Obligor may
successfully invoke an election of remedies defense to a deficiency claim in the
event that the Servicer's repossession and sale of the leased Equipment is found
to be a retention discharging the Obligor 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 Obligor for the shortfall, but a defaulting
Obligor may have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
In the event of the bankruptcy or reorganization of an Obligor,
various provisions of the Bankruptcy Reform Act of 1978, as amended, which we
refer to as the "BANKRUPTCY CODE", and related laws may delay, interfere with
and/or eliminate or reduce the ability of the trustee to enforce its rights
under the Contracts. With regard to any Contract not constituting a "true
lease", the Bankruptcy Code permits an Obligor to be treated as the owner of the
related Equipment. If bankruptcy cases or proceedings were instituted for an
Obligor, the trustee could be prevented from continuing to collect payments due
from or on behalf of that Obligor or exercising any remedies assigned to the
trustee without the approval of the bankruptcy court, and the bankruptcy court
could permit the Obligor to use, sublease, sell or dispose of the Equipment and
provide the trustee with a lien on replacement collateral, so long as the
replacement collateral constituted "adequate protection" as defined under the
Bankruptcy Code. In the event that, as a result of the bankruptcy or
reorganization of an Obligor, the trustee is prevented from collecting payments
with respect to a Contract and that Contract becomes a Defaulted Contract,
Noteholders could experience delays in the payment of principal and interest
and/or losses on their investment.
With regard to any Contract constituting a "true lease", the
Bankruptcy Code grants to the bankruptcy trustee for an Obligor, or the Obligor
as a debtor-in-possession, a right to elect to assume or reject that unexpired
lease. Also, a bankruptcy court may permit an Obligor to assign its rights and
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obligations under the Contract. Any assumption of a Contract requires the
Obligor to cure any default under that Contract, which may mean "adequate
assurance" of prompt cure, and to provide "adequate assurance" of future
performance under that Contract, and of compensation for any actual pecuniary
loss incurred by noteholders resulting from the default. Any rejection of the
Contract constitutes a breach of that Contract, entitling the trustee to return
of the Equipment and to a pre-petition unsecured claim for damages for breach of
the Contract. The trustee also would be entitled to collect from an Obligor's
bankruptcy estate any administrative rent or adequate protection amounts payable
by the Obligor as provided under the Bankruptcy Code. Bankruptcy court approval
might be necessary prior to the trustee repossessing the Equipment or obtaining
payments on its unsecured pre-petition claims and/or claims against the
Obligor's bankruptcy estate.
Most states have adopted a version of Article 2A of the Uniform
Commercial Code, which is applicable to "true leases" such as Fair Market Value
Leases. Article 2A purports to codify many provisions of existing common law.
Although there is little precedential authority regarding how Article 2A will be
interpreted, it may, among other things, limit enforceability of any
"unconscionable" lease or "unconscionable" provision in a lease, provide a
lessee with remedies, including the right to cancel the lease contract, for any
lessor breach or default, and may add to or modify the terms of "consumer
leases" and leases where the lessee is a "merchant lessee." However, DVI will
represent that, to the best of its knowledge (i) no Contract is a "consumer
lease"; and (ii) each Obligor has accepted the Equipment leased to it and, after
reasonable opportunity to inspect and test, has continued to make scheduled
payments under the related Contract. Article 2A, moreover, recognizes typical
commercial lease "hell or high water" rental payment clauses and validates
reasonable liquidated damages provisions in the event of lessor or lessee
defaults. Article 2A also recognizes the concept of freedom of contract and
permits the parties in a commercial context a wide latitude to vary provisions
of the law.
Certain governmental and quasi-governmental entities, like
municipalities and public hospitals, condition contract payments on the
availability of budgeted funds. If Contracts are part of the trust property and
such budgeted funds are not available, the Servicer or trustee may be forced to
repossess related Equipment and Noteholders may experience delays and/or losses
in payment.
Title 6 of the Bankruptcy Reform Act of 1994 established the National
Bankruptcy Review Commission for purposes of analyzing the nation's bankruptcy
laws and making recommendations to Congress for legislative changes to the
bankruptcy laws. A similar commission was involved in developing the Bankruptcy
Code. The final National Bankruptcy Review Commission report has been issued and
may ultimately lead to substantive changes to the existing Bankruptcy Code which
could affect the Contracts.
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of leased Equipment, may limit the
amount realized on the sale of the collateral to less than the amount due on the
related Contract.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the notes
is based upon the provisions of the Internal Revenue Code of 1986, as amended,
the Treasury regulations promulgated thereunder, published rulings of the
Internal Revenue Service and judicial decisions, all in effect as of the date
hereof, all of which authorities are subject to change or differing
interpretations, which could apply retroactively. We refer to the Internal
Revenue Code as the "CODE", and the Internal Revenue Service as the "SERVICE".
The discussion below does not purport to deal with the federal income tax
consequences applicable to all categories of investors and is directed solely to
Class A, Class B or Class C Noteholders that are
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institutional investors, hold the notes as capital assets within the meaning of
section 1221 of the Code and acquire such notes for investment and not as a
dealer or for resale. This discussion does not address every aspect of the
federal income tax laws that may be relevant to a Class A, Class B, Class C or
Class D Noteholder in light of its particular investment circumstances, nor does
it purport to deal with federal income tax consequences applicable to all
categories of Class A, Class B, Class C or Class D Noteholders. Some categories
of noteholders, such as banks, insurance companies and foreign investors, among
others, may be subject to special rules or treatment under the federal income
tax laws. Further, this discussion does not address certain collateral tax
consequences that may result from ownership of the notes. For purposes of this
tax discussion, references to a "noteholder" or a "holder" are to the beneficial
owner of a note.
Class A, Class B, Class C or Class D noteholders and preparers of tax
returns should be aware that under applicable Treasury regulations a provider of
advice on specific issues of law is not considered an income tax return preparer
unless the advice is (i) given with respect to events that have occurred at the
time the advice is rendered and is not given with respect to the consequences of
contemplated actions, and (ii) is directly relevant to the determination of an
entry on a tax return. Accordingly, Class A, Class B, Class C or Class D
Noteholders should consult their own tax advisors and tax return preparers
regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein.
Prospective investors should be aware that the Servicer and the Issuer
will not seek any rulings from the IRS regarding any of the tax consequences
discussed herein. Further, while the Issuer will receive an opinion of counsel,
as described generally below, with respect to the federal income tax treatment
of the notes, that opinion is not binding on the IRS or the courts, and no
assurance can be given that the IRS will not take contrary positions that may be
sustained by a court.
In addition to the federal income tax consequences described herein,
potential investors should consider the tax consequences, if any, of the
purchase, ownership and disposition of the notes under the tax laws of any
applicable state, locality or foreign jurisdiction. See "CERTAIN STATE, LOCAL
AND OTHER TAX CONSIDERATIONS" at page S-63 of this prospectus supplement. The
Servicer and the Issuer make no representations regarding the tax consequences
of purchase, ownership or disposition of the notes under the tax laws of any
state, locality or foreign jurisdiction. Investors considering an investment in
the notes should consult their own tax advisors regarding such tax consequences.
All investors are urged to consult their own tax advisors in determining the
federal, state, local and foreign and any other tax consequences to them of an
investment in the notes and the purchase, ownership and disposition of the
notes.
CHARACTERIZATION OF THE CLASS A, CLASS B, CLASS C AND CLASS D NOTES
Thacher Proffitt & Wood, special counsel to [name of underwriter[s],
who [together] will be called the "UNDERWRITER[S]", is of the opinion that,
under existing law, and assuming compliance in all material respects with all
provisions of the Indenture, the Contribution and Servicing Agreement and the
other transaction documents relating to the issuance of the Notes, and based in
part on the facts set forth in this Prospectus Supplement and additional
information and representations, including financial calculations relating to
the Contracts provided or reviewed and verified by DVI or the Underwriter[s],
for federal income tax purposes, the Class A Notes, the Class B Notes, the Class
C Notes and the Class D Notes will be treated as indebtedness.
Except where indicated to the contrary, the following discussion sets
forth the consequences that will follow if the Class A, Class B, Class C and
Class D Notes are treated as indebtedness for federal income tax purposes.
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TAXATION OF CLASS A, CLASS B, CLASS C AND CLASS D NOTEHOLDERS
PAYMENTS OF INTEREST. The following discussion of federal income
taxation of the notes is based in part upon the rules governing original issue
discount within the meaning of section 1273(a) of the Code, called "OID", that
are set forth in sections 1271-1273 and 1275 of the Code and in the Treasury
regulations issued thereunder, called the "OID REGULATIONS". The OID Regulations
do not adequately address certain issues relevant to, and in some instances may
not be applicable to, securities such as the Notes.
It is not anticipated that the Class A, Class B, Class C or Class D
Notes will be treated as having been issued with OID within the meaning of
section 1273 of the Code. Rather, interest on the Notes will be taxable as
ordinary income for federal income tax purposes when received by a Class A,
Class B, Class C or Class D Noteholder using the cash method of accounting or
when accrued by a Class A, Class B, Class C or Class D Noteholder using the
accrual method of accounting. Interest received on the Notes also may constitute
"investment income" for purposes of certain limitations of the Code concerning
the deductibility of investment interest expense by taxpayers other than
corporations.
MARKET DISCOUNT. A subsequent holder who purchases a note at a market
discount, in other words, in the case of a note issued without OID, at a
purchase price less than its remaining stated principal amount, or in the case
of a note issued with OID, at a purchase price less than its adjusted issue
price, may be subject to the "market discount" rules of section 1276 of the
Code. These rules provide, in part, for the treatment of gain attributable to
accrued market discount as ordinary income upon the receipt of partial principal
payments or on the sale or other disposition of the note, and for the deferral
of interest deductions with respect to debt incurred to acquire or carry a note
purchased with market discount. In particular, under section 1276 of the Code, a
holder who purchases a note at a discount that exceeds DE MINIMIS market
discount generally will be required to allocate a portion of each partial
principal payment or proceeds of disposition to accrued market discount not
previously included in income, and to recognize ordinary income to that extent.
If the provisions of section 1272(a)(6) of the Code apply to the notes, as
described above with respect to the use of a reasonable prepayment assumption,
and adjustments resulting from actual prepayments, those provisions also would
affect the accrual of any market discount.
Any Class A, Class B, Class C or Class D Noteholder may elect to
include market discount in income currently as it accrues rather than including
it on a deferred basis in accordance with the foregoing discussion. If made,
such election will apply to all market-discount bonds acquired by such Class A,
Class B, Class C or Class D Noteholder on or after the first day of the first
taxable year to which such election applied. If such election is made, the
interest deferral rule described above will not apply and the adjusted basis of
a note will be increased to reflect market discount included in gross income,
thereby reducing any gain, or increasing any loss, on a sale, redemption, or
other taxable disposition. Notwithstanding the above rules, market discount on a
note will be considered to be zero if it is less than a DE MINIMIS amount. In
that case, the actual discount will be required to be allocated amounts the
principal payments to be made on that note, and the portion of discount
allocated to each principal payment will be required to be reported as income as
each principal payment is made, in the same manner as discussed above regarding
DE MINIMIS OID.
In addition, the OID Regulations permit a Class A, Class B, Class C or
Class D Noteholder to elect to accrue all interest, discount, including DE
MINIMIS market or original issue discount, and premium in income as interest,
based on a constant yield method. If such an election were made with respect to
a note with market discount, the Class A, Class B, Class C or Class D Noteholder
would be deemed to have made an election to include market discount in income
currently with respect to all other debt instruments that the noteholder owns or
acquires during the taxable year of the election or thereafter. Similarly, a
Class
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A, Class B, Class C or Class D Noteholder that made this election for a note
that is acquired at a premium would be deemed to have made an election to
amortize bond premium with respect to all debt instruments that the noteholder
owns as of the beginning of the taxable year for which the election is made or
thereafter acquires. See "PREMIUM" later in this section. Each of these
elections to accrue interest, discount and premium with respect to a note on a
constant yield method or as interest would be irrevocable.
For purposes of the foregoing discussion, market discount with respect
to a note will be considered to be DE MINIMIS for purposes of section 1276 of
the Code if such market discount is less than 0.25% of the stated redemption
price of that note multiplied by the number of complete years to maturity
remaining after the date of its purchase. In interpreting a similar rule with
respect to OID on obligations payable in installments, the OID Regulations refer
to the weighted average maturity of obligations, and it is likely that the same
rule will be applied with respect to market discount.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Conference Committee Report, called the "COMMITTEE
REPORT", accompanying the Tax Reform Act of 1986 will apply. The Committee
Report indicates that in each accrual period market discount on notes should
accrue, at the option of the Class A, Class B, Class C or Class D Noteholder:
(i) on the basis of a constant yield method, (ii) in the case of a note issued
without OID, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the note as of the
beginning of the accrual period, or (iii) in the case of a note issued with OID,
in an amount that bears the same ratio to the total remaining market discount as
the OID accrued in the accrual period bears to the total OID remaining on the
note at the beginning of the accrual period. Moreover, if the provisions of
section 1272(a)(6) of the Code apply to the notes, as described above with
respect to the use of a reasonable prepayment assumption, the prepayment
assumption used in calculating the accrual of OID also would be used in
calculating the accrual of market discount. Because the regulations referred to
in this paragraph have not been issued, it is not possible to predict what
effect such regulations might have on the tax treatment of a note purchased at a
discount in the secondary market. The prepayment assumption used in calculating
the accrual of OID, premium, market discount, if any, will be equal to a CPR of
_%. We cannot predict whether the Contracts will prepay at that rate or at any
other rate.
To the extent that notes provide for monthly or other periodic
payments throughout their term, the effect of these rules may be to require
market discount to be includible in income at a rate that is not significantly
slower than the rate at which such discount would accrue if it were OID.
Moreover, in any event, a Class A, Class B, Class C or Class D Noteholder
generally will be required to treat a portion of any gain on the sale or
exchange of its note as ordinary income to the extent of the market discount
accrued to the date of disposition under one of the foregoing methods, less any
accrued market discount previously reported as ordinary income.
PREMIUM. A note that is purchased at a cost, excluding any portion of
such cost attributable to accrued qualified stated interest, greater than its
remaining stated redemption price will be considered to be purchased at a
premium. A Class A, Class B, Class C or Class D Noteholder may elect under
section 171 of the Code to amortize that premium under the constant yield method
over the life of the note. If made, that election will apply to all debt
instruments having amortizable bond premium that the noteholder owns as of the
beginning of the taxable year for which the election is made or thereafter
acquires. Amortizable premium will be treated as an offset to interest income on
the related debt instrument, with a corresponding reduction in the noteholder's
basis of such instrument, rather than as a separate interest deduction. The OID
Regulations also permit Class A, Class B, Class C and Class D Noteholders to
elect
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to include all interest, discount and premium in income based on a constant
yield method, further treating the Noteholder as having made the election to
amortize premium generally. See "MARKET DISCOUNT" at page S-59 of this
prospectus supplement. The Committee Report states that the same rules that
apply to accrual of market discount also will apply in amortizing bond premium
under section 171 of the Code; these rules might, as described above, require
use of a prepayment assumption in accruing market discount with respect to Notes
without regard to whether those notes have OID. Bond premium on a note held by a
Class A, Class B, Class C or Class D Noteholder who does not elect to offset the
premium will decrease the gain, or increase the loss, otherwise recognized on
the sale, redemption or other taxable disposition of the note.
REALIZED LOSSES. Under section 166 of the Code, both corporate holders
of notes and noncorporate holders of notes that acquire notes in connection with
a trade or business should be allowed to deduct, as ordinary losses, any losses
sustained during a taxable year in which their notes become wholly or partially
worthless as the result of one or more realized losses on the Contracts that are
allocable to those notes. However, it appears that a noncorporate holder that
does not acquire a note in connection with its trade or business will not be
entitled to deduct a loss under section 166 of the Code until such holder's note
becomes wholly worthless, in other words, until its outstanding principal
balance has been reduced to zero, and that the loss will be characterized as a
short-term capital loss.
Each Class A, Class B, Class C or Class D Noteholder will be required
to accrue OID, if any, and, if that holder uses an accrual method of accounting
for federal income tax purposes, interest with respect to that note, without
giving effect to any reductions in distributions attributable to defaults or
delinquencies on the Contracts until it can be established that any reduction of
that kind ultimately will not be recoverable. As a result, the amount of taxable
income reported in any period by the holder of a note could exceed the amount of
economic income actually realized by the holder in such period. Although the
holder of a note eventually will recognize a loss or reduction in income
attributable to previously accrued and included income that as the result of a
realized loss ultimately will not be realized, the law is unclear with respect
to the timing and character of such loss or reduction in income.
SALES OF NOTES. Except as described above with respect to the market
discount rules, and except as provided under section 582(c) of the Code in the
case of banks and other financial institutions, any gain or loss, equal to the
difference between the amount realized on the sale and the adjusted basis of a
note, recognized on the sale or exchange of a note by an investor who holds that
note as a capital asset, will be capital gain or loss. However, a portion of any
gain that might otherwise be capital gain may be treated as ordinary income to
the extent that the note is held as part of a "conversion transaction" within
the meaning of section 1258 of the Code. A conversion transaction generally is
one in which the taxpayer has taken two or more positions in notes or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in that transaction. The amount of gain realized in a conversion
transaction that may be recharacterized as ordinary income generally will not
exceed the amount of interest that would have accrued on the taxpayer's net
investment in such transaction at 120% of the appropriate "applicable Federal
rate", which rate is computed and published monthly by the IRS, subject to
appropriate reduction to reflect prior inclusion of interest or other ordinary
income items from the transaction, but the extent of that kind of reduction
would need to be provided for in regulations which have not yet been issued.
In addition, taxpayers other than corporations may elect to have net
capital gain taxed at ordinary income rates rather than capital gains rates in
order to include that net capital gain in total net investment income for the
taxable year, for purposes of the rule that limits the deduction of interest on
indebtedness incurred to purchase or carry property held for investment to that
taxpayer's net investment income.
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The adjusted basis of a note generally will equal its cost, increased
by any income previously reported, including any OID and market discount income,
by the selling Class A, Class B, Class C or Class D noteholder and reduced, but
not below zero, by any deduction previously allowed for losses and any amortized
premium and by any payments previously received with respect to that note.
Principal payments on the note will be treated as amounts received upon a sale
or exchange of the note under the foregoing rules relating to OID.
INFORMATION REPORTING. The Servicer is required to furnish or cause to
be furnished to each Class A, Class B, Class C or Class D Noteholder with each
payment a statement setting forth the amount of such payment allocable to
principal on the Note and to interest thereon. In addition, the Servicer is
required to furnish or cause to be furnished, within a reasonable time after the
end of each calendar year, to each Class A, Class B, Class C or Class D
Noteholder who was such a holder at any time during such year, a report
indicating such other customary factual information as the Servicer deems
necessary to enable holders of Notes to prepare their tax returns and will
furnish comparable information to the IRS as and when required by law to do so.
If the Class A, Class B, Class C or Class D Notes are issued with OID, the
Servicer will provide or cause to be provided to the IRS and, as applicable, to
the Class A, Class B, Class C or Class D Noteholder information statements with
respect to OID as required by the Code or as holders of those notes may
reasonably request from time to time. If the notes are issued with OID, those
information reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to an initial Class A, Class B, Class C or Class D
Noteholder which purchased its note at the initial offering price used in
preparing those reports. Class A, Class B, Class C or Class D Noteholders should
consult their own tax advisors to determine the amount of any OID and market
discount includible in income during a calendar year.
As applicable, the note information reports will include a statement
of the adjusted issue price of the notes at the beginning of each accrual
period. In addition, the reports will include information required by
regulations with respect to computing the accrual of any market discount.
Because exact computation of the accrual of market discount on a constant yield
method would require information relating to the noteholder's purchase price
that the Servicer will not have, such regulations only require that information
pertaining to the appropriate proportionate method of accruing market discount
be provided. See "MARKET DISCOUNT" at page S-60 above.
FOREIGN INVESTORS. Any Class A, Class B, Class C or Class D Noteholder
that is not a "United States person", as defined below, and is not holding the
note in connection with a United States trade or business generally will not be
subject to United States federal income or 30% withholding tax in respect of
interest, including any accrued OID, paid on a note, PROVIDED that the Class A,
Class B, Class C or Class D Noteholder complies to the extent necessary with
certain identification requirements, including delivery of a statement, such as
a properly executed IRS Form W-8, signed by the Class A, Class B, Class C or
Class D Noteholder under penalties of perjury, certifying that such Class A,
Class B, Class C or Class D Noteholder is not a United States person and
providing the name and address of such Class A, Class B, Class C or Class D
Noteholder. The foregoing exemption does not apply to payments of interest,
including payments in respect of any accrued OID, received by a Class A, Class
B, Class C or Class D Noteholder that either (i) owns directly or indirectly a
10% or greater interest in the Issuer, (ii) is a bank that is treated as
receiving such interest "on an extension of credit made under a loan agreement
entered into in the ordinary course of its trade or business," (iii) is a person
within a foreign country which the IRS has included in a list of countries that
do not provide adequate exchange of information with the United States to
prevent tax evasion by United States persons, or (iv) is a "controlled foreign
corporation", within the meaning of section 957 of the Code, with respect to
which the Issuer is a "related person", within the meaning of section
881(c)(3)(C) of the Code. If the Class A, Class B, Class C or Class D Noteholder
does not qualify for the foregoing exemption from withholding, payments of
interest, including payments
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in respect of any accrued OID, to that Class A, Class B, Class C or Class D
Noteholder may be subject to withholding tax at a tax rate of 30%, subject to
reduction, including exemption, under any applicable tax treaty, PROVIDED the
Class A, Class B, Class C or Class D Noteholder supplies at the time of its
initial purchase, and at all subsequent times as are required under the Treasury
regulations, a properly executed IRS Form 1001 to report its eligibility for
such reduced rate or exemption.
Amounts allocable to interest, including any accrued OID, received by
a Class A, Class B, Class C or Class D Noteholder that is not a United States
person, which constitute income that is effectively connected with a United
States trade or business carried on by the Class A, Class B, Class C or Class D
Noteholder, will not be subject to withholding tax, but rather will be subject
to United States income tax at the graduated rates applicable to United States
persons, PROVIDED the Class A, Class B, Class C or Class D Noteholder supplies,
at the time of its initial purchase, and at such subsequent times as are
required under the Treasury regulations, a written statement, such as a properly
executed IRS Form 4224, that the income is, or is expected to be, effectively
connected with the conduct of a trade or business within the United States of
that holder and that this income is includible in the holder's gross income for
the taxable year. This statement must include, among other things, the name and
address of the Class A, Class B, Class C or Class D Noteholder, such holder's
identifying number and the trade or business with which the income is, or is
expected to be, effectively connected.
In addition, the foregoing rules will not apply to exempt a United
States shareholder of a controlled foreign corporation from taxation on such
United States shareholder's allocable portion of the interest income received by
such controlled foreign corporation.
For purposes of this discussion, "UNITED STATES PERSON" means a
citizen or resident of the United States, a corporation, partnership or any
other entity created or organized in, or under the laws of, the United States or
any political subdivision thereof, except, in the case of a partnership, to the
extent provided in regulations, or an estate whose income is subject to United
States federal income tax regardless of its source, or a trust other than a
"foreign trust" as described in Section 7701(a)(31) of the Code. Class A, Class
B, Class C or Class D Noteholders who are not United States persons should
consult their own tax advisors regarding the tax consequences of purchasing,
owning or disposing of a note.
BACKUP WITHHOLDING. Payments of interest and principal, as well as
payments of proceeds from the sale of notes, may be subject to the "backup
withholding tax" under section 3406 of the Code at a rate of 31% if recipients
of those payments 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 liability. Furthermore, certain penalties may be imposed by the IRS
on a recipient of payments that is required to supply information but that does
not do so in the proper manner. Information returns will be sent annually to the
IRS and each Class A, Class B, Class C and Class D Noteholder, setting forth the
amount of interest paid on the notes and the amount of any federal income tax
withheld on the notes.
NEW WITHHOLDING REGULATIONS. The Treasury Department has issued new
regulations which make some modifications to the withholding and information
reporting rules described above. The new withholding regulations attempt to
unify certification requirements and modify reliance standards. The new
withholding regulations will generally be effective for payments made after
December 31, 2000, subject to some transition rules. Prospective investors are
urged to consult their tax advisors regarding the new withholding regulations.
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CERTAIN STATE, LOCAL AND OTHER TAX CONSIDERATIONS
Investors should consult their own tax advisors regarding whether the
purchase of the notes, either alone or in conjunction with an investor's other
activities, may subject an investor to any state or local taxes based, for
example, on an assertion that the investor is either "doing business" in, or
deriving income from a source located in, any state or local jurisdiction.
Additionally, potential investors should consider, and consult their own tax
advisors regarding, the state, local, foreign and other tax consequences of
purchasing, owning or disposing of a note. State, local and foreign tax laws may
differ substantially from the corresponding federal tax law, and the foregoing
discussion does not purport to describe any aspect of the tax laws of any state,
local, foreign or other jurisdiction.
THE FEDERAL TAX CONSEQUENCES SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A CLASS A, CLASS B,
CLASS C OR CLASS D NOTEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
CONSIDERATIONS FOR BENEFIT PLAN INVESTORS
INVESTORS AFFECTED
A federal law called the Employee Retirement Income Security Act of
1974, as amended, or "ERISA", the Code and a variety of state laws may affect
your decision whether to invest in Offered Notes if you are investing for:
o a pension or other employee benefit plan of employers in the private
sector that are regulated under ERISA, referred to as an "ERISA PLAN,"
o an individual retirement account or annuity, called an "IRA", or a
pension or other benefit plan for self-employed individuals, called a
"KEOGH PLAN,"
o a pension and other benefit plan for the employees of state and local
governments, called a "GOVERNMENT PLAN," or
o an insurance company general or separate account, a bank collective
investment fund and other pooled investment vehicle which includes the
assets of ERISA plans, IRAs, Keogh plans, and/or government plans.
A summary of the effects of those laws follows.
FIDUCIARY STANDARDS FOR ERISA PLANS AND RELATED INVESTMENT VEHICLES
ERISA imposes standards of fiduciary conduct on those who are
responsible for operating ERISA plans or investing their assets. These standards
include requirements that fiduciaries act prudently in making investment
decisions and diversify investments so as to avoid large losses unless under the
circumstances it is clearly prudent not to do so. If you are a fiduciary of an
ERISA plan, you are subject to these standards in deciding whether to invest the
plan's assets Offered Notes. You may find the full text
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of the applicable standards of fiduciary conduct in section 404 of ERISA. If you
are a fiduciary of an ERISA Plan, you should consult with your advisors
concerning your investment decision in the context of section 404 of ERISA.
PROHIBITED TRANSACTION ISSUES FOR ERISA PLANS, KEOGH PLANS, IRAS AND RELATED
INVESTMENT VEHICLES
GENERAL. Certain transactions involving the assets of an ERISA plan, a
Keogh plan or an IRA, called "prohibited transactions", may result in the
imposition of excise taxes and, in the case of an ERISA plan, civil money
penalties. A prohibited transaction occurs when a person with a pre-existing
relationship to an ERISA plan or IRA, known as a "party in interest" or a
"disqualified person", engages in a transaction involving the assets of the plan
or IRA. You may find the laws applicable to prohibited transactions in section
406 of ERISA and section 4975 of the Code. There are statutory and regulatory
prohibited transaction exemptions, as well as administrative exemptions granted
by the United States Department of Labor. Prohibited transactions exemptions
waive the excise taxes and civil money penalties for certain prohibited
transactions which are structured to satisfy prescribed conditions.
PURCHASE AND SALE OF OFFERED NOTES. If an ERISA plan, a Keogh plan, an
IRA or a related investment vehicle acquires Offered Notes from, or sells
Offered Notes to, a party in interest or a disqualified person, a prohibited
transaction may occur. In such a case, the party in interest or disqualified
person might be liable for excise taxes unless a prohibited transaction
exemption is available. Where a prohibited transaction involves an ERISA plan or
related investment vehicle, the fiduciary who causes or permits the prohibited
transaction may also be liable for civil money penalties.
TRANSACTIONS INCIDENTAL TO THE OPERATION OF THE ISSUER. Transactions
involving the assets of the Issuer may also give rise to prohibited transactions
to the extent that an investment in Offered Notes causes the assets of the
Issuer to be considered assets, commonly known as "plan assets", of an ERISA
plan, a Keogh plan, an IRA or a related investment vehicle. Whether an
investment in notes will cause the Issuer's assets to be treated as plan assets
depends on whether the Offered Notes are debt or equity investments for purposes
of ERISA. The United States Department of Labor has issued regulations, commonly
known as the "plan asset regulations", which define debt and equity investments.
The plan asset regulations appear at 12 C.F.R. ss.2510.3-101.
Under the plan asset regulations, the Issuer's assets will not be
"plan assets" of an ERISA plan, Keogh plan, IRA or related investment vehicle
that purchases Offered Notes if the Offered Notes are considered debt. For this
purpose, the Offered Notes will be debt if they are treated as indebtedness
under applicable local law and do not have any substantial equity features. The
term "substantial equity features" has no definition under the plan asset
regulations. In the absence of such a definition, we cannot assure you that the
Offered Notes, either when they are issued or at any later date, will have no
substantial equity features. Thus, we cannot assure you that the Offered Notes
will be treated as debt.
To the extent that the Offered Notes do not constitute debt for
purposes of ERISA, they will constitute equity investments unless (1) the Issuer
is an operating company or a venture capital operating company as defined in the
plan asset regulations, (2) the Offered Notes are "publicly offered securities"
as defined in the plan asset regulations, (3) "benefit plan investors" as
defined in the plan asset regulations do not own 25% or more of the Offered
Notes or any other class of equity security issued by the Issuer. In this case,
an ERISA plan, Keogh plan, IRA or related investment vehicle that acquires an
Offered Note would also acquire an undivided interest in each asset of the
Issuer. This would cause all of the Issuer's assets to be plan assets under the
plan asset regulations. If the Offered Notes are treated
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as equity investment under the plan asset regulations, we cannot assure you that
any of these exceptions will apply.
POSSIBLE EXEMPTIVE RELIEF
The United States Department of Labor has issued Prohibited
Transaction Class Exemptions, or PTCEs, which conditionally waive the excise
taxes and civil money penalties that might otherwise apply to certain types of
transactions. A PTCE's exemptive relief is available to any party to any
transaction which satisfies the conditions of the exemption. A partial listing
of the PTCEs which may be available for investments in Offered Notes follows.
Each of these exemptions is available only if specified conditions are satisfied
and may provide relief for some, but not all, of the prohibited transactions
that a particular transaction may cause. You should consult with your advisors
regarding the specific scope, terms and conditions of an exemption before
relying on that exemption's availability to you.
CLASS EXEMPTIONS FOR PURCHASES AND SALES OF OFFERED NOTES. The
following exemptions may apply to a purchase or sale of Offered Notes between an
ERISA plan, a Keogh plan, an IRA or related investment vehicle, on the one hand,
and a party in interest or disqualified person, on the other hand:
o PTCE 84-14, which exempts particular transactions approved on
behalf of the plan by a qualified professional asset manager, or
"QPAM".
o PTCE 86-128, which exempts certain transactions between a plan
and particular broker-dealers.
o PTCE 90-1, which exempts particular transactions entered into by
insurance company pooled separate accounts in which plans have
made investments.
o PTCE 91-38, which exempts particular transactions entered into by
bank collective investment funds in which plans have made
investments.
o PTCE 96-23, which exempts particular transaction approved on
behalf of a plan by an in-house investment manager, or "INHAM".
These exemptions do not expressly address prohibited transactions that might
result from transactions incidental to the operation of the Issuer. We cannot
assure you that a purchase or sale of Offered Notes in reliance on one of these
exemptions will not give rise to indirect prohibited transactions as a result of
the operation of the Issuer for which there is no exemption.
CLASS EXEMPTION FOR PURCHASES AND SALES OF OFFERED NOTES AND
TRANSACTIONS INCIDENTAL TO THE OPERATION OF THE ISSUER. PTCE 95-60, which
exempts certain transactions involving insurance company general accounts, may
apply to purchases and sales of Offered Notes. It also provides express
exemptions for prohibited transactions that may result from transactions
incidental to the operation of the Issuer. If this exemption applies to your
purchase or sale of Offered Notes, it will also apply to prohibited transaction
that may result from transactions incident to the operation of the Issuer.
STATUTORY EXEMPTION FOR INSURANCE COMPANY GENERAL ACCOUNTS. In
addition to the Prohibited Transaction Class Exemptions described above, a
temporary statutory exemption may be available if you are investing on behalf of
an insurance company general account that includes plan assets. This exemption
appears in section 401(c) of ERISA. Section 401(c) of ERISA requires the United
States
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Department of Labor to issue regulations defining when an insurance company
general account will be deemed to include plan assets and, hence, be subject to
the ERISA prohibited transaction rules. Generally, until 18 months after the
issuance of such regulations, no person will be subject to liability for
prohibited transactions that result from the inclusion of plan assets in an
insurance company general account. If you are investing on behalf of an
insurance company general account, section 401(c) generally provides an
exemption for your purchases and sales of Offered Notes, as well as prohibited
transactions resulting from transactions incident to the operation of the
Issuer, until 18 months after the issuance of regulations. This will be the case
as long as you have not acted to avoid the regulations or committed a breach of
fiduciary responsibilities which would also constitute a violation of federal or
state criminal law. If you are investing on behalf of an insurance company
general account, we cannot assure that the purchase or sale of Offered Notes,
the continued holding of Offered Notes previously purchased, or transactions
incidental to the operation of the Issuer, more than 18 months after the
issuance of final regulations would qualify for further exemptive relief.
GOVERNMENT PLANS
Government plans are generally not subject to the fiduciary standards
of ERISA or the prohibited transaction rules of ERISA or the Code. However, many
states have enacted laws which established standards of fiduciary conduct, legal
investment rules, or other requirements for investment transactions involving
the assets of government plans. If you are considering investing in Offered
Notes on behalf of a government plan, you should consult with your advisors
regarding the requirements of applicable state law.
REQUIRED REPRESENTATIONS OF INVESTORS
It is anticipated that, on the date of this Prospectus Supplement, the
Offered Notes should be treated as indebtedness without substantial equity
features for purposes of the plan asset regulations. However, even if the
Offered Notes are treated as indebtedness for such purposes, the acquisition or
holding of Offered Notes by or on behalf of an ERISA plan, a Keogh plan, an IRA
or related investment vehicle could be considered to give rise to a prohibited
transaction if the Issuer, the Servicer, the trustee, an underwriter or any of
their respective affiliates is or becomes a party in interest or disqualified
person with respect to such ERISA plan, Keogh plan, IRA or related investment
vehicle, unless certain exemptions from the prohibited transaction rules were
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire an Offered Note. In view of the investor-specific nature
of the conditions on the exemptive relief available under the PTCEs and section
401(c) of ERISA we are requiring each investor to determine whether it is
investing plan assets in the Offered Notes and, if it is, to determine that
appropriate exemptive relief from ERISA's prohibited transaction provisions is
available. The Offered Notes will be issued and transferred only in book-entry
form through The Depository Trust Company, whose issuance and transfer
procedures do not permit us to secure written representations from each investor
and subsequent transferee. As a result, by acquiring an Offered Note, each
purchaser will be deemed to represent that either (1) it is not acquiring the
Offered Notes with the assets of an ERISA plan, a Keogh plan, an IRA or related
investment vehicle; or (2) the acquisition and holding of the Offered Notes will
not give rise to a nonexempt prohibited transaction under Section 406(a) of
ERISA or Section 4975 of the Code. If a purchaser is investing on behalf of more
than one party or using more than one source of funds, such purchaser will be
deemed to have made one, but not necessarily the same, of these representations
as to each party or source of funds.
If the Offered Notes are issued as definitive securities, the transfer
of the Offered Notes to you will not be registered by the trustee unless you
provide the Issuer, the trustee, the Servicer and any successor Servicer with a
representation that the statements in clause (1) or (2) in the preceding
paragraph
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is an accurate representation as to all sources of funds you are using to pay
the purchase price of the Offered Notes.
THIS DISCUSSION IS A GENERAL DISCUSSION OF SOME OF THE RULES WHICH
APPLY TO ERISA PLANS, KEOGH PLANS, IRAS, GOVERNMENT PLANS AND THEIR RELATED
INVESTMENT VEHICLES. PRIOR TO MAKING AN INVESTMENT IN THE OFFERED NOTES,
PROSPECTIVE PLAN INVESTORS SHOULD CONSULT WITH THEIR LEGAL AND OTHER ADVISORS
CONCERNING THE IMPACT OF ERISA AND THE CODE, AND, PARTICULARLY IN THE CASE OF
GOVERNMENT PLANS AND RELATED INVESTMENT VEHICLES, ANY ADDITIONAL STATE LAW
CONSIDERATIONS, AND THE POTENTIAL CONSEQUENCES IN THEIR SPECIFIC CIRCUMSTANCES.
LEGAL INVESTMENT
[The Class A Notes will be eligible securities for purchase by money
market funds under the Investment Company Act of 1940, as amended.]
RATINGS
As a condition to the issuance of the Class A Notes, the Class A Notes
must be rated "___" or "___", as applicable by the Rating Agencies, the Class B
Notes and Class C Notes must be rated "__" or "___", as applicable, by the
Rating Agencies, and the Class D Notes must be rated "__", or "--", as
applicable, by the Rating Agencies. A rating on a security is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time. The ratings assigned to the Notes address the likelihood
of the receipt by Class A Noteholders, Class B Noteholders, Class C Noteholders
and Class D Noteholders of all distributions to which such Noteholders are
entitled. The ratings assigned to the Notes do not represent any assessment of
the likelihood that principal prepayments might differ from those originally
anticipated or address the possibility that Class A Noteholders, Class B
Noteholders, Class C Noteholders and Class D Noteholders might suffer a lower
than anticipated yield.
USE OF PROCEEDS
The Issuer will use the net proceeds from the sale of the Notes for
general organizational purposes, to pay the purchase price of the Trust Property
to DVI Financial Services Inc. or an Affiliate thereof and to make the required
deposits in the Reserve Account. See "DESCRIPTION OF THE NOTES AND PRINCIPAL
TRANSACTION DOCUMENTS--RESERVE ACCOUNT" at page S-45 for a description of the
Reserve Account.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting
agreement the Issuer has agreed to sell and the Underwriter[s] have severally
agreed to purchase, the Class A Notes, the Class B Notes, the Class C Notes the
Class D Notes, in the principal amounts set forth opposite their names:
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITER CLASS A NOTES CLASS B NOTES CLASS C NOTES CLASS D NOTES
- -------------- ------------- ------------- ------------- -------------
$ $ $ $
---------- --------- --------- ---------
$ $ $ $
---------- ---------- --------- ---------
$ $ $ $
Total ---------- ---------- --------- ---------
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In the underwriting agreement, the Underwriter[s] have agreed, subject
to the terms and conditions therein, to purchase all the Class A Notes, the
Class B Notes, the Class C Notes and the Class D Notes offered hereby in the
amounts set forth above if any of such Class A Notes, the Class B Notes, the
Class C Notes and the Class D Notes are purchased.
The Issuer has been advised by the Underwriter[s] that the
Underwriter[s] propose initially to offer the Class A Notes, Class B Notes,
Class C Notes and Class D Notes to the public at the respective public offering
prices set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a discount not in excess of ____% per note. The
Underwriter[s] may allow and such dealers may reallow a discount not in excess
of _____% per note to certain other dealers. After the initial public offering,
the prices of the notes, such concessions and such discounts may vary.
The Issuer has been advised by the Underwriter[s] that they presently
intend to make a market in the Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes; however, they are not obligated to do so, any
market-making may be discontinued at any time, and there can be no assurance
that an active public market for such notes will develop.
For further information regarding any offer or sale of the Class A
Notes, the Class B Notes, the Class C Notes and the Class D Notes pursuant to
this Prospectus Supplement, see "PLAN OF DISTRIBUTION" at page 15 of the
Prospectus.
The underwriting agreement provides that DVI and the Transferor will
indemnify the Underwriter[s] against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended, or contribute to
payments the Underwriter[s] may be required to make in respect thereof.
In connection with this offering and in compliance with applicable law
and industry practice, the Underwriter[s] may over-allot or effect transactions
which stabilize, maintain or otherwise affect the market price of the Class A
Notes, Class B Notes, Class C Notes and Class D Notes at a level above that
which might otherwise prevail in the open market, including stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids. A
stabilizing bid means the placing of any bid or the effecting of any purchase,
for the purpose of pegging, fixing or maintaining the price of a security. A
syndicate covering transaction means the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to reduce a short
position created in connection with the offering. A penalty bid means an
arrangement that permits the Underwriter[s] to reclaim a selling concession from
a syndicate member in connection with the offering when the Class A Notes, Class
B Notes, Class C Notes and Class D Notes originally sold by the syndicate member
are purchased in syndicate covering transactions. The Underwriter[s] are not
required to engage in any of these activities. Any such activities, if
commenced, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Notes will be
passed upon for the Issuer, the Transferor, the Contributor and the Servicer by
the general counsel to such parties, and by Thacher Proffitt & Wood, New York,
New York, special counsel to the Underwriter[s].
WHERE YOU CAN FIND MORE INFORMATION
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS
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PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. TO THE EXTENT THAT ANY
STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE
PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONTROL.
For all notes offered by this Prospectus supplement, there are
incorporated and in the related Supplement to the Indenture by reference all
documents and reports filed or caused to be filed by the Issuer pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the offering of the applicable notes, that relate specifically to such
related series of notes. The issuer will provide or cause to be provided without
charge to each person to whom this Prospectus supplement and the prospectus is
delivered in connection with offering of the notes, upon written or oral request
of such person, a copy of any or all of the reports incorporated in this
prospectus supplement by reference. In each case, information will be
incorporated to the extent those reports relate to one or more of classes of
notes. This will not include the exhibits to those documents, unless those
exhibits are specifically incorporated by reference in those documents. Please
direct requests in writing to the issuer at its address in the summary section
of this prospectus supplement.
REPORTS TO NOTEHOLDERS
Unless and until Definitive Securities are issued, periodic and annual
reports containing information concerning the trust property will be prepared by
the Servicer and sent on behalf of the Issuer only to the trustee for the
noteholders and Cede & Co., as registered holder of the notes and the nominee of
DTC. See "DESCRIPTION OF THE NOTES AND PRINCIPAL TRANSACTION DOCUMENTS --
BOOK-ENTRY REGISTRATION" at page S-56, and "DESCRIPTION OF THE NOTES AND
PRINCIPAL TRANSACTION DOCUMENTS -- REPORTS TO SECURITYHOLDERS" at page 8, of the
attached prospectus. These reports will not be prepared in accordance with
generally accepted accounting principles. The Issuer will file with the
Securities and Exchange Commission, those periodic reports required under the
Exchange Act and as otherwise required by the Commission. Copies of any of these
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.
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INDEX OF DEFINED TERMS
1933 Act......................................................................57
Actual Discount Rate..........................................................25
Aggregate Discounted Contract Balance.........................................24
Amortization Event............................................................50
Article 2A....................................................................63
Assumed Discount Rate.........................................................26
Available Funds...............................................................47
Balloon Payment...............................................................38
Bankruptcy Code...............................................................62
Beneficial Owner..............................................................40
Book-Entry Securities.........................................................40
Brokered Transactions.........................................................23
Brokers.......................................................................23
Class A Monthly Interest......................................................41
Class A Monthly Principal.....................................................41
Class A Overdue Interest......................................................41
Class A Overdue Principal.....................................................41
Class A Percentage............................................................41
Class B Monthly Interest......................................................41
Class B Monthly Principal.....................................................41
Class B Overdue Interest......................................................41
Class B Overdue Principal.....................................................41
Class B Percentage............................................................41
Class C Monthly Interest......................................................41
Class C Monthly Principal.....................................................42
Class C Overdue Interest......................................................42
Class C Overdue Principal.....................................................42
Class C Percentage............................................................42
Class D Monthly Interest......................................................42
Class D Monthly Principal.....................................................42
Class D Overdue Interest......................................................42
Class D Overdue Principal.....................................................42
Class D Percentage............................................................42
Class E Monthly Interest......................................................42
Class E Monthly Principal.....................................................42
Class E Overdue Interest......................................................43
Class E Overdue Principal.....................................................43
Class E Percentage............................................................43
Closing Date...................................................................1
Code .........................................................................63
Collection Account............................................................45
Collection Period.............................................................24
Committee Report..............................................................66
Contract File.................................................................23
Contract Payments.............................................................18
Contract Schedule.............................................................36
CT .........................................................................31
Cut-off Date...................................................................1
Defaulted Contract............................................................24
Definitive Note...............................................................40
Delinquency Condition.........................................................46
Delinquent Contract...........................................................25
Deposited Available Funds.....................................................49
Determination Date............................................................20
Discount Rate.................................................................25
Discounted Contract Balance...............................................24, 27
Distribution Account..........................................................45
DTC .........................................................................40
DVI .........................................................................14
Eligible Contract.............................................................38
Eligible Investments..........................................................45
ERISA.........................................................................70
ERISA Plan....................................................................70
Facilities....................................................................15
Fair Market Value Leases.......................................................2
Finance Leases.................................................................2
Financially Stronger Hospitals................................................16
government plan...............................................................70
Indenture Event of Default....................................................52
Initial Aggregate Discounted Contract
Balance..................................................................25
Initial Contracts.............................................................22
Initial Reserve Account Required Amount
........................................................................46
Keogh Plan....................................................................70
Lease Receivable Purchases.....................................................2
Leveraged Lease Loans..........................................................2
Lockbox Account...............................................................45
Lockbox Bank..................................................................45
Medium-Sized Hospitals........................................................15
Monthly Interest..............................................................43
Monthly Principal.............................................................43
Monthly Servicer Report.......................................................20
MRI .........................................................................30
NBRC .........................................................................63
Nonrecoverable Advance........................................................25
Note Balance..................................................................43
Note Rate.....................................................................43
Note Register.................................................................40
Number of Contracts...........................................................27
Offered Notes.................................................................56
Officer's Certificate.........................................................18
OID .........................................................................65
OID Regulations...............................................................65
Original Equipment Cost.......................................................27
Outstanding...................................................................43
Overdue Interest..............................................................44
Partial Prepayment Amount.....................................................25
Participant...................................................................40
Payment Date..................................................................25
Physician Groups..............................................................15
Pool A........................................................................36
Pool A Aggregate Discounted Contract
Balance..................................................................36
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Pool A Contract...............................................................36
Pool A Non-Performing Contract
Substitution.............................................................36
Pool A Prepaid Contract Substitution..........................................36
Pool B........................................................................36
Pool B Aggregate Discounted Contract
Balance..................................................................36
Pool B Contract...............................................................37
Pool B General Contract Substitution..........................................37
Pool B Prepaid Contract Substitution..........................................37
Predecessor Contract..........................................................25
Prepayment Amount.............................................................26
Priority Payments.............................................................49
Repurchase Amount ............................................................26
Reserve Account...............................................................45
Reserve Account Deposit Amount................................................46
Reserve Account Property......................................................46
Reserve Account Required Amount...............................................46
Reserve Account Withdrawal....................................................47
Restricting Event.............................................................46
Rules.........................................................................56
Scheduled Termination Date....................................................26
Secured Equipment Notes........................................................2
Service.......................................................................63
Servicer Advance..............................................................26
Servicer Event of Default.....................................................54
Servicing Charges.............................................................19
Servicing Fee.................................................................19
Shared Service Providers......................................................15
Stated Maturity Date..........................................................26
Statistical Contracts.........................................................26
Subordination Deficiency Event................................................49
Substitute Contract...........................................................36
Terms and Conditions..........................................................58
Transferor....................................................................18
UCC .........................................................................61
Underwriters..................................................................64
United States person..........................................................69
Voting Rights.................................................................49
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (ITEM 14 OF FORM S-3).
The expenses expected to be incurred in connection with the issuance
and distribution of the Securities being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the filing
fee, are estimated.
Filing Fee for Registration Statement............$ 111,200
Legal Fees and Expenses.......................... 150,000
Accounting Fees and Expenses..................... 200,000
Trustee's Fees and Expenses
(including counsel fees).................. 150,000
Printing and Engraving Fees...................... 100,000
Rating Agency Fees............................... 250,000
Miscellaneous.................................. 100,000
-----------
Total .......................................... $ 961,200
===========
INDEMNIFICATION OF DIRECTORS AND OFFICERS (ITEM 15 OF FORM S-3).
Any underwriters who execute an Underwriting Agreement in the form
filed as Exhibit 1.1 to this Registration Statement will agree to indemnify the
Registrant's directors and its officers who signed this Registration Statement
against certain liabilities which might arise under the Securities Act of 1933
from certain information furnished to the Registrant by or on behalf of such
indemnifying party.
Subsection (a) of Section 145 of the General Corporation Law of
Delaware empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including
<PAGE>
-2-
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and except that no indemnification may be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
that despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification or advancement of expenses provided
for by Section 145 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled; and empowers the corporation to purchase
and maintain insurance on behalf of a director, officer, employee or agent of
the corporation against any liability asserted against him or incurred by him in
any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
The By-Laws of the Registrant provide, in effect, that to the extent
and under the circumstances permitted by subsections (a) and (b) of Section 145
of the General Corporation Law of the State of Delaware, the Registrant (i)
shall indemnify and hold harmless each person who was or is a party or is
threatened to be made a party to any action, suit or proceeding described in
subsections (a) and (b) by reason of the fact that he is or was a director or
officer, or his testator or intestate is or was a director or officer of the
Registrant, against expenses, judgments, fines and amounts paid in settlement,
and (ii) shall indemnify and hold harmless each person who was or is a party or
is threatened to be made a party to any such action, suit or proceeding if such
person is or was serving at the request of the Registrant as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
In addition, the Indenture will provide that no director, officer,
employee or agent of the Registrant is liable to the Noteholders, except for
such person's own willful misfeasance, bad faith, gross negligence in the
performance of duties or reckless disregard of obligations and duties. The
Indenture will further provide that, with the exceptions stated above, a
director, officer, employee or agent of the Registrant is entitled to be
indemnified against any loss, liability or expense incurred in connection with
legal action relating to such Indenture and related Notes other than such
expenses related to particular Contracts.
<PAGE>
-3-
EXHIBITS (ITEM 16 OF FORM S-3).
Exhibits--
1.1 -- Form of Underwriting Agreement
3.1 -- Certificate of Incorporation of DVI Receivables Corp. VIII.
3.2 -- By-Laws of DVI Receivables Corp. VIII.
4.1 -- Form of Indenture. 4.2 -- Form of Trust Agreement
4.3 -- Form of Contribution and Servicing Agreement.
4.4 -- Form of Subsequent Contract Transfer Agreement
5.1 -- Opinion of Thacher Proffitt & Wood with respect to legality.
8.1 -- Opinion of Thacher Proffitt & Wood with respect to certain tax
matters (included with Exhibit 5.1)..
23.1 -- Consent of Thacher Proffitt & Wood (included as part of Exhibit 5.1
and Exhibit 8.1).
24.1 -- Power of Attorney
<PAGE>
-4-
UNDERTAKINGS (ITEM 17 OF FORM S-3).
A. UNDERTAKINGS PURSUANT TO RULE 415.
The Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration
Statement;
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in
this Registration Statement;
PROVIDED HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement 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.
<PAGE>
-5-
B. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
NUMBER DESCRIPTION LOCATION OF EXHIBIT
IN SEQUENTIAL
NUMBERING SYSTEM
<S> <C> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of DVI Receivables Corp. VIII
3.2 By-Laws of DVI Receivables Corp. VIII
4.1 Form of Indenture
4.2 Form of Trust Agreement
4.3 Form of Contribution and Servicing Agreement
4.4 Form of Subsequent Contract Transfer Agreement
5.1 Opinion of Thacher Proffitt & Wood with respect to legality.
8.1 Opinon of Thacher Proffitt & Wood with respect to certain tax
matters (included in Exhibit 5.1).
23.1 Consent of Thacher Proffitt & Wood (included as part of Exhibit 5.1
and Exhibit 8.1).
24.1 Power of Attorney
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, DVI
Receivables Corp. VIII certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3, reasonably believes
that the security rating requirement contained in Transaction Requirement B.5 of
Form S-3 will be met by the time of the sale of the securities registered
hereunder, and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Doylestown,
Comonwealth of Pennsylvania, as of the 12th day of March, 1999.
DVI RECEIVABLES CORP. VIII
By: /s/ John P. Boyle
-----------------------
John P. Boyle
Chief Executive Officer
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Director, Chief Executive March 12, 1999
/s/ John P. Boyle Officer and Vice President
- ------------------------------
John P. Boyle
Executive Vice President and March 12, 1999
/s/ Steven R. Garfinkel Chief Financial Officer
- ------------------------------
Steven R. Garfinkel
Director and Vice President March 12, 1999
/s/ Lisa J. Cruikshank
- ------------------------------
Lisa J. Cruikshank
Director March 12, 1999
/s/ Jeffrey M. Medaglio
- ------------------------------
Jeffrey M. Medaglio
Director
/s/ William A. Norris, III
- ------------------------------
William A. Norris, III March 12, 1999
</TABLE>
Exhibit 1.1
-----------
$__________ _____% ASSET-BACKED NOTES, SERIES ______, CLASS A
$___________ ____% ASSET-BACKED NOTES, SERIES ______, CLASS B
$__________ ____% ASSET-BACKED NOTES, SERIES ______, CLASS C
$_________ ____% ASSET-BACKED NOTES, SERIES ______, CLASS D
UNDERWRITING AGREEMENT
----------------------
----------------
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
DVI Receivables Corp. VIII (the "TRANSFEROR"), as sole owner of all of
the outstanding beneficial interest in DVI ______________ (the "ISSUER"), the
Issuer and DVI Financial Services Inc. (the "Contributor" or "Servicer"), hereby
agree with the Underwriters (defined below) as follows:
Section 1. ISSUANCE AND SALE OF NOTES. The Issuer proposes to issue and
sell $__________ (the "CLASS A INITIAL PRINCIPAL AMOUNT") of _____% Class A
Asset-Backed Notes (the "CLASS A NOTES");$_________ (the "CLASS B INITIAL
PRINCIPAL AMOUNT") of ____% Class B Asset- Backed Notes (the "CLASS B NOTES");
$_________ (the "CLASS C INITIAL PRINCIPAL AMOUNT") of ____% Class C
Asset-Backed Notes (the "CLASS C NOTES"); and $_________ (the "CLASS D INITIAL
PRINCIPAL AMOUNT") of _____% Class D Asset-Backed Notes (the "CLASS D NOTES";
together with the Class A Notes, the Class B Notes and the Class C Notes, the
"NOTES"). The Notes will be issued pursuant to an Indenture, dated as of
________________ (the "INDENTURE"), between the Issuer and ___________, a
national banking association (the "TRUSTEE"). The Notes are more fully described
in the Prospectus Supplement (as defined below), a copy of which the Transferor
is furnishing to the Underwriters. The Notes will evidence secured obligations
of the Issuer. The assets of the Issuer will include a pool of leases, loans and
other contracts and security interests in the related underlying Equipment.
The Notes will be sold by the Issuer to the Underwriters listed on
SCHEDULE A hereto (the "UNDERWRITERS") in accordance with the terms of this
agreement.
The terms which follow, when used in this Agreement, shall have the
meanings indicated:
<PAGE>
"INITIAL PRINCIPAL AMOUNT" means the sum of the Class A Initial
Principal Amount, the Class B Initial Principal Amount, the Class C Initial
Principal Amount and the Class D Initial Principal Amount.
"UNDERWRITING INFORMATION" has the meaning given to such term in
SECTION 8(B).
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in APPENDIX I to the Indenture.
Section 2. PURCHASE AND SALE OF NOTES.
(a) Subject to the terms and conditions and in reliance upon the
covenants, representations and warranties set forth herein, each of the
Underwriters agrees to purchase from the Issuer the Initial Principal Amount of
the Notes pursuant to the terms of this Agreement on the Closing Date at a
purchase price equal to the aggregate of the Initial Principal Amount of each
class of Notes purchased by such Underwriter times the applicable Underwriter's
discount (the "PURCHASE PRICE") set forth on SCHEDULE A attached hereto.
(b) The obligations of each of the Underwriters hereunder to purchase
the respective Notes of each Class shall be several and not joint. Each
Underwriter's obligation shall be to purchase the aggregate principal amount of
Notes of the related class as is indicated with respect to each Underwriter on
Schedule A attached hereto. The rights of the Issuer and any Non-Defaulting
Underwriter shall be as set forth in Section 13 hereof.
(c) It is understood that the Underwriters propose to offer the Notes
for sale to the public in the manner set forth in the Prospectus Supplement (as
defined below).
Section 3. DELIVERY AND PAYMENT. Delivery of and payment for the Notes
purchased by the Underwriters shall be made at the offices of Thacher Proffitt &
Wood, at Two World Trade Center, 39th Floor, New York, New York, on the Closing
Date, or such other place and time as the parties hereto agree. Delivery of the
Notes shall be made against payment of the purchase price in immediately
available funds drawn to the order of the Issuer or as it shall so direct. The
Notes to be so delivered will be initially represented by one or more Notes
registered in the name of Cede & Co., as nominee for The Depository Trust
Company. The interests of beneficial owners of the Notes will be represented by
book entries on the records of the Note Registrar and participating members
thereof. Definitive Notes will be available only under limited circumstances
described in the Indenture.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR AND
THE ISSUER.
(a) Each of the Transferor or the Issuer, as the case may be, hereby
severally represents and warrants to, and agrees with, the Underwriters as
follows:
(i) The Transferor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (No. ________)
on Form S-3 for the registration under the Securities Act of 1933, as
amended (the "Act"), of Asset Backed Certificates and
-2-
<PAGE>
Asset Backed Notes (issuable in series), including the Notes, which
registration statement has become effective, and a copy of which, as
amended to the date hereof, has heretofore been delivered to you. The
Transferor proposes to file with the Commission pursuant to Rule 424(b)
under the rules and regulations of the Commission under the Act (the
"1933 Act Regulations") a supplement dated ________________ (the
"Prospectus Supplement"), to the prospectus dated _________________
(the "Basic Prospectus"), relating to the Notes and the method of
distribution thereof. Such registration statement (No. ________)
including exhibits thereto and any information incorporated therein by
reference, as amended at the date hereof, is hereinafter called the
"Registration Statement"; and the Basic Prospectus and the Prospectus
Supplement and any information incorporated therein by reference,
together with any amendment thereof or supplement thereto authorized by
the Transferor on or prior to the Closing Date for use in connection
with the offering of the Notes, are hereinafter called the
"Prospectus."
(ii) The Registration Statement has become effective, and the
Registration Statement as of the effective date (the "Effective Date"),
and the Prospectus, as of the date of the Prospectus Supplement,
complied in all material respects with the applicable requirements of
the Act and the 1933 Act Regulations; and the Registration Statement,
as of the Effective Date, did not contain any untrue statement of a
material fact and did not omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading and the Prospectus, as of the date of the Prospectus
Supplement, did not, and as of the Closing Date will not, contain an
untrue statement of a material fact and did not and will not omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; PROVIDED, HOWEVER, that neither the Transferor, the
Issuer, the Contributor nor the Servicer makes any representations or
warranties as to the Underwriting Information. The conditions to the
use by the Transferor of a registration statement on Form S-3 under the
Act, as set forth in the General Instructions to Form S-3, have been
satisfied with respect to the Registration Statement, as applicable,
and the Prospectus, except that the Transferor makes no such
representation regarding any Computational Materials (as defined
herein) incorporated by reference therein. There are no contracts or
documents (not including Computational Materials) of the Transferor
which are required to be filed as exhibits to the Registration
Statement pursuant to the Act or the 1933 Act Regulations which have
not been so filed.
(iii) This Agreement has been duly authorized, executed and
delivered by the Transferor and the Issuer and constitutes a legal,
valid and binding agreement of the Transferor and the Issuer,
enforceable in accordance with its terms, except that the provisions
hereof relating to indemnification of the Underwriters may be subject
to limitations of public policy.
(iv) Each of the Transaction Documents to which the Transferor
or the Issuer is a party have been duly authorized by the Transferor or
the Issuer, as the case may be and each of the Transferor and the
Issuer has the power, authority and legal right to execute, deliver and
perform its respective obligations under each of the Transaction
Documents to which it is a party and to consummate all transactions
contemplated thereunder, and, when executed
-3-
<PAGE>
and delivered by the Transferor or the Issuer, each of the Transaction
Documents to which it is a party will constitute the legal, valid and
binding obligation of the Transferor or the Issuer, as the case may be,
enforceable in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought.
(v) The direction by the Issuer to Trustee to authenticate the
Notes has been duly authorized by the Issuer and, the Notes when duly
and validly authenticated by Trustee and delivered in accordance with
the Indenture and this Agreement, will be the legal, valid and binding
obligations of the Issuer, enforceable in accordance with their terms,
and entitled to the benefits of the Indenture, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(vi) The sale of the Notes and the performance by the
Transferor or the Issuer, as the case may be, of this Agreement and the
Transaction Documents to which the Transferor or the Issuer is a party
will (A) not conflict with or result in a breach of, and will not
constitute a default under any of the provisions of, its respective
certificate of incorporation or trust agreement or any law,
governmental rule or regulation, or any judgment, decree or order
binding on the Transferor or the Issuer or either of their respective
properties, or any of the provisions of any indenture, mortgage, deed
of trust, contract or other agreement or instrument to which the
Transferor or the Issuer, as the case may be, is a party or by which it
is bound and (B) not result in the creation or imposition of any
adverse claim and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the sale of the Notes or the
consummation by the Transferor or the Issuer, as the case may be, of
the transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Act and under state securities or Blue Sky laws in
connection with the purchase and distribution of the Notes by the
Underwriters.
(vii) Neither the Transferor nor the Issuer is, or will be,
subject to registration as an "investment company" under the Investment
Company Act of 1940 (the "1940 Act").
(viii) the Issuer is a Delaware __________ duly organized,
validly existing and in good standing under the laws of the State of
Delaware, with its chief executive office located at
_____________________, and has the power and authority to own, convey
and otherwise deal with its assets and to engage in the activities in
which it is presently engaged and is duly qualified and in good
standing under the laws of each jurisdiction where its ownership of
property or the conduct of its activities requires such qualification,
if the failure to so qualify would have a material adverse effect on
the financial condition of the Issuer or on the enforceability of the
Contracts or the Notes or the ability of the Issuer to perform its
obligations under the Transaction Documents to which it is a party; one
hundred percent of
-4-
<PAGE>
the beneficial ownership interests of the Issuer at all times will be
owned by the Transferor; and the Issuer has no subsidiaries.
(ix) Each of the Transferor and the Issuer hereby makes and
repeats each of the respective representations and warranties expressly
made by it in the Transaction Documents. Such representations and
warranties are incorporated by reference in this SECTION 4(A) and the
Underwriters may rely thereon as if such representations and warranties
were fully set forth herein.
(b) The Contributor hereby represents and warrants to and agrees with
the Underwriters as follows:
(i) This Agreement has been duly authorized, executed and
delivered, each of the Transaction Documents to which the Contributor
is a party has been duly authorized, and this Agreement constitutes,
and when executed and delivered, each of such Transaction Documents
will constitute, the legal, valid and binding obligations of the
Contributor enforceable in accordance with their respective terms,
except that (A) the enforcement thereof may be subject to (1)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally
and (2) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought, and (B) the
provisions hereof relating to indemnification of the Underwriters may
be subject to limitations of public policy.
(ii) The performance by the Contributor of each of this
Agreement and the Transaction Documents to which the Contributor is a
party, and the consummation by the Contributor of the transactions
herein and therein contemplated, will (A) not conflict with or result
in a breach of, and will not constitute a default under any of the
provisions of its certificate of incorporation or by-laws or any law,
governmental rule or regulation, or any judgment, decree or order
binding on the Contributor or its properties, or any of the provisions
of any indenture, mortgage, deed of trust, contract or other agreement
or instrument to which the Contributor is a party or by which it is
bound and (B) not result in the creation or imposition of any lien,
pledge or incumbrance upon any of the Contributor's, Transferor's or
Issuer's property and no consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body is required for the consummation by the Contributor of
the transactions contemplated by this Agreement or the Transaction
Documents, except such consents, approvals, authorizations,
registrations or qualifications as may be required under the Securities
Act and under state securities or Blue Sky laws in connection with the
purchase and distribution of the Notes by the Underwriters.
(iii) The Contributor hereby makes and repeats the
representations and warranties set forth in ARTICLES II and III of the
Contribution Agreement. Such representations and warranties are
incorporated by reference in this SECTION 4(B), and the Underwriters
may rely thereon as if such representations and warranties were fully
set forth herein.
(iv) The Contributor represents and warrants it has delivered
to the Underwriters complete and correct copies of its balance sheet
and statements of income and retained
-5-
<PAGE>
earnings for the fiscal year ended _____________. Except as set forth
in or contemplated in the Registration Statement and the Prospectus,
there has been no material adverse change in the condition (financial
or otherwise) of the Contributor or any other consolidated subsidiary
of the Contributor since __________________.
(v) Any taxes, fees and other governmental charges arising
from the execution and delivery of this Agreement and the Transaction
Documents and in connection with the execution, delivery and issuance
of the Notes and with the transfer of the Contracts and any interest in
the Equipment, have been paid or will be paid by the Contributor.
(c) Each of the Transferor and the Contributor severally represents and
warrants to the Underwriters that:
(i) There is no pending or threatened action, suit or
proceeding against or affecting it in any court or tribunal or before
any arbitrator of any kind or before or by any governmental authority
(A) asserting the invalidity of this Agreement, any Transaction
Document or the Notes, (B) seeking to prevent the issuance of the Notes
or the consummation of any of the transactions contemplated by this
Agreement or the Transaction Documents or (C) seeking any determination
or ruling that might materially and adversely affect (x) its
performance or its obligations under this Agreement or the Transaction
Documents (as applicable), (y) the validity or enforceability of this
Agreement, any Transaction Documents or the Notes or (z) the federal
income tax attributes of such Notes described in the Prospectus.
(ii) _____________________ is an independent public accountant
with respect to the Contributor and the Transferor within the meaning
of the Act and the rules and regulations promulgated thereunder.
Section 5. COVENANTS OF THE TRANSFEROR AND THE CONTRIBUTOR. The
Transferor and the Contributor, jointly and severally, hereby covenant and agree
with the Underwriters as follows:
(a) To use best efforts to cause the Registration Statement, and any
amendment thereto, if not effective as of the date hereof, to become effective.
If the Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule 424(b), the
Transferor will file the Prospectus, properly completed, pursuant to Rule 424(b)
within the time period prescribed and will provide evidence satisfactory to the
Underwriters of such timely filing. The Transferor will promptly advise the
Underwriters (i) when the Registration Statement shall have become effective,
(ii) when any amendment thereof shall have become effective, (iii) of any
request by the Commission for any amendment or supplement of the Registration
Statement or the Prospectus or for any additional information or of the receipt
of any comments from the Commission with respect to the Registration Statement
or the Prospectus, (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose, and (v) of the receipt by the
Transferor of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. Before amending or supplementing
the Registration Statement or the Prospectus with respect to the Notes,
-6-
<PAGE>
the Transferor will furnish each of the Underwriters with a copy of each such
proposed amendment or supplement within a reasonable time in advance of filing
and the Transferor will not file any amendment of the Registration Statement or
supplement to the Prospectus to which the Underwriters reasonably object. The
Transferor and the Contributor will use best efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when the Prospectus relating to the Notes is
required to be delivered under the Act, 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 supplement such Prospectus
to comply with the Act or the rules thereunder, the Transferor promptly will
prepare and file with the Commission, subject to PARAGRAPH (A) of this SECTION
5, a supplement which will correct such statement or omission or an amendment
which will effect such compliance.
(c) As soon as practicable, the Transferor will make generally
available to Noteholders and to the Underwriters an earnings statement or
statements of the Issuer which will satisfy the provisions of Section 11(a) of
the Act and Rule 158 under the Act.
(d) The Issuer will furnish to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of the prospectus by
either of the Underwriters or any dealer may be required by the Act, as many
copies of each Prospectus relating to the Notes and any supplement thereto as
the Underwriters may reasonably request.
(e) The Contributor and the Transferor will take all reasonable actions
requested by the Underwriters to arrange for the qualification of the Notes for
sale under the laws of such jurisdictions within the United States and as the
Underwriters may reasonably designate, will maintain such qualifications in
effect so long as required for the completion of the distribution of the Notes;
PROVIDED, in connection therewith the Contributor and the Transferor shall not
be required to qualify as a foreign corporation doing business in any
jurisdiction or to file a general consent to service of process in any
jurisdiction.
(f) For so long as the Notes are outstanding, the Transferor shall
deliver to the Underwriters by first-class mail and as soon as practicable a
copy of all reports and notices delivered by the Issuer to the Trustee or the
Noteholders under the Indenture.
(g) For so long as the Notes are outstanding, the Transferor and the
Contributor will furnish to the Underwriters as soon as practicable after filing
any other information concerning the Transferor or the Contributor filed with
any government or regulatory authority which is otherwise publicly available.
(h) To the extent, if any, that any rating provided with respect to the
Notes set forth in SECTION 6(E) is conditional upon the furnishing of documents
reasonably available to the Transferor or the Contributor, the Transferor or the
Contributor, as necessary, shall furnish such documents.
-7-
<PAGE>
(i) The Transferor will file with the Commission within fifteen days of
the issuance of the Notes a current report on Form 8-K setting forth specific
information concerning the Notes and the Contracts to the extent that such
information is not set forth in the Prospectus. The Transferor will also file
with the Commission a current report on Form 8-K setting forth all Computational
Materials, ABS Term Sheets and Collateral Term Sheets (as such terms are defined
herein) provided to the Transferor by any Underwriter within the applicable time
periods allotted for such filing pursuant to the No-Action Letters (as such term
is defined herein).
(j) In connection with any Computational Materials, ABS Term Sheets or
Collateral Term Sheets provided by an Underwriter pursuant to Section 5A, the
Transferor must receive a letter from Deloitte & Touche LLP, certified public
accountants, satisfactory in form and substance to the Transferor, to the effect
that such accountants have performed certain specified procedures, all of which
have been agreed to by the Transferor, as a result of which they have determined
that the information included in the Computational Materials, ABS Term Sheets or
Collateral Term Sheets (if any), provided by the Underwriter(s) to the
Transferor for filing on Form 8-K pursuant to Section 5A and subsection (i), is
accurate except as to such matters that are not deemed by the Transferor to be
material. The foregoing letter shall be obtained at the expense of the
Transferor.
(k) In the event that an Underwriter must prepare corrected
Computational Materials, ABS Term Sheets or Collateral Term Sheets pursuant to
Section 5A(d), the Transferor shall file any corrected Computational Materials,
ABS Term Sheets or Collateral Term Sheets no later than two days following
receipt thereof.
Section 5A. INVESTOR INFORMATION. Each Underwriter may prepare and
provide to prospective investors certain Computational Materials, ABS Term
Sheets or Collateral Term Sheets in connection with its offering of the Notes,
subject to the following conditions:
(a) Such Underwriter shall comply with the requirements of the
No-Action Letter of May 20, 1994 issued by the Commission to Kidder, Peabody
Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and Kidder
Structured Asset Corporation, as made applicable to other issuers and
underwriters by the Commission in response to the request of the Public
Securities Association dated May 24, 1994 (collectively, the "Kidder/PSA
Letter"), and the requirements of the No-Action Letter of February 17, 1995
issued by the Commission to the Public Securities Association (the "PSA Letter"
and, together with the Kidder/PSA Letter, the "No-Action Letters").
(b) For purposes hereof, "Computational Materials" shall have the
meaning given such term in the No-Action Letters, but shall include only those
Computational Materials that have been prepared or delivered to prospective
investors by any Underwriter. For purposes hereof, "ABS Term Sheets" and
"Collateral Term Sheets" shall have the meanings given such terms in the PSA
Letter but shall include only those ABS Term Sheets or Collateral Term Sheets
that have been prepared or delivered to prospective investors by any
Underwriter.
(c) Each Underwriter shall provide to the Transferor any Computational
Materials, ABS Term Sheets or Collateral Term Sheets which are provided to
investors by it no later than the date preceding the date such Computational
Materials, ABS Term Sheets or Collateral Term Sheets are required to be filed
pursuant to the applicable No-Action Letters. Each Underwriter may provide
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copies of the foregoing in a consolidated or aggregated form including all
information required to be filed.
(d) In the event that the Transferor or any Underwriter discovers an
error in the Computational Materials, ABS Term Sheets or Collateral Term Sheets,
the Underwriter that prepared such material shall prepare corrected
Computational Materials, ABS Term Sheets or Collateral Term Sheets, as
applicable, and deliver them to the Transferor for filing pursuant to Section
5(k).
Section 6. CONDITIONS OF THE UNDERWRITERS' OBLIGATION. The obligation
of the Underwriters to purchase and pay for the Notes as provided herein shall
be subject to the accuracy as of the date hereof and the Closing Date (as if
made at the Closing Date) of the representations and warranties of the
Transferor, the Contributor and the Issuer contained herein (including those
representations and warranties set forth in the Transaction Documents and
incorporated herein), to the accuracy of the statements of the Transferor, the
Contributor and the Issuer made in any certificate or other document delivered
pursuant to the provisions hereof, to the performance by the Transferor, the
Contributor and the Issuer of its respective obligations hereunder, and to the
following additional conditions:
(a) (i) no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the Commission and the Prospectus Supplement
shall have been filed or transmitted for filing by means reasonably calculated
to result in filing with the Commission not later than the time required by Rule
424(b) under the Act and (ii) there shall not have come to any Underwriter's
attention any facts that would cause such Underwriter to believe that the
Prospectus at the time it was required to be delivered to a purchaser of the
Notes, contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in light of the
circumstances existing at such time, not misleading. No challenge by the
Commission shall have been made to the accuracy or adequacy of the Registration
Statement and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus shall have been
complied with and the Transferor shall not have filed with the Commission any
amendment or supplement to the Registration Statement or the Prospectus without
prior written notice to the Underwriters.
(b) The Underwriters shall have received the Transaction Documents,
including the Notes, in form and substance reasonably satisfactory to the
Underwriters, duly executed by all signatories required pursuant to the
respective terms thereof.
(c) (i) The Underwriters shall have received the favorable opinions of
(i) Thacher Proffitt & Wood with respect to items (B) (relating solely to
enforceability), (F), and (H) through (L) below, and (ii) of Melvin Breaux,
Esq., general counsel to the Issuer, the Transferor and the Contributor, with
respect to items (A) through (E) and (G) below, each dated the Closing Date:
(A) Each of the Transferor and the Issuer has been
duly organized and is validly existing as a corporation or, in
the case of the Issuer, a ______________, in good standing
under the laws of the State of Delaware, and is qualified to
do business in each jurisdiction in which the character of the
properties owned or leased by it or
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the nature of the business conducted by it makes such
qualification necessary to conduct its business as presently
conducted (except where the failure to be so qualified or in
good standing could not individually or in the aggregate have
a material adverse effect upon (x) the business, assets,
property, condition (financial or otherwise) or prospects of
the Issuer or the Transferor, respectively, taken as a whole
or (y) the validity and enforceability of the Transaction
Documents to which any of them is a party (the "Documents")).
Each of the Transferor and the Issuer has the power and
authority to make, deliver and perform the Documents to which
it is a party.
(B) The Documents have been duly authorized, executed
and delivered by each of the Transferor and the Issuer, as to
those agreements as to which each respectively is a party, and
each constitutes the valid and binding obligation of the
Transferor or the Issuer, as applicable, enforceable against
the Transferor or the Issuer, as applicable, in accordance
with their respective terms, except as enforcement thereof may
be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a
proceeding in equity or at law).
(C) Neither the consummation of transactions
contemplated by, nor the execution, delivery and performance
of the terms of the Documents, (x) will result in any
violation of the certificate of incorporation or bylaws of the
Transferor or the organizational documents of the Issuer; or
(y) to the best of such counsel's knowledge, any order,
judgment or decree of any court or arbitrator to which the
Transferor or the Issuer is a party or is subject; and (z) to
the best of such counsel's knowledge, will not conflict with,
result in a breach, violation or acceleration of any of the
terms of, constitute a default under or result in the creation
or imposition of any lien, pledge or encumbrance upon the
Transferor's or the Issuer's property pursuant to the terms of
any indenture, loan agreement, any other agreement, instrument
or other undertaking to which either the Transferor or the
Issuer or any of their subsidiaries is a party or by which any
of them is bound or to which any of their property or assets
of any of them is subject, or upon the Notes, except as
otherwise contemplated by the Indenture.
(D) Except for the filing of Financing Statements and
the registration under the Act of the Notes, and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution
by the Underwriters, no consent, approval, authorization,
order or withholding of objection on the part of, or
registration or qualification with, any court, governmental
agency or body or tribunal is required for the execution and
delivery by it of, or the consummation by it of the Documents,
except such consents, approvals, authorizations, registrations
or qualifications which have been obtained and such as have
been made and are in full force and effect.
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(E) Other than as may be set forth or contemplated in
the Prospectus Supplement, there are no actions, proceedings
or investigations pending or, to the best of such counsel's
knowledge, threatened before any court, administrative agency
or other tribunal to which the Transferor or the Issuer is a
party or threatened to be made a party (i) asserting the
invalidity of the Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by the
Documents, or (iii) which could reasonably be expected to have
a material adverse effect upon (x) the business, assets,
property, condition (financial or otherwise) or prospects of
the Transferor or the Issuer or any of their subsidiaries,
taken as a whole or (y) the validity and enforceability of the
Indenture or the rights of the Trustee therein.
(F) Except as to any statistical, accounting or other
financial data contained in the Registration Statement or, in
the case of Computational Materials, incorporated therein by
reference, and other than with respect to the Underwriting
Information, as to which no opinion or belief need be
expressed, to such counsel's knowledge, the Registration
Statement 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
not misleading.
(G) The Notes, assuming due execution by the Issuer
and authentication by the Trustee, and delivery and payment
therefor pursuant to this Agreement, are validly issued and
outstanding and are entitled to the benefits of the Indenture.
(H) To the knowledge of such counsel, the Commission
has not issued any stop order suspending the effectiveness of
the Registration Statement or any order directed to any
prospectus relating to the Notes (including the Prospectus),
and has not initiated or threatened any proceeding for that
purpose.
(I) The Registration Statement and the Prospectus
Supplement, dated ________________ (the "PROSPECTUS
SUPPLEMENT") (other than the financial and statistical data
included therein or, in the case of Computational Materials,
incorporated therein by reference, as to which such counsel
need express no opinion), as of the date on which the
Registration Statement was declared effective and as of the
date hereof, comply as to form in all material respects with
the requirements of the Act and the rules and regulations
thereunder, and such counsel does not know of any amendment to
the Registration Statement required to be filed, or of any
contracts, indentures or other documents (not including
Computational Materials) of a character required to be filed
as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus
Supplement which has not been filed or described as required.
(J) The statements in the Prospectus Supplement set
forth under "DESCRIPTION OF THE NOTES AND THE PRINCIPAL
TRANSACTION DOCUMENTS", to the extent such statements purport
to summarize certain provisions of the Notes, the Contribution
and Servicing Agreement, the Subsequent
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Contract Transfer Agreement or the Indenture, are true and
correct in all material respects.
(K) The statements in the Prospectus Supplement under
the headings "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" and
"CONSIDERATIONS FOR BENEFIT PLAN INVESTORS," to the extent
that they constitute statements of matters of law or legal
conclusions with respect thereto, have been prepared or
reviewed by such counsel, and, while they do not purport to
discuss all ramifications of the purchase, ownership and
disposition of the Notes, fairly summarize those legal matters
which are discussed.
(L) Each of the Transferor and the Issuer is not, and
will not as a result of the offer and sale of the Notes as
contemplated in the Prospectus and in this Agreement become,
required to be registered as an "investment company" under the
1940 Act.
(ii) The Underwriters shall have received the favorable
opinions of (i) Thacher Proffitt & Wood, with respect to item (B) below
relating to enforceability, and (ii) of Melvin Breaux, Esq., general
counsel to the Contributor, with respect to items (A) through (E)
below:
(A) The Contributor has been duly organized and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, and is qualified to do business
in each jurisdiction in which the character of the properties
owned or leased by it or the nature of the business conducted
by it makes such qualification necessary to conduct its
business as presently conducted (except where the failure to
be so qualified or in good standing could not individually or
in the aggregate have a material adverse effect upon (x) the
business, assets, property, condition (financial or otherwise)
or prospects of the Contributor taken as a whole or (y) the
validity and enforceability of the Transaction Documents to
which the Contributor is a party (the "Contributor
Documents"). The Contributor has the power and authority to
make, deliver and perform each of the Contributor Documents.
(B) The Contributor Documents have been duly
authorized, executed and delivered by the Contributor, and
each constitutes the valid and binding obligation of the
Contributor, enforceable against the Contributor in accordance
with their respective terms, except as enforcement thereof may
be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a
proceeding in equity or at law).
(C) Neither the consummation of transactions
contemplated by, nor the execution, delivery and performance
of the terms of the Contributor Documents, (x) will result in
any violation of the certificate of incorporation or bylaws of
the Contributor; or (y) to the best of such counsel's
knowledge, any order, judgment or
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decree of any court or arbitrator to which the Contributor is
a party or is subject; and (z) to the best of such counsel's
knowledge, will not conflict with, result in a breach,
violation or acceleration of any of the terms of, constitute a
default under or result in the creation or imposition of any
lien, pledge or encumbrance upon the Contributor's property
pursuant to the terms of any indenture, loan agreement, any
other agreement, instrument or other undertaking to which the
Contributor or any of its subsidiaries is a party or by which
any of them is bound or to which any of their property or
assets of any of them is subject, or upon the Notes, except as
otherwise contemplated by the Contributor Documents.
(D) Except for the filing of Financing Statements and
the registration under the Act of the Notes, and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution
by the Underwriters, no consent, approval, authorization,
order or withholding of objection on the part of, or
registration or qualification with, any court, governmental
agency or body or tribunal is required for the execution and
delivery by it of, or the consummation by it of the
Contributor Documents, except such consents, approvals,
authorizations, registrations or qualifications which have
been obtained and such as have been made and are in full force
and effect.
(E) Other than as may be set forth or contemplated in
the Prospectus Supplement, there are no actions, proceedings
or investigations pending or, to the best of such counsel's
knowledge, threatened before any court, administrative agency
or other tribunal to which the Contributor is a party or
threatened to be made a party (i) asserting the invalidity of
the Contributor Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by the
Contributor Documents, or (iii) which could reasonably be
expected to have a material adverse effect upon (x) the
business, assets, property, condition (financial or otherwise)
or prospects of the Contributor or any of its subsidiaries,
taken as a whole or (y) the validity and enforceability of the
Contributor Documents or the rights of the Trustee therein.
(iii) The Underwriters shall have received the favorable
opinion(s), dated the Closing Date, of Thacher Proffitt & Wood, with
respect to such matters as the Underwriters shall reasonably require.
In rendering their opinions, the counsel described in this Paragraph
(c) may rely, as to matters of fact, on certificates of responsible officers of
the Transferor, the Contributor, the Issuer, the Trustee and public officials.
Such opinions may also assume the due authorization, execution and delivery of
the instruments and documents referred to therein by the parties thereto;
provided, however, that counsel to the Transferor, the Contributor and the
Issuer may not make such assumptions with respect to such Transferor,
Contributor and Issuer.
(d) The Underwriters shall have received a letter from a nationally
recognized independent accounting firm, dated on or before the Closing Date, in
form and substance satisfactory
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<PAGE>
to the Underwriters and counsel for the Underwriters, to the effect that they
have performed certain specified procedures requested by the Underwriters with
respect to the information set forth in the Prospectus and certain matters
relating to the Transferor.
(e) The Notes shall have been rated _________ and ________ as
applicable, by the Rating Agencies; and such ratings shall not have been
rescinded. The Underwriters and counsel for the Underwriters shall have received
copies of any opinions of counsel supplied to the rating organizations relating
to any matters with respect to the Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes. Any such opinions shall be dated the Closing Date
and addressed to the Underwriters or accompanied by reliance letters to the
Underwriters or shall state that the Underwriters may rely upon them.
(f) The Underwriters shall have received from the Transferor a
certificate, signed by the president, a senior vice president or a vice
president of the Transferor, dated the Closing Date, to the effect that the
signer of such certificate has carefully examined the Registration Statement,
the Prospectus, the Indenture and this Agreement and that, to his or her
knowledge:
(i) the representations and warranties of the Transferor and
the Issuer, as applicable, in this Agreement and in the Contribution
and Servicing Agreement, as of the Closing Date, and in the Indenture,
the Subsequent Contract Transfer Agreement and in all related
agreements, as of the date specified in such agreements, are true and
correct, and the Transferor and the Issuer, as applicable, has complied
with all the agreements, and satisfied all the conditions on its part
to be performed or satisfied, thereunder at or prior to the Closing
Date;
(ii) there are no actions, suits or proceedings pending, or,
to such officer's knowledge, threatened, against or affecting the
Transferor or the Issuer which, if adversely determined, individually
or in the aggregate, would be reasonably likely to materially and
adversely affect the ability of the Transferor or the Issuer to perform
the Transferor's or the Issuer's, respectively, obligations under the
Transaction Documents or the Notes; and no merger, liquidation,
dissolution or bankruptcy of the Transferor or the Issuer is pending or
contemplated;
(iii) the information contained in the Registration Statement
and the Prospectus relating to the Transferor, the Issuer, the
Contracts or the servicing procedures of its affiliates is true and
accurate in all material respects, and nothing has come to his or her
attention that would lead such officer to believe that the Registration
Statement or the Prospectus includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein not misleading;
(iv) the information set forth in the List of Contracts
required to be furnished pursuant to the Indenture is true and correct
in all material respects;
(v) there has been no amendment or other document filed
affecting the certificate of incorporation or bylaws of the Transferor
since March 3, 1995, and no such amendment has been authorized. There
has been no amendment or other document filed affecting the
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Subsequent Contract Transfer Agreement or the ___________ of the Issuer
since __________ and no such amendment has been authorized. No event
has occurred since __________ which has affected the good standing of
the Transferor or the Issuer under the laws of the State of Delaware;
(vi) there has not occurred any material adverse change, or,
to such officer's knowledge, any development involving a prospective
material adverse change, in the condition, financial or otherwise,
results of operations, business or operations of the Issuer, the
Transferor and its parent, taken as a whole, since _____________;
(vii) on or prior to the Closing Date, there has been no
downgrading nor has any notice been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating,
the direction of which has not been indicted in, the rating, if any,
accorded the Notes by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the Act; and
(viii) each person who, as an officer or representative of the
Transferor or the Issuer, signed or signs the Registration Statement,
the Transaction Documents or any other document delivered pursuant
hereto, on the date of such execution or on the Closing Date, as the
case may be, in connection with the transactions described in the
Transaction Documents, was, at the respective times of such signing and
delivery, and is now, duly elected or appointed, qualified and acting
as such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
The Transferor shall attach to such certificate a true and correct copy
of its certificate of incorporation and bylaws, which are in full force and
effect on the date of such certificate, and a certified true copy of the
resolutions of its Board of Directors with respect to the transactions
contemplated herein.
(g) The Underwriters shall have received a certificate, signed by the
president, a senior vice president or a vice president of each of the
Contributor and the Servicer, dated the Closing Date, to the effect that the
signer of such certificate has carefully examined the Registration Statement,
the Prospectus, the Indenture, and the Contribution and Servicing Agreement and
that, to his or her knowledge:
(i) the representations and warranties of each of the
Contributor and the Servicer in the Contributor Documents, as of the
Closing Date, and in all related agreements, as of the date specified
in such agreements, are true and correct, and each of the Contributor
and the Servicer has complied with all the respective agreements, and
satisfied all the conditions on its part to be performed or satisfied
thereunder at or prior to the Closing Date;
(ii) there are no actions, suits or proceedings pending, or,
to such officer's knowledge, threatened, against or affecting the
Contributor or the Servicer which, if adversely determined,
individually or in the aggregate, would be reasonably likely to
materially and adversely affect the Contributor's or the Servicer's
respective obligations
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under the Contributor Documents; and no merger, liquidation,
dissolution or bankruptcy of the Contributor or the Servicer is
pending or contemplated;
(iii) the information contained in the Registration Statement
and the Prospectus relating to the Contributor and the Servicer, the
Contracts, the origination procedures of the Contributor and the
servicing procedures of the Servicer is true and accurate in all
material respects, and nothing has come to his or her attention that
would lead such officer to believe that the Registration Statement or
the Prospectus, includes any untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein
not misleading;
(iv) the information set forth in the List of Contracts
required to be furnished pursuant to the Contribution and Servicing
Agreement is true and correct in all material respects;
(v) there has been no amendment or other document filed
affecting the certificate of incorporation or bylaws of the
Contributor/Servicer since ______________ and no such amendment has
been authorized. No event has occurred since __________________, which
has affected the good standing of the Contributor/Servicer under the
laws of the State of Delaware;
(vi) there has not occurred any material adverse change, or,
any development involving a prospective material adverse change, in the
condition, financial or otherwise, results of operations, business or
operations of the Contributor or the Servicer and its respective
subsidiaries, taken as a whole, since __________________; and
(vii) each person who, as an officer or representative of the
Contributor or the Servicer, signed or signs the Contributor Documents
or any other document delivered pursuant hereto, on the date of such
execution, or on the Closing Date, as the case may be, in connection
with the transactions described in the Contributor Documents, was, at
the respective times of such signing and delivery, and is now, duly
elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
The Contributor/Servicer shall attach to such certificate a true and
correct copy of its certificate of incorporation and bylaws, which are in full
force and effect on the date of such certificate, and a certified true copy of
the resolutions of its Board of Directors with respect to the transactions
contemplated herein.
(h) The Underwriters shall have received a favorable opinion of counsel
to the Trustee, dated the Closing Date and in form and substance reasonably
satisfactory to the Underwriters, to the effect that:
(i) the Trustee is a banking corporation duly organized,
validly existing and in good standing under the laws of the United
States of America, and has the power and authority to enter into and to
take all actions required of it under the Indenture;
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(ii) the Indenture has been duly authorized, executed and
delivered by the Trustee, and the Indenture constitutes the legal,
valid and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except as enforceability thereof
may be limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally,
as such laws would apply in the event of a bankruptcy, insolvency or
reorganization or similar occurrence affecting the Trustee, and (B)
general principles of equity, regardless of whether such enforcement is
sought in a proceeding at law or in equity;
(iii) no consent, approval, authorization or other action by
any state or federal court or any governmental agency or body or other
tribunal is required on the part of the Trustee in connection with its
execution and delivery of the Indenture or the performance of its
obligations thereunder;
(iv) the Notes have been duly authenticated and delivered by
the Trustee; and
(v) the execution and delivery of, and performance by the
Trustee of its obligations under, the Indenture do not conflict with or
result in a violation of any statute or regulation applicable to the
Trustee, or the charter or bylaws of the Trustee, or any order,
judgment, writ, injunction or decree of any governmental authority
having jurisdiction over the Trustee, or, to the best knowledge of such
counsel, the terms of any material indenture or other agreement or
instrument to which the Trustee is a party or by which it is bound.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Transferor, the Trustee and
public officials. Such opinion may also assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Trustee.
(i) The Underwriters shall have received from the Trustee a
certificate, signed by the president, a senior vice president or a vice
president of the Trustee, dated the Closing Date, to the effect that each person
who, as an officer or representative of the Trustee, signed or signs the Notes,
the Indenture or any other document delivered pursuant hereto, on the date
hereof or on the Closing Date, in connection with the transactions described in
the Indenture, was, at the respective times of such signing and delivery, and is
now, duly elected or appointed, qualified and acting as such officer and
representation, and the signatures of such persons appearing on such documents
are their genuine signatures.
(j) On or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or (B)
any review or possible changes in rating, the direction of which has not been
indicated in the rating, if any, in any rating accorded the Notes by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of the Act.
(k) The Underwriters shall have received a favorable opinion of counsel
to the Issuer in its individual capacity and not as Owner Trustee (in such
capacity, the "Bank"), dated the Closing Date and in form and substance
reasonably satisfactory to the Underwriters, to the effect that:
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(i) the Issuer is a ___________ duly organized, validly
existing and in good standing under the laws of Delaware, and has the
power and authority to enter into and to take all actions required of
it under the Transaction Documents to which it is a party;
(ii) each of the Transaction Documents to which the Issuer is
a party has been duly authorized, executed and delivered by the Issuer,
and such document constitutes the legal, valid and binding obligation
of the Issuer, enforceable against the Issuer in accordance with its
terms, except as enforceability thereof may be limited by (A)
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally, as such laws would
apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Issuer, and (B) general principles of
equity, regardless of whether such enforcement is sought in a
proceeding at law or in equity;
(iii) no consent, approval, authorization or other action by
any state or federal court or any governmental agency or body or other
tribunal is required on the part of the Issuer, in connection with its
respective execution and delivery of the Transaction Documents to which
it is a party or the performance of its respective obligations
thereunder, except for the filing of the ____________________ with the
Delaware Secretary of State;
(iv) the Notes have been duly executed by the Issuer; and
(v) the execution and delivery of, and performance by the
Issuer of its obligations under the Transaction Documents to which it
is a party do not conflict with or result in a violation of any statute
or regulation of the State of Delaware or the United States government,
or the organizational documents or bylaws of the Issuer, or to the best
knowledge of such counsel without independent investigation any order,
judgment, writ, injunction or decree of any governmental authority
having jurisdiction over the Issuer or, to the best knowledge of such
counsel without independent investigation, the terms of any material
indenture or other agreement or instrument to which the Issuer is a
party or by which it is bound.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Transferor, the Issuer and
public officials. Such opinion may also assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Transferor and the Issuer.
(l) Since ____________, there has not occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the business or operations, of (A) the Transferor, (B) the
Servicer or (C) the Contributor, that, in either Underwriter's judgment, is
material and adverse and that makes it, in either Underwriter's reasonable
judgment, impracticable to market the Notes on the terms and in the manner
contemplated in the Prospectus.
(m) The Underwriters shall have received a certificate, signed by an
assistant secretary of the Issuer, dated the Closing Date, to the effect that
each person who, as an officer or representative of the Issuer, signed or signs
any Transaction Document or any other document
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delivered pursuant hereto, on the date hereof or on the Closing Date, in
connection with the transactions described in the Subsequent Contract Transfer
Agreement, was, at the respective times of such signing and delivery, and is
now, duly elected or appointed, qualified and acting as such officer and
representation, and the signatures of such persons appearing on such documents
are their genuine signatures.
(n) The Underwriters and counsel for the Underwriters shall have
received copies of any opinions of counsel to the Contributor, the Transferor or
the Issuer supplied to the Trustee relating to matters with respect to the
Notes. Any such opinions shall be dated the Closing Date and addressed to the
Underwriters or accompanied by reliance letters to the Underwriters or shall
state the Underwriters may rely thereon.
(o) The Underwriters shall have received such further information,
certificates and documents as the Underwriters may reasonably have requested not
fewer than three (3) full Business Days prior to the Closing Date.
(p) The Contributor shall have transferred to the Trustee, for deposit
in the Collection Account to be maintained by the Trustee in accordance with the
Indenture, all Contract Payments actually received by the Contributor which were
due subsequent to the Cut-Off Date and received on or prior to the Closing Date.
(q) The Financing Statements shall have been prepared and filed as set
forth in Article One of the Contribution and Servicing Agreement.
If any of the conditions specified in this SECTION 6 shall not have
been fulfilled in all respects when and as provided in this Agreement, if the
Transferor, the Issuer or the Contributor is in breach of any covenants or
agreements contained herein or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Underwriters and counsel to
the Underwriters, this Agreement and all obligations of the Underwriters
hereunder may be canceled on, or at any time prior to, the Closing Date by the
Underwriters. Notice of such cancellation shall be given to the Transferor in
writing, or by telephone or telegraph confirmed in writing.
Section 7. REIMBURSEMENT OF EXPENSES. If (x) no closing of the sale of
the Notes occurs by the Closing Date through no fault of the Transferor, the
Issuer or the Contributor or because the conditions set forth in SECTION 6 have
not been met, or (y) the Underwriters terminate the engagement pursuant to
SECTION 10 or because any conditions precedent in SECTION 6 have not been
fulfilled, then the Transferor's or the Contributor's liability to the
Underwriters shall be limited to the reimbursement of the Underwriters' expenses
incurred through the date of termination for their reasonable out-of-pocket and
incidental expenses. In addition, whether or not the Notes are issued or sold:
(a) The Transferor or the Contributor shall pay the reasonable fees and
expenses associated with the transactions contemplated hereby not paid by the
Underwriters in accordance with the provisions of SECTION 7(B) including,
without limitation, the following fees and expenses:
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(i) rating agency fees payable with respect to their ratings
of the Notes;
(ii) any fees charged by the firm of independent public
accountants referred to in SECTION 6(D);
(iii) filing fees in connection with the transactions
contemplated hereby including, but not limited to, the Commission;
(iv) reasonable fees and expenses of counsel to the
Underwriters;
(v) The Trustee's fees and expenses and reasonable fees and
expenses of counsel to the Trustee;
(vi) the costs and expenses of printing the Prospectus;
(vii) the costs of printing or reproducing this Agreement, the
Blue Sky Survey, if applicable, and any other documents in connection
with the offer, sale and delivery of the Notes;
(viii) all expenses in connection with the qualification of
the Notes under state securities laws as provided in SECTION 4(A)(VI),
including the fees and disbursements of counsel in connection with the
Blue Sky Survey, if applicable;
(ix) the cost of preparing the Notes;
(x) the cost or expenses of any transfer agent or registrar;
and
(xi) all other costs and expenses incident to the performance
of their obligations hereunder which are not otherwise specifically
provided for in this SECTION 7; PROVIDED, that neither the Contributor
nor the Transferor waives any rights to reimbursement from the
Underwriters in the event of either Underwriter's failure to perform in
accordance with this Agreement.
(b) It is understood and agreed that, except as provided in SECTIONS 8
and 9, the Underwriters will pay securities transfer taxes on resale of any of
the Notes by them, and any advertising expenses connected with any offers they
may make.
Section 8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Transferor and the Contributor, jointly and severally, will
indemnify and hold harmless each Underwriter as follows: (i) against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or acts in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
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or necessary to make the statements therein not misleading, and will promptly
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating, preparing to defend or
defending, or appearing as a third-party witness in connection with, any such
action or claim; PROVIDED, that the Transferor and the Contributor shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement or
the Prospectus or any such amendment or supplement, in reliance upon and in
conformity with the Underwriting Information (defined below); and (ii) against
any losses, claims, damages, liabilities, joint or several, and expenses
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Computational Materials, ABS Term
Sheets or Collateral Term Sheets distributed by any Underwriter; unless such
untrue statement or alleged untrue statement of a material fact was made in
reliance upon and in conformity with Derived Information provided by such
Underwriter expressly for use in the Computational Materials, the ABS Term
Sheets or the Collateral Term Sheets and the untrue statement or alleged untrue
statement did not derive from an inaccuracy in the Transferor- Provided
Information used in the preparation of such Computational Materials, ABS Term
Sheets or Collateral Term Sheets.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Transferor and the Contributor as follows: (i) against any
losses, claims, damages or liabilities to which the Transferor or the
Contributor may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or acts in respect thereof) arise out of
or are based upon an untrue statement or alleged untrue statement of a material
fact contained in the Underwriting Information or any amendment or supplement
thereto, or arise out of or are based upon 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, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Underwriting Information or any such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Transferor or the Contributor by or on behalf of
such Underwriter expressly for use therein; and will reimburse the Transferor or
the Contributor for any legal or other expenses reasonably incurred by the
Transferor or the Contributor in connection with the investigating, preparing to
defend or defending, or appearing as a third-party witness in connection with
any such action or claim; and (ii) against any losses, claims, damages and
expenses described in the indemnity contained in subsection (a) of this Section
8, as incurred, but only with respect to untrue statements or alleged untrue
statements made in the Computational Materials, Collateral Term Sheets or ABS
Term Sheets furnished by such Underwriter to the extent that such untrue
statement or alleged untrue statement of a material fact was made in reliance
upon and in conformity with Derived Information provided by it expressly for use
in the Computational Materials, the ABS Term Sheets or the Collateral Term
Sheets and the untrue statements or alleged untrue statements were not derived
from any inaccuracy in the Transferor-Provided Information used in the
preparation of such Computational Materials, ABS Term Sheets or Collateral Term
Sheets.
The Transferor and the Contributor acknowledge that the
statements set forth under the headings "THE UNDERWRITING" and "PLAN OF
DISTRIBUTION" in the Registration Statement and the Prospectus constitute the
only information furnished in writing by or on behalf of the Underwriters for
inclusion in the Registration Statement or the Prospectus (the "UNDERWRITING
INFORMATION"), and
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the Underwriters confirm that such statements are correct; provided, however,
that if but only if, all Transferor-Provided Information (as defined below) is
accurate and complete in all material respects, the references to "Underwriting
Information" in this Agreement shall be deemed to include any Derived
Information contained in a Form 8-K relating to the Notes filed by the
Transferor with the Commission. For purposes of this Section, the term "Derived
Information" means such portion, if any, of the information contained in
Computational Materials, Collateral Term Sheets or ABS Term Sheets in any Form
8-K relating to the Notes filed by the Transferor with the Commission as:
(1) is not also contained in the Prospectus or
the Prospectus Supplement without taking
into account information incorporated
therein by reference; and
(2) does not constitute Transferor-Provided
Information.
"Transferor-Provided Information" means the information set forth under the
heading "The Contracts" in the Prospectus Supplement and any computer tape or
other information furnished to any Underwriter by or on behalf of the Transferor
concerning the assets of the Issuer.
(c) Promptly after receipt by an indemnified party under SUBSECTION (A)
or (B) of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; PROVIDED, that if the defendants
in any such action include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by counsel that
representation of such indemnified party and the indemnifying party may be
inappropriate under applicable standards of professional conduct due to actual
or potential differing interests between them, the indemnified party or parties
shall have the right to select separate counsel to defend such action on behalf
of such indemnified party or parties. It is understood that the indemnifying
party shall, in connection with any such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of only one separate firm of attorneys together with appropriate local
counsel at any time from all indemnified parties not having actual or potential
differing interest with any other indemnified party. Upon receipt of notice from
the indemnifying party to such indemnified party of such counsel, the
indemnifying party will not be liable for any settlement entered into without
its consent and will not be liable to such indemnified party under this SECTION
8 for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the
second preceding sentence, (ii) the indemnifying party shall have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party; and except
that, if
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CLAUSE (I) OR (III) is applicable, such liability shall be only in respect of
the counsel referred to in such CLAUSE (I) OR (III). Notwithstanding the
immediately preceding sentence and the first sentence of this paragraph, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnifying party in accordance with such request prior to the date of such
settlement.
(d) If the indemnification provided for in this SECTION 8 is
unavailable to or insufficient to hold harmless an indemnified party under
SUBSECTION (A) or (B) in respect of any losses, claims, damages or liabilities
(or actions or proceeding in respect thereon) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Transferor and the Contributor
on the one hand and the Underwriters on the other from the offering of the
Notes. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under SUBSECTION (C), then each indemnifying party
shall contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Transferor or the Contributor on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Transferor or the
Contributor on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion that the total net proceeds from the offering (before
deducting expenses) received by the Transferor and the Contributor bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Transferor or the Contributor on the one hand or the Underwriters on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Transferor,
the Contributor and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this SUBSECTION (D) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above in this SUBJECTION
(D). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this SUBSECTION (D) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending, or appearing as
a third-party witness in connection with, any such action or claim.
Notwithstanding the provision for this SUBSECTION (D), the Underwriters shall
not be required to contribute any amount in excess of the total underwriting
discount as set forth on the cover page of the Prospectus. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Underwriters to contribute
pursuant to this subsection (d) are several in proportion to their respective
underwriting obligations with respect to such Notes and not joint.
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<PAGE>
(e) The obligations of the Transferor and the Contributor under this
SECTION 8 shall be in addition to any liability which the Transferor or the
Contributor may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls either of the Underwriters
within the meaning of the Act, and the obligations of the Underwriters under
this SECTION 8 shall be in addition to any liability which the Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Transferor and the Contributor and to each person,
if any, who controls the Transferor or the Contributor within the meaning of the
Act.
Section 9. SURVIVAL. The respective representations, warranties and
agreements of the Transferor, the Issuer, the Contributor and the Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, notwithstanding any investigation heretofore or hereafter made by or on
behalf of the Transferor, the Issuer, the Contributor or the Underwriters or any
director, officer or controlling person thereof, and such representations,
warranties and agreements made by the Transferor, the Issuer and the Contributor
shall survive the delivery and payment for the Notes. The provisions of SECTIONS
7 and 8 shall survive the termination or cancellation of this Agreement.
Section 10. TERMINATION.
(a) This Agreement may be terminated by the Underwriters at any time
upon the giving of notice at any time prior to the Closing Date: (i) if there
has been, since __________________, any material adverse change in the
condition, financial or otherwise, of the Contributor, the Issuer or the
Transferor, or in the earnings, business affairs or business prospects of the
Contributor, the Issuer or the Transferor, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any outbreak or
escalation of hostilities or other calamity or crises the effect of which on the
financial markets of the United States is such as to make it, in your reasonable
judgment, impracticable to market the Notes or enforce contracts for the sale of
the Notes, or (iii) if trading generally on either the American Stock Exchange
or the New York Stock Exchange has been suspended, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices for securities have
been required, by either of said exchanges or by order of the Commission or any
other governmental authority, or (iv) if a banking moratorium has been declared
by either federal or New York authorities. In the event of any such termination,
no party will have any liability to any other party hereto, except as otherwise
provided in SECTIONS 7 or 8.
(b) This agreement may not be terminated by the Transferor, the Issuer
or the Contributor, except in accordance with law, without the written consent
of the Underwriters.
(c) Notwithstanding anything herein to the contrary, if the Transferor,
the Issuer or the Contributor does not perform any obligation under this
agreement or any representation and warranty hereunder is incomplete or
inaccurate in any material respect, this Agreement and all of the Underwriters'
obligations hereunder may be immediately canceled by the Underwriters by notice
thereof to the Transferor or the Contributor. Any such cancellation shall be
without liability of any party to any other party except that the provisions of
SECTIONS 8 and 9 shall survive any such cancellation.
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<PAGE>
Section 11. NOTICES. All communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by certified or registered mail, postage
prepaid, or transmitted by telex or telegraph and confirmed by a similar mailed
writing, if to the Underwriters, addressed to Prudential Securities
Incorporated, c/o ________, facsimile no.: (212) ________, at the address first
stated in this Agreement and if to Lehman Brothers Inc., addressed c/o
___________________, facsimile no.: (212)_________, at the address set forth in
the beginning of this Agreement, or to such other address as either of the
Underwriters may designate with respect to itself in writing to the Transferor
or the Contributor; if to the Contributor, addressed to the Chief Financial
Officer at 500 Hyde Park, Doylestown, Pennsylvania 18901, facsimile no.: (215)
345-4428; if to the Transferor, addressed to the Transferor at 500 Hyde Park,
Doylestown, Pennsylvania 18901, facsimile no.: (215) 230-5328, or such other
address as the Transferor or the Contributor may have designated in writing to
you; or, if to the Issuer, addressed to _________________________, facsimile
no.: ______________, or such other address as the Issuer may have designated in
writing to you.
Section 12. SUCCESSORS; ACTIONS BY THE UNDERWRITERS. This Agreement
will inure to the benefit of and be binding upon the Transferor, the Issuer and
the Contributor and their respective successors and assigns and the Underwriters
and their respective successors and assigns. Any action by the Underwriters
hereunder may be taken by the Underwriters jointly or by the [lead underwriter]
alone or on behalf of the Underwriters, and any such action taken by the [lead
underwriter] alone shall be binding upon the Underwriters.
Section 13. DEFAULT BY EITHER UNDERWRITER. If either Underwriter shall
fail on the Closing Date to purchase the Notes which it is obligated to purchase
hereunder (the "DEFAULTED NOTES"), the remaining Underwriter (the
"NON-DEFAULTING UNDERWRITER") shall have the right, but not the obligation,
within one (1) Business Day thereafter, to make arrangements to purchase all,
but not less than all, of the Defaulted Notes upon the terms herein set forth;
if, however, the Non-Defaulting Underwriter shall not have completed such
arrangements within such one (1) Business Day period, then this Agreement shall
terminate without liability on the part of the Non-Defaulting Underwriter.
No action taken pursuant to this Section 13 shall relieve the
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, any of the Non-Defaulting Underwriter, the Transferor or the
Contributor shall have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
Section 14. ENTIRE AGREEMENT. This Agreement and the documents referred
to herein and to be delivered pursuant hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.
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Section 15. GOVERNING LAW.
(a) THIS AGREEMENT IS TO BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK.
(b) EACH UNDERWRITER, THE TRANSFEROR, THE ISSUER AND THE CONTRIBUTOR
HEREBY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN
NEW YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL
DIRECTED TO THE ADDRESS SET FORTH IN SECTION 11 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE
U.S. MAILS, POSTAGE PREPAID. THE TRANSFEROR, THE ISSUER AND THE CONTRIBUTOR
HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO
VENUE OF ANY ACTION INSTITUTED HEREUNDER. NOTHING IN THIS SECTION SHALL AFFECT
THE RIGHT OF THE TRANSFEROR, THE ISSUER OR THE CONTRIBUTOR TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT EITHER'S RIGHT TO BRING
ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE TRANSFEROR, THE ISSUER AND THE CONTRIBUTOR HEREBY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
Section 17. MISCELLANEOUS. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
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If you are in agreement with the foregoing, please sign a counterpart
hereof and return the same to the Transferor, the Issuer and the Contributor,
whereupon this Agreement shall become a binding agreement among the
Underwriters, the Transferor, the Issuer and the Contributor.
Very truly yours,
DVI RECEIVABLES CORP. VIII
By:______________________________________
Name:
Title:
DVI FINANCIAL SERVICES INC.
By:______________________________________
Name:
Title:
DVI ___________________
By:______________________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
By:_____________________________________
Name:
Title:
LEHMAN BROTHERS INC.
By:_____________________________________
Name:
Title:
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EXHIBIT A
PURCHASING PRICE
Principal Amount to Principal Amount to
be Purchased by be Purchased by
Class of Note Price Prudential Securities, Inc. Lehman Brothers Inc.
- ------------------ --------- ----------------------------- ---------------------
The Class A Notes % $ $
The Class B Notes % $ $
The Class C Notes % $ $
The Class D Notes % $ $
A-1
Exhibit 3.1
-----------
CERTIFICATE OF INCORPORATION
OF
DVI RECEIVABLES CORP. VIII
I. The name of the corporation is
DVI RECEIVABLES CORP. VIII
2. The address of DVI Receivables Corp. VIII (hereinafter the
"Corporation") registered office in the State of Delaware is Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The
name of the Corporation's registered agent at such address is The Corporation
Trust Company.
3. The nature of the business or purposes to be conducted or
promoted by the Corporation is, limited to the following activities and none
other:
A. To acquire and hold a limited liability company
interest in and to make an initial or additional
capital contributions to DVI Receivables VIII,
L.L.C., a Delaware limited liability company ("DRVIII
LLC") and to become a member of DRVIII LLC as the
Board of Directors of the Corporation may from time
to time authorize and direct;
B. To acquire, own, purchase, hold, transfer, pledge and
otherwise deal with any of the units representing
limited liability company ownership interests
("Units") in DRVIII LLC or any other notes, debt or
other securities (collectively "Securities") issued
by DRVIII LLC or by any trust for which DRVIII LLC is
a depositor or sponsor;
C. To act as the managing member of DRVIII LLC and to
perform all acts and assume all responsibilities
required thereby;
<PAGE>
D. To enter into a limited liability company agreement
of DRVIII LLC, as the same may be amended or restated
from time to time (the "DRVIII LLC Agreement"), and
to exercise all rights, duties and obligations of a
member of DRVIII LLC under the DRVIII LLC Agreement
and applicable law;
E. To perform any and all of the activities set forth
above with respect to other limited liability
companies ("Other LLCs") in which the Company holds
Units;
F. Borrowing money pursuant to one or more interim
finance agreements between the Corporation and one or
more lenders and acquiring, owning, leasing,
purchasing, investing, transferring, selling and/or
pledging certain property to be contributed to the
Corporation pursuant to a contribution agreement or
subsequent contract transfer agreement in connection
with such borrowing; provided, however, that there
may be only one interim finance agreement outstanding
at one time;
G. To acquire, own and hold one or more series of
securities ("Pass-Through Securities") issued
pursuant to one or more pooling agreements (each, a
"Pooling Agreement"), and to cause the issuance of
one or more series of Pass-Through Securities; such
Pass-Through Securities of each series (i) will
represent ownership interests in various equipment
finance contracts, the cash flow, income, payments
and proceeds therefrom and any related property
and/or collections in respect thereof, and (ii) may
be structured to contain one or more classes of
Pass-Through Securities, each class having the
characteristics specified in the related Pooling
Agreement; and to sell,
<PAGE>
transfer, assign, finance, and refinance one or more
Pass-Through Securities or classes of Pass-Through
Securities of any series;
H. To issue, acquire, own and hold in addition to the
Units, one or more series of (i) debt obligations
("Notes") pursuant to one or more indentures (each,
an "Indenture"), which Notes are collateralized by
equipment finance contracts or income, payments or
proceeds therefrom ("Funding Agreements"),
Pass-Through Securities or supplemental collateral
(collectively, the "Collateral"); and to sell,
transfer, assign and finance such Notes;
I. To establish one or more trusts ("Trusts") to engage
in any one or more of the activities described in any
of the clauses above or to issue, acquire, own, hold
and sell a particular series of notes to be issued
pursuant to an indenture between such trust and an
indenture trustee (the "Trustee"); to receive upon
the formation of any such Trust one or more
certificates ("Trust Certificates") representing the
beneficial ownership interest in such Trust; and to
acquire, own, hold, sell, transfer, assign, pledge,
finance, refinance and otherwise deal with any or all
of the Trust Certificates in any such Trust;
J. To invest and reinvest the funds received or
collected by the Corporation on Collateral in other
investments of such types or in other
interest-bearing or discount securities, loans or
other investments;
K. To convey or transfer all or any portion of the
Corporation's right, title and interest in and to the
collateral for any series of Notes, subject and
subordinate to the rights of the related Noteholders;
<PAGE>
L. To transfer the Corporation's rights to (1) any cash
flow in excess of amounts necessary to pay holders of
the Notes remitted, or to be remitted to, the
Corporation pursuant to an Indenture with respect to
such Notes or (2) amounts remitted or to be remitted
to the Corporation pursuant to a Pooling Agreement;
M. To acquire, own, hold, sell, transfer, assign,
pledge, finance, refinance and otherwise deal with
(1) installment sales contracts, equipment leases,
equipment finance leases, rental and other payments
from leases and other contracts, equipment finance
loans and secured equipment notes (collectively,
"Contracts"), (2) the equipment which is the subject
of such Contracts, (3) policies of insurance relating
to such Contracts, Contract payments due thereunder,
equipment, or proceeds of any of the foregoing, (4)
any other assets which may be incidental to the
ownership of such Contracts, or (5) any participation
interest in or security based on or backed by assets
described in (1) through (5) (collectively, "Lease
Receivables");
N. To engage in any other acts or activities and to
exercise any power permitted to the Corporation under
the General Corporation Law of the State of Delaware
so long as the same are incidental to, or connected
with, the foregoing or are necessary, suitable or
convenient to accomplish the foregoing; and
O. Provided, however, that none of the permitted
activities set forth in E through N above shall
result in a downgrade of the rating by the nationally
recognized rating agency related to the Units or any
previously issued Notes, Pass-Through Securities or
Trust Certificates.
<PAGE>
4. The total number of shares of stock which the Corporation
shall have authority to issue is one hundred (100) of the par value of one cent
($.01) per share.
5. A. The Corporation shall at all times have at
least one director who shall not be, nor
have been, a director of any Affiliate of
the Corporation except as described below or
an officer of, be employed by, be a
creditor, supplier or contractor of, or hold
any beneficial or economic interest in the
Corporation or any Affiliate of the
Corporation, or be a family member of any of
the foregoing. As used in the preceding
sentence, "Affiliate" shall mean any entity
other than the Corporation (i) which owns
beneficially, directly or indirectly, 10% or
more of the outstanding shares of common
stock of the Corporation; or (ii) of which
10% or more of the outstanding shares of its
common stock is owned beneficially, directly
or indirectly, by any entity described in
clause (i) above, or (iii) which is
"controlled", as defined in Section 230.405
of the Rules and Regulations of the
Securities and Exchange Commission, 17
C.F.R. Section 230.405, by an entity
described in clause (i) above; provided,
however, that such independent director may
serve in similar capacities for other
"special purpose corporations" formed by
DVI, Inc. or its affiliates.
B. With respect to a vote for the filing of a
bankruptcy petition or other such action as
described in Section 6(ii) hereof, the
independent director shall, to the extent
permitted under applicable law, consider
<PAGE>
the interests of creditors of the
Corporation and the wholly-owned
subsidiaries of the Corporation (if any).
C. No action voted upon by the Corporation's
board of directors shall be effective until
a successor independent director has been
elected to replace any independent director
that has resigned or been
removed.
6. The affirmative unanimous vote of the holders of all of the
Corporation's outstanding common stock and the unanimous vote of the whole board
of directors, including the vote of the independent director, at any meeting of
the board of directors shall be necessary (i) for the amendment of the Articles
3, 5, 6, 9 and 10 of this Certificate of Incorporation of the Corporation and
for the amendment of the by-laws of the Corporation (any amendment pursuant to
this clause (i) also shall not result in a downgrade of the rating by the
nationally recognized rating agency related to any previously issued Notes,
Notes, Pass-Through Securities or Trust Certificates); or (ii) before the
Corporation may take any action to institute proceedings to have itself or
DRVIII LLC adjudicated as bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against either of them, or seek or
consent to the entry of any order for relief or the appointment of a receiver,
trustee, or other similar official for either of them or for any substantial
part of either of their property, or seek liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
either of them or either of their debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or make any general
assignment for the benefit of creditors; or (iii) to take any corporate action
in furtherance of any of the actions set forth above in this Article 6.
7. A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director,
<PAGE>
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived any improper personal benefit. If the Delaware
General Corporation Law is amended after the filing of the certificate of
incorporation of which this paragraph is a part to authorize corporate action
eliminating or further limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing portion of this paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
8. Elections of directors need not be by written ballot unless
the by-laws of the Corporation shall so provide.
9. Notwithstanding any other provision of this Certificate of
Incorporation and any provision of law which otherwise so empowers the
Corporation, the Corporation shall not perform any act in contravention of any
of the following:
A. the Corporation shall not (i) consolidate or
merge with or into any other entity or
person or dissolve or liquidate in whole or
in part or transfer its properties and
assets substantially as an entirety to any
entity or (ii) engage in any other action
that bears on whether the separate legal
identity of the Corporation will be
respected, including, without limitation (a)
holding itself out as being liable for the
debts of any other party; (b) forming, or
causing to be formed,
<PAGE>
any subsidiaries; or (c) acting other than
in its corporate name and through its duly
authorized officers or agents;
B. the Corporation shall not engage in any
joint activity or transaction of any kind
with or for the benefit of any Related
Company, including loans to or from any
Related Company and any guarantee of the
indebtedness of any Related Company, except
for (i) entering into the Contribution
Agreement and other agreements or
transactions referenced in Article 3, (ii)
purchasing management services and leasing
office space or equipment, in each case only
to the extent necessary for the conduct of
the Corporation's business, (iii) payment of
lawful dividends and capital distributions
to its shareholder or shareholders, and (iv)
any guaranty by a Related Company, in whole
or in part, of the Notes or any series of
Pass-Through Securities or Notes or the
Corporation's obligations under any interim
financing or other agreements;
C. the Corporation shall not create, incur,
assume, guarantee or in any manner become
liable in respect of any indebtedness,
except as stated in Article 3, other than
trade payables and expense accruals incurred
in the ordinary course of business and which
are incident to the business purpose of the
Corporation as stated in Article 3 above;
D. the Corporation shall not commingle its
funds and assets with those of any Related
Company; and
<PAGE>
E. "Related Company" means the shareholder or
shareholders of the Corporation or any
entity other than the Corporation now or
hereafter controlled directly or indirectly
by, or under direct or indirect common
control with, the shareholders of the
Corporation.
10. The Corporation (A) shall maintain its financial and
accounting books and records separate from those of any other entity or person,
(B) shall pay from its assets any obligations and indebtedness of any kind
incurred by it, and shall not pay from its assets any obligations or
indebtedness of any other entity or person, and (C) shall observe all corporate
formalities required by its Certificate of Incorporation, by-laws and the laws
of the State of Delaware.
11. The name and mailing address of the sole incorporator is
as follows:
Susan A.T. Tice
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
12. The Corporation is to have perpetual existence.
13. Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the by-laws of the Corporation.
14. Except as otherwise provided by statute, any action which
might have been taken by a vote of the stockholders at a meeting thereof
(including any action under Articles 13, 15, 16 and 17 hereof) may be taken with
the written consent of such of the holders of stock who would have been entitled
to vote upon the action if a meeting were held having not less than the minimum
percentage of the total vote required for the proposed action by statute, this
Certificate
<PAGE>
of Incorporation or the by-laws of the Corporation, as may be applicable (but in
the case of the election of a director or directors, not less than a majority of
the stock of the Corporation entitled to vote); provided that prompt notice
shall be given to all stockholders of the taking of such corporate action
without a meeting if less than unanimous written consent is obtained.
15. Any director may be removed from office either with or
without cause at any time by the affirmative vote of stockholders of record
holding a majority of the outstanding shares of the stock of the Corporation
entitled to vote, given at a meeting of the stockholders called for that purpose
(or as provided in Article 14 above).
16. Any action required or permitted to be taken at a meeting
of the Board of Directors, other than an action requiring shareholder approval,
may be taken by written action signed by the number of directors that would be
required to take the same action at a meeting of the Board of Directors at which
all directors were present.
17. In furtherance and not in limitation of the power
conferred upon the Board of Directors by law, the Board of Directors shall have
power to make, adopt, alter, amend and repeal by-laws of the Corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter, amend and repeal by-laws made by the Board of Directors.
18. Subject to the limitations in Article 6 of this
Certificate of Incorporation, the Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights and powers conferred upon stockholders, directors and officers herein are
granted subject to this reservation.
<PAGE>
THE UNDERSIGNED, being the incorporator, for the purpose of
forming a corporation pursuant to the provisions of the Delaware General
Corporation Law, does make this certificate, hereby declaring and further
certifying that this is the undersigned's act and deed and that the facts herein
stated are true, and, accordingly, have hereunto set the undersigned's hand this
17th day of December, 1998.
--------------------------------
Susan A.T. Tice
EXHIBIT 3.2
-----------
DVI RECEIVABLES CORP. VIII
BY-LAWS
-------
ARTICLE I
---------
OFFICERS
--------
Section 1.1. Registered Office.
-----------------
The registered office of the Corporation in the State of
Delaware shall be located at the principal place of business of the corporation
or individual acting as the Corporation's
registered agent in the State of Delaware.
Section 1.2. Other Offices.
-------------
The Corporation may have other offices, either within or
without the State of Delaware, at such place or places as the Board of Directors
of the Corporation from time to time may designate or the business of the
Corporation may require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1. Date, Time, and Place.
---------------------
All meetings of stockholders of the Corporation shall be held
on such date and at such time and place, either within or without the State of
Delaware, as shall be stated in the written notice of the meeting or in a duly
executed written waiver of notice of the meeting.
Section 2.2. Annual Meetings.
---------------
Annual meetings of stockholders of the Corporation for the
election of directors to the Board of Directors of the Corporation and for the
transaction of such other business as may properly come before the meeting shall
be held on such date and at such time and place, either within or without the
State of Delaware, as shall be designated by the Board of Directors and stated
in the written notice of the meeting or in a duly executed written waiver of
notice of the meeting.
<PAGE>
Section 2.3. Special Meetings.
----------------
Special meetings of stockholders of the Corporation for any
purpose or purposes, unless otherwise prescribed by the Certificate of
Incorporation or these By-laws, may be called by the Board of Directors or the
President and shall be called by the President or the Secretary at the written
request of stockholders holding a majority of the shares of the Corporation's
issued and outstanding common stock and entitled to vote at such meeting. Such
written request shall state the purpose or purposes for which the special
meeting is called. The place, date and time of a special meeting shall be fixed
by the Board of Directors or the officer calling the meeting and shall be stated
in the written notice of such meeting, which notice shall state the purpose or
purposes for which the meeting is called. Business transacted at a special
meeting shall be confined to the purpose or purposes stated in the written
notice of meeting and matters germane thereto.
Section 2.4. Notice of Meetings.
------------------
Written notice of any meeting of stockholders of the
Corporation shall be given to each stockholder of record entitled to vote at
such meeting, in the manner prescribed by Section 6.1 of these By-laws, not less
than ten (10) nor more than sixty (60) days prior to the date of the meeting,
except that where the matter to be acted upon at the meeting is a merger or
consolidation of the Corporation, or a sale, lease, or exchange of all or
substantially all of the Corporation's assets, such notice shall be given not
less than twenty (20) nor more than sixty (60) days prior to such meeting.
Section 2.5. Stockholder List.
----------------
The Secretary or other officer in charge of the stock ledger
of the Corporation shall prepare and make, at least ten (10) days prior to a
meeting of stockholders, a complete list of stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares of stock of the Corporation registered in
the name of each stockholder. Such list shall be open to examination by any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list also shall be produced and kept at the
place and time of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.6 Voting Rights.
-------------
In order that the Corporation may determine the stockholders
entitled to notice of, and to vote at, a meeting of stockholders or at any
adjournment(s) thereof or to express consent or dissent to corporate action in
writing without a meeting, the Board of Directors may fix a record date in the
manner prescribed by Section 9.1 of these By-laws. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for such stockholder by proxy in the manner prescribed by Section 2.7 of
these By-laws. Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these By-laws, each stockholder entitled to vote at a meeting of stockholders or
<PAGE>
to express consent or dissent to corporate action in writing without a meeting
shall be entitled to one vote for each share of stock registered in such
stockholder's name on the books and records of the Corporation as of the record
date.
Section 2.7. Proxies.
-------
Each proxy shall be in writing and shall be executed by the
stockholder giving the proxy or by such stockholder's duly authorized attorney.
No proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy expressly provides for a longer period. Unless and until voted,
every proxy shall be revocable at the pleasure of the person who executed it or
of his legal representative or assigns, except in those cases where an
irrevocable proxy permitted by the General Corporation Law of the State of
Delaware shall have been given.
Section 2.8 Quorum and Adjournment(s) of Meetings.
-------------------------------------
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these By-laws, a majority of the aggregate number of shares of common stock
issued and outstanding and entitled to vote, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at a meeting of
stockholders. If such majority shall not be present in person or represented by
proxy at a meeting of stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time until holders of the requisite number of shares of
stock entitled to vote at the meeting shall be present in person or represented
by proxy. When a meeting of stockholders is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place of such
adjourned meeting are announced at the meeting at which the adjournment is
taken. At any such adjourned meeting at which a quorum shall be present in
person or represented by proxy, stockholders may transact any business that
might have been transacted at the meeting as originally noticed, but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment(s) thereof. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.9. Required Vote.
-------------
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these By-laws, the affirmative vote of a majority of the shares of common stock
present in person or represented by proxy at a meeting of stockholders at which
a quorum is present and entitled to vote on the subject matter (including, but
not limited to, the election of directors to the Board of Directors) shall be
the act of the stockholders with respect to the matter voted upon.
Section 2.10. Action Without Meeting.
----------------------
Notwithstanding contrary provisions of these By-laws covering
notices and meetings, any action required or permitted to be taken at any annual
or special meeting of stockholders of the Corporation may be taken without a
meeting, without prior notice and without
<PAGE>
a vote if a consent in writing, setting forth the action so taken, shall be
signed by the holders of shares of stock issued and outstanding and entitled to
vote on the subject matter having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting of stockholders
at which all such shares of stock entitled to vote thereon were present and
voted. Prompt notice of the taking of corporate or other action by stockholders
without a meeting by less than unanimous written consent of stockholders shall
be given to those stockholders who have not consented in writing.
ARTICLE III
-----------
DIRECTORS
---------
Section 3.1. Board of Directors.
------------------
The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors. The Board of Directors may
exercise all such powers of the Corporation and do all such lawful acts and
things on its behalf as are not by the General Corporation Law of the State of
Delaware, the Certificate of Incorporation or these By-laws directed or required
to be exercised or done by stockholders.
Section 3.2. Number, Election, and Tenure.
----------------------------
The first Board of Directors shall consist of three (3)
members. Thereafter, the number of directors which shall constitute the whole
Board of Directors of the Corporation shall be fixed from time to time by
resolution of the Board of Directors. The corporation shall at all times have at
least one director who shall not be a director, officer or employee of any
direct or ultimate parent or affiliate of DVI, Inc; provided however, that such
independent director may serve in similar capacities for other "special purpose
corporations" formed by DVI, Inc. or its affiliates. In no event shall the total
number of directors which shall constitute the whole Board of Directors be fixed
by the Board of Directors at less than one (1) or more than ten (10). The Board
of Directors shall not at any time decrease the total number of directors which
shall constitute the whole Board of Directors if to do so would shorten the term
of any incumbent director. With the exception of the first Board of Directors,
which shall be elected by the incorporator(s) of the Corporation, and except as
provided otherwise in these By-laws, directors shall be elected at the annual
meeting of stockholders. Each director shall hold office until the annual
meeting of stockholders next succeeding his election or appointment and until
his successor is elected and qualified or until his earlier resignation or
removal.
Section 3.3. Resignation and Removal.
-----------------------
Any director, or member of a committee of the Board of
Directors, may resign at any time upon written notice to the Board of Directors
or the President. Unless specified otherwise in the notice, such resignation
shall take effect upon receipt of the notice by the Board of Directors or the
President. The acceptance of a resignation shall not be necessary to make it
effective. Any director may be removed, either with or without cause, as
provided by the General Corporation Law of the State of Delaware.
<PAGE>
Section 3.4. Vacancies and Newly-Created Directorships.
-----------------------------------------
Vacancies occurring for any reason and newly-created
directorships resulting from an increase in the authorized number of directors
which shall constitute the whole Board of Directors, as fixed pursuant to
Section 3.2 of these By-laws, may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director, and any
director so chosen shall hold office until the annual meeting of stockholders
next succeeding his election or appointment and until his successor shall be
elected and qualified or until his earlier resignation or removal.
Section 3.5. Compensation.
------------
Each director on the Board of Directors and on any committee
thereof shall receive for services rendered as a director and committee member
such reasonable compensation as may be fixed from time to time by the Board of
Directors. The directors and committee members also may be paid their expenses,
if any, in attending meetings of the Board of Directors or any committee
thereof. Nothing in these By-laws shall be construed to preclude any director
from serving the Corporation in any other capacity as an officer, agent, or
otherwise and receiving compensation therefor.
ARTICLE IV
----------
MEETING OF THE BOARD OF DIRECTORS
---------------------------------
Section 4.1. Date, Time, and Place.
---------------------
Meetings of the Board of Directors shall be held on such date
and at such time and place, either within or without the State of Delaware, as
shall be determined by the Board of Directors pursuant to these By-laws.
<PAGE>
Section 4.2. Annual Meetings.
---------------
After the annual meeting of stockholders, the newly-elected
Board of Directors may hold a meeting, on such date and at such time and place
as shall be determined by the Board of Directors, for the purpose of
organization, election of officers, and such other business that may properly
come before the meeting. Such meeting may be held without notice.
Section 4.3 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without
notice on such date and at such time and place as shall be determined from time
to time by the Board of Directors.
Section 4.4. Special Meetings.
----------------
Special meetings of the Board of Directors may be held at any
time upon the call of the President or the Secretary by means of oral,
telephonic, written, telegraphic, cable, or other similar notice, duly given,
delivered, sent, or mailed to each director, in the manner prescribed by Section
6.1 of these By-laws, not less than two (2) days prior to such meeting. Special
meetings of the Board of Directors may be held at any time without notice if all
of the directors are present or if those directors not present waive notice of
the meeting in writing either before or after the date of the meeting.
Section 4.5. Quorum.
------
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, a majority of the whole Board of
Directors, as fixed pursuant to Section 3.2 of these By-laws, shall constitute a
quorum for the transaction of business at a meeting of the Board of Directors.
If a quorum shall not be present at a meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 4.6. Required Vote.
-------------
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the affirmative vote of a majority of
the directors present at a meeting of the Board of Directors at which a quorum
is present shall be the act of the Board of Directors with
respect to the matter voted upon.
Section 4.7. Action Without Meeting.
----------------------
Any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting if all members of the Board of Directors or committee thereof, as the
case may be, consent thereto in writing and such writing is filed with the
minutes of proceedings of the Board of Directors or committee thereof.
Section 4.8. Telephone Meetings.
------------------
<PAGE>
Members of the Board of Directors or any committee thereof may
participate in a meeting of the Board of Directors or committee thereof, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting by such means shall
constitute presence in person at such meeting.
ARTICLE V
---------
COMMITTEES OF THE BOARD OF DIRECTORS
------------------------------------
Section 5.1 Designation and Powers.
----------------------
The Board of Directors may designate one or more committees
from time to time in its discretion, by resolution passed by the affirmative
vote of a majority of the whole Board of Directors, as fixed pursuant to Section
3.2 of these By-laws. Each committee shall consist of one or more of the
directors on the Board of Directors. The Board of Directors may designate one or
more directors as alternate members of any committee who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all of the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation and may authorize the corporate seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation or these By-laws, adopting an agreement of merger
or consolidation, or recommending to the stockholders the sale, lease, or
exchange of all or substantially all of the Corporation's property and assets, a
dissolution of the Corporation or a revocation of a dissolution; and, unless the
resolution of the Board of Directors, these By-laws or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock of the
Corporation or any class or series of stock. Each committee shall keep regular
minutes of its meetings and shall report the same to the Board of Directors when
requested to do so.
<PAGE>
ARTICLE VI
----------
NOTICES
-------
Section 6.1. Delivery of Notice.
------------------
Notices to stockholders and, except as permitted below, to
directors shall be in writing and may be delivered by mail or by messenger.
Notice by mail shall be deemed to be given at the time when such notice is
deposited in a United States post office or letter box, enclosed in a post-paid
sealed wrapper, and addressed to a stockholder or director at his respective
address appearing on the books and records of the Corporation, unless such
stockholder or director shall have filed with the Secretary a written request
that notices intended for such stockholder or director be mailed or delivered to
some other address, in which case the notice shall be mailed to or delivered at
the address designated in such request. Notice by messenger shall be deemed to
be given when such notice is delivered to the address of a stockholder or
director as specified above. Notices to directors also may be given orally in
person or by telephone, or by telex, telegram, cable, or other similar means, or
by leaving the notice at the residence or usual place of business of a director.
Notice by oral communication, telex, telegram, cable, or other similar means
shall be deemed to be given upon dispatch of such notice. Notice by messenger
shall be deemed to be given when such notice is delivered to a director's
residence or usual place of business. Notice to the Corporation shall be deemed
to be given upon actual receipt of such notice by the Corporation.
Section 6.2 Waiver of Notice.
----------------
Whenever notice is required to be given by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these By-laws, a written waiver of notice, signed by the person entitled
thereto, whether before or after the time stated in the notice, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of stockholders, Board of Directors, or committee of
the Board of Directors need be specified in any written waiver of notice.
ARTICLE VI
----------
OFFICERS
--------
Section 7.1. Officers.
--------
At its annual meeting, or at such other meeting as it may
determine, or by unanimous written consent of the directors without meeting, the
Board of Directors shall elect a President, a Treasurer and a Secretary, and may
elect one or more Vice Presidents, Assistant Treasurers, Assistant Secretaries,
and such other officers as the Board of Directors from time to time may
designate or the business of the Corporation may require. No executive officer
need be a member of the Board of Directors. Any number of offices may be held by
the same person.
<PAGE>
Section 7.2. Other Officers and Agents.
-------------------------
The Board of Directors also may elect such other officers and
agents as the Board of Directors from time to time may determine to be
advisable. Such officers and agents shall serve for such terms, exercise such
powers, and perform such duties as shall be specified from time to time by the
Board of Directors.
Section 7.3. Tenure, Resignation, Removal, and Vacancies.
-------------------------------------------
Each officer of the Corporation shall hold his office until
his successor is elected and qualified or until his earlier resignation or
removal except that if the term of office of any officer elected pursuant to
Section 7.2 of these By-laws shall have been fixed by the Board of Directors,
such person shall cease to hold such office no later than the date of expiration
of such term, regardless of whether any other person shall have been elected or
appointed to succeed him. Any officer elected by the Board of Directors may be
removed at any time, with or without cause, by the Board of Directors provided
that any such removal shall be without prejudice to the rights, if any, of the
officer so employed under any employment contract or other agreement with the
Corporation. Any officer may resign at any time upon written notice to the Board
of Directors or the President. Unless specified otherwise in the notice, such
resignation shall take effect upon receipt of the notice by the Board of
Directors or the President. The acceptance of the resignation shall not be
necessary to make it effective. Any vacancy occurring in any office of the
Corporation by death, resignation, removal, or otherwise shall be filled by the
Board of Directors and such successor or successors shall hold office for such
term as may be specified by the Board of Directors.
Section 7.4. Compensation.
------------
The salaries or other compensation of all officers and agents
of the Corporation shall be fixed from time to time by the Board of Directors.
Section 7.5. Authority and Duties.
--------------------
All officers and agents, as between themselves and the
Corporation, shall have such authority and perform such duties in the management
of the Corporation as may be provided in these By-laws and as generally pertain
or are necessary incidental to the particular office or agency. In addition to
the powers and duties hereinafter specifically prescribed for certain officers
of the Corporation, the Board of Directors from time to time may impose or
confer upon any of the officers such additional duties and powers as the Board
of Directors may see fit, and the Board of Directors from time to time may
impose or confer any or all of the duties and powers hereinafter specifically
prescribed for any officer upon any other officer or officers. The Board of
Directors may give general authority to any officer to affix the corporate seal
of the Corporation and to attest the affixing by his signature.
Section 7.6. The President.
-------------
The President shall be the chief executive officer of the
Corporation, shall have general and active management, supervision and control
of the business of the Corporation, shall
<PAGE>
preside at all meetings of stockholders and of the Board of Directors, and shall
see that all resolutions and orders of the Board of Directors are carried into
effect. He shall report from time to time to the Board of Directors all matters
within his knowledge which the interest of the Corporation may require to be
brought to the attention of the Board of Directors. The President shall have the
general powers and duties of supervision and management usually vested in the
office of president of a corporation and shall exercise such powers and perform
such duties as generally pertain or are necessarily incidental to his office and
shall have such other powers and perform such other duties as may be
specifically assigned to him from time to time by the Board of Directors. Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages, and other contracts for and on behalf
of the Corporation and shall cause the corporate seal of the Corporation to be
affixed to any instrument requiring it, and when so affixed the seal shall be
attested by the signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
Section 7.7. The Vice President(s).
---------------------
The Vice President, or if there are more than one, the Vice
Presidents, shall perform such duties as may be specifically assigned to them
from time to time by the Board of Directors or the President and shall exercise
such powers as the Board of Directors from time to time may prescribe. In case
of the absence or disability of the President and if the Board of Directors or
the President has so authorized, the Vice President, or if there are more than
one Vice President, such Vice President as the Board of Directors or the
President shall designate, shall perform the duties of the office of the
President. Any Vice President shall have general authority to affix the seal of
the Corporation to any instrument requiring it, and to attest the affixing by
his signature.
Section 7.8. The Treasurer.
-------------
The Treasurer shall have the charge and custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books and records belonging to the Corporation. He
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors or any officer of the Corporation authorized by the Board of
Directors to make such designation. The Treasurer shall exercise such powers and
perform such duties as generally pertain or are necessarily incidental to his
office and shall perform such other duties as may be specifically assigned to
him from time to time by the Board of Directors or the President and shall
exercise such other powers as the Board of Directors from time to time may
prescribe. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or the President, taking proper vouchers for
such disbursements. He shall render to the President and the Board of Directors
(at its regular and special meetings), or whenever any of them may request it,
an account of all of his transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, he shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement, or removal from office, of all books,
papers, vouchers, moneys, and other property of whatever kind in his possession
or under his control belonging to the Corporation.
<PAGE>
Section 7.9. The Assistant Treasurer(s).
--------------------------
The Assistant Treasurer, or if there are more than one, the
Assistant Treasurers, shall perform such duties as may be specifically assigned
to them from time to time by the Board of Directors or the President. In case of
the absence or disability of the Treasurer, and if the Board of Directors or the
President has so authorized, the Assistant Treasurer or if there are more than
one Assistant Treasurer, such Assistant Treasurer as the Board of Directors or
the President shall designate, shall perform the duties of the office of the
Treasurer.
Section 7.10. The Secretary.
-------------
The Secretary shall attend all meetings of the Board of
Directors and all meetings of stockholders and record all votes and record the
proceedings of such meetings in a book to be kept for that purpose. He shall
perform like duties for any committees of the Board of Directors when required
or requested. He shall give, or cause to be given, notice of all meetings of
stockholders and, when necessary, of the Board of Directors. The Secretary shall
exercise such powers and perform such duties as generally pertain or are
necessarily incidental to his office and shall perform such other duties as may
be specifically assigned to him from time to time by the Board of Directors or
the President and shall exercise such other powers as the Board of Directors
from time to time may prescribe. The Secretary shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the corporate seal to any instrument requiring it, and when
so affixed it shall be attested by his signature or by the signature of an
Assistant Secretary.
Section 7.11. The Assistant Secretary(ies).
----------------------------
The Assistant Secretary, or if there are more than one, the
Assistant Secretaries, shall perform such duties as may be specifically assigned
to them from time to time by the Board of Directors or the President and shall
exercise such other powers as the Board of Directors from time to time may
prescribe. In case of the absence or disability of the Secretary and if the
Board of Directors or the President has so authorized, the Assistant Secretary,
or if there are more than one Assistant Secretaries, such Assistant Secretary as
the Board of Directors or the President shall designate, shall perform the
duties of the office of the Secretary.
ARTICLE VIIII
-------------
CERTIFICATES OF STOCK
---------------------
Section 8.1. Form and Signature.
------------------
The stock certificates representing shares of stock of the
Corporation shall be in such form or forms not inconsistent with the Certificate
of Incorporation and these By-laws as the Board of Directors shall approve from
time to time. Stock certificates shall be numbered, the certificates for the
shares of stock of each class to be numbered consecutively, and shall be entered
in the books and records of the Corporation as such certificates are issued. No
certificate shall be issued for any share until the consideration therefor has
been fully paid. Stock certificates shall exhibit the holder's name, certify the
class of stock and the number of shares in such class of stock
<PAGE>
owned by the holder, and shall be signed by (a) the President or a Vice
President, AND (b) the Treasurer, Assistant Treasurer, the Secretary or an
Assistant Secretary. Any or all of the signatures on a stock certificate may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate shall have ceased to
be such officer, transfer agent or registrar before such certificate is issued,
such certificate may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issuance.
Section 8.2. Lost, Stolen, or Destroyed Certificates.
---------------------------------------
The Board of Directors may direct that a new stock certificate
be issued in place of any certificate theretofore issued by the Corporation
which is alleged to have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person, or his legal representative, claiming the
certificate of stock to be lost, stolen, or destroyed. When authorizing such
issuance of a new certificate, the Board of Directors, in its discretion and as
a condition precedent to the issuance thereof, may require the owner of the
lost, stolen, or destroyed certificate, or his legal representative, to
advertise the same in such manner as the Board of Directors shall require and/or
to give the Corporation a bond in such sum as the Board of Directors shall
direct as indemnity against any claim that may be made against the Corporation,
any transfer agent, or any registrar on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of such new certificate.
Section 8.3. Registration of Transfer.
------------------------
Shares of stock of the Corporation shall be transferable only
upon the Corporation's books by the holders thereof in person or by their duly
authorized attorney or legal representatives, and upon such transfer the old
certificates shall be surrendered to the Corporation by delivery thereof to the
person in charge of the stock and transfer books and ledgers of the Corporation,
or to such other person as the Board of Directors may designate. Upon surrender
to the Corporation of a certificate for shares, duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction on its books.
ARTICLE IX
----------
GENERAL PROVISIONS
------------------
Section 9.1. Record Date.
-----------
In order that the Corporation may determine the stockholders
entitled to notice of, and to vote at, a meeting of stockholders, or to express
consent or dissent to corporate action in writing without meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock, or for the purpose of any other lawful action, the Board
of Directors may fix, in advance, a record date which shall not be more than
sixty (60) nor less than ten (10) days prior to the date of such meeting nor
more than sixty (60) days prior to any other action. A determination of
stockholders of record entitled to notice of, and to vote at, a meeting of
<PAGE>
stockholders shall apply to any adjournment(s) of such meeting; provided that,
the Board of Directors may fix a new record date for the adjourned meeting.
Section 9.2. Registered Stockholders.
-----------------------
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Corporation shall be entitled to
recognize the exclusive right of a person registered on its books and records as
the owner of shares of stock of the Corporation to receive dividends and to vote
as such owner, shall be entitled to hold such person liable for calls and
assessments, and shall not be bound to recognize any equitable or other claim
to, or interest in, such stock on the part of any other person, whether or not
the Corporation shall have express or other notice thereof.
Section 9.3. Dividends.
---------
The Board of Directors, from time to time in its sole and
absolute discretion, may declare and pay dividends upon the shares of the
Corporation's capital stock out of funds legally available therefor. Before
declaring or paying any dividend, the Board of Directors may set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors, from time to time in its absolute discretion, shall think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
Section 9.4 Checks and Notes.
----------------
All checks and drafts on the bank accounts of the Corporation,
all bills of exchange and promissory notes of the Corporation, and all
acceptances, obligations, and other instruments for the payment of money drawn,
signed, or accepted by the Corporation shall be signed or accepted, as the case
may be, by such officer or officers, agent or agents, and in such manner as
shall be thereunto authorized from time to time by the Board of Directors or by
officers of the Corporation designated by the Board of Directors to make such
authorization.
Section 9.5. Fiscal Year.
-----------
The fiscal year of the Corporation shall commence on and end
on such dates as shall be fixed by resolution of the Board of Directors.
Section 9.6. Corporate Seal.
--------------
The corporate seal, if there shall be one, shall be circular
in form and shall have inscribed thereon the name of the Corporation, the year
of its organization, and the words "Corporate Seal, Delaware". The seal may be
used by causing it or a facsimile thereof to be impressed, affixed, or otherwise
reproduced.
Section 9.7. Voting of Securities of Other Issuers.
-------------------------------------
<PAGE>
In the event that the Corporation shall own and/or have power
to vote any securities (including, but not limited to, shares of stock) of any
other issuer, such securities shall be voted by such person or persons, to such
extent, and in such manner as may be determined by the Board of Directors.
Section 9.8. Transfer Agents.
---------------
The Board of Directors may make such rules and regulations as
it may deem expedient concerning the issuance, transfer, and registration of
securities (including, but not limited to, stock) of the Corporation. The Board
of Directors may appoint one or more transfer agents and/or one or more
registrars and may require all stock certificates and other certificates
evidencing securities of the Corporation to bear the signature of either or
both.
Section 9.9. Books and Records.
-----------------
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the books and records of the
Corporation shall be kept at the principal
executive offices of the Corporation.
ARTICLE X
---------
INDEMNIFICATION
---------------
Section 10.1. Indemnification of Directors, Officers,
Employees and Agents.
----------------------------------------
To the extent not prohibited by applicable law, the
Corporation shall indemnify and hold harmless any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action, suit or proceeding, by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, from and against any and
all liability and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 10.2. Determination of Right to Indemnification.
------------------------------------------
Any indemnification under Section 10.1 of these By-laws
(except indemnification in connection with the successful defense, on the merits
or otherwise, of any action, suit or
<PAGE>
proceeding or any claim, issue or matter therein, or except indemnification
ordered by a court) shall be made by the Corporation 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 has met the
applicable standard of conduct set forth in Section 10.1 of these By-laws. Such
determination shall be made (1) by the Board of Directors of the Corporation by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) 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 (3) by the stockholders of the
Corporation.
Section 10.3. Advances.
--------
Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors in the specific case 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 is entitled to be indemnified by the
Corporation as authorized in this Article X of these By-laws.
Section 10.4. Exclusivity.
-----------
The indemnification provided by this Article X of these
By-Laws shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any agreement, resolution, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, 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 10.5 Insurance.
---------
The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article X of these By-laws or
otherwise.
ARTICLE XI
----------
AMENDMENTS TO THESE BY-LAWS
---------------------------
Section 11.1. By the Stockholders.
-------------------
These By-laws may be amended or repealed in whole or in part
and new By-laws may be adopted by the affirmative unanimous vote of the
stockholders holding all of the shares of the Corporation's issued and
outstanding common stock entitled to vote on such matters.
<PAGE>
Section 11.2. By the Board of Directors.
-------------------------
These By-laws may be amended or repealed in whole or in part
and new By-laws may be adopted by unanimous written consent of the directors on
the Board of Directors without a meeting or by the affirmative unanimous vote of
the whole Board of Directors at a meeting at which a quorum is present.
ARTICLE XII
-----------
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
----------------------------------------------
Section 12.1. By the Stockholders.
-------------------
Any amendment of Articles 3, 5, 6, 9 and 10 to the Certificate
of Incorporation shall require the affirmative unanimous vote of the
stockholders holding all of the shares of Corporation's issued and outstanding
common stock entitled to vote on such matter, and any amendment of any other
Articles to the Certificate of Incorporation shall require the affirmative vote
of the stockholders holding a majority of the shares of Corporation's issued and
outstanding common stock entitled to vote on such matter.
Exhibit 4.1
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DVI _______________
ISSUER
AND
_________________________,
TRUSTEE
INDENTURE
Dated as of ________________
$_______ in aggregate principal amount of Asset-Backed Notes, Series ____,
consisting of:
$______ ____% ASSET BACKED NOTES, SERIES ______, CLASS A
$_______ ___% ASSET BACKED NOTES, SERIES ______, CLASS B
$______ ___% ASSET BACKED NOTES, SERIES ______, CLASS C
$_____ ___% ASSET BACKED NOTES, SERIES ______, CLASS D
$_____ ___% ASSET BACKED NOTES, SERIES ______, CLASS E
<PAGE>
TABLE OF CONTENTS
Page
RECITALS OF THE ISSUER ....................................................... 1
GRANTING CLAUSE .............................................................. 1
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01 Definitions....................................................3
SECTION 1.02 Compliance Certificates........................................3
SECTION 1.03 Form of Documents Delivered to Trustee.........................3
SECTION 1.04 Acts of Noteholders, etc.......................................4
SECTION 1.05 Notices........................................................5
SECTION 1.06 Notice to Noteholders; Waiver..................................5
SECTION 1.07 Table of Contents, Headings, etc...............................6
SECTION 1.08 Successors and Assigns.........................................6
SECTION 1.09 Severability Clause............................................6
SECTION 1.10 Benefits of Indenture..........................................6
SECTION 1.11 GOVERNING LAW..................................................6
SECTION 1.12 Legal Holidays.................................................7
SECTION 1.13 Execution in Counterparts......................................7
SECTION 1.14 Inspection.....................................................7
SECTION 1.15 Survival of Representations and Warranties.....................7
SECTION 1.16 Incorporation by Reference to Trust Indenture Act..............7
SECTION 1.17 Communications by Noteholders with Other Noteholders...........8
SECTION 1.18 Statements Required in Officer's Certificate...................8
SECTION 1.19 When Treasury Securities are Disregarded.......................8
SECTION 1.20 Rules by Trustee...............................................8
SECTION 1.21 No Adverse Interpretation of Other Agreements..................9
SECTION 1.22 No Recourse Against Others.....................................9
SECTION 1.23 Independence of Covenants......................................9
SECTION 1.24 Consent to Jurisdiction........................................9
SECTION 1.25 No Bankruptcy Petition.........................................9
SECTION 1.26 Voting Rights of Class F Instruments..........................10
SECTION 1.27 Indebtedness Treatment........................................10
ARTICLE II
THE NOTES
SECTION 2.01 General Provisions............................................11
i
<PAGE>
Page
----
SECTION 2.02 Global Notes..................................................12
SECTION 2.03 Execution, Authentication, Delivery and Dating................15
SECTION 2.04 Registration, Transfer and Exchange...........................16
SECTION 2.05 Mutilated, Destroyed, Lost and Stolen Notes...................17
SECTION 2.06 Delivery of Class F Instruments...............................18
SECTION 2.07 Payment of Interest and Principal; Rights Preserved...........19
SECTION 2.08 Persons Deemed Owners.........................................20
SECTION 2.09 Cancellation..................................................20
SECTION 2.10. Noteholder Lists; Communications to Noteholders...............20
SECTION 2.11. ERISA Deemed Representations..................................21
ARTICLE III
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS
SECTION 3.01 Accounts; Investments by Trustee..............................22
SECTION 3.02 Reserved......................................................24
SECTION 3.03 Collection of Moneys..........................................24
SECTION 3.04 Collection Account............................................25
SECTION 3.05 Class A Distribution Sub-Account; Class B Distribution Sub-
Account; Class C Distribution Sub-Account; Class D Distribution
Sub-Account; Class E Distribution Sub-Account; Class F
Distribution Sub-Account......................................28
SECTION 3.06 Reports; Notices of Certain Payments..........................30
SECTION 3.07. Trustee May Rely on Certain Information from Contributor and
Servicer......................................................30
SECTION 3.08 Reserve Account...............................................30
ARTICLE IV
CONTRACTS AND EQUIPMENT
SECTION 4.01 Representations and Warranties of the Issuer..................32
SECTION 4.02 Purchase upon Breach; Contribution and Servicing Agreement....32
SECTION 4.03 Release of Contracts and Equipment Following Substitution
or Purchase...................................................33
SECTION 4.04 Release of Contracts and Equipment Upon Final Contract
Payment.......................................................33
SECTION 4.05 Execution of Documents........................................34
ARTICLE V
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
ii
<PAGE>
Page
----
SECTION 5.01 Servicer Events of Default....................................35
SECTION 5.02 Substitute Servicer...........................................35
SECTION 5.03 Notification to Noteholders and Rating Agencies...............35
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
SECTION 6.01 Events of Default.............................................36
SECTION 6.02 Acceleration of Maturity; Rescission and Annulment............37
SECTION 6.03 Other Remedies................................................38
SECTION 6.04 Trustee May File Proofs of Claim..............................38
SECTION 6.05 Trustee May Enforce Claims Without Possession of Notes........39
SECTION 6.06 Application of Money Collected................................39
SECTION 6.07 Limitation on Suits...........................................41
SECTION 6.08 Unconditional Right of Noteholders to Receive Payment.........42
SECTION 6.09 Restoration of Rights and Remedies............................42
SECTION 6.10. Rights and Remedies Cumulative................................42
SECTION 6.11 Delay or Omission Not Waiver..................................42
SECTION 6.12 Control by Noteholders........................................43
SECTION 6.13 Waiver of Defaults and Events of Default......................43
SECTION 6.14 Waiver of Stay or Extension Laws..............................44
SECTION 6.15 Sale of Trust Property........................................44
SECTION 6.16 Undertaking for Costs.........................................45
ARTICLE VII
THE TRUSTEE
SECTION 7.01 Certain Duties and Responsibilities...........................46
SECTION 7.02 Notice of Defaults or Events of Default.......................47
SECTION 7.03 Certain Rights of Trustee.....................................47
SECTION 7.04 Trustee's Disclaimer..........................................48
SECTION 7.05 Money Held in Trust...........................................48
SECTION 7.06 Compensation, Reimbursement, etc..............................48
SECTION 7.07 Eligibility; Disqualification.................................49
SECTION 7.08 Resignation and Removal; Appointment of Successor.............49
SECTION 7.09 Acceptance of Appointment by Successor........................50
SECTION 7.10. Merger, Conversion, Consolidation or Succession to Business...51
SECTION 7.11 Co-trustees and Separate Trustees.............................51
SECTION 7.12 Trustee to Hold Contracts.....................................52
SECTION 7.13 Financing Statements..........................................53
iii
<PAGE>
Page
----
SECTION 7.14 Trustee to Act; Appointment of Successor......................53
SECTION 7.15 Reports by Trustee to Holders.................................53
SECTION 7.16 Preferential Collection of Claims Against Issuer..............54
ARTICLE VIII
COVENANTS
SECTION 8.01 Payment of Principal and Interest.............................55
SECTION 8.02 Maintenance of Office or Agency; Chief Executive Office.......55
SECTION 8.03 Money for Payments to Noteholders to be Held in Trust.........55
SECTION 8.04 Issuer Existence; etc.........................................56
SECTION 8.05 Protection of Trust Property; Further Assurances..............57
SECTION 8.06 Compliance Certificates.......................................58
SECTION 8.07 Performance of Obligations; Contribution and Servicing
Agreement.....................................................58
SECTION 8.08 Negative Covenants............................................59
SECTION 8.09 Information as to the Issuer..................................60
SECTION 8.10. Payment of Taxes and Other Claims.............................61
SECTION 8.11 Indemnification...............................................61
SECTION 8.12 Contract Files to Trustee.....................................61
SECTION 8.13 Payment Advices...............................................61
ARTICLE IX
AMENDMENTS AND SUPPLEMENTAL INDENTURES
SECTION 9.01 Amendments and Supplemental Indentures........................63
SECTION 9.02 Execution of Amendments and Supplemental Indentures...........63
SECTION 9.03 Effect of Amendments and Supplemental Indentures..............64
SECTION 9.04 Reference in Notes to Amendments and Supplemental Indentures..64
SECTION 9.05 Compliance with Trust Indenture Act...........................64
SECTION 9.06 Revocation and Effect of Consents.............................64
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01 Optional Redemption; Election to Redeem.......................65
SECTION 10.02 Notice to Trustee.............................................65
SECTION 10.03 Notice of Redemption or Partial Redemption by the Issuer......65
SECTION 10.04 Deposit of the Redemption Price or Partial Redemption Price...66
SECTION 10.05 Notes Payable on Redemption Date..............................66
iv
<PAGE>
Page
----
ARTICLE XI
SATISFACTION AND DISCHARGE
SECTION 11.01 Satisfaction and Discharge of Indenture.......................68
SECTION 11.02 Application of Trust Money....................................69
SECTION 11.03 Reinstatement.................................................69
v
<PAGE>
SCHEDULES
Schedule 1 - Contract Schedule
EXHIBITS
Exhibit A - Form of Class A Note
Exhibit B - Form of Class B Note
Exhibit C - Form of Class C Note
Exhibit D - Form of Class D Note
Exhibit E - Form of Class E Note
Exhibit F - Form of Class F Instrument
Exhibit G - Investment Letter
Exhibit H - Tax Certificate
APPENDICES
Appendix I - Defined Terms
vi
<PAGE>
INDENTURE
This INDENTURE dated as of ________________, is between DVI _____ a
Delaware ________________ (herein called the "ISSUER"), and ______________, a
national banking association, as trustee (herein called the "TRUSTEE").
RECITALS OF THE ISSUER
The Issuer has duly authorized the issuance of $___________ in
aggregate principal amount of its ___% Asset Backed Notes, Series _____________,
Class A, Class B, Class C, Class D and Class E (together with the Class A Notes,
the Class B Notes, the Class C Notes and the Class D Notes, the "OFFERED
NOTES"), of substantially the tenor hereinafter set forth, and to provide
therefor the Issuer has duly authorized the execution and delivery of this
Indenture.
Subsequent to the execution and delivery of this Indenture, the
Issuer may, subject to the restrictions described herein, enter into a
Supplement directing the issuance of a sixth class of privately offered
securities (the "CLASS F INSTRUMENTS", and together with the Offered Notes, the
"NOTES") which will be subordinate to the Class A Notes, the Class B Notes, the
Class C Notes, the Class D Notes and the Class E Notes.
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, for the benefit and
security of the Noteholders and the Trustee as their interests appear herein,
all of the Issuer's right, title and interest in and to the Trust Property. The
Issuer also hereby assigns to the Trustee, for the benefit of the Noteholders
and the Trustee, its security interest in the Equipment (which shall be a first
priority perfected security interest in Equipment other than Equipment relating
to a Secured Equipment Note or Finance Lease and for which the Original
Equipment Cost is less than $20,000) subject to the underlying equipment lease
related to the Contracts and all of the Issuer's rights in all income, payments
and proceeds related thereto. The Grants of the Trust Property 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, collect, receive, and give
receipts for Contract Payments in respect of the Contracts and all other moneys
payable thereunder, to give and receive notices and
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other communications, to recover on the Equipment pursuant thereto, to make
waivers, amendments or other agreements, to exercise all rights and options, to
bring judicial proceedings in the name of the Issuer or otherwise, to terminate
a Contract pursuant to the terms thereof, enforce all rights and remedies of the
Issuer with respect to the duties, covenants, obligations, indemnities,
representations and warranties of the Contributor and the Servicer under the
Contribution and Servicing Agreement and generally to do and receive anything
that the Issuer is or may be entitled to do or receive thereunder or with
respect thereto. Such Grants are 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 between any Note of the same class
and any other Note of the same class by reason of differences in time of
issuance or otherwise, except as otherwise may be provided in this Indenture or
any Supplement, (ii) the payment of all other sums payable under this Indenture
and (iii) compliance with the provisions of this Indenture and any Supplement
with respect to the Notes.
The Trustee acknowledges such Grants, accepts the trusts hereunder
in accordance with the provisions hereof, and agrees to perform the duties
herein required to the best of its ability and to the end that the interests of
the Noteholders may be adequately and effectively protected as hereinafter
provided.
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01 DEFINITIONS.
For purposes of this Indenture, capitalized terms used herein but
not otherwise defined shall have the respective meaning assigned to such terms
in Appendix I hereto.
SECTION 1.02 COMPLIANCE CERTIFICATES.
Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture or any Supplement, other than
any request that (i) the Trustee authenticate the Notes specified in such
request, (ii) the Trustee invest moneys in the Collection Account or the Reserve
Account pursuant to the written directions specified in such request, or (iii)
the Trustee pay moneys due and payable to the Issuer hereunder to the Issuer's
beneficial owner or other assignee specified in such request, the Trustee may
require the Issuer to furnish to the Trustee an Officer's Certificate stating
that all conditions precedent, if any, provided for in this Indenture or any
Supplement relating to the proposed action 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 or any Supplement, no additional certificate need be
furnished.
SECTION 1.03 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any Officer's Certificate 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 Authorized Officer or Authorized Officers
of the Transferor as to such factual matters unless such Authorized Officer or
counsel of the Transferor 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.
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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 or any Supplement, they may, but need not, be
consolidated and form one instrument.
Wherever in this Indenture or any Supplement, 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).
SECTION 1.04 ACTS OF NOTEHOLDERS, ETC.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture or any Supplement 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, with a copy (or if expressly required
an original) to the Issuer and the Servicer. 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 or any Supplement 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 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 therefor 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 and any
Supplement, each Noteholder irrevocably appoints the Trustee hereunder as the
special attorney-in-fact for such
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Noteholder vested with full power on behalf of such Noteholder to effect and
enforce the rights of such Noteholder pursuant hereto and the provisions hereof
for the benefit of such Noteholder.
(e) Each holder of a Note, by acceptance of such Note, agrees to
treat such Note as indebtedness for federal, state and local income or franchise
tax purposes.
SECTION 1.05 NOTICES.
Any request, demand, authorization, direction, notice, consent,
waiver, Act of Noteholders, or other document provided or permitted by this
Indenture or any Supplement 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 if in writing and telexed, telecopied (with the original of
the telexed or telecopied material sent to the recipient by overnight courier on
the day of the telex or telecopy), mailed, first-class postage prepaid, or hand
delivered. 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:
(i) if to the Trustee, at the Corporate Trust Office, _____________;
(ii) if to the Issuer, at ________________, with a copy to the
Servicer at the address set forth in clause (iv) below;
(iii) if to the Contributor, Attention: Securitization Manager at
500 Hyde Park, Doylestown, Pennsylvania 18901 (Number for telecopy: (215)
230-5328; Number for telephonic confirmation: (215) 230-6375) or at any
other address previously furnished in writing to the Trustee, the Issuer
and the Servicer by the Contributor;
(iv) if to the Servicer, Attention: Servicing Manager at 500 Hyde
Park, Doylestown, Pennsylvania 18901 (Number for telecopy: (215) 230-5328;
Number for telephonic confirmation: (215) 489-8025) or at any other
address previously furnished in writing to the Trustee, the Issuer and the
Contributor by the Servicer; or
(v) if to the Rating Agency, at __________________.
SECTION 1.06 NOTICE TO NOTEHOLDERS; WAIVER.
(a) Where this Indenture or any Supplement 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 sent by
private courier or confirmed telecopy (with a copy of the telecopied material
sent to the recipient by overnight courier on the day of the telecopy) to each
Noteholder affected by such event or to whom such report is required to be
mailed, at such Noteholder's address as it appears in the Note
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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 or any Supplement
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 or any Supplement, 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 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and the Article and Section headings are for
convenience only and shall in no way modify or restrict any of the terms or
provisions 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.
SECTION 1.09 SEVERABILITY CLAUSE.
In case any provision in this Indenture, any Supplement or in the
Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 1.10 BENEFITS OF INDENTURE.
Nothing in this Indenture, any Supplement or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any separate trustee or co-trustee appointed under Section
7.11 and the holders of Notes, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.11 GOVERNING LAW.
THIS INDENTURE, ANY SUPPLEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO
THE TRUST INDENTURE ACT OF 1939, AS AMENDED
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FROM TIME TO TIME, AS IN EFFECT ON ANY RELEVANT DATE (THE "TIA") AND SHALL BE
GOVERNED THEREBY OR CONSTRUED IN ACCORDANCE THEREWITH.
SECTION 1.12 LEGAL HOLIDAYS.
In any case where any Payment Date or the Stated Maturity Date 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 shall be made on the next
succeeding Business Day, and no interest shall accrue for the intervening
period.
SECTION 1.13 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 1.14 INSPECTION.
The Issuer agrees that, on reasonable prior notice, it will permit
the representatives of the Trustee or any Noteholder, 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 with an Authorized Officer of the Transferor (as
sole beneficiary of the Issuer) present (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 Contribution and
Servicing Agreement, the other Transaction Documents, or any of the other
documents referred to herein or therein. Any expense incident to the exercise by
the Trustee or any Noteholder during the continuance of any Default or Indenture
Event of Default of any right under this Section 1.14 shall be borne by the
Issuer, but any expense due to the exercise of a right by any such Person prior
to the occurrence of a Default or Indenture Event of Default shall be borne by
such Person.
SECTION 1.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations, warranties and certifications of the Issuer
made in this Indenture or in any certificate or other writing delivered by the
Issuer pursuant hereto shall survive the authentication and delivery of the
Notes hereunder, but unless explicitly provided to the contrary, they are made
only as of the Closing Date.
SECTION 1.16 INCORPORATION BY REFERENCE TO TRUST INDENTURE ACT.
The provisions of TIA Sections 310 through 317 inclusive that impose
duties on any Person (including the provisions automatically deemed included
herein unless expressly excluded
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by the provisions of this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision of the TIA shall control.
SECTION 1.17 COMMUNICATIONS BY NOTEHOLDERS WITH OTHER NOTEHOLDERS.
A Noteholder may communicate with other Noteholders pursuant to TIA
Section 312(b) with respect to their rights under this Indenture or the Notes.
The Issuer, the Trustee and anyone else shall have the protection of Section
312(c) of the TIA.
SECTION 1.18 STATEMENTS REQUIRED IN OFFICER'S CERTIFICATE.
Each Officer's Certificate with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that the Person making such certification has read
such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate
are based;
(iii) a statement that, in the opinion of such Person, he or she 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
(iv) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
SECTION 1.19 WHEN TREASURY SECURITIES ARE DISREGARDED.
In determining whether the Noteholders of the required principal
amount of Notes have concurred in any direction, waiver or consent hereunder,
Notes owned by the Issuer or any other obligor on the Notes or by any Affiliate
of the Issuer or such obligor related thereto shall be disregarded, 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 of the Trustee actually knows are so owned shall be so disregarded.
Notes so owned which have been pledged in good faith shall not be disregarded if
the pledgee establishes to the reasonable satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Issuer or any other obligor upon the Notes or any Affiliate of the Issuer or
such obligor.
SECTION 1.20 RULES BY TRUSTEE.
The Trustee may make reasonable rules for action by or at a meeting
of Noteholders.
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SECTION 1.21 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Issuer or an Affiliate of the Issuer. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 1.22 NO RECOURSE AGAINST OTHERS.
All liability described in the Notes of any director, officer,
employee or member, as such, of the Issuer is waived and released.
SECTION 1.23 INDEPENDENCE OF COVENANTS.
All covenants and agreements in this Indenture shall be given
independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Indenture Event of Default if such
action is taken or condition exists.
SECTION 1.24 CONSENT TO JURISDICTION.
Each of the Issuer and the Trustee irrevocably submits to the
jurisdiction of any New York State or Federal court sitting in the Borough of
Manhattan in the City of New York over any suit, action or proceeding arising
out of or relating to this Indenture or any Note. Each of the Issuer and the
Trustee irrevocably waives, to the fullest extent permitted by laws, any
objection which it may have to the laying of the venue of any such suit, action
or proceeding brought in such a court and any claim that any such suit, action
or proceeding brought in such a court has been brought in any inconvenient
forum. Each of the Issuer and the Trustee agrees that final judgment in any such
suit, action or proceeding brought in such a court shall be conclusive and
binding upon the Issuer or the Trustee, as the case may be, and may be enforced
in the courts of New York (or any other courts to the jurisdiction of which the
Issuer or the Trustee, as the case may be, is subject) by a suit upon such
judgment, provided that service of process is effected upon the Issuer as
permitted by law; PROVIDED, HOWEVER, that each of the Issuer and the Trustee
does not waive, and the foregoing provisions of this sentence shall not
constitute or be deemed to constitute a waiver of, (i) any right to appeal any
such judgment, to seek any stay or otherwise to seek reconsideration or review
of any such judgment or (ii) any stay of execution or levy pending an appeal
from, or a suit, action or proceeding for reconsideration or review of, any such
judgment.
SECTION 1.25 NO BANKRUPTCY PETITION.
Notwithstanding any provision contained herein, each of the
Noteholders and the Trustee covenants and agrees that prior to the date which is
one year and one day after the payment in full of all Notes issued by the
Issuer, it will not institute against, or join any other Person in instituting
against, the Issuer or its Owner Trustee or beneficial owner any bankruptcy,
reorganization, receivership, arrangement, insolvency or liquidation
proceedings, or other similar proceedings under any federal or state bankruptcy
or similar law. The Issuer represents, warrants, and covenants that it and its
Owner
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Trustee have obtained, and will in the future obtain, a no-petition agreement
from each and every Person that enters into any agreement of any kind with the
Issuer or its Owner Trustee or beneficial owner. This Section 1.25 shall survive
the termination of this Indenture.
SECTION 1.26 VOTING RIGHTS OF CLASS F INSTRUMENTS.
Upon the irrevocable payment in full of all of the Class A Notes,
the Class B Notes the Class C Notes, the Class D Notes and the Class E Notes,
all voting and consent rights otherwise granted to the Class A Noteholders, the
Class B Noteholders, the Class C Noteholders, the Class D Noteholders and the
Class E Noteholders shall be exercised by the requisite percentage of holders of
the Class F Instruments, if any.
SECTION 1.27 INDEBTEDNESS TREATMENT.
This Indenture and the Notes have been structured with the intention
that the Notes will qualify under applicable tax law as indebtedness. Each
Noteholder agrees to treat the Notes for purposes of federal, state and local
income or franchise taxes (and any other tax imposed on or measured by income)
as indebtedness and to cause any Person acquiring an interest in a Note by,
through or under it to acknowledge the characterization of the Notes as
indebtedness and to agree to treat the Notes as indebtedness for such tax
purposes.
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ARTICLE II
THE NOTES
SECTION 2.01 GENERAL PROVISIONS.
(a) The Notes issuable hereunder shall be issued as registered Notes
without coupons in no more than five classes as from time to time shall be
authorized by the Issuer. The Notes of all classes shall be known and entitled
generally as the "DVI Receivables Corp. VIII Asset-Backed Notes, Series ______"
The Notes of each class shall have further particular designation as the Issuer
may adopt for each class, and each Note issued hereunder shall bear upon the
face thereof the designation so adopted for the class to which it belongs. The
Trustee is hereby authorized and directed upon the written order of the Issuer
to authenticate and deliver Notes to be issued hereunder in five classes,
entitled "_____% Asset-Backed Notes, Series ______, Class A", "____%
Asset-Backed Notes, Series ______, Class B", "____% Asset-Backed Notes, ______,
Class C" "____% Asset-Backed Notes, Series ______, Class D" and "____%
Asset-Backed Notes, Series ______, Class E", respectively. The Issuer may issue
in accordance with Section 2.06 hereof, the Class F Instruments which will be
subordinate to the Class A Notes, the Class B Notes, the Class C Notes, the
Class D Notes and the Class E Notes by entering into a Supplement. The form of
each class of Offered Notes and of the Trustee's certificate of authentication
shall be in substantially the forms set forth in Exhibits A, B, C, D and E
hereto, 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 $___________ except for Notes authenticated and
delivered upon registration of, transfer of, or in exchange for, or in lieu of,
other Notes pursuant to Section 2.04, 2.05, or 9.04. The Notes shall be issuable
only in registered form and only in denominations of at least $500,000 and
integral multiples of $1,000 thereof; PROVIDED that the foregoing shall not
restrict or prevent the transfer or issuance in accordance with Section 2.04 or
2.05 of any Note having a remaining outstanding principal amount of less than
$500,000; PROVIDED, FURTHER, that a single Note of each Class may be issued in a
different amount as may be necessary so that the Notes of such Class evidence
the full initial principal balance thereof. The Class F Instruments, if any,
shall be issued in the minimum denominations indicated in the related
Supplement.
(b) The aggregate amount of principal due and payable on each class
of Notes on each Payment Date shall be equal to the sum of (i) Monthly Principal
for such class and (ii) any other due and unpaid principal for such class.
Except (i) for optional redemption pursuant to Section 10.01, (ii) for
Prepayment Amounts or Partial Prepayment Amounts or (iii) 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).
(c) Interest and principal on the Notes shall be payable on each
Payment Date commencing with the Initial Payment Date to Noteholders of record
on the Record Date. Interest on the Notes is required to be paid to Noteholders
in an amount equal to the Monthly Interest plus Overdue Interest. Interest on
the Notes shall be computed on the basis of a 360-day year consisting of twelve
30-day months PROVIDED that for Class A-1, interest shall be computed using the
actual number of days elapsed over a 360-day year.
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(d) All payments made with respect to any Note shall be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts and shall be applied first
to the interest then due and payable on such Notes and then to the principal
thereof.
(e) All Notes of the same class issued under this Indenture or any
Supplement shall be in all respects equally and ratably entitled to the benefits
hereof and thereof 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 or any Supplement. Payments of principal
and interest on Notes of the same class shall be made pro rata among all
outstanding Notes of such class, without preference or priority of any kind.
(f) The Issuer, the Trustee and each Class A, Class B, Class C,
Class D and Class E Noteholder by acceptance of its Class A, Class B, Class C,
Class D or Class E Note (and any Person that is a beneficial owner of any
interest in a Class A, Class B, Class C, Class D or Class E Note, by virtue of
such Person's acquisition of a beneficial interest therein) agrees to treat such
Note(s) for purposes of federal, state and local income or franchise taxes (and
any other tax imposed on or measured by income) as indebtedness. Each Class A,
Class B, Class C, Class D and Class E Noteholder agrees that it will cause any
Person acquiring an interest in a Class A, Class B, Class C, Class D or Class E
Note through it to acknowledge the Class A, Class B, Class C, Class D or Class E
Notes' characterization as indebtedness and to agree to comply with this
Indenture as to treatment of such Notes as indebtedness for such tax purposes.
SECTION 2.02 GLOBAL NOTES.
(a) Initially, the Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes shall be issued in the form of one or more Public
Global Notes and the Class E Notes shall be issued in the form of one or more
Rule 144A Global Note(s) which (i) shall represent, and shall be denominated in
an aggregate amount equal to, the aggregate principal amount of all Class A
Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E
Notes to be issued hereunder, (ii) shall be delivered as one or more Notes held
by the Book Entry Custodian, or, if appointed to hold such Notes as provided
below, the Depositary shall be registered in the name of the Depositary or its
nominee, (iii) shall be substantially in the form of the Note specified pursuant
to Section 2.01, with such changes therein as may be necessary to reflect that
each such Note is a global security, and (iv) shall each bear a legend
substantially to the effect included in the form of the face of the Notes as set
forth in Exhibits A, B, C, D and E hereto. Notwithstanding anything in any
Transaction Document to the contrary, no Class E Note shall be purchased by a
Person who is not a U.S. Person, as defined herein and no Class E Note shall be
purchased by a Person who is not a "qualified institutional buyer" as defined in
Rule 144A of the Securities Act.
(b) Notwithstanding any other provisions of this Section 2.02 or of
Section 2.04, unless and until a Global Note is exchanged in whole for Notes in
definitive form, a Global Note may be transferred, in whole, but not in part,
and in the manner provided in this Section 2.02, only by the Depositary to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary selected or approved by the Issuer or to a nominee of
such successor Depositary or in the
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manner specified in Section 2.02(c). The Depositary shall order the Note
Registrar to authenticate and deliver the following Book-Entry Notes: with
respect to the Class E Notes only, a Rule 144A Global Note having an aggregate
initial Outstanding principal balance equal to the Initial Class Note Balance of
such Class, and, with respect to the Class A Notes, the Class B Notes, the Class
C Notes and the Class D Notes only, a Public Global Note, having an initial
Outstanding principal balance equal to zero. Note Owners shall hold their
respective Ownership Interests in and to such Notes through the book-entry
facilities of the Depositary. Without limiting the foregoing, Class A, Class B,
Class C and Class D Note Owners shall hold their respective Ownership Interests,
if any, in Public Global Notes only through Depositary Participants, Euroclear
or Cedel.
(c) If (i) the Depositary for the Notes represented by one or more
Global Notes at any time notifies the Issuer that it is unwilling or unable to
continue as Depositary of the Notes or if at any time the Depositary shall no
longer be a clearing agency registered under the Exchange Act and any other
applicable statute or regulation, and a successor Depositary is not appointed or
approved by the Issuer within 90 days after the Issuer receives such notice or
becomes aware of such condition, as the case may be, (ii) the Trustee, at the
direction of Noteholders evidencing not less than 66 2/3% of the Voting Rights,
elects to terminate the book-entry system through the Depositary or (iii) after
an Indenture Event of Default or a Servicer Event of Default, Noteholders
representing more than 50% of the Voting Rights advise the Depositary, or Book
Entry Custodian, as the case may be, in writing that the continuation of a
book-entry system through the Depositary, or the Book Entry Custodian, as the
case may be, is no longer in such Noteholder's best interest upon the request of
such Noteholder, but only with respect to the interests of such Noteholder, the
Issuer will promptly execute, and the Trustee, upon receipt of an Officer's
Certificate evidencing such determination by the Issuer, will promptly
authenticate and make available for delivery, Notes in definitive form without
coupons, in authorized denominations and in an aggregate principal amount equal
to the principal amount of the Global Note or Notes then outstanding in exchange
for such Global Note or Notes and this Section 2.02 shall no longer be
applicable to the Notes. Upon the exchange of the Global Notes for such Notes in
definitive form without coupons, in authorized denominations, such Global Notes
shall be canceled by the Trustee. Such Notes in definitive form issued in
exchange of the Global Notes pursuant to this Section 2.02(c) shall be
registered in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee may conclusively rely on any such
instructions furnished by the Depositary and shall not be liable for any delay
in delivery of such instructions. The Trustee shall make such Notes available
for delivery to the Persons in whose names such Notes are so registered.
(d) As long as the Notes outstanding are represented by one or more
Global Notes:
(i) the Note Registrar and the Trustee may deal with the Depositary
for all purposes (including the payment of principal of and interest on
the Notes) as the authorized representative of the Note Owners;
(ii) the rights of Note Owners shall be exercised only through the
Depositary and shall be limited to those established by law and agreements
between such Note Owners and the Depositary and/or the Depositary
Participants. Unless and until Definitive Notes are issued, the Depositary
will make book-entry transfers among the Depositary Participants and
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receive and transmit payments of principal of and interest on the Notes to
such Depositary Participants; and
(iii) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes evidencing
a specified percentage of the Voting Rights, the Depositary shall be
deemed to represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or Depositary
Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Notes (or Class of Notes) and
has delivered such instruction to the Trustee.
(e) If Notes are to be issued in global form other than as Global
Notes, the provisions governing such Notes shall be specified pursuant to an
Officer's Certificate with respect thereto and by an indenture supplemental
hereto.
(f) Whenever a notice or other communication to the Noteholders is
required under this Indenture, unless and until Notes have been issued in
definitive form to Note Owners, the Trustee shall give all such notices and
communications to the Depositary.
(g) The Trustee is hereby initially appointed as the Book Entry
Custodian and hereby agrees to act as such in accordance with the agreement that
it has with the Depositary authorizing it to act as such. The Book Entry
Custodian may, and, if it is no longer qualified to act as such, the Book Entry
Custodian shall, appoint, by written instrument delivered to the Issuer and the
Depositary, any other transfer agent (including the Depositary or any successor
Depositary) to act as Book Entry Custodian under such conditions as the
predecessor Book Entry Custodian and the Depositary or any successor Depositary
may prescribe, PROVIDED that the predecessor Book Entry Custodian shall not be
relieved of any of its duties or responsibilities by reason of any such
appointment of other than the Depositary. If the Trustee resigns or is removed
in accordance with the terms hereof, the successor Trustee or, if it so elects,
the Depositary shall immediately succeed to its predecessor's duties as Book
Entry Custodian. The Issuer shall have the right to inspect, and to obtain
copies of, any Notes held as Book-Entry Notes by the Book Entry Custodian.
(h) The provisions of this Section 2.02(h) shall apply to all
transfers of Definitive Notes, if any, issued in respect of Ownership Interests
in the Rule 144A Global Notes.
(1) No transfer of any Class of Note or interest therein shall be
made unless that transfer is made pursuant to an effective registration
statement under the Securities Act, and effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. If a
transfer of any Definitive Note is to be made without registration under
the Securities Act (other than in connection with the initial issuance
thereof or a transfer thereof by the Depositary or one of its Affiliates),
then the Note Registrar shall refuse to register such transfer unless it
receives (and upon receipt, may conclusively rely upon) either: (i) a
certificate from such Noteholder substantially in the form attached as
Exhibit G hereto or such other certification reasonably acceptable to the
Trustee and a certificate from such Noteholder's prospective transferee
substantially in the form attached as Exhibit G hereto or such other
certification reasonably acceptable to the Trustee; or (ii) an Opinion of
Counsel satisfactory to the Trustee to the effect that such transfer may
be made
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without registration under the Securities Act (which Opinion of Counsel
shall not be an expense of the Issuer or any Affiliate thereof that is a
trust or of the Depositary, the Servicer, the Trustee or the Note
Registrar in their respective capacities as such), together with the
written certification(s) as to the facts surrounding such transfer from
the Noteholder desiring to effect such transfer and/or such Noteholder's
prospective transferee on which such Opinion of Counsel is based. If such
a transfer of any interest in a Book-Entry Note is to be made without
registration under the Securities Act, the transferor will be deemed to
have made each of the representations and warranties set forth on Exhibit
G hereto in respect of such interest as if it was evidenced by a
Definitive Note and the transferee will be deemed to have made each of the
representations and warranties set forth in either Exhibit G hereto in
respect of such interest as if it was evidenced by a Definitive Note. None
of the Depositary, the Trustee or the Note Registrar is obligated to
register or qualify any Class of 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 Note or interest therein
without registration or qualification. Any Noteholder or Note Owner
desiring to effect such a transfer shall, and does hereby agree to,
indemnify the Depositary, the Trustee and the Note Registrar against any
liability that may result if the transfer is not so exempt or is not made
in accordance with such federal and state laws.
SECTION 2.03 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
(a) The Notes shall be executed manually or by facsimile signature
on behalf of the Issuer by a corporate trust officer of the Owner Trustee.
(b) Any Note bearing the signature of an individual who was at the
time of execution thereof a proper authorized signatory of the Issuer shall bind
the Issuer, notwithstanding that such individual did not hold such office at the
date of such Note.
(c) No Note shall be entitled to any benefit under this Indenture or
any Supplement 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 an Issuer Request to
the Trustee 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.
All Notes and the interest thereon shall be nonrecourse obligations
of the Issuer and shall be payable from and secured by the Trust Property. The
Notes shall never constitute obligations of the Trustee, the Owner Trustee, the
Contributor, the Servicer, the Transferor or of any shareholder or any Affiliate
of such parties (other than any Affiliate that guarantees any Notes) or any
officers, directors, employees or agents of any thereof, and no recourse may be
had under or upon any obligation, covenant or agreement of this Indenture, any
Supplement or of any Notes, or for any claim based thereon or otherwise in
respect thereof, against any incorporator or against any past, present, or
future owner, partner of an owner or any officer, employee or director thereof
or of any successor entity, or any other
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Person, either directly or through the Issuer, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly agreed that this Indenture and the
obligations issued hereunder are solely obligations of the Issuer, and that no
such personal liability whatever shall attach to, or is or shall be incurred by,
any other Person under or by reason of this Indenture, any Supplement or any
Notes or implied therefrom, or for any claim based thereon or in respect
thereof, all such liability and any and all such claims being hereby expressly
waived and released as a condition of, and as a consideration for, the execution
of this Indenture and the issue of such Notes. Except as provided in any
Supplement, no Person other than the Issuer shall be liable for any obligation
of the Issuer under this Indenture or any Note or any losses incurred by any
Noteholder.
SECTION 2.04 REGISTRATION, TRANSFER AND EXCHANGE.
(a) The Issuer shall cause to be kept at the Corporate Trust Office
a register (the "NOTE REGISTER") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Issuer 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) Upon surrender for registration of transfer of any Note at the
Corporate Trust Office, 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 the same class, of any authorized
denominations and of a like aggregate original principal amount.
(c) 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 and any Supplement, as
the Notes surrendered upon such registration of transfer or exchange.
(d) Every Note presented or surrendered for registration of transfer
or for exchange shall (if so required by 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 duly authorized in writing.
(e) No service charge shall be made for any registration of transfer
or exchange of Notes but the Issuer or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, but this
provision shall not apply to any exchange pursuant to Section 9.04 not involving
any transfer.
(f) If Notes are issued or exchanged in definitive form under
Section 2.02, such Notes will not be registered by the Trustee unless each
prospective initial Noteholder acquiring a Note, each prospective transferee
acquiring a Note and each prospective owner (or transferee thereof) of a
beneficial interest in Notes acquiring such beneficial interest provides the
Servicer, the Issuer, the Trustee and any successor Servicer with a
representation that the statements in either subsections (1) or (2) of Section
2.11 is an accurate representation as to all sources of funds to be used to pay
the purchase price of the Notes.
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(g) No transfer of a Note shall be deemed effective unless the
registration and prospectus delivery requirements of Section 5 of the Securities
Act of 1933, as amended, and any applicable state securities laws are complied
with, or such transfer is exempt from the registration and prospectus delivery
requirements under said Securities Act and laws. In the event that a transfer is
to be made without registration or qualification, such Noteholder's prospective
transferee shall deliver to the Trustee an investment letter substantially in
the form of Exhibit G hereto (the "INVESTMENT LETTER"). The Trustee is not under
any obligation to register the Notes under said Act or any other securities law
or to bear any expense with respect to such registration by any other Person or
monitor compliance of any transfer with the securities laws of the United States
regulations promulgated in connection thereto or ERISA unless the Notes are
issued or exchanged in definitive form under Section 2.02.
(h) No Class E Noteholder shall transfer, sell, assign, pledge or
otherwise grant a security interest in ("TRANSFER"), a Class E Note to any
Person that is not a United States person within the meaning of section
7701(a)(30) of the Code. In the event of any Transfer with respect to a Class E
Note, the Trustee shall require, in addition to any other applicable
requirements set forth in this Indenture, including without limitation, the
delivery of the Investment Letter, (A) the purchaser to execute a Tax
Certificate in substantially the form attached as Exhibit I hereto certifying to
the transferor and the Trustee as to the matters set forth therein and (B) the
transferee to certify, in form and substance reasonably acceptable to the
Trustee, that (1) the transferee is acquiring the Class E Note for its own
behalf and is not acting as agent or custodian for any other person or entity in
connection with such acquisition and (2) the transferee is a United States
person within the meaning of section 7701(a)(30) of the Code.
In addition, no Class E Noteholder shall Transfer a Class E Note to
any Person that is a grantor trust, partnership or S corporation (each a
"Pass-Through Entity") if substantially all of the value of the assets of the
Pass-Through Entity is attributable to the Pass-Through Entity's ownership
interest in securities of the Issuer other than the Class A, Class B, Class C
Notes and Class D Notes, nor may the Class E Notes be Transferred or sold to any
Person if, for the purposes of Section 7704 of the Code and the Treasury
regulations promulgated thereunder, after giving effect to such Transfer the
Issuer would be treated under the Code (by virtue of calculating the aggregate
number of Class E Noteholders and holders of the Class F Instrument (if issued))
as being owned by more than 100 persons. In the event of any Transfer with
respect to a Class D or Class E Note, the Trustee shall require, in addition to
any other applicable requirements set forth in this Agreement, including without
limitation, the delivery of the Investment Letter, (A) the purchaser to execute
a Tax Certificate substantially in the form attached as Exhibit I hereto in form
and substance reasonably acceptable to the Trustee certifying to the transferor
and the Trustee as to the matters set forth therein and (B) the transferee to
certify, in form and substance reasonably acceptable to the Trustee, that (1)
the transferee is acquiring the Class E Note for its own behalf and is not
acting as agent or custodian for any other person or entity in connection with
such acquisition and (2) the transferee is (x) not a Pass-through Entity or (y)
is a Pass- through Entity but after giving effect to such purchase of such Class
E Note by such person, substantially all of the value of the assets of the
Pass-Through Entity is not attributable to the Pass-Through Entity's ownership
interest in the Class E Notes.
SECTION 2.05 MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
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(a) If any mutilated Note is surrendered to the Trustee, the Issuer
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a replacement Note of the same class, 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 the same class, of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
(c) In case the final installment of principal on any such
mutilated, destroyed, lost or stolen Note has become or will at the next Payment
Date become due and payable, 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 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 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 and any Supplement equally and
proportionately with any and all other Notes of the same class, duly issued
hereunder.
(f) The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06 DELIVERY OF CLASS F INSTRUMENTS.
(a) The Issuer may issue the Class F Instruments upon delivery to
the Trustee of the following: (i) a Supplement in form reasonably satisfactory
to the Trustee executed by the Issuer, the Trustee and any other applicable
party and specifying the items provided in Section 2.06(c) and any other terms
(the "PRINCIPAL TERMS"), (ii) any related credit enhancement agreements as
contemplated by such Supplement, (iii) written confirmation from each Rating
Agency that the issuance of such Class F Instruments will not result in a
Ratings Effect with respect to any class of Notes; PROVIDED, HOWEVER, that no
such written confirmation shall be required if the Class F Instruments are
issued on the Closing Date, (iv) such other closing documents, certificates and
Opinions of Counsel as may be required by this Indenture or the applicable
Supplement and (v) an Officer's Certificate from the Issuer stating that each of
the conditions to the issuance of the Class F Instruments set forth in this
Section 2.06 have been satisfied. In no event shall the Issuer issue a Class F
Instrument to the order of the Issuer or an Affiliate.
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(b) Any such Class F Instrument shall be substantially in the form
of Exhibit F hereto and shall bear, upon its face, the designation for such
class to which it belongs so selected by the Issuer and set forth in the related
Supplement. All Class F Instruments shall be identical in all respects except
for the denominations thereof and shall be equally and ratably entitled among
themselves to the benefits of this Indenture and any Supplement thereof without
preference, priority or distinction on account of the actual title or times of
authentication and delivery, all in accordance with the terms and provisions of
this Indenture and such Supplement. Notwithstanding anything contained in any
Supplement, such Class F Instruments, if any, shall be subordinate to the Class
A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E
Notes, and no Class F Instruments shall adversely affect the method of
allocating Available Funds to Class A Notes, the Class B Notes, the Class C
Notes, the Class D Notes or the Class E Notes for any period or alter or affect
the manner or timing of distributions to the Class A, Class B, Class C, Class D
or Class E Noteholders or the rights or priority of such holders in and to the
Trust Property.
(c) Any Supplement relating to Class F Instruments shall define or
provide for, but shall not be limited to, the following Principal Terms: (i) the
name or designation of the Class F Instruments, (ii) the initial balance of the
Class F Instrument (or method for calculating such amount), (iii) the rate of
interest applicable to such Class F Instrument (or formula for the determination
thereof, which may provide that such rate is a floating rate), (iv) the Class F
Percentage, (v) the Stated Maturity Date, (vi) the Redemption Price, if any,
(vii) the Payment Dates and the date or dates from which interest shall accrue
and (viii) if the Class F Instruments are entitled to receive less than the
entire amount distributable to the Issuer or its designee pursuant to Section
3.04(b)(xiii), the amount that the Class F Instruments are entitled to receive;
PROVIDED that no such Supplement shall conflict with the terms of this Indenture
in any respect.
(d) The Issuer will not issue, sell, assign, pledge or otherwise
grant a security interest in, the Class F Instruments without an Opinion of
Counsel acceptable in form and substance to the Trustee and addressed to the
Trustee delivered by outside counsel to the Issuer to the effect that for
federal income tax purposes (i) such issuance, sale, assignment, pledge or grant
of a security interest in the Class F Instruments will not affect the tax
characterization of any of the Class A Notes, Class B Notes or Class C Notes as
indebtedness or Class D Notes or Class E Notes as indebtedness or partnership
interests, (ii) such issuance, sale, assignment, pledge or grant of a security
interest in the Class F Instruments will not constitute a deemed reissuance of
the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or
the Class E Notes under Treasury Regulations ss.1.1001-3 and (iii) such
issuance, sale, assignment, pledge or grant of a security interest in the Class
F Instruments will not prevent the income from the Trust Property from being
properly included in the consolidated federal income tax return of the DVI
Group.
SECTION 2.07 PAYMENT OF INTEREST AND PRINCIPAL; RIGHTS PRESERVED.
(a) Any installment of interest or principal payable on any Note
that is 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
immediately available funds to the account and number specified in the Note
Register on such Record Date for such Person or, if no such account or number is
so specified, then by check mailed to such Person's address as it appears in the
Note Register on such Record Date.
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(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 therefor 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 for the payment of the final installment of principal on such Note.
SECTION 2.08 PERSONS DEEMED OWNERS.
Prior to due presentment of a Note for registration or transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Noteholder as the owner of such Note for the purpose of receiving payment of
principal of and interest on such Note and for all other purposes whatsoever,
whether or not such Note be overdue, and neither the Issuer, the Trustee nor any
agent of the Issuer or the Trustee shall be affected by notice to the contrary.
SECTION 2.09 CANCELLATION.
All Notes surrendered for registration of transfer or exchange or
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 an Issuer Order.
SECTION 2.10. NOTEHOLDER LISTS; COMMUNICATIONS TO NOTEHOLDERS.
(a) 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. If the Trustee is not the Note Registrar, the Issuer or other
obligor, if any, shall furnish to the Trustee at least three Business Days prior
to each Record Date 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.
(b) If any Noteholder (herein referred to as an "APPLICANT") applies
in writing to the Trustee, and such application states that the applicant
desires to communicate with other Noteholders with respect to their rights under
this Indenture or under the Notes, then the Trustee shall, within three Business
Days after the receipt of such application, afford such applicant(s) access to
the information preserved at the time by the Trustee in accordance with Section
2.10(a).
(c) Every Noteholder, by receiving and holding the same, agrees with
the Issuer and the Trustee that neither the Issuer nor the Trustee nor any agent
of either of them shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Noteholders in accordance
with Section 2.10(b), regardless of the source from which such information
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was derived, and that the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request made under Section 2.10(b).
SECTION 2.11. ERISA DEEMED REPRESENTATIONS
Each prospective initial Noteholder acquiring Notes, each
prospective transferee acquiring the Notes, and each prospective owner (or
transferee thereof) of a beneficial interest in Notes (each a "Prospective
Owner") will be deemed to have represented by such purchase to the Issuer, the
Trustee, the Servicer and any successor Servicer that either (1) it is not
acquiring the Notes with the assets of a Plan; or (2) the acquisition and
holding of the Notes will not give rise to a nonexempt prohibited transaction
under Section 406(a) of ERISA or Section 4975 of the Code.
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ARTICLE III
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS
SECTION 3.01 ACCOUNTS; INVESTMENTS BY TRUSTEE.
(a) The Servicer, pursuant to a Lock-Box Agreement, shall establish
a Lock-Box Account, which account shall be an Eligible Deposit Account, in the
name of the Trustee for the benefit of the Noteholders. Each Lock-Box Account
shall be a segregated account initially established and maintained with
_____________________ or such other Lock-Box Bank as the Servicer may select;
PROVIDED, HOWEVER, that the Servicer (i) shall give the Trustee and the Rating
Agencies written notice of any change in the location of a Lock-Box Account and
(ii) shall give at least 10 days' prior written notice of the new location to
each Obligor.
In addition, on or before the Closing 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
and in the Contribution and Servicing Agreement, the following accounts, which
accounts shall be trust accounts maintained at the Corporate Trust Office:
(i) Collection Account;
(ii) Distribution Account; and
(iii) Reserve Account.
Each of such accounts shall be established and maintained as an Eligible Deposit
Account. In addition, the Trustee shall establish a sub-account to the
Distribution Account for each Class of Notes (such sub-accounts the "CLASS A
DISTRIBUTION SUB-ACCOUNT," the "CLASS B DISTRIBUTION SUB-ACCOUNT," the "CLASS C
DISTRIBUTION SUB-ACCOUNT" the "CLASS D DISTRIBUTION SUB-ACCOUNT," the "CLASS E
DISTRIBUTION SUB-ACCOUNT" and, if necessary, the "CLASS F DISTRIBUTION
SUB-ACCOUNT"). 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 written direction of the Servicer
and the provisions of this Indenture. All such amounts and all investments made
with such amounts, including all income and other gain from such investments,
shall be held by the Trustee in such accounts as part of the Trust Property as
herein provided, subject to withdrawal by the Trustee in accordance with, and
for the purposes specified in the written direction of the Servicer pursuant to
the provisions of, this Indenture.
The Collection Account shall be comprised of more than one such
Eligible Deposit Account, but shall, for the purposes of the Transaction
Documents, be deemed to be one account. Funds shall be withdrawn equally from
each such Eligible Account that constitutes the Collection Account to make all
payments from the Collection Account in accordance with the terms and conditions
of this Indenture.
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(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 written instructions of the
Servicer. Unless otherwise advised in writing by the Servicer, the Trustee shall
assume that any amount remitted to it is to be deposited into the Collection
Account pursuant to Section 3.03(b). 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 Trust Property 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) The Trustee shall have no right of set-off with respect to any
Lock-Box Account, the Collection Account, the Reserve Account, the Distribution
Account, the Class A Distribution Sub- Account, the Class B Distribution
Sub-Account, the Class C Distribution Sub-Account, the Class D Distribution
Sub-Account, the Class E Distribution Sub-Account, the Class F Distribution
Sub-Account or any investment therein, or any Trust Property, including
collections or proceeds with respect thereto regardless of when or how held by
the Trustee and whether or not commingled.
(d) So long as no Default or Indenture Event of Default shall have
occurred and be continuing, the amounts in the Collection 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
Issuer, and any Class F Instrumentholder, agrees to report as income for
financial reporting and tax purposes (to the extent reportable) all investment
earnings on amounts in the Collection Account and the Reserve Account.
(e) In the event that either (i) the Servicer shall have failed to
give investment directions to the Trustee by 12:00 P.M. New York time on any
Business Day on which there may be uninvested cash or (ii) a Default or
Indenture Event of Default shall have occurred and be continuing, then the
Trustee shall invest and reinvest the funds then in the Collection Account, the
Reserve Account, as the case may be, to the fullest extent practicable in one or
more Eligible Investments as specified in paragraph (vii) of the definition of
Eligible Investments. All investments made by the Trustee shall mature no later
than the maturity date therefor permitted by Section 3.01(f).
(f) No investment of any amount held in the Collection Account or
the Reserve Account shall mature later than the second Business Day immediately
preceding the Payment Date which is scheduled to occur immediately following the
date of investment; all such investments shall be held to maturity. All income
or other gains from the investment of moneys deposited in the Collection Account
or the Reserve Account shall be deposited by the Trustee in such account
immediately upon receipt. Any net loss of principal (determined on a month by
month basis) resulting from such investment
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of amounts in the Collection Account or the Reserve Account shall be charged to
the Issuer, and the Issuer shall reimburse such account for such loss within
three Business Days.
(g) Any investment of any funds in the Collection Account or 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
(in its capacity as such) for the benefit of the Noteholders or in the
name of a nominee of the Trustee;
(ii) the investment earnings of any investment shall be credited to
the account for which such investment was made;
(iii) 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; and
(iv) the proceeds of any sale of an investment shall be remitted by
the purchaser thereof directly to the Trustee for deposit in the account
in which such investment was held.
(h) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Collection Account or the Reserve Account, 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 losses or any liquidation
prior to its maturity or any investment made by it in accordance with this
Section 3.01 on the grounds that it could have made a more favorable investment.
SECTION 3.02 RESERVED.
SECTION 3.03 COLLECTION OF MONEYS.
(a) Except as otherwise expressly provided herein, the Trustee may
demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Trustee pursuant to
this Indenture. The Trustee shall apply all such money received by it as
provided in this Indenture. Except as otherwise expressly provided in this
Indenture, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Trust Property, the
Trustee may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
proceedings. Notwithstanding the foregoing, the Trustee shall not be obligated
to act as Servicer prior to its being appointed Successor Servicer. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided in
Article VI. If at any time the Issuer shall receive any payment on or in respect
of any Contract or Equipment (including any Residual Payment), it shall hold
such payment in trust for the benefit of the Trustee and the Noteholders, shall
segregate such payment
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from the other property of the Issuer, and shall, within two Business Days of
receipt, deliver such payment in immediately available funds to the Trustee.
(b) If at any time the Trustee shall receive any payment on or in
respect of any Contract or Equipment (including any Residual Payment), it shall,
within two Business Days of receipt, deposit such payment by it into the
Collection Account in accordance with the written direction of the Servicer.
SECTION 3.04 COLLECTION ACCOUNT.
(a) The Trustee shall deposit the following into the Collection
Account in accordance with the written instructions delivered to the Trustee by
the Servicer:
(i) promptly upon receipt, each Contract Payment or Servicer Advance
received by the Trustee, including all Contract Payments deposited with
the Trustee by the Contributor on the Closing Date;
(ii) promptly upon receipt, the proceeds of any purchase
of Contracts and Equipment pursuant to Section 4.02 of this Indenture;
(iii) promptly upon receipt, each Prepayment Amount or
Partial Prepayment Amount received by the Trustee and any amounts
remitted by the Contributor in connection with any substitution of
Contracts;
(iv) promptly upon receipt, any amount required to be
deposited in the Collection Account pursuant to this Indenture;
(v) promptly upon receipt, each Residual Payment
received by the Trustee;
(vi) promptly upon receipt, any proceeds received by the
Trustee pursuant to any insurance policy covering Equipment or any
other amounts received by the Trustee relating to a Contract or
Equipment; and
(vii) promptly upon receipt, any amounts the Trustee
receives pursuant to Section 3.03 of this Indenture.
(b) Unless the Notes have been declared due and payable
pursuant to Section 6.02 hereof and moneys collected by the Trustee are being
applied in accordance with Section 6.06 hereof, the Trustee shall by 3:00 P.M.,
New York City time, on each Payment Date disburse all Available Funds deposited
in the Collection Account (including any investment income with respect to
monies on deposit in the Collection Account) in the amounts required, and in the
following order of priority in accordance with the Monthly Servicer Report:
(i) to the Servicer, the Servicing Fee due to the
Servicer on such Payment Date;
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(ii) to the Servicer, any unreimbursed Nonrecoverable
Advances or Servicer Advances previously made with respect to
Delinquent Contracts in accordance with Section 5.01 of the
Contribution and Servicing Agreement;
(iii) first, to the Class A Distribution Sub-Account, in
the following order of priority, the sum of:
(A) the Class A Monthly Interest; and
(B) the Class A Overdue Interest, if any;
(iv) to the Class B Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class B Monthly Interest; and
(B) the Class B Overdue Interest, if any;
(v) to the Class C Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class C Monthly Interest; and
(B) the Class C Overdue Interest, if any;
(vi) to the Class D Distribution Sub-Account, in the
following order of priority, in the sum of:
(A) the Class D Monthly Interest; and
(B) the Class D Overdue Interest, if any;
(vii) to the Class E Distribution Sub-Account, in the
following order of priority, the sum of:
(A) the Class E Monthly Interest; and
(B) the Class E Overdue Interest, if any;
(viii) PROVIDED that no Amortization Event shall have
occurred and be continuing, to the Class A Distribution Sub-Account, in
the following order of priority, the sum of:
(A) the Class A Overdue Principal, if any;
(B) the Class A Monthly Principal;
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(ix) PROVIDED that no Amortization Event shall have
occurred and be continuing, to the Class B Distribution Sub-Account, in
the following order of priority, the sum of:
(A) the Class B Overdue Principal, if any;
and
(B) the Class B Monthly Principal;
(x) PROVIDED that no Amortization Event shall have
occurred and be continuing, to the Class C Distribution Sub-Account, in
the following order of priority, the sum of:
(A) the Class C Overdue Principal, if any;
and
(B) the Class C Monthly Principal;
(xi) PROVIDED that no Amortization Event shall have
occurred and be continuing, to the Class D Distribution Sub-Account, in
the following order of priority, the sum of:
(A) the Class D Overdue Principal, if any;
and
(B) the Class D Monthly Principal;
(xii) PROVIDED that no Amortization Event shall have
occurred and be continuing, to the Class E Distribution Sub-Account, in
the following order of priority, the sum of:
(A) the Class E Overdue Principal, if any;
and
(B) the Class E Monthly Principal;
(xiii) PROVIDED that no Amortization Event shall have
occurred and be continuing, to the Reserve Account, the Reserve Account
Deposit Amount;
(xiv) if an Amortization Event shall have occurred and is
continuing and is not subject to a continuing waiver from Noteholders
evidencing not less than 662/3% of the Voting Rights, in the following
order of priority:
FIRST, to the Class A Distribution
Sub-Account the amount necessary to reduce the Class
A Note Balance to zero; and
SECOND, to the Class B Distribution
Sub-Account the amount necessary to reduce the Class
B Note Balance to zero; and
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THIRD, to the Class C Distribution
Sub-Account the amount necessary to reduce the Class
C Note Balance to zero;
FOURTH, to the Class D Distribution
Sub-Account the amount necessary to reduce the Class
D Note Balance to zero; and
FIFTH, to the Class E Distribution
Sub-Account the amount necessary to reduce the Class
E Note Balance to zero;
(xv) if the Servicer is no longer DVI, and the Servicer
has, in its good faith and reasonable business judgment, deemed the
Servicing Fee to be commercially unreasonable, then, to the Servicer,
the amount agreed upon between the then Servicer and the Trustee, each
in their good faith and commercially reasonable judgment, as necessary
to make the Servicing Fee commercially reasonable and to cover the
reasonable costs in transferring the servicing obligations; and
(xvi) any remaining Available Funds on deposit in the
Collection Account shall be paid to DVI Receivables Corp., as sole
beneficial owner of the Issuer, or, if the Class F Instrument has been
issued, to the Class F Distribution Sub-Account.
Noteholders evidencing not less than 662/3% of the Voting Rights shall have the
ability to waive or defer any Amortization Event by written notice delivered to
the Trustee. If at any time any amount or portion thereof previously distributed
pursuant to this Section 3.04(b) 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 3.04(b)
such amount or portion thereof shall be deemed not to have been previously so
distributed. The Trustee shall make the disbursements in accordance with the
Monthly Servicer Report on each Payment Date to the extent of Available Funds
for such Payment Date.
(c) If on any Payment Date, the Available Funds on deposit in
the Collection Account (the "DEPOSITED AVAILABLE FUNDS") are less than the sum
necessary to make the payments required pursuant to Section 3.04(b), clauses
(iii) through (xii) inclusive and clause (xiv), each as applicable (the sum of
such payments, the "PRIORITY PAYMENTS"), then the Trustee shall withdraw from
the Reserve Account, to the extent that such funds are on deposit in the Reserve
Account and after taking into account payments to be made pursuant to clauses
(i) and (ii) of Section 3.04(b), and deposit into the Distribution Account for
payment on such Payment Date, funds equal to the amount of the Priority Payments
less any Deposited Available Funds (such funds, the "AVAILABLE RESERVE ACCOUNT
FUNDS") for payment in accordance with Section 3.04(b)(iii) through and
including (xii) and (xiv) hereof, as applicable.
SECTION 3.05 Class A Distribution Sub-Account; Class B
Distribution Sub-Account; Class C Distribution Sub-Account; Class D Distribution
Sub-Account; Class E DISTRIBUTION SUB-ACCOUNT; CLASS F DISTRIBUTION SUB-ACCOUNT.
(a) On each Payment Date in accordance with the Monthly
Servicer Report the Trustee shall pay to the Class A Noteholders the amounts
then on deposit in the Class A Distribution Sub-
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Account. Such payments are to be made, first to the Class A-1 Noteholders, PRO
RATA, in the following order of priority:
(i) the Class A Monthly Interest;
(ii) the Class A Overdue Interest, if any;
(iii) the Class A Overdue Principal, if any;
(iv) the Class A Monthly Principal; and
(v) any additional principal payable
pursuant to the Indenture.
(b) On each Payment Date in accordance with the Monthly
Servicer Report the Trustee shall pay to the Class B Noteholders, PRO RATA, the
amount then on deposit in the Class B Distribution Sub-Account. Such payments to
the Class B Noteholders shall be made in the following order of priority:
(i) the Class B Monthly Interest;
(ii) the Class B Overdue Interest, if any;
(iii) the Class B Overdue Principal, if any;
(iv) the Class B Monthly Principal; and
(v) any additional principal payable
pursuant to the Indenture.
(c) On each Payment Date in accordance with the Monthly
Servicer Report the Trustee shall pay to the Class C Noteholders, PRO RATA, the
amount then on deposit in the Class C Distribution Sub-Account. Such payments to
the Class C Noteholders shall be made in the following order of priority:
(i) the Class C Monthly Interest;
(ii) the Class C Overdue Interest, if any;
(iii) the Class C Overdue Principal, if any;
(iv) the Class C Monthly Principal; and
(v) any additional principal payable
pursuant to the Indenture.
(d) On each Payment Date in accordance with the Monthly
Servicer Report the Trustee shall pay to the Class D Noteholders, PRO RATA, the
amount then on deposit in the Class D Distribution Sub-Account. Such payments to
the Class D Noteholders shall be made in the following order of priority:
(i) the Class D Monthly Interest;
(ii) the Class D Overdue Interest, if any;
(iii) the Class D Overdue Principal, if any;
(iv) the Class D Monthly Principal; and
(v) any additional principal payable
pursuant to the Indenture.
(e) On each Payment Date in accordance with the Monthly
Servicer Report the Trustee shall pay to the Class E Noteholders, PRO RATA, the
amount then on deposit in the Class E Distribution Sub-Account. Such payments to
the Class E Noteholders shall be made in the following order of priority:
(i) the Class E Monthly Interest;
(ii) the Class E Overdue Interest, if any;
(iii) the Class E Overdue Principal, if any;
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(iv) the Class E Monthly Principal; and
(v) any additional principal payable
pursuant to the Indenture.
(f) If the Class F Instruments have been issued, on each
Payment Date in accordance with the Monthly Servicer Report the Trustee shall
distribute to the Class F Instrumentholders, PRO RATA, the amount then on
deposit in the Class F Distribution Sub-Account in the priority set forth in the
Supplement.
SECTION 3.06 REPORTS; NOTICES OF CERTAIN PAYMENTS.
(a) Following each payment to the Noteholders, the Trustee
shall mail to the Issuer, Cede & Co. and the Rating Agencies, and make available
to each Noteholder, the Monthly Servicer Report furnished to the Trustee by the
Servicer on the Determination Date prior to such Payment Date (or if such report
has not been received, a written statement to such effect).
(b) The Trustee shall deliver to the Servicer, and within two
Business Days after the request of the Issuer, deliver to the Issuer a written
statement setting forth the amounts on deposit in the Collection Account and the
Reserve Account, and identifying the investments included therein.
SECTION 3.07. TRUSTEE MAY RELY ON CERTAIN
INFORMATION FROM CONTRIBUTOR AND SERVICER.
Pursuant to the Contribution and Servicing Agreement, the
Contributor and the Servicer are 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 III and in Article IV of
this Indenture. The Trustee shall be entitled to rely conclusively in good faith
on any such information and calculations in the performance of its duties
hereunder, (i) unless and until a Responsible Officer of the Trustee has actual
knowledge that such information or calculations is or are incorrect, or (ii)
unless there is a manifest error in any such information; PROVIDED that the
Trustee shall verify the mathematical accuracy of the Class A Monthly Principal,
the Class B Monthly Principal, the Class C Monthly Principal, the Class D
Monthly Principal, the Class E Monthly Principal, the Class A Monthly Interest,
the Class B Monthly Interest, the Class C Monthly Interest, the Class D Monthly
Interest and the Class E Monthly Interest to be paid on each Payment Date.
SECTION 3.08 RESERVE ACCOUNT.
(a) On each Payment Date the Trustee shall promptly deposit
into the Reserve Account all amounts required to be deposited into the Reserve
Account and actually received by the Trustee pursuant to this Indenture. The
obligation of the Trustee to deposit amounts into the Reserve Account in
accordance with the terms of this Indenture shall be limited to the deposit of
amounts in the Collection Account pursuant to Section 3.04(b) hereof. The
Trustee shall not have any responsibility to determine the amount or adequacy of
funds on deposit in the Reserve Account, or the amount of any deposits to or
withdrawals from the Reserve Account. The Issuer, or Class F Instrumentholder,
if any, by its acceptance of the Class F Instrument, agrees to treat such assets
(and all earnings thereon) (the "RESERVE ACCOUNT PROPERTY") as its assets (and
earnings) for federal, state and local tax purposes and not to sell, transfer or
otherwise dispose of its interest therein.
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(b) On each Payment Date, the Trustee shall, on the basis of
the Monthly Servicer Report, deposit in the Reserve Account, pursuant to Section
3.04(b), an amount equal to the Reserve Account Deposit Amount. If on any
Payment Date, Deposited Available Funds are less than the Priority Payments, the
Trustee shall withdraw from the Reserve Account the excess of the Priority
Payments over the Available Funds in accordance with Section 3.04(c) hereof. On
each Payment Date, if, after giving effect to all deposits and withdrawals
therefrom on such Payment Date, the balance in the Reserve Account is greater
than the Reserve Account Requirement, the Trustee shall release and, at the
instruction of the Servicer, shall pay the amount (such amount, a "RESERVE
ACCOUNT WITHDRAWAL") of the excess to the Issuer or its designee, or Class F
Instrumentholder, if any. Amounts properly paid to the Issuer or its designee,
or Class F Instrumentholder, if any, pursuant to this Section 3.08, either
directly from the Distribution Account without deposit in the Reserve Account or
from the Reserve Account, shall be deemed released from the Trust Property, and
the Issuer or its designee, or Class F Instrumentholder, if any, shall not in
any event thereafter be required to refund any such paid amounts.
(c) With respect to the Reserve Account Property, the Issuer
and the Trustee agree that any Reserve Account Property that is held in deposit
accounts shall be held solely in the name of the Trustee, on behalf of the
Noteholders. Each such deposit account shall be subject to the exclusive custody
and control of the Trustee, and the Trustee shall have sole signature authority
with respect thereto.
(d) Upon termination of this Indenture, any amounts on deposit
in the Reserve Account, after payment of amounts due to the Class A Noteholders,
the Class B Noteholders, the Class C Noteholder, the Class D Noteholder, the
Class E Noteholder upon Transferor's written request to the Trustee, shall be
paid to the Transferor (as sole beneficial owner of the Issuer), or Class F
Instrumentholder, if any.
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ARTICLE IV
CONTRACTS AND EQUIPMENT
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE ISSUER.
The Issuer hereby restates and incorporates herein each of the
representations and warranties, IN MUTATIS MUTANDIS, set forth in Section 2.03
and Section 2.04 of the Contribution and Servicing Agreement. The Trustee shall
rely on such representations and warranties in accepting the Contracts and the
other Trust Property in trust and authenticating the Notes. Such representations
and warranties shall speak as of the Closing Date.
SECTION 4.02 PURCHASE UPON BREACH; CONTRIBUTION AND
SERVICING AGREEMENT.
The Issuer shall inform the Trustee promptly, in writing, upon
the discovery of a breach of any of the Contributor's representations and
warranties set forth in Section 2 of the Contribution and Servicing Agreement.
With respect to any breach of the Contributor's representations and warranties
set forth in Section 2 of the Contribution and Servicing Agreement which
materially and adversely affects the interest of the Noteholders in such
Contract or Contracts, the Issuer shall cause the Contributor to either (a)
replace such Contract and the related Equipment with a Substitute Contract in
accordance with the provisions of Section 5.03 of the Contribution and Servicing
Agreement (and for the Transferor to receive from the Contributor and transfer
to the Issuer such Substitute Contract) or (b) purchase from the Transferor
(which Transferor shall purchase from the Issuer and resell to the Contributor)
the Contract and the security interest in the related Equipment that are
affected by such breach, unless, in each such instance such breach has been
cured, or waived in all respects by Noteholders evidencing more than 50% of the
Voting Rights, within 90 days following the Issuer's discovery or receipt of
notice of such breach. In the event of a repurchase of a Contract, the Issuer
and the Transferor (as sole beneficial owner of the Issuer) shall cause the
Contributor to remit to the Trustee (upon written notice to the Trustee thereof)
the Repurchase Amount of such Contract (or, if such Contract is then a Defaulted
Contract, an amount equal to the Repurchase Amount as of the date such Contract
first became a Defaulted Contract, together with interest thereon at the
Discount Rate from the date such Contract first became a Defaulted Contract to
the end of the month in which the repurchase is to be made). The Trustee shall,
to the extent received, deposit such Repurchase Amounts and any cash received in
connection with a substitution in the Collection Account on or prior to 11:00
a.m. New York City time on the second Business Day after receipt thereof. The
sole remedy of the Trustee or the Noteholders against the Contributor with
respect to a breach of a representation or a warranty set forth in Section 2 of
the Contribution and Servicing Agreement, and against the Issuer or the
Transferor with respect to a breach under this agreement or the Pooling and
Trust Agreement by reason of such breach by the Contributor, shall be to require
the Contributor to purchase or substitute Contracts pursuant to the Contribution
and Servicing Agreement, PROVIDED that the limitation contained in this sentence
shall not otherwise limit the rights of any such Person under Section 5.02 of
the Contribution and Servicing Agreement. In the event that the Contributor
fails to purchase or substitute for any Contract that it is required to
substitute or repurchase pursuant to the Contribution and Servicing Agreement,
the Trustee, upon the written direction of the Noteholders, shall enforce the
Issuer's and the Transferor's rights against the Contributor under and in
accordance with the terms of the Contribution and Servicing Agreement and
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the Pooling and Trust Agreement, as assigned to the Trustee, to require the
purchase or replacement of the Contract.
SECTION 4.03 RELEASE OF CONTRACTS AND EQUIPMENT FOLLOWING
SUBSTITUTION OR PURCHASE.
In the event that (i) the Contributor shall have substituted a
Substitute Contract and a security interest in the Equipment subject thereto for
a Predecessor Contract and a security interest in the Equipment subject thereto
in accordance with Section 7 of the Contribution and Servicing Agreement, or
(ii) the Contributor shall have purchased a Contract and a security interest in
the related Equipment in accordance with Section 5.03 of the Contribution and
Servicing Agreement, the Predecessor Contract or the repurchased Contract, as
applicable, and the security interest in the Equipment subject thereto, shall be
released from the lien of this Indenture when the Trustee shall have (i) in the
case of the purchase of a Contract, deposited in the Collection Account all
amounts received pursuant to Section 5.03 of the Contribution and Servicing
Agreement, (ii) in the case of a Substitute Contract, received a fully executed
original of the Substitute Contract Transfer Form and the Contract File with
respect to such Substitute Contract plus any cash amount delivered as provided
in Section 7.01(d) of the Contribution and Servicing Agreement, (iii) received
written certification from an Authorized Officer of the Servicer that there are
no unreimbursed Servicer Advances with respect to such Contract and (iv)
delivered to the Contributor acknowledgment of its receipt of the related
Contract Files. If there are such unreimbursed amounts, any proceeds received
with respect to such Predecessor Contract or repurchased Contract, as
applicable, and the security interest in the related Equipment shall be applied
hereunder only to the extent necessary to repay such Servicer Advances (and
clause (iii) of the foregoing sentence shall be deemed satisfied) and to
reimburse the Collection Account for any other amounts drawn thereon and the
balance of such proceeds, if any, shall be paid to, or as directed by, the
Contributor.
In connection with the substitution of a Contract, if the
Discounted Contract Balance of such Substitute Contract is less than the
Discounted Contract Balance of the Predecessor Contract, the Contributor shall,
on the date of substitution, deposit an amount equal to such difference into the
Collection Account.
SECTION 4.04 RELEASE OF CONTRACTS AND EQUIPMENT UPON FINAL
CONTRACT PAYMENT.
(a) In the event that the Trustee shall have received written
certification from an Authorized Officer of the Servicer that the Trustee has
received from amounts paid by the Obligor or from the proceeds of the Equipment
subject to any Contract (i) the final Contract Payment due and payable under any
Contract (including, if applicable, any Purchase Option Payment paid by the
Obligor) or (ii) a Prepayment Amount in respect of any Contract and, following
such final Contract Payment or Prepayment Amount, no further payments on, or in
respect of, such Contract are or will be due and payable, such Contract and the
Equipment subject thereto shall be released from the lien of this Indenture
except if a Restricting Event or an Amortization Event shall have occurred and
then be continuing.
(b) If a Restricting Event or Amortization Event shall have
occurred and then be continuing, then each Contract and the security interest in
all Equipment (except for security interests relating to Equipment subject to a
conditional sales agreement or an equipment note) which would
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otherwise be released from the lien of this Indenture pursuant to this Section
4.04 shall instead remain subject to such lien and all of the provisions of this
Indenture, including, without limitation, Article VI hereof.
SECTION 4.05 EXECUTION OF DOCUMENTS.
The Trustee shall promptly execute and deliver such documents
(which shall be furnished to the Trustee by the Issuer) and take such other
actions as the Issuer, by Issuer Request, may reasonably request to fully
effectuate the release from this Indenture of any Contract and the security
interest relating to Equipment required to be so released pursuant to Sections
4.03 and 4.04 hereof.
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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 under Section 10.01 of the Contribution and Servicing Agreement, the
Trustee shall, upon the written request of Noteholders evidencing not less than
66-2/3% of the Voting Rights give written notice to the Servicer of the
termination of all of the rights and obligations of the Servicer (but none of
the Contributor's obligations thereunder, which shall survive any such
termination) under the Contribution and Servicing Agreement and the Trustee
shall act as successor Servicer in accordance with Section 10 of the
Contribution and Servicing Agreement.
SECTION 5.02 SUBSTITUTE SERVICER.
Notwithstanding the provisions of Section 5.01, the Trustee
may, if it shall be unwilling or unable to act as the Successor Servicer in
accordance with Section 5.01, appoint a Successor Servicer in accordance with
the provisions of Section 10.03 of the Contribution and Servicing Agreement.
SECTION 5.03 NOTIFICATION TO NOTEHOLDERS AND
RATING AGENCIES.
Upon any termination of the Servicer or appointment of a
Successor Servicer, and upon any resignation, discharge or removal of the Owner
Trustee or appointment of a successor Owner Trustee, the Trustee shall give
prompt notice of such termination, resignation, discharge, removal or
appointment, together with the conditions of default, if applicable, to the
Rating Agencies and each Noteholder in the manner provided herein.
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ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
"INDENTURE EVENT OF DEFAULT," wherever used herein, means any
one of the following (whatever the reason for such Indenture 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):
(i) default in the payment of (A) any interest payment
on any outstanding Class A Note, Class B Note, Class C Note, Class D
Note or Class E Note when it becomes due and payable, or (B) the then
outstanding principal balance of the Class A Notes on the Class A
Stated Maturity Date, of the Class B Notes on the Class B Stated
Maturity Date, of the Class C Notes on the Class C Stated Maturity
Date, of the Class D Notes on the Class D Stated Maturity Date or of
the Class E Notes on the Class E Stated Maturity Date or (C) any
payment of principal of or interest on any outstanding Note when it
becomes due and payable to the extent that sufficient Available Funds
were on deposit in the Collection Account and to the extent that
sufficient Available Reserve Account Funds are on deposit in the
Reserve Account with respect to such Payment Date;
(ii) default in the performance, or breach, of any
covenant set forth in Section 8.04, 8.07(c) or 8.08;
(iii) default in the performance, or breach, of any
covenant of the Issuer in the Notes or this Indenture (other than a
covenant described in (ii) above), or of any party to the Contribution
and Servicing Agreement or the other Transaction Documents and
continuance of such default or breach for a period of 30 days after the
earliest of (A) any officer of the Transferor or Corporate Trust
Officer of the Owner Trustee first acquiring knowledge thereof, (B) the
Trustee's giving written notice thereof to the Issuer or (C) the holder
of any Note giving written notice thereof to the Issuer;
(iv) if any representation or warranty of the Issuer,
the Transferor or the Contributor made in this Indenture, the
Subsequent Contract Transfer Agreement or the Contribution and
Servicing Agreement, respectively, or any other writing provided to the
Noteholders in connection with the foregoing documents 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 Contributor in Section 2.03 or
2.04 of the Contribution and Servicing Agreement with respect to any of
the Contracts or the security interest in the Equipment subject thereto
shall not constitute an Indenture Event of Default if the Contributor
substitutes one or more Substitute Contracts and the security interest
in the Equipment subject thereto for such Contract and a security
interest in the related Equipment in accordance with Section 7.01 of
the Contribution and Servicing Agreement or repurchases a Contract and
the security interest in the related Equipment in accordance with
Section 5.03 of the Contribution and Servicing Agreement;
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(v) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Issuer
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 Issuer a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment, or composition of or in respect of the Issuer
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator, or other similar
official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 90 consecutive
days; or
(vi) the commencement by the Issuer of a voluntary case
or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of the
Issuer in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization, or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable
federal or state law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator, or similar
official of the Issuer 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 to pay its debts generally as they become due, or the
taking of company action by the Issuer in furtherance of any such
action.
SECTION 6.02 ACCELERATION OF MATURITY; RESCISSION AND
ANNULMENT.
(a) If an Indenture Event of Default occurs and is continuing,
of which a Responsible Officer of the Trustee has received written notice
(PROVIDED that such written notice need not have been received by the Trustee in
connection with a payment default as described in Section 6.01(i)), then and in
every such case the Trustee with the consent of Noteholders evidencing not less
than 66-2/3% of the Voting Rights may declare the unpaid principal amount of all
the Notes to be due and payable immediately, by a notice in writing to the
Issuer, and upon any such declaration such principal amount shall become
immediately due and payable together with all accrued and unpaid interest
thereon, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Issuer.
(b) At any time after such a declaration of acceleration has
been made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, Noteholders
evidencing not less than 66-2/3% of the Voting Rights, by written notice to the
Issuer and the Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Issuer has paid or deposited with the Trustee a
sum sufficient to pay:
(A) all sums paid or advanced, together with
interest thereon, by the Trustee hereunder and the reasonable
compensation, expenses, disbursements, and advances, if any,
of the Trustee, its agents and counsel;
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(B) all principal of any Notes which have
become due otherwise than by such declaration of acceleration,
and interest thereon from the date when the same first became
due at the applicable Note Rate; and
(C) all interest which has become due with
respect to the Notes;
(ii) all Indenture Events of Default, other than the
non-payment of the aggregate principal amount of the Notes which has
become due solely by such declaration of acceleration, have been cured
or waived as provided in Section 6.13; and
(iii) the rescission would not conflict with any judgment
or decree of a court of competent jurisdiction.
No such rescission shall affect any subsequent Indenture Event of Default or
impair any right consequent thereon.
SECTION 6.03 OTHER REMEDIES.
(a) If an Indenture Event of Default occurs and is continuing
of which a Responsible Officer of the Trustee has received written notice
(PROVIDED that such written notice need not have been received by the Trustee in
the case of a payment default as described in Section 6.01(i)), the Trustee
shall give notice to each Noteholder as set forth in Section 7.02. The Trustee
shall then take such action, if any, as may be directed by Noteholders
evidencing not less than 66-2/3% of the Voting Rights.
(b) Following any acceleration of the Notes, the Trustee shall
have all of the rights, powers and remedies with respect to the Trust Property
as are available to secured parties under the Uniform Commercial Code or other
applicable law or as are otherwise available to it under applicable law to
protect and enforce the rights and remedies of the Trustee and the Noteholders
hereunder and under the other Transaction Documents; PROVIDED that, so long as
the Offered Notes are outstanding, the Trustee, in acting during the pendency of
an Indenture Event of Default shall act solely on behalf of the holders of the
Offered Notes and shall not take into account any Class F Instruments that may
have been issued in so acting. Such rights, powers and remedies may be exercised
by the Trustee in its own name as trustee of an express trust.
SECTION 6.04 TRUSTEE MAY 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, the Transferor, the
Contributor, the Servicer or any other obligor upon the Notes or the other
obligations secured hereby or relating to the property of the Issuer, the
Transferor, the Contributor, 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,
the Transferor, the Contributor or the Servicer for the payment of overdue
principal or overdue interest or any such other obligation) shall be entitled
and empowered, by intervention in such proceeding or otherwise:
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(i) to 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,
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
(iii) unless prohibited by applicable law and
regulations, to vote on behalf of the Noteholders in any election of a
trustee, a standby trustee or Person performing similar functions in
any such proceedings; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Trustee or the Noteholders allowed in any proceedings relative
to the Issuer, its creditors and its property;
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 7.06.
(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, except as aforesaid to vote for the election of a trustee in
bankruptcy or similar Person.
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, securities or property collected by the Trustee
pursuant to this Article, and any moneys, securities or property that may then
be held or thereafter received by the Trustee, shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution
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of the entire amount due on account of principal or interest, upon presentation
of the Notes and surrender thereof:
FIRST, to the payment of all costs and expenses of collection
incurred by the Trustee (including the reasonable fees and
expenses of any counsel to the Trustee) and all other amounts
due the Trustee under Section 7.06 (the parties hereto agree
that when the Trustee renders services following an Indenture
Event of Default under Section 6.01 (v) or (vi), compensation
for such services and expenses in connection therewith are
intended to constitute administrative expenses under
applicable bankruptcy law);
SECOND, to the payment of all unreimbursed Servicer Advances
due to the Servicer;
THIRD, only in the event that DVI is no longer the Servicer,
and the Servicer has, in its good faith and reasonable
business judgment, deemed the Servicing Fee to be commercially
unreasonable, then, to the Servicer, the amount agreed upon
between the then Servicer and the Trustee, each in their good
faith and commercially reasonable judgment, as necessary to
make the Servicing Fee commercially reasonable and to cover
the reasonable costs in transferring the servicing
obligations;
FOURTH, to the payment of all accrued and unpaid interest on
the outstanding Class A Note Balance to the date of payment
thereof, ratably to each Class A Noteholder, without
preference or priority of any kind;
FIFTH, to the payment of all accrued and unpaid interest on
the outstanding Class B Note Balance to the date of payment
thereof, ratably to each Class B Noteholder without preference
or priority of any kind;
SIXTH, to the payment of all accrued and unpaid interest on
the outstanding Class C Note Balance to the date of payment
thereof, ratably to each Class C Noteholder without preference
or priority of any kind;
SEVENTH, to the payment of all accrued and unpaid interest on
the outstanding Class D Note Balance to the date of payment
thereof, ratably to each Class D Noteholder without preference
or priority of any kind;
EIGHTH, to the payment of all accrued and unpaid interest on
the outstanding Class E Note Balance to the date of payment
thereof, ratably to each Class E Noteholder without preference
or priority of any kind;
NINTH, to the payment of the outstanding Class A Note Balance,
and any other amounts due to the Class A Noteholders, ratably,
without preference or priority of any kind, until the Class A
Note Balance has been reduced to zero;
TENTH, to the payment of the outstanding Class B Note Balance,
and any other amounts due to the Class B Noteholders ratably,
without preference or priority of any kind;
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ELEVENTH, to the payment of the outstanding Class C Note
Balance, and any other amounts due to the Class C Noteholders
ratably, without preference or priority of any kind;
TWELFTH, to the payment of the outstanding Class D Note
Balance, and any other amounts due to the Class D Noteholders
ratably, without preference or priority of any kind;
THIRTEENTH, to the payment of the outstanding Class E Note
Balance, and any other amounts due to the Class E Noteholders
ratably, without preference or priority of any kind;
FOURTEENTH, to the payment of all accrued and unpaid interest
on outstanding Class F Instruments, if any, to the date of
payment thereof, ratably to each Holder of the Class F
Instruments without preference or priority of any kind;
FIFTEENTH, to the payment of the outstanding principal balance
of the Class F Instruments, if any, and any other amounts due
to the Holders of any Class F Instruments ratably, without
preference or priority of any kind; and
SIXTEENTH, in the event that DVI is the Servicer, to the
payment of all unreimbursed Servicing Fees due to the
Servicer; and
SEVENTEENTH, to the payment of the remainder, if any, to, or
at the order of, the Issuer.
SECTION 6.07 LIMITATION ON SUITS.
The holder of any Note shall not have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Notes, 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 Indenture Event of Default;
(ii) the Noteholders evidencing not less than 25% of the
Voting Rights shall have made written request to the Trustee to
institute proceedings in respect of such Indenture 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 Noteholders evidencing not less
than 66-2/3% of the Voting Rights;
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it being understood and intended that no one or more Noteholder 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
Noteholder, or to obtain or to seek to obtain priority or preference over any
other Noteholder or to enforce any right under this Indenture, except in the
manner herein provided. It is further understood and intended that so long as
any portion of the Notes remains outstanding, the Servicer shall not have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture (other than for the enforcement of Sections 3.04(b) and 4.04) or for
the appointment of a receiver or trustee, or for any other remedy hereunder.
SECTION 6.08 UNCONDITIONAL RIGHT OF NOTEHOLDERS
TO RECEIVE PAYMENT.
Notwithstanding any other provision in this Indenture, other
than the provisions hereof establishing priorities of payment or limiting the
right to recover amounts due on the Notes to recoveries from the Trust Property,
the holder of any Note shall have the absolute and unconditional right to
receive payment of the principal of and interest on such Note as such principal
and interest becomes due on the Payment Dates for such payments, including the
Stated Maturity Date for the applicable Class, and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Noteholder.
SECTION 6.09 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 shall
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 the last paragraph
of Section 2.05, 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 Indenture Event of
Default shall impair any such right or remedy or constitute a waiver of any such
Indenture 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
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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 Section 11.01 have been satisfied in
full, Noteholders evidencing not less than 66-2/3% of the Voting Rights 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 believes may be unduly prejudicial to
the rights of another Noteholder not joining in such direction or which
the Trustee believes might result in any personal liability on the part
of the Trustee for which the Trustee is not indemnified to its
reasonable satisfaction; and
(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 WAIVER OF DEFAULTS AND EVENTS OF
DEFAULT.
(a) Subject to the provisions of Sections 6.08 and 9.01,
Noteholders evidencing more than 50% of the Voting Rights, may, by one or more
instruments in writing, waive an existing Default or Indenture Event of Default
hereunder and its consequences, except a continuing Indenture Event of Default:
(i) in respect of the payment of the principal of or
interest on any outstanding Note (which may only be waived by the
holder of such Note), or
(ii) in respect of a covenant or provision hereof which
under Article IX cannot be modified or amended without the consent of
the holder of each outstanding Note affected (which only may be waived
by the holders of all outstanding Notes affected).
(b) A copy of each waiver pursuant to Section 6.13(a) shall be
furnished by the Issuer to the Trustee. Upon any such waiver, such Indenture
Event of Default shall cease to exist and shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Indenture Event of Default or impair any right consequent
thereon.
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SECTION 6.14 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.
SECTION 6.15 SALE OF TRUST PROPERTY.
(a) The power to effect any sale of any portion of the Trust
Property pursuant to Section 6.03 shall not be exhausted by any one or more
sales as to any portion of the Trust Property remaining unsold, but shall
continue unimpaired until the entire Trust Property 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.
(b) To the extent permitted by applicable law, the Trustee
shall not in any private sale sell the Trust Property, or any portion thereof,
unless either (i) until such time as the conditions specified in Section
11.01(a) have been satisfied in full, Noteholders evidencing not less than
66-2/3% of the Voting Rights consent to or direct the Trustee 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 all Class
A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes then
outstanding 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.
(c) In connection with a sale of all or any portion of the
Trust Property:
(i) any one or more Noteholders or the Trustee 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 therefor, 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 such 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 Trust Property in connection with a sale thereof;
(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 Trust Property in connection with a sale
thereof, and to take all action necessary to effect such sale; and
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(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 Trust Property shall be commercially reasonable.
(e) The provisions of this Section 6.15 shall not be construed
to restrict the ability of the Trustee to exercise any rights and powers against
the Issuer or the Trust Property 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 6.16 UNDERTAKING FOR COSTS.
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 or
omitted by it as Trustee, a court may in its discretion require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.16 does not apply to a suit by the Trustee, a suit by a
Noteholder pursuant to Sections 6.07 and 6.08, or a suit by any Noteholder or
group of Noteholders of more than 10% in principal amount of all Class A Notes,
Class B Notes, Class C Notes, Class D Notes and Class E Notes then outstanding.
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ARTICLE VII
THE TRUSTEE
SECTION 7.01 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Indenture Event
of Default:
(i) the Trustee undertakes to perform only those duties
that are specifically set forth in this Indenture and no others and no
covenants or duties shall be implied herein in connection with 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,
statements, opinions, reports or documents furnished to the Trustee and
conforming to the requirements of this Indenture. The Trustee, however,
shall examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) If an Indenture Event of Default has occurred and is
continuing, the Trustee shall exercise its 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 7.01;
(ii) the Trustee shall not be liable for any error in
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the directions received by it pursuant to Section 6.12 or 6.13;
and
(iv) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any personal
financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
indemnity reasonably satisfactory to it against such risk or liability
is not assured to it.
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(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 receives
written notice or is otherwise notified of the occurrence of any Default or
Indenture Event of Default hereunder or Servicer Event of Default under the
Contribution and Servicing Agreement, 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, the
Issuer, the Servicer, the Rating Agencies and the Contributor notice of such
Default, Indenture Event of Default or Servicer Event of Default hereunder known
to the Trustee, unless such Default, Indenture Event of Default or Servicer
Event of Default shall have been cured or waived.
SECTION 7.03 CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 7.01:
(i) the Trustee may rely conclusively 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;
(ii) any request or direction of the Issuer mentioned
herein shall be sufficiently evidenced by an Issuer Request or Issuer
Order and any action of the Issuer may be sufficiently evidenced by an
Issuer Order;
(iii) 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
Officer's Certificate;
(iv) the Trustee may consult with counsel as to legal
matters and the advice or opinion 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;
(v) 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
security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in compliance
with such request or direction;
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(vi) prior to the occurrence of an Indenture Event of
Default and after the curing or waiving of all Indenture Events of
Default, the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, note, debenture, other evidence of indebtedness, or other paper
or document, other than to examine such documents to determine whether
they conform as to form to the requirements of this Indenture, unless
requested in writing to do so by the Noteholders evidencing more than
50% of the Voting Rights; PROVIDED that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Indenture, the Trustee
may require indemnity reasonably satisfactory to it against such
expenses or liabilities as a condition to proceeding; the reasonable
expenses of every such examination shall be paid by the Issuer or, if
paid by the Trustee or any predecessor trustee, shall be promptly
repaid by the Issuer upon demand; and
(vii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, custodians, nominees or attorneys and the Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent, custodian, nominee or attorney appointed with due care by it
hereunder.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or
adequacy of this Indenture (except as against itself), the Pooling and Trust
Agreement, the Contribution and Servicing Agreement or the Notes and it shall
not be responsible for any statement in the Notes other than its certificate of
authentication or in any document used in the sale of the Notes. The Trustee
shall have no responsibility for, or duty, or liability in connection with
performance by the Servicer, and shall have no obligation to monitor the
performance of the Servicer. The Trustee shall not be accountable for the use or
application by the Issuer of the Notes or the proceeds thereof.
SECTION 7.05 MONEY HELD IN TRUST.
Money and investments held by the Trustee or other paying
agent shall be held in trust in one or more Eligible Accounts as required
hereunder. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with Issuer.
SECTION 7.06 COMPENSATION, REIMBURSEMENT, ETC.
(a) Pursuant to the Contribution and Servicing Agreement,
the Servicer has agreed:
(i) to pay to the Trustee from time to time such
compensation for all services rendered by it hereunder as the Servicer
and the Trustee have agreed in writing prior to the Closing Date (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust), such payment to be
made independent of the other payment obligations of the Servicer
hereunder;
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(ii) except as otherwise expressly provided herein,
to reimburse the Trustee upon its request for all reasonable expenses,
disbursements, and advances 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;
(iii) to pay the Trustee its annual administrative fee
on the Closing Date;
(iv) to pay the reasonable fees and expenses of
Trustee's counsel on the Closing Date; and
(v) to pay the reasonable annual administrative fee of
each Lock-Box Bank.
(b) The Trustee hereby acknowledges and agrees that if the
Servicer fails to pay the amounts set forth in Section 7.06(a) of this
Indenture, the Trustee will continue to perform its obligations under this
Indenture, regardless of the Servicer's failure to pay such amounts, until the
appointment of a successor Trustee reasonably satisfactory to the Noteholders in
accordance with Section 7.08 of this Indenture; PROVIDED, HOWEVER, that in such
event, the Trustee shall withhold amounts otherwise payable to it pursuant to
Section 7.06(a) hereof from amounts payable to the Servicer pursuant to Section
3.04(b)(i).
SECTION 7.07 ELIGIBILITY; DISQUALIFICATION.
The Trustee hereunder (a) shall at all times be a national
banking association organized and doing business under the laws of the United
States of America or any state thereof authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$100,000,000 or shall be a member of a bank holding system, the aggregate
combined capital and surplus of which is at least $100,000,000, and (b) shall be
subject to supervision or examination by Federal or state authority and, in the
case of any successor Trustee subject to regulations regarding fiduciary funds
on deposit substantially similar to 12 CFR ss. 9.10(b). If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section 7.07, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.07, the Trustee shall resign immediately in the manner and with the
effect specified in Section 7.08.
SECTION 7.08 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 a successor Trustee reasonably
satisfactory to Noteholders evidencing more than 50% of the Voting Rights under
Section 7.09.
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(b) Subject to Section 7.08(a) 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 the Rating Agencies and the
Noteholders at their addresses appearing on the Note Register.
(c) The Trustee may be removed at any time by written notice
from Noteholders evidencing more than 50% of the Voting Rights delivered to the
Trustee and the Issuer. The Issuer, with the consent of Noteholders evidencing
more than 50% of the Voting Rights, may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.07;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes
charge of the Trustee or its property;
or
(iv) the Trustee becomes incapable of acting.
(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 Noteholders evidencing more than 50%
of the Voting Rights 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 as hereinabove 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 to the
Rating Agencies. Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
(g) A Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated therein.
SECTION 7.09 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, 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
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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 and no reduction in the then current ratings, if
any, on the Notes has occurred as a result of such appointment.
SECTION 7.10. 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.
SECTION 7.11 CO-TRUSTEES AND SEPARATE TRUSTEES.
(a) At any time or times, for the purpose of meeting the legal
requirements of any jurisdiction in which any of the Trust Property may at the
time be located, the Issuer and the Trustee shall have power to appoint, and,
upon the written request of the Trustee or the Noteholders evidencing more than
50% of the Voting Rights, 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 such Trust Property, or to act as separate trustee of any such property,
in either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in the capacity aforesaid,
any property, title, right or power deemed necessary or desirable, subject to
the other provisions of this Section 7.11. 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 Indenture Event of Default has occurred and is continuing, the Trustee
alone shall have power to make such appointment.
(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 personal
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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
an Issuer Order, may accept the resignation of or remove any co-trustee
or separate trustee appointed under this Section 7.11, and, in case an
Indenture 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
7.11.
(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 and supervised by the
Trustee with due care or appointed in accordance with directions to the
Trustee pursuant to Section 6.12.
(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 7.12 TRUSTEE TO HOLD CONTRACTS.
On or prior to the Closing Date, the Contributor, on behalf of
the Issuer, shall deliver to the Trustee (or its designee) the sole original,
manually executed counterpart of each Contract (or, if the original Contract is
in the form of a schedule or supplement to a master lease, all original
counterparts of such schedule or supplement previously in the possession of the
Contributor or the Issuer together with a true and correct copy of such master
lease) that constitutes "chattel paper" or an "instrument", as such terms are
defined in the UCC. The Trustee (or its designee) shall hold such documents
until such time as such Contract is released from the lien of this Indenture
pursuant to the provisions hereof.
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SECTION 7.13 FINANCING STATEMENTS.
The Trustee shall execute such UCC financing statements and
continuation statements as shall have been prepared by the Servicer and as shall
be necessary and shall furnish the Servicer with such limited powers of attorney
or other documents necessary or appropriate to enable the Servicer to fulfill
its obligations under Section 4 of the Contribution and Servicing Agreement and
to carry out its servicing and administration duties under the Contribution and
Servicing Agreement.
SECTION 7.14 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 10.02 of the Contribution and Servicing
Agreement, the Trustee (subject to subsection (b) hereof) shall be the successor
in all respects to the Servicer in its capacity as servicer under the
Contribution and Servicing Agreement of the Contracts and, to such extent, shall
be subject to all the responsibilities, duties and liabilities (other than the
duty to advance funds and indemnify) relating thereto placed on the Servicer by
the terms and provisions thereof (but not the obligations of the Contributor
contained therein which shall survive any such termination as provided in
Section 10.02 thereof) and shall be entitled to receive from the Issuer the
Servicing Fee and other servicing compensation provided for in Section 4.04 of
the Contribution and Servicing Agreement; 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.
(b) The Trustee may, if it is unwilling or unable to act as
the successor Servicer, give notice of such fact to each Noteholder and (i)
appoint a successor Servicer with a net worth of at least $15,000,000 and
reasonably acceptable to Noteholders evidencing more than 50% of the Voting
Rights and whose regular business includes the servicing of a similar type of
contracts and the financing of medical diagnostic imaging equipment, as the
successor Servicer under the Contribution and Servicing Agreement to assume all
of the rights and obligations of the Servicer thereunder, including, without
limitation, the Servicer's right thereunder to receive the Servicing Fee (but
not the obligations of the Contributor contained therein) or, (ii) if no such
institution is so appointed, petition a court of competent jurisdiction to
appoint an institution meeting such criteria as the Servicer thereunder. Pending
appointment of a successor Servicer under the Contribution and Servicing
Agreement, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee shall cause such
successor Servicer to enter into a servicing agreement substantially in the form
of the Contribution and Servicing Agreement except that such agreement shall not
include any of the Contributor's representations, warranties or obligations and
the Trustee may make arrangements for the compensation of such successor
Servicer out of payments on Contracts and the related Contracts as it and such
successor Servicer shall agree; PROVIDED, HOWEVER, that no such compensation
shall be in excess of that provided in Section 4.04 of the Contribution and
Servicing Agreement.
SECTION 7.15 REPORTS BY TRUSTEE TO HOLDERS.
If required by the TIA, within 60 days after each Payment Date
beginning with _______, the Trustee shall mail to each Noteholder a brief report
dated as of such Payment Date that complies with TIA Section 313(a).
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SECTION 7.16 PREFERENTIAL COLLECTION OF CLAIMS
AGAINST ISSUER.
The Trustee is subject to and shall comply with TIA Section
311(a), excluding any creditor relationship listed in TIA Section 311(b).
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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. An installment of interest shall be considered paid on the date it is
due if the Trustee holds on that date money designated for and sufficient to pay
the installment.
SECTION 8.02 MAINTENANCE OF OFFICE OR AGENCY;
CHIEF EXECUTIVE OFFICE.
(a) The Owner Trustee of the Issuer will maintain in the State
of Delaware an office or agency where notices and demands to or upon the Issuer
in respect of the Notes and this Indenture may be served.
(b) The corporate trust office of the Owner Trustee of the
Issuer, and the office at which the Issuer maintains its records with respect to
the Contracts, the Equipment, and the transactions contemplated hereby, is
located in Wilmington, Delaware. The Issuer will not change the location of such
office without giving the Trustee and each Noteholder at least 60 days' prior
written notice thereof (or, in the case of resignation or removal of the Owner
Trustee, such lesser time period as provided in the Pooling and Trust
Agreement).
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 Collection Account
pursuant to Section 3.04(b) or Section 6.06 shall be made on behalf of the
Issuer by the Trustee, and no amounts so withdrawn from the Collection Account
for payments of Notes shall be paid over to the Issuer under any circumstances
except as provided in this Section 8.03.
(b) In making payments hereunder, the Trustee will:
(i) allocate all sums received for payment to the
Noteholders on each Payment Date in accordance with the terms of this
Indenture;
(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
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imposed thereon and with respect to any applicable reporting
requirements in connection therewith, in each case, consistent with the
treatment of the Notes as indebtedness.
(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 two years after such amount has become due and
payable to the Noteholder shall be discharged from such trust and, subject to
applicable escheat laws, paid to the Issuer upon request; and such Noteholder
shall thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof, and all liability of the Trustee with respect to such trust
money shall thereupon cease.
SECTION 8.04 ISSUER EXISTENCE; ETC.
(a) The Issuer will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
Delaware _____ and the rights, licenses and franchises of the Issuer, and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, or any of the Contracts.
(b) The Issuer shall at all times observe and comply in all
material respects with (i) its organizational documents as in effect on the date
hereof, (ii) all laws, regulations and court orders applicable to it, (iii) all
requirements of law in the declaration and payment of any distributions to its
record and beneficial owner(s), and (iv) all requisite and appropriate
formalities (including, without limitation, obtaining the consent of its sole
beneficial owner to authorize Issuer action as required, and as otherwise
required by law) in the management of its business and affairs and the conduct
of the transactions contemplated hereby, by the Subsequent Contract Transfer
Agreement and by the Contribution and Servicing Agreement. The limit the
Issuer's activities to the purchases of assets, issuance of securities, and
activities incidental thereto. No Affiliate of the Issuer pays the expenses of
the Issuer except as contemplated in the Transaction Documents, and no Affiliate
of the Issuer guarantees any obligation of the Issuer. Other than the purchase,
contribution, substitution or sale of assets, the Issuer has no intercorporate
transactions with DVI.
(c) The Issuer will, at all times: (i) maintain (A) trust and
financial books and records separate from those of any other Person and (B)
minutes of the meetings and other proceedings of its governing body and record
and beneficial owner(s); (ii) continuously maintain the resolutions, agreements
and other instruments underlying the transactions contemplated hereby, by the
Subsequent Contract Transfer Agreement and by the Contribution and Servicing
Agreement as official records of the Issuer; (iii) act solely in its official
name to maintain an arm's-length relationship with the Contributor and its
Affiliates; (iv) pay all of its operating expenses and liabilities from its own
funds; (v) maintain an office and telephone number separate from that of the
Contributor and the Transferor, (vi) maintain its assets separately from the
assets of the Contributor and the Transferor and (vii) characterize the
Contributor and the Transferor as separate entities in any report, tax return,
financial statement, other accounting or business transaction.
(d) The Issuer shall conduct its business solely in its own
name so as to not mislead others as to the identity of the trust with which
those others are concerned, and particularly will avoid the appearance of
conducting business on behalf of the Contributor or any of its Affiliates or
that the
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assets of the Issuer are available to pay the creditors of the Contributor or
any of its Affiliates. Without limiting the generality of the foregoing, all
oral and written communications, including, without limitation, letters,
invoices, purchase orders, contracts, statements and loan applications, will be
made solely in the name of the Issuer.
(e) The Issuer will be operated so as not to be substantively
consolidated for bankruptcy purposes with the Contributor.
(f) The Issuer will not amend its organizational documents
without the prior consent of Noteholders evidencing more than 50% of the Voting
Rights.
(g) The Issuer shall also comply with the other applicable
provisions of TIA Section 314.
SECTION 8.05 PROTECTION OF TRUST PROPERTY;
FURTHER ASSURANCES.
The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such UCC 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
Trust Property;
(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 or assignment made or to be made by this Indenture and perfect
the security interest contemplated hereby in favor of the Trustee in
the Contracts and any security interest in the related Equipment;
(iv) enforce or cause the Servicer to enforce any of
the Contracts; or
(v) preserve and defend title to any Contract
(including the right to receive all payments due or to become due
thereunder subsequent to the applicable Cut-off Date), the security
interest of the Trustee in the Equipment, or other property included in
the Trust Property and preserve and defend the rights of the Trustee
and the Noteholders in such Contract (including the right to receive
all payments due or to become due thereunder subsequent to the
applicable Cut-off Date), 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 UCC financing statement,
continuation statement or other document or instrument 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.
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SECTION 8.06 COMPLIANCE CERTIFICATES.
The Issuer will deliver to the Trustee and the Rating
Agencies, within 90 days after the end of each fiscal year, an Officer's
Certificate of the Transferor, as sole owner of the beneficial interests of the
Issuer, stating, in addition to the statements required by Section 1.18, as to
each signer thereof, that
(i) a review of the activities of the Issuer during
such year and of performance under this Indenture has been made under
such officers' supervision and
(ii) to the best of such officers' knowledge, based on
such review, (a) the Issuer has fulfilled all of its obligations under
this Indenture throughout such year and (b) the Servicer has fulfilled
all of the Servicer's obligations under the Contribution and Servicing
Agreement.
(iii) whether the officer knows of any Defaults by the
Issuer under this Indenture throughout such year or, if there has been
a Default in the fulfillment of any such obligation, specifying each
such Default known to him and the nature and status thereof and the
nature of the action taken with respect thereto.
SECTION 8.07 PERFORMANCE OF OBLIGATIONS;
CONTRIBUTION AND SERVICING AGREEMENT.
(a) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, any Supplement, the
Notes, the Subsequent Contract Transfer Agreement, the Note Purchase Agreement,
the Underwriting Agreement and any other applicable Transaction Documents.
(b) The Issuer will clearly mark its books and records to
reflect each assignment and transfer of a Contract and the security interest in
the Equipment subject thereto from the Transferor.
(c) If the Issuer shall have actual knowledge of the
occurrence of a default under either the Contribution and Servicing Agreement or
the Subsequent Contract Transfer 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 Noteholders evidencing more than 50% of the Voting Rights, the
Issuer may not waive any default under or amend the Contribution and Servicing
Agreement or the Subsequent Contract Transfer Agreement.
(d) The Issuer shall, and shall cause the Contributor to,
update any information required to be provided pursuant to Rule 144A(d) (4) of
the Securities Act to subsequent purchasers of the Class E Notes to prevent such
information from becoming materially false and materially misleading in a manner
adverse to any Noteholder.
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SECTION 8.08 NEGATIVE COVENANTS.
The Issuer will not:
(i) sell, transfer, exchange or otherwise dispose of
any portion of the Trust Property except as expressly permitted by this
Indenture or any Supplement; PROVIDED THAT nothing contained herein
shall prohibit the transfer by the Issuer of amounts payable to the
Issuer pursuant to Section 3.04(b);
(ii) claim any credit on, or make any deduction from,
the principal of, or interest on, any of the Notes by reason of the
payment of any taxes levied or assessed upon any portion of the Trust
Property;
(iii) seek dissolution or liquidation in whole or in part
or reorganization of its business or affairs;
(iv) (A) permit the validity or effectiveness of this
Indenture or any Grant hereby to be impaired, or permit the lien of
this Indenture to be amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations under this Indenture, except as may be expressly permitted
hereby, (B) 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 Trust Property or any part thereof or any interest
therein or the proceeds thereof other than the lien of this Indenture
and the rights of Obligors, or (C) permit the lien of this Indenture
not to constitute a valid first priority perfected security interest in
the Contracts and a valid security interest in the Equipment;
(v) engage in any business or activity in violation of
the provisions contained in the Pooling and Trust Agreement;
(vi) at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or
extension law or other law that would prohibit or forgive the Issuer
from paying all or any portion of the principal of or interest on the
Notes as contemplated herein or in the Notes, wherever enacted, now or
at any time hereafter in force, or that may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully
do so) the Issuer 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;
(vii) merge or consolidate with any other Person unless
(i) the entity surviving such merger or consolidation is a Person
organized under the laws of the United States or any jurisdiction
thereof, (ii) the surviving entity, if not the Issuer, shall execute
and deliver to the Servicer and the Trustee, in form and substance
satisfactory to each of them, (x) an instrument expressly assuming all
of the obligations of the Issuer hereunder, and (y) an opinion of
counsel to the effect that such Person is a Person of the type
described in the preceding clause (i), has effectively assumed the
obligations of the Issuer hereunder, that all conditions precedent
provided
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for in this Indenture relating to such transaction have been complied
with, that in the opinion of such counsel, all UCC financing statements
and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest
of the Trustee in the Trust Property, and reciting the details of such
filings, or stating that no such action shall be necessary to preserve
and protect such interest, (iii) the Issuer shall deliver to the
Trustee a letter from each Rating Agency to the effect that such
transaction will not, in and of itself, result in a downgrading of the
rating for the Notes and (iv) immediately after giving effect to such
transaction, no event of default under any Transaction Document, and no
event which, after notice or lapse of time, or both, would become an
event of default, shall have occurred and be continuing. The Issuer and
any surviving entity, if not the Issuer, will keep all of its material
assets within the United States at all times. The Issuer will not make
any material change in its business; or
(viii) 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 Contract or any other instrument
included in the Trust Property other than any such release occasioned
by the early termination of a Contract after receipt of the Prepayment
Amount, or which would result in the amendment, hypothecation,
subordination, termination, or discharge of, or impair the validity or
effectiveness of, any Contract or such other instrument, except as
expressly provided in this Indenture or the Contribution and Servicing
Agreement.
SECTION 8.09 INFORMATION AS TO THE ISSUER. The
Issuer shall file with the Trustee and the Rating Agencies:
(a) within 15 days after filing with the Commission, copies of
the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may by rules
and regulations prescribe) which it is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
(b) immediately upon becoming aware of the existence of any
condition or event which constitutes a Default or an Indenture 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;
(c) 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, individually or in the aggregate,
of materially and adversely affecting the properties, business, 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; and
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(d) with reasonable promptness, any other data and information
which may be reasonably requested from time to time.
SECTION 8.10. PAYMENT OF TAXES AND OTHER CLAIMS.
The Issuer will pay or discharge or cause to be paid or
discharged, before any penalty accrues from the failure to so pay or discharge,
(1) all taxes, assessments and governmental charges levied or imposed upon the
Issuer or upon the income, profits or property (including any property that is
part of the Trust Property) of the Issuer and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Issuer; PROVIDED, HOWEVER, that the Issuer shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings and for which adequate
provision has been made or where the failure to effect such payment or discharge
is not adverse in any material respect to the Noteholders.
SECTION 8.11 INDEMNIFICATION.
The Issuer agrees to indemnify and hold harmless the Trustee
(which shall include its directors, officers, employees and agents) and each
Noteholder (each an "INDEMNIFIED PARTY") against any and all liabilities,
losses, damages, penalties, costs and expenses (including the fees and expenses
of counsel and the costs of defense and legal fees and expenses) which may be
incurred or suffered by such Indemnified Party without negligence, bad faith 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, by the Pooling and Trust Agreement or by the Contribution
and Servicing Agreement, including, without limitation, any claims resulting
from any use, operation, maintenance, repair, storage or transportation of any
item of Equipment, whether or not in 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 the United States or any state or local
government or governmental authority; PROVIDED that, except to the extent
otherwise provided in Section 6.06, all amounts payable pursuant to this Section
8.11 shall be fully subordinated to amounts payable under the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes to the
extent that any amounts otherwise due and payable under the terms of this
Indenture have not been fully paid. In every circumstance where the Issuer has
agreed to indemnify or hold harmless the Noteholders for legal fees, counsel
fees and related costs and expenses, it is understood and agreed, and the
Noteholders by their acceptance of their respective Notes agree, that such
indemnification and holding harmless is limited to the reasonable fees, related
costs and expenses of the Noteholders Counsel only. The provisions of this
Section 8.11 shall survive the termination of this Indenture.
SECTION 8.12 CONTRACT FILES TO TRUSTEE.
On or prior to the Closing Date or each Substitute Date, as
applicable, the Contributor, on behalf of the Issuer, shall deliver to the
Trustee the original counterpart of each Contract that constitutes "chattel
paper" or an "instrument", as such terms are defined in the UCC.
SECTION 8.13 PAYMENT ADVICES. Each payment by
the Issuer or the Servicer to the Trustee pursuant to any of the provisions of
the Transaction Documents shall be accompanied
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by written advice containing sufficient information to identify the Contract
and/or Equipment to which such payment relates, the Section of the Transaction
Documents pursuant to which such payment is made, and the proper application
pursuant to the provisions of the applicable Transaction Document of the amounts
being paid.
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ARTICLE IX
AMENDMENTS AND SUPPLEMENTAL INDENTURES
SECTION 9.01 AMENDMENTS AND SUPPLEMENTAL INDENTURES.
This Indenture or the Notes may be amended from time to time
by the parties hereto, without the consent of any of the Noteholders, (i) to
cure any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under this Indenture or the Notes
which shall not be materially inconsistent with the provisions of this Indenture
or the Notes, PROVIDED THAT such action shall not adversely affect in any
respect the interests of any Noteholder or (ii) to make any change to comply
with the TIA or any amendment thereto, or to comply with any requirement of the
Commission in connection with the qualification of the Indenture under the TIA.
This Indenture or the Notes may also be amended from time to
time by the parties hereto with the consent of the Holders of Notes evidencing
more than 66-2/3% of the Voting Rights (and with prior written notice to the
Rating Agency) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or the Notes or of
modifying in any manner the rights of the Holders of Notes; PROVIDED, HOWEVER,
that no amendment to this Indenture or any supplemental indenture may (i) cause
a reduction in the then current ratings, if any, of the Notes, (ii) increase or
reduce in any manner the amount of, or accelerate or delay the timing of
collections of payments on the related Contracts or distributions that are
required to be made for the benefit of such Noteholders, (iii) reduce the
aforesaid percentage of the Notes of such series which is required to consent to
any such amendment or waiver, or (iv) release any of the Trust Property from the
lien hereof (except as otherwise permitted herein) or modify Section 2.06, 3.04,
6.06, 6.08, 6.13 or 9.01, without the consent of each affected Noteholder. The
Issuer shall furnish to the Rating Agencies copies of all amendments to and
supplements to this Indenture.
It shall not be necessary for the consent of the Noteholders
under this Section 9.01 to approve the particular form of any proposed amendment
or supplement, but it shall be sufficient if such consent approves the substance
thereof.
SECTION 9.02 EXECUTION OF AMENDMENTS AND SUPPLEMENTAL
INDENTURES.
In executing any amendment to this Indenture, the Notes or any
supplemental indenture pursuant to Section 9.01 of this Indenture, the Trustee
shall be entitled to receive, and (subject to Section 7.01) shall be fully
protected in relying upon (i) an Officer's Certificate stating that all
conditions precedent for entering into such amendment or supplemental indenture
as set forth in the Indenture have been met and (ii) an Opinion of Counsel
stating that the execution of such amendment to this Indenture, the Note, or any
supplemental indenture is authorized or permitted by this Indenture. The Trustee
may, but shall not be obligated to, enter into any supplemental indenture which
affects the Trustee's own rights, duties, protections, or immunities under this
Indenture or otherwise.
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SECTION 9.03 EFFECT OF AMENDMENTS AND
SUPPLEMENTAL INDENTURES.
Upon the execution of any amendment to this Indenture, the
Notes or any supplemental indenture under this Article, this Indenture, the
Notes or any supplemental indenture shall be modified in accordance therewith,
and such amendment or supplemental indenture shall form a part of this
Indenture, the Notes or any supplemental indenture for all purposes, and every
Noteholder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 9.04 REFERENCE IN NOTES TO AMENDMENTS AND
SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any
amendment to this Indenture or 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 amendment or
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
amendment or supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for outstanding
Notes.
SECTION 9.05 COMPLIANCE WITH TRUST INDENTURE ACT.
The Issuer hereby covenants and agrees that every amendment or
supplement to this Indenture or the Notes shall comply with the TIA as then in
effect.
SECTION 9.06 REVOCATION AND EFFECT OF CONSENTS.
Subject to this Indenture, each amendment, waiver or
instrument evidencing other action shall become effective in accordance with its
terms. Until an amendment, waiver or other action becomes effective, a consent
to it by a Noteholder is a continuing consent by the Noteholder even if notation
of the consent is not made on any Note.
The Issuer may, but shall not be obligated to, fix a record
date for the purpose of determining the Noteholders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then those Persons
who were Noteholders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to consent to such amendment, supplement
or waiver or to revoke any consent previously given, whether or not such Persons
continue to be Noteholders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.
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ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01 OPTIONAL REDEMPTION; ELECTION TO REDEEM.
(a) The Notes may be redeemed in part by the Issuer at the
Partial Redemption Price on any Payment Date on which the outstanding Pool B
Aggregate Discounted Contract Balance is less than 20% of the outstanding Pool B
Aggregate Discounted Contract Balance as of the Closing Date. The Notes may be
redeemed by the Issuer, in whole but not in part, at the Redemption Price on any
Payment Date on which the Pool A Aggregate Discounted Contract Balance is less
than 10% of the Pool A Aggregate Discounted Contract Balance as of the Closing
Date and the Pool B Aggregate Discounted Contract Balance is less than 20% of
the Pool B Aggregate Discounted Contract Balance as of the Closing Date. The
Issuer, by an Authorized Officer of the Transferor, shall set the Redemption
Date and the Redemption Record Date and give notice thereof to the Trustee.
Notice of redemption or partial redemption having been given as provided in the
Indenture, the Notes shall, on the applicable Redemption Date, become due and
payable at the Redemption Price or Partial Redemption Price, as applicable. The
respective Noteholders shall be paid the Redemption Price or Partial Redemption
Price, as applicable, by the Trustee to the extent of Available Funds on deposit
in the Collection Account, and upon presentation and surrender of the Notes on
behalf of the Issuer; PROVIDED, HOWEVER, that installments of principal and
interest which are due on or prior to the Redemption Date shall be payable to
the respective Noteholders registered as such on the relevant Record Dates or
Redemption Record Dates, as applicable, according to their terms.
(b) The Issuer, by order of an Authorized Officer of the
Transferor, shall set the Redemption Date and the Redemption Record Date and
give notice thereof to the Trustee pursuant to Section 10.02.
SECTION 10.02 NOTICE TO TRUSTEE.
In the case of any redemption or partial redemption pursuant
to Section 10.01, the Issuer shall, at least 20 days prior to the Redemption,
notify the Trustee and the Rating Agencies of such Redemption Date and the
principal amount of Notes to be redeemed in part. The notice shall be
accompanied by an Officer's Certificate stating that the redemption or partial
redemption complies with the provisions of this Indenture.
SECTION 10.03 NOTICE OF REDEMPTION OR PARTIAL REDEMPTION
BY THE ISSUER.
Notice of redemption or partial redemption pursuant to Section
10.01 shall be given by first class mail, postage prepaid, mailed at least 15
days but not more than 60 days prior to the applicable Redemption Date, to each
holder of a Note, at its address in the Note Register.
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All notices of redemption or partial redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price or Partial Redemption
Price, as applicable;
(3) that on the Redemption Date, the Redemption
Price or Partial Redemption Price, as
applicable, will become due and payable upon
each such Note, and that interest on the
redeemed portion of such Note shall cease to
accrue if payment is made on such date;
(4) the private placement number or CUSIP
number, if any, of the Notes;
(5) Corporate Trust Office where Notes are to be
surrendered for payment of the Redemption
Price; and
(6) the Redemption Record Date.
Notice of redemption or partial redemption, as applicable, of
Notes shall be given by the Issuer, by order of an Authorized Officer of the
Transferor, or, at the request of such Authorized Officer of the Transferor, by
the Trustee in the name and at the expense of the Issuer. Failure to give notice
of redemption or partial redemption, as applicable, or any defect therein, to
any holder of a Note shall not impair or affect the validity of the redemption
or partial redemption, as applicable, of any other Note. If a private placement
number or CUSIP number is listed in such notice or printed on the Note, the
notice may state that no representation is made as to the correctness or
accuracy of such private placement number or CUSIP number.
SECTION 10.04 DEPOSIT OF THE REDEMPTION PRICE OR
PARTIAL REDEMPTION PRICE.
On or before the Business Day immediately preceding any
Redemption Date, the Issuer shall deposit with the Trustee an amount of monies
sufficient to pay the Redemption Price or Partial Redemption Price, as
applicable, of all Notes outstanding on such Redemption Date (less any portion
of such payment to be made from monies in the Collection Account).
SECTION 10.05 NOTES PAYABLE ON REDEMPTION DATE.
(a) Notice of redemption in full having been given as provided
in Section 10.03, the Notes shall, on the applicable Redemption Date, become due
and payable at the Redemption Price and on such Redemption Date (unless the
Issuer shall default in the payment of the Redemption Price) such Notes shall
cease to bear interest. The Noteholders shall be paid the Redemption Price by
the Trustee on behalf of the Issuer; PROVIDED, HOWEVER, that installments of
principal and interest which are due on or prior to the Redemption Date shall be
payable to the Noteholders registered as such on the relevant Record Dates
according to their terms and the provisions of Section 2.07. If the holders of
any Note called for redemption in full shall not be so paid upon surrender, the
principal and interest shall, until paid, bear interest from the Redemption Date
at the related Note Rate.
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(b) Notice of partial redemption having been given as provided
in Section 10.03, that portion of the Notes shall, on the applicable Redemption
Date, become due and payable at the Partial Redemption Price and on such
Redemption Date (unless the Issuer shall default in the payment of the
Redemption Price) such Notes shall continue to bear interest only on the
principal balances remaining outstanding. The Noteholders shall be paid the
Partial Redemption Price by the Trustee on behalf of the Issuer; PROVIDED,
HOWEVER, that installments of principal and interest which are due on or prior
to the Redemption Date shall be payable to the Noteholders registered as such on
the relevant Record Dates according to their terms and the provisions of Section
2.07. If the holders of any Note called for partial redemption shall not be so
paid, the principal and interest shall, until paid, bear interest from the
Redemption Date at the related Note Rate.
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ARTICLE XI
SATISFACTION AND DISCHARGE
SECTION 11.01 SATISFACTION AND DISCHARGE OF INDENTURE.
(a) This Indenture shall cease to be of further effect (except
as to any surviving rights herein expressly provided for), and the Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments and
certifications acknowledging satisfaction and discharge of this Indenture, when:
(i) either:
(A) all Notes theretofore authenticated and
delivered (other than (x) Notes which have been destroyed,
lost, or stolen and which have been replaced or paid as
provided in Section 2.05 and (y) 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 irrevocably paid and 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:
(1) have become due and payable, or
(2) will become due and payable at
their Stated Maturity Date within one year,
and the Issuer has 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 Date 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; and
(iii) the Issuer has delivered to the Trustee an
Officer's Certificate of the Transferor 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
Trust Property other than funds deposited with the Trustee pursuant to Section
11.01(a)(i)(B) for the payment and discharge of the Notes and a certificate from
a Responsible Officer certifying the satisfaction and discharge of this
Indenture.
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(b) Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Issuer under Sections 7.06 and 8.11, and, if
money shall have been deposited with the Trustee pursuant to Section
11.01(a)(i)(B), the obligations of the Trustee under Section 11.02 and Section
8.03(c) shall survive.
SECTION 11.02 APPLICATION OF TRUST MONEY.
Subject to the provisions of Section 8.03(c), all money
deposited with the Trustee pursuant to Sections 11.01 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 11.03 REINSTATEMENT.
If the Trustee is unable to apply any money in accordance with
Section 11.01 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuer's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 11.01 until such time as the Trustee is permitted
to apply all such money in accordance with Section 11.01.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the day and year first above written.
DVI ______
By:
---------------------------------------
Name:
Title:
---------------------------------------,
as Trustee
By:
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
CONTRACT SCHEDULE
<PAGE>
EXHIBIT A
TO INDENTURE
[FORM OF CLASS A NOTES]
NO BENEFICIAL OWNERS OF THIS NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT
OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED NOTES HAVE BEEN DELIVERED
PURSUANT TO THE TERMS OF THE INDENTURE.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, OR
DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN 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 REQUESTED 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.
BY ACCEPTANCE OF THIS NOTE, THE HOLDER AND ANY BENEFICIAL OWNER AGREES
TO TREAT THIS NOTE AS INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.
BY ITS ACCEPTANCE HEREOF, THE HOLDER AND ANY BENEFICIAL OWNER IS DEEMED
TO HAVE REPRESENTED TO THE ISSUER, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR
SERVICER THAT EITHER (1) IT IS NOT ACQUIRING THIS NOTE WITH THE ASSETS OF A
PLAN; OR (2) THE ACQUISITION AND HOLDING OF THIS NOTE WILL NOT GIVE RISE TO A
NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975
OF THE CODE.
No. 1 Principal Amount $__________
Due: _________________ CUSIP No. ___________
_____% ASSET-BACKED NOTE, SERIES ______, CLASS A
DVI _____________, a Delaware corporation/limited liability
company/partnership/business trust (the "ISSUER"), for value received, hereby
promises to pay to CEDE & CO. or registered assigns, the principal sum of
_______________________and __/100 Dollars ($__________) in monthly installments
equal to the sum of (i) the Class A Monthly Principal, (ii) the Class A Overdue
Principal and (iii) any other principal that may be due hereon pursuant to the
Indenture during an Amortization Event together with (i) the Class A Monthly
Interest and (ii) the Class A Overdue Interest due thereon on the ____ day of
each month (or if such date is not a Business Day, the next succeeding Business
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Day, commencing ________________ (each, a "PAYMENT DATE"), and not later than
___________, all remaining principal and interest (computed on the basis of a
360-day year of actual number of days elapsed) are due and payable in their
entirety as set forth in the Indenture.
Payments of principal and interest on this Note shall be made
on each Payment Date in such coin or currency of the United States of America as
at such time is legal tender for payment of public and private debts to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Record Date, or Redemption Record Date, as
applicable, for such Payment Date, which shall be the last Business Day of the
month preceding the month in which the Payment Date occurs (or in the case of
the initial Payment Date, the Closing Date), by wire transfer of immediately
available funds to the account and number specified in the Note Register on such
Record Date for such Person or, if no such account or number is so specified,
then by check mailed to such Person's address as it appears in the Note Register
on such Record Date. The holder hereof shall surrender this Note at the
principal Corporate Trust Office of the Trustee for the final installment of
principal of this Note.
This Note is one of a duly authorized issue of Class A Notes
of the Issuer designated as its _____% Asset-Backed Notes, Series ______, Class
A with aggregate principal amount of $__________ and to be issued under an
Indenture dated as of ________________ (herein called the "INDENTURE"), between
the Issuer and ____________________________________, 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 of the
Notes and of the terms upon which the Notes are, and are to be, authenticated
and delivered. The Trust Property secures the Notes equally and ratably without
prejudice, priority, or distinction between any Note of the same tranche and any
other Note of the same tranche by reason of difference in time of issuance or
otherwise, and also secures the payment of certain other amounts and certain
other obligations as set forth in the Indenture. This Note is issued under and
is subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Note by virtue of the acceptance hereof assents and
by which such Holder is bound.
Each Class A Noteholder by acceptance of its Class A Note (and
any Person which is a beneficial owner of any interest in a Class A Note, by
virtue of such Persons' acquisition of a beneficial interest therein) agrees to
treat the Class A Notes (or beneficial interest therein) for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness. Each Class A Noteholder agrees that it
will cause any Person acquiring an interest in a Class A Note through it to
acknowledge the Class A Notes' characterization as indebtedness and to treat the
Class A Notes as indebtedness for such tax purposes.
If an Indenture Event of Default or Amortization Event shall
occur and be continuing, the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in the Indenture and subject to the limitations
set forth therein and above, the transfer of this Note is registrable in the
Note Register, upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee
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duly executed by, the holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Notes, of authorized denominations and for the
same original aggregate principal amount, will be issued to the designated
transferee or transferees.
The Notes may be redeemed in part by the Issuer at the partial
redemption price set forth in the Indenture on any Payment Date on which the
outstanding Pool B Aggregate Discounted Contract Balance is less than 20% of the
Pool B Aggregate Discounted Contract Balance on the Closing Date in the manner
provided in the Indenture. The Notes may be redeemed by the Issuer, in whole but
not in part, at the redemption price set forth in the Indenture on any Payment
Date on which the Pool A Aggregate Discounted Contract Balance is less than 10%
of the Pool A Aggregate Discounted Contract Balance as of the Closing Date and
the Pool B Aggregate Discounted Contract Balance is less than 20% of the Pool B
Aggregate Discounted Contract Balance as of the Closing Date in the manner
provided in the Indenture.
The Notes are issuable only in registered form without coupons
in denominations as provided in the Indenture and subject to certain limitations
therein set forth. 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.
Prior to due presentment of this Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither the Issuer, the
Trustee nor any such agent shall be affected by notice to the contrary.
This Note and the Indenture may be amended or supplemented as
set forth in the Indenture.
By accepting this Note, the holder hereof irrevocably appoints
the Trustee under the Indenture as the special attorney-in-fact for the holder
vested with full power on behalf of the holder to effect and enforce the rights
of such holder and the provisions of the Indenture for the benefit of the
holder. The preceding provision in no way shall limit the right of the holder
hereof to demand payment hereunder or bring an action to enforce payment hereof.
All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
As provided in the Indenture, this Note and the Indenture
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to the conflict of laws principles thereof.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
This Class A Note does not purport to summarize the Indenture
and reference is made to the Indenture for information with respect to
interests, rights, benefits, obligations, proceeds and
A-1-3
<PAGE>
duties evidenced hereby and the rights, duties and immunities of the Trustee.
Copies of the Indenture and all amendments thereto will be provided to any
Noteholder, at its expense, upon a written request to the Trustee, at
_________________.
A-1-4
<PAGE>
IN WITNESS WHEREOF, ____________________ has caused this
instrument to be duly executed.
-----------------------------
By:
---------------------------------------
Name:
Title:
Dated:
------------------------------
This is one of the Notes referred to in the within mentioned Indenture.
- --------------------------,
as Trustee
By:
-----------------------------------------------
Authorized Signatory
A-1-5
<PAGE>
EXHIBIT B
TO INDENTURE
[FORM OF CLASS B NOTES]
NO BENEFICIAL OWNERS OF THIS NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT
OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED NOTES HAVE BEEN DELIVERED
PURSUANT TO THE TERMS OF THE INDENTURE.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, OR
DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN 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 REQUESTED 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.
BY ACCEPTANCE OF THIS NOTE, THE HOLDER AND ANY BENEFICIAL OWNER AGREES
TO TREAT THIS NOTE AS INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.
BY ITS ACCEPTANCE HEREOF, THE HOLDER AND ANY BENEFICIAL OWNER IS DEEMED
TO HAVE REPRESENTED TO THE ISSUER, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR
SERVICER EITHER (1) IT IS NOT ACQUIRING THIS NOTE WITH THE ASSETS OF A PLAN; OR
(2) THE ACQUISITION AND HOLDING OF THIS NOTE WILL NOT GIVE RISE TO A NONEXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975 OF THE
CODE.
No. 1 Principal Amount $_________
Due: ________________ CUSIP No. ___________
____% ASSET-BACKED NOTE, SERIES ______, CLASS B
DVI _________________, a Delaware corporation/limited
liability company/partnership/business trust (the "ISSUER"), for value received,
hereby promises to pay to CEDE & CO. or registered assigns, the principal sum of
_____________________ and __/100 Dollars
B-1
<PAGE>
($_________) in monthly installments equal to the sum of (i) the Class B Monthly
Principal, (ii) the Class B Overdue Principal and (iii) any other principal that
may be due hereon pursuant to the Indenture during an Amortization Event
together with (i) the Class B Monthly Interest and (ii) the Class B Overdue
Interest due thereon on the ____ day of each month (or if such date is not a
Business Day, the next succeeding Business Day, commencing ________________
(each, a "PAYMENT DATE"), and not later than ________________, all remaining
principal and interest (computed on the basis of a 360-day year of twelve 30-day
months) are due and payable in their entirety as set forth in the Indenture.
Payments of principal and interest on this Note shall be made
on each Payment Date in such coin or currency of the United States of America as
at such time is legal tender for payment of public and private debts to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Record Date, or Redemption Record Date, as
applicable, for such Payment Date, which shall be the last Business Day of the
month preceding the month in which the Payment Date occurs (or in the case of
the initial Payment Date, the Closing Date), by wire transfer of immediately
available funds to the account and number specified in the Note Register on such
Record Date for such Person or, if no such account or number is so specified,
then by check mailed to such Person's address as it appears in the Note Register
on such Record Date. The holder hereof shall surrender this Note at the
principal Corporate Trust Office of the Trustee for the final installment of
principal of this Note.
This Note is one of a duly authorized issue of Class B Notes
of the Issuer designated as its ____% Asset-Backed Notes, Series ______, Class B
with aggregate principal amount of $_________ and to be issued under an
Indenture dated as of ________________ (herein called the "INDENTURE"), between
the Issuer and __________________________, 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 of the Notes
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The Trust Property secures the Notes equally and ratably without
prejudice, priority, or distinction between any Note of the same class and any
other Note of the same class by reason of difference in time of issuance or
otherwise, and also secures the payment of certain other amounts and certain
other obligations as set forth in the Indenture. This Note is issued under and
is subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Note by virtue of the acceptance hereof assents and
by which such Holder is bound.
Each Class B Noteholder by acceptance of its Class B Note (and
any Person which is a beneficial owner of any interest in a Class B Note, by
virtue of such Persons' acquisition of a beneficial interest therein) agrees to
treat the Class B Notes (or beneficial interest therein) for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness. Each Class B Noteholder agrees that it
will cause any Person acquiring an interest in a Class B Note through it to
acknowledge the Class B Notes' characterization as indebtedness and to agree to
comply with the Indenture as to treatment of the Class B Notes as indebtedness
for such tax purpose.
If an Indenture Event of Default or Amortization Event shall
occur and be continuing, the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
B-2
<PAGE>
As provided in the Indenture and subject to the limitations
set forth therein and above, the transfer of this Note is registrable in the
Note Register, upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the holder hereof
or his attorney duly authorized in writing, and thereupon one or more new Notes,
of authorized denominations and for the same original aggregate principal
amount, will be issued to the designated transferee or transferees.
The Notes may be redeemed in part by the Issuer at the partial
redemption price set forth in the Indenture on any Payment Date on which the
outstanding Pool B Aggregate Discounted Contract Balance is less than 20% of the
Pool B Aggregate Discounted Contract Balance on the Closing Date in the manner
provided in the Indenture. The Notes may be redeemed by the Issuer, in whole but
not in part, at the redemption price set forth in the Indenture on any Payment
Date on which the Pool A Aggregate Discounted Contract Balance is less than 10%
of the Pool A Aggregate Discounted Contract Balance as of the Closing Date and
the Pool B Aggregate Discounted Contract Balance is less than 20% of the Pool B
Aggregate Discounted Contract Balance as of the Closing Date in the manner
provided in the Indenture.
The Notes are issuable only in registered form without coupons
in denominations as provided in the Indenture and subject to certain limitations
therein set forth. 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.
Prior to due presentment of this Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither the Issuer, the
Trustee nor any such agent shall be affected by notice to the contrary.
This Note and the Indenture may be amended or supplemented as
set forth in the Indenture.
By accepting this Note, the holder hereof irrevocably appoints
the Trustee under the Indenture as the special attorney-in-fact for the holder
vested with full power on behalf of the holder to effect and enforce the rights
of such holder and the provisions of the Indenture for the benefit of the
holder. The preceding provision in no way shall limit the right of the holder
hereof to demand payment hereunder or bring an action to enforce payment hereof.
All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
As provided in the Indenture, this Note and the Indenture
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to the conflict of laws principles thereof.
B-3
<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
This Class B Note does not purport to summarize the Indenture
and reference is made to the Indenture for information with respect to
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Indenture
and all amendments thereto will be provided to any Noteholder, at its expense,
upon a written request to the Trustee, at __________________.
B-4
<PAGE>
IN WITNESS WHEREOF, ___________________ has caused this
instrument to be duly executed.
-----------------------------------------
By:
---------------------------------------
Name:
Title:
Dated:
--------------------------------
This is one of the Notes referred to in the within mentioned Indenture.
______________________, as Trustee
By:
---------------------------------------
Authorized Signatory
B-5
<PAGE>
EXHIBIT C
TO INDENTURE
[FORM OF CLASS C NOTES]
NO BENEFICIAL OWNERS OF THIS NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT
OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED NOTES HAVE BEEN DELIVERED
PURSUANT TO THE TERMS OF THE INDENTURE.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, OR
DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN 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 REQUESTED 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.
BY ACCEPTANCE OF THIS NOTE, THE HOLDER AND ANY BENEFICIAL OWNER AGREES
TO TREAT THIS NOTE AS INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.
BY ITS ACCEPTANCE HEREOF, THE HOLDER AND ANY BENEFICIAL OWNER IS DEEMED
TO HAVE REPRESENTED TO THE ISSUER, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR
SERVICER THAT EITHER (1) IT IS NOT ACQUIRING THIS NOTE WITH THE ASSETS OF A
PLAN; OR (2) THE ACQUISITION AND HOLDING OF THIS NOTE WILL NOT GIVE RISE TO A
NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975
OF THE CODE.
No. 1 Principal Amount $_________
Due ________________ CUSIP No. ___________
____% ASSET-BACKED NOTE, SERIES ______, CLASS C
DVI _____________________, a Delaware corporation/limited
liability company/partnership/business trust (the "ISSUER"), for value received,
hereby promises to pay to CEDE & CO. or registered assigns, the principal sum of
__________________ and __/100 Dollars
C-1
<PAGE>
($_________) in monthly installments equal to the sum of (i) the Class C Monthly
Principal, (ii) the Class C Overdue Principal and (iii) any other principal that
may be due hereon pursuant to the Indenture during an Amortization Event
together with (i) the Class C Monthly Interest and (ii) the Class C Overdue
Interest due thereon on the ____ day of each month (or if such date is not a
Business Day, the next succeeding Business Day, commencing ________________
(each, a "PAYMENT DATE"), and not later than ________________, all remaining
principal and interest (computed on the basis of a 360-day year of twelve 30-day
months) are due and payable in their entirety as set forth in the Indenture.
Payments of principal and interest on this Note shall be made
on each Payment Date in such coin or currency of the United States of America as
at such time is legal tender for payment of public and private debts to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Record Date, or Redemption Record Date, as
applicable, for such Payment Date, which shall be the last Business Day of the
month preceding the month in which the Payment Date occurs (or in the case of
the initial Payment Date, the Closing Date), by wire transfer of immediately
available funds to the account and number specified in the Note Register on such
Record Date for such Person or, if no such account or number is so specified,
then by check mailed to such Person's address as it appears in the Note Register
on such Record Date. The holder hereof shall surrender this Note at the
principal Corporate Trust Office of the Trustee for the final installment of
principal of this Note.
This Note is one of a duly authorized issue of Class C Notes
of the Issuer designated as its ____% Asset-Backed Notes, Series ______, Class C
with aggregate principal amount of $_________ and to be issued under an
Indenture dated as of ________________ (herein called the "INDENTURE"), between
the Issuer and ________________________, 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 of the Notes
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The Trust Property secures the Notes equally and ratably without
prejudice, priority, or distinction between any Note of the same class and any
other Note of the same class by reason of difference in time of issuance or
otherwise, and also secures the payment of certain other amounts and certain
other obligations as set forth in the Indenture. This Note is issued under and
is subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Note by virtue of the acceptance hereof assents and
by which such Holder is bound.
Each Class C Noteholder by acceptance of its Class C Note (and
any Person which is a beneficial owner of any interest in a Class C Note, by
virtue of such Persons' acquisition of a beneficial interest therein) agrees to
treat the Class C Notes (or beneficial interest therein) for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness. Each Class C Noteholder agrees that it
will cause any Person acquiring an interest in a Class C Note through it to
acknowledge the Class C Notes' characterization as indebtedness and to agree to
comply with the Indenture as to treatment of the Class C Notes as indebtedness
for such tax purpose.
If an Indenture Event of Default or Amortization Event shall
occur and be continuing, the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
C-2
<PAGE>
As provided in the Indenture and subject to the limitations
set forth therein and above, the transfer of this Note is registrable in the
Note Register, upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the holder hereof
or his attorney duly authorized in writing, and thereupon one or more new Notes,
of authorized denominations and for the same original aggregate principal
amount, will be issued to the designated transferee or transferees.
The Notes may be redeemed in part by the Issuer at the partial
redemption price set forth in the Indenture on any Payment Date on which the
outstanding Pool B Aggregate Discounted Contract Balance is less than 20% of the
Pool B Aggregate Discounted Contract Balance on the Closing Date in the manner
provided in the Indenture. The Notes may be redeemed by the Issuer, in whole but
not in part, at the redemption price set forth in the Indenture on any Payment
Date on which the Pool A Aggregate Discounted Contract Balance is less than 10%
of the Pool A Aggregate Discounted Contract Balance as of the Closing Date and
the Pool B Aggregate Discounted Contract Balance is less than 20% of the Pool B
Aggregate Discounted Contract Balance as of the Closing Date in the manner
provided in the Indenture.
The Notes are issuable only in registered form without coupons
in denominations as provided in the Indenture and subject to certain limitations
therein set forth. 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.
Prior to due presentment of this Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither the Issuer, the
Trustee nor any such agent shall be affected by notice to the contrary.
This Note and the Indenture may be amended or supplemented as
set forth in the Indenture.
By accepting this Note, the holder hereof irrevocably appoints
the Trustee under the Indenture as the special attorney-in-fact for the holder
vested with full power on behalf of the holder to effect and enforce the rights
of such holder and the provisions of the Indenture for the benefit of the
holder. The preceding provision in no way shall limit the right of the holder
hereof to demand payment hereunder or bring an action to enforce payment hereof.
All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
As provided in the Indenture, this Note and the Indenture
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to the conflict of laws principles thereof.
C-3
<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
This Class C Note does not purport to summarize the Indenture
and reference is made to the Indenture for information with respect to
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Indenture
and all amendments thereto will be provided to any Noteholder, at its expense,
upon a written request to the Trustee, at _________________.
C-4
<PAGE>
IN WITNESS WHEREOF, ____________________ has caused this
instrument to be duly executed.
---------------------------------------
By:
---------------------------------------
Name:
Title:
Dated:
This is one of the Notes referred
to in the within mentioned Indenture.
, as Trustee
- -----------------------------
By:
---------------------------------------
Authorized Signatory
C-5
<PAGE>
EXHIBIT D
TO INDENTURE
[FORM OF CLASS D NOTES]
NO BENEFICIAL OWNERS OF THIS NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT
OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED NOTES HAVE BEEN DELIVERED
PURSUANT TO THE TERMS OF THE INDENTURE.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, OR
DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO BELOW.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN 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 REQUESTED 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.
BY ACCEPTANCE OF THIS NOTE, THE HOLDER AND ANY BENEFICIAL OWNER AGREES
TO TREAT THIS NOTE AS INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.
BY ITS ACCEPTANCE HEREOF, THE HOLDER AND ANY BENEFICIAL OWNER IS DEEMED
TO HAVE REPRESENTED TO THE ISSUER, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR
SERVICER THAT EITHER (1) IT IS NOT ACQUIRING THIS NOTE WITH THE ASSETS OF A
PLAN; OR (2) THE ACQUISITION AND HOLDING OF THIS NOTE WILL NOT GIVE RISE TO A
NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975
OF THE CODE.
No. 1 Principal Amount $_________
Due: ________________ CUSIP No. ___________
____% ASSET-BACKED NOTE, SERIES ______, CLASS D
___________________, a Delaware corporation/limited liability
company/partnership/business trust (the "ISSUER"), for value received, hereby
promises to pay to CEDE & CO. or registered assigns, the principal sum of
_____________ and __/100 Dollars ($_________) in monthly installments equal to
the sum of (i) the Class D Monthly Principal, (ii) the Class D Overdue
D-1
<PAGE>
Principal and (iii) any other principal that may be due hereon pursuant to the
Indenture during an Amortization Event together with (i) the Class D Monthly
Interest and (ii) the Class D Overdue Interest due thereon on the ____ day of
each month (or if such date is not a Business Day, the next succeeding Business
Day, commencing ________________ (each, a "PAYMENT DATE"), and not later than
________________, all remaining principal and interest (computed on the basis of
a 360-day year of twelve 30-day months) are due and payable in their entirety as
set forth in the Indenture.
THE RIGHTS TO RECEIVE PAYMENTS WITH RESPECT TO THIS CLASS D
NOTE ARE SUBORDINATE TO THE PRIOR PAYMENT IN FULL ON EACH PAYMENT DATE OF
CERTAIN AMOUNTS DUE AND PAYABLE ON THE CLASS A NOTES, THE CLASS B NOTES AND THE
CLASS C NOTES AS PROVIDED IN THE INDENTURE.
Payments of principal and interest on this Note shall be made
on each Payment Date in such coin or currency of the United States of America as
at such time is legal tender for payment of public and private debts to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Record Date or Redemption Date, as applicable,
for such Payment Date, which shall be the last Business Day of the month
preceding the month in which the Payment Date occurs (or in the case of the
initial Payment Date, the Closing Date), by wire transfer of immediately
available funds to the account and number specified in the Note Register on such
Record Date for such Person or, if no such account or number is so specified,
then by check mailed to such Person's address as it appears in the Note Register
on such Record Date. The holder hereof shall surrender this Note at the
principal Corporate Trust Office of the Trustee for the final installment of
principal of this Note.
This Note is one of a duly authorized issue of Class D Notes
of the Issuer designated as its ____% Asset-Backed Notes, Series ______, Class D
with aggregate principal amount of $_________ and to be issued under an
Indenture dated as of ________________ (herein called the "INDENTURE"), between
the Issuer and ______________________, 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 of the Notes
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The Trust Property secures the Notes equally and ratably without
prejudice, priority, or distinction between any Note of the same class and any
other Note of the same class by reason of difference in time of issuance or
otherwise, and also secures the payment of certain other amounts and certain
other obligations as set forth in the Indenture. This Note is issued under and
is subject to the terms, provisions and conditions of the Indenture, to which
Indenture the Holder of this Note by virtue of the acceptance hereof assents and
by which such Holder is bound.
Each Class D Noteholder by acceptance of its Class D Note (and
any Person that is a beneficial owner of any interest in a Class D Note, by
virtue of such Person's acquisition of a beneficial interest therein) agrees to
treat the Class D Notes for purposes of federal, state and local income or
franchise taxes (and any other tax imposed on or measured by income) as
indebtedness. Each Class D Noteholder agrees that it will cause any Person
acquiring an interest in a Class D Note through it to acknowledge the Class D
Notes' characterization as indebtedness and to agree to comply with this
Indenture as to treatment of the Class D Notes as indebtedness for such tax
purposes.
D-2
<PAGE>
If an Indenture Event of Default or Amortization Event shall
occur and be continuing, the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in the Indenture and subject to the limitations
set forth therein and above, the transfer of this Note is registrable in the
Note Register, upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the holder hereof
or his attorney duly authorized in writing, and thereupon one or more new Notes,
of authorized denominations and for the same original aggregate principal
amount, will be issued to the designated transferee or transferees.
The Notes may be redeemed in part by the Issuer at the partial
redemption price set forth in the Indenture on any Payment Date on which the
outstanding Pool B Aggregate Discounted Contract Balance is less than 20% of the
Pool B Aggregate Discounted Contract Balance on the Closing Date in the manner
provided in the Indenture. The Notes may be redeemed by the Issuer, in whole but
not in part, at the redemption price set forth in the Indenture on any Payment
Date on which the Pool A Aggregate Discounted Contract Balance is less than 10%
of the Pool A Aggregate Discounted Contract Balance as of the Closing Date and
the Pool B Aggregate Discounted Contract Balance is less than 20% of the Pool B
Aggregate Discounted Contract Balance as of the Closing Date in the manner
provided in the Indenture.
The Notes are issuable only in registered form without coupons
in denominations as provided in the Indenture and subject to certain limitations
therein set forth. 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.
Prior to due presentment of this Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither the Issuer, the
Trustee nor any such agent shall be affected by notice to the contrary.
This Note and the Indenture may be amended or supplemented as
set forth in the Indenture.
By accepting this Note, the holder hereof irrevocably appoints
the Trustee under the Indenture as the special attorney-in-fact for the holder
vested with full power on behalf of the holder to effect and enforce the rights
of such holder and the provisions of the Indenture for the benefit of the
holder. The preceding provision in no way shall limit the right of the holder
hereof to demand payment hereunder or bring an action to enforce payment hereof.
All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
As provided in the Indenture, this Note and the Indenture
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to the conflict of laws principles thereof.
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<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
This Class D Note does not purport to summarize the Indenture
and reference is made to the Indenture for information with respect to
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Indenture
and all amendments thereto will be provided to any Noteholder, at its expense,
upon a written request to the Trustee, at _______________.
D-4
<PAGE>
IN WITNESS WHEREOF, _____________________ has caused this
instrument to be duly executed.
By:
----------------------------------
Name:
Title:
Dated:
---------------------------------------
This is one of the Notes referred to in the within mentioned Indenture.
, as Trustee
- ------------------------------------
By:
---------------------------------------
Authorized Signatory
D-5
<PAGE>
EXHIBIT E
TO INDENTURE
[FORM OF CLASS E NOTES]
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN 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 REQUESTED 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.
BY ACCEPTANCE OF THIS NOTE, THE HOLDER AND ANY BENEFICIAL OWNER AGREES
TO TREAT THIS NOTE AS INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.
THIS NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAW OF ANY STATE. ANY RESALE,
TRANSFER OR OTHER DISPOSITION OF THIS NOTE WITHOUT SUCH REGISTRATION OR
QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH
REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION
2.04 OF THE INDENTURE REFERRED TO HEREIN.
BY ITS ACCEPTANCE HEREOF, THE HOLDER AND ANY BENEFICIAL OWNER IS DEEMED
TO HAVE REPRESENTED TO THE ISSUER, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR
SERVICER THAT EITHER (1) IT IS NOT ACQUIRING THIS NOTE WITH THE ASSETS OF A
PLAN; OR (2) THE ACQUISITION AND HOLDING OF THIS NOTE WILL NOT GIVE RISE TO A
NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406(a) OF ERISA OR SECTION 4975
OF THE CODE.
THIS CLASS E NOTE MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS (i) SUCH TRANSFEREE IS A "UNITED STATES PERSON" AS DEFINED IN SECTION
7701(a)(30) OF THE CODE; (ii) (A) SUCH TRANSFEREE IS NOT A GRANTOR TRUST,
PARTNERSHIP OR S CORPORATION FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR
(B) SUCH TRANSFEREE IS A GRANTOR TRUST, PARTNERSHIP OR S CORPORATION FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES, BUT AFTER GIVING EFFECT TO SUCH TRANSFER OF
CLASS E NOTES TO SUCH TRANSFEREE, SUBSTANTIALLY ALL OF THE VALUE OF THE INTEREST
OF AN OWNER OF THE TRANSFEREE IN THE TRANSFEREE WILL NOT BE ATTRIBUTABLE TO THE
PASS-THROUGH ENTITY'S OWNERSHIP INTEREST IN SECURITIES ISSUED BY THE ISSUER
OTHER THAN THE CLASS A, CLASS B AND CLASS C NOTES AND (ii) FOR THE PURPOSES OF
SECTION 7704 OF THE CODE AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER,
E-1
<PAGE>
AFTER SUCH TRANSFER THE ISSUER WOULD NOT BE TREATED AS HAVING MORE THAN 100
PARTNERS.
No. 1 Principal Amount $_________
Due: ________________ CUSIP No. ___________
____% ASSET-BACKED NOTE, SERIES ______, CLASS E
_________________, a Delaware corporation/limited liability
company/partnership/business trust (the "ISSUER"), for value received, hereby
promises to pay to CEDE & CO. or registered assigns, the principal sum of
_____________ and __/100 Dollars ($_________) in monthly installments equal to
the sum of (i) the Class E Monthly Principal, (ii) the Class E Overdue Principal
and (iii) any other principal that may be due hereon pursuant to the Indenture
during an Amortization Event together with (i) the Class E Monthly Interest and
(ii) the Class E Overdue Interest due thereon on the ____ day of each month (or
if such date is not a Business Day, the next succeeding Business Day, commencing
________________ (each, a "PAYMENT DATE"), and not later than ________________,
all remaining principal and interest (computed on the basis of a 360-day year of
twelve 30-day months) are due and payable in their entirety as set forth in the
Indenture.
THE RIGHTS TO RECEIVE PAYMENTS WITH RESPECT TO THIS CLASS E
NOTE ARE SUBORDINATE TO THE PRIOR PAYMENT IN FULL ON EACH PAYMENT DATE OF
CERTAIN AMOUNTS DUE AND PAYABLE ON THE CLASS A NOTES, THE CLASS B NOTES, THE
CLASS C NOTES AND THE CLASS D NOTES AS PROVIDED IN THE INDENTURE.
Payments of principal and interest on this Note shall be made
on each Payment Date in such coin or currency of the United States of America as
at such time is legal tender for payment of public and private debts to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on the Record Date or Redemption Date, as applicable,
for such Payment Date, which shall be the last Business Day of the month
preceding the month in which the Payment Date occurs (or in the case of the
initial Payment Date, the Closing Date), by wire transfer of immediately
available funds to the account and number specified in the Note Register on such
Record Date for such Person or, if no such account or number is so specified,
then by check mailed to such Person's address as it appears in the Note Register
on such Record Date. The holder hereof shall surrender this Note at the
principal Corporate Trust Office of the Trustee for the final installment of
principal of this Note.
This Note is one of a duly authorized issue of Class E Notes
of the Issuer designated as its ____% Asset-Backed Notes, Series ______, Class E
with aggregate principal amount of $_________ and to be issued under an
Indenture dated as of ________________ (herein called the "INDENTURE"), between
the Issuer and ________________, 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 of the Notes and of the terms upon
which the Notes are, and are to be, authenticated and delivered. The Trust
Property secures the Notes equally and ratably without prejudice, priority, or
distinction between any Note of
E-2
<PAGE>
the same class and any other Note of the same class by reason of difference in
time of issuance or otherwise, and also secures the payment of certain other
amounts and certain other obligations as set forth in the Indenture. This Note
is issued under and is subject to the terms, provisions and conditions of the
Indenture, to which Indenture the Holder of this Note by virtue of the
acceptance hereof assents and by which such Holder is bound.
The Issuer, the Trustee and each Class E Noteholder by
acceptance of its Class E Note (and any Person that is a beneficial owner of any
interest in a Class E Note, by virtue of such Person's acquisition of a
beneficial interest therein) agrees to treat the Class E Notes for purposes of
federal, state and local income or franchise taxes (and any other tax imposed on
or measured by income) as indebtedness. Each Class E Noteholder agrees that it
will cause any Person acquiring an interest in a Class E Note through it to
acknowledge the Class E Notes' characterization as indebtedness and to agree to
comply with this Indenture as to treatment of the Class E Notes as indebtedness
for such tax purposes.
If an Indenture Event of Default or Amortization Event shall
occur and be continuing, the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in the Indenture and subject to the limitations
set forth therein and above, the transfer of this Note is registrable in the
Note Register, upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the holder hereof
or his attorney duly authorized in writing, and thereupon one or more new Notes,
of authorized denominations and for the same original aggregate principal
amount, will be issued to the designated transferee or transferees.
The Notes may be redeemed in part by the Issuer at the partial
redemption price set forth in the Indenture on any Payment Date on which the
outstanding Pool B Aggregate Discounted Contract Balance is less than 20% of the
Pool B Aggregate Discounted Contract Balance on the Closing Date in the manner
provided in the Indenture. The Notes may be redeemed by the Issuer, in whole but
not in part, at the redemption price set forth in the Indenture on any Payment
Date on which the Pool A Aggregate Discounted Contract Balance is less than 10%
of the Pool A Aggregate Discounted Contract Balance as of the Closing Date and
the Pool B Aggregate Discounted Contract Balance is less than 20% of the Pool B
Aggregate Discounted Contract Balance as of the Closing Date in the manner
provided in the Indenture.
The Notes are issuable only in registered form without coupons
in denominations as provided in the Indenture and subject to certain limitations
therein set forth. 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.
Prior to due presentment of this Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither the Issuer, the
Trustee nor any such agent shall be affected by notice to the contrary.
E-3
<PAGE>
This Note and the Indenture may be amended or supplemented as
set forth in the Indenture.
By accepting this Note, the holder hereof irrevocably appoints
the Trustee under the Indenture as the special attorney-in-fact for the holder
vested with full power on behalf of the holder to effect and enforce the rights
of such holder and the provisions of the Indenture for the benefit of the
holder. The preceding provision in no way shall limit the right of the holder
hereof to demand payment hereunder or bring an action to enforce payment hereof.
All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
As provided in the Indenture, this Note and the Indenture
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to the conflict of laws principles thereof.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
This Class E Note does not purport to summarize the Indenture
and reference is made to the Indenture for information with respect to
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Indenture
and all amendments thereto will be provided to any Noteholder, at its expense,
upon a written request to the Trustee, at __________________.
E-4
<PAGE>
IN WITNESS WHEREOF, _________________________ has caused this
instrument to be duly executed.
-----------------------------------------
By:
By:
--------------------------------------
Name:
Title:
- -----------------------------------------
Dated:
This is one of the Notes referred to in the within mentioned Indenture.
, as Trustee
- ------------------------------------
By:-----------------------------------------
Authorized Signatory
E-5
<PAGE>
EXHIBIT F
TO INDENTURE
[FORM OF CLASS F INSTRUMENT TO BE PROVIDED WITH ANY
SUPPLEMENT PURSUANT TO WHICH CLASS F INSTRUMENTS ARE ISSUED]
F-1
<PAGE>
EXHIBIT G
TO INDENTURE
INVESTMENT LETTER
_______________, 199__
[Issuer]
DVI Financial Services Inc.
500 Hyde Park
Doylestown, Pennsylvania 18901
[Trustee]
Re: $ % Asset-Backed Notes, Series ______,
Class ______ CUSIP NUMBER
---------------------------------------------------
Ladies and Gentlemen:
___________________________ (the "SELLER") intends to transfer
$_____________ in aggregate principal amount of the captioned Notes to
_____________________ (the "PURCHASER").
1. In connection with such transfer, and in accordance with
Section 2.04 of the Indenture, dated as of ________________ (the "INDENTURE";
all capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Indenture), between __________ (the "ISSUER") and
_________________, not in its individual capacity but solely as Trustee (the
"TRUSTEE"), pursuant to which the Notes were issued, the Seller hereby certifies
to you the following facts: Neither the Seller nor anyone acting on its behalf
has offered, transferred, pledged, sold or otherwise disposed of the Notes, any
interest in the Notes or any other similar security to, or solicited any offer
to buy or accept a transfer, pledge or other disposition of the Notes, any
interest in the Notes or any other similar security with, any person in any
manner, or made any general solicitation by means of general advertising or in
any other manner, or taken any other action which would constitute a
distribution of the Notes under the Securities Act of 1933, as amended (the
"1933 ACT"), or under state securities laws, or which would render the
disposition of the Notes a violation of Section 5 of the 1933 Act or applicable
state securities laws or require registration pursuant thereto.
2. The Purchaser warrants and represents to, and covenants
with, the Trustee pursuant to Section 2.04 of the Indenture that:
(a) The Purchaser agrees to be bound, as Noteholder, by all of
the terms, covenants and conditions of the Indenture and the Notes, and
from and after the date hereof, the Purchaser
G-1
<PAGE>
assumes for the benefit of each of the Trustee and the Seller all of
the Seller's obligations as Noteholder thereunder;
(b) The Purchaser understands that the Notes have not been and
may never be registered under the 1933 Act or the securities laws of
any state;
(c) The Purchaser is acquiring the Notes for investment for
its own account or the account of another qualified institutional buyer
(within the meaning of Rule 144A under the 1933 Act) only and not for
any other person or with a view to the distribution thereof in
violation of applicable securities laws;
(d) The Purchaser considers itself a substantial,
sophisticated institutional investor having such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Notes;
(e) The Purchaser has been furnished with all information
regarding the Notes that it has requested from the Seller or the
Trustee and has been afforded the opportunity to ask all questions it
reasonably desires to ask of the Seller (and all such questions have
been answered to the Purchaser's satisfaction); and
(f) Neither the Purchaser nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Notes,
any interest in the Notes or any other similar security to, or
solicited any offer to buy or accept a transfer, pledge or other
disposition of the Notes, any interest in the Notes or any other
similar security from, or otherwise approached or negotiated with
respect to the Notes, any interest in the Notes or any other similar
security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action which would constitute a distribution of the
Notes under the 1933 Act or applicable state securities laws or which
would render the disposition of the Notes a violation of Section 5 of
the 1933 Act or applicable state securities laws or require
registration pursuant thereto, nor will it act, nor has it authorized
or will it authorize any person to act, in such manner with respect to
the Notes.
(g) The Purchaser will strictly comply with the Indenture as
to treatment of the Class ___ Notes as indebtedness of the Transferor
for purposes of federal, state and local income or franchise taxes and
any other tax imposed on or measured by income.
3. The Purchaser represents and warrants to the Issuer, the
Trustee, the Servicer and any successor Servicer that either (1) it is not
acquiring this Note with the assets of a Plan; or (2) the acquisition and
holding of this Note will not give rise to a nonexempt prohibited transaction
under Section 406(a) of ERISA or section 4975 of the code.
4. The Purchaser understands and agrees with the Seller that
the Seller is transferring the Notes pursuant to the exemption from registration
under the 1933 Act provided by Rule 144A thereunder ("RULE 144A") and the
Purchaser hereby represents and warrants to the Seller and the Trustee that the
Purchaser is a "qualified institutional buyer" as defined in Rule 144A.
G-2
<PAGE>
The Purchaser acknowledges that it is familiar with Rule 144A
and understand that you are and will continue to rely on the statements made
herein.
5. This Certification may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Investment
Letter to be executed by their duly authorized officers as of the date first
above written.
- -------------------------------- ------------------------------------
Seller Purchaser
By: By:
-------------------------- ---------------------------------
Its: Its:
-------------------------- ---------------------------------
Taxpayer Identification Taxpayer Identification
No. No.
-------------------------- ------------------------------
G-3
<PAGE>
EXHIBIT H
TAX CERTIFICATE
[With respect to the Class E Notes]
The undersigned hereby certifies and represents as follows to the
parties listed in the Indenture to which this certification relates with respect
to the Class E Notes described therein:
This Tax Certificate ("certificate") is delivered in
connection with the acquisition of, transfer to or possession by the
undersigned, whether as beneficial owner (the "Beneficial Owner"), or nominee on
behalf of the Beneficial Owner of the above-described Class E Notes.
Each Holder must complete Part I, Part II (if the holder is a
nominee), Part III, Part IV and in all cases sign and otherwise complete this
certificate. Each Holder shall submit with this certificate an IRS Form W-9 (or
any such successor form) to such Holder.
Part I
1. _______________ (Name of Beneficial Owner) is not a
foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined
in the Code and Treasury Regulations);
2. The Beneficial Owner's office address and place of
incorporation (if applicable) is _______________; and
3. The Beneficial Owner's U.S. employer identification
number is ---------------.
Part II - Nominees
If the undersigned is the nominee for the Beneficial Owner,
the undersigned certifies that this certificate has been made in reliance upon
information contained in:
____ an IRS Form W-9
____ a form such as this or substantially similar
provided to the undersigned by an appropriate person and (i) the undersigned
agrees to notify the Trustee at least thirty (30) days prior to the date that
the form relied upon becomes obsolete, and (ii) in connection with a change in
Beneficial Owners, the undersigned agrees to submit a new Tax Certificate to the
Trustee promptly after such change.
I-1
<PAGE>
Part III - Declaration
The undersigned, as the Beneficial Owner or a nominee thereof,
agrees to notify the Trustee within sixty (60) days of the date that the
Beneficial Owner becomes a foreign person. The undersigned understands that this
certificate may be disclosed to the Internal Revenue Service by the Trustee and
any false statement contained therein could be punishable by fines, imprisonment
or both.
Part IV - Representation
The undersigned hereby represents, warrants and agrees that it
:
(1) (a) is purchasing the Class E Note for its own
account and is the sole beneficial owner of such Note;
(b) either (i) is not, for federal income tax
purposes, a partnership, trust, estate or "S Corporation" (as defined in the
Code) (each a "Pass-through Entity") or (ii) is for federal income tax purposes,
a Pass-through Entity, but after giving effect to our purchase of such Note less
than 50 percent of the aggregate value of our assets would consist of Class E
Notes; and
(c) such Note has not been transferred through an
"established securities market"
within the meaning of Section 7704(b) of the Code;
(2) if we are a Pass-through Entity, we covenant that the
portion of our assets consisting of Class E Notes will remain below 50 percent
at all times; and
(3) if it resells or transfers any of the Class E Notes, it
will obtain from each subsequent purchaser or transferee a letter containing the
same representations and agreements as set forth herein.
The undersigned understands and agrees that no initial or subsequent
sale or other transfer of a Class E Note may be made unless such sale or
transfer (i) is accompanied by delivery of a tax statement in the form of this
letter, (ii) is made to a "United States Person" as defined in Section
7701(a)(30) of the code, as certified in such tax statement, and (iii) will not
cause the Issuer to be treated as a publicly traded partnership for United
States federal income tax purposes. Any attempted transfer, assignment,
conveyance, participation or subdivision in contravention of the preceding
restrictions, as reasonably determined by the Trustee, shall be void AB INITIO
and the purported transferor, seller or subdivider of such Class E Note shall
continue to be treated as the Holder of such Note for all purposes of the
Indenture.
IN WITNESS WHEREOF, the undersigned has caused this
certificate to be executed by its duly authorized officer as of the date first
above written.
-------------------------------------
Purchaser
By:
---------------------------------
Its:
---------------------------------
I-2
<PAGE>
APPENDIX I
----------
Definition of terms used in the Contribution and Servicing
Agreement, the Indenture, the Subsequent Contract Transfer Agreement, any Trust
Agreement and the Underwriting Agreement. The following terms, unless the
context otherwise requires, shall have the following meanings and such meanings
shall be equally applicable to both the singular and plural forms of such terms:
ACT: with respect to any Noteholder, as defined in Section
1.04(a) of the Indenture.
AFFILIATE: of any specified Person, any other Person (i) which
directly or indirectly controls, or whose directors or officers directly or
indirectly control, or is controlled by, or is under common control with, such
specified Person, (ii) which beneficially owns or holds, or whose directors or
officers beneficially own or hold, 5% or more of any class of the voting stock
(or, in the case of an entity that is not a corporation, 5% of the equity
interest) of such specified Person, or (iii) 5% or more of the voting stock (or,
in the case of an entity that is not a corporation, 5% of the equity interest)
of which is owned or held by 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 CONTRACT BALANCE: means, with respect to
any date of
determination, the sum of the Discounted Contract Balances of all Contracts.
AGGREGATE NOTE BALANCE: means the sum of (i) the Note Balance
for the Class A Notes, (ii) the Note Balance for the Class B Notes, (iii) the
Note Balance for the Class C Notes, (iv) the Note Balance for the Class D Notes
and (v) the Note Balance for the Class E Notes .
AMORTIZATION EVENT: means the occurrence of any one of the
following events and notice from Noteholders evidencing not less than 66-2/3% of
the Voting Rights to the Trustee declaring that such event shall constitute an
Amortization Event:
(i) The entry by a court having jurisdiction
in the premises of (A) a decree or order for relief in respect
of DVI, Inc. 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 DVI, Inc. a bankrupt or insolvent, or approving as
properly filed a petition servicing reorganization,
arrangement, adjustment, or composition of or in respect of
DVI, Inc. under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator, or other similar official of DVI, Inc.
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 90
consecutive days; or
(ii) The commencement by DVI, Inc. 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
<PAGE>
adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of DVI,
Inc. 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 DVI, Inc. or of any substantial part of its
property, or the making by it of an assignment for the benefit
of creditors, or DVI, Inc.'s failure to pay its debts
generally as they become due, or the taking of corporate
action by DVI, Inc. in furtherance of any such action; or
(iii) On and as of any Determination Date,
(x) the quotient of (1) the sum of the Discounted Contract
Balances of all Contracts listed as more than 90 days
delinquent as of the last day of the three immediately
preceding calendar months, divided by (2) three exceeds (y)
the product of (1) 0.08 and (2) the quotient of (A) the sum of
the Aggregate Discounted Contract Balance as of the last day
of the three immediately preceding Collection Periods, divided
by (B) three; or
(iv) As of any Determination Date, the sum
of Discounted Contract Balances of all Contracts that have
been classified as Defaulted Contracts since the Closing Date
(such Discounted Contract Balances to be determined
immediately prior to the classification as a Defaulted
Contract) exceeds the product of (1) 0.06 and (2) the
Aggregate Discounted Contract Balance on the Closing Date.
AUTHORIZED OFFICER: with respect to any matter, any officer of
or other Person representing the Issuer, the Transferor, the Contributor, the
Servicer, the Trustee, the Owner Trustee or a Noteholder, as the case may be,
who is authorized to act for that party.
AVAILABLE FUNDS: means, with respect to each Payment Date, the
excess of (i) all amounts on deposit in the Collection Account on the second
Business Day preceding such Payment Date over (ii) any portion thereof
representing Contract Payments due, or voluntary prepayments deposited therein,
subsequent to the end of the related Collection Period.
AVAILABLE RESERVE ACCOUNT FUNDS: has the meaning set forth in
Section 3.04(c) of the Indenture.
BALLOON PAYMENT: means, with respect to any Contract, a final
Contract Payment that is at least equal to six times any other Contract Payment
related to such Contract.
BOOK-ENTRY CUSTODIAN: means, the Person appointed pursuant to
the terms of the Indenture to act in accordance with a certain Letter of
Representations agreement such person has with DTC, in which DTC delegates its
duties to maintain the Book-Entry Notes to such Person and authorizes such
Person to perform such duties.
2
<PAGE>
BOOK-ENTRY NOTE(S): means each Note for so long as such Note
is registered in the name of its depository or its nominee in accordance with
the terms and conditions of the Indenture.
BUSINESS DAY: any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in which the
Corporate Trust Office is located are authorized or required by law or executive
order to close.
CAPITAL STOCK: the Transferor's common stock, $1.00 par value.
CLASS A DISTRIBUTION SUB-ACCOUNT: the sub-account or
sub-accounts by that name established and maintained by the Trustee pursuant to
Section 3.01 of the Indenture.
CLASS A MONTHLY INTEREST: means, for any Payment Date, the
product of (i) one-twelfth, (ii) the Class A Note Rate and (iii) the Class A
Note Balance on the immediately preceding Payment Date (or, in the case of the
first Payment Date, the Closing Date) after giving effect to all principal
payments on the Class A Notes on such Payment Date. The Class A Monthly Interest
shall be calculated based upon a twelve month year of thirty days in each month,
except for the first Payment Date, for which interest shall accrue from the
Closing Date to but excluding such Payment Date.
CLASS A MONTHLY PRINCIPAL: means (A) on any Payment Date other
than the Class A Stated Maturity Date, the product of (x) the Class A Percentage
and (y) Monthly Principal, and (B) on the Class A Stated Maturity Date, the
entire amount of the then outstanding Class A Note Balance.
CLASS A NOTE BALANCE: means, as of the Closing Date,
$___________ and thereafter shall equal the Class A Note Balance as of the
Closing Date reduced by all principal payments on all of the Class A Notes.
CLASS A NOTEHOLDER: at any time, any Person in whose name a
Class A Note is registered in the Note Register.
CLASS A NOTES: any Class A Note described in Article II of,
and authorized by, and authenticated and delivered under, the Indenture.
CLASS A OVERDUE INTEREST: means, for any Payment Date, the
excess, if any, of (a) the aggregate amount of Class A Monthly Interest payable
on all prior Payment Dates over (b) the aggregate amount of interest actually
paid to the Class A Noteholders on all prior Payment Dates.
CLASS A OVERDUE PRINCIPAL: means, as of any Payment Date, the
excess, if any, of (a) the aggregate amount of Class A Monthly Principal due on
the Class A Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class A Noteholders on all prior Payment Dates.
CLASS A PERCENTAGE: _____%.
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CLASS A STATED MATURITY DATE: means the Payment Date occurring
in _____________.
CLASS B DISTRIBUTION SUB-ACCOUNT: the sub-account or
sub-accounts by that name established and maintained by the Trustee pursuant to
Section 3.01 of the Indenture.
CLASS B MONTHLY INTEREST: means, for any Payment Date, the
product of (i) one-twelfth, (ii) the Class B Note Rate and (iii) the Class B
Note Balance on the immediately preceding Payment Date (or, in the case of the
first Payment Date, the Closing Date) after giving effect to all principal
payments on the Class B Notes on such Payment Date. The Class B Monthly Interest
shall be calculated based upon a twelve month year of thirty days in each month,
except for the first Payment Date, for which interest shall accrue from the
Closing Date to but excluding such Payment Date.
CLASS B MONTHLY PRINCIPAL: means (A) on any Payment Date other
than the Class B Stated Maturity Date, the product of (x) the Class B Percentage
and (y) Monthly Principal, and (B) on the Class B Stated Maturity Date, the
entire amount of the then outstanding Class B Note Balance.
CLASS B NOTE BALANCE: means, as of the Closing Date,
$_________ and thereafter shall equal the Class B Note Balance as of the Closing
Date reduced by all principal payments on the Class B Notes.
CLASS B NOTE RATE: ____________ percent (_____%) per annum.
CLASS B NOTEHOLDER: at any time, any Person in whose name a
Class B Note is registered in the Note Register.
CLASS B NOTES: any Class B Notes described in Article II of,
and authorized by, and authenticated and delivered under, the Indenture.
CLASS B OVERDUE INTEREST: means, for any Payment Date, the
excess, if any, of (a) the aggregate amount of Class B Monthly Interest payable
on all prior Payment Dates over (b) the aggregate amount of interest actually
paid to the Class B Noteholders on all prior Payment Dates.
CLASS B OVERDUE PRINCIPAL: means, as of any Payment Date, the
excess, if any, of (a) the aggregate amount of Class B Monthly Principal due on
the Class B Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class B Noteholders on all prior Payment Dates.
CLASS B PERCENTAGE: ____%.
CLASS B STATED MATURITY DATE: means the Payment Date occurring
in ____________.
CLASS C DISTRIBUTION SUB-ACCOUNT: the sub-account or
sub-accounts by that name established and maintained by the Trustee pursuant to
Section 3.01 of the Indenture.
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CLASS C MONTHLY INTEREST: means, for any Payment Date, the
product of (i) one-twelfth, (ii) the Class C Note Rate and (iii) the Class C
Note Balance on the immediately preceding Payment Date (or, in the case of the
first Payment Date, the Closing Date) after giving effect to all principal
payments on the Class C Note on such Payment Date. The Class C Monthly Interest
shall be calculated based upon a twelve month year of thirty days in each month,
except for the first Payment Date, for which interest shall accrue from the
Closing Date to but excluding such Payment Date.
CLASS C MONTHLY PRINCIPAL: means, (A) on any Payment Date
other than the Class C Stated Maturity Date, an amount equal to the product of
(x) the Class C Percentage and (y) the Monthly Principal and (B) on the Class C
Stated Maturity Date, the entire amount of the then outstanding Class C Note
Balance.
CLASS C NOTEHOLDER: at any time, any Person in whose name a
Class C Note is registered in the Note Register.
CLASS C NOTE BALANCE: means, as of the Closing Date,
$_________ and thereafter shall equal the Class C Note Balance as of the Closing
Date reduced by all principal payments on the Class C Notes.
CLASS C NOTE RATE: means ____________ percent (_____%) per
annum.
CLASS C NOTES: any Class C Notes described in Article II of,
and authorized by, and authenticated and delivered under, the Indenture.
CLASS C OVERDUE INTEREST: means, for any Payment Date, the
excess, if any, of (a) the aggregate amount of Class C Monthly Interest payable
on all prior Payment Dates over (b) the aggregate amount of interest actually
paid to the Class C Noteholders on all prior Payment Dates.
CLASS C OVERDUE PRINCIPAL: means, as of any Payment Date, the
excess, if any, of (a) the aggregate amount of Class C Monthly Principal due on
the Class C Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class C Noteholders on all prior Payment Dates.
CLASS C PERCENTAGE: ____%.
CLASS C STATED MATURITY DATE: means the Payment Date occurring
in ____________.
CLASS D DISTRIBUTION SUB-ACCOUNT: the sub-account or
sub-accounts by that name established and maintained by the Trustee pursuant to
Section 3.01 of the Indenture.
CLASS D MONTHLY INTEREST: means, for any Payment Date, the
product of (i) one- twelfth, (ii) the Class D Note Rate and (iii) the Class D
Note Balance on the immediately preceding Payment Date (or, in the case of the
first Payment Date, the Closing Date) after giving effect to all principal
payments on the Class D Notes on such Payment Date. The Class D Monthly Interest
shall be calculated based upon a twelve month year of thirty days in each month,
except for the first
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Payment Date, for which interest shall accrue from the Closing Date to but
excluding such Payment Date.
CLASS D MONTHLY PRINCIPAL: means (A) on any Payment Date other
than the Class D Stated Maturity Date, the product of (x) the Class D Percentage
and (y) Monthly Principal, and (B) on the Class D Stated Maturity Date, the
entire amount of the then outstanding Class D Note Balance.
CLASS D NOTE BALANCE: means, as of the Closing Date,
$_________ and thereafter shall equal the Class D Note Balance as of the Closing
Date reduced by all principal payments on the Class D Notes.
CLASS D NOTE RATE: ___________ percent (_____%) per annum.
CLASS D NOTEHOLDER: means at any time, any Person in whose
name a Class D Note is registered in the Note Register.
CLASS D NOTES: any Class D Notes described in Article II of,
and authorized by, and authenticated and delivered under, the Indenture.
CLASS D OVERDUE INTEREST: means, for any Payment Date, the
excess, if any, of (a) the aggregate amount of Class D Monthly Interest payable
on all prior Payment Dates over (b) the aggregate amount of interest actually
paid to the Class D Noteholders on all prior Payment Dates.
CLASS D OVERDUE PRINCIPAL: means, as of any Payment Date, the
excess, if any, of (a) the aggregate amount of Class D Monthly Principal due on
the Class D Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class D Noteholders on all prior Payment Dates.
CLASS D PERCENTAGE: ____%.
CLASS D STATED MATURITY DATE: means the Payment Date occurring
in ____________.
CLASS E DISTRIBUTION SUB-ACCOUNT: the sub-account or
sub-accounts by that name established and maintained by the Trustee pursuant to
Section 3.01 of the Indenture.
CLASS E MONTHLY INTEREST: means, for any Payment Date, the
product of (i) one-twelfth, (ii) the Class E Note Rate and (iii) the Class E
Note Balance on the immediately preceding Payment Date (or, in the case of the
first Payment Date, the Closing Date) after giving effect to all principal
payments on the Class E Note on such Payment Date. The Class E Monthly Interest
shall be calculated based upon a twelve month year of thirty days in each month,
except for the first Payment Date, for which interest shall accrue from the
Closing Date to but excluding such Payment Date.
CLASS E MONTHLY PRINCIPAL: means, (A) on any Payment Date
other than the Class E Stated Maturity Date, an amount equal to the product of
(x) the Class E Percentage and (y) the
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Monthly Principal and (B) on the Class E Stated Maturity Date, the entire amount
of the then outstanding Class E Note Balance.
CLASS E NOTEHOLDER: at any time, any Person in whose name a
Class E Note is registered in the Note Register.
CLASS E NOTE BALANCE: means, as of the Closing Date,
$_________ and thereafter shall equal the Class E Note Balance as of the Closing
Date reduced by all principal payments on the Class E Notes.
CLASS E NOTE RATE: means ____________ percent (_____%) per
annum.
CLASS E NOTES: any Class E Notes described in Article II of,
and authorized by, and authenticated and delivered under, the Indenture.
CLASS E OVERDUE INTEREST: means, for any Payment Date, the
excess, if any, of (a) the aggregate amount of Class E Monthly Interest payable
on all prior Payment Dates over (b) the aggregate amount of interest actually
paid to the Class E Noteholders on all prior Payment Dates.
CLASS E OVERDUE PRINCIPAL: means, as of any Payment Date, the
excess, if any, of (a) the aggregate amount of Class E Monthly Principal due on
the Class E Notes on all prior Payment Dates over (b) the aggregate amount of
principal actually paid to the Class E Noteholders on all prior Payment Dates.
CLASS E PERCENTAGE: ____%.
CLASS E STATED MATURITY DATE: means the Payment Date occurring
in ____________.
CLASS F DISTRIBUTION SUB-ACCOUNT: the sub-account or
sub-accounts by that name that may be established and maintained by the Trustee
pursuant to Section 3.01 of the Indenture.
CLASS F INSTRUMENTS: any Class F Instruments described in
Article II of the Indenture, that may be issued from time to time under the
Indenture and the related Supplement.
CLASS F INSTRUMENTHOLDER: at any time, any Person in whose
name a Class F Instrument is registered in the Note Register.
CLOSING DATE: _________________.
CODE: means the Internal Revenue Code of 1986, as amended.
COLLECTION ACCOUNT: the account or accounts by that name
established and maintained by the Trustee pursuant to Section 3.01 of the
Indenture.
COLLECTION PERIOD: with respect to each Payment Date related
thereto, the entire calendar month immediately preceding such Payment Date.
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COMMISSION: means the Securities and Exchange Commission.
COMPANY: DVI Receivables Corp. VIII, a Delaware corporation
and its permitted successors and assigns (the "Transferor").
CONTRACT: each separate noncancelable Finance Lease, Fair
Market Value Lease, Leveraged Lease Loan, Lease Receivable Purchase or Secured
Equipment Note acquired from time to time by the Transferor from the
Contributor, directly or indirectly, pursuant to the Contribution and Servicing
Agreement. The term shall include any Contract transferred to the Transferor on
the Closing Date or, directly or indirectly, any Substitution Date in connection
with any substitution in accordance with the Contribution and Servicing
Agreement, respectively.
CONTRACT FILE: The following documents or instruments with
respect to each Contract:
(i) The executed original counterpart of the Contract
that constitutes "chattel paper" or an "instrument" for purposes of
Section 9-105(1)(b) and 9-305 of the UCC;
(ii) Documents evidencing or related to any insurance
policy with respect to the related Equipment;
(iii) A copy of each delivery and acceptance certificate
with respect to each Contract that is a lease or a copy of each
original invoice for the related Equipment and the receipt of delivery
related thereto with respect to each Contract that is a loan;
(iv) A copy of the financing statement filed with
respect to the related Equipment with evidence of proper recording;
(v) A copy of any related agreement with the vendor,
dealer or manufacturer of the Equipment or with any Person from whom
DVI acquired the Contract and rights in the related Equipment (if
applicable); and
(vi) Copies of such documents that the Servicer or its
Affiliates keep on file indicating that the Equipment is subject to the
interest of the Trustee, in accordance with their customary procedures
relating to the individual Contract, Obligor or Equipment.
CONTRACT PAYMENT: any payment which the Obligor is required to
make pursuant to a Contract on or before, with respect to the Initial Contracts,
October 2005, other than (i) certain amounts included in such payments for which
the Contributor is not the ultimate beneficiary thereof, including, but not
limited to, property taxes, sales taxes, manufacturer's maintenance costs,
insurance premiums and supplies and transaction costs and (ii) Purchase Option
Payments.
CONTRACT SCHEDULE: means the schedule of Contracts attached to
the Contribution and Servicing Agreement and the Indenture as amended from time
to time, setting forth the following information as to each Contract: (i) the
Contract Number, (ii) the original Equipment cost, if available, (iii) the
Discounted Contract Balance as of the Cut-off Date, (iv) the Obligor, (v) the
State of location of the related Equipment, (vi) the commencement date and
original term of each
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Contract, (vii) the remaining term and amount of the Contract Payments for each
original Contract as of the Cut-off Date, (viii) the type of related Equipment,
(ix) the related cash flow schedule, (x) the type of Contract and (xi) the
applicable Pool on such Contracts. The Contract Schedule shall be deemed
supplemented and amended to incorporate therein any Substitute Contracts.
CONTRACT TRANSFER DATE: any date on or prior to the Closing
Date that, pursuant to the Contribution and Servicing Agreement, the Contributor
may transfer a Contract to the Transferor.
CONTRIBUTED PROPERTY: means all of the Contributor's right,
title and interest in and to (a) all Contracts, including those listed on the
Contract Schedule delivered by the Contributor to the Transferor and all
Substitute Contracts (including its interest in the proceeds of such Contracts
and including the assignment of the security interest of the Obligor of a
Leveraged Lease Loan in the equipment lease that is subject thereto), including
all payments received on or with respect to such Contracts after the Cut-off
Date but excluding the Retained Interest, and including any Broker Agreement
Rights relating to such Contracts, (b) any documents in the Contract Files
relating to the Contracts listed on the Contract Schedule delivered by the
Contributor to the Transferor, (c) Insurance Policies and Insurance Proceeds
relating to the Contracts (or the related Equipment) listed on the Contract
Schedule delivered by the Contributor to the Transferor, (d) an assignment or
grant, as the case may be, of a security interest in the Equipment (which shall
be a first priority perfected security interest in Equipment other than
Equipment relating to a Secured Equipment Note or Finance Lease and for which
the Original Equipment Cost is less than $20,000) and any collateral, including,
without limitation, any credit enhancement (other than accounts receivable of an
Obligor), which relates specifically to a Contract and (e) all payments, income
and proceeds of the foregoing or relating thereto.
CONTRIBUTION AND SERVICING AGREEMENT: the Contribution and
Servicing Agreement dated as of ________________ between the Company and the
Contributor, as the same may be amended or modified from time to time in
accordance with the provisions hereof and thereof.
CONTRIBUTION DATE: means, with respect to the Initial
Contracts, the Closing Date, and, with respect to any Substitute Contract, the
related Substitution Date.
CONTRIBUTOR: DVI Financial Services Inc., a corporation
organized and existing under the laws of the State of Delaware, and its
successors.
CORPORATE TRUST OFFICE: the principal corporate trust office
of the Trustee located on the Closing Date at ______________, or at such other
address as the Trustee may designate from time to time by notice to the
Noteholders and the Transferor.
CUT-OFF DATE: for each Initial Contract, ____________; and as
to any Substitute Contract, the last day of the month prior to the month in
which such Substitute Contract is substituted.
DEFAULT: any occurrence that is, or with notice or the lapse
of time or both would become, an Indenture Event of Default.
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DEFAULTED CONTRACT: any Contract with respect to which under
the Contribution and Servicing Agreement, (i) any Contract Payment (or portion
thereof) is delinquent for more than 180 days as of the last day of the calendar
month or (ii) the Servicer has declined to make a Servicer Advance with respect
to any delinquent amounts in accordance with the Contribution and Servicing
Agreement on the grounds that such advance would be a Nonrecoverable Advance or
(iii) any Contract has been rejected by or on behalf of the Obligor in a
bankruptcy proceeding or (iv) the Lessor with respect to any Leveraged Lease
Loan has rejected the related lease in a bankruptcy proceeding. For purposes of
clause (i), the delinquency of a Contract Payment shall be measured based on the
Contract Payments required to be made during the term of such Contract as of the
date that such Contract became part of the Trust Property without giving effect
to any modifications, (except those modifications permitted pursuant to Section
4.02 of the Contribution and Servicing Agreement) waivers or extensions
subsequently granted by the Servicer.
DEFINITIVE NOTE: a Note issued in definitive form pursuant to
the terms and conditions of Article Two of the Indenture.
DELINQUENCY CONDITION: shall be deemed to exist on and as of
any Determination Date if (x) the quotient of (1) the sum of the Discounted
Contract Balances of all Contracts listed as more than 90 days delinquent as of
the last day of the three immediately preceding calendar months, divided by (2)
_____ exceeds (y) the product of (1) ____ and (2) the quotient of (A) the sum of
the Aggregate Discounted Contract Balance as of the last day of the _____
immediately preceding Collection Periods, divided by (B) _____.
DELINQUENT CONTRACT: means, as of any Determination Date, any
Contract (other than a Contract which became a Defaulted Contract prior to such
Determination Date) with respect to which the Obligor has not paid all Contract
Payments due as of the end of the immediately preceding Collection Period. The
delinquency of a Contract Payment shall be measured based on the Contract
Payments required to be made during the term of such Contract as of the date
such Contract became part of the Trust Property without giving effect to any
modifications, waivers or extensions subsequently granted by the Servicer.
DEPOSITARY: means The Depository Trust Company until a
successor depositary shall have become such pursuant to the applicable
provisions of the Indenture and thereafter "Depositary" shall mean or include
each Person who is then a Depositary thereunder. For purposes of the Indenture,
unless otherwise specified pursuant to Section 2.02 thereof, any successor
Depositary shall, at the time of its designation and at all times while it
serves as Depositary, be a clearing agency registered under the Exchange Act,
and any other applicable statute or regulation.
DEPOSITARY PARTICIPANT: means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Depositary
effects book-entry transfers and pledges of securities deposited with the
Depositary.
DEPOSITED AVAILABLE FUNDS: has the meaning set forth in
Section 3.04(c) of the Indenture.
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DETERMINATION DATE: with respect to any Payment Date, the
third Business Day immediately preceding each Payment Date.
DISCOUNT RATE: _______% per annum.
DISCOUNTED CONTRACT BALANCE: means, with respect to any
Contract, on any date of determination, an amount equal to the sum of (a)
present value of each remaining Contract Payment to become due under a Contract
before the last day of the month prior to the month of the Stated Maturity Date,
discounted monthly from the last day of the Collection Period in which such
Contract Payment is to become due at a rate equal to one-twelfth (or with
respect to the period from the Closing Date to but excluding the Initial Payment
Date, a fraction, the numerator of which is equal to the number of days from the
Closing Date to but excluding the Initial Payment Date, and the denominator of
which is equal to 360) of the Discount Rate and (b) one hundred percent (100%)
of the unpaid balance, as of such date of determination of Contract Payments due
with respect to such Contract which were not the subject of a Servicer Advance;
PROVIDED, HOWEVER, that, except for purposes of computing the Repurchase Amount
or for computing the Discounted Contract Balance of a Predecessor Contract, (x)
on the date a Contract becomes a Defaulted Contract, the Discounted Contract
Balance for such Contract will be zero and (y) any Purchase Option Payments
shall not be included in the Discounted Contract Balance. For purposes of
calculating the Discounted Contract Balance of a Contract, any Contract Payment
for which the Contributor received on or prior to the Cut-off Date a security
deposit or an advance payment shall be deemed to be zero.
DISTRIBUTION ACCOUNT: The account or accounts by that name
established and maintained by Trustee pursuant to Section 3.01 of the Indenture.
DVI: DVI Financial Services Inc., a corporation organized and
existing under the laws of the State of Delaware, and its successors.
DVI FAIR MARKET VALUE LEASE: A Fair Market Value Lease
originated by DVI.
DVI GROUP: As of any relevant date, the affiliated group
within the meaning of section 1504 of the Code of which DVI, Inc., or any
successor thereto, is the common parent, or of which DVI, the Transferor and the
Issuer are members, and shall mean any group eligible to file consolidated or
combined returns for state, local or foreign tax purposes which includes DVI and
the Transferor, regardless of the identity of the common parent.
DVI, INC.: DVI, Inc., a corporation organized and existing
under the laws of the State of Delaware, and its successors.
ELIGIBLE CONTRACT: means any Contract which meets the
Contributor's credit requirements in effect on the Closing Date and satisfies
each of the representations and warranties set forth in Section 2.03 of the
Contribution and Servicing Agreement with respect to the Initial Contracts and,
with respect to Substitute Contracts, also satisfy the requirements of Section
7.01(d) of the Contribution and Servicing Agreement on the related Substitution
Date.
ELIGIBLE DEPOSIT ACCOUNT: any one or more of the following
accounts:
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(i) a segregated account with an Eligible Institution;
or
(ii) a segregated trust account with the corporate trust
department of a depositary 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) subject
to regulations regarding fiduciary funds on deposit, having corporate
trust powers and acting as a trustee for funds deposited in such
account acceptable to the Rating Agencies.
ELIGIBLE INSTITUTION: any one or more of the following
institutions: (i) the corporate trust department of the Trustee, or (ii) a
depositary institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia acceptable to the
Rating Agencies (or any domestic branch of a foreign bank), which (a)(1) has
either (w) a long-term unsecured debt rating acceptable to the Rating Agencies
or (x) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies or (2) the parent corporation of which has
either (y) a long-term unsecured debt rating acceptable to the Rating Agencies
or (z) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (b) whose deposits are insured by the
Federal Deposit Insurance Corporation.
ELIGIBLE INVESTMENTS: any and all of the following:
(i) direct obligations of, and obligations fully
guaranteed for timely payment by, the United States of America, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Federal Home Loan Banks or any agency or
instrumentality of the United States of America which has a rating of
at least Aaa by Moody's and AAA by Duff & Phelps at the time of such
investment the obligations of which are backed by the full faith and
credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of
deposit of, banker's acceptances issued by or federal funds sold by any
depository institution or trust company (including the Trustee or its
agent acting in their respective commercial capacities) incorporated
under the laws of the United States of America or any State thereof and
subject to supervision and examination by federal and/or state
authorities, so long as at the time of such investment or contractual
commitment providing for such investment, such depository institution
or trust company has a long term unsecured debt rating of at least A1
by Moody's and AA+ by Duff & Phelps or A+ by Fitch and a short term
unsecured debt rating in the highest available rating category of each
of the Rating Agencies and provided that each such investment has an
original maturity of no more than 365 days, and (B) any other demand
or time deposit or deposit which is fully insured by the Federal
Deposit Insurance Corporation;
(iii) repurchase obligations with a term not to exceed 30
days with respect to any security described in clause (i) above and
entered into with a depository institution or trust company (acting as
a principal) rated A or higher by S&P, AA+ by Duff & Phelps or A by
Fitch and at least A1 or higher by Moody's or Prime-1 by Moody's;
provided, however, that collateral transferred pursuant to such
repurchase obligation must (A) be valued weekly at current market price
plus accrued interest, (B) pursuant to such valuation, equal, at all
times, 105% of the cash transferred by the Trustee in exchange for such
collateral and (C)
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be delivered to the Trustee or, if the Trustee is supplying the
collateral, an agent for the Trustee, in such a manner as to
accomplish perfection of a security interest in the collateral by
possession of certificated securities;
(iv) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United
States of America or any State thereof which has a long term unsecured
debt rating in the highest available rating category of each of the
Rating Agencies at the time of such investment;
(v) commercial paper having an original maturity of
less than 365 days and issued by an institution having a long term
unsecured debt rating of A1 by Moody's, AA+ by Duff & Phelps or A+ by
Fitch and a short term unsecured debt rating in the highest available
rating category of each of the Rating Agencies at the time of such
investment;
(vi) a guaranteed investment contract approved in
writing by each of the Rating Agencies and issued by an insurance
company or other corporation having a long term unsecured debt rating
in the highest available rating category of each of the Rating Agencies
at the time of such investment;
(vii) money market funds having ratings in the highest
available rating category of each of the Rating Agencies at the time of
such investment; any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Eligible Investments set forth in the Indenture; and
(viii) any investment approved in writing by each of the
Rating Agencies.
EQUIPMENT: the underlying equipment subject to a Contract,
which is principally medical diagnostic and therapeutic equipment, together with
the income and proceeds thereof.
ERISA: means the Employee Retirement Income Security Act of
1974, as amended.
EXCHANGE ACT: means the Securities Exchange Act of 1934, as
amended.
EXCLUDED AMOUNTS: means any payments received from an Obligor
in connection with any late charges, taxes, fees or other charges imposed by any
Governmental Authority, any indemnity payments made by an Obligor for the
benefit of the originator or vendor under the related Contract or any payments
collected from an Obligor for the benefit of the originator or vendor which
relate to maintenance payments pursuant to the related Contract or maintenance
agreement, as applicable.
FAIR MARKET VALUE LEASE: means any Contract in the form of a
lease that contains a purchase option based on either (a) a stated non de
minimus percentage of the original cost of the related Equipment or (b) the fair
market value of the related Equipment at the expiration, or earlier termination,
of the Contract. A Fair Market Value Lease is identified as "FMV" on the
Contract Schedule.
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FINANCE LEASE: means any Contract in the form of a lease that
contains an end of term purchase option for a nominal amount. A Finance Lease is
identified as "FL" on the Contract Schedule.
GAAP: Generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
GLOBAL NOTE: either a Rule 144A Global Note or a Public Global
Note.
GRANT: grant, bargain, sell, convey, assign, transfer,
mortgage, pledge, create and perfect a security interest in and right of set-off
against, deposit, set over and confirm.
INDENTURE: the Indenture between the Issuer and the Trustee
dated as of _________ and as from time to time supplemented or amended pursuant
to the applicable provisions thereof.
INDENTURE EVENT OF DEFAULT: as defined in Section 6.01 of the
Indenture.
INITIAL AGGREGATE DISCOUNTED CONTRACT BALANCE: an amount equal
to $--------------.
INITIAL CONTRACT: any Contract acquired by the Transferor on
the Closing Date as set forth on Schedule 1 of the Indenture.
INITIAL PAYMENT DATE: means ________________.
INSURANCE POLICY: means, with respect to an item of Equipment,
any insurance policy required to be maintained by the Obligor pursuant to the
related Contract that covers physical damage to the Equipment.
INSURANCE PROCEEDS: means proceeds paid (i) by any insurer
pursuant to any Insurance Policy covering a Contract or (ii) if the Obligor has
self-insured with respect to a Contract, by the Obligor, in either case, net of
reasonable costs of collecting such proceeds not otherwise reimbursed.
INSURED EXPENSES: means expenses covered by any Insurance
Policy.
ISSUER: means DVI ___________, a Delaware _________.
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 RECEIVABLE PURCHASE: means any Contract in the form of a
purchase by DVI from a lessor of lessor's right, title and interest in Contract
Payments related to an underlying
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<PAGE>
equipment lease and that is secured by the lessor's rights in the related
Equipment. A Lease Receivable Purchase is identified as "LRP" on the Contract
Schedule.
LESSOR: means the Person who is the lessor under the equipment
lease related to a Leveraged Lease Loan or Lease Receivable Purchase.
LEVERAGED LEASE LOAN: means any Contract in the form of a loan
that is (a) made by the Contributor to a lessor of the related Equipment
pursuant to an underlying noncancelable equipment lease and (b) secured by a
pledge by such lessor to the Contributor of all of its right, title and interest
to such noncancelable equipment lease (including such lessor's right to receive
rental payments from the lessee on such equipment lease) and the related
Equipment. A Leveraged Lease Loan is identified as "LL" on the Contract
Schedule.
LOCK-BOX ACCOUNT: means an account designated as such,
established and maintained pursuant to Section 3.01 of the Indenture.
LOCK-BOX AGREEMENT: means the agreement dated as of _____, by
and between the Contributor and _____________, pursuant to which a Lock-Box
Account is established and maintained.
LOCK-BOX BANK: means, as of any date, the bank or trust
company at which a Lock- Box Account is established and maintained as of such
date.
MONTHLY INTEREST: means as of any Payment Date, the sum of (i)
the Class A Monthly Interest, (ii) the Class B Monthly Interest, (iii) the Class
C Monthly Interest, (iv) the Class D Monthly Interest, and (v) the Class E
Monthly Interest.
MONTHLY PRINCIPAL: means, with respect to any Payment Date, an
amount equal to the excess of (a) the Aggregate Discounted Contract Balance at
the close of business on the last day of the second preceding Collection Period
over (b) the Aggregate Discounted Contract Balance at the close of business on
the last day of the immediately preceding Collection Period.
MONTHLY SERVICER REPORT: the report attached as Exhibit B to
the Contribution and Servicing Agreement.
NONRECOVERABLE ADVANCE: any Servicer Advance previously made
in respect of a Delinquent Contract by the Servicer pursuant to the terms of the
Contribution and Servicing Agreement, which in the good faith judgment of the
Servicer and pursuant to an Officer's Certificate, will not be ultimately
recoverable by the Servicer from payments by the related Obligor or disposition
of the related Equipment.
NOTE BALANCE: means, as of the Closing Date, $___________ for
the Class A Notes, $_________ for the Class B Notes, $_________ for the Class C
Notes, $_________ for the Class D Notes and $_________ for the Class E Notes and
thereafter shall equal the Note Balance for such class reduced by all principal
payments on such class of Notes.
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<PAGE>
NOTE OWNER: means, with respect to a Global Note, the Person
who is the owner of such Global Note, as reflected on the books of the
Depositary, or on the books of a Person maintaining an account with the
Depositary (directly as a Depositary Participant or an indirect participant, in
each case in accordance with the rules of the Depositary).
NOTE PURCHASE AGREEMENT: Any agreement (other than the
Underwriting Agreement) between the Issuer and the parties specified therein,
relating to the purchase of privately placed Notes.
NOTE RATE: the annualized rate of interest on the relevant
class of Notes (_____% on the Class A Notes, _____% on the Class B Notes, _____%
on the Class C Notes, _____% on the Class D Notes, _____% on the Class E Notes
and the interest rate set forth in the Supplement for the Class F Instruments).
NOTE REGISTER: as defined in Section 2.04 of the Indenture.
NOTEHOLDER: at any time, any Person in whose name a Note is
registered in the Note Register.
NOTEHOLDER COUNSEL: means the single legal counsel as selected
by Noteholders evidencing more than 50% of the Voting Rights.
NOTES: any of the Class A Notes, Class B Notes, Class C Notes,
Class D Notes or Class E Notes described in Article II of the Indenture, and
authorized by, and authenticated and delivered under, the Indenture or any
Supplement.
OBLIGOR: the obligor under any Contract, including any
guarantor.
OFFERED NOTES: means the Class A Notes, the Class B Notes and
the Class C Notes.
OFFICER'S CERTIFICATE: a certificate delivered to the Trustee
and signed by Chairman, the President, a Vice President, the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the relevant
entity.
OPINION OF COUNSEL: a written opinion of counsel, which shall
be reasonably satisfactory in form and substance to the Person to whom it is to
be delivered. Except as otherwise expressly provided in the Indenture, such
opinion may be delivered by inside or outside counsel for the Contributor, the
Transferor or the Issuer.
ORIGINAL EQUIPMENT COST: (i) with respect to each Contract
originated by DVI, the vendor's invoice price of the related Equipment at the
time of origination of the related Contract and (ii) with respect to each
Contract acquired by DVI from others, the amount recorded on DVI's records as
paid by DVI to acquire such Contract and the broker's interest in the related
Equipment.
OUTSTANDING OR OUTSTANDING: When used with reference to the
Notes and as of any particular date, any Note theretofore and thereupon being
authenticated and delivered except:
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(i) any Note canceled by the Trustee at or before
said date;
(ii) any Note, or portion thereof, for payment of
redemption of which monies equal to the principal amount or redemption price
thereof, as the case may be, with interest to the date of maturity or
redemption, shall have theretofore been irrevocably deposited with the Trustee
(whether upon or prior to maturity or the redemption date of such Note);
(iii) any Note in lieu of or in substitution for
which another Note shall have been authenticated and delivered; and
(iv) any Note owned by the Transferor or any
Affiliate of the Transferor (except that, in determining whether the Trustee
shall be protected in relying upon any request, demand, authorization,
direction, notice, consent or waiver of Noteholders under the Indenture, only
Notes which the Trustee knows to be so owned shall be disregarded).
OVERDUE INTEREST: means, for any Payment Date, the sum of (i)
the Class A Overdue Interest, (ii) the Class B Overdue Interest, (iii) the Class
C Overdue Interest, (iv) the Class D Overdue Interest and (v) the Class E
Overdue Interest.
OWNERSHIP INTEREST: an ownership interest in a Global Note.
OWNER TRUSTEE: ______, acting not in its individual capacity
but solely as owner trustee under the Trust Agreement.
PARTIAL PREPAYMENT AMOUNT: with respect to the Collection
Period and a Contract for which the Obligor has requested to make a voluntary
partial prepayment and for which no Substitute Contract has been provided, an
amount equal to the excess, if any, of (A) the difference between (i) the
Discounted Contract Balance of such Contract as of the first day of such
Collection Period together with one month of interest thereon at the Discount
Rate and (ii) the Discounted Contract Balance of such Contract as of the first
day of such Collection Period calculated based on the amount of each Contract
Payment payable by the Obligor after giving effect to the reduction of such
Contract Payment which will result from such partial prepayment, minus (B) any
Contract Payments actually received by the Servicer with respect to the prepaid
portion of such Contract for the current Collection Period on or before the date
of such partial prepayment.
PARTIAL REDEMPTION PRICE: with respect to any Offered Note,
and as of any date of partial redemption fixed by the Issuer, an amount equal to
the sum of (x) the product of (i) the quotient of (A) the aggregate Discounted
Contract Balance of the Contracts in Pool B as of such date of partial
redemption, divided by (B) the Aggregate Discounted Contract Balance as of such
date of partial redemption and (ii) the outstanding Note Balance of such Offered
Note and (y) interest accrued thereon to, but not including, such Redemption
Date at the applicable Note Rate.
PAYMENT DATE: the ________ day of each month (or if such date
is not a Business Day, the immediately succeeding Business Day), commencing
________________.
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PBGC: means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
PERSON: any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
PLACEMENT AGENT(S): means Prudential Securities Incorporated
and Lehman Brothers Inc.
PLAN: means an "employee benefit plan" within the meaning of
Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Code.
POOL: means either Pool A or Pool B.
POOL A: the Contracts identified on the Contract Schedule as
constituting Pool A and the other Trust Property related thereto.
POOL A AGGREGATE DISCOUNTED CONTRACT BALANCE: means, with
respect to any date of determination, the sum of the Discounted Contract
Balances of all Contracts in Pool A.
POOL A NON-PERFORMING CONTRACT SUBSTITUTION: shall have the
meaning ascribed thereto in Section 7.01(a)(1) of the Contribution and Servicing
Agreement.
POOL A PREPAID CONTRACT SUBSTITUTION: shall have the meaning
ascribed thereto in Section 7.01(a)(2) of the Contribution and Servicing
Agreement.
POOL B: the Contracts identified on the Contract Schedule as
constituting Pool B and the other Trust Property related thereto.
POOL B AGGREGATE DISCOUNTED CONTRACT BALANCE: means, with
respect to any date of determination, the sum of the Discounted Contract
Balances of all Contracts in Pool B.
POOL B GENERAL CONTRACT SUBSTITUTION: shall have the meaning
ascribed thereto in Section 7.01(b)(1) of the Contribution and Servicing
Agreement.
POOL B PREPAID CONTRACT SUBSTITUTION: shall have the meaning
ascribed thereto in Section 7.01(b)(2) of the Contribution and Servicing
Agreement.
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 2.05 of the Indenture 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).
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PREDECESSOR CONTRACT: with respect to any Substitute Contract
acquired by the Transferor by substitution pursuant to Section 7 of the
Contribution and Servicing Agreement and by the Issuer by substitution pursuant
to Section 7 of the Pooling and Trust Agreement, the Contract or Contracts for
which such Substitute Contract or any intervening Substitute Contract has been
substituted.
PREPAYMENT AMOUNT: means, with respect to any Contract, the
sum of (1) the Discounted Contract Balance as of the first day of the Collection
Period preceding such prepayment, together with one month of interest thereon at
the Discount Rate, (2) any unreimbursed Servicer Advances with respect to such
Contract and (3) any Contract Payments due and outstanding under such Contract
that are not the subject of a Servicer Advance.
PRINCIPAL TERMS: as defined in Section 2.06(b) of the
Indenture.
PRIORITY PAYMENTS: shall have the meaning ascribed thereto in
Section 3.04(c) of the Indenture.
PROSPECTUS SUPPLEMENT: the prospectus supplement, dated the
Closing Date, relating to the Offered Notes.
PUBLIC GLOBAL NOTE: a Book-Entry Note evidencing all or part
of an issuance of the Class A Notes, Class B Notes, Class C Notes, or Class D
Notes to which the provisions of Article II of the Indenture shall apply.
PURCHASE OPTION PAYMENT: means as specified in each Contract,
any payment made by the Obligor to purchase the Equipment covered thereby,
including any funds received in respect of (w) an end of term purchase option
for $1, (x) an end of term option to purchase the Equipment at a stated
percentage of the original cost of the Equipment, (y) an option to purchase the
Equipment at the fair market value of the Equipment determined at the end of the
Contract term or (z) an end of term option to extend the term of the lease for
another immediately successive twelve month period upon the expiration of which
the lessee will own the equipment.
RATING AGENCIES: _________________.
RATINGS EFFECT: a reduction or withdrawal of a rating on a
class of Notes by a Rating Agency.
RECORD DATE: with respect to any Payment Date, the fifth
Business Day immediately preceding such Payment Date.
RECOVERIES: with respect to any Contract, any cash sale
proceeds, vendor recourse, payments under personal and other guaranties,
litigation judgments and the present value (calculated at the implicit yield on
each of the Defaulted Contracts) of re-lease rents.
REDEMPTION DATE: with respect to any redemption or partial
redemption of Notes, a date fixed pursuant to Section 10.01 of the Indenture.
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<PAGE>
REDEMPTION PRICE: with respect to any Note, and as of any
redemption date fixed by the Issuer, the sum of (x) the outstanding Note Balance
of such Note, and (y) interest accrued thereon to, but not including, such
Redemption Date at the applicable Note Rate.
REDEMPTION RECORD DATE: with respect to any redemption of
Notes, a date fixed pursuant to Section 10.01 of the Indenture.
RELATED PERSON: means any Person (whether or not incorporated)
which is under common control with the Contributor within the meaning of Section
14(c) of the Code, or of Section 4001(b) of ERISA.
REPORTABLE EVENT: means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, a withdrawal from a Pension Plan
described in Section 4063 of ERISA, or a cessation of operations described in
Section 4062(3) of ERISA.
REPURCHASE AMOUNT: means, with respect to any Contract, the
sum of (1) the Discounted Contract Balance as of the first day of the Collection
Period preceding such repurchase, together with one month of interest thereon at
the Discount Rate and (2) any unreimbursed Servicer Advances with respect to
such Contract.
RESERVE ACCOUNT: The account specified in Section 3.01(a) of
the Indenture.
RESERVE ACCOUNT BALANCE: An amount equal to deposits of all
Reserve Account Deposit Amounts as reduced by (a) all Reserve Account Draws and
(b) all Reserve Account Withdrawals paid to the Transferor, or the Class F
Instrumentholder, if any.
RESERVE ACCOUNT DEPOSIT AMOUNT: means, on any Payment Date, an
amount equal to the excess of (A) the Reserve Account Required Amount over (B)
the amount on deposit in the Reserve Account (after giving effect to any Reserve
Account Draws on such Payment Date).
RESERVE ACCOUNT DRAW: For each Payment Date, the amount, if
an, withdrawn by the Trustee from the Reserve Account for payment of the
Priority Payments pursuant to Section 3.04(c) of the Indenture.
RESERVE ACCOUNT PROPERTY: The property set forth in Section
3.08(a) of the Indenture.
RESERVE ACCOUNT REQUIRED AMOUNT: means, with respect to the
Initial Payment Date, $____________ (the "Initial Reserve Account Required
Amount"); and, with respect to each Payment Date thereafter, means
____________________.
RESERVE ACCOUNT WITHDRAWAL: For each Payment Date, the amount
of such excess, if any, withdrawn from the Reserve Account for payment to the
Issuer or the Class F Instrumentholder pursuant to Section 3.08 of the
Indenture.
RESIDUAL PAYMENT: any amount received by the Servicer or the
Trustee as a Purchase Option Payment under a Contract or proceeds of the sale of
an item of Equipment subject to the lien
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of the Indenture or rental payments from the re-leasing of an item of Equipment
subject to the lien of the Indenture after the final Contract Payment due and
payable under the initial terms of the Contract to which such item of Equipment
is subject is made.
RESIDUAL PRINCIPAL BALANCE: means the excess of (x) the
Aggregate Discounted Contract Balance, over (y) the sum of the Class A Note
Balance, the Class B Note Balance, the Class C Note Balance, the Class D Note
Balance and the Class E Note Balance.
RESPONSIBLE OFFICER: means, with respect to the Trustee, any
President, Senior Vice President, Vice President, Assistant Vice President,
Trust Officer or Assistant Secretary with direct responsibility for the
administration of the Trustee's obligations and duties under the Indenture and
with respect to a particular matter, any officer to whom such matter is referred
because of such other officer's knowledge or familiarity with the particular
subject.
RESTRICTING EVENT: the condition that exists on any Payment
Date if any one of the following conditions exists: (i) a Delinquency Condition
exists or (ii) an Indenture Event of Default has occurred and is then
continuing.
RETAINED INTEREST: All right, title and interest of the
Contributor in and to (i) the Contributed Property prior to and including the
Cut-off Date (ii) any periodic payment set forth in a Contract in respect of
maintenance, insurance or taxes and (iii) any Purchase Option Payments.
RULE 144A GLOBAL NOTE: means a Note evidencing all or a part
of an issuance of the Class E Notes, registered in the name of the Depositary or
its nominee, and delivered to the Depositary pursuant to the Depositary's
instruction, in accordance with Section 2.02 of the Indenture and bearing the
legend prescribed in Section 2.02 of the Indenture.
SCHEDULED TERMINATION DATE: with respect to any Contract, the
date upon which such Contract is scheduled to terminate in accordance with its
terms.
SECURED EQUIPMENT NOTE: means any Contract in the form of a
loan to the user of the related Equipment secured by such Equipment. A Secured
Equipment Note is identified as "LOAN" on the Contract Schedule.
SECURITYHOLDER: any Noteholder, as defined in the related
Indenture, or any Certificateholder, as defined in the related Trust Agreement.
SECURITIES ACT: The Securities Act of 1933 as amended.
SERVICER: the Contributor and any Successor Servicer appointed
pursuant to the terms of the Contribution and Servicing Agreement.
SERVICER ADVANCE: an advance made by the Servicer in
accordance with Section 5.01 of the Contribution and Servicing Agreement.
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SERVICER EVENT OF DEFAULT: as defined in Section 10.01 of the
Contribution and 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 FEE: an amount equal to the product of (i)
one-twelfth (or with respect to the Initial Payment Date, a fraction, the
numerator of which is equal to the number of days from the Closing Date to but
excluding the Initial Payment Date, and the denominator of which is equal to
360), (ii) the Servicing Fee Rate and (iii) the Aggregate Discounted Contract
Balance as of the beginning of the previous Collection Period.
SERVICING FEE RATE: ____%.
SPECIAL PURPOSE ENTITY: a business trust which at all times
since its formation and at all times thereafter shall have complied with each of
the following:
(i) AFFILIATE SECURITIES. Such entity has not acquired
securities of the Transferor.
(ii) ALLOCATIONS. Such entity has allocated fairly and
reasonably any overhead for shared office space and uses separate
stationery, invoices and checks.
(iii) ARM'S LENGTH TRANSACTIONS. Such entity has not entered
into, nor has it been a party to, any transaction with the Transferor
or any affiliates of the Transferor except (i) for the Transaction
Documents and the transactions contemplated thereby and (ii) in the
ordinary course of its business and on terms which are intrinsically
fair and are no less favorable to it than would be obtained in a
comparable arm's-length transaction with an unrelated third party.
(iv) COMMINGLING. Such entity has not commingled its funds or
assets with those of any other entity, and has held its assets in its
own name.
(v) DIVISIONS. Such entity has not identified the Transferor,
or any affiliates of the Transferor, as a division or part of it.
(vi) FORMALITIES. Such entity has observed all corporate trust
formalities.
(vii) GUARANTEES. Such entity has not assumed or guaranteed or
become obligated for the debts of any other entity or held out its
credit as being available to satisfy the obligations of any other
entity.
(viii) IDENTIFICATION. Such entity has held and identified
itself as a separate and distinct entity under its own name and not as
a division or part of any other person or entity.
(ix) LOANS. Such entity has not made loans to any Person other
than the Notes.
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(x) NO DISSOLUTION. Such entity has not engaged in, sought, or
consented to any dissolution, winding up, liquidation, consolidation,
merger, asset sale, transfer of ownership interest, or amendment of its
certificate of formation without the prior written consent of the
Independent Directors of the Transferor.
(xi) NO OTHER ASSETS. Such entity has not had any assets as of
the Closing Date other than those related to its trust property.
(xii) NO OTHER BUSINESS. As of the Closing Date, such entity
has not engaged in any business unrelated to the ownership of its
assets.
(xiii) NO OTHER INDEBTEDNESS. As of the Closing Date, such
entity has no indebtedness other than the indebtedness evidenced by the
Notes and existing under the Indenture, and liabilities in the ordinary
course of business relating to the ownership and operation of its
assets.
(xiv) OWN LIABILITIES. Such entity has paid its own
liabilities out of its own funds and assets.
(xv) OWN NAME. Such entity has conducted its business in its
own name.
(xvi) PLEDGES. Such entity has not pledged its assets for the
benefit of any other person or entity other than pursuant to the
Transaction Documents.
(xvii) PURPOSE. Such entity was organized solely for the
purposes set forth in Section ___ of the _____ Agreement.
(xviii) SEPARATE ACCOUNTS. Such entity has maintained its
accounts, books and records separate from any other person or entity
and in accordance with GAAP.
(xix) SEPARATE RECORDS. Such entity has maintained its
accounting records and other entity documents separate from any other
person or entity.
STATED MATURITY DATE: with respect to the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the
Payment Date occurring in __________.
SUBORDINATION DEFICIENCY EVENT: the occurrence of the Class A
Note Balance being greater than the Aggregate Discounted Contract Balance as of
the date of determination.
SUBSTITUTE CONTRACT: an Eligible Contract substituted by the
Contributor pursuant to either Section 5.03 or Section 7.01 of the Contribution
and Servicing Agreement.
SUBSTITUTE CONTRACT TRANSFER FORM: a Substitute Contract
Transfer Form, substantially in the form of Exhibit A to the Pooling and Trust
Agreement.
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SUBSTITUTION DATE: any Business Day on which the Contributor
transfers a Substitute Contract to the Transferor (which Substitute Contract is
subsequently assigned to the Issuer and then pledged by the Issuer to the
Trustee).
SUCCESSOR SERVICER: the Trustee or any successor to the
Servicer pursuant to the Contribution and Servicing Agreement.
SUPPLEMENT: means a supplement to the Indenture complying with
the terms of the Indenture.
TRANSACTION DOCUMENTS: collectively, the Contribution and
Servicing Agreement, the Pooling and Trust Agreement, the Indenture, the
Underwriting Agreement, any Note Purchase Agreement(s) and any and all
agreements relating to the servicing of the Contracts and the issuance of the
Notes.
TRANSFERRED PROPERTY: means all of the Transferor's right,
title and interest to (a) the Contributed Property, (b) all of the Transferor's
rights under the Contribution and Servicing Agreement and each Substitute
Contract Transfer Form and (c) all payments, income and proceeds of the
foregoing or relating thereto.
TRANSFEROR: means DVI Receivables Corp. VIII, a Delaware
corporation, and its permitted successors and assigns (the "Company").
TRANSFEROR ORDER or TRANSFEROR REQUEST: a written order or
request delivered to the Trustee and signed in the name of the Transferor by an
Authorized Officer.
TRUST AGREEMENT: means the trust agreement dated as of
________________ by and among the Transferor and the Trustee.
TRUST INDENTURE ACT OR TIA: means the Trust Indenture Act of
1939, as amended from time to time, as in effect on any relevant date.
TRUST PROPERTY: (a) the Contributed Property, (b) all moneys
from time to time held by the Trustee pursuant to Section 3.01 of the Indenture
pending deposit in one of the accounts referred to therein, (c) all moneys from
time to time on deposit in each Lock-Box Account, Collection Account, the
Reserve Account, the Distribution Account, Class A Distribution Sub- Account,
Class B Distribution Sub-Account, Class C Distribution Sub-Account, Class D
Distribution Sub-Account, the Class E Distribution Sub-Account and Class F
Distribution Sub-Account, if any, including all investments and income from the
investment of such moneys, (d) the Contribution and Servicing Agreement, (e) the
Pooling and Trust Agreement and (f) all income, payments and proceeds of any of
the foregoing.
TRUSTEE: the Person named as the "Trustee" in the first
paragraph of the Indenture until a successor Person shall have become the
Trustee pursuant to the applicable provisions of the Indenture or the Trust
Agreement, as the case may be, and thereafter "Trustee" shall mean such
successor Person; PROVIDED, that the provisions of Sections 7.06 and 8.11 of the
Indenture, as
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applicable to any Person at any time serving as Trustee under the Indenture,
shall survive (with respect to any period prior to the date of such termination)
the termination of such Person's status as Trustee under the Indenture and the
succession of any other Person to such status.
UNDERWRITERS: means Graduated Securities' Incorporated and
Lehman Brothers Inc.
UNDERWRITING AGREEMENT: means the underwriting agreement dated
as of __________, by and among the Underwriters, the Contributor, the Issuer and
the Transferor.
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.
VOTING RIGHTS: For so long as any Notes remain outstanding,
and shall encompass, for so long as any Class A Note, Class B Note, Class C
Note, Class D Note or Class E Note is outstanding, the voting rights of each
such class which shall include, as of the date of determination (i) the votes of
Class A Noteholders evidencing 100% of the then-outstanding Class A Note
Balance, (ii) the votes of Class B Noteholders evidencing 100% of the
then-outstanding Class B Note Balance, (iii) the votes of the Class C
Noteholders evidencing 100% of the then-outstanding Class C Note Balance, (iv)
the votes of Class D Noteholders evidencing 100% of the then-outstanding Class D
Note Balance and (v) the votes of the Class E Noteholders evidencing 100% of the
then-outstanding Class E Note Balance. When none of the Class A Notes, Class B
Notes, Class C Notes, Class D Notes and Class E Notes is outstanding, 100% of
the Voting Rights shall be exercised by the Holders of the Class F Instrument,
if any. When used in the Transaction Documents, "50% of the Voting Rights" and
"662/3% of the Voting Rights" shall be deemed to refer to fifty and sixty-six
and 2/3 percent, respectively, of each class of Notes then Outstanding as
measured by the Outstanding Note Balance of such class on such date of
determination.
25
Exhibit 4.2
-----------
TRUST AGREEMENT
by and between
------------------,
as Depositor,
and
---------------
as Trustee,
TRUST AGREEMENT
Dated as of ___________, 199_
$------------
DVI Asset Funding Trust ________
Equipment Finance Certificates
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
-----------
<S> <C>
Section 1.02. GENERAL INTERPRETIVE PRINCIPLES........................................................8
ARTICLE II
CONVEYANCE OF CONTRACTS; TRUST ESTATE
-------------------------------------
Section 2.01. CONVEYANCE OF CONTRACTS..................................................................10
Section 2.02. ACCEPTANCE BY THE TRUSTEE................................................................10
Section 2.03. CUSTODY OF CONTRACTS AND CONTRACT FILES..................................................11
Section 2.04. LIABILITIES OF THE TRUST AND PARTIES TO THIS AGREEMENT; LIMITATIONS THEREON..............11
Section 2.05. TITLE TO TRUST ESTATE....................................................................11
Section 2.06. CONDITIONS TO CLOSING....................................................................12
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Section 3.01. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR..........................................14
Section 3.02. COVENANTS OF THE DEPOSITOR...............................................................15
ARTICLE IV
THE CERTIFICATES
----------------
Section 4.01. AUTHORIZATION OF CERTIFICATES............................................................18
Section 4.02. FORM OF CERTIFICATES.....................................................................18
Section 4.03. CERTIFICATE OF AUTHENTICATION............................................................18
Section 4.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES......................18
Section 4.05. MUTILATED, DESTROYED, LOST AND STOLEN CERTIFICATES.......................................19
Section 4.06. CANCELLATION.............................................................................20
Section 4.07. PERSONS DEEMED OWNERS....................................................................20
Section 4.08. BOOK ENTRY CERTIFICATES..................................................................20
Section 4.09. NOTICES TO CLEARING AGENCY...............................................................21
Section 4.10. DEFINITIVE CERTIFICATES..................................................................21
Section 4.11. TEMPORARY CERTIFICATES...................................................................22
ARTICLE V
<PAGE>
PAYMENT OF CERTIFICATES; ACCOUNTS
---------------------------------
Section 5.01. COLLECTION ACCOUNT.......................................................................23
[Section 5.02. RESERVE ACCOUNT.........................................................................25
Section 5.03. [RESERVED]...............................................................................25
Section 5.04. INVESTMENT OF MONIES HELD IN THE ACCOUNTS................................................25
Section 5.05. RECORDS..................................................................................26
Section 5.06. CAPITALIZED INTEREST ACCOUNT.............................................................26
[Section 5.07. LOCKBOX ACCOUNT.........................................................................26
[Section 5.08. PRE-FUNDING ACCOUNT.....................................................................27
ARTICLE VI
CONCERNING THE TRUSTEE
----------------------
Section 6.01. DUTIES OF TRUSTEE........................................................................28
Section 6.02. RIGHTS OF THE TRUSTEE....................................................................29
Section 6.03. TRUSTEE NOT LIABLE.......................................................................29
Section 6.04. TRUSTEE MAY OWN CERTIFICATES.............................................................30
Section 6.05. LIEN FOR TRUSTEE'S FEES AND EXPENSES.....................................................30
Section 6.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.....................................................30
Section 6.07. RESIGNATION AND REMOVAL OF TRUSTEE.......................................................31
Section 6.08. SUCCESSOR TRUSTEE........................................................................31
Section 6.09. MERGER OR CONSOLIDATION OF TRUSTEE.......................................................32
Section 6.10. SEPARATE TRUSTEES, CO-TRUSTEES AND CUSTODIANS............................................32
Section 6.11. REPRESENTATIONS AND WARRANTIES...........................................................34
Section 6.12. TRUSTEE OFFICES..........................................................................35
Section 6.13. NOTICE OF EVENT OF SERVICER DEFAULT......................................................35
Section 6.14. REPORTS TO CERTIFICATEHOLDERS............................................................35
Section 6.15. LIST OF CERTIFICATEHOLDERS; NO MEETINGS..................................................36
ARTICLE VII
TERMINATION
-----------
Section 7.01. TERMINATION..............................................................................37
Section 7.02 DISSOLUTION UPON BANKRUPTCY OF THE DEPOSITOR..............................................38
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
Section 8.01. SEVERABILITY OF PROVISIONS...............................................................39
Section 8.02. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS...............................................39
Section 8.03. AMENDMENT................................................................................40
Section 8.04. DURATION OF AGREEMENT....................................................................41
ii
<PAGE>
Section 8.05. GOVERNING LAW............................................................................41
Section 8.06. NOTICES..................................................................................42
Section 8.07. BINDING EFFECT...........................................................................42
Section 8.08. CAPTIONS.................................................................................42
Section 8.09. EXHIBITS.................................................................................42
Section 8.10. GENERAL INTERPRETIVE PRINCIPLES..........................................................42
Section 8.11. NO BANKRUPTCY PETITION AGAINST DEPOSITOR OR TRANSFEROR...................................43
</TABLE>
EXHIBIT A - Form of Class A Certificate
EXHIBIT B - Form of Class B Certificate
<PAGE>
This TRUST AGREEMENT, dated as of _______________, ____, is
made with respect to the formation of the DVI ASSET FUNDING TRUST ____ and is
made by and between DVI _________, a ___________, as Depositor and
___________________, a [national] banking association, as Trustee.
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever used herein, capitalized words and phrases, unless
the context otherwise requires, shall have the respective meanings set forth in
Exhibit A to the Contribution and Servicing Agreement, dated as of _________,
between DVI Financial Services Inc. and DVI Receivables Corp. VIII, except that
the following terms shall have the meanings indicated in this Trust Agreement:
AGREEMENT: This Trust Agreement, dated as of _________, ____, between
the Depositor and the Trustee, as it may be amended or supplemented from time to
time in accordance with its terms.
ASSETS: That portion of the Trust Fund relating to a Series of
Certificates.
AUTHORIZED OFFICERS: With respect to the Trust, any officer of the
Trustee who is designated to act for the Trustee in matters relating to the
Trust and who is identified on the list of Authorized Officers, containing the
specimen signature of such Person, delivered by the Trustee on the Closing Date
(as such list may be modified or supplemented from time to time thereafter).
BOOK ENTRY CERTIFICATES: A beneficial interest in the Certificates,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section ___ of this Agreement.
[CAPITALIZED INTEREST ACCOUNT: The account or accounts established by
the Trustee for the benefit of the Certificateholders pursuant to Section ___ of
this Agreement.]
[CAPITALIZED INTEREST REQUIREMENT: For any Payment Date, the excess, if
any, of (a) the interest payable on the Certificates on such Payment Date over
(b) the sum of (i) one month's interest on the Aggregate Discounted Contract
Principal Balance as of the last day of the immediately preceding Collection
Period, calculated at the weighted average Certificate Remittance Rate for all
Classes of Certificates then issued and outstanding hereunder [and (ii) the
amount of investment earnings on deposit in the Pre-Funding Account].
CERTIFICATES: The [Class A] Certificates [and the Class B Certificates]
collectively.
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CERTIFICATEHOLDER OR HOLDER: The person in whose name a Certificate is
registered in the Certificate Register.
CERTIFICATE OWNER: With respect to Book Entry Certificate, the Person
who is the owner of such Book Entry Certificate, as reflected on the books of
the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant in each case in accordance with the rules of such Clearing
Agency).
CERTIFICATE REGISTER: The register maintained by the Trustee pursuant
to Section 4.04 of this Agreement.
CHARGES: All federal, state, county, city, municipal, local, foreign or
other governmental taxes (including income or franchise taxes), levies,
assessments, charges or claims, in each case then due and payable, upon or
relating to (a) the Transferred Assets, (b) employees, payroll, income or gross
receipts of [Originator,] [Transferor,] [Depositor,] (c) ownership or use of any
of the properties or assets of [Originator,] [Transferor,] [Depositor,] or (d)
any other aspect of the business of [Originator,] [Transferor,] [Depositor].
CLASS: All Certificates having the same rights to payment under [this
Agreement].
[CLASS A] CERTIFICATE: Any one of the ____% Class A Equipment Finance
Pass-Through Certificates issued pursuant to the terms of this Agreement.
[CLASS A] CERTIFICATEHOLDER: A Holder of a Class A Certificate.
[CLASS A] CERTIFICATE INTEREST ARREARAGE: For any Payment Date, an
amount equal to the excess, if any, of (a) the Class A Certificate Monthly
Interest for such Payment Date and any outstanding Class A Certificate Interest
Arrearage from the immediately preceding Payment Date plus interest on such
outstanding Class A Certificate Interest Arrearage, to the extent permitted by
law, at the Class A Certificate Remittance Rate from the immediately preceding
Payment Date through (but not including) the current Payment Date minus (b) the
amount of Class A Certificate Monthly Interest and Class A Certificate Interest
Arrearage actually distributed to the Holders of the Class A Certificates on
such Payment Date from whatever source.
[CLASS A] CERTIFICATE MONTHLY INTEREST: For any Payment Date, an amount
equal to the product of (i) one twelfth of the Class A Certificate Remittance
Rate and (ii) the Class A Certificate Principal Balance on the immediately
preceding Payment Date (or, in the case of the first Payment Date, on the
Closing Date), after giving effect to any payments of Class A Certificate
Monthly Principal and Class A Certificate Principal Arrearage paid on such
preceding Payment Date.
[CLASS A] CERTIFICATE MONTHLY PRINCIPAL: For any Payment Date, an
amount equal to the product of (a) the Class A Certificate Percentage and (b)
the Monthly Principal Payment.
[CLASS A] CERTIFICATE PERCENTAGE: ____________ percent (__%).
<PAGE>
-3-
[CLASS A] CERTIFICATE PRINCIPAL ARREARAGE: For any Payment Date, the
excess, if any, of (a) Class A Certificate Monthly Principal due on such Payment
Date plus any outstanding Class A Certificate Principal Arrearage from the
immediately preceding Payment Date over (b) the amount of Class A Certificate
Monthly Principal and Class A Certificate Principal Arrearage paid to the Class
A Certificateholders on such Payment Date from whatever source.
[CLASS A] CERTIFICATE PRINCIPAL BALANCE: An amount equal, initially, to
the Class A Certificate Initial Principal Balance and, thereafter, shall equal
the Class A Certificate Initial Principal Balance reduced by all amounts
previously paid to the Holders of the Class A Certificates representing payments
of Class A Certificate Monthly Principal and Class A Certificate Monthly
Principal Arrearage.
[CLASS A] CERTIFICATE REMITTANCE RATE: ______ percent (___%) per annum.
[CLASS A] INITIAL PRINCIPAL BALANCE: $_________________.
[CLASS A] PREPAYMENT PREMIUM: An amount equal to the product of (i) the
Class A Certificate Percentage and (ii) the Prepayment Premium.]
CLASS B CERTIFICATE: Any one of the ____% Class B Equipment Finance
Pass-Through Certificates issued pursuant to the terms of this Agreement.
CLASS B CERTIFICATEHOLDER: A Holder of a Class B Certificate.
CLASS B CERTIFICATE INTEREST ARREARAGE: For any Payment Date, an amount
equal to the excess, if any, of (a) the Class B Certificate Monthly Interest for
such Payment Date and any outstanding Class B Certificate Interest Arrearage
from the immediately preceding Payment Date plus interest on such outstanding
Class B Certificate Interest Arrearage, to the extent permitted by law, at the
Class B Certificate Remittance Rate from the immediately preceding Payment Date
through (but not including) the current Payment Date minus (b) the amount of
Class B Certificate Monthly Interest and Class B Certificate Interest Arrearage
actually distributed to the Holders of the Class B Certificates on such Payment
Date from whatever source.
CLASS B CERTIFICATE MONTHLY INTEREST: For any Payment Date, an amount
equal to the product of (i) one twelfth of the Class B Certificate Remittance
Rate and (ii) the outstanding Class B Certificate Principal Balance on the
immediately preceding Payment Date (or, in the case of the first Payment Date,
on the Closing Date), after giving effect to any payments of Class B Certificate
Monthly Principal and Class B Certificate Principal Arrearage on such preceding
Payment Date.
CLASS B CERTIFICATE MONTHLY PRINCIPAL: For any Payment Date, an amount
equal to the product of (a) the Class B Certificate Percentage and (b) the
Monthly Principal Payment.
CLASS B CERTIFICATE PERCENTAGE: __________ percent (__%).
<PAGE>
-4-
CLASS B CERTIFICATE PRINCIPAL ARREARAGE: For any Payment Date, the
excess, if any, of (a) Class B Certificate Monthly Principal due on such Payment
Date plus any outstanding Class B Certificate Principal Arrearage from the
immediately preceding Payment Date over (b) the amount of Class B Certificate
Monthly Principal and Class B Certificate Principal Arrearage distributed to the
Class B Certificateholders on such Payment Date from whatever source.
CLASS B CERTIFICATE PRINCIPAL BALANCE: An amount equal, initially, to
the Class B Initial Principal Balance and, thereafter, shall equal the Class B
Initial Principal Balance reduced by all amounts previously paid to the Holders
of the Class B Certificates representing payments of Class B Certificate Monthly
Principal and Class B Certificate Monthly Principal Arrearage.
CLASS B CERTIFICATE REMITTANCE RATE: _______________________ percent
(_____%) per annum.
CLASS B INITIAL PRINCIPAL BALANCE: $_____________.
CLASS B PREPAYMENT PREMIUM: An amount equal to the product of (i) the
Class B Certificate Percentage and (ii) the Prepayment Premium.
CLEARING AGENCY: An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
CLEARING AGENCY PARTICIPANT: A broker, dealer, bank, other financial
institution or other Person for whom a Clearing Agency effects from time to time
book entry transfer and pledges of securities deposited with the Clearing
Agency.
CODE: The Internal Revenue Code of 1986, as amended.
COLLECTION ACCOUNT: The account or accounts established by the Trustee
for the benefit of the Certificateholders [Securityholders] pursuant to Section
___ of this Agreement [the Indenture].
CONTRACT DEFAULT: An event of default by an Obligor under a Contract.
CONVEYED PROPERTY: The Conveyed Property will consist of (i) the
Transferred Assets, (ii) funds on deposit in the Accounts and any Eligible
Investments purchased with such amounts, (iii) the rights of the Depositor under
the Sale Agreement, (iv) the rights of the Transferor (and of the Depositor, as
assignee of the Transferor) under the Contribution and Servicing Agreement and
(v) all of the income and proceeds of any of the foregoing.
CREDIT ENHANCEMENT: [Any bond or certificate insurance, a letter of
credit, a guaranty, a cash collateral loan or other arrangement that increases
the certainty of payment to the Securityholders.]
<PAGE>
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DEFINITIVE CERTIFICATE: This term shall have the meaning set forth in
Section 4.10 hereof.
DEPOSITOR: [DVI Receivables Corp. VIII], a corporation organized and
existing under the laws of the State of Delaware.
DEPOSITORY AGREEMENT: The agreement among the Depositor, the Trustee
and The Depository Trust Company, as the initial Clearing Agency, dated as of
the Closing Date, in the form acceptable to the Majority of Holders.
DISTRIBUTION DATE: _____________.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
FUNDING PERIOD: The period commencing on the Closing Date and ending on
the earlier to occur of (i) the _________ Payment Date after the Closing Date,
(ii) the date on which an Early Amortization Event occurs, [or (iii) the
depletion of the Pre-Funding Account].
INITIAL AGGREGATE DISCOUNTED CONTRACT BALANCE: $___________.
INITIAL CERTIFICATE PRINCIPAL BALANCE: An amount equal to the [sum of
the Class A] Initial Principal Balance [and the Class B Initial Principal
Balance].
MAJORITY OF HOLDERS: Holders of Certificates representing more than
fifty percent (50%) of the Percentage Interest of the Trust.
OID: Original Issue Discount, as defined in section 1273(a) of the Code
and the Treasury Regulations issued thereunder.
OPTIONAL REDEMPTION: The repurchase in whole or in part of the
Outstanding Certificates, as permitted by Section ___ of [this Trust Agreement].
OUTSTANDING: When used with reference to the Certificates and as of any
particular date, any Certificate theretofore and thereupon being authenticated
and delivered except:
(i) any Certificate cancelled by the Trustee [or proven to the
satisfaction of the Trustee to have been duly cancelled by the Issuer
at or before said date];
(ii) any Certificate, or portion thereof, called for payment
or redemption for which monies equal to the principal amount or
redemption price thereof, as the case may be, with interest to the
final payment date or redemption date, shall have theretofore been
deposited with the Trustee (whether upon or prior to final payment date
or the redemption date of such Certificate);
(iii) any Certificate in lieu of or in substitution for which
another Certificate shall subsequently have been authenticated and
delivered; and
<PAGE>
-6-
(iv) any Certificate held by the [Issuer] or any Affiliate
thereof.
PARTIAL PREPAYMENT AMOUNT: With respect to a Collection Period and a
Contract for which the Obligor has requested to make a voluntary partial
Prepayment, an amount equal to the excess, if any, of (A) the sum of (w) the
difference between (i) the Discounted Contract Balance of such Contract as of
the first day of such Collection Period and (ii) the Discounted Contract Balance
of such Contract as of the first day of such Collection Period calculated based
on the amount of each Scheduled Payment payable by the Obligor after giving
effect to the reduction of such Scheduled Payment which will result from such
partial Prepayment, plus (x) accrued and unpaid interest on the balance in
clause (w) at the Discount Rate from the Due Date on which a Scheduled Payment
was last paid to (but not including) the first day of such Collection Period,
plus (y) any unpaid Scheduled Payments from previous Collection Periods
(regardless of whether Servicer Advances were made with respect to such
Scheduled Payments) and interest thereon through the date of such partial
Prepayment, [plus (z) the Prepayment Premium] less (B) any Scheduled Payments
actually received by the Servicer with respect to the prepaid portion of such
Contract for the current Collection Period on or before the date of such partial
Prepayment.
PAYMENT DATE: The __th day of each calendar month (or if such day is
not a Business Day, the next succeeding Business Day).
PERCENTAGE INTEREST: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made hereunder such percentage
interest being equal to the percentage obtained by dividing the denomination of
such Certificate by the aggregate of the denomination of the same class.
PLAN: An "employee benefit plan" within the meaning of Section 3(3) of
ERISA or a "plan" within the meaning of Section 4975(e)(i) of the Code.
[PRE-FUNDING ACCOUNT: The account or accounts established by the
Trustee for the benefit of the Certificateholders pursuant to Section ___ of
[the Indenture] this Agreement.]
PREPAYMENT: With respect to a Collection Period and a Contract (except
a Defaulted Contract), any payment received from or on behalf of an Obligor in
respect of any Scheduled Payment(s), in advance of their scheduled Due Date,
including Prepayment Amounts, Partial Prepayment Amounts, Casualty Proceeds,
Insurance Proceeds or otherwise, to the extent that any such amounts are
included in the Discounted Contract Balance and have not been previously
deducted from the Discounted Contract Balance of such Contract.
PREPAYMENT AMOUNT: With respect to a Collection Period and a Contract
for which the Obligor has requested to make a voluntary Prepayment in full, [and
for which no Substitute Contract has been provided,] an amount equal to the
excess of (A) the sum of (i) the Discounted Contract Balance of such Contract as
of the beginning of such Collection Period, (ii) accrued and unpaid interest on
the balance in clause (i) at the Discount Rate from the Due Date on which a
Scheduled Payment was last paid to (but not including) the first day of such
Collection Period, (iii) any unpaid Scheduled Payments from previous Collection
Periods (regardless of whether
<PAGE>
-7-
Servicer Advances were made with respect to such Scheduled Payments) and
interest thereon through the date of Prepayment [and (iv) the Prepayment
Premium] over (B) all Scheduled Payments received with respect to such Contract
for such Collection Period on or before the date of such Prepayment.
PREPAYMENT PREMIUM: With respect to any Contract for which the Obligor
has requested to make a voluntary Prepayment in full or in part, an amount equal
to the excess, if any, of (a) an amount equal to the Discounted Contract Balance
of the Contract subject to the prepayment calculated using a discount rate equal
to the sum of (i) the then current yield on U.S. Treasury securities with a
maturity comparable to the weighted average life of the prepaid Contract, plus
(ii) an amount, expressed as a percentage, equal to the weighted average spread
(between the Certificate rate and the applicable Treasury rate) used in pricing
the Certificates at the original sale, plus (iii) the Servicing Fee Rate over
(b) an amount equal to the actual Discounted Contract Balance of such Contract.
[PRE-FUNDING AMOUNT: For any Payment Date during the Funding Period, an
amount equal to the amount by which (x) the Monthly Principal Payment for such
Payment Date exceeds (y) the sum of the Discounted Contract Balance of all
Contracts that were initially classified as a Defaulted Contract during the
immediately preceding Collection Period.
RELATED DOCUMENTS: The Contribution and Servicing Agreement, the Sale
Agreement, this Trust Agreement, the Certificates, the Underwriting Agreement
and each other document or instrument executed in connection thereof or the
transaction contemplated thereby.
REPURCHASE OPTION PAYMENT: As defined in ss. 7.01 hereof.
REQUIRED PAYMENTS: The amounts distributable pursuant to clauses [(a),
(b), (c), (d), (e), (f) and (g)] as set forth in Section ___ of this Agreement.
[RESERVE ACCOUNT: The account or accounts established by the Trustee
for the benefit of the Certificateholders pursuant to Section ____ of this
Agreement.]
SCHEDULED PAYMENTS: means, with respect to a Contract, the periodic
payment, including but not limited to principal and interest scheduled to be
paid by an Obligor pursuant to the terms and conditions of a Contract, due from
the Obligor during the related Collection Period.
SECURITY DEPOSIT: Any refundable deposit collected from, or on behalf
of, an Obligor as a security deposit at the time of origination of a Contract.
[TRANSFER DATE: With respect to the Original Contracts, the Cut-Off
Date, and with respect to Additional Contracts or Substitute Contracts, the
Payment Date that such Additional Contract or Substitute Contract is sold or
contributed to the Trust Estate, as the case may be.]
TRUST: DVI Asset Funding Trust _____, a [business] trust organized and
existing under the laws of the State of ________.]
<PAGE>
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TRUST ESTATE: All right, title and interest of the Trust in and to the
property and rights transferred to or held by the Trust pursuant to this
Agreement.
TRUST ORDER: A written order or request signed in the name of [the
Depositor by its Authorized Officers] [an Authorized Officer of the Owner
Trustee] and delivered to the Trustee.
TRUSTEE: The Person performing the duties of the Trustee under this
Agreement, initially -------------.
WARRANTY REPURCHASE AMOUNT: With respect to a Collection Period and for
each Contract repurchased by Originator pursuant to the Contribution and
Servicing Agreement[, and for which no Substitute Contract has been provided,]
an amount equal to the excess of (A) the sum of (i) the Discounted Contract
Balance of such Contract as of the beginning of such Collection Period, (ii)
accrued and unpaid interest on the balance in clause (i) at the Discount Rate
from the Due Date on which a Scheduled Payment was last paid to (but not
including) the first day of such Collection Period, (iii) any unpaid Scheduled
Payments from previous Collection Periods (regardless of whether Servicer
Advances were made with respect to such Scheduled Payments) and interest thereon
through the date of repurchase [and (iv) the Prepayment Premium] over (B) all
Scheduled Payments received with respect to such Contract for such Collection
Period on or before the date of such repurchase.
Section 1.02. GENERAL INTERPRETIVE PRINCIPLES. For purposes of this
Agreement except as otherwise expressly provided or unless the context otherwise
requires:
(a) the defined terms in this Agreement shall include the
plural as well as the singular, and the use of any gender herein shall be deemed
to include any other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date hereof;
(c) references herein to "Articles", "Sections",
"Subsections", "paragraphs", and other subdivisions without reference to a
document are to designated Articles, Sections, Subsections, paragraphs and other
subdivisions of this Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
provision;
<PAGE>
-9-
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration;
(g) interest payable under this Agreement shall be calculated
on the basis of a 360 day year consisting of twelve 30 day months; and
(h) the term "principal" when referring to the Certificates
shall mean the [sum of Class A] Certificate Monthly Principal, [Class A]
Certificate Principal Arrearage, [Class B Certificate Monthly Principal and
Class B Certificate Principal Arrearage] and the term "interest" when referring
to the Certificates shall mean [the sum of Class A] Certificate Monthly
Interest, [Class A] Certificate Interest Arrearage, [Class B Certificate Monthly
Interest and Class B Certificate Interest Arrearage].
<PAGE>
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ARTICLE II
CONVEYANCE OF CONTRACTS; TRUST ESTATE
-------------------------------------
Section 2.01. CONVEYANCE OF CONTRACTS. In consideration for
the delivery to the Depositor by the Trustee of the Certificates in authorized
denominations equal in the aggregate to [the sum of the Class A] Initial
Principal Balance [and the Class B Initial Principal Balance], the Depositor
does hereby sell, transfer, assign, set over and convey to the Trustee without
recourse, all the right, title and interest of the Depositor in and to the
Conveyed Property.
It is the intention of the Depositor and the Trustee that the
assignment and conveyance by the Depositor of the Conveyed Property and the
related issuance of the Certificates pursuant to this Agreement shall constitute
a purchase by the Trust of the Conveyed Property [(other than the Reserve
Account, the Pre-Funding Account and the Capitalized Interest Account)], and
that the Conveyed Property not be part of the Depositor's estate in the event of
the insolvency or bankruptcy of the Depositor. In the event that the Conveyed
Property is held to be property of the Depositor's bankruptcy estate, or if for
any reason this Agreement is held or deemed to create a security interest in the
Conveyed Property, then (x) this Agreement shall also be deemed to be a security
agreement within the meaning of Article 8 and Article 9 of the Uniform
Commercial Code as in effect in the States of _____________ and (y) the
conveyance provided for in this section 2.01 shall be deemed to be a grant by
the Depositor to the Trustee of (A) a valid first priority perfected security
interest in all of the Depositor's right, title and interest in and to the
Conveyed Property, except for the Equipment not owned by the Depositor, and (B)
a valid assignment by the Depositor to the Trustee of its security interest in
the Equipment not owned by the Depositor. If the Trust terminates prior to the
satisfaction of the claims of any Person in any Certificates, the security
interest created hereby shall continue in full force and effect and the Trustee
shall be deemed to be the collateral agent for the benefit of the
Certificateholders.
Section 2.02. ACCEPTANCE BY THE TRUSTEE. (a) The Trustee
acknowledges and accepts the assignment to it of the Conveyed Property pursuant
to this Agreement to be held in trust for the use and benefit of all present and
future Certificateholders [Securityholders], and has caused to be authenticated
and delivered to or upon the order of the Depositor, in exchange for the
Conveyed Property, Certificates duly authenticated by the Trustee in authorized
denominations evidencing ownership of the entire Trust Estate.
(b) The Depositor hereby (x) appoints the Trustee as the
Depositor's attorney-in-fact with all power to independently enforce against the
Originator, the Transferor and the Servicer, as appropriate, any of its rights
under any of the Related Documents under the Contribution and Servicing
Agreement and the Sale Agreement and (y) directs the Trustee to enforce any such
rights. The Trustee hereby accepts such appointment and agrees to enforce any
such rights.
Section 2.03. CUSTODY OF CONTRACTS AND CONTRACT FILES. The
executed original counterpart of each Contract, together with the other
documents or instruments, if any, which
<PAGE>
-11-
constitute a part of a Contract File shall be held by the [Indenture] Trustee,
in accordance with its customary practices, for the benefit of the Depositor [,
the Certificateholders] and the Certificateholders, as their respective
interests may appear.
Section 2.04. LIABILITIES OF THE TRUST AND PARTIES TO THIS
AGREEMENT; LIMITATIONS THEREON. (a) The obligations evidenced by the
Certificates provide recourse only to the Trust Estate and provide no recourse
against the Depositor, the Originator, the Servicer, the Trustee, or any other
Person. In consideration of the sale of the Certificates by the Depositor to the
initial Certificateholders for aggregate proceeds equal to the Initial
Certificate Principal Balance, the Depositor hereby instructs the Trustee to,
and the Trustee hereby agrees to, cause the Trust to pay to the
Certificateholders an amount of principal and interest, in each case at the
times, from the sources and on the terms and conditions set forth herein.
(b) The Depositor, the Originator, the Transferor and the
Servicer shall not be liable to the Trust, the Trustee or the Certificateholders
except as expressly provided herein and, with respect to the Originator and the
Servicer, as provided in the Contribution and Servicing Agreement. Without
limiting the generality of the foregoing, if any Obligor fails to pay any
Scheduled Payment or other amounts due under a Contract, then neither the
Trustee, the Trust nor the Certificateholders will have any recourse against the
Depositor, the Originator, the Transferor or the Servicer for such Scheduled
Payment, other amounts due under the Contract or any losses, damages, claims,
liabilities or expenses incurred by the Trustee, the Trust or any
Certificateholder as a direct or indirect result thereof, except as may be
expressly provided for herein and, with respect to the Originator and the
Servicer, as provided in the Contribution and Servicing Agreement.
(c) The Trustee agrees that in the event of a Contract Default
by an Obligor, the Trustee, the Trust and the Certificateholders shall be
expressly limited to the sources of payment specified herein. In addition, the
Trustee shall have the right to exercise the rights of the Originator (assigned
to the Transferor, then to the Depositor and finally to the Trustee) under the
Contract, the Insurance Policies and any document in any Contract File in the
name of the Trustee, the Trust and the Certificateholders, either directly or
through the Servicer as agent, and the Trustee is hereby directed by the
Depositor to exercise such rights.
(d) The receipt of the Conveyed Property by the Trustee
pursuant to this Agreement does not constitute and is not intended to result in
an assumption by the Trustee, the Trust or any Certificateholder of any
obligation (except for the obligation not to disturb an Obligor's right of quiet
enjoyment) of the Originator or the Servicer to any Obligor, or other Person in
connection with the Equipment, the Contract, the Insurance Policies or any
document in the Contract Files.
Section 2.05. TITLE TO TRUST ESTATE. Legal title to all of the
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable in any jurisdiction requires title to any part of
the Trust Estate to be vested in a trustee, in which case title shall be deemed
to be vested in the Trustee.
<PAGE>
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Section 2.06. CONDITIONS TO CLOSING. As conditions to the
execution, authentication and delivery of the Certificates by the Trustee on the
Closing Date, the Trustee shall have received a certificate of the Depositor
(and the Trustee shall not be responsible for any independent verification of
such certificate) to the effect that the following have been delivered on or
before the Closing Date:
(a) The List of Contracts certified by a duly authorized
officer of the Originator;
(b) Copies of resolutions of the Board of Directors of the
Originator and the Transferor approving the execution, delivery and performance
of the Related Documents to which each is a party, certified by a Secretary or
an Assistant Secretary of the Originator or the Transferor, as appropriate.
(c) A copy of a document, certified by the Secretary of State
of the State of ________, and dated not more than 30 days prior to the Closing
Date (and confirmed on the Business Day prior to the Closing Date by telegram,
telephone or other similar means), evidencing the due organization and good
standing of the Originator and the Transferor, as appropriate;
(d) Copies of the Certificate of Incorporation and By-Laws of
the Originator and the Transferor certified as true, correct, complete by the
Secretary of the Originator or the Transferor, as appropriate;
(e) Evidence of filing with the Secretary of State of the
State of ___________ of UCC-1 financing statements (i) executed by the
Originator, as debtor, and naming the Transferor as secured party (and the
Trustee as assignee thereof) and the Conveyed Property as collateral; (2)
executed by the Transferor, as debtor, and naming the Depositor as secured party
(and the Trustee as assignee thereof) and the Conveyed Property as collateral;
and (3) executed by the Depositor, as debtor and naming the Trustee as secured
party and the Conveyed Property as collateral;
(f) A certificate listing the Servicing Officers of the
Servicer as of the Closing Date;
(g) Executed copies of each of the Related Documents;
(h) Copies of resolutions of the Board of Directors of the
Depositor approving the execution, delivery and performance of the Related
Documents to which it is a party and the transactions contemplated thereby,
certified by a Secretary or an Assistant Secretary of the Depositor;
(i) A copy of an officially certified document, dated not more
than 30 days prior to the Closing Date and confirmed on the Business Day prior
to the Closing Date by
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telegram, telephone or other similar means, evidencing the due organization and
good standing of the Depositor;
(j) Copies of the Certificate of Incorporation and By-Laws of
the Depositor, certified by a Secretary or an Assistant Secretary of the
Depositor; and
(k) Evidence that all collections received on the Contracts
from the close of business on the Cut-Off Date through ______________ have been
deposited in the Collection Account, and of the deposit of $____________ in the
Capitalized Interest Account, $__________ in any Reserve Account and $__________
in the Pre-Funding Account.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.
The Depositor hereby makes the following representations and warranties on which
the Trustee relies in accepting the Conveyed Property in trust and in
authenticating the Certificates. Such representations, warranties and covenants
are made as of the Closing Date (unless an earlier date is indicated therein),
but shall survive the sale, transfer and assignment of the Conveyed Property to
the Trustee.
(a) ORGANIZATION AND GOOD STANDING. The Depositor is a
corporation duly organized, validly existing and in good standing under
the laws of the State of ________, and is qualified to transact
business in all states in which the ownership or lease of its property
or the conduct of its business requires such qualification, except to
the extent that the failure to so qualify would not in the aggregate
materially adversely affect the ability of the Depositor to perform its
obligations under this Agreement and each other Related Document to
which it is a party.
(b) AUTHORIZATION. The Depositor has the power, authority and
legal right to execute, deliver and perform this Agreement and each
other Related Document to which it is a party including the sale and
assignment of the Conveyed Property to the Trustee, and the execution,
delivery, and performance of this Agreement have been duly authorized
by the Depositor by all necessary corporate action;
(c) BINDING OBLIGATION. This Agreement and each other Related
Document to which it is a party, assuming due authorization, execution
and delivery by the other parties hereto and thereto, each constitutes
a legal, valid and binding obligation of the Depositor, enforceable
against the Depositor in accordance with its terms, subject to
bankruptcy, insolvency and other laws of general application affecting
the rights of creditors;
(d) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and each other Related Document to which
it is a party and the fulfillment of the terms hereof will not conflict
with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a default
under the certificate of incorporation or bylaws of the Depositor, or
any material indenture, agreement, mortgage, deed of trust or other
instrument to which Depositor is a party or by which it is bound, or
result in the creation or imposition of any lien upon any of its
material properties pursuant to the terms of such indenture, agreement,
mortgage, deed of trust or other such instrument, other than this
Agreement, or violate any law, or any material order, rule or
regulation applicable to it of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or any of its
properties;
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(e) NO PROCEEDINGS. There are no proceedings or investigations
to which the Depositor is a party pending or, to the knowledge of the
Depositor, threatened, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
(A) asserting the invalidity of this Agreement or any other Related
Document, (B) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this
Agreement or any other Related Document or (C) seeking any
determination or ruling that would materially and adversely affect the
performance by the Depositor of its obligations under, or the validity
or enforceability of, this Agreement or any other Related Document;
(f) APPROVALS. All approvals, authorizations, consents, orders
or other actions of any person, corporation or other organization, or
of any court, governmental agency or body or official, required in
connection with the execution and delivery of this Agreement or any
other Related Document and with the valid and proper authorization,
issuance and sale of the Certificates pursuant to this Agreement, have
been or will be taken or obtained on or prior to the Closing Date;
(g) PLACE OF BUSINESS. The Depositor's principal place of
business and chief executive office is at 500 Hyde Park, Doylestown,
Pennsylvania 18901;
(h) SALE AGREEMENT. As of the Closing Date, the Depositor has
entered into the Sale Agreement with the Transferor from whom it has
acquired the Transferred Assets and any representations and warranties
relating to the Equipment and the Contracts made by the Transferor in
the Sale Agreement are for the benefit of the Depositor, the Trustee,
and the Certificateholders;
(i) NO OTHER CONVEYANCE. The Depositor has not conveyed any of
the Conveyed Property, nor will it convey any of the Trust Estate, to
the Trust with any intent to hinder, delay or defraud any of its
creditors.
(j) DEPOSITOR SOLVENT. The Depositor is solvent and will not
be rendered insolvent as a result of the sale of the Conveyed Property
to the Trust or the sale of the Certificates.
Section 3.02. COVENANTS OF THE DEPOSITOR. The Depositor hereby
covenants and agrees with Trustee and the Certificateholders as follows:
(a) SECURITY INTERESTS. Except as otherwise provided herein,
the Depositor will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist, any Lien on
any Trust Property now existing or hereafter created, or any interest
therein, prior to the termination of this Agreement pursuant to Article
___ and the Depositor shall defend the right, title and interest of the
Trust in, to and under the applicable Trust Estate now existing or
hereafter created, against all claims of third parties claiming through
or under the Depositor; PROVIDED, HOWEVER, that nothing in this
subsection shall prevent or be deemed to prohibit the Depositor from
suffering to exist
<PAGE>
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upon any of the Trust Estate any Liens for municipal or other local
taxes and other governmental charges if such taxes or governmental
charges shall not at the time be due and payable or if the Depositor
shall currently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto.
(b) DELIVERY OF COLLECTIONS. The Depositor agrees to pay to
the Servicer all amounts which may be received by the Depositor in
respect of the Trust Estate, and to which the Depositor shall not
otherwise be entitled, as soon as practicable after receipt thereof by
the Depositor.
(c) OBLIGATIONS WITH RESPECT TO CONTRACTS. The Depositor has
and will have no obligations to be fulfilled under or in connection
with any Contract and will do nothing to impair the rights of the Trust
in the Contract. As long as there is no default of any of the
provisions of the applicable Contract, the Depositor will not disturb
the Obligor's quiet and peaceful possession of the related Equipment
and Obligor's unrestricted use thereof for its intended purpose.
(d) COMPLIANCE WITH LAW. The Depositor will comply, in all
material respects, with all acts, rules, regulations, orders, decrees
and directions of any governmental authority applicable to the
Contracts or any part thereof; PROVIDED, HOWEVER, that the Depositor
may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not materially and adversely affect the
rights of the Trust in the Contracts and the related Equipment. The
Depositor will comply, in all material respects, with all requirements
of law applicable to the Depositor.
(e) NOTICE OF LIENS. The Depositor shall notify the Trustee in
writing promptly after becoming aware of the existence of any Lien on
the Trust Estate, except for any Liens for municipal or other local
taxes if such taxes shall not at the time be due or payable without
penalty or if the Trust shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
(f) PROTECTION OF TRUST ESTATE. The Depositor shall take or
cause to be taken such actions and execute such documents as are
necessary to protect the Trust Estate and the Certificateholders'
interests in the Trust Estate, including, without limitation, the
filing of financing statements, amendments thereto and continuation
statements, the execution of transfer instruments and the making of
notations on or taking possession of all records or documents of title
and shall take no action, including the filing of financing statements
under the UCC, which would be adverse to the Trust Estate or the
Certificateholders' interests in the Contracts and the security
interests in the Equipment.
(g) NAME CHANGE OR RELOCATION. If any change in either the
Depositor's name, structure or the location of its principal place of
business or chief executive office occurs, then the Depositor shall
deliver [sixty (60) days'] prior written notice of such change or
<PAGE>
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relocation to the Trustee, and the Depositor, no later than [five] days
after the effective date of such change or relocation, shall file such
amendments or statements as may be required to preserve and protect the
Certificateholders' and the Trustee's respective interests in the Trust
Estate.
(h) CHIEF EXECUTIVE OFFICE. During the term of this Agreement,
the Depositor will maintain its chief executive office and principal
place of business in one of the States of the United States.
(i) COSTS AND EXPENSES. The Depositor agrees to pay all
reasonable costs and disbursements in connection with the protection,
as against all third parties, of the Trust Estate and the
Certificateholders' right, title and interest in and to the Trust
Estate.
<PAGE>
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ARTICLE IV
THE CERTIFICATES
Section 4.01. AUTHORIZATION OF CERTIFICATES. There shall be
issued under this Agreement [(i)] the [Class A] Certificates in the initial
aggregate principal amount of $__________ [and (ii) the Class B Certificates in
the initial aggregate principal amount of
$---------.]
The [Class A] Certificates [and the Class B Certificates]
shall be initially issued in minimum denominations of $500,000, [each] as
requested by the Depositor in writing prior to the date of issuance of the
Certificates.
Section 4.02. FORM OF CERTIFICATES. The [Class A] Certificates
[and the Class B Certificates] issued under this Agreement shall be
substantially in the following form of Exhibit B, respectively, in each case,
with such appropriate variations, omissions, additions and insertions as are
permitted or required by this Agreement, and may have such legends or
endorsements placed thereon as may, consistently herewith, be determined by any
of the Corporate Trust Officers of the Trustee executing such Certificates, as
evidenced by their execution of the Certificates.
Section 4.03. CERTIFICATE OF AUTHENTICATION. No Certificate
shall be secured hereby or entitled to the benefit hereof or shall be or become
valid or obligatory for any purpose unless there shall be endorsed thereon a
certificate of authentication, substantially in the form as set forth in the
form of Certificate attached hereto as Exhibit B, executed by a Corporate Trust
Officer of the Trustee; and such certificate on any Certificate shall be
conclusive evidence and the only competent evidence that it has been duly
authenticated and delivered hereunder.
At the written direction of the Depositor, the Trustee shall
authenticate and deliver the Certificates. It shall not be necessary that the
same authorized signatory of the Trustee execute the certificate of
authentication on each of the Certificates.
Section 4.04. REGISTRATION; REGISTRATION OF TRANSFER AND
EXCHANGE OF CERTIFICATES. (a) The Trustee shall cause to be kept a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for the registration and registration
of transfers of the Certificates. The names and addresses of the Holders of all
Certificates and all transfers of, and the names and addresses of the
transferees of, all Certificates will be registered in the Certificate Register.
If a Person other than the Trustee is to maintain the Certificate Register, such
successor certificate registrar shall give the Trustee prompt written notice of
such appointment and of the location, and any change in the location, of the
successor certificate registrar, and the Trustee shall have the right to inspect
the Certificate Register at all reasonable times and to obtain copies thereof,
and the Trustee shall have the right to rely upon a certificate executed on
behalf of the certificate registrar by an officer thereof as to the names and
<PAGE>
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addresses of the Holders of the Certificates and the principal amounts and
number of such Certificates.
(b) Any Certificate is transferable only upon the
surrender to the Trustee of such Certificate assignment executed by the existing
Holder or its duly authorized attorney in form reasonably satisfactory to the
Trustee duly endorsed by, or accompanied by a written instrument of transfer.
Upon satisfaction of such requirements, each Holder of a Certificate shall have
the right to require a new Certificate or Certificates of the same Class to be
issued to it or to its assignee. All Certificates issued upon any registration
of transfer or exchange of Certificates shall be entitled to the same rights
under this Agreement as the Certificates surrendered upon such registration of
transfer or exchange.
(c) Any service charge made or expense incurred by
the Trustee for any such registration, discharge from registration or exchange
referred to in this Section 4.04 shall be paid by the Certificateholder. The
Trustee may require payment by the Holder of a sum sufficient to cover any tax
expense or other governmental charge payable in connection therewith.
(d) The preceding provisions of this Section 4.04
notwithstanding, the Trustee shall not be required to make and the Certificate
Registrar need not register transfers or exchanges, of any Certificate for a
period of thirty (30) days preceding the due date for the final repayment of
principal with respect to the Certificate.
Section 4.05. MUTILATED, DESTROYED, LOST AND STOLEN
CERTIFICATES. (a) If (i) any mutilated Certificate is surrendered to the
Trustee, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (ii) there is delivered to
the Trustee such security or indemnity as it may require to hold the Trust and
the Trustee harmless, then the Trustee shall execute and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
replacement Certificate of the same Class and maturity and of like terms as the
mutilated, destroyed, lost or stolen Certificate; PROVIDED, HOWEVER, that if any
such destroyed, lost or stolen Certificate, but not a mutilated Certificate,
shall have become, or within thirty (30) days shall be, due and payable, the
Trustee may pay such destroyed, lost or stolen Certificate when so due or
payable instead of issuing a replacement Certificate.
(b) If, after the delivery of such replacement Certificate, or
payment of a destroyed, lost or stolen Certificate pursuant to the proviso to
the last sentence of subparagraph (a), a bona fide purchaser of the original
Certificate in lieu of which such replacement Certificate was issued presents
for payment such original Certificate, the Trustee shall be entitled to recover
upon the security or indemnity provided therefor to the extent of any loss,
damage, cost or expense incurred by the Trustee in connection therewith.
(c) The Trustee may, for each new Certificate authenticated
and delivered under the provisions of this Section 4.05, require the advance
payment by the Certificateholder of the expenses, including counsel fees,
service charges and any tax or governmental charge which may be incurred by the
Trustee or Trust Estate. Any Certificate issued under the provisions of this
<PAGE>
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Section 4.05 in lieu of any Certificate alleged to be destroyed, mutilated, lost
or stolen, shall be equally and proportionately entitled to the benefits of this
Agreement with all other Certificates of the same Class issued hereunder. The
provisions of this Section 4.05 are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Certificates.
Section 4.06. CANCELLATION. Any such Certificate as to which
the Trustee has made or holds the final payment thereon shall be deemed
cancelled and shall no longer be outstanding for any purpose of this Agreement,
whether or not such Certificate is ever returned to the Trustee. All
Certificates surrendered for payment, registration of transfer, exchange or
transfer shall be promptly cancelled by the Trustee. If the Trustee, for its own
account, shall acquire any of the Certificates, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Certificates. All cancelled Certificates may be held or disposed of by the
Trustee in accordance with its standard retention or disposal policy as in
effect at the time.
Section 4.07. PERSONS DEEMED OWNERS. The Person in whose name
any Certificate is registered shall be deemed and treated as the owner and
Holder thereof for all purposes of this Agreement and the Trustee and the Trust
Estate shall not be affected by any notice or knowledge to the contrary.
Payments of principal and interest on the Certificates shall be payable on each
Payment Date only to the registered Holder thereof on the immediately preceding
Record Date.
Section 4.08. BOOK ENTRY CERTIFICATES. The Certificates, upon
original issuance, will be issued in the form of a typewritten Certificate or
Certificates representing the Book Entry Certificates, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Trust Estate. Such Certificates shall initially be registered on the Certificate
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Certificate Owner will receive a Definitive Certificate representing such
Certificate Owner's interest in such Certificates, except as provided in Section
4.10 hereof. Unless and until Definitive Certificates have been issued to
Certificate Owners pursuant to Section 4.10:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the certificate registrar and the Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of principal of and interest on such
Certificates and the giving of instructions or directions hereunder) as
the sole Holder of such Certificates, and shall have no obligation to
such Certificate Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the provisions of
this Section shall control;
(iv) the rights of such Certificate Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law and agreements between
<PAGE>
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such Certificate Owners and the Clearing Agency and/or the Clearing
Agency Participants and, pursuant to the Depository Agreement, unless
and until Definitive Certificates are issued pursuant to Section 4.10,
the initial Clearing Agency will make book entry transfers among the
Clearing Agency Participants and receive and transmit payments of
principal of and interest on such Certificates to such Clearing Agency
Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Percentage Interest in the
Trust, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has (i) received instructions to such effect
from Certificate Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in such Certificates and (ii) has delivered such instructions
to the Trustee.
Section 4.09. NOTICES TO CLEARING AGENCY. With respect to the
Certificates, whenever a notice or other communication to the related
Certificateholders is required or other communication to Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 4.10, the Trustee
shall give all such notices and communications specified herein to be given to
such Certificateholders to the Clearing Agency, and shall have no obligation to
the related Certificate Owners.
Section 4.10. DEFINITIVE CERTIFICATES. If, with respect to
Book Entry Certificates, (i) the Trustee is notified in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to such Certificates, and the Trustee is unable to
locate a qualified successor, (ii) the Trustee, at is option, elects to
terminate the book entry system through the Clearing Agency or (iii) [after the
occurrence of an Event of Default or a Servicer Default], Certificate Owners
representing beneficial interests aggregating at least a Majority of Holders
advise the Clearing Agency in writing that the continuation of a book entry
system through the Clearing Agency is no longer in the best interests of such
Certificate Owners, then the Clearing Agency shall notify all such Certificate
Owners and the Trustee of the occurrence of any such event and of the
availability of definitive fully registered Certificates ("Definitive
Certificates") to such Certificate Owners requesting the same. Upon surrender to
the Trustee of the typewritten Certificate or Certificates representing the Book
Entry Certificates by the Clearing Agency, accompanied by registration
instructions, the Trustee shall execute and authenticate the Definitive
Certificates in accordance with the instructions of the Clearing Agency. Neither
the Certificate Registrar 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
Certificates, the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders.
Section 4.11. TEMPORARY CERTIFICATES. Pending the
preparation of Definitive Certificates to be issued in exchange for Book Entry
Certificates, the Trustee may execute and authenticate and deliver, temporary
Certificates which are printed, lithographed, typewritten,
<PAGE>
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mimeographed or otherwise produced, of the tenor of the Definitive Certificates
in lieu of which they are issued with such variations not inconsistent with the
terms of this Agreement as the Corporate Trust Officers executing such
Certificates may determine, as evidenced by their execution of such
Certificates.
If temporary Certificates are so issued, the Trustee will
cause Definitive Certificates to be prepared without unreasonable delay. After
preparation of Definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Trustee without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
Certificates, the Trustee shall execute and authenticate and deliver in exchange
therefor a like principal amount of Definitive Certificates of authorized
denominations. Until so exchanged, the temporary Certificates shall in all
respects be entitled to the same benefits under this Agreement as Definitive
Certificates.
<PAGE>
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ARTICLE V
PAYMENT OF CERTIFICATES; ACCOUNTS
[NOTE: THE PROVISIONS OF SECTIONS 5.01, 5.02, 5.03, 5.07, 5.08, 5.09 AND 5.10
MAY BE DELETED OR MODIFIED DEPENDING ON THE TERMS OF A PARTICULAR TRANSACTION.]
Section 5.01. COLLECTION ACCOUNT. (a) The Trustee hereby
establishes the Collection Account to be held (together with all property
therein from time to time) by and maintained with the Trustee in accordance with
the provisions of this Section 5.01. The Collection Account shall at all times
be an Eligible Account and shall be held as one or more segregated trust
accounts, initially in the Trustee's corporate trust department, and shall be
titled as follows: "_______________, as Trustee for the benefit of the
registered Certificateholders of DVI Asset Funding Trust 199_____ -- Collection
Account". The Trustee shall make or permit withdrawals from the Collection
Account only as provided in this Agreement.
(b) The following amounts shall be deposited in the Collection
Account at the times indicated below:
(i) The Servicer shall remit to the Trustee and
the Trustee shall immediately deposit, or
cause to be deposited into the Collection
Account the aggregate amount of Collections
received by the Servicer on or before the
[second] Business Day following the
Servicer's receipt of such Collections;
[provided, however, that the Servicer shall
not be obligated to remit any portion of the
foregoing amounts which represent Excluded
Amounts];
(ii) The Servicer shall remit to the Trustee on
or prior to _______ on the [Notice] Date,
and the Trustee shall immediately deposit
into the Collection Account, any Servicer
Advances;
(iii) The Originator shall remit to the Trustee,
and the Trustee shall deposit in immediately
available funds, the aggregate Warranty
Repurchase Amount due and payable by the
Originator not later than the _________
Business Day following the date on which it
becomes obligated to pay such Warranty
Repurchase Amount and the Trustee shall
immediately deposit into the Collection
Account any Warranty Repurchase Amount
received from, or on behalf of, the
Originator;
[(iv) The Trustee shall immediately deposit into
the Collection Account any Reserve Account
Draw required to be deposited into the
Collection Account pursuant to Section 5.02
of this Agreement]; and
<PAGE>
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[(v) The Trustee shall immediately deposit into
the Collection Account the amount of any
withdrawals made from the Capitalized
Interest Account in accordance with Section
5.10 of this Agreement.]
(c) On each Payment Date, the Trustee shall pay the amounts
set forth below (based solely on the information stated on the Servicer Report
delivered on the immediately preceding Notice Date) out of the Collection
Account from amounts deposited therein pursuant to this Section 5.01 to the
following Persons in the following order of priority:
[(1) To the Servicer by [wire transfer of immediately
available funds] (to the account that the Servicer has designated to the Trustee
on or prior to the Business Day immediately preceding such Payment Date), an
amount necessary to reimburse the Servicer for unreimbursed Servicer Advances as
follows: (i) for Servicer Advances made with respect to Contracts which become
Defaulted Contracts, from all Collections; and (ii) for Servicer Advances made
with respect to Delinquent Contracts, from such delinquent payments subsequently
received from Obligors under such Delinquent Contract;]
(2) To the Servicer by [wire transfer of immediately available
funds] (to the account that the Servicer has designated to the Trustee on or
prior to the Business Day immediately preceding such Payment Date), the sum of
(a) any Servicing Fee Arrearage, plus (b) any other amounts to which the
Servicer is entitled pursuant to the [Contribution and Servicing Agreement]; and
(3) To each Holder of a [Class A] Certificate on the
immediately preceding Record Date (or, in the case of the initial Distribution
Date, the Closing Date), pro rata, by [wire transfer of immediately available
funds] (to the account that such Certificateholder has designated to the Trustee
in writing on or prior to the Business Day immediately preceding such Payment
Date), an amount equal to the sum of (x) [Class A] Certificate Monthly Interest
and (y) [Class A] Certificate Interest Arrearage, if any;
[ (4) To each Holder of a Class B Certificate on the immediately preceding
Record Date (or, in the case of the initial Distribution Date, the Closing
Date), pro rata, by [wire transfer of immediately available funds] (to the
account that such Certificateholder has designated to the Trustee in writing on
or prior to the Business Day immediately preceding such Payment Date), an amount
equal to the sum of (x) Class B Certificate Monthly Interest and (y) Class B
Certificate Interest Arrearage, if any;]
(5) To each Holder of a [Class A] Certificate on the
immediately preceding Record Date, pro rata, by [wire transfer of immediately
available funds] (to the account such Certificateholder has designated to the
Trustee in writing on or prior to the Business Day immediately preceding such
Payment Date), an amount equal to the sum of (i) [Class A] Certificate Monthly
Principal and (ii) [Class A] Certificate Principal Arrearage, if any;
[ (6) To each Holder of a Class B Certificate on the
immediately preceding Record Date, pro rata, by [wire transfer of immediately
available funds] (to the account that such
<PAGE>
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Certificateholder has designated to the Trustee in writing on or prior to the
Business Day immediately preceding such Payment Date), pro rata, an amount equal
to the sum of (i) Class B Certificate Monthly Principal and (ii) Class B
Certificate Principal Arrearage, if any;]
[(7) To the Trustee, the amount of any fees, expenses and
indemnifications owing pursuant to Section ___ hereof;] and
(8) To the Depositor (or its designee), any remaining
Available Funds (and the proceeds thereof) on deposit in the Collection Account.
[Section 5.02. RESERVE ACCOUNT. (a) The [Depositor] [Trustee]
hereby establishes the Reserve Account to be held (together with all property
therein from time to time) by and maintained with the Trustee in accordance with
the provisions of this Section 5.02. The Reserve Account shall at all times be
an Eligible Account and shall be held as one or more segregated trust accounts
in the Trustee's corporate trust department and shall be titled as follows:
"__________, as Trustee for the benefit of the registered Certificateholders of
DVI Asset Funding Trust _____-Reserve Account". The Trustee shall make or permit
withdrawals from the Reserve Account only as provided in this Indenture.
(b) No later than the Business Day prior to each Payment Date,
the Trustee shall, in accordance with the information set forth in the Servicer
Report, make a draw on the Reserve Account in an amount equal to the extent by
which Available Funds related to such Collection Period are not sufficient to
pay the Required Payments on such Payment Date, and the amount of any such
Reserve Account Draw will be deposited in the Collection Account.
(c) On the first Business Day after the date on which this
Agreement terminates pursuant to Section ____ hereof, the Trustee shall withdraw
all amounts then on deposit in the Reserve Account and deliver such amounts
first to the Holders of the [Class A] Certificates to the extent of any unpaid
amounts owing on the [Class A] Certificates, [then to the Holders of the Class B
Certificates to the extent of any unpaid amounts owing on the Class B
Certificates and finally to the Depositor or its designee.]]
Section 5.03. [RESERVED]
Section 5.04. INVESTMENT OF MONIES HELD IN THE ACCOUNTS. The
Trustee shall invest any cash deposited in the Accounts in such Eligible
Investments as the Servicer shall direct. Each Eligible Investment (including
reinvestment of the income and proceeds of Eligible Investments) shall be held
to its maturity and shall mature not later than the [Business Day immediately
preceding the next succeeding] Payment Date. If the Trustee has not received
written instructions from the Servicer as to the investment of funds then on
deposit in any of the aforementioned accounts, the Issuer hereby instructs the
Trustee to invest such funds in Eligible Investments described in clause [(iv)]
of the definition thereof. Any funds in the Accounts not so invested must be
fully insured by the Federal Deposit Insurance Corporation. Eligible Investments
shall be made in the name of the Trustee for the benefit of the Noteholders
provided that upon release of such Eligible Investments in accordance with
Section ____ of this
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Agreement, the Trustee shall transfer such Eligible Investments into the name of
the Issuer or its designee. Any earnings on Eligible Investments in the Accounts
shall be retained in each such account and be distributed in accordance with the
terms of this Indenture. The Trustee shall not be liable or responsible for
losses on any investments made by it pursuant to and in compliance with such
instructions of the Servicer.
Section 5.05. RECORDS. The Trustee shall cause to be kept
and maintained adequate records pertaining to the Accounts and all disbursements
therefrom.
[Section 5.06. CAPITALIZED INTEREST ACCOUNT. (a) The Trustee
hereby establishes the Capitalized Interest Account to be held (together with
all property therein from time to time) by and maintained with the Trustee for
the benefit of the Certificateholders. The Capitalized Interest Account shall at
all times be an Eligible Account and initially shall be held as one or more
segregated trust accounts in the Trustee's corporate trust department and shall
be titled as follows: "_______________, as Trustee for the benefit of the
registered Certificateholders of DVI Asset Funding Trust ______ -Capitalized
Interest Account". The Trustee shall make or permit withdrawals from the
Capitalized Interest Account only as provided in this Agreement.
(b) On the Closing Date, the Trustee shall deposit in the
Capitalized Interest Account funds in an amount equal to $________ from the
proceeds of the sale of the Notes.
(c) On each Payment Date through and including the Payment
Date immediately following the termination of the Funding Period, the Trustee
shall transfer from the Capitalized Interest Account to the Collection Account
the Capitalized Interest Requirement for such Payment Date.
(d) On the Payment Date following the termination of the
Funding Period, any amounts remaining in the Capitalized Interest Account shall
be paid to the Company on such Payment Date and the Capitalized Interest Account
shall be closed.]
[Section 5.07. LOCKBOX ACCOUNT. On or prior to the Closing
Date, the Trustee, on behalf of the Issuer, shall establish in the name of the
Trustee for the benefit of the Noteholders, a post-office box with __________
(the "Lockbox Account") for the receipt directly from the Obligors of all
Collections on, or in respect of, each Contract. No Person other than the
Trustee shall be permitted to have access to such Lockbox Account. On each
Business Day, the Trustee shall cause all items received in the Lockbox Account
since the preceding Business Day to be deposited into the Collection Account.
All Collections relating to a Contract received in the Lockbox Account shall
constitute part of the Collateral.]
[Section 5.08. PRE-FUNDING ACCOUNT. (a) The Trustee, on
behalf of the Issuer, hereby establishes the Pre-Funding Account to be held
(together with all property therein from time to time) by and maintained with
the Trustee for the benefit of the Certificateholders. The Pre-Funding Account
shall at all times be an Eligible Account and initially shall be held as one or
more segregated trust accounts in the Trustee's corporate trust department and
shall be titled as follows: "_______________, as Trustee for the benefit of the
registered Certificateholders of
<PAGE>
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DVI Asset Funding Trust _____ Pre-Funding Account". The Trustee shall make or
permit withdrawals from the Pre-Funding Account only as provided in this
Indenture.
(b) On the Closing Date, the Trustee shall deposit, on behalf
of the Noteholders, in the Pre-Funding Account funds in an amount equal to
$________ from the proceeds of the sale of the Notes.
(c) On any Transfer Date occurring subsequent to the Closing
Date [and prior to the expiration of the Funding Period], the Issuer shall
instruct the Trustee to withdraw from the Pre-Funding Account an amount equal to
___% of the Discounted Contract Balances of the Additional Contracts sold to the
Company on such Transfer Date and pay such amount, upon satisfaction of the
conditions set forth in Section ____ of the [Contribution and Servicing
Agreement] with respect to such transfer.
(d) If the balance of funds on deposit in the Pre-Funding
Account has not been reduced to zero on the Final Transfer Date [within the
Funding Period], the Trustee is hereby authorized and directed to withdraw from
the Pre-Funding Account on such Final Transfer Date the remaining Pre-Funded
Amount on deposit in the Pre-Funding Account and shall distribute such amounts
on such Final Additional Closing Date to the [Class A] Certificateholders [and
the Class B Certificateholders], in accordance with their respective
percentages, [as a prepayment on the Class A Certificates and the Class B
Certificates.]]
<PAGE>
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ARTICLE VI
CONCERNING THE TRUSTEE
----------------------
Section 6.01. DUTIES OF TRUSTEE. (a) Except during the
continuance of a Servicer Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement and no
implied covenants or obligations shall be read into this Agreement
against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates, statements, reports, documents, orders, opinions or other
instruments furnished to the Trustee and conforming to the requirements
of this Agreement; PROVIDED, HOWEVER, the Trustee shall examine such
statements, reports, documents, orders, opinions or other instruments
whether or not they confirm on their face to the requirements of this
Agreement.
(b) If a Servicer Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by the
Contribution and Servicing Agreement, and use the degree of care and skill in
their exercise as is required pursuant to the terms of the Contribution and
Servicing Agreement.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; PROVIDED, HOWEVER, that:
(i) This paragraph shall not limit the effect of paragraph
(b) of this Section;
(ii) The Trustee shall not be liable for an error of judgment
made in good faith by a Corporate Trust Officer or Corporate Trust
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the directions received from the requisite
amount of Holders relating to the time, method and place of conducting
any Proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Agreement.
(d) No provisions of this Agreement shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of its duties hereunder, or in the exercise of any of its rights
or powers, if it shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
<PAGE>
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Section 6.02. RIGHTS OF THE TRUSTEE.
(a) The Trustee may consult with counsel and any advice of
such counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel.
(b) The Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement
PROVIDED, HOWEVER, that the Trustee's conduct does not constitute willful
misconduct, negligence or bad faith.
(c) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so by the Majority of
Holders; PROVIDED, HOWEVER, that the Trustee may require reasonable indemnity
against any cost, expense or liability likely to be incurred in making such
investigation as a condition to so proceeding. The reasonable expense of any
such examination shall be paid, on a pro rata basis, by the Certificateholders
requesting such examination or, if paid by the Trustee, shall be reimbursed by
such Certificateholders upon demand.
(d) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, [provided that the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed by it
with due care hereunder].
(e) The provisions of this Section 902 shall be applicable to
the Trustee in its capacity as Trustee under this Agreement. If the Trustee, in
accordance with the Contribution and Servicing Agreement, shall have succeeded
to the obligations of the Servicer, the provisions of the [Contribution and
Servicing] Agreement shall govern the actions of the Trustee as successor
Servicer.
Section 6.03. TRUSTEE NOT LIABLE. (a) Other than the
representations and warranties contained in Section 9.11 hereof and the
certificate of authentication on the Certificates, the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Agreement, the Certificates, the Trust
Estate or of any related document. The Trustee shall not be accountable for the
use or application by the Trust Estate of any of the Certificates or of the
proceeds thereof, or for the use or application of any funds paid to the Trust
Estate or the Servicer (if the Servicer is a Person other than the Trustee) in
respect of the Collateral.
(b) The Trustee shall not have any obligation or
responsibility with respect to the Contract Files [except as set forth in
Section _____________]. The Trustee shall have no responsibility or liability
for or with respect to the existence or validity of any Contract or item of
Equipment, the perfection of any security interest (whether as of the date
hereof or at any future time), the maintenance of or the taking of any action to
maintain such perfection, the validity of
<PAGE>
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the assignment of any portion of the Collateral to the Trustee or of any
intervening assignment, the review of any Contract (it being understood that the
Trustee has not reviewed and does not intend to review the substance or form of
any such Contract), the performance or enforcement of any Contract, the
compliance by the Originator or the Servicer [(other than the Trustee acting as
Servicer)] with any covenant or the breach by the Originator or the Servicer
(other than the Trustee acting as Servicer) of any warranty or representation
made hereunder or in any related document or the accuracy of such warranty or
representation, any investment of monies in the Accounts or any loss resulting
therefrom (provided that such investments are made in accordance with the
provisions of Section 5.04 hereof), the acts or omissions of the Depositor, the
Servicer (other than the Trustee acting as Servicer) or any Obligor or any
action of the Servicer taken in the name of the Trustee.
(c) The Trustee shall not have any obligation or liability
under any Contract by reason of or arising out of this Agreement or the granting
of a security interest in such Contract hereunder or the receipt by the Trustee
of any payment relating to any Contract pursuant hereto, nor shall the Trustee
be required or obligated in any manner to perform or fulfill any of the
obligations of the Trust Estate or the Depositor under or pursuant to any
Contract, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it, or the sufficiency of any performance
by any party, under any Contract.
Section 6.04. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee; PROVIDED, HOWEVER,
that (1) such transaction must not result in the disqualification of the Trustee
for purposes of Rule 3a-7 under the Investment Company Act of 1940, as amended
and (2) the Trustee must comply with Section 6.06 hereof.
Section 6.05. LIEN FOR TRUSTEE'S FEES AND EXPENSES. The fees
and expenses of the Trustee shall be paid in accordance with Section 5.01 of
this Agreement. Subject to the provisions of Section ______ hereof, the Trust
Estate shall indemnify the Trustee for, and hold it harmless against, any loss,
liability or expense incurred without negligence or willful misconduct on its
part, arising out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself both
individually and in its representative capacity against any claim or liability
in connection with the exercise or performance of any of its power or duties
hereunder.
Section 6.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The
Trustee may have normal banking relationships with the Company. The Trustee or
its parent corporation shall at all times have a combined capital and surplus of
at least [$50,000,000]. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of such supervising or
examining authority, then, for the purposes of this Section 6.06, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In addition, the Trustee hereunder shall at all times qualify for
purposes of Rule 3a-7 under the Investment Company Act of 1940. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section,
<PAGE>
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the Trustee shall resign immediately in the manner and with the effect specified
in Section 6.07 hereof.
Section 6.07. RESIGNATION AND REMOVAL OF TRUSTEE. (a) The
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Certificateholders, the Company, any
other Depositor, and any Indenture Trustee. Upon receiving such notice of
resignation, the Majority of Holders shall promptly appoint a successor trustee
(which shall be reasonably acceptable to the Majority of Holders) by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor Trustee. If no successor Trustee
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee,
which successor trustee shall be reasonably acceptable to the Majority of
Holders.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 6.06 hereof and shall fail to resign
after written request therefor by the Company, or if at any time the Trustee
shall become incapable of acting, or shall be adjudged a bankrupt or insolvent,
or a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Company shall remove the Trustee and appoint a successor Trustee reasonably
acceptable to the Majority of Holders by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor Trustee.
The Trustee also may be removed at any time (i) by the
Company, if the Trustee ceases to be eligible to continue as such under this
Trust Agreement, (ii) if the Trustee become insolvent, (iii) if a tax is imposed
or threatened with respect to the Trust Fund by any state in which the Trustee
or the Trust Estate held by the Trustee pursuant to this Trust Agreement is
located, or (iv) by the Majority of Holders upon 30 days' advance written notice
to the Trustee and to the Company.
(c) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 6.08 hereof.
Section 6.08. SUCCESSOR TRUSTEE. (a) Any successor Trustee
appointed as provided in Section 6.07 hereof shall execute, acknowledge and
deliver to the Trust Estate and to its predecessor Trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as Trustee herein. The predecessor Trustee
shall deliver to the successor Trustee the original Contracts and Contract
Files, if any, delivered to it, together with any amount remaining in the
Accounts. In addition, the predecessor Trustee and, upon request of the
successor Trustee, the Trust Estate shall execute and deliver such instruments
and do such other things as may
<PAGE>
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reasonably be required for more fully and certainly vesting and confirming in
the successor Trustee all such rights, powers, duties and obligations.
(b) No successor Trustee shall accept appointment as provided
in this Section unless at the time of such acceptance such successor Trustee
shall be eligible under the provisions of Section 6.06 hereof.
(c) Upon acceptance of appointment by a successor Trustee as
provided in this Section, the Trustee shall mail notice of its succession to all
Certificateholders at their addresses as shown in the Note Register.
Section 6.09. MERGER OR CONSOLIDATION OF TRUSTEE. Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 6.06 hereof, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 6.10. SEPARATE TRUSTEES, CO-TRUSTEES AND CUSTODIANS.
The Trustee or the Majority of Holders shall each have the power from time to
time to appoint one or more persons or corporations to act either as co-trustees
jointly with the Trustee, or as separate trustees, or as custodians, for the
purpose of holding title to, foreclosing or otherwise taking action with respect
to any of the Collateral, where such separate trustee or co-trustee is necessary
or advisable under any applicable laws or for the purpose of otherwise
conforming to any legal requirement, restriction or condition in any applicable
jurisdiction. The separate trustees, co-trustees, or custodians so appointed
shall be trustees, co-trustees, or custodians for the benefit of all
Certificateholders and shall have such powers, rights and remedies as shall be
specified in the instrument of appointment; PROVIDED, HOWEVER, that no such
appointment shall, or shall be deemed to, constitute the appointee an agent of
the Trustee. The Trustee shall join in any such appointment, but such joining
shall not be necessary for the effectiveness of such appointment.
Every separate trustee, co-trustee and custodian shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all powers, duties, obligations and rights conferred upon
the Trustee in respect of the receipt, custody and payment of moneys
shall be exercised solely by the Trustee;
(ii) all other rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee, co-trustee, or custodian jointly, except as provided in the
instrument of appointment, and except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the
Servicer) the Trustee shall be incompetent or unqualified to perform
<PAGE>
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such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Collateral or any
portion thereof in any such jurisdiction) shall be exercised and
performed by such separate trustee, co-trustee or custodian;
(iii) no trustee or custodian hereunder shall be personally
liable by reason of any act or omission of any other trustee or
custodian hereunder; and
(iv) the Trustee or the Majority of Holders may at any time
accept the resignation of or remove any separate trustee, co-trustee or
custodian so appointed by it or them if such resignation or removal
does not violate the other terms of this Agreement.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee, co-trustee, or custodian shall refer to this
Agreement and the conditions of this Article. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be furnished
to the Trustee.
Any separate trustee, co-trustees, or custodian may, at any
time, constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name, provided that the
Trustee shall continue to be responsible for its duties and obligations under
the Trust Agreement. If any separate trustee, co-trustee, or custodian shall
die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee or custodian.
No separate trustee, co-trustee or custodian hereunder shall
be required to meet the terms of eligibility as a successor trustee under
Section 6.06 hereof and no notice to Noteholders of the appointment thereof
shall be required under Section 6.08 hereof.
The Trustee agrees to instruct the co-trustees, if any, to the
extent necessary to fulfill the Trustee's obligations hereunder.
Section 6.11. REPRESENTATIONS AND WARRANTIES. The Trustee
hereby represents and warrants that:
(a) ORGANIZATION AND GOOD STANDING. The Trustee is a
[national] banking association duly organized, validly existing and in good
standing under the laws of [the United States of America], and has the power to
own its assets and to transact the business in which it is presently engaged;
<PAGE>
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(b) AUTHORIZATION. The Trustee has the power, authority and
legal right to execute, deliver and perform this Agreement and to authenticate
the Certificates, and the execution, delivery and performance of this Agreement
and the authentication of the Certificates has been duly authorized by the
Trustee by all necessary corporate action;
(c) BINDING OBLIGATIONS. This Agreement, assuming due
authorization, execution and delivery by the Depositor, constitutes the legal,
valid and binding obligations of the Trustee, enforceable against the Trustee in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
(whether statutory, regulatory or decisional) now or hereafter in effect
relating to creditors' rights generally and the rights of trust companies in
particular and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought,
whether a proceeding at law or in equity.
(d) NO VIOLATION. The performance by the Trustee of its
obligations under this Agreement will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice, lapse
of time or both) a default under, the charter documents or bylaws of the
Trustee;
(e) NO PROCEEDINGS. There are no proceedings or investigations
to which the Trustee is a party pending, or, to the knowledge of the Trustee,
threatened, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality (A) asserting the invalidity of this
Agreement or the Certificates, (B) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by this
Agreement or (C) seeking any determination or ruling that would materially and
adversely affect the performance by the Trustee of its obligations under, or the
validity or enforceability of, this Agreement or the Certificates; and
(f) APPROVALS. Neither the execution or delivery by the
Trustee of this Agreement nor the consummation of the transactions by the
Trustee contemplated hereby requires the consent or approval of, the giving of
notice to, the registration with or the taking of any other action with respect
to any governmental authority or agency under any existing federal or State of
____________ law governing the banking or trust powers of the Trustee;
Section 6.12. TRUSTEE OFFICES. The Trustee shall maintain in
the State of ____________ an office or offices or agency or agencies where
Certificates may be surrendered for registration of transfer or exchange, which
office shall initially be located at
___________________________________________________, and shall promptly notify
the Servicer and the Certificateholders of any change of such location.
Section 6.13. NOTICE OF EVENT OF SERVICER DEFAULT. (a) If the
Trustee shall have actual knowledge of a Servicer Default, the Trustee, shall
give prompt written notice thereof to the Certificateholders. For all purposes
of this Agreement, in the absence of actual knowledge by a Corporate Trust
Officer of the Trustee, the Trustee shall not be deemed to have actual
<PAGE>
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knowledge of any Servicer Default unless notified in writing thereof by the
Depositor, the Servicer or any Certificateholder, and such notice references the
Certificates generally, the Trust Estate or this Agreement.
[(b) Upon the waiver or cure of a Servicer Default, the
Trustee shall promptly notify the Rating Agencies as to how and when such
Servicer Default was waived or cured.]
Section 6.14. REPORTS TO CERTIFICATEHOLDERS. The Trustee will
prepare and forward to each Certificateholder on each Distribution Date, or as
soon thereafter as is practicable, a statement setting forth, to the extent
applicable to any Series, among other things:
(i) with respect to a Series, the amount of such distribution
allocable to principal on the Certificates, separately
identifying the aggregate amount of any principal prepayments
or redemptions included therein;
(ii) with respect to a Series, the amount of such distribution
allocable to interest on the Certificates;
(iii) the aggregate outstanding implicit or explicit principal
balance of the Assets as of the close of business on the
Determination Date;
(iv) the Aggregate Outstanding Principal Balance of the
Certificates of such series as of the Distribution Date, after
giving effect to distributions allocated to principal reported
under (i) above;
(v) if applicable, the amount of any shortfall (I.E., the
difference between the aggregate amounts of principal and
interest which Certificateholders would have received if there
were sufficient eligible funds to distribute and the amounts
actually distributed);
(vi) if applicable, the number and aggregate principal
balances of any Delinquent Contracts or Defaulted Contracts;
(vii) in the case of any Credit Enhancement described in the
related Prospectus Supplement, the amount of coverage of such
credit support as of the close of business on the applicable
Distribution Date;
(viii) in the case of any Series which includes Subordinate
Securities, the subordinated amount, if any, determined as of
the related Determination Date and if the distribution to the
Holders of Senior Securities is less than their required
distribution, the amount of the shortfall;
(ix) the amount of any withdrawal from any applicable Reserve
Fund included in amounts actually distributed to
Certificateholders and the remaining balance of
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each Reserve Fund, if any, on such Distribution Date, after
giving effect to distributions made on such date; and
(x) such other information as specified in the related Trust
Agreement.
In addition, within a reasonable period of time after the end
of each calendar year the Trustee, unless otherwise specified in the related
Prospectus Supplement, will furnish to each Certificateholder of record at any
time during such calendar year: (A) the aggregate of amounts reported pursuant
to clauses (i), (ii) and (v) (to the extent not received on any subsequent
Payment Date(s) during such calendar year) above for such calendar year and (B)
such other information specified in this Trust Agreement to enable
Certificateholders to prepare their tax returns including, without limitation,
the amount of original issue discount accrued on the Certificates, if
applicable. Information in the Distribution Date and annual reports provided to
the Certificateholders will not have been examined and reported upon by an
independent public accountant.
Section 6.15. LIST OF CERTIFICATEHOLDERS; NO MEETINGS. Unless
otherwise specified in the Prospectus Supplement, upon written request of three
or more Certificateholders of record of a Series for more than six months for
purposes of communicating with other Certificateholders with respect to their
rights under the Trust Agreement or under the Certificates for such Series,
which request is accompanied by a copy of the communication which such
Certificateholders propose to transmit, the Trustee will afford such
Certificateholders access during business hours to the most recent list of
Certificateholders of that Series held by the Trustee.
ARTICLE VII
TERMINATION
Section 7.01. TERMINATION. (a) The Trust created by this
Agreement shall terminate [135] days after the earlier to occur of (i) upon the
final payment or other liquidation (or any advance with respect thereto) of the
last Contract or the disposition of all property acquired upon repossession and
resale of any Equipment relating to such Contract and the remittance of all
funds due hereunder; or (ii) at the option of the Servicer [or the Company or
other Depositor], on any Payment Date which occurs in the month next following a
Collection Period in which the Aggregate Discounted Contract Balance is 10% or
less of the Aggregate Discounted Contract Balance as of the Cut-Off Date, so
long as the Servicer [or the Company or other Depositor] deposits or causes to
be deposited in the Certificate Account during the Collection Period related to
such Payment Date an amount equal to the Warranty Repurchase Amount for each
Contract (a "Repurchase Option Payment").
Notice of any termination, specifying the Payment Date upon
which all Certificateholders may surrender their Certificates to the Trustee for
payment and cancellation, shall be given promptly by the Trustee (upon direction
by the Servicer 10 days prior to the date such notice is to be mailed) by letter
to Certificateholders [and the Rating Agencies] mailed no later than the 25th
day of the month preceding the month of such final distribution specifying (i)
<PAGE>
-37-
the Payment Date upon which final payment on the Certificates will be made upon
presentation and surrender of Certificates at the office or agency of the
Trustee therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Payment Date is not
applicable, payment being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified. After
giving such notice, the Trustee shall not register the transfer or exchange of
any Certificates. If such notice is given in connection with the Servicer's
election to repurchase, the Servicer shall deposit in the Certificate Account
during the applicable Collection Period an amount equal to the above-described
purchase price and on the Payment Date on which such termination is to occur,
Certificateholders will be entitled to the amount of such purchase price but not
amounts in excess thereof, all as provided herein. Upon presentation and
surrender of the Certificates, the Trustee shall notify the Servicer, or its
successor servicer, and the Servicer, or its successor servicer, shall cause to
be distributed to Certificateholders an amount equal to (a) the amount otherwise
distributable on such Payment Date, if not in connection with the Servicer's
optional repurchase; or (b) if the Servicer elected to so purchase, an amount
equal to the then outstanding principal balance of, and accrued interest on, the
Certificates.
If all of the Certificateholders shall not surrender their
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
three months after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee shall appoint an agent to take
appropriate and reasonable steps to contact the remaining Certificateholders
concerning surrender of their Certificates, and the cost thereof shall be paid
out of the funds and other assets which remain in the Trust Estate hereunder.
(b) Upon deposit into the Certificate Account of the Warranty
Repurchase Amount by the Servicer under Section [_______], the Trustee shall be
deemed without any further action to have assigned to the Servicer, each
Contract that remains in default immediately prior to such termination, without
recourse, representation or warranty.
(c) Notwithstanding any other provision of this Agreement, the
Trust created by this Agreement shall not continue beyond the expiration of 21
years from the death of the last survivor of the descendants of John D.
Rockefeller living on the date hereof.
(d) Except as provided in Section [________], neither the
Depositor nor any Certificateholder shall be entitled to revoke or terminate the
Trust. The bankruptcy, liquidation, dissolution, death or incapacity of any
Certificateholder, other than the Depositor as described in Section [_____],
shall not (i) operate to terminate this Agreement or the Trust, nor (ii) entitle
such Certificateholder's legal representatives or heirs to claim an accounting
or to take any action or proceeding in any court for a partition or winding up
of all or any part of the Trust or Trust Estate nor (iii) otherwise affect the
rights, obligations and liabilities of the parties hereto.
Section 7.02 DISSOLUTION UPON BANKRUPTCY OF THE DEPOSITOR. In
the event that any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other
<PAGE>
-38-
proceeding, voluntary or involuntary, under any federal or state bankruptcy or
similar law (each, an "Insolvency Event") shall occur with respect to the
Depositor, this Agreement shall be terminated 60 days after the date of such
Insolvency Event, unless, before the end of such 60-day period the Trustee shall
have received written instructions from each of the Certificateholders (other
than the Depositor), to the effect that each such party disapproves of the
liquidation of the Contracts and termination of the Trust. Promptly after the
occurrence of any Insolvency Event with respect to the Depositor, (i) the
Depositor shall give the Trustee written notice of such Insolvency Event and
(ii) the Trustee shall, upon receipt of written notice of such Insolvency Event
from the Depositor, give prompt written notice to the Certificateholders of the
occurrence of such event; PROVIDED, HOWEVER, that any failure to give a notice
required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust pursuant to the first sentence of this Section [____].
Upon a termination pursuant to this Section, the Trustee shall sell the assets
of the Trust in a commercially reasonable manner and on commercially reasonable
terms. The proceeds of such a sale of the assets of the Trust shall be treated
as Collections under the Contribution and Servicing Agreement.
<PAGE>
-39-
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. SEVERABILITY OF PROVISIONS. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 8.02. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding-up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
No Certificateholder shall have any right to vote or in any
manner otherwise control (except as expressly provided herein) the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
Except as set forth in Section ____, no Certificateholder
shall have any right by virtue of any provision of this Agreement to institute
any suit, action or proceeding in equity or at law upon or under or with respect
to this Agreement, unless such Holder previously shall have given to the Trustee
a written notice of default (including any Servicer Default) and of the
continuance thereof, as hereinbefore provided, and the Holder of Certificate
evidencing in the aggregate not less than 25% of the Percentage Interests shall
have made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the cost, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificate shall have any right in any manner whatever
by virtue of any provision of this Agreement to affect, disturb or prejudice the
rightful Holders of any other of such Certificates or to obtain or seek to
obtain priority over or preference to any other such Holder, or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of Certificateholders. For the protection and enforcement of the
provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
<PAGE>
-40-
Section 8.03. AMENDMENT. (a) Without the consent of any
Securityholder and based on an Opinion of Counsel from a nationally recognized
outside counsel, the Depositor and the Trustee, at any time and from time to
time, may amend this Trust Agreement for any of the following purposes:
(i) to add to the covenants of the [Depositor] for
the benefit of the Securityholders, 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 to make any other provisions with respect
to matters or questions arising under this Agreement, provided
that such action shall not materially adversely affect the
interests of the Securityholders of the Certificates. Any such
amendment pursuant to clause (iii) of the preceding sentence
shall be deemed not to adversely affect in any material
respect the interests of any Certificateholder if the Trustee
receives written confirmation from each Rating Agency which
may have rated such Certificates that such amendment will not
cause such Rating Agency to reduce the then current rating
thereof;
(iii) to correct or amplify the description of any
property at any time a part of the Trust Estate, or better to
assure, convey and confirm unto the Trustee any property part
of or required to be a part of the of Trust Estate, or to
deposit additional property into the Trust Estate, or to set
forth the terms of and security for additional Series;
[(iv) to add to the conditions, limitations and
restrictions on the authorized amount, terms and purposes of
issue, authentication and delivery of the Certificates, as
herein set forth, or additional conditions, limitations and
restrictions thereafter to be observed by the [Issuer]
[Depositor];]
(v) to convey, transfer, assign, mortgage or pledge
any additional property to or with the Trust or the Trustee;
(vi) to evidence the succession of the Trustee
pursuant to Article __;
[(vii) to evidence the succession of another person
to [Issuer] [Depositor];]
(viii) to make any amendment necessary or desirable
to maintain the federal income tax status of the [Issuer]
[Depositor] [Trust]; or
<PAGE>
-41-
(ix) to amend the provisions of this Trust Agreement
relating to [authentication and] delivery of a Series with
respect to which an amendment has not theretofore been
authorized; or
(b) This Trust Agreement also may be amended by the Trustee
and the Company with respect to such Series with the consent of the Holders
possessing not less than 66% of the Aggregate Outstanding Principal Balance of
the Certificates of each Class of such Series affected thereby, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Trust Agreement or modifying in any manner the rights of
Certificateholders of such Series; PROVIDED, HOWEVER, that no such amendment may
(a) reduce the amount or delay the timing of payments on any Certificate without
the consent of the Holder of such Certificate; or (b) reduce the aforesaid
percentage of Aggregate Outstanding Principal Balance of Certificates of each
Class, the Holders of which are required to consent to any such amendment
without the consent of the Holders of 100% of the Aggregate Outstanding
Principal Balance of each Class of Certificates affected thereby; (c) modify or
alter the provisions of this Trust Agreement defining the term "Outstanding";
(d) reduce the percentage of the Voting Rights, the consent of the Holders of
which is required to direct the Trustee to liquidate the Assets for such Series,
(e) modify any of the provisions of this Trust Agreement if such modification
affects the calculation of the amount of any payment of interest or principal
due and payable on any Certificate on any Distribution Date or to affect the
rights of the Holders of Certificates of any Series (or Class of such Series) to
the benefit of any provisions for the mandatory redemption of Certificates of
such Series (or Class of such Series) contained therein or (f) modify the
provisions of this Trust Agreement regarding that any modifications of this
Trust Agreement receive the consent of the requisite portion of the Holders of
Certificates, except to increase the percentage or number of Holders required to
consent to such modification of this Trust Agreement, or to provide that
additional provisions of this Trust Agreement cannot be modified or waived
without the consent of the Holder of each Certificate affected thereby.
(c) Promptly after the execution of any amendment pursuant to
this Section, the Trustee [Depositor] shall mail to the Securityholders of the
Certificates and the Rating Agencies, a notice setting forth in general terms
the substance of such amendment or supplement, together with a copy of the text
of such Supplement. Any failure of the Trustee [Depositor] to mail such notice,
or any defect therein, shall not, however, in any way impair or affect the
validity of any such Amendment.
Section 8.04. DURATION OF AGREEMENT. This Agreement shall
continue in existence and effect until terminated as herein provided.
Section 8.05. GOVERNING LAW. This Agreement shall be construed
in accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 8.06. NOTICES. All demands, notices and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered at or mailed by first class or registered
mail, postage prepaid, to (i) in the case of the Trustee,
<PAGE>
-42-
- -----------------------, -----------------, ---------, ----------,
- ----------------------, or (ii) in the case of the Rating Agencies, to
- -----------------------------, -------------------------------, ----------,
- -----------, ----------------------, (iii) in the case of Certificateholders,
the address that appears in the Certificate Register, (iv) in the case of the
Depositor, 500 Hyde Park, Doylestown, Pennsylvania 18901, or (v) in the case of
any of the foregoing persons, such other addresses as may hereafter be furnished
by any such person to the other parties to this Agreement.
Section 8.07. BINDING EFFECT. This Agreement shall inure to
the benefit of, and shall be binding upon, the Seller, the Depositor, the
Trustee and the Certificateholders and their respective successors and permitted
assigns.
Section 8.08. CAPTIONS. The captions or headings in this
Agreement are for convenience only and in no way define, limit or describe the
scope and intent of any provisions or sections of this Agreement.
Section 8.09. EXHIBITS. The exhibits to this Agreement are
hereby incorporated herein and made a part hereof and are an integrate part of
this Agreement.
Section 8.10. GENERAL INTERPRETIVE PRINCIPLES. For purposes of
this Agreement except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the other
gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date hereof;
(c) references herein to "Articles", "Sections", "paragraphs",
and other subdivisions without reference to a document are to be designated
Articles, Sections, paragraphs and other subdivisions of this Agreement;
(d) a reference to a paragraph without further reference to a
Section is a reference to such paragraph as contained in the same Section in
which the reference appears, and this rule shall also apply to other
subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration.
<PAGE>
-43-
Section 8.11. NO BANKRUPTCY PETITION AGAINST DEPOSITOR OR
TRANSFEROR. Each party hereto agrees that, prior to the date that is one year
and one day after the payment in full of all outstanding Certificates, it will
not institute against the Depositor or the Transferor, or join any other Person
in instituting against the Depositor, Transferor, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceeding under the laws of the United States or any state of the United
States. This Section 8.11 shall survive the termination of this Agreement.
<PAGE>
-44-
IN WITNESS WHEREOF, the Depositor and the Trustee have caused
their name to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
DVI
--------------------,
as Depositor
By:
------------------------------
Name: Title:
---------------------------- ------------------------------
- ---------------------,
as Trustee
By:
------------------------------
Name: Title:
---------------------------- ------------------------------
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATE
[Face of Certificate]
[DVI ASSET FUNDING] TRUST ______
____% CLASS A EQUIPMENT FINANCE CERTIFICATE
evidencing a fractional undivided interest in a Trust, the corpus of
which consists primarily of the receivables of a portfolio of equipment
leases and security interests in Equipment, as more fully described in
the Trust Agreement referred to herein.
Principal in respect of this Class A Certificate is payable monthly on
the dates and in the amounts set forth in the Trust Agreement referred
to herein. Accordingly, the unpaid principal balance of the fractional
undivided interest evidenced hereby at any time may be less than the
Initial Class A Principal Balance set forth below.
This Certificate does not represent any interest in DVI ____________,
or any Affiliate thereof. Neither the Certificates nor the Contracts
are insured by any governmental agency.
Initial Class A Principal Balance
of this Certificate: $______________
Certificate No. ________ Class A Interest Rate: ____%
Initial Class A Principal Balance $_________
Interest representing ____% of the Class A Principal Balance
____% of the Aggregate Certificate Principal
Balance
THIS CERTIFIES THAT ___________________________________ is the
registered owner of a ______________ ($__________________ dollars)
nonassessable, fully-paid, fractional undivided interest in the DVI Asset
Funding Trust _______ (the "Trust") formed by DVI ___________, a Delaware
________ (the "Transferor"). The Trust hereby agrees to pay to such registered
Holder its pro rata share (based on the aggregate Percentage Interest held by
such registered Holder) of the Required Payments, as hereinafter set forth in
this Certificate and as more fully set forth in the hereinafter defined
Agreement, at all times from the sources and on the terms and conditions
hereinafter set forth and as more fully set forth in the Agreement. The corpus
of the Trust includes a portfolio of equipment finance contracts (the
"Contracts"), including all Scheduled Payments and other payments due thereunder
after _____________, 199_ (the "Cut-Off Date"), a security interest in the
Equipment leased thereunder and the income and proceeds of such Equipment, a
Collection Account, [a Reserve Account,] and [a _______ Account], as described
in the Agreement, and other property. The Aggregate Discounted Contract Balance
for all Contracts
A-1
<PAGE>
is $_____________ as of the Cut-Off Date. The Trust was created pursuant to a
Trust Agreement dated as of ____________, 199_ (the "Agreement") between DVI
_______, as Depositor, and __________ Bank, N.A., as trustee of the Trust (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This Class A
Certificate is one of the duly authorized Certificates designated as Class A
Equipment Finance Certificates of DVI Asset Funding Trust _____ (the
"Certificates"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Under the Agreement, the Trust is obligated to pay to the
extent that monies are available in the Collection Account [and the Reserve
Account] for such payments, on the [fifteenth] day of each month or, if such day
is not a Business Day, the Business Day immediately following (the "Payment
Date"), commencing on ________ [15], 199_, to the person in whose name this
Class A Certificate is registered and at the address specified in the
Certificate Register at the close of business on the Record Date, an amount from
certain monies deposited in the Collection Account with respect to the related
Collection Period equal to the product of the Percentage Interest evidenced by
this Certificate and an amount equal to the sum of [the Class A Monthly
Principal, Class A Monthly Interest, any Class A Overdue Principal, any Class A
Overdue Interest due and owing].
Payments on this Class A Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof, by wire transfer
of immediately available funds, to the Person entitled thereto, as specified by
such Person in accordance with the terms of the Agreement or by such other means
as the Person entitled thereto and the Trustee shall agree, without the
presentation or surrender of this Class A Certificate or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class A
Certificate, agrees to look solely to the funds in the Collection Account [and
the Reserve Account] [and any Credit Enhancement] to the extent available for
payment to the Holder hereof as provided in the Agreement for payment hereunder
and that the Trustee in its individual capacity is not personally liable to the
Holder hereof for any amounts due under this Certificate or the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Certificateholder, at its
expense, upon a written request to the Trustee, __________ Bank, N.A.
__________, (Attn.: [Corporate Trust Department]).
Reference is hereby made to the further provisions of this
Class A Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Certificate to
be duly executed.
DVI ASSET FUNDING TRUST ______
By: __________ BANK, N.A.,
not in its individual capacity,
but solely as Trustee
Dated:
By:___________________________
Authorized Officer
This is one of the Certificates of the Series designated herein, issued under
the within-mentioned Trust Agreement.
__________ BANK, N.A.
not in its individual capacity but
solely as Trustee
By:________________________
Authorized Officer
A-3
<PAGE>
[Reverse of Certificate]
The Certificates do not represent an obligation of, or an
interest in, __________ Bank, N.A. or any Affiliate thereof. The Certificates
are limited in right of payment to certain collections and recoveries respecting
the Contracts and the Equipment, all as more specifically set forth above and in
the Agreement.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement at any time by the Depositor and the Trustee with the consent of a
Majority of Holders. Any such consent by the Holder of this Class A Certificate
shall be conclusive and binding on such Holder and upon all future Holders of
this Class A Certificate and of any Class A Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Class A Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Certificateholders.
As provided in the Agreement, the transfer of this Class A
Certificate is registrable in the Certificate Register upon surrender of this
Class A Certificate for registration of transfer at the offices or agencies
maintained by the Trustee, in the City of [_________], accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Class A Certificates of authorized denominations
evidencing the same aggregate Percentage Interest in the Trust will be issued to
the designated transferee or transferees. As provided in the Agreement, the
effectiveness of any such transfer is contingent upon such surrender for
registration of transfer. The Seller, the Servicer, the Trustee and any agent of
any of the foregoing may treat the person in whose name this Class A Certificate
is registered as the owner hereof for all purposes, and none of the foregoing
shall be affected by any notice to the contrary.
The Certificates are issuable only as registered Certificates
without coupons in denominations of $1,000,000 or integral multiples thereof
(except that a single Certificate may be issued in a non-standard denomination
in excess of $1,000,000) of each class. As provided in the Agreement and subject
to certain limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
Percentage Interest as requested by the Certificateholder surrendering the same.
Each prospective initial Certificateholder acquiring a
Certificate, each prospective transferee acquiring a Certificate and each
prospective owner of a beneficial interest in a Certificate acquiring such
beneficial interest (the prospective initial Certificateholder, the prospective
transferee and the prospective owner of a beneficial interest, collectively, the
"PROSPECTIVE OWNER"), will be deemed to have represented by such purchase to the
Depositor, Originator, the Servicer, any successor Servicer and the Trustee that
either (1) the Prospective Owner is not acquiring the Certificate with the
assets of a Plan or (2) the acquisition and holding of the certificate will not
give rise to a nonexempt prohibited transaction under Section 406(a) of ERISA or
Section 4975 of the Code.
A-4
<PAGE>
No Certificate may be subdivided for resale or other transfer
(including any assignment or transfer of a participation or beneficial interest
therein) into a unit smaller than a unit the initial offering price of which
would have been $500,000.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge payable in connection therewith.
The obligations and responsibilities created by the Agreement
and the Trust created thereby (other than the obligation of the Trustee to make
payments to Certificateholders as set forth in the Agreement) shall terminate
[367] days after the earliest of (i) the repurchase by the Servicer, at its
option, subject to the restriction set forth below as to the size of the
Aggregate Certificate Principal Balance, of all Contracts and all other Conveyed
Property acquired in respect of any Contract remaining in the Trust at the price
specified in the Agreement, (ii) the payment to Certificateholders of all
amounts required to be paid to them pursuant to the Agreement, reducing the
Aggregate Certificate Principal Balance to zero, (iii) the Payment Date next
succeeding the Collection Period during which the last Contract not repurchased
by the Servicer shall have been liquidated and any Liquidation Proceeds shall
have been deposited in the applicable account (but not later than [180] days
after the completion of all collection efforts following the declaration of a
Contract as a Defaulted Contract) and (iv) the Payment Date on which the
proceeds of a liquidation pursuant to Section [____] of the Agreement are
distributed. The exercise of the right of the Servicer to purchase all the
Contracts and Equipment and cause distribution to the Transferor of all other
property of the Trust will effect early retirement of the Certificates, but such
right of purchase is exercisable only as of a Payment Date subsequent to any
[Determination] Date as of which the Aggregate Certificate Principal Balance is
less than 10 percent (10.00%) of the Initial Aggregate Certificate Principal
Balance. After such date, interest on the Certificates shall cease to accrue.
A-5
<PAGE>
EXHIBIT B
FORM OF CLASS B CERTIFICATE
[Face of Certificate]
[DVI ASSET FUNDING] TRUST ______
____% CLASS B EQUIPMENT FINANCE CERTIFICATE
evidencing a fractional undivided interest in a Trust, the corpus of
which consists primarily of the receivables of a portfolio of equipment
leases and security interests in Equipment, as more fully described in
the Trust Agreement referred to herein.
Principal in respect of this Class B Certificate is payable monthly on
the dates and in the amounts set forth in the Trust Agreement referred
to herein. Accordingly, the unpaid principal balance of the fractional
undivided interest evidenced hereby at any time may be less than the
Initial Class B Principal Balance set forth below.
This Certificate does not represent any interest in DVI _________, or
any Affiliate thereof. Neither the Certificates nor the Contracts are
insured by any governmental agency.
Initial Class B Principal Balance
of this Certificate: $______________
Certificate No. ________ Class B Interest Rate: ____%
Initial Class B Principal Balance $____________
Interest representing ____% of the Class B Principal Balance
____% of the Aggregate Certificate Principal
Balance
THIS CERTIFIES THAT ___________________________________ is the
registered owner of a ______________ ($__________________ dollars)
nonassessable, fully-paid, fractional undivided interest in the DVI Asset
Funding Trust ______ (the "Trust") formed by DVI ________, a Delaware _________
(the "Transferor"). The Trust hereby agrees to pay to such registered Holder its
pro rata share (based on the aggregate Percentage Interest held by such
registered Holder) of the Required Payments, as hereinafter set forth in this
Certificate and as more fully set forth in the hereinafter defined Agreement, at
all times from the sources and on the terms and conditions hereinafter set forth
and as more fully set forth in the Agreement. The corpus of the Trust includes a
portfolio of equipment finance contracts (the "Contracts"), including all
Scheduled Payments and other payments due thereunder after _________, 199_ (the
"Cut-Off Date"), a security interest in the Equipment leased thereunder and the
income and proceeds of such Equipment, a Collection Account, [a Reserve Account]
[and a ________ Account], as described in the Agreement, and other property. The
Aggregate Discounted Contract Balance for all Contracts is $__________ as of the
Cut-Off Date. The Trust was created pursuant to a Trust Agreement dated as of
_______,
B-1
<PAGE>
199_ (the "Agreement") between DVI _______, as Depositor, and __________ Bank,
N.A., as trustee of the Trust (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This Class B Certificate is one of the duly authorized
Certificates designated as Class B Equipment Finance Certificates of DVI Asset
Funding Trust ______ (the "Certificates"). This Certificate is issued under and
is subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
Under the Agreement, the Trust is obligated to pay to the
extent that monies are available in the Collection Account [and the Reserve
Account for such payments], on the [fifteenth] day of each month or, if such day
is not a Business Day, the Business Day immediately following (the "Payment
Date"), commencing on _______ [15], 199_, to the person in whose name this Class
B Certificate is registered and at the address specified in the Certificate
Register at the close of business on the Record Date, an amount from certain
monies deposited in the Collection Account with respect to the related
Collection Period equal to the product of the Percentage Interest evidenced by
this Certificate and an amount equal to the sum of [the Class B Monthly
Principal, Class B Monthly Interest, any Class B Overdue Principal, any Class B
Overdue Interest, and any Class B Premium] due and owing. THE RIGHTS OF THE
CLASS B CERTIFICATEHOLDERS TO RECEIVE SUCH PAYMENTS ARE SUBORDINATED TO THE
RIGHTS OF THE CLASS A CERTIFICATEHOLDERS TO RECEIVE PAYMENTS IN RESPECT OF THE
CLASS A CERTIFICATES, AS PROVIDED IN THE AGREEMENT.
Payments on this Class B Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof, by wire transfer
of immediately available funds, to the Person entitled thereto, as specified by
such Person in accordance with the terms of the Agreement or by such other means
as the Person entitled thereto and the Trustee shall agree, without the
presentation or surrender of this Class B Certificate or the making of any
notation hereon.
The Holder hereof, by its acceptance of this Class B
Certificate, agrees to look solely to the funds in the Collection Account [and
the Reserve Account] to the extent available for payment to the Holder hereof as
provided in the Agreement for payment hereunder and that the Trustee in its
individual capacity is not personally liable to the Holder hereof for any
amounts due under this Certificate or the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Certificateholder, at its
expense, upon a written request to the Trustee, __________ Bank, N.A. __________
(Attn.: [Corporate Trust Department]).
Reference is hereby made to the further provisions of this
Class B Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
B-2
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Certificate to
be duly executed.
DVI ASSET FUNDING TRUST ______
By: __________ BANK, N.A.,
not in its individual capacity,
but solely as Trustee
Dated:
By:___________________________
Authorized Officer
This is one of the Certificates of the Series designated herein, issued under
the within-mentioned [Trust] Agreement.
__________ BANK, N.A.
not in its individual capacity
but solely as Trustee
By:________________________
Authorized Officer
B-3
<PAGE>
[Reverse of Certificate]
The Certificates do not represent an obligation of, or an
interest in, __________ Bank, N.A. or any Affiliate thereof. The Certificates
are limited in right of payment to certain collections and recoveries respecting
the Contracts and the Equipment, all as more specifically set forth above and in
the Agreement.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement at any time by the Depositor and the Trustee with the consent of a
Majority of Holders. Any such consent by the Holder of this Class B Certificate
shall be conclusive and binding on such Holder and upon all future Holders of
this Class B Certificate and of any Class B Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Class B Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Certificateholders.
As provided in the Agreement, the transfer of this Class B
Certificate is registrable in the Certificate Register upon surrender of this
Class B Certificate for registration of transfer at the offices or agencies
maintained by the Trustee, in the City of [____________], accompanied by a
written instrument of transfer in form satisfactory to the Trustee duly executed
by the Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Class B Certificates of authorized denominations
evidencing the same aggregate Percentage Interest in the Trust will be issued to
the designated transferee or transferees. As provided in the Agreement, the
effectiveness of any such transfer is contingent upon such surrender for
registration of transfer. The Seller, the Servicer, the Trustee and any agent of
any of the foregoing may treat the person in whose name this Class B Certificate
is registered as the owner hereof for all purposes, and none of the foregoing
shall be affected by any notice to the contrary.
The Certificates are issuable only as registered Certificates
without coupons in denominations of $1,000,000 or integral multiples thereof
(except that a single Certificate may be issued in a non-standard denomination
in excess of $1,000,000) of each class. As provided in the Agreement and subject
to certain limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
Percentage Interest as requested by the Certificateholder surrendering the same.
Each prospective initial Certificateholder acquiring a
Certificate, each prospective transferee acquiring a Certificate and each
prospective owner of a beneficial interest in a Certificate acquiring such
beneficial interest (the prospective initial Certificateholder, the prospective
transferee and the prospective owner of a beneficial interest, collectively, the
"PROSPECTIVE OWNER"), will be deemed to have represented by such purchase to the
Depositor, Originator, the Servicer, any successor Servicer and the Trustee that
either (1) the Prospective Owner is not acquiring the Certificate with the
assets of a Plan or (2) the acquisition and holding of the Certificate will not
give rise to a nonexempt prohibited transaction under Section 406(a) of ERISA or
Section 4975 of the Code.
B-4
<PAGE>
No Certificate may be subdivided for resale or other transfer
(including any assignment or transfer of a participation or beneficial interest
therein) into a unit smaller than a unit the initial offering price of which
would have been $500,000.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge payable in connection therewith.
The obligations and responsibilities created by the Agreement
and the Trust created thereby (other than the obligation of the Trustee to make
payments to Certificateholders as set forth in the Agreement) shall terminate
[367] days after the earliest of (i) the repurchase by the Servicer, at its
option, subject to the restriction set forth below as to the size of the
Aggregate Certificate Principal Balance, of all Contracts and all other Conveyed
Property acquired in respect of any Contract remaining in the Trust at the price
specified in the Agreement, (ii) the payment to Certificateholders of all
amounts required to be paid to them pursuant to the Agreement, reducing the
Aggregate Certificate Principal Balance to zero, (iii) the Payment Date next
succeeding the Collection Period during which the last Contract not repurchased
by the Servicer shall have been liquidated and any Liquidation Proceeds shall
have been deposited in the applicable account (but not later than [180] days
after the completion of all collection efforts following the declaration of a
Contract as a Defaulted Contract) and (iv) the Payment Date on which the
proceeds of a liquidation pursuant to Section [___] of the Agreement are
distributed. The exercise of the right of the Servicer to purchase all the
Contracts and Equipment and cause distribution to the Transferor of all other
property of the Trust will effect early retirement of the Certificates, but such
right of purchase is exercisable only as of a Payment Date subsequent to any
Determination Date as of which the Aggregate Certificate Principal Balance is
less than 10 percent (10.00%) of the Initial Aggregate Certificate Principal
Balance. After such date, interest on the Certificates shall cease to accrue.
B-5
Exhibit 4.3
-----------
*[THIS AGREEMENT IS THE SAME FORM THAT WILL BE USED WHEN A DVI AFFILIATE
SELLS CONTRACTS TO THE TRANSFEROR]
DVI FINANCIAL SERVICES INC.,
CONTRIBUTOR AND SERVICER
AND
DVI RECEIVABLES CORP. VIII
CONTRIBUTION AND SERVICING AGREEMENT
Dated as of ________________
ALL RIGHTS IN AND TO THIS AGREEMENT ON THE PART OF DVI RECEIVABLES CORP. VIII
HAVE BEEN ASSIGNED TO [ISSUER] AND REASSIGNED AND ARE SUBJECT TO A SECURITY
INTEREST IN FAVOR OF [TRUSTEE] FOR THE BENEFIT OF THE PERSONS REFERRED TO
THEREIN.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SECTION 1. CAPITAL CONTRIBUTION [Sale].....................................................................1
1.01 CONTRIBUTION [SALE]................................................................................1
SECTION 2. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
THE CONTRIBUTOR..........................................................................................3
2.01 CORPORATE ORGANIZATION AND AUTHORITY...............................................................3
2.02 BUSINESS AND PROPERTY..............................................................................4
2.03 EQUIPMENT AND CONTRACTS............................................................................4
2.04 CONTRACT SCHEDULE..................................................................................9
2.05 PENDING LITIGATION.................................................................................9
2.06 NO MATERIAL EVENT..................................................................................9
2.07 TRANSACTIONS LEGAL AND AUTHORIZED..................................................................9
2.08 GOVERNMENTAL CONSENT..............................................................................10
2.09 COMPLIANCE WITH LAW...............................................................................10
2.10 ORDINARY COURSE; NO INSOLVENCY....................................................................10
2.11 ASSETS AND LIABILITIES............................................................................10
2.12 FAIR CONSIDERATION; VALID SALE....................................................................11
2.13 ABILITY TO PAY DEBTS..............................................................................11
2.14 BULK TRANSFER PROVISIONS..........................................................................11
2.15 TAX RETURNS.......................................................................................11
2.16 TRANSFER TAXES....................................................................................12
2.17 PRINCIPAL EXECUTIVE OFFICE........................................................................12
2.18 LEGAL NAME........................................................................................12
2.19 SERVICING PROVISIONS CUSTOMARY....................................................................12
2.20 DEFAULTS..........................................................................................12
2.21 ERISA.............................................................................................12
2.22 ALL FILINGS MADE..................................................................................12
2.23 NONCONSOLIDATION..................................................................................13
2.24 ALL REPRESENTATIONS AND WARRANTIES TRUE...........................................................13
2.25 PROSPECTUS SUPPLEMENT. ..........................................................................14
2.26 INSURANCE. ......................................................................................14
2.27 NO BANKRUPTCY PETITION AGAINST THE TRANSFEROR OR THE ISSUER.......................................14
SECTION 3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF
THE TRANSFEROR.................................................................................15
3.01 TRANSFEROR ORGANIZATION AND AUTHORITY; SUBSIDIARIES...............................................15
3.02 DUE AUTHORIZATION AND NO VIOLATION................................................................15
3.03 NO LITIGATION.....................................................................................15
3.04 PRINCIPAL OFFICE..................................................................................15
3.05 TAX RETURNS.......................................................................................16
3.06 SOLVENCY..........................................................................................16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.07 APPROVALS.........................................................................................16
3.08 NONCONSOLIDATION..................................................................................16
SECTION 4. ADMINISTRATION OF CONTRACTS....................................................................17
4.01 SERVICER TO ACT...................................................................................17
4.02 CONTRACT AMENDMENTS AND MODIFICATIONS; REPURCHASE OF CONTRACTS BY SERVICER
..............................................................................................18
4.03 CONTRACT DEFAULTS; RESIDUAL REALIZATIONS..........................................................19
4.04 COSTS OF SERVICING; SERVICER'S FEE................................................................20
4.05 OTHER TRANSACTIONS................................................................................21
4.06 COLLECTION OF MONEYS..............................................................................21
4.07 VOLUNTARY TERMINATION.............................................................................22
SECTION 5. SERVICER ADVANCES; REPURCHASE OF CONTRACTS.....................................................22
5.01 SERVICER ADVANCES.................................................................................22
5.02 INDEMNIFICATION...................................................................................22
5.03 REPURCHASE AND SUBSTITUTION OF CONTRACTS; OTHER PAYMENTS..........................................23
SECTION 6. INFORMATION TO BE PROVIDED.....................................................................24
6.01 MONTHLY SERVICER REPORT...........................................................................24
6.02 TAX REPORTING AND TREATMENT.......................................................................24
6.03 OTHER INFORMATION.................................................................................25
6.04 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT...........................................25
6.05 PAYMENT ADVICES...................................................................................25
SECTION 7. SUBSTITUTION OF CONTRACTS......................................................................25
7.01 SUBSTITUTION......................................................................................25
7.02 NOTICE OF SUBSTITUTION............................................................................28
7.03 CONTRIBUTOR'S AND SERVICER'S SUBSEQUENT OBLIGATIONS...............................................28
SECTION 8. THE SERVICER...................................................................................28
8.01 CORPORATE EXISTENCE OF THE SERVICER...............................................................28
8.02 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS................................................29
8.03 SERVICER NOT TO RESIGN OR BE REMOVED..............................................................29
8.04 FINANCIAL AND BUSINESS INFORMATION................................................................30
8.05 OFFICER'S CERTIFICATES............................................................................30
8.06 INSPECTION........................................................................................31
8.07 SERVICER RECORDS..................................................................................31
8.08 INSURANCE.........................................................................................31
8.09 NO BANKRUPTCY PETITION AGAINST THE TRANSFEROR OR THE ISSUER.......................................31
8.10 FIDELITY BOND AND ERRORS AND OMISSIONS INSURANCE..................................................31
SECTION 9. THE CONTRIBUTOR................................................................................32
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.01 CORPORATE EXISTENCE OF THE CONTRIBUTOR............................................................32
9.02 FINANCIAL AND BUSINESS INFORMATION................................................................32
9.03 INSPECTION........................................................................................33
9.04 NO BANKRUPTCY PETITION AGAINST THE TRANSFEROR OR THE ISSUER.......................................33
9.05 ACCOUNTS, BOOKS AND RECORDS.......................................................................33
9.06 TAX RETURNS.......................................................................................34
9.07 INSURANCE.........................................................................................34
9.08 PROTECTION OF RIGHT, TITLE AND INTEREST...........................................................34
9.09 OTHER LIENS OR INTERESTS..........................................................................35
9.10 COSTS AND EXPENSES................................................................................35
SECTION 10. EVENTS OF DEFAULT..............................................................................35
10.01 SERVICER EVENTS OF DEFAULT.......................................................................35
10.02 TERMINATION......................................................................................37
10.03 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.........................................................37
10.04 SERVICER TO COOPERATE............................................................................38
10.05 REMEDIES NOT EXCLUSIVE...........................................................................39
10.06 WAVIER OF PAST DEFAULTS..........................................................................39
SECTION 11. ASSIGNMENT.....................................................................................39
11.01 ASSIGNMENT TO TRUSTEE............................................................................39
11.02 ASSIGNMENT BY CONTRIBUTOR OR SERVICER............................................................39
SECTION 12. NATURE OF CONTRIBUTOR'S OBLIGATIONS AND SECURITY THEREFOR
39
12.01 CONTRIBUTOR'S OBLIGATIONS ABSOLUTE...............................................................39
12.02 POWER OF ATTORNEY................................................................................40
SECTION 13. MISCELLANEOUS PROVISIONS.......................................................................40
13.01 SALE.............................................................................................40
13.02 AMENDMENT........................................................................................41
13.03 WAIVERS..........................................................................................41
13.04 NOTICES..........................................................................................41
13.05 COSTS AND EXPENSES...............................................................................42
13.06 THIRD PARTY BENEFICIARIES........................................................................42
13.07 SURVIVAL OF REPRESENTATIONS......................................................................42
13.08 CONFIDENTIAL INFORMATION.........................................................................42
13.09 HEADINGS AND CROSS-REFERENCES....................................................................43
13.10 GOVERNING LAW....................................................................................43
13.11 CONSENT TO JURISDICTION..........................................................................43
13.12 COUNTERPARTS.....................................................................................43
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A Contract Schedule
Exhibit B Monthly Servicer Report
Exhibit C Underwriting Guidelines
Exhibit D Substitute Contract Transfer Form
Exhibit E Form of Re-Assignment
Exhibit F Form of Officer's Certificate for Section 7
Exhibit G Forms of Contracts
APPENDICES
Appendix I Defined Terms
iv
<PAGE>
CONTRIBUTION AND SERVICING AGREEMENT
This Agreement is made and dated as of ___________, by and
between DVI FINANCIAL SERVICES INC., a Delaware corporation ("DVI"), as
contributor [Seller] (in such capacity, the "Contributor" ["Seller"]) and
servicer (in such capacity, the "Servicer") hereunder, and DVI RECEIVABLES CORP.
VIII, a Delaware corporation (the "Transferor").
RECITALS
A. Pursuant to this Agreement, the Contributor is contributing
and assigning to the Transferor (i) all right, title and interest of the
Contributor in, to and under, INTER ALIA, a pool of non-cancelable Finance
Leases, Fair Market Value Leases, Leveraged Lease Loans, Lease Receivable
Purchases and Secured Equipment Notes described in Exhibit A hereto (the
"Initial Contracts"), (ii) certain payments and proceeds received relating to
the Initial Contracts that are payable after the Cut-off Date and (iii) a
security interest in each item of underlying Equipment that is subject to each
Initial Contract. The Contributor may contribute and assign certain Substitute
Contracts and a security interest in the Equipment related thereto and certain
other related payments and proceeds in accordance with the terms of this
Agreement.
B. It is anticipated that the Transferor will pledge or
otherwise transfer all of its right, title and interest in and to such Contracts
and Equipment to ________ (the "Trustee") for the benefit of the
Securityholders.
C. In connection with the contribution and assignment of such
Contracts and the grant or assignment of a security interest in the related
Equipment, the Contributor agrees to undertake certain obligations set forth
herein.
D. In consideration for the Servicing Fee and other amounts as
more particularly set forth herein, the Servicer agrees to undertake certain
obligations set forth herein.
E. Capitalized terms used but not defined herein shall have
the respective meanings set forth in Appendix I hereto.
AGREEMENTS
SECTION 1. CAPITAL CONTRIBUTION [Sale]
1.01 CONTRIBUTION [SALE]. (a) Upon the terms and conditions
herein set forth, the Contributor hereby agrees to transfer, assign and
contribute [sell], on one or more Contract Transfer Dates, to the Transferor as
a capital contribution (or, in case of any Substitute Contracts, the related
Substitution Date), without recourse except as set forth herein, all of the
Contributor's right, title and interest in and to the Contributed Property. As
collateral security for the performance of its obligations as Contributor and as
Servicer hereunder, DVI hereby grants to the Transferor a first priority
perfected security interest in the Equipment related to a Contract that is a
Fair Market Value
<PAGE>
Lease, and such security interest shall constitute additional Contributed
Property. The Transferor assumes all of the Contributor's obligations under the
Contracts arising after the related Cut-off Date. All funds received by the
Contributor on or in connection with the Contracts that are payable after the
applicable Cut-off Date shall be received, held and applied by the Contributor
in trust for the benefit of the Transferor as owner of the Contracts.
(b) After giving effect to such contribution [Sale], the
ownership of each Contract will be vested in the Transferor. The Contract Files
and any other documents relating to the Contracts and the other Contributed
Property that are delivered as part of the Contributed Property or as incidental
thereto are and shall be held in trust by the Trustee for the benefit of the
Securityholders. The Contributor agrees to take no action inconsistent with the
ownership of the Contracts and the other Contributed Property, to promptly
indicate to all parties with a valid interest inquiring as to the true ownership
of the Contracts and the other Contributed Property, that the Contracts and the
other Contributed Property have been contributed and assigned to the Transferor
and to claim no ownership interest in the Contracts and the other Contributed
Property.
(c) The Contributor shall take, or cause to be taken, such
actions and execute such documents as are necessary to protect the Trustee's
interest in the Contracts, and its security interest in the Equipment and the
other Contributed Property, against all other Persons, including, without
limitation, the following: (i) in the case of the Contracts, on or before the
Closing Date (or, in case of any Substitute Contracts, the related Substitution
Date), (A) filing UCC-1 financing statements naming the Contributor as debtor,
the Transferor as secured party, the Issuer as assignee of the secured party and
the Contracts as collateral in the jurisdiction in which the principal place of
business of the Contributor is located, (B) UCC-1 financing statements naming
the Transferor as debtor, the Issuer as secured party, the Trustee as assignee
of the secured party and the Contracts as collateral in the jurisdiction in
which the principal place of business of the Transferor is located, (C) filing
UCC financing statements naming the Issuer as debtor and the Trustee as secured
party in the jurisdiction in which the principal place of business of the Issuer
is located, and (D) filing UCC-3 termination statements or releases from
lenders, if any, with liens on the Contracts; (ii) in the case of the assignment
of the security interests in the Equipment, within thirty days after the Closing
Date (or, in case of any Substitute Contracts, the related Substitution Date),
(A) with respect to a security interest in Equipment (other than Equipment for
which the Original Equipment Cost is less than $20,000) subject to Finance
Leases or Secured Equipment Notes, filing UCC financing statements naming the
Obligor as debtor, the Contributor as secured party, the Transferor as assignee
and the Trustee as further assignee, (B) with respect to all Fair Market Value
Leases, filing UCC-1 financing statements naming the Transferor as debtor, the
Trustee, as secured party and the Transferor's security interest in the
Equipment as collateral in the appropriate filing offices in the jurisdiction in
which the Transferor maintains its chief executive office, (C) with respect to
Equipment subject to Leveraged Lease Loans or Lease Receivable Purchases, filing
UCC-3 assignments naming the Obligor as debtor, the Contributor as secured
party, the Trustee, as assignee of the secured party and the Equipment as
collateral, in the appropriate filing offices in the jurisdiction where the
Equipment was located on the date the underlying contract was originated, and
(D) with respect to any Equipment for which a certificate of title has been
issued, making an application for notation of lien on each such certificate of
title indicating the interest of the Trustee. Thereafter, the Contributor
promptly shall file such additional UCC financing statements, continuation
statements and
2
<PAGE>
assignments and cause to be made such notations on certificates of title with
respect thereto as may be necessary because of equipment replacements in
accordance with the provisions of any Contract, or otherwise so that the
interest of the Trustee in (x) each of the Contracts, (y) the Equipment which is
subject to the Contracts and (z) the remainder of the Trust Property will be
perfected by such filings with the appropriate UCC filing offices and/or
notations on the appropriate certificates of title.
(d) If (i) any change in either the Contributor's name,
structure or the location of its principal place of business or chief executive
office occurs, then the Contributor shall deliver thirty (30) days' prior
written notice of such change or relocation to the Transferor and the Trustee
and (ii) if the Contributor becomes aware of the change in location of any
Equipment, then, no later than sixty (60) days after the effective date of such
change or relocation, shall file such amendments or statements as may be
required to preserve and protect the Transferor's, the Issuer's and the
Trustee's interest in the Contracts, the Equipment and the other Trust Property.
The Contributor shall pay all filing fees or taxes payable in respect of any UCC
financing or continuation statements required to be filed pursuant to this
Section 1.01(d).
(e) On or prior to the Closing Date or the related
Substitution Date, as applicable, the Contributor shall deliver to the Trustee
the sole original, manually executed counterpart of each Contract that
constitutes "chattel paper" (or, if the original Contract is in the form of a
schedule or supplement to a master lease or loan, all original counterparts of
such schedule or supplement previously in the possession of the Contributor or
the Transferor together with a true and correct copy of such master lease or
loan) or an "instrument". The Contributor will cause its accounting records to
be clearly and unambiguously marked to show that such Contract has been
transferred by the Contributor to the Transferor, and by the Transferor to the
Issuer, and then pledged by the Issuer to the Trustee for the benefit of the
Securityholders.
SECTION 2. REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE CONTRIBUTOR
The Contributor (in its capacity as such and as the initial
Servicer under this Agreement) hereby represents and warrants to the Transferor
and covenants and agrees with the Transferor for the benefit of the Transferor,
the Issuer, the Trustee and the Securityholders with respect to the Initial
Contracts, as of the Closing Date and, with respect to any Substitute Contracts
(except for Sections 2.02 and 2.25) as of each Substitution Date (unless
otherwise indicated herein):
2.01 CORPORATE ORGANIZATION AND AUTHORITY. The Contributor (in
its capacity as such and as the initial Servicer under this Agreement):
(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
3
<PAGE>
(except where the failure to have such licenses and permits could not
individually or in the aggregate have a material adverse effect on the
business or condition (financial or otherwise) of the Contributor or
impair the enforceability of any Contract) and to enter into and
perform its obligations under this Agreement and each Transaction
Document to which it is a party and the transactions contemplated
hereby, including performance of the duties of the Servicer and the
Contributor hereunder;
(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 could not individually or in the
aggregate have a material adverse effect on the Trust Property or the
business or condition (financial or otherwise) of the Contributor or
impair the enforceability of any Contract); and
(d) has duly executed and delivered this Agreement
and each Transaction Document to which it is a party and all other
documents delivered in connection herewith, and this Agreement are each
the legal, valid and binding obligation of the Contributor enforceable
in accordance with the terms hereof except as enforcement of such terms
may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally and by equitable
principles (regardless of whether such enforceability is in a
proceeding in equity or at law).
2.02 BUSINESS AND PROPERTY. The Prospectus Supplement (the
"Prospectus Supplement") dated ________________, to the Prospectus, dated
_________________, correctly describes in all material respects the Initial
Contracts and the general nature of the business of the Contributor.
2.03 EQUIPMENT AND CONTRACTS.
(a) As to each Contract:
(i) (A) Immediately prior to the transfers and conveyances set
forth herein, the Contributor will be the sole owner of, and have good and
marketable title to, the subject Contracts. With respect to any Leveraged Lease
Loan, Fair Market Value Lease or Lease Receivable Purchase, the Contributor will
have a valid first priority security interest in the equipment lease and the
Equipment that has been pledged as collateral security for such Leveraged Lease
Loan, Fair Market Value Lease or Lease Receivable Purchase; (B) immediately
prior to the transfers and conveyances set forth herein, the Contributor will
have acquired either good title to each item of Equipment or, with respect to
the Equipment that is the subject of a Secured Equipment Note, Lease Receivables
Purchase, Finance Lease or a Leveraged Lease Loan, a valid first priority
perfected security interest therein from the related Obligor (except for
Equipment relating to a Secured Equipment Note or Finance Lease and for which
the Original Equipment Cost is less than $20,000). Immediately prior to such
date, with respect to each item of Equipment related to Fair Market Value
Leases, the Contributor will have paid in full to the manufacturer or supplier
or Obligor, as the case may be, the purchase price and any related charges in
connection with the acquisition of such Equipment; (C)
4
<PAGE>
upon the transfer to the Transferor by the Contributor of the Contributor's
interest in the Contracts and a security interest in the Equipment pursuant to
Section 1 hereof, the Transferor will, after giving effect to the provisions of
Section 1.01(d), have a valid first priority perfected ownership interest in,
and have good title to the Contributed Property including the Contracts and a
valid first priority perfected (except for Equipment relating to a Secured
Equipment Note or Finance Lease and for which the Original Equipment Cost is
less than $20,000) security interest in each item of the Equipment subject to
any Contract. At such time, the Contracts and the Transferor's interest in the
Equipment will be free and clear of all Liens other than the rights of each
Obligor under the Contract to which such Obligor is a party and Liens to be
discharged on the Closing Date; and there will be no delinquent taxes or other
outstanding charges affecting the Equipment which are or may be Liens;
(ii) Each of the Contracts is a legal, valid and binding full
recourse obligation of the related Obligor, enforceable by the Contributor (and
its designee) against such Obligor in accordance with the terms thereof, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization or
other laws relating to or affecting the enforcement of creditors' rights and by
general equitable principles, and is in full force and effect, and any and all
requirements of any federal, state or local law including, without limitation,
usury, truth-in-lending and equal credit opportunity laws applicable to the
origination, enforceability or assignment of each Contract have been complied
with; and the Contributor has no knowledge of any challenge, dispute or claim by
the Obligor under or affecting any Contract or of the bankruptcy or the
insolvency of any such Obligor;
(iii) The obligation of each Obligor to pay Contract Payments
under each of its related Contract(s) throughout the term thereof is and will be
unconditional, without any right of set-off by such Obligor and without regard
to any event affecting the Equipment, the obsolescence of any Equipment, any
claim of such Obligor against the Contributor or any change in circumstance of
such Obligor or any other circumstance whatsoever;
(iv) The Contributor has no knowledge that any item of the
Equipment has suffered any loss or damage except for such Equipment that has
been restored to its original condition, ordinary wear and tear excepted;
(v) Each Contract requires the Obligor thereunder to either
maintain insurance covering damage to, destruction or theft of the Equipment
subject thereto in an amount at least equal to the remaining Discounted Contract
Balance of such Contract;
(vi) As of the Cut-off Date, (A) no Contract had a remaining
term of more than __ months, (B) no Contract Payment under any Contract is
delinquent for more than sixty (60) days and (C) no event of default has
occurred and is continuing under any Contract;
(vii) There will be no facts or circumstances existing as of
the time of the transfer pursuant to this Agreement which give rise, or would
give rise at any time in the future, to any right of rescission, offset,
counterclaim or defense, including the defense of usury, to the obligations of
any Obligor, including the obligation of such Obligor to pay all amounts due
with respect to any Contract and neither the operation of any of the terms of
any Contract or the exercise of any right thereunder will render such Contract
unenforceable in whole or in part or subject to any right of
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rescission, offset, counterclaim or defense, including the defense of usury, and
no such right of rescission, offset, counterclaim or defense has been asserted
with respect thereto;
(viii) No Contract has been amended, altered or modified in
any respect and no provision of any Contract has been waived, except in writing
and copies of all such writings are attached to the Contract delivered to the
Transferor;
(ix) No Obligor has been released, in whole or in part, from
any of its obligations in respect of a Contract; no Contract has been satisfied,
cancelled or subordinated, in whole or in part, or rescinded, and no Equipment
has been released from the related Contract, in whole or in part, nor has any
instrument been executed that would effect any such satisfaction, release,
cancellation, subordination or rescission;
(x) Each Contract is in substantially one of the forms
included as Exhibit G to this Agreement, and no Contract shall have been the
subject of any restructuring of the terms and provisions thereof;
(xi) No Contract permits early termination or voluntary
prepayment by the Obligor;
(xii) No right of the Contributor with respect to an Obligor's
failure to pay all rent due under any Contract has been waived by the
Contributor;
(xiii) Each Contract is "chattel paper" or an "instrument"
under the UCC as in effect in the applicable jurisdiction. The sole executed
counterpart of each Contract that constitutes chattel paper or an instrument is
in the possession of the Trustee and all of the documents required to be
delivered to the Trustee in connection therewith pursuant to Section 1 have been
so delivered;
(xiv) No Obligor is an Affiliate of the Contributor or the
Servicer;
(xv) The Contributor has no knowledge that the obligations of
any Obligor under any Contract will not be paid in full;
(xvi) No Contract will have been originated in or be subject
to the laws of any jurisdiction whose laws would make the assignment and
transfer thereof pursuant to the terms hereof or of the other Transaction
Documents unlawful;
(xvii) In the case of each Contract which consists of a master
lease and one or more exhibits or schedules thereto, (A) the Contributor has not
assigned and will not assign such master lease in its entirety, and has not
delivered and will not deliver physical possession of such master lease, to any
Person other than the Trustee and (B) such exhibits or schedules constitute a
separate contract and are not part of any other contract not sold to the
Transferor;
(xviii) All parties to each Contract had requisite authority
and capacity to execute such Contract;
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(xix) Prior to the time of assignment, transfer, sale and
contribution to the Transferor, each Contract will have been originated by the
Contributor in the ordinary course of its business, except for certain Contracts
which have been acquired by the Contributor in the ordinary course of its
business, and each Contract shall have been underwritten by the Contributor in
accordance with the standards set forth on Exhibit C hereto;
(xx) The Contributor is not aware of any fact that would
prevent or prohibit Obligors from being reimbursed by Medicare or Medicaid for
any services provided;
(xxi) The Contract Schedule accurately reflects the
information relating to each Contract;
(xxii) There are no proceedings or investigations pending or,
to the knowledge of the Contributor, threatened, before any court, regulatory
body, administrative agency or other tribunal or governmental instrumentality
(A) asserting the invalidity of any of the Contracts, (B) seeking to prevent the
payment and discharge of any of the Contracts or (C) seeking any determination
or ruling that would materially and adversely affect the performance by an
Obligor of its obligations under, or the validity or enforceability of the
Contracts;
(xxiii) Each Contract effects either the lease of, or the
grant of a perfected first priority security interest in, a specified item of
Equipment (other than Equipment relating to a Secured Equipment Note or Finance
Lease and for which the Original Equipment Cost is less than $20,000) in favor
of the Contributor as lessor or secured party, as the case may be, and contains
provisions sufficient for the realization of such leasehold interest or security
interest, as the case may be, as against such Equipment, and is assignable by
the Contributor without the consent of any other Person;
(xxiv) Each Contract provides that the Contributor has no
obligation to assemble, install, test, adjust or service the Equipment subject
to a Contract. Each Contract provides that the Obligor, at its sole expense, at
all times during the term of the Contract and until return of the Equipment will
maintain the Equipment in good operating order, repair, condition, appearance
and protect the Equipment from deterioration, and provide all accessories,
upgrades, repairs, replacement parts and service required therefor except that
the equipment lease pledged as collateral security for a Leveraged Lease Loan
may in certain instances provide that the related lessor is responsible for
maintaining such Equipment;
(xxv) The Contributor has no knowledge that any Obligor under
a Contract is a Person involved in the business of selling medical equipment of
the same type as the Equipment subject to such Contract;
(xxvi) With respect to each item of Equipment either (A) no
such Equipment has been relocated from the jurisdiction set forth in the
Contract or, (B) if such Equipment has been
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relocated from the jurisdiction set forth in the Contract and the Contributor
has knowledge of any such relocation, all UCC filings necessary to continue the
first priority security interest in such Equipment have been made (other than
Equipment relating to a Secured Equipment Note or Finance Lease and for which
the Original Equipment Cost is less than $20,000) ;
(xxvii) No Contract is a consumer lease as defined in Article
2A of the UCC;
(xxviii) Each Obligor has accepted the related Equipment and,
after reasonable opportunity to inspect and test, has not notified the
Contributor of any defects therein;
(xxix) No Obligor is a government or municipality; and
(xxx) No Contract requires the prior written consent of the
Obligor or contains any other restriction relating to the transfer or assignment
of such Contract by the Contributor or the seller except such consent as has
been obtained on or prior to the date of such transfer.
(b) The Contributor represents and warrants, as to the
Contracts in the aggregate:
(i) The Initial Aggregate Discounted Contract Balance of
the Contracts as of the initial Cut-off Date is equal to
$______________;
(ii) The Contracts have the following characteristics: (A)
each Initial Contract has a Discounted Contract Balance as of the
Cut-off Date of not more than $____________; (B) no Discounted Contract
Balance of any Contract will include an amount attributable to any (i)
Purchase Option Payment for such Contract, (ii) Contract Payment due on
or prior to the Cut-off Date, (iii) security deposit or (iv) advance
payment; (C) as of the Cut-off Date, no item of Equipment has been
repossessed; (D) as of the Cut-off Date no Contract is a refinancing
due to delinquencies under a prior lease, security agreement or loan
with the same Obligor relating to the Equipment; (E) the Obligor with
respect to each Contract has a place of business in, or is organized
under, the laws of any state or territory of the United States of
America; (F) with respect to the Initial Contracts, each Contract will
have a Scheduled Termination Date no later than ______________; (G) as
of the Cut-off Date, (i) the Discounted Contract Balance of Contracts
that have Balloon Payments constitute not more than ___% of the
Aggregate Discounted Contract Balance, (ii) the Discounted Contract
Balance of Contracts that have non-level payments to the Scheduled
Termination Date (excluding Contracts that have Balloon Payments)
constitutes not more than __% of, with respect to the Initial
Contracts, the Aggregate Discounted Contract Balance of the Initial
Contracts as of the Closing Date; (H) as of the Closing Date, the sum
of the Discounted Contract Balances of all Contracts with Equipment
located in any one State will not exceed __% of, with respect to the
Initial Contracts, the Aggregate Discounted Contract Balance of the
Initial Contracts, no single Obligor will have a Discounted Contract
Balance that exceeds ____% of the Aggregate Discounted Contract Balance
on the Closing Date, the sum of the Discounted Contract Balances of any
seven Contracts shall not exceed ____% of the Aggregate Discounted
Contract Balance on the Closing Date and (iv) the sum of the Discounted
Contract Balances of all Contracts for which the related Equipment is
magnetic
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resonance imaging equipment will not exceed _____% of the Aggregate
Discounted Contract Balance as of the Closing Date; (I) not more than
____% of the Aggregate Discounted Contract Balance will arise from
Contracts which do not constitute loans to manufacturers, wholesalers,
and retailers of, and to prospective purchasers of, specified
merchandise, insurance and services; (J) the Obligor under each
Contract has made at least one Contract Payment under such Contract
prior to the first Payment Date occurring after the time such Contract
was executed by the parties thereto in addition to any payment made at
the time of the signing of such Contract except for Contracts
representing ___% of the Aggregate Discounted Contract Balance as of
the Closing Date which Contracts provide for the related initial
Contract Payment to be due within 30 days of the Payment Date occurring
in _____________; and (K) the sum of the Discounted Contract Balance of
all Contracts that are Lease Receivable Purchases shall not exceed, at
any time, more than ____% of the Aggregate Discounted Contract Balance
as of the Closing Date.
2.04 CONTRACT SCHEDULE. The Contract Schedule (i) accurately
sets forth the identifying number of each Contract, the Obligor's name and
address, the original Scheduled Maturity Date of each Contract, the remaining
maturity of each Contract, the Discounted Contract Balance of each Contract as
of the Cut-off Date, the amount and scheduled due date of each Contract Payment
due under each of the Contracts, and the original amount funded on each
Contract, (ii) accurately sets forth the information with respect to certain
other characteristics of the Contracts and the Equipment described on such list,
(iii) identifies those Contracts which constitute Pool A and those Contracts
which constitute Pool B and (iv) is otherwise true and correct in all material
respects.
2.05 PENDING LITIGATION. There are no actions, suits,
proceedings, investigations or injunctive or other orders pending, or to the
knowledge of the Contributor or Servicer threatened, against or affecting the
Contributor or Servicer or any subsidiary in or before any court, governmental
authority or agency or arbitration board or tribunal, including, but not limited
to, any such actions, suits, proceeding, investigation or order 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, or
condition (financial or otherwise) of the Contributor or Servicer and its
subsidiaries, or the ability of the Contributor or Servicer to perform its
obligations under this Agreement or the payment or enforceability of any
Contract.
2.06 NO MATERIAL EVENT. No event has occurred which materially
adversely affects the Contributor's operations, including, but not limited to,
its ability to perform the transaction contemplated hereunder.
2.07 TRANSACTIONS LEGAL AND AUTHORIZED. This Agreement and all
other documents delivered in connection herewith and the assignment, transfer
and contribution by the Contributor to the Transferor of all of the
Contributor's right, title and interest in and to each Contract and a security
interest in each item of Equipment at any time transferred hereunder and
compliance by the Contributor and the Servicer with all of the provisions of
this Agreement:
(a) have been duly authorized by all necessary
corporate action on the part of the Contributor or the Servicer, as the
case may be, and do not and will not require any
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stockholder approval, or approval or consent of any trustee or holders
of any indebtedness or obligations of the Contributor or the Servicer,
as the case may be;
(b) are within the corporate powers of the
Contributor and the Servicer; 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 Contributor
or the Servicer, as the case may be, under the provisions of, any
agreement, charter instrument, by-law or other instrument to which the
Contributor or the Servicer, as the case may be, is or will be 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
Contributor or the Servicer, as the case may be, or its properties, or
any order to which the Contributor or the Servicer, as the case may be,
or its properties is subject, of or by any government or governmental
agency or authority.
2.08 GOVERNMENTAL CONSENT. Except for the filing of the UCC
financing statements and the making of applications as set forth in Section
1.01(c) hereof, no consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority is or will be
necessary or required on the part of the Contributor in connection with the
execution and delivery of this Agreement or the assignment, transfer and
contribution of the Contracts and the Equipment hereunder.
2.09 COMPLIANCE WITH LAW. Each of the Contributor and the
Servicer:
(a) is not in violation of any laws, ordinances,
governmental rules or regulations or court orders to which it is
subject; and
(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.
2.10 ORDINARY COURSE; NO INSOLVENCY. The transactions
contemplated by this Agreement are being consummated by the Contributor and the
Servicer, respectively, in furtherance of the Contributor's and the Servicer's
ordinary business purposes and constitute a practical and reasonable course of
action by the Contributor and the Servicer, respectively, designed to improve
the financial position of the Contributor and the Servicer, respectively, with
no contemplation of insolvency and with no intent to hinder, delay or defraud
any of its present or future creditors. Neither as a result of the transactions
contemplated by this Agreement, nor immediately before or after such
transactions, will the Contributor or the Servicer be insolvent, and both the
Contributor and the Servicer shall have adequate capital for the conduct of its
business and the payment of anticipated obligations.
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2.11 ASSETS AND LIABILITIES.
(a) Both immediately before and after the assignment, transfer
and contribution of Contracts (including the right to receive all payments due
or to become due thereunder) and the other Contributed Property, the present
fair salable value of the Contributor's assets will be in excess of the amount
that will be required to pay the Contributor's probable liabilities as they then
exist and as they become absolute and matured.
(b) Both immediately before and after the assignment and
transfer of Contracts and the other Contributed Property, the sum of the
Contributor's assets will be greater than the sum of the Contributor's debts,
valuing the Contributor's assets at a fair salable value.
2.12 FAIR CONSIDERATION; VALID SALE. The consideration
received and to be received by the Contributor in exchange for the assignment,
transfer and contribution of the Contracts and the Contributed Property is fair
consideration having value equivalent to or in excess of the value of the assets
being transferred by the Contributor. This Agreement effects a valid assignment,
transfer and contribution of the Contributor's interest in the Contracts and the
other Contributed Property, enforceable against creditors of and purchasers from
the Contributor.
2.13 ABILITY TO PAY DEBTS. Neither as a result of the
transactions contemplated by this Agreement nor otherwise does the Contributor
believe that it will incur debts beyond its ability to pay or which would be
prohibited by its charter documents or by-laws. The Contributor's assets and
cash flow enable it to meet its present obligations in the ordinary course of
business as they become due.
2.14 BULK TRANSFER PROVISIONS. No transfer, assignment or
conveyance of Contracts or the other Contributed Property by the Contributor to
the Transferor contemplated by this Agreement will be subject to the bulk
transfer or any similar statutory provisions in effect in any applicable
jurisdiction.
2.15 TAX RETURNS.
(a) The provisions for taxes on the books of the
Contributor and each subsidiary are in accordance with generally accepted
accounting principles.
(b) The Contributor and the Transferor are
members of an affiliated group, within the meaning of Section 1504 of the Code,
that files a consolidated return for federal income tax purposes, and all of the
entities with which the Contributor is consolidated for federal income tax
purposes (including the Transferor) have timely filed all tax returns required
to be filed in any jurisdiction and have paid all taxes, assessments, fees and
other governmental charges upon them or their properties, income or franchises,
shown to be due and payable on such returns, except to the extent any such
entity is contesting the same in good faith by appropriate proceedings and has
set aside adequate reserves in accordance with generally accepted accounting
principles for the payment thereof. The Contributor does not know of any
proposed additional tax assessment against any such entity in any material
amount or of any basis therefor.
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2.16 TRANSFER TAXES. No transfer, assignment or conveyance of
Contracts or the other Contributed Property contemplated by this Agreement is
subject to or will result in any tax, fee or governmental charge payable by the
Contributor or the Transferor to any federal, state or local government
("Transfer Taxes"). In the event that the Contributor or the Transferor receives
actual notice of any Transfer Taxes arising out of the transfer, assignment and
conveyance of any Contracts and/or the other Contributed Property, on written
demand by the Transferor, or upon the Contributor otherwise being given notice
thereof, the Contributor shall pay, and otherwise indemnify and hold the
Transferor, 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 neither the holders of the Notes nor the Trustee shall have any
obligation to pay such Transfer Taxes).
2.17 PRINCIPAL EXECUTIVE OFFICE. The principal place of
business and chief executive office of each of the Contributor and the Servicer,
and has been for at least four months prior to the date that this Agreement is
dated of, is located at 500 Hyde Park, Doylestown, Pennsylvania 18901.
2.18 LEGAL NAME. The legal name of the Contributor is as set
forth in this Agreement and the Contributor has not changed its name in the last
six years and does not have any trade names, fictitious names, assumed names or
"doing business as" names except Medical Equipment Finance Company, DVI Capital,
DVI Vendor, DVI Health Services Corp., DVI Finance Inc. and Medical Devices
Capital Company.
2.19 SERVICING PROVISIONS CUSTOMARY. The servicing
arrangements hereunder, including, without limitation, the terms and conditions
pursuant to which the Contributor will act as Servicer and the Servicer's Fee
and other amounts to be paid to the Contributor, are consistent with the
arrangements and customary practices of the Contributor when providing
comparable services to nonaffiliated entities and of other services in the
equipment leasing industry.
2.20 DEFAULTS. As of the Closing Date, neither the
Contributor nor the Servicer is in default with respect to any debt or
obligation.
2.21 ERISA. The Contributor neither maintains, contributes to,
nor has any obligations to contribute to any "employee pension benefit plans,"
as such term is defined in Section 3(2) of ERISA (other than the 401(k) Plan of
DVI, Inc.). The execution and delivery of this Agreement and the other
applicable Transaction Documents and the consummation of the transactions
contemplated thereby will neither result in, constitute or otherwise give rise
to a "prohibited transaction" as described in Section 406 of ERISA or Section
4975 of the Code, with respect to a Contributor Plan. For the purpose of this
Section 2.21, the term "Contributor Plan" shall mean an "employee benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are, have been or are required to be made,
by the Contributor or by any trade or business, whether or not incorporated,
which, together with the Contributor, is under common control, as described in
Section 414(b) or (c) of the Code or Section 4001 of ERISA.
2.22 ALL FILINGS MADE. At the Closing Date, no further filings
(including, without limitation, UCC filings) or other actions are necessary in
any jurisdiction to give the Transferor an
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ownership interest in the Contracts and the other Contributed Property, except
that with respect to the Equipment, the Contributor shall, within 30 days of the
Closing Date, file the UCC financing statements and made the necessary
applications with respect to the Equipment that are described in Section 1.01(c)
hereof.
2.23 NONCONSOLIDATION. The Contributor is operated in such a
manner that it would not be substantively consolidated with the Transferor or
the Issuer, such that the separate existence of the Contributor and the
Transferor or the Issuer would not be disregarded in the event of a bankruptcy
or insolvency of the Contributor or the Transferor or the Issuer, and in such
regard, among other things:
(a) the Contributor is not involved in the day to day
management of the Transferor or the Issuer;
(b) the Contributor maintains separate corporate
records and books of account from the Transferor and the Issuer and
otherwise observes corporate formalities and has a separate business
office from the Transferor and the Issuer;
(c) the financial statements and books and records of
the Contributor prepared after the respective dates of creation of the
Transferor and the Issuer reflect and will reflect the separate
existence of the Transferor and the Issuer;
(d) the Contributor maintains its assets separately
from the assets of the Transferor and the Issuer (including through the
maintenance of a separate bank account), the Contributor's funds and
assets, and records relating thereto, have not been and are not
commingled with those of the Transferor or the Issuer and the separate
creditors of the Transferor and the Issuer will be entitled to be
satisfied out of the Transferor's assets or the Issuer's assets,
respectively, prior to any value in the Transferor becoming available
to the Transferor's equityholders or the Contributor's creditors;
(e) all business correspondence of the Contributor
and other communications are conducted in the Contributor's own name
and on its own stationery;
(f) the Transferor and the Issuer do not act as an
agent of the Contributor in any capacity and the Contributor does not
act as agent for the Transferor or the Issuer, but instead presents
itself to the public as a corporation separate from the Transferor and
the Issuer; PROVIDED, HOWEVER, the Transferor and its successors and
assigns acknowledge that the Contributor is acting as the Servicer
hereunder; and
(g) the Transferor is not engaged in any other
activities other than the transactions contemplated by the Transaction
Documents.
2.24 ALL REPRESENTATIONS AND WARRANTIES TRUE. All
representations and warranties made by the Contributor in any certificate or
other document delivered at the closing of the
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transactions contemplated by the applicable Transaction Document, including all
representations and warranties made to counsel in support of their opinions, are
true and correct in all material respects.
2.25 PROSPECTUS SUPPLEMENT. The Prospectus Supplement does not
contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements contained therein not misleading in light of
the circumstances under which they were made; PROVIDED, HOWEVER, the Contributor
makes no representation or warranty as to the information contained in or
omitted from the Prospectus Supplement in reliance upon and in conformity with
information furnished to the Contributor in writing by Lehman Brothers, Inc. or
Prudential Securities Incorporated or any of their respective Affiliates (i.e.
the paragraphs under the headings "The Underwriting" or "Plan of Distribution")
or by the Trustee (under the heading "The Trustee").
2.26 INSURANCE. In addition to the insurance maintained by the
Obligors with respect to the Equipment, the Contributor maintains, among other
policies, a general liability insurance policy in the aggregate amount of
$1,000,000 and an excess liability insurance policy in umbrella form in the
aggregate amount of $3,000,000 for a total of $4,000,000 of liability insurance.
Each of such policies is in full force and effect and covers all Equipment owned
by the Contributor and the Transferor. All premiums in respect of such policies
have been paid. Each of the Trustee on behalf of the Securityholders, and the
Transferor is named as additional insureds on such liability policies.
2.27 NO BANKRUPTCY PETITION AGAINST THE TRANSFEROR OR THE
ISSUER. The Contributor covenants and agrees it will not, prior to the date that
is one year and one day after the payment in full of all amounts owing pursuant
to the Transaction Documents, institute against, or join any other Person in
instituting against, either the Transferor or the Issuer, any bankruptcy,
reorganization, receivership, arrangement, insolvency or liquidation proceedings
or other similar proceedings under any federal or state bankruptcy or similar
law. This Section 2.27 shall survive the termination of this Agreement.
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SECTION 3. REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE TRANSFEROR
The Transferor hereby represents to the Contributor as of the
Closing Date and warrants, covenants and agrees as follows:
3.01 TRANSFEROR ORGANIZATION AND AUTHORITY; SUBSIDIARIES. The
Transferor is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation, and has full power and
authority to own and convey the Contracts and execute and deliver the
Transaction Documents to which the Transferor is a party (collectively, the
"Transferor Documents") and all related documents, and to perform the terms and
provisions hereof. The Transferor has no subsidiaries, but is the sole
beneficial owner of the Issuer.
3.02 DUE AUTHORIZATION AND NO VIOLATION. Each of the
Transferor Documents and all related documents have been duly authorized,
executed and delivered by the Transferor, and is the legal, valid and binding
obligation of the Transferor enforceable in accordance with its terms, except as
the same may be limited by insolvency, bankruptcy, reorganization or other laws
relating to or affecting the enforcement of creditors' rights or by general
equitable principles. The consummation of the transactions contemplated by the
Transferor Documents and all related documents and the fulfillment of the terms
hereof, will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or assets
of the Transferor pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, guarantee or similar agreement or instrument under which
the Transferor is a debtor or guarantor (other than the liens created pursuant
to the Transaction Documents), nor will such action result in any violation of
the provisions of the certificate of incorporation or the by-laws of the
Transferor. All applicable laws, rules, regulations, and orders with respect to
the Transferor, its business and properties, have been complied with. No
consents and no filings or governmental approvals that have not been made or
obtained are required for due execution, delivery and performance of the
agreements by the Transferor.
3.03 NO LITIGATION. No legal or governmental proceedings are
pending to which the Transferor is a party or of which any property of the
Transferor is the subject, and, to the knowledge of the Transferor, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others and no injunctions, writs, restraining orders or other
orders of any nature are in effect or, to the knowledge of the Transferor,
threatened, other than such proceedings which will not have a material adverse
effect upon the general affairs, financial position, net worth or results of
operations of the Transferor and will not materially and adversely affect the
performance by the Transferor of its obligations under, or the validity and
enforceability of, the Transferor Documents and all related documents.
3.04 PRINCIPAL OFFICE. The Transferor's principal place of
business and chief executive office is located at 500 Hyde Park, Doylestown,
Pennsylvania 18901. The legal name of the Transferor is as set forth herein and
the Transferor has no tradenames, fictitious names, assumed names or "doing
business" names.
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3.05 TAX RETURNS. The Transferor has filed on a timely basis
all tax returns required to be filed in any jurisdiction and has paid all taxes,
assessments, fees and other governmental charges upon it or its properties,
income or franchises, shown to be due and payable on such returns, except to the
extent the Transferor is contesting the same in good faith by appropriate
proceedings and has set aside adequate reserves in accordance with generally
accepted accounting principles for the payment thereof. The Transferor does not
know of any proposed additional tax assessment against it in any material amount
or of any basis therefor.
3.06 SOLVENCY. The Transferor is solvent and will not become
insolvent after giving effect to the contemplated transactions. The Transferor
is paying its debts as they become due and will have adequate capital to conduct
its business after giving effect to the contemplated transactions.
3.07 APPROVALS. All approvals, authorizations, consents,
orders or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection with
the execution and delivery of the Transferor Documents have been or will be
taken or obtained on or prior to the Closing Date.
3.08 NONCONSOLIDATION. The Transferor is operated in such a
manner that it would not be substantively consolidated with the Contributor,
such that the separate existence of the Transferor and the Contributor would not
be disregarded in the event of a bankruptcy or insolvency of the Transferor or
the Contributor, and in such regard, among other things:
(a) the Transferor is not involved in the day to day
management of the Contributor;
(b) the Transferor maintains separate Transferor
records and books of account from the Contributor and otherwise
observes Transferor formalities and has a separate business office from
the Contributor;
(c) the financial statements and books and records of
the Transferor prepared after the date of creation of the Contributor
reflect and will reflect the separate existence of the Contributor;
(d) the Transferor maintains its assets separately
from the assets of the Contributor (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 Contributor and the separate creditors of the Contributor
will be entitled to be satisfied out of the Contributor's assets prior
to any value in the Contributor becoming available to the Contributor's
equityholders or the Transferor's creditors;
(e) all business correspondence of the Transferor and
other communications are conducted in the Transferor's own name and on
its own stationery;
(f) the Contributor does not act as an agent of the
Transferor in any capacity and the Transferor does not act as agent for
the Contributor, but instead presents
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itself to the public as a corporation separate from the Contributor;
PROVIDED that the Contributor is the Servicer hereunder; and
(g) the Transferor will at all times maintain two
Independent Directors (as such term is defined in the certificate of
incorporation of the Transferor).
SECTION 4. ADMINISTRATION OF CONTRACTS
4.01 SERVICER TO ACT.
(a) Notwithstanding the transfers and assignments of the
Contracts and the other Contributed Property contemplated hereby, the Servicer,
for the benefit of the Transferor, and, upon assignment of the Transferor's
rights hereunder to the Issuer (and the Issuer's assignment thereof to the
Trustee for the benefit of the Trustee and the Securityholders), will service
and administer each Contract in accordance with the terms thereof and of this
Agreement. The Servicer shall provide the Obligors with appropriate invoices and
such other notices as may be required to ensure that all Contract Payments,
Prepayment Amounts and Partial Prepayment Amounts on or in respect of each
Contract are remitted by the Obligors directly to a Lock-Box Account.
(b) The Servicer shall do, and shall have full power and
authority to do, subject only to the specific requirements and prohibitions of
this Agreement, any and all things in connection with the servicing and
administration of the Contracts and the Equipment which are in the same manner
in which it services contracts and equipment held for its own account
(including, without limitation, servicing and administration of Contracts with
respect to which the related Equipment may be substituted or upgraded) and
consistent with prudent and customary practices of servicers in the industry,
but in performing its duties hereunder, the Servicer will act on behalf and for
the benefit of the Transferor, the Issuer, the Trustee and the Securityholders,
subject at all times to the provisions of the Transaction Documents, without
regard to any relationship which the Servicer or any Affiliate of the Servicer
may otherwise have with an Obligor. Notwithstanding the prior sentence, the
Servicer shall, within ten (10) Business Days after the Closing Date, notify
each Obligor to make all payments with respect to its respective Contracts which
are due after the Cut-off Date directly to a Lock-box Account. The Servicer
shall give the Trustee and the Rating Agencies prior written notice of any
change in the location of a Lock-box Account and the Servicer shall give at
least ten (10) days' prior written notice of the new location to each Obligor.
The Servicer shall at all times act in accordance with the provisions of each
Contract, and shall observe and comply with all requirements of law applicable
to it. Except as permitted by the terms of any Contract following a default
thereunder, the Servicer shall not take any action which would result in the
interference with the Obligor's right to quiet enjoyment of the Equipment
subject to the Contract during the term thereof.
(c) Without limiting the generality of the foregoing, the
Servicer will be responsible, among other duties, to (i) invoice each Obligor
for all Contract Payments required to be paid by such Obligor in such manner and
to the same extent as the Servicer does with respect to similar contracts held
for its own account, (ii) maintain with respect to each Contract and each item
of Equipment, and with respect to each payment by each Obligor and compliance by
each Obligor
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with the provisions of each Contract, complete and accurate records in such
manner and to the same extent as the Servicer does with respect to similar
contracts held for its own account and (iii) 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 Transferor, the Issuer and the
Trustee, any and all tax returns with respect to sales, use, personal property
and other taxes (other than corporate income and franchise tax returns) and any
and all reports or licensing applications required to be filed in any
jurisdiction with respect to any Contract or any item of Equipment and any and
all filings required by Section 4.01(d) below.
(d) The Servicer will file the UCC financing statements set
forth in Sections 1.01(c) and 7.01(c) hereof within the time frames set forth
therein and thereafter will file such additional UCC financing statements and
continuation statements and assignments in accordance with the provisions of any
Contract and item of Equipment or otherwise so that the security interest in
favor of the Trustee in each of the Contracts and the related Equipment will be
perfected by such filings with the appropriate UCC filing offices. The
Transferor agrees to execute such UCC financing statements and continuation
statements as shall be necessary and shall furnish the Servicer with any powers
of attorney or other documents necessary and appropriate to carry out its
servicing and administration duties hereunder.
(e) The Servicer will maintain, or cause to be maintained,
with respect to the Contracts and the Equipment, liability insurance in amounts
at least as great as those described in Section 2.26.
4.02 CONTRACT AMENDMENTS AND MODIFICATIONS; REPURCHASE OF
CONTRACTS BY SERVICER. (a) In performing its obligations hereunder, the Servicer
may, acting in the name of the Transferor and without the necessity of obtaining
the prior consent of the Transferor or the Trustee, enter into and grant
modifications, waivers and amendments to the terms of any Contract except for
modifications, waivers or amendments that (i) are inconsistent with the
servicing standards set forth in Section 4.01 above, (ii) would extend the date
of the final Contract Payment on any Contract by more than 24 months, (iii)
would reduce or adversely affect, individually or in the aggregate, the
Obligor'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,(iv) extend the Stated Maturity
Date of the Notes, (v) have a material adverse effect on the weighted average
life of any Class of Notes, (vi) be implemented on more than twenty percent of
the Initial Aggregate Discounted Contract Balance of the Contracts, (vii) be
effected on any Contract that is either 90 days or more delinquent or Defaulted
Contract, (viii) PROVIDED that the Issuer fails to deposit an amount into the
Collection Account equal to such decrease, decrease the Discounted Contract
Balance of any Contract or (ix) otherwise could adversely affect, individually
or in the aggregate, the interests of any of the Transferor, the Issuer, the
Trustee or the Securityholders. Notwithstanding the provisions of clause (ii) of
the preceding sentence, the Servicer may (1) permit any of the actions set forth
in clause (ii) of the preceding sentence, which in the Servicer's sole
discretion, in accordance with the same manner in which it services contracts
and equipment held for its own account, would maximize Recoveries on any
Defaulted Contract, or (2) permit termination of a Contract which does not
otherwise provide for termination by requiring, in the case of either clause (1)
or (2), that the Obligor pay, or, if the terms of such extension or termination
do
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not provide for such payment by the Obligor that the Servicer deposit, in lieu
of all future Contract Payments with respect to such Contract, an amount which
equals or exceeds the applicable Prepayment Amount for such Contract as of 11:00
A.M. New York time on the second Business Day prior to the Payment Date next
succeeding the making of such payment is deposited into the Collection Account;
PROVIDED, HOWEVER, that the Servicer will not be permitted to allow prepayment
by an Obligor if there are any amounts due under the related Contract after such
prepayment.
In the event of any modification, waiver or amendment of any
Contract in accordance with this Section 4.02, the Servicer will promptly
furnish the Transferor, the Issuer and the Trustee with a copy thereof, together
with a certificate of the Servicer signed by one of its executive or financial
officers stating that such modification, waiver or amendment is not prohibited
by the provisions of this Section 4.02.
(b) If an Obligor requests either an upgrade or a trade-in of
an item of Equipment, the Servicer may either (x) remove such Contract and the
related Equipment from the Trust Property PROVIDED that the Servicer either (i)
subject to the limitations set forth in Section 7.01(c), transfers a Substitute
Contract and the related Equipment to the Transferor in accordance with Section
7 of this Agreement or (ii) deposits an amount equal to the Prepayment Amount
for such Contract into the Collection Account or (y) permit such Contract and
remaining related Equipment to remain in the Trust Property, PROVIDED that the
Servicer deposits an amount equal to the Partial Prepayment Amount for such
Contract into the Collection Account.
4.03 CONTRACT DEFAULTS; RESIDUAL REALIZATIONS.
(a) Upon receipt of notice from the Transferor, the Issuer,
the Trustee or any other Person, or if the Servicer otherwise learns that the
Obligor under any Contract is in default thereunder, the Servicer will take such
action as is appropriate, consistent with the Servicer's administration of
contracts held for its own account and consistent with the customary practices
of servicers in the industry, including such action as may be necessary to
cause, or attempt to cause, the Obligor thereunder to cure such default (if the
same may be cured) or to terminate or attempt to terminate such Contract and to
recover, or attempt to recover, all damages resulting from such default.
(b) The Servicer will use its best efforts (i) to sell or
re-lease any Equipment and realize on any other collateral related to a
Defaulted Contract in a timely manner and upon reasonable terms and conditions
so as to maximize, to the extent possible under then prevailing market
conditions, as expeditiously as is consistent with sound commercial practice and
the Servicer standard referenced in Section 4.01, the net proceeds from such
Equipment and other collateral, if any and (ii) to sell or re-lease any
Equipment remaining subject to the lien of the Indenture upon the expiration of
the Contract to which such Equipment is subject, in a timely manner and in a
manner consistent with that utilized by the Servicer with respect to equipment
owned by it so as to maximize, to the extent possible under then prevailing
market conditions, the net proceeds from such Equipment.
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(c) In the event that the Servicer is required to sell any
item of Equipment pursuant to the provisions of this Section 4.03 at a time when
the Servicer is trying to lease or sell other similar items of equipment, the
Servicer will not favor any such other item in its remarketing efforts.
4.04 COSTS OF SERVICING; SERVICER'S FEE.
(a) All costs of servicing each Contract in the manner
required by this Section 4 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 4.03 hereof with
respect to any Contract or the Equipment subject thereto, the Servicer's actual
out-of-pocket expenses reasonably incurred in the course of such performance
with respect to such Contract or Equipment. (For all purposes of this Section 4,
the Servicer's "out-of-pocket expenses" means only those expenses incurred to
non-Affiliated third parties (E.G., outside counsel in a collection suit) and
shall not include salaries, operating costs, overtime wages and other such
"overhead" costs or expenses of the Servicer or its Affiliates, and shall not
include expenses of or payments to an agent or subservicer allowed under Section
11.02, except that out-of-pocket expenses for the fees and expenses of an agent
used to remarket Equipment subject to Contracts shall be included as
"out-of-pocket expenses".) In addition, the Servicer shall be entitled to
receive from the Transferor on each Payment Date any unreimbursed Nonrecoverable
Advances or Servicer Advances with respect to any Contract (in accordance with
Section 5) and a servicing fee (the "Servicing Fee") in the amount described in
paragraph (b) below.
(b) As compensation to the Servicer for its servicing of the
Contracts, the Servicer will be entitled to receive on each Payment Date from
amounts on deposit in the Collection Account the Servicing Fee in an amount
equal to the product of (i) one-twelfth, (ii) the Servicing Fee Rate and (iii)
the Aggregate Discounted Contract Balance as of the beginning of the related
Collection Period. In addition, the Servicer will be entitled to receive as
additional compensation late payment fees, the penalty portion of interest paid
on past due amounts, origination fees, documentation fees, other administrative
fees or similar charges allowed by applicable law with respect to the Contracts,
and certain other similar fees paid by the Obligors ("Servicing Charges") and
earnings from any Eligible Investments of amounts on deposit in the Collection
Account.
(c) The Servicer hereby agrees:
(i) to pay to the Trustee from time to time such
compensation for all services rendered by it under the Indenture as the
Servicer and the Trustee have agreed in writing prior to the Closing
Date, such payment to be made independent of the other payment
obligations of the Servicer hereunder;
(ii) except as otherwise expressly provided herein,
to reimburse the Trustee upon its request for all reasonable expenses,
disbursements, and advances incurred or made by the Trustee in
accordance with any provision of the Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel),
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except any such expense, disbursement, or advance as may be
attributable to its negligence or bad faith;
(iii) to pay the Trustee its annual administrative
fee on the Closing Date;
(iv) to pay the reasonable fees and expenses of
Trustee's counsel, Dorsey and Whitney, on the Closing Date; and
(v) to pay the reasonable annual administrative fee
of each Lock-box Bank.
To the extent the Trustee has not been paid pursuant to the
Indenture, then all of the expenses set forth in this clause (c) shall be borne
by the Servicer, and the Servicer shall not be entitled to reimbursement of such
amounts from the Trust Property.
4.05 OTHER TRANSACTIONS. Nothing in this Agreement shall
preclude the Contributor or the Servicer from entering into other contracts or
other financial transactions with any Obligor or selling or discounting any such
contract with any Person.
4.06 COLLECTION OF MONEYS.
(a) Subject to Section 4.06(b), the Servicer shall remit or
cause each Lock-box Bank to remit all payments received by it on or in respect
of any Contract or Equipment (including any Residual Payment) during such
Collection Period into the Collection Account (including any such amounts then
held by the Servicer) as soon as practicable, but in any event within two
Business Days after receipt thereof; provided, however, that upon satisfaction
of conditions provided by the Rating Agencies from time to time, the Servicer
shall be permitted to deposit such amounts received during a particular
Collection Period into the Collection Account within two Business Days prior to
the related Payment Date.
(b) Any such amounts remitted to the Collection Account may
not include Excluded Amounts.
(c) Notwithstanding the provisions of paragraph (a) hereof,
the Servicer may retain, or will be entitled to be reimbursed, from amounts
otherwise payable into, or on deposit in, the Collection Account with respect to
a Collection Period, amounts previously deposited in the Collection Account but
later determined to have resulted from mistaken deposits or payments due before
or on the Cut-off Date or postings of checks returned for insufficient funds
(PROVIDED that the Servicer accounts for such amounts in the Monthly Servicer's
Report for the related Collection Period). The amount to be retained or
reimbursed hereunder shall not be included in funds available for distribution
with respect to the related Payment Date.
(d) Pending their deposit into the Collection Account, all
collections shall be segregated by book-entry or similar form of identification
on the Servicer's books and records and identified as the property of the
Transferor.
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4.07 VOLUNTARY TERMINATION.
(a) At the option of the Servicer, the obligations and
responsibilities of the Servicer with respect to all of the Contracts shall
terminate on any Payment Date on which the Pool A Aggregate Discounted Contract
Balance is less than 10% of the Pool A Aggregate Discounted Contract Balance as
of the Closing Date and the Pool B Aggregate Discounted Contract Balance is less
than 20% of the Pool B Aggregate Discounted Contract Balance as of the Closing
Date so long as the Servicer deposits or causes to be deposited into the
Collection Account the Repurchase Amount for each Contract.
(b) At the option of the Servicer, the obligations and
responsibilities of the Servicer with respect to the Contracts in Pool B shall
terminate on any Payment Date on which the Pool B Aggregate Discounted Contract
Balance is less than 20% of the Pool B Aggregate Discounted Contract Balance as
of the Closing Date so long as the Servicer deposits or causes to be deposited
into the Collection Account the Repurchase Amount for each Contract in Pool B.
SECTION 5. SERVICER ADVANCES; REPURCHASE OF CONTRACTS
5.01 SERVICER ADVANCES. Following each Determination Date, the
Servicer shall advance and remit to the Trustee, in such manner as will ensure
that the Trustee will have immediately available funds on account thereof by
11:00 A.M. New York time on the second Business Day prior to the next succeeding
Payment Date, a Servicer Advance equal to an amount sufficient to cover all
amounts due and unpaid on any Delinquent Contract as of the related
Determination Date; PROVIDED, HOWEVER, that the Servicer will not be obligated
to make a Servicer Advance with respect to (a) any Defaulted Contract, (b) any
Contract that was finally liquidated on or prior to such Determination Date or
(c) any Contract if the Servicer, in its good faith judgment, believes that such
Servicer Advance would be a Nonrecoverable Advance. If the Servicer determines
that any Servicer Advance it has made, or is contemplating making, would be a
Nonrecoverable Advance, the Servicer shall deliver to the Trustee an Officer's
Certificate stating the basis for such determination.
The Servicer shall be reimbursed for Servicer Advances on each
Payment Date from amounts on deposit in the Collection Account as follows: (i)
for any Servicer Advance made with respect to a Delinquent Contract, from
subsequent collections of such delinquent Contract Payments, Prepayment Amounts
or Repurchase Amounts and (ii) for any Nonrecoverable Advance, from all
collections received on all of the Contracts.
5.02 INDEMNIFICATION. Each of the Contributor and the Servicer
agrees to indemnify and hold harmless the Transferor, the Issuer, the Servicer,
the Trustee, the Owner Trustee (which shall include each of their respective
members, directors, officers, employees and agents), the Contributor and each
Noteholder, as the case may be, (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 caused by gross negligence or
willful misconduct on the part of the Indemnified Party) as a
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result of claims, actions, suits or judgments asserted or imposed against an
Indemnified Party and arising out of the transactions contemplated hereby or by
the Indenture or arising out of, or based upon, action or inaction by the
Contributor or the Servicer, as the case may be, that is contrary to the terms
of this Agreement or the other Transaction Documents to which it is a party or a
breach by the Contributor or the Servicer, as the case may be, of any of its
covenants set forth in any of the Transaction Documents to which it is a party
or any information certified in any schedule delivered by the Contributor or the
Servicer, as the case may be, being untrue in any material respect as of the
date of such Certification, 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 Servicer's possession or under its
control pursuant to this Agreement, and any tort claims and any fines or
penalties arising from any violation of the laws or regulations of the United
States or any state or local government or governmental authority, PROVIDED that
the foregoing indemnity shall in no way be deemed to impose on the Contributor
any obligation, other than to the extent specifically set forth in this Section
5, to make any payment with respect to principal or interest on the Notes or to
reimburse the Transferor for any payments on account of the Notes. In every
circumstance where the Indemnified party seeking indemnity hereunder for legal
fees, counsel fees and related costs and expenses is a Noteholder it is
understood, and the Securityholders by their acceptance of their respective
Notes agree, that such reimbursement, indemnification and holding harmless is
limited to the reasonable fees, related costs and expenses of the
Securityholders Counsel only. The obligations of the Contributor under this
Section 5.02 shall survive the termination of the Agreement the resignation or
removal of the Trustee and the termination of the Servicer pursuant to the terms
hereof.
5.03 REPURCHASE AND SUBSTITUTION OF CONTRACTS; OTHER PAYMENTS.
(a) The Contributor or the Servicer, as the case may be, shall inform the
Transferor, the Issuer and the Trustee promptly, in writing, upon the discovery
of a breach of any of the Contributor's representations and warranties set forth
herein. With respect to any breach of the Contributor's representations and
warranties set forth herein which materially and adversely affects the interest
of the Securityholders in any Contract or Contracts, the Contributor, unless
within 90 days following the discovery or receipt of notice of such breach such
breach has been cured or waived in all respects by the Securityholders
evidencing more than 50% of the Voting Rights, shall either (a) purchase such
Contract and the security interest in the related Equipment from either the
Transferor or the Issuer, as the case may be, or (b) replace such Contract and
the security interest in the related Equipment with a Substitute Contract in
accordance with the provisions of Sections 7.01, 7.02 and 7.03 of this
Agreement. In the event of a repurchase of a Contract, the Contributor shall
remit to the Trustee (upon written notice to the Trustee thereof) for deposit
into the Collection Account the Repurchase Amount of each such Contract to be
repurchased on or prior to 11:00 A.M. New York City time on the second Business
Day prior to the Payment Date immediately following the date when the
Contributor shall become obligated to purchase (or, if such Contract is then a
Defaulted Contract, an amount equal to the Repurchase Amount as of the date such
Contract first became a Defaulted Contract, together with interest thereon at
the Discount Rate from the date such Contract first became a Defaulted Contract
to the end of the month preceding the date of payment). In connection with such
repurchase, the Servicer shall be reimbursed in accordance with Section 3.04(b)
of the Indenture for all amounts, if any, theretofore advanced by the Servicer
pursuant to Section 5.01 with respect to such Contract. The Trustee shall
deposit such Repurchase Amounts in the Collection Account on or prior to
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11:00 A.M. New York City time on the second Business Day immediately following
the date on which the Trustee receives such Repurchase Amounts. Without limiting
the generality of the foregoing, it is agreed and understood that for purposes
of this Section 5.03, any inaccuracy in any representation or warranty with
respect to (i) the priority of the lien of the Indenture with respect to any
Contract or (ii) the amount (if less than represented) of the Contract Payments
or Repurchase Amount under any Contract shall be deemed to be material.
(b) With respect to all Predecessor Contracts and the security
interest in the related Equipment purchased or replaced by the Contributor
pursuant to this Section 5 hereof, the Transferor will deliver to the
Contributor, an instrument substantially in the form of Exhibit E hereto,
assigning to the Contributor, without recourse, representation or warranty
(except as to the absence of liens, claims, or encumbrances resulting from
actions taken, or failed to be taken, by the Transferor), all of the
Transferor's right, title and interest in and to such Predecessor Contracts and
the security interest in the related Equipment, and all security and documents
relating thereto.
(c) The Transferor, the Issuer and the Trustee agree that the
obligation of the Contributor to repurchase or substitute any Contract pursuant
to this Section 5.03 shall constitute the sole remedy for any such breach
available against the Contributor by the Transferor, the Issuer, any Noteholder
or the Trustee; PROVIDED, that the limitation contained in this clause (c) shall
not otherwise limit the rights of any such Person under Section 5.02.
SECTION 6. INFORMATION TO BE PROVIDED
6.01 MONTHLY SERVICER REPORT. On or prior to each
Determination Date, the Servicer shall deliver a report in writing substantially
in the form of Exhibit B (the "Monthly Servicer Report") to the Trustee and the
Rating Agencies.
6.02 TAX REPORTING AND TREATMENT. (a) The Servicer shall
furnish or cause to be furnished to each Noteholder, within a reasonable time
after the end of each calendar year, to each Noteholder who was a Noteholder at
any time during such year, a report setting forth the amount of principal and
interest paid on the Notes during such year and indicating such other customary
factual information as the Servicer deems necessary, or as any Noteholder
reasonably requests, to enable Securityholders to prepare their respective tax
returns. In addition, the Servicer shall provide, or cause to be provided to the
Internal Revenue Service and each Noteholder, information statements required by
the Code (and the regulations issued thereunder) or as such Securityholders may
reasonably request from time to time with respect to in the case of any class of
Notes that is issued with original issue discount within the meaning of section
1273 of the Code ("OID"), information statements with respect to OID. For
purposes of consolidated federal and state income and franchise tax reporting,
the Contributor will be treated (i) as the owner of the Contracts and the other
Contributed Property and (ii) as the borrower under the Indenture.
(b) The Transferor, the Issuer, the Contributor, the Servicer,
any subservicer and each Noteholder by acceptance of its Note (and any Person
that is a beneficial owner of any interest in a Note, by virtue of such Person's
acquisition of a beneficial interest therein) agrees to treat the
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Notes as indebtedness for purposes of federal, state and local income or
franchise taxes (and any other tax imposed on or measured by income).
6.03 OTHER INFORMATION. The Servicer shall at the Trustee's
request, 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 as set forth in the Indenture. Copies of all information furnished
pursuant to this Section shall also be furnished to the Rating Agencies.
6.04 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT.
The Servicer shall cause a firm of independent certified public accountants (who
may also render other services to the Servicer or to the Contributor) to deliver
to the Trustee, the Rating Agencies and each Noteholder within 90 days following
the end of each fiscal year of the Servicer, beginning with the Servicer's
fiscal year ending June 30, ____, a written statement to the effect that such
firm has examined in accordance with generally accepted practices samples of the
accounts, records, and computer systems of the Servicer for the fiscal year
ended on the previous June 30 relating to the Contracts (which accounts,
records, and computer systems shall be described in one or more schedules to
such statement), that such firm has compared the information contained in the
Servicer's reports delivered in the relevant period with information contained
in the accounts, records, and computer systems for such period, and that, on the
basis of such examination and comparison, such firm is of the opinion that the
Servicer has, during the relevant period, serviced the Contracts in compliance
with such servicing procedures, manuals, and guides and in the same manner as it
services comparable leases for itself or others, and that such certificates,
accounts, records, and computer systems have been properly prepared and
maintained in all material respects, except in each case for (a) such exceptions
as such firm shall believe to be immaterial and (b) such other exceptions as
shall be set forth in such statement. Copies of all information furnished
pursuant to this Section shall also be furnished to the Rating Agencies.
6.05 PAYMENT ADVICES. Each payment by the Contributor or the
Transferor or the Servicer to the Trustee pursuant to any of the provisions of
the Transaction Documents shall be accompanied by written advice containing
sufficient information to identify the Contract and/or Equipment to which such
payment relates, the Section of the Transaction Documents pursuant to which such
payment is made, and the proper application pursuant to the provisions of the
applicable Transaction Document of the amounts being paid.
SECTION 7. SUBSTITUTION OF CONTRACTS
7.01 SUBSTITUTION. (a) (1) With respect to Pool A, in addition
to the Servicer's other rights of substitution, the Servicer will have the right
(but not the obligation), at any time in connection with exercise by the
Transferor of its rights of substitution under the Pooling and Trust Agreement,
to substitute (a "Pool A Non-Performing Contract Substitution") one or more
Eligible Contracts and the security interest in the related Equipment subject
thereto (the foregoing collectively, a "Substitute Contract") for a Contract in
Pool A and the security interest in the related Equipment subject thereto (the
foregoing collectively, a "Predecessor Contract") if:
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(i) (A) any Contract Payment on the Predecessor
Contract is delinquent for at least sixty (60) consecutive days as of
the most recent Determination Date; or
(B) a bankruptcy petition has been filed by or
against the Obligor or, with respect to a Leveraged Lease Loan, the
related Lessor, under any Predecessor Contract; or
(C) the Predecessor Contract was initially classified
as a Defaulted Contract during the related Collection Period.
PROVIDED, HOWEVER, that if the Predecessor Contract included a first
priority perfected security interest in Equipment related to a Fair
Market Value Lease, the related Substitute Contract, if related to a
Fair Market Value Lease, shall also include a first priority perfected
security interest in the Equipment related thereto.
(ii) the conditions set forth in Section 7.01(d) have been
satisfied and the sum of (x) the Discounted Contract Balances of all
Substitute Contracts substituted under this Section 7.01(a)(1) and (y)
amounts deposited by the Servicer in the Collection Account in
connection with all such substitutions under this Section 7.01(a)(1)
does not exceed 10% of the Pool A Aggregate Discounted Contract Balance
as of the Closing Date.
(2) With respect to Pool A, in addition to the Servicer's
other rights of substitution, the Servicer will have the right (but not the
obligation) at any time in connection with exercise by the Transferor of its
rights of substitution under the Pooling and Trust Agreement, to substitute (a
"Pool A Prepaid Contract Substitution") one or more Substitute Contracts for a
Predecessor Contract in Pool A if (i) the Predecessor Contract has been prepaid
and (ii) the conditions set forth in Section 7.01(d) have been satisfied and the
sum of (x) the Discounted Contract Balance of all Substitute Contracts
substituted under this Section 7.01(a)(2) and Section 4.02(b) and (y) amounts
deposited by the Servicer in the Collection Account in connection with all such
substitutions under this Section 7.01(a)(2) and Section 4.02(b) does not exceed
10% of the Pool A Aggregate Discounted Contract Balance as of the Closing Date.
(b) (1) With respect to Pool B, in addition to the Servicer's
other rights of substitution, the Servicer will have the right (but not the
obligation), at any time in connection with exercise by the Transferor of its
rights of substitution under the Pooling and Trust Agreement, to substitute (a
"Pool B General Contract Substitution") one or more Substitute Contracts for a
Predecessor Contract in Pool B if the conditions set forth in Section 7.01(d)
have been satisfied and the sum of (x) the Discounted Contract Balances of all
Substitute Contracts substituted under this Section 7.01(b)(1) and (y) amounts
deposited by the Servicer in the Collection Account in connection with all such
substitutions under this Section 7.01(b)(1) does not exceed 10% of the Pool B
Aggregate Discounted Contract Balance as of the Closing Date.
(3) With respect to Pool B, in addition to the Servicer's
other rights of substitution, the Servicer will have the right (but not the
obligation), at any time in connection with exercise by the Transferor of its
rights of substitution under the Pooling and Trust Agreement, to substitute (a
"Pool B Prepaid Contract Substitution") one or more Substitute Contracts for a
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Predecessor Contract in Pool B if (i) the Predecessor Contract has been prepaid
and (ii) the conditions set forth in Section 7.01(d) have been satisfied and the
sum of (x) the Discounted Contract Balance of all Substitute Contracts
substituted under this Section 7.01(b)(2) and Section 4.02(b) and (y) amounts
deposited by the Servicer in the Collection Account in connection with all such
substitutions under this Section 7.01(b)(2) and Section 4.02(b) does not exceed
10% of the Pool B Aggregate Discounted Contract Balance as of the Closing Date;
PROVIDED, HOWEVER, that unless the Rating Agency has given its prior consent,
the sum of clauses (x) and (y) in this Section 7.01(b)(2) may not exceed 10% of
the Pool B Aggregate Discounted Contract Balance as of the Closing Date.
(c) Any substitution pursuant to this Section 7.01 or Section
5.03 shall become effective upon (i) delivery to the Trustee and the Transferor
of the Substitute Contract Transfer Form, substantially in the form of Exhibit D
hereto, transferring to the Transferor (and the Issuer, as assignee of the
Transferor) all right, title and interest of the Contributor or the Servicer in
and to the Eligible Contract being substituted and a security interest in the
related Equipment subject thereto, and granting the Trustee a valid and first
priority security interest in such Substitute Contracts and the related
Equipment (other than Equipment relating to a Secured Equipment Note or Finance
Lease and for which the Original Equipment Cost is less than $20,000) subject
thereto, (ii) delivery to the Trustee of amendments to, or executed originals
of, the UCC financing statements referred to in Section 1.01(c) hereof
reflecting the deletion of the Predecessor Contract and the addition of the
Substitute Contract, (iii) delivery to the Contributor by the Transferor of an
instrument, substantially in the form of Exhibit E hereto, transferring to the
Contributor or the Servicer, without representation or warranty, all of the
Transferor's right, title and interest in and to the Predecessor Contract, (iv)
delivery to the Trustee of the sole original, manually executed counterpart of
each Contract that constitutes "chattel paper" or an "instrument" under the UCC
and (v) delivery to the Trustee of an amendment to the Contract Schedule,
reflecting the deletion of the Predecessor Contract and the addition of the
Substitute Contract. Upon delivery of each Substitute Contract and the
Substitute Contract Transfer Form therefor, the definition of "Contributed
Property" will be automatically amended to include such Substitute Contract and
all related property and rights contained in the definition of Contributed
Property.
(d) With respect to a substitution of Contracts in accordance
with the provisions of this Section 7 and Section 5.03 hereof, each proposed
Substitute Contract must (i) be an Eligible Contract; (ii) satisfy all of the
representations and warranties set forth in Section 2.03(a) of this Agreement;
(iii) have a Discounted Contract Balance such that the sum of its Discounted
Contract Balance, including any additional cash delivered by the Servicer into
the Collection Account in connection therewith, is not less than the Discounted
Contract Balance of the Contract(s) being replaced; (iv) not cause the remaining
weighted average life of the Contracts (as calculated based upon the Contract
Payments which constitute the Discounted Contract Balance of the Contracts) to
be materially altered; and (v) in accordance with the Servicer's standard credit
evaluation policies, be of equal or better credit quality than the Contract
being replaced. For purposes of determining compliance with clause (iii) of the
preceding sentence, if more than one Substitute Contract is being provided on
any date, the Discounted Contract Balance of the Substitute Contracts and the
Contracts being replaced shall be determined on an aggregate basis.
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7.02 NOTICE OF SUBSTITUTION. In the Monthly Servicer Report to
be delivered on each Determination Date, the Contributor shall give written
notice to the Trustee, each Noteholder, the Rating Agencies and the Servicer of
each substitution of Contracts pursuant to Section 7.01(a) hereof and of any
substitution or repurchase pursuant to Section 5.03 hereof during the preceding
Collection Period. Such Monthly Servicer Report or other written notice shall
(i) specify the amount of each periodic Contract Payment under the Predecessor
Contract and the amount of each periodic Contract Payment under each Eligible
Contract being substituted, (ii) specify the residual values of the Equipment
subject to the Predecessor Contract and the Equipment subject to the Eligible
Contract being substituted, (iii) specify the Discounted Contract Balance of the
Predecessor Contracts, the Discounted Contract Balance of the Substitute
Contracts, any Excess Substituted Discounted Contract Balance, and any amounts
to be deposited in the Collection Account in connection with such Substitute
Contracts and (iv) with respect to a substitution pursuant to Section 7.01(a)
hereof, be accompanied by an Officer's Certificate, substantially in the form of
Exhibit F hereto, certifying as to compliance with the provisions of Section
7.01(a) hereof.
7.03 CONTRIBUTOR'S AND SERVICER'S SUBSEQUENT OBLIGATIONS. Upon
any substitution of Contracts in accordance with the provisions of this Section
7 or Section 5.03, the Contributor's and the Servicer's obligations hereunder
with respect to the Predecessor Contract shall cease (except for the Servicer's
obligation as set forth in Section 4.03 hereof to take such action as is
necessary and appropriate to maximize net proceeds to be paid to the Trustee)
but the Contributor and the Servicer shall each thereafter have the same
obligations with respect to the Substitute Contract substituted as it has with
respect to all other Contracts subject to the terms hereof.
SECTION 8. THE SERVICER
8.01 CORPORATE EXISTENCE 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 Contracts or to permit performance of the
Servicer's duties under this 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 state thereof,
(ii) the surviving entity, if not the Servicer, shall execute and deliver to the
Transferor and the Trustee, in form and substance satisfactory to each of them,
(x) an instrument expressly assuming all of the obligations of the Servicer
hereunder, and (y) an Officer's Certificate to the effect that such Person is a
corporation of the type described in the preceding clause (i), has effectively
assumed the obligations of the Servicer hereunder, that all conditions precedent
provided for in this Agreement relating to such transaction have been complied
with, that all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the Transferor, the Issuer and Trustee in the Trust
Property, and reciting the details of such filings, or stating that no such
action shall be necessary to preserve and protect such interest, (iii) the
Servicer shall deliver to the Trustee a letter from each Rating Agency to the
effect that such consolidation, merger or succession will not, in and
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of itself, result in a downgrading of the ratings for the Notes and (iv)
immediately after giving effect to such transaction, no Servicer Event of
Default, and no event which, after notice or lapse of time, or both, would
become a Servicer Event of Default shall have occurred and be continuing.
8.02 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS. (a)
Neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer shall incur any liability to the Transferor, the Issuer, the Owner
Trustee, the Trustee or the holders of the Notes, for any action taken or not
taken in good faith pursuant to the terms of this Agreement with respect to any
Contract (including any Defaulted Contract) or the Equipment subject thereto;
PROVIDED, HOWEVER, that this provision shall not protect the Servicer or any
such person against any breach of representations or warranties made by it
herein or in any certificate delivered in conjunction with the purchase of the
Notes or for any liability that would otherwise be imposed by reason of willful
misfeasance or negligence in the performance of its duties hereunder or by
reason of reckless disregard of obligations and duties hereunder.
(b) Except as provided in this Agreement, the Servicer shall
not be under any obligation to appear in, prosecute, or defend any legal action
that shall not be incidental to its duties to service the Contracts in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability; PROVIDED, HOWEVER, that the Servicer may undertake, at its
expense, any reasonable action that it may deem necessary or desirable in
respect of this Agreement and the rights and duties of the parties to this
Agreement and the interests of the Securityholders under this Agreement.
(c) The Servicer, and any director or officer or employee or
agent of the Servicer, may rely in good faith on the advice of counsel selected
by it with due care or on any document of any kind, prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
8.03 SERVICER NOT TO RESIGN OR BE REMOVED. The Servicer shall
not resign from the servicing obligations and duties hereby imposed on it except
in connection with an assignment permitted by Section 11.02 hereof or 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, in form and
substance satisfactory to the Securityholders evidencing more than 50% of the
Voting Rights, to such effect delivered to the Trustee.
Except as provided in Section 10.02 hereof, the Servicer shall
not be removed or be replaced as Servicer with respect to any Contract or
Equipment; PROVIDED, HOWEVER, that upon the occurrence of any Amortization
Event, Securityholders evidencing not less than 66-2/3% of the Voting Rights
shall have the right to replace DVI as Servicer with a successor Servicer in
accordance with Section 10.02 hereof.
No resignation or removal of the Servicer shall in any event
(i) become effective until the successor Servicer shall have assumed the
Servicer's servicing responsibilities and obligations
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in accordance with Section 10.02 hereof, or (ii) affect the Contributor's
obligations pursuant to this Agreement.
8.04 FINANCIAL AND BUSINESS INFORMATION. The Servicer will
deliver to the Transferor, the Issuer, the Trustee (who shall forward copies to
each Noteholder) and the Rating Agencies:
(a) promptly upon their becoming available, one copy
of each report (including the Servicer's (or for so long as DVI
Financial Services Inc. is the Servicer, DVI, Inc.'s) annual report to
shareholders and reports on Form 8-K, 10-K, and 10-Q, proxy statement,
registration statement, prospectus and notices filed with or delivered
to any securities exchange, the Securities and Exchange Commission or
any successor agencies, in each case relating to the Transferor or the
Notes;
(b) immediately upon becoming aware of the existence
of any condition or event which constitutes a Servicer Event of
Default, a written notice describing its nature and period of existence
and what action the Servicer is taking or proposes to take with respect
thereto;
(c) promptly upon the Servicer's becoming aware of:
(i) any proposed or pending
investigation of it by any governmental authority or agency,
or
(ii) any court or administrative
proceeding
which individually or in the aggregate involves the possibility of
materially and adversely affecting the properties, business, 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
(d) (i) upon request, the Servicer shall furnish to
the Transferor, the Issuer and the Trustee, within ten (10) Business
Days, a list of all Contracts (by contract number and name of Obligor),
as of the end of the most recent Collection Period, held as part of the
Trust Property, together with a reconciliation of such list to the
Contract Schedule and (ii) with reasonable promptness, any other data
and information which may be reasonably requested from time to time.
8.05 OFFICER'S CERTIFICATES. With each set of documents
delivered pursuant to Section 8.04(a), the Servicer will deliver an Officer's
Certificate stating (i) that the officer signing such Certificate have reviewed
the relevant terms of this 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
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review the officer signing such certificate is of the opinion that during such
period the Servicer has serviced the Contracts in compliance with the procedures
hereof except as described in such certificate.
8.06 INSPECTION. The Servicer shall make available to the
Trustee or its duly authorized representatives, attorneys or auditors, and the
Securityholders or their duly authorized representative attorneys or auditors
copies of the Contract Files and the related accounts, records and computer
systems maintained by the Servicer at such times during normal operating hours
as the Trustee shall reasonably request which does not unreasonably interfere
with the Servicer's normal operations or customer or employee relations. Nothing
in this Section 8.06 shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access to information as a result of such
obligation shall not constitute a breach of this Section 8.06. Any expense
incident to the exercise by the Trustee or any Noteholder during the continuance
of a Servicer Event of Default of any right under this Section 8.06 shall be
borne by the Servicer, but any expense due to the exercise of a right by any
such Person prior to the occurrence of a Servicer Event of Default shall be
borne by such Person.
8.07 SERVICER RECORDS. On or before the Closing Date, the
Servicer will indicate in its records that it is servicing and administering
each Contract in its capacity as Servicer hereunder, at the request and for the
benefit of the Transferor (and subject to the provisions of the applicable
Transaction Documents) and its successors and assigns (including the Issuer and
the Trustee).
8.08 INSURANCE. The Servicer will track, on a quarterly basis,
casualty insurance premium payments by Obligors as required by the Contracts, in
the same manner in which the Servicer would service contracts and equipment held
for its own account.
8.09 NO BANKRUPTCY PETITION AGAINST THE TRANSFEROR OR THE
ISSUER. The Servicer covenants and agrees it will not, prior to the date that is
one year and one day after the payment in full of all amounts owing pursuant to
the Transaction Documents, institute against, or join any other Person in
instituting against, either the Transferor or the Issuer, any bankruptcy,
reorganization, receivership, arrangement, insolvency or liquidation proceedings
or other similar proceedings under any federal or state bankruptcy or similar
law. This Section 8.09 shall survive the termination of this Agreement.
8.10 FIDELITY BOND AND ERRORS AND OMISSIONS INSURANCE. The
Servicer shall maintain, at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, with coverage appropriate and customary
in the industry with responsible companies on all officers, employees or other
persons acting in any capacity with regard to the Contracts to handle funds,
money, documents and papers relating to the Contracts. Any such fidelity bond
and errors and omissions insurance shall protect and insure the Servicer against
losses, including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such persons and shall be maintained in a form and amount that
would meet the requirements of a prudent institutional servicer. No provision of
this Section 8.10 requiring such fidelity bond and errors and omissions
insurance shall diminish or relieve the Servicer from its duties and obligations
as set forth in this
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Agreement. Any such fidelity bond or insurance policy shall not be cancelled or
modified in a materially adverse manner without ten days' prior written notice
to the Rating Agencies. Promptly upon receipt of any notice from the surety or
the insurer that such fidelity bond or insurance policy has been terminated or
materially modified, the Servicer shall notify the Trustee and the Rating Agency
of any such termination or modification.
SECTION 9. THE CONTRIBUTOR
9.01 CORPORATE EXISTENCE OF THE CONTRIBUTOR. The Contributor
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 Contracts or to permit performance of the
Contributor's duties under this Agreement.
The Contributor 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, (ii) the surviving entity, if not the Contributor, shall execute and
deliver to the Transferor, the Servicer and the Trustee, in form and substance
satisfactory to each of them, (x) an instrument expressly assuming all of the
obligations of the Contributor hereunder, and (y) an Officer's Certificate to
the effect that such Person is a corporation of the type described in the
preceding clause (i), has effectively assumed the obligations of the Contributor
hereunder, that all conditions precedent provided for in this Agreement relating
to such transaction have been complied with, and, that all UCC financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Transferor, the Issuer and Trustee in the Trust Property, and reciting the
details of such filings, or stating that no such action shall be necessary to
preserve and protect such interest, (iii) the Contributor shall deliver to the
Trustee a letter from each Rating Agency to the effect that such consolidation,
merger or succession will not, in and of itself, result in a downgrading of the
ratings for the Notes and (iv) immediately after giving effect to such
transaction, no event of default under any Transaction Document, and no event
which, after notice or lapse of time, or both, would become an event of default
shall have occurred and be continuing.
9.02 FINANCIAL AND BUSINESS INFORMATION. The Contributor will
deliver to the Transferor, the Issuer, the Trustee and the Rating Agencies and,
upon request, to each Noteholder:
(a) promptly upon their becoming available, one copy
of each report (including DVI, Inc.'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;
(b) promptly upon the Contributor's becoming aware of
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(i) any proposed or pending
investigation of it by any governmental authority or agency,
or
(ii) any court or administrative
proceedings
which individually or in the aggregate involves or may involve the
possibility of materially and adversely affecting the properties,
business, profits or conditions (financial or otherwise) of the
Contributor, a written notice specifying the nature of such
investigation or proceeding and what action the Contributor is taking
or proposes to take with respect thereto and evaluating its merits; and
(c) with reasonable promptness, any other data and
information which may be reasonably requested from time to time.
9.03 INSPECTION. The Contributor shall make available to the
Transferor, the Issuer or the Trustee or their respective duly authorized
representatives, attorneys or auditors and the Securityholders or their duly
authorized representatives, attorneys or auditors its accounts, records and
computer systems regarding any Contract maintained by the Contributor at such
times during normal operating hours as the Trustee, the Issuer or the Transferor
shall reasonably instruct which do not unreasonably interfere with the
Contributor's normal operations or customer or employee relations. Nothing in
this Section 9.03 shall affect the obligation of the Contributor to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Contributor to provide access to information as a result of
such obligation shall not constitute a breach of this Section 9.03. Any expense
incident to the exercise by the Trustee or any Noteholder during the continuance
of a Servicer Event of Default of any right under this Section 9.03 shall be
borne by the Servicer, but any expense due to the exercise of a right by any
such Person prior to the occurrence of a Servicer Event of Default shall be
borne by such Person.
9.04 NO BANKRUPTCY PETITION AGAINST THE TRANSFEROR OR THE
ISSUER. The Contributor covenants and agrees it will not, prior to the date that
is one year and one day after the payment in full of all amounts owing pursuant
to the Indenture, institute against, or join any other Person in instituting
against, the Transferor or the Issuer, any bankruptcy, reorganization,
receivership, arrangement, insolvency or liquidation proceedings or other
similar proceedings under any federal or state bankruptcy or similar law. This
Section 9.04 shall survive the termination of this Agreement.
9.05 ACCOUNTS, BOOKS AND RECORDS.
(a) The Contributor shall maintain accounts and records as to
each Contract accurately and in sufficient detail to permit the reader thereof
to know at any time the status of such Contract, including payments and
recoveries made and payments owing (and the nature of each). Prior to the
transfer of the Contracts to the Transferor, the Contributor will clearly mark
its books and records and each Contract File (including each Contract) to
reflect each sale of a Contract and the Equipment subject thereto to the
Transferor, the resale to the Issuer and to show that the Issuer owns the
Contracts absolutely. The Contributor or the Transferor, as the case may be,
will cause the
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electronic ledger, the Contract File (including the Contract), with respect to
each Contract and the related Contract and the Contract Schedule to be clearly
and unambiguously marked to show that such Contract and the related Contract has
been contributed by Contributor to the Transferor, resold by the Transferor to
the Issuer and pledged by the Issuer to the Trustee for the benefit of the
Securityholders pursuant to the Indenture.
(b) The Contributor shall maintain its computer systems so
that, from and after the time of sale hereunder of the Contracts to the
Transferor, the Contributor's master computer records (including archives) that
refer to a Contract and the related Contract shall indicate clearly the interest
of the Transferor in such Contract and that such Contract has been resold to the
Issuer and pledged by the Issuer to the Trustee for the benefit of the
Securityholders. Indication of the Transferor's ownership of a Contract, the
resale to the Issuer, and the pledge of such Contract by the Issuer to the
Trustee for the benefit of the Securityholders shall be deleted from or modified
on the Contributor's computer systems when, and only when, the Contract shall
have been paid in full or purchased or substituted by the Contributor pursuant
to the terms hereof.
9.06 TAX RETURNS. (a) At all times, so long as any of the
Notes or the other obligations secured by the Indenture remain outstanding, the
Contributor and the Transferor shall be members of the same affiliated group
within the meaning of Section 1504 of the Code (the "DVI Group") and shall join
in the filing of a consolidated return for federal income tax purposes.
(b) The Contributor shall promptly pay and discharge, or cause
the payment and discharge of, all federal income taxes (and all other material
taxes) when due and payable by Contributor, the DVI Group, or the Transferor,
except (i) such as may be paid thereafter without penalty or (ii) such as may be
contested in good faith by appropriate proceedings and for which an adequate
reserve has been established and is maintained in accordance with GAAP.
Contributor shall promptly notify the Transferor, the Trustee and the
Securityholders of any material challenge, contest or proceeding pending by or
against Contributor or the DVI Group before any taxing authority.
9.07 INSURANCE. The Contributor will at all times maintain
general liability and excess liability insurance policies in at least the amount
set forth in Section 2.26.
9.08 PROTECTION OF RIGHT, TITLE AND INTEREST.
(a) The Contributor shall not change its name, identity, or
corporate structure in any manner that would, could, or might make any UCC
financing statement or continuation statement filed by the Contributor in
accordance with Section 1.01(c) seriously misleading within the meaning of ss.
9-402(7) of the UCC, unless it shall have given the Transferor at least thirty
(30) days' prior written notice thereof and shall promptly file appropriate
amendments to all previously filed UCC financing statements or continuation
statements.
(b) If at any time the Contributor shall propose to sell,
grant a security interest in, or otherwise transfer any interest in contracts to
any prospective purchaser, lender, or other transferee, the Contributor shall
give to such prospective purchaser, lender, or other transferee
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computer tapes, records, or print-outs (including any restored from archives)
that, if they shall refer in any manner whatsoever to any Contract, shall
indicate clearly that such Contract has been sold to the Transferor and then
resold to the Issuer and pledged by the Issuer to the Trustee for the benefit of
the Securityholders.
(c) The Contributor shall deliver to the Transferor, the
Rating Agencies and the Trustee promptly after the execution and delivery of
each amendment hereto, an opinion of counsel either (i) stating that, in the
opinion of such counsel, all UCC financing statements and continuation
statements necessary to preserve and protect fully the interest of the
Transferor, the Issuer and the Trustee in the Trust Property have been filed or,
with respect to the Equipment, are required to be filed within thirty (30) days
following the Closing Date or the Substitution Date, as applicable, or (ii)
stating that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interest.
9.09 OTHER LIENS OR INTERESTS. Except for the conveyances
hereunder, the Contributor will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any lien on the
Contracts or any other Trust Property or any interest therein, and the
Contributor shall defend the right, title, and interest of the Transferor, the
Issuer and the Trustee in, to and under the Contracts and the other Trust
Property against all claims of third parties claiming through or under the
Contributor; PROVIDED, HOWEVER, that the Contributor's obligations to the
Trustee under this Section 9.09 shall terminate upon the repayment in full of
the Notes and the expiration of any applicable preference period and, with
respect to any Contract, on the date it is paid in full or purchased by the
Contributor pursuant to Section 5.03 hereof.
9.10 COSTS AND EXPENSES. The Contributor agrees to pay all
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and under the Indenture.
SECTION 10. EVENTS OF DEFAULT
10.01 SERVICER EVENTS OF DEFAULT. The following events and
conditions shall constitute Servicer Events of Default hereunder:
(i) failure on the part of the Servicer (or for so long
as the Contributor is the Servicer, the Transferor) to (A) remit any
payment to the Trustee within the time period required by Section 4.06
hereof or (B) make any Servicer Advance required by Section 5.01
hereof;
(ii) failure to pay to the Trustee on or before the date
when due in accordance with the terms hereof, any deposit required to
be made by the Servicer pursuant to Section 4.02 hereof;
(iii) failure on the part of either the Servicer (or for
so long as the Contributor is the Servicer, the Transferor) duly to
observe or perform in any material respect
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any other of their respective covenants or agreements in this Agreement
(including without limitation, failure of the Servicer to deliver a
Monthly Servicer Report on the date required pursuant to Section 6.01
or the delivery of a Monthly Servicer Report which is materially
incorrect) which failure materially and adversely affects the rights of
the Securityholders and continues unremedied for a period of 30 days
after the Servicer becomes aware of such failure or the giving of
written notice of such failure (A) to the Servicer (or the Transferor,
if applicable) by the Trustee or (B) to the Servicer (or the
Transferor, if applicable) and the Trustee by Securityholders
evidencing not less than 66-2/3% of the Voting Rights, taken together.
(iv) if any representation or warranty of the Servicer
made in this Agreement or in any certificate or other writing delivered
pursuant hereto or the Transaction Documents or made by any successor
Servicer in connection with such successor Servicer's assumption of the
duties of the Servicer shall prove to be incorrect in any material
respect as of the time when the same shall have been made;
(v) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Servicer
(or for so long as the Contributor is the Servicer, the Transferor) 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 (or for so long as the
Contributor is the Servicer, the Transferor) bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment, or composition of or in respect of the
Servicer (or for so long as the Contributor is the Servicer, the
Transferor) under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or
other similar official of the Servicer (or for so long as the
Contributor is the Servicer, the Transferor) or of any substantial part
of the property of either, or ordering the winding up or liquidation of
the affairs of either, 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 90 consecutive days;
(vi) the commencement by the Servicer (or for so long as
the Contributor is the Servicer, 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 either to the entry of a decree or order for relief in respect of
the Servicer (or for so long as the Contributor is the Servicer, 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 either, or the filing by either of a petition or
answer or consent seeking reorganization or relief under any applicable
federal or state law, or the consent by either 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 for so long as the Contributor is the
Servicer, the Transferor) or of any substantial part of the property of
either, or the making by either of an assignment for the benefit of
creditors, or the failure by the Servicer (or for so long as the
Contributor is the Servicer, the Transferor) to pay its debts generally
as they become due, or
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<PAGE>
the taking of corporate action by the Servicer (or for so long as the
Contributor is the Servicer, the Transferor) in furtherance of any
such action;
(vii) any assignment by the Servicer, or any attempt by
the Servicer to assign its duties or rights hereunder, except as
specifically permitted hereunder;
(viii) (A) the failure of the Servicer to make one or more
payments with respect to aggregate recourse indebtedness for borrowed
money exceeding $_________ or (B) the occurrence of any other event or
the existence of any other condition, the effect of which event or
condition is to cause more than $_________ of aggregate recourse
indebtedness for borrowed money of the Servicer to become due before
its (or their) stated maturity or before its (or their) regularly
scheduled dates of payment, so long as such failure, event or condition
specified in either clause (A) or (B) shall be continuing and shall not
have been waived by the Person or Persons entitled to performance;
(ix) the rendering against the Servicer of a final
judgment, decree or order (all possible appeals having been exhausted)
for the payment of money in excess of $_________ which is uninsured,
and the continuance of such judgment, decree or order unsatisfied and
in effect for any period of 60 consecutive days without a stay of
execution; or
(x) the occurrence of an Amortization Event (so long as
the Contributor is the Servicer).
10.02 TERMINATION. If a Servicer Event of Default shall have
occurred and be continuing, the Trustee shall, upon the request of
Securityholders evidencing more than 66-2/3% of the Voting Rights, give written
notice to the Servicer of the termination of all of the rights and obligations
of the Servicer (but none of the Contributor's obligations hereunder, which
shall survive any such termination) under this Agreement. On the receipt by the
Servicer of such written notice, all rights and obligations of the Servicer
under this Agreement, including without limitation the Servicer's right
hereunder to receive Servicing Fees accruing subsequent to such termination
date, but none of the Contributor's obligations hereunder, shall cease and the
same shall pass to and be vested in, and assumed by, the Trustee pursuant to and
under this Agreement and the Indenture subject to the provisions of Section
10.03; 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 Contract and the related Contract and Equipment or such
passing, vesting or assumption or to cause Obligors to remit all future Contract
Payments and other amounts due under any Contract to such account as shall be
specified by the Trustee. The Servicer may be removed only pursuant to a
Servicer Event of Default.
10.03 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 10.02 hereof, the Trustee (subject to subsection
(b) hereof) shall be the successor in all
37
<PAGE>
respects to the Servicer in its capacity as servicer under this Agreement of the
Contracts and, to such extent, shall be subject to all the responsibilities,
duties and liabilities (other than the duty to advance funds and to indemnify)
relating thereto placed on the Servicer by the terms and provisions hereof (but
not the obligations of the Contributor contained herein which shall survive any
such termination as above provided) and shall be entitled to receive from the
Transferor the Servicing Fee and other servicing compensation provided for in
Section 4.04 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.
(b) The Trustee may, if it is unwilling or unable to act as
the successor Servicer, give notice of such fact to each Noteholder and (i)
appoint a successor Servicer with a net worth of at least $15,000,000 and
reasonably acceptable to Securityholders evidencing more than 50% of the Voting
Rights and whose regular business includes the servicing of receivables arising
from equipment similar to the Equipment, as the successor 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
(but not the obligations of the Contributor contained herein) or, (ii) 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 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 Servicer to enter into a
servicing agreement substantially in the form of this Agreement except that such
agreement shall not include any of the Contributor's representations, warranties
or obligations and the Trustee may make arrangements for the compensation of
such successor Servicer out of payments on Contracts and the related Contracts
as it and such successor Servicer shall agree; PROVIDED, HOWEVER, that no such
compensation shall be in excess of that provided in Section 4.04 hereof. Neither
the Trustee nor a Successor Servicer shall be deemed to be in default hereunder
by reason of its failure to make, or its delay in making, any distribution
hereunder or any portion thereof which failure or delay was caused by (i) the
failure of the prior Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the prior Servicer.
10.04 SERVICER TO COOPERATE. The Servicer hereby agrees to
cooperate with the successor Servicer appointed in accordance with Section 10.02
or 10.03 hereof, as applicable, in effecting the termination and transfer of the
responsibilities and rights of the Servicer hereunder to the successor Servicer,
including, without limitation, the execution and delivery of assignments of UCC
financing statements, and the transfer to the successor 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 Contracts and the related
Contracts. The Servicer hereby agrees to transfer to any successor Servicer its
electronic records and all other records, correspondence and documents relating
to the Contracts and the related Contracts in the manner and at such times as
the successor Servicer shall reasonably request. The Servicer hereby designates
the successor Servicer its agent and attorney-in-fact to execute transfers of
UCC financing statements (including any and all UCC financing statements naming
an individual Obligor as debtor and the Contributor 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. Upon any such
termination or appointment of a
38
<PAGE>
successor Servicer, the Trustee shall give prompt written notice thereof to each
Noteholder in the manner provided in the Indenture.
10.05 REMEDIES NOT EXCLUSIVE. Nothing in the preceding
provisions of this Section 10 shall be interpreted as limiting or restricting
any rights or remedies which the Transferor, the Issuer, the Trustee, the
Securityholders or any other Person would otherwise have at law or in equity on
account of the breach or violation of any provision of this 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 8.02
hereof.
10.06 WAVIER OF PAST DEFAULTS. Holders of Notes evidencing
more than 50% of the Voting Rights may waive any default by the Servicer in the
performance of its obligations hereunder and its consequences. Upon any such
waiver of a past default, such default shall cease to exist, and any default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly so waived.
SECTION 11. ASSIGNMENT
11.01 ASSIGNMENT TO TRUSTEE. It is understood that this
Agreement and all rights of the Transferor hereunder and with respect to the
Contributed Property will be assigned by the Transferor to the Issuer, and then
assigned by the Issuer to the Trustee, for the benefit of the Trustee and the
Securityholders, and may be subsequently assigned by the Trustee to any
successor Trustee. Each of the Contributor and the Servicer hereby expressly
agrees to each such assignment and agrees that all of its duties, covenants,
obligations, indemnities, representations and warranties hereunder, and all of
the rights and remedies of the Transferor hereunder, shall be for the benefit
of, and may be enforced directly by, the Issuer, the Trustee, the
Securityholders and any successor to or assignee of any thereof.
11.02 ASSIGNMENT BY CONTRIBUTOR OR SERVICER. None of the
respective rights or obligations of the Contributor and the Servicer hereunder
may be assigned without the prior written consent of the Transferor and the
Trustee (acting upon the instructions of Securityholders evidencing not less
than 66-2/3% of the Voting Rights); PROVIDED that nothing herein shall preclude
the Servicer from performing its duties hereunder through the use of agents to
the extent that such use is consistent with the Servicer's business practices in
dealing with similar contracts and equipment for its own account, and PROVIDED,
FURTHER, that the use of an agent shall not relieve the Servicer from any of its
obligations hereunder.
SECTION 12. NATURE OF CONTRIBUTOR'S OBLIGATIONS AND SECURITY
THEREFOR
12.01 CONTRIBUTOR'S OBLIGATIONS ABSOLUTE. The obligations of
the Contributor hereunder, and the rights of the Issuer and the Trustee, as
assignee of the Transferor, in and to all
39
<PAGE>
amounts payable by the Contributor 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 Contributor may have against the Servicer, the Issuer, the Transferor, the
Trustee, any holder of the Notes or any other Person for any reason whatsoever;
nor, except as otherwise expressly provided herein, shall this Agreement
terminate, or the respective obligations of the Transferor, the Contributor or
the Servicer be otherwise affected, by reason of any defect in any Contract or
in any unit of Equipment or in the respective rights and interests of the
Transferor, the Issuer, the Contributor and the Trustee in any thereof, or by
reason of any liens, encumbrances, security interests or rights of others with
respect to any Contract or any unit of Equipment, or any failure by the
Transferor, or the Servicer 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 Issuer, the Servicer, the Trustee or any holder
of the Notes to the Contributor or any other Person or by reason of any
insolvency, bankruptcy, or similar proceedings by or against the Contributor,
the Servicer, 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 Contributor hereunder and all amounts
payable by the Contributor hereunder shall continue to be due and payable in all
events and in the manner and at the times herein provided unless and until the
obligation to perform or pay the same shall be terminated or limited pursuant to
the express provisions of this Agreement; PROVIDED that nothing in this Section
12.01 shall be interpreted as precluding the Contributor from pursuing
independently any claim it may have against the Transferor, the Servicer, the
Issuer, any holder of the Notes or any other Person; PROVIDED, FURTHER, that any
claims of the Contributor against the Transferor shall be subordinate in right
of payment to amounts due and owing to the Trustee under the Indenture and any
amounts received by the Contributor on such claims shall be held in trust by the
Contributor for the Trustee and turned over to the Trustee until such time as
all amounts due the Trustee under the Transaction Document are fully paid.
12.02 POWER OF ATTORNEY. Each of the Contributor and Servicer
hereby grants to each of the Transferor and the Trustee the power as its
attorney-in-fact (i) to file UCC financing statements in the appropriate offices
evidencing the conveyance of the Contracts and other Contributed Property to the
Transferor and (ii) in the event an event of default exists under any
Transaction Document, to do any and all other acts as may be necessary or
appropriate to effect the transaction contemplated herein. The Contributor will
execute any document or instrument deemed necessary by the Transferor or the
Trustee to effect or to evidence this power of attorney. All costs associated
with such filings or instructions shall be paid by the Contributor.
SECTION 13. MISCELLANEOUS PROVISIONS
13.01 SALE. The Contributor agrees to treat the conveyances to
the Transferor of the Contributor's interest in the Contracts and Equipment
pursuant to the terms of this Agreement for all purposes other than taxes
measured by income (including, without limitation, financial accounting purposes
of the Contributor on a stand alone basis) as a sale of the Contributor's
interest
40
<PAGE>
in the Contracts and Equipment on all relevant books, records, financial
statements and other applicable documents. The execution and delivery of this
Agreement shall constitute an acknowledgment by the Contributor and the
Transferor that each intends that the assignment and transfer herein
contemplated constitutes an outright sale and assignment to the Transferor by
the Contributor of its interest in the Contracts and the other Contributed
Property, and not for security, conveying good title in such interests free and
clear of any liens, and that such interest shall not be a part of the
Contributor's estate in the event of the bankruptcy or the occurrence of another
similar event, of, or with respect to, the Contributor. In the event that such
conveyance is determined to be made as security for a loan made by the
Transferor, the Issuer, the Trust or the Securityholders to the Contributor, the
parties intend that the Contributor shall have granted to the Transferor, and
its successors and assigns, a security interest in the Contracts and other
Contributed Property and that this Agreement shall constitute a security
agreement under applicable law.
For federal and state income tax purposes, the conveyance to
the Transferor shall be treated as a sale to the extent of cash remitted to the
Contributor and shall be treated as an additional contribution to the capital of
the Transferor to the extent of the excess of the Discounted Contract Balances
of the Contracts conveyed over the amount of such cash.
13.02 AMENDMENT. This Agreement may be amended from time to
time by the parties hereto, without the consent of any of the Securityholders,
to cure any ambiguity, to correct or supplement any provision herein which may
be inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under this Agreement which shall
not be materially inconsistent with the provisions of this Agreement, PROVIDED
that such actions shall not adversely affect in any respect the interests of any
Noteholder.
This Agreement may also be amended from time to time by the
parties hereto with the consent of the Holders of Notes evidencing more than 50%
of the Voting Rights (and with prior written notice to the Rating Agencies) for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Holders of Notes; PROVIDED, HOWEVER, that such amendment may not, without
the consent of all of the Securityholders (i) increase or reduce in any manner
the amount of, or accelerate or delay the timing of, collections of payments on
the Contracts or distributions that are required to be made for the benefit of
such Securityholders, (ii) reduce the aforesaid percentage of the Voting Rights
which are required to consent to any such amendment, or (iii) modify this
Section 13.02. The Servicer shall deliver copies of any amendment to this
Agreement to each of the Rating Agencies and each Noteholder.
13.03 WAIVERS. No failure or delay on the part of the
Transferor, the Issuer or the Trustee in exercising any power, right or remedy
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other or
further exercise thereof or the exercise of any other power, right or remedy.
13.04 NOTICES. All communications and notices pursuant hereto
to any party shall be in writing or by telegraph, telex or telecopy and
addressed or delivered to it at its address (or in case of telex or telecopy, at
its telex or telecopy number at such address) as follows or at such other
41
<PAGE>
address as may be designated by it by notice to the other party and, if mailed
or sent by telegraph or telex, shall be deemed given when mailed, communicated
to the telegraph office or transmitted by telex or telecopy:
(a) in the case of the Contributor or Servicer:
500 Hyde Park
Doylestown, Pennsylvania 18901
Attention: Securitization Manager
Telephone: (215) 230-6375
Telecopier: (215) 230-5328
(b) in the case of the Transferor:
500 Hyde Park
Doylestown, Pennsylvania 18901
Attention: Securitization Manager
Telephone: (215) 230-6375
Telecopier: (215) 230-5328
(c) in the case of the Trustee:
(d) in the case of the Rating Agencies:
13.05 COSTS AND EXPENSES. The Contributor will pay all
reasonable expenses incident to the performance of its obligations under this
Agreement and any other Transaction Document and the Contributor agrees to pay
all reasonable out-of-pocket costs and expenses of the Transferor, including
fees and expenses of counsel, in connection with the enforcement of any
obligation of the Contributor hereunder.
13.06 THIRD PARTY BENEFICIARIES. The Issuer, the Trustee and
the Securityholders are express third party beneficiaries to this Agreement.
13.07 SURVIVAL OF REPRESENTATIONS. The respective agreements,
representations, warranties and other statements by the Contributor and the
Transferor set forth in or made pursuant to this Agreement shall remain in full
force and effect and will survive the Closing Date.
13.08 CONFIDENTIAL INFORMATION. The Transferor agrees that
it will neither use nor disclose to any person the names and addresses of the
Obligors, except in connection with the
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<PAGE>
enforcement of the Transferor's rights hereunder, under the Contracts, under the
applicable Transaction Documents or as required by law.
13.09 HEADINGS AND CROSS-REFERENCES. The various headings in
this Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Agreement. References in this
Agreement to Section names or numbers are to such Sections of this Agreement.
13.10 GOVERNING LAW. THIS AGREEMENT 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.
13.11 CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in the Borough of Manhattan in the City of New York over any suit,
action or proceeding arising out of or relating to this Agreement. Each of the
parties hereto irrevocably waives, to the fullest extent permitted by law, any
objection which it may have to the laying of the venue of any such suit, action
or proceeding brought in such a court and any claim that any such suit, action
or proceeding brought in such a court has been brought in any inconvenient
forum. Each of the parties hereto agrees that the final judgment in any such
suit, action or proceeding brought in such a court shall be conclusive and
binding upon each of the parties hereto and may be enforced by the courts of New
York (or any other courts to the jurisdiction of which it is subject) by a suit
upon such judgment, PROVIDED that service of process is effected upon it as
permitted by law; PROVIDED, HOWEVER, that each of the parties hereto does not
waive, and the foregoing provisions of this sentence shall not constitute or be
deemed to constitute a waiver of, (i) any right to appeal any such judgment, to
seek any stay or otherwise to seek reconsideration or review of any such
judgment or (ii) any stay of execution or levy pending an appeal from, or a
suit, action or proceeding for reconsideration or review of, any such judgment.
13.12 COUNTERPARTS. This Agreement may be executed in two or
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
DVI FINANCIAL SERVICES INC.
By:
-----------------------------------
Name:
Title:
DVI RECEIVABLES CORP. VIII
By:
-----------------------------------
Name:
Title:
44
<PAGE>
EXHIBIT A
CONTRACT SCHEDULE
-----------------
A-1
<PAGE>
EXHIBIT B
MONTHLY SERVICER REPORT
B-1
<PAGE>
EXHIBIT C
UNDERWRITING GUIDELINES
Copies are on file at the offices of the Trustee, and are available
upon request.
C-1
<PAGE>
EXHIBIT D
SUBSTITUTE CONTRACT TRANSFER FORM
DVI Financial Services Inc. (the "Contributor") and DVI
Receivables Corp. VIII (the "Transferor"), pursuant to the Contribution and
Servicing Agreement, dated as of ________________ (the "Contribution and
Servicing Agreement"), hereby confirm their understanding with respect to the
contribution by the Contributor to the Transferor of those substitute Contracts
listed on the Schedule 1 attached hereto (the "Substitute Contracts"), together
with a security interest in all of the Contributor's right, title and interest
in and to the related Equipment and other related property described herein.
CONVEYANCE OF SUBSTITUTE CONTRACTS. The Contributor hereby
makes a capital contribution to the Transferor of all of Contributor's rights,
title and interest in, to, and under (i) the Substitute Contracts listed on
Schedule 1 hereto including, without limitation, its interests in the proceeds
of such Substitute Contracts, the right to receive all amounts due or to become
due thereunder after __________ (the "Cut-off Date"), but excluding any Retained
Interest, (ii) the Contract Files relating to such Contracts, (iii) a security
interest in the Equipment subject to such Substitute Contracts, (iv) any
remarketing agreement to the extent specifically relating to a Substitute
Contract, and all guarantees, cash deposits or credit support (other than any
accounts receivable of the related Obligor) supporting or securing payment of
any arrangements with the vendor, dealer or manufacturer of the Equipment to the
extent specifically relating to any Substitute Contract, (v) any insurance
carried by any Obligor under any Substitute Contract (or the related Equipment)
and (vi) all income, payments and proceeds of the foregoing.
The Contributor hereby confirms that:
(1) On or prior to ___________ (the "Substitution Date), the
Contributor shall have deposited in the Collection Account all collections in
respect of the Substitute Contracts that were due on or after the related
Cut-off Date;
(2) As of the Substitution Date, the Contributor was not
insolvent nor will it be made insolvent by such transfer nor is any of them
aware of any pending insolvency;
(3) Each Substitute Contract is an Eligible Contract;
(4) On or prior to the Substitution Date, the Contributor
shall have delivered to the Trustee the sole original, manually executed
counterpart of each Substitute Contract that constitutes "chattel paper" or an
"instrument", as such terms are defined in the UCC;
(5) The sum of the Discounted Contract Balances as of the
Cut-off Date of the Substitute Contracts listed on Schedule 1 attached hereto is
$__________;
(6) When the Substitute Contracts are added to the Trust
Property, all representations and warranties will be true and correct as of the
Substitution Date unless any breach
D-1
<PAGE>
of such representations and warranties resulting from the inclusion of such
Substitute Contract shall have been waived in advance by Securityholders
evidencing more than 50% of the Voting Rights;
(7) The Contributor has delivered to the Trustee evidence of
all UCC filings necessary to give the Trustee a perfected first priority
security interest in the Substitute Contract and the related Equipment (other
than Equipment relating to a Secured Equipment Note or Finance Lease and for
which the Original Equipment Cost is less than $20,000);
(8) Such Substitute Contract(s) shall be added to, and
constitute a part of, [Pool A] [Pool B]; and
(9) Such Substitute Contract(s) is/are being substituted
pursuant to [Section 5.03 of the Agreement] [Section 7.01(a)(1) of the
Agreement] [Section 7.01(a)(2) of the Agreement] [Section 7.01(b)(1) of the
Agreement] [Section 7.01(b)(2) of the Agreement].
All terms and conditions of the Contribution and Servicing
Agreement and the other Transaction Documents with respect to the Contributor
and the Substitute Contracts have been complied with and are hereby ratified,
confirmed and incorporated herein, PROVIDED that in the event of any conflict,
the provisions of this Substitute Contract Transfer Form shall control over the
conflicting provisions of the Contribution and Servicing Agreement.
Terms capitalized herein and not defined herein shall have
their respective meanings as set forth in the Contribution and Servicing
Agreement.
DVI FINANCIAL SERVICES INC.
By:
-----------------------------------
Name:
Title:
DVI RECEIVABLES CORP. VIII
By:
-----------------------------------
Name:
Title:
D-2
<PAGE>
EXHIBIT E
FORM OF RE-ASSIGNMENT BY TRANSFEROR
PURSUANT TO SECTION 5.03(b) OR 7.01(c) OF THE
CONTRIBUTION AND SERVICING AGREEMENT
DVI Receivables Corp. VIII (the "Transferor") pursuant to the
Contribution and Servicing Agreement, dated as of ________________, between the
Transferor and DVI Financial Services Inc. (the "Contributor") does hereby sell,
transfer, assign, deliver and otherwise convey to Contributor, without recourse,
representation or warranty, all of the Transferor's right, title and interest in
and to all of the Predecessor Contracts listed on Schedule A hereto and all
security and documents relating thereto.
DVI RECEIVABLES CORP. VIII
By:
-----------------------------------
Name:
Title:
E-1
<PAGE>
EXHIBIT F
FORM OF OFFICER'S CERTIFICATE PURSUANT TO SECTION 7
The undersigned certifies that the undersigned is a duly
authorized officer of DVI Financial Services Inc. (the "Contributor"), and that,
as such the undersigned is authorized to execute and deliver this certificate on
behalf of the Contributor, and further certifies pursuant to Section 7.02 of the
Contribution and Servicing Agreement (the "Agreement") dated as of
________________, between the Contributor and DVI Receivables Corp.VIII (the
"Transferor"), that to his or her knowledge, the Contributor's contribution to
the Transferor of those Substitute Contracts listed in Schedule 1 attached
hereto, together with all of the Contributor's right, title and interest in and
to the related Contracts and the related Contributed Property, is in compliance
with Section 7 of the Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name.
Date:
DVI FINANCIAL SERVICES INC.
By:
-----------------------------------
Name:
Title:
F-1
<PAGE>
EXHIBIT G
FORMS OF CONTRACTS
Copies are on file at the offices of the Trustee, and are available
upon request.
G-1
<PAGE>
SUBSEQUENT CONTRACT TRANSFER AGREEMENT
between
DVI RECEIVABLES CORP. VIII,
as Company
and
DVI ________________________,
as Issuer
Dated as of ________________
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS 1
SECTION 1.01 DEFINITIONS. 1
ARTICLE II.
PROCEDURES FOR PURCHASES OF ELIGIBLE CONTRACTS 1
SECTION 2.01 CONTRIBUTION. 1
SECTION 2.02 SUBSTITUTE CONTRACTS. 2
SECTION 2.03 INTENT OF PARTIES; SECURITY INTEREST. 2
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3
SECTION 3.01 ORGANIZATION AND GOOD STANDING. 3
SECTION 3.02 AUTHORIZATION. 3
SECTION 3.03 BINDING OBLIGATION. 3
SECTION 3.04 NO VIOLATION. 4
SECTION 3.05 NO PROCEEDINGS. 4
SECTION 3.06 APPROVALS. 4
SECTION 3.07 ABILITY TO PERFORM. 4
SECTION 3.08 EQUIPMENT AND CONTRACTS. 4
SECTION 3.09 PRINCIPAL EXECUTIVE OFFICE. 5
SECTION 3.10 NO PRIOR ASSIGNMENTS. 5
SECTION 3.11 FAIR CONSIDERATION. 5
SECTION 3.12 NONCONSOLIDATION. 6
SECTION 3.13 ORDINARY COURSE; NO INSOLVENCY. 6
SECTION 3.14 ASSETS AND LIABILITIES. 7
SECTION 3.15 VALID SALE. 7
SECTION 3.16 ABILITY TO PAY DEBTS. 7
SECTION 3.17 BULK TRANSFER PROVISIONS. 7
SECTION 3.18 TRANSFER TAXES. 7
ARTICLE IV.
CONDITIONS TO PURCHASE 8
SECTION 4.01 REPRESENTATIONS AND WARRANTIES. 8
ARTICLE V.
COVENANTS OF THE COMPANY 8
SECTION 5.01 BOOKS AND RECORDS. 8
SECTION 5.02 PRESERVATION OF OFFICE. 9
SECTION 5.03 LIENS. 9
SECTION 5.04 NO BANKRUPTCY PETITION AGAINST THE ISSUER. 9
SECTION 5.05 PROTECTION OF RIGHT, TITLE AND INTEREST. 9
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ARTICLE VI.
REPRESENTATIONS AND COVENANTS OF
THE ISSUER 10
SECTION 6.01 NONCONSOLIDATION. 10
SECTION 6.02 NO BANKRUPTCY PETITION AGAINST THE COMPANY. 11
ARTICLE VII.
SUBSTITUTION 11
SECTION 7.01 SUBSTITUTION. 11
SECTION 7.02 NOTICE OF SUBSTITUTION. 11
SECTION 7.03 CONTRIBUTOR'S AND COMPANY'S
SUBSEQUENT OBLIGATIONS. 12
ARTICLE VIII.
MISCELLANEOUS 12
SECTION 8.01 AMENDMENT; WAIVERS. 12
SECTION 8.02 EFFECT OF INVALIDITY OF PROVISIONS. 12
SECTION 8.03 NOTICES. 12
SECTION 8.04 ENTIRE AGREEMENT. 13
SECTION 8.05 SURVIVAL. 13
SECTION 8.06 CONSENT TO SERVICE. 13
SECTION 8.07 JURISDICTION NOT EXCLUSIVE. 13
SECTION 8.08 CONSTRUCTION. 13
SECTION 8.09 FURTHER ASSURANCES. 13
SECTION 8.10 THIRD PARTY BENEFICIARIES. 14
SECTION 8.11 GOVERNING LAW. 14
SECTION 8.12 CONSENT TO JURISDICTION; WAIVER OF
OBJECTION TO VENUE. 14
SECTION 8.13 WAIVER OF JURY TRIAL. 15
SECTION 8.14 HEADINGS AND CROSSREFERENCES. 15
SECTION 8.15 COSTS AND EXPENSES. 15
SECTION 8.16 CONFIDENTIAL INFORMATION. 15
SECTION 8.17 EXECUTION IN COUNTERPARTS. 15
Exhibit A Form of Subsequent Contract Transfer Form
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SUBSEQUENT CONTRACT TRANSFER AGREEMENT ("Agreement") dated as
of ________________, between DVI ______________________, a Delaware
_________________________________________ (the "ISSUER"), and DVI
RECEIVABLES CORP.
VIII, a Delaware corporation (the "COMPANY").
WHEREAS, the Company will from time to time acquire certain
Contracts and Assets related thereto pursuant to the Contribution and Servicing
Agreement.
WHEREAS, the Company desires to transfer to Issuer all
Contributed Property (other than any ownership interest in certain Equipment)
which it acquires from the Contributor and certain other assets, and Issuer
desires to purchase such Contributed Property and other assets, in each instance
in accordance with the terms and conditions set forth in this Agreement.
WHEREAS, pursuant to the Indenture, the Issuer intends to
[issue its Series ____ Notes, which Notes will be collateralized by a pledge by
the Issuer to the Trustee, on behalf of the Noteholders of all of the Issuer's
right, title and interest in, to and under the Issuer Assets] [transfer the
Company assets to the Trust, which will issue certificates of beneficial
ownership therein].
NOW, THEREFORE, the parties, in consideration of good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 DEFINITIONS.
For purposes of this Agreement, capitalized terms used herein but not
otherwise defined shall have the respective meanings assigned to such terms in
Appendix I hereto.
ARTICLE II.
PROCEDURES FOR PURCHASES OF ELIGIBLE CONTRACTS
SECTION 2.01 TRANSFER.
(a) CONVEYANCE. Upon the terms and conditions herein set forth, in
consideration for __________ and for other good and valuable consideration, the
Company hereby transfers, pledges, assigns and contributes to the Issuer on the
Closing Date and as of the related Contribution Date (or, in the case of any
Substitute Contracts, the related Substitution Date), without recourse except as
set forth herein, all of the Company's right, title and interest in and to the
Company Assets as set forth
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on the related Subsequent Contract Transfer Form. All funds received by the
Company on or in connection with the Company Assets that are payable on and
after the applicable Cutoff Date shall be received, held and applied by the
Company in trust for the benefit of the Issuer as owner of the Contracts.
(b) After giving effect to such contribution and sale, the ownership of
each such Contract transferred on the related Contribution Date shall be vested
in the Issuer. The Contract Files and any other documents relating to each
Contract shall be held in trust by the Trustee for the benefit of the
Noteholders pursuant to the terms of the Indenture. The Company agrees to take
no action inconsistent with the ownership of any Contract, to promptly indicate
to all parties with a valid interest inquiring as to the true ownership of each
Contract, that each Contract has been contributed and sold to the Issuer and to
claim no ownership interest in any such Contracts and the other Contributed
Property.
(c) Any Company Assets transferred to the Company from time to time
shall forthwith be contributed and sold to the Issuer without further act,
notwithstanding the delivery of any Subsequent Contract Transfer Forms in
respect thereof.
SECTION 2.02 SUBSTITUTE CONTRACTS.
In consideration for the transfer by the Issuer to the Company of any
Predecessor Contract transferred to the Company by the Issuer in accordance with
the terms and conditions of Section 7 of the Contribution and Servicing
Agreement, the Company shall transfer to the Issuer on the Substitution Date
related thereto, and the Issuer shall accept, a Substitute Contract, PROVIDED
that such Substitute Contract is in accordance with the terms and conditions of
the Contribution and Servicing Agreement.
SECTION 2.03 INTENT OF PARTIES; SECURITY INTEREST.
The Issuer and the Company hereby confirm that the transactions
contemplated in this Agreement are intended as contributions and sales rather
than as loan transactions. In the event, for any reason, and solely in such
event, any transaction hereunder is construed by any court or regulatory
authority as a loan or other than a contribution and sale of any or all Company
Assets, then the Company shall be deemed to have hereby pledged to the Issuer as
security for the performance by the Company of all of its obligations from time
to time arising hereunder and with respect to any and all purchases effected
pursuant hereto, and shall be deemed to have granted to the Issuer a first
priority perfected (except Equipment for which the Original Equipment Cost is
less than $20,000) security interest in all of the Company Assets. In
furtherance of the foregoing, (i) this Agreement shall constitute a security
agreement, (ii) the Trustee shall be deemed to be a bailee for purposes of
perfection of the security interest granted to Issuer, (iii) Issuer shall have
all of the rights of a secured party with respect to the Company Assets pursuant
to applicable law and (iv) in the
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manner consistent with the Indenture, the Company shall execute all documents,
including, but not limited to, UCC financing statements, to effectively perfect
and evidence Issuer's first priority security interest in the Company Assets,
except that UCC financing statements need not be filed with respect to Equipment
for which the Original Equipment Cost is less than $20,000. Company also
covenants not to pledge, assign or grant any security interest to any other
party in any of the Company Assets. The consideration received and to be
received by the Company in exchange for the assignment, transfer and
contribution of the Company Assets is intended to be fair consideration having
value equivalent to or in excess of the value of the assets being transferred by
the Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties
for the benefit of the Issuer, the Trustee and the Noteholders on which the
Issuer relies in purchasing and otherwise acquiring the Company Assets and on
which the Noteholders rely in funding advances under their respective Notes .
Other than as set forth in Section 3.08 hereof, such representations and
warranties are and will be true and correct as of the Closing Date and as of
each Contribution Date or Substitution Date, as the case may be (unless an
earlier date is specified therein), and shall survive each contribution and sale
to the Issuer of the Company Assets and the subsequent pledge thereof by the
Issuer pursuant to the Indenture.
SECTION 3.01 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
SECTION 3.02 AUTHORIZATION.
Company has all requisite power and authority and all necessary
licenses and permits to enter into and perform its obligations under this
Agreement and the transactions contemplated hereby, and the execution, delivery,
and performance of this Agreement have been duly authorized by the Company by
all necessary corporate action.
SECTION 3.03 BINDING OBLIGATION.
This Agreement has been duly and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency and other laws of general application affecting the
rights of creditors and equitable principle (whether considered in a proceeding
at law or in equity).
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SECTION 3.04 NO VIOLATION.
The consummation of the transactions contemplated by this Agreement and
the fulfillment of the terms thereof will not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice, lapse of time or both) a default under the certificate of incorporation
or bylaws of the Company, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Company is a party or by which it is bound, or
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of such indenture, agreement, mortgage, deed of trust or
other such instrument, other than this Agreement, or violate any law, or, to the
best of the Company's knowledge, any order, rule or regulation applicable to it
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Company or
any of its properties.
SECTION 3.05 NO PROCEEDINGS.
The Company is not subject to any injunction, writ, action, suit,
restraining order or other order of any nature, and there are no actions, suits,
proceedings or investigations to which the Company is a party pending or, to the
knowledge of the Company, threatened, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality (A)
asserting the invalidity of any of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by the this Agreement or
(C) seeking any determination or ruling that would materially and adversely
affect the performance by the Company of its obligations under, or the validity
or enforceability of, any of this Agreement.
SECTION 3.06 APPROVALS.
All approvals, authorizations, consents, orders or other actions of any
person, corporation or other organization, or of any court, governmental agency
or body or official, required in connection with the execution and delivery of,
and compliance with the terms of, this Agreement, have been or will be taken or
obtained on or prior to the related Contribution Date.
SECTION 3.07 ABILITY TO PERFORM.
The Company has the ability to perform all of its obligations under
this Agreement and the Contribution and Servicing Agreement.
SECTION 3.08 EQUIPMENT AND CONTRACTS.
With respect to each Contract, the Company hereby represents and
warrants to the Issuer, as of each Contribution Date or Substitution Date, as
the case may be, that:
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(a) The sale to the Issuer of the Company's interest in such
Contract(s) transferred on such date and the assignment of the Company's
security interest in the Equipment related thereto pursuant to Section 2.01 or
Section 2.02 hereof constitutes a valid transfer of all of Company's right,
title and interest in such Contributed Property or a grant of a firstpriority
perfected (except for Equipment for which the Original Equipment Cost is less
than $20,000) security interest therein from the Company in favor of the Issuer,
free and clear of any and all claims, charges, liens or security interests
created by the Company or any of its affiliates.
(b) The Company did not, in the exercise of its interest in any such
Contributed Property, waive, discharge, release or otherwise permit any
modification thereto not in effect or agreed to at the time the Company acquired
its interest therein.
(c) Notwithstanding the foregoing clauses (a) and (b), the Company
makes no representation or warranty with respect to claims, charges, liens or
security interests created, or waivers, discharges, releases or modifications
made, by the Contributor.
The representations and warranties described in this Section 3.08 shall
survive the conveyance of the Company Assets to the Issuer.
SECTION 3.09 PRINCIPAL EXECUTIVE OFFICE.
The principal executive office of the Company is located at 500 Hyde
Park, Doylestown, Pennsylvania 18901, and has been so located for at least four
months immediately preceding the Closing Date. The Company has no trade names,
fictitious names, assumed names or "doing business as" names. If (i) any change
in either the Company's name, structure or the location of its principal place
of business or chief executive office occurs, then the Company shall deliver
thirty (30) days' prior written notice of such change or relocation to the
Issuer and the Trustee and (ii) if the Company becomes aware of the change in
location of any Equipment, then, no later than sixty (60) days after the
effective date of such change or relocation, shall file such amendments or
statements as may be required to preserve and protect the Issuer's and the
Trustee's interest in the Contracts, the Equipment and the other Trust Property.
The Company shall pay all filing fees or taxes payable in respect of any UCC
financing or continuation statements required to be filed pursuant to Section
1.03 of the Contribution and Servicing Agreement and not paid by the
Contributor.
SECTION 3.10 NO PRIOR ASSIGNMENTS.
The Company has not pledged, assigned or encumbered or terminated, in
whole or in part, any of the Company Assets.
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SECTION 3.11 FAIR CONSIDERATION.
The consideration received by the Company in connection with the
contribution and sale of the Company Assets constitutes reasonably equivalent
value and fair consideration for the Company
Assets.
SECTION 3.12 NONCONSOLIDATION.
The Company is operated in such a manner that it would not be
substantively consolidated with DVI, such that the separate existence of the
Company and DVI would not be disregarded in the event of a bankruptcy or
insolvency of the Company or DVI, and in such regard, among
other things:
(a) the Company is not involved in the day to day management of DVI;
(b) the Company maintains separate corporate records and books of
account from DVI and otherwise observes corporate formalities and has a separate
business office from DVI (which may be at the same address as DVI PROVIDED that
the Company and DVI have entered into a written agreement specifying a
reasonable allocation of expenses with respect to overhead and other shared
costs with respect to such premises or a lease agreement);
(c) the financial statements and books and records of the Company
prepared after the date of creation of DVI reflect and will reflect the separate
existence of DVI;
(d) the Company maintains its assets separately from the assets of DVI
(including through the maintenance of a separate bank account), the Company's
funds and assets, and records relating thereto, have not been and are not
commingled with those of DVI and the separate creditors of DVI will be entitled
to be satisfied out of DVI's assets prior to any value in DVI becoming available
to DVI's equityholders or the Company's creditors;
(e) all business correspondence of the Company and other communications
are conducted in the Company's own name and on its own stationery;
(f) DVI does not act as an agent of the Company in any capacity and the
Company does not act as agent for DVI, but instead presents itself to the public
as a corporation separate from DVI; PROVIDED that DVI is the Servicer under the
Contribution and Servicing Agreement;
(g) the Company will cause its accounting records to be clearly and
unambiguously marked to show that such Contract has been transferred by the
Company to the Issuer and pledged by the Issuer to the Trustee for the benefit
of the Noteholders.
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SECTION 3.13 ORDINARY COURSE; NO INSOLVENCY.
The transactions contemplated by this Agreement are being consummated
by the Company and the Issuer, respectively, in furtherance of the Company's
ordinary business purposes and constitute a practical and reasonable course of
action by the Company designed to improve the financial position of the Company
with no contemplation of insolvency and with no intent to hinder, delay or
defraud any of its present or future creditors. Neither as a result of the
transactions contemplated by this Agreement, nor immediately before or after
such transactions, will the Company be insolvent, and the Company has adequate
capital for the conduct of its business and the payment of anticipated
obligations.
SECTION 3.14 ASSETS AND LIABILITIES.
(a) Both immediately before and after the assignment, transfer and
contribution of Contracts (including the right to receive all payments due or to
become due thereunder) and the other Contributed Property, the present fair
salable value of the Company's assets will be in excess of the amount that will
be required to pay the Company's probable liabilities as they then exist and as
they become absolute and matured.
(b) Both immediately before and after the assignment and transfer of
Contracts and the other Contributed Property, the sum of the Company's assets
will be greater than the sum of the Company's debts, valuing the Company's
assets at a fair salable value.
SECTION 3.15 VALID SALE.
This Agreement effects a valid assignment, transfer and contribution of
the Company's interest in the Company Assets, enforceable against creditors of
the Company.
SECTION 3.16 ABILITY TO PAY DEBTS.
Neither as a result of the transactions contemplated by this Agreement
nor otherwise does the Company believe that it will incur debts beyond its
ability to pay or which would be prohibited by its charter documents or bylaws.
The Company's assets and cash flow enable it to meet its present obligations in
the ordinary course of business as they become due.
SECTION 3.17 BULK TRANSFER PROVISIONS.
No transfer, assignment or conveyance of Contracts or the other Company
Assets by the Company to the Issuer contemplated by this Agreement will be
subject to the bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction.
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SECTION 3.18 TRANSFER TAXES.
No transfer, assignment or conveyance of Company Assets contemplated by
this Agreement is subject to or will result in any tax, fee or governmental
charge payable by the Company or the Issuer to any federal, state or local
government ("Transfer Taxes"). In the event that the Company or the Issuer
receives actual notice of any Transfer Taxes arising out of the transfer,
assignment and conveyance of any Company Assets, on written demand by the
Issuer, or upon the Company otherwise being given notice thereof, the Company
shall pay, and otherwise indemnify and hold the Issuer, the Trustee and the
holders of the Notes harmless, on an aftertax basis, from and against any and
all such Transfer Taxes (it being understood that neither the holders of the
Notes nor the Trustee shall have any obligation to pay such Transfer Taxes).
ARTICLE IV.
CONDITIONS TO PURCHASE
SECTION 4.01 REPRESENTATIONS AND WARRANTIES.
The obligation of the Issuer to purchase any Contracts on the Closing
Date each Contribution Date or Substitution Date, as the case may be, is subject
to receipt by the Issuer of the
following:
(a) an Officer's Certificate from Company to the effect that, on or
before such Contribution Date or Substitution Date, as applicable (after giving
effect to the sale of the Subsequent Contracts on such date), all
representations and warranties of the Company contained herein shall be true and
correct in all respects, with respect to each Contract individually and all
Contracts in the aggregate, with the same force and effect as though such
representations and warranties had been made on and as of such date (unless such
representations and warranties specifically relate to an earlier date).
(b) an Officer's Certificate from the Contributor to the effect that,
on or before such Contribution Date or Substitution Date, as applicable (after
giving effect to the sale of Subsequent Contracts on such date), all
representations and warranties of the Contributor contained in Section 2 of the
Contribution and Servicing Agreement shall be true and correct in all respects,
with respect to each Contract individually and all Contracts in the aggregate as
stated therein, with the same force and effect as though such representations
and warranties had been made on and as of such date (unless such representations
and warranties specifically relate to an earlier date).
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ARTICLE V.
COVENANTS OF THE COMPANY
So long as the Agreement remains in effect or the Company shall have
any obligations hereunder, Company hereby covenants and agrees with Issuer as
follows:
SECTION 5.01 BOOKS AND RECORDS.
The Company will clearly mark its books and records to reflect each
contribution and sale to the Issuer of all Company Assets and to show that the
Issuer owns the Company Assets
absolutely.
SECTION 5.02 PRESERVATION OF OFFICE.
The Company will give the Issuer, each Securityholder and the Trustee
prior written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement.
SECTION 5.03 LIENS.
The Company shall defend the right, title and interest of the Issuer in
the Company Assets against all claims of third parties claiming through or under
the Company (excluding claims arising from actions of the Contributor, in its
capacity as Servicer under the Contribution and Servicing Agreement, or any
agent of DVI as such Servicer).
SECTION 5.04 NO BANKRUPTCY PETITION AGAINST THE ISSUER.
The Company covenants and agrees it will not, prior to the date that is
one year and one day after the payment in full of all amounts owing pursuant to
the Transaction Documents, institute against, or join any other Person in
instituting against, either the Issuer or itself, any bankruptcy,
reorganization, receivership, arrangement, insolvency or liquidation proceedings
or other similar proceedings under any federal or state bankruptcy or similar
law. This Section 5.04 shall survive the termination of this Agreement.
SECTION 5.05 PROTECTION OF RIGHT, TITLE AND INTEREST.
(a) The Company shall not change its name, identity, or corporate
structure in any manner that would, could, or might make any UCC financing
statement or continuation statement filed by the Contributor in accordance with
Section 1.01(d) of the Contribution and Servicing Agreement seriously misleading
within the meaning of ss. 9402(7) of the UCC, unless it shall have
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given the Issuer at least thirty (30) days' prior written notice thereof and
shall promptly file appropriate amendments to all previously filed UCC financing
statements or continuation statements.
(b) If at any time the Company shall propose to sell, grant a security
interest in, or otherwise transfer any interest in contracts to any prospective
lender, or other transferee, the Company shall give to such prospective lender,
or other transferee computer tapes, records, or printouts (including any
restored from archives) that, if they shall refer in any manner whatsoever to
any Contract, shall indicate clearly that such Contract have been sold to the
Issuer and pledged by the Issuer to the Trustee for the benefit of the
Noteholders.
(c) The Company shall deliver to the Issuer, the Rating Agencies, each
Securityholder and the Trustee promptly after the execution and delivery of each
amendment hereto, an opinion of counsel either (i) stating that, in the opinion
of such counsel, all UCC financing statements and continuation statements
necessary to preserve and protect fully the interest of the Company, the Issuer,
the Securityholders and the Trustee in the Trust Property have been filed or,
with respect to the Equipment, are required to be filed within thirty (30) days
following the related Contribution Date, or (ii) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interest.
ARTICLE VI.
REPRESENTATIONS AND COVENANTS OF
THE ISSUER
The Issuer hereby represents and warrants to the Company as of the
Closing Date and as of each Contribution Date:
SECTION 6.01 NONCONSOLIDATION.
The Issuer is operated in such a manner that it would not be
substantively consolidated with DVI, such that the separate existence of the
Issuer and DVI would not be disregarded in the event of a bankruptcy or
insolvency of the Issuer or DVI, and in such regard, among other things:
(a) the Issuer is not involved in the day to day management of DVI;
(b) the Issuer maintains separate company records and books of account
from DVI and otherwise observes company formalities and has a separate business
office from the Company;
(c) the financial statements and books and records of the Issuer
prepared after the date of creation of DVI reflect and will reflect the separate
existence of DVI;
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(d) the Issuer maintains its assets separately from the assets of DVI
(including through the maintenance of a separate bank account), the Issuer's
funds and assets, and records relating thereto, have not been and are not
commingled with those of DVI and the separate creditors of DVI will be entitled
to be satisfied out of DVI's assets prior to any value in DVI becoming available
to DVI's equityholders or the Issuer's creditors;
(e) all business correspondence of the Issuer and other communications
are conducted in the Issuer's own name and on its own stationery;
(f) DVI does not act as an agent of the Issuer in any capacity and the
Issuer does not act as agent for DVI, but instead presents itself to the public
as a limited liability company separate from the Company; PROVIDED HOWEVER, that
DVI shall not be deemed an agent by acting as the Servicer under the
Contribution and Servicing Agreement.
SECTION 6.02 NO BANKRUPTCY PETITION AGAINST THE COMPANY.
The Issuer covenants and agrees it will not, prior to the date that is
one year and one day after the payment in full of all amounts owing pursuant to
the Transaction Documents, institute against, or join any other Person in
instituting against, either the Company or itself, any bankruptcy,
reorganization, receivership, arrangement, insolvency or liquidation proceedings
or other similar proceedings under any federal or state bankruptcy or similar
law. This Section 6.01 shall survive the termination of this Agreement.
ARTICLE VII.
SUBSTITUTION
SECTION 7.01 SUBSTITUTION.
In the event that the Contributor contributes and assigns a Substitute
Contract to the Company pursuant to Section 7.01 of the Contribution and
Servicing Agreement, the Company hereby agrees to contribute and assign any such
Substitute Contract and the security interest in the related Equipment to the
Issuer. In addition, the Company hereby agrees to take any action to facilitate
the transfer of any Predecessor Contract, including (i) delivery to the
Contributor by the Company of an instrument, substantially in the form of
Exhibit __ of the Contribution and Servicing Agreement, transferring to the
Contributor, without representation or warranty, all of the Company's right,
title and interest in and to the Predecessor Contract, (ii) delivery to the
Trustee of the original, manually executed counterpart of each Contract that
constitutes "chattel paper" or an "instrument" under the UCC as appropriate for
the purposes of perfecting a security interest under the UCC and (iii) delivery
to the Trustee of an amendment to the Contract Schedule, reflecting the deletion
of the Predecessor Contract and the addition of the Substitute Contract.
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SECTION 7.02 NOTICE OF SUBSTITUTION.
In the Monthly Servicer Report to be delivered on each Determination
Date, the Company shall cause the Servicer to give written notice to the
Trustee, the Initial Class A Noteholder, each Noteholder, and the Company of
each substitution of Contracts pursuant to Section 7.01 hereof during the
preceding Collection Period. Such Monthly Servicer Report or other written
notice shall (i) specify the amount of each periodic Contract Payment under the
Predecessor Contract and the amount of each periodic Contract Payment under each
Eligible Contract being substituted, (ii) specify the residual values of the
Equipment subject to the Predecessor Contract and the Equipment subject to the
Eligible Contract being substituted, (iii) specify the Discounted Contract
Balance of the Predecessor Contracts, the Discounted Contract Balance of the
Substitute Contracts, and any amounts to be deposited in the Collection Account
in connection with such Substitute Contracts and (iv) with respect to a
substitution pursuant to Section 7.01(a) hereof, be accompanied by an Officer's
Certificate, substantially in the form of Exhibit F hereto, certifying as to
compliance with the provisions of Section 7.01(a) hereof.
SECTION 7.03 CONTRIBUTOR'S AND COMPANY'S SUBSEQUENT OBLIGATIONS.
Upon any substitution of Contracts in accordance with the provisions of
this Section 7, the Company's obligations hereunder with respect to the
Predecessor Contract shall cease but the Contributor and the Company shall each
thereafter have the same obligations with respect to the Substitute Contract
substituted as it has with respect to all other Contracts subject to the terms
hereof.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01 AMENDMENT; WAIVERS.
This Agreement may be amended, waived, supplemented or modified from
time to time only by written agreement of each of Company, Issuer and their
respective assigns, including the Trustee. Any forbearance, failure, or delay by
a party in exercising any right, power, or remedy hereunder shall not be deemed
to be a waiver thereof, and any single or partial exercise by a party of any
right, power or remedy hereunder shall not preclude the further exercise
thereof. Every right, power and remedy of a party shall continue in full force
and effect until specifically waived by it in writing. No right, power or remedy
shall be exclusive, and each such right, power or remedy shall be cumulative and
in addition to any other right, power or remedy, whether conferred hereby or
hereafter available at law or in equity or by statute or otherwise.
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SECTION 8.02 EFFECT OF INVALIDITY OF PROVISIONS.
In case any one or more of the provisions contained in this Agreement
should be or become invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall in no way be affected, prejudiced or
disturbed thereby.
SECTION 8.03 NOTICES.
Any notices, consents, directions, demands and other communications
given under this Agreement (unless otherwise specified herein) shall be in
writing and shall be deemed to have been duly given when personally delivered at
or telefaxed to the respective addresses or facsimile numbers, as the case may
be, set forth on the signature page hereof for Company and Issuer, or to such
other address or facsimile number as either party shall give notice to the other
party pursuant to this Section. Notices, consents, etc. may be also effected by
first class mail, postage prepaid sent to the foregoing addresses and will be
effective upon receipt by the intended recipient.
SECTION 8.04 ENTIRE AGREEMENT.
This Agreement, including the Exhibits hereto, contains the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements between them, whether oral
or written, of any nature whatsoever with respect to the subject matter hereof.
SECTION 8.05 SURVIVAL.
All indemnities and undertakings of Company and Issuer hereunder shall
survive the termination of this Agreement.
SECTION 8.06 CONSENT TO SERVICE.
Each party irrevocably consents to the service of process by registered
or certified mail, postage prepaid, to it at its address PROVIDED on the
signature page hereto.
SECTION 8.07 JURISDICTION NOT EXCLUSIVE.
Nothing herein will be deemed to preclude either party hereto from
bringing an action or proceeding in respect of this Agreement in any
jurisdiction other than as set forth in Section 8.12 hereof.
SECTION 8.08 CONSTRUCTION.
The headings in this Agreement are for convenience only and are not
intended to influence its construction. References to Sections, Schedules and
Exhibits in this Agreement are to the
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<PAGE>
Sections of and Schedules and Exhibits to this Agreement. Any Schedules and
Exhibits are hereby incorporated into and form a part of this Agreement. In this
Agreement, the singular includes the plural, the plural the singular, the words
"and" and "or" are used in the conjunctive or disjunctive as the sense and
circumstances may require and the word "including" means "including, but not
limited to." Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding".
SECTION 8.09 FURTHER ASSURANCES.
In addition to its agreements set forth herein, the Company (at the
Issuer's expense) agrees to do such further acts and things and to execute and
deliver such additional assignments, agreements, powers and instruments as are
reasonably requested by the Issuer to carry into effect the purposes of this
Agreement and the transactions contemplated herein.
SECTION 8.10 THIRD PARTY BENEFICIARIES.
Any Securityholder and the Trustee shall be an express third party
beneficiary of this Agreement. The obligations of the Company hereunder may be
assigned by the Issuer to the Trustee under the Indenture [the Trust Agreement].
The Company acknowledges that the Issuer intends, pursuant to the Indenture [the
Trust Agreement], to pledge the Company Assets, together with its respective
rights under this Agreement, to the Trustee on the Closing Date and each
Contribution Date and each Substitution Date, with respect to each Contract and
each Substitute Contract. The Company acknowledges and consents to such
conveyance and waives any further notice thereof and covenants and agrees that
the representations and warranties of the Company contained in this Agreement
and the rights of the Issuer hereunder, are intended to benefit the Trustee and
each Securityholder. In furtherance of the foregoing, the Company covenants and
agrees to perform its duties and obligations hereunder, in accordance with the
terms hereof and for the benefit of the Trustee and the Securityholders and
that, notwithstanding anything to the contrary in this Agreement, the Company
shall be directly liable to the Trustee (notwithstanding any failure by the
Servicer or the Issuer to perform its duties and obligations hereunder, or under
the Indenture or Contribution and Servicing Agreement), and that the Trustee may
enforce the duties and obligations of the Company under this Agreement against
the Company for the benefit of the Securityholders.
SECTION 8.11 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS RULES REGARDING
CONFLICT OF LAWS.
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<PAGE>
SECTION 8.12 CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO
VENUE.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, EACH OF THE ISSUER AND THE COMPANY HEREBY
AGREED TO THE NONEXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED WITH THE
STATE OF NEW YORK. EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE NON
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, AND
EACH PARTY IRREVOCABLY HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY
OF THE AFOREMENTIONED COURTS AND CONSENT TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
SECTION 8.13 WAIVER OF JURY TRIAL.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE ISSUER AND THE
COMPANY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
SECTION 8.14 HEADINGS AND CROSSREFERENCES.
The various headings in this Agreement are included for convenience
only and shall not affect the meaning or interpretation of any provision of this
Agreement. References in this Agreement to Section names or numbers are to such
Sections of this Agreement.
SECTION 8.15 COSTS AND EXPENSES.
The Company will pay all reasonable expenses incident to the
performance of its obligations under this Agreement and under the Indenture and
the Company agrees to pay all reasonable outofpocket costs and expenses of the
Issuer, including fees and expenses of counsel, in connection with the
enforcement of any obligation of the Company hereunder.
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<PAGE>
SECTION 8.16 CONFIDENTIAL INFORMATION.
The Issuer agrees that it will neither use nor disclose to any person
the names and addresses of the Obligors, except in connection with the
enforcement of the Issuer's rights hereunder, under the Contracts, under the
applicable Transaction Documents or as required by law.
SECTION 8.17 EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same instrument.
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<PAGE>
IN WITNESS WHEREOF, Issuer and Company have duly executed this
Subsequent Contract Transfer Agreement as of the date and year first above
written.
DVI RECEIVABLES CORP. VIII
By __________________________
Name:
Title:
Address: 500 Hyde Park
Doylestown, Pennsylvania 18901
Attn: Securitization Manager
Telephone: (215) 3456600
Facsimile: (215) 2305328
DVI ____________________
By __________________________
Name:
Title:
Address:
Telephone: ___________________
Facsimile: ___________________
-17-
<PAGE>
EXHIBIT A
SUBSEQUENT CONTRACT TRANSFER FORM
[DATE]
DVI Receivables Corp. VIII (the "COMPANY") and DVI ___________
("the Issuer"), pursuant to the Subsequent Contract Transfer Agreement, dated as
of ________________ (the "Subsequent Contract Transfer Agreement"), hereby
confirm their understanding with respect to the contribution by the Company to
the Issuer of those Contracts listed on Schedule 1 attached hereto (the
"CONTRACTS"), together with a firstpriority perfected (except for such item of
related Equipment that had an Original Equipment Cost of less than $20,000)
security interest in all of the Company's right, title and interest in and to
the related Equipment, and other related property described herein.
CONVEYANCE OF CONTRACTS. On the date set forth above, the
Company hereby transfers to the Issuer all of the Company's rights, title and
interest in, to, and under the Contracts listed on Schedule 1 hereto including,
without limitation, its interests in the proceeds of such Contracts, the right
to receive all amounts due or to become due thereunder after __________ (the
"CUTOFF DATE") together with the Assets related thereto.
The Company hereby confirms that:
(1) On or prior to the date hereof (the "SUBSEQUENT CONTRACT
TRANSFER DATE"), the Contributor shall have deposited in the Collection Account
all collections in respect of the Contracts that were due on or after the Cutoff
Date;
(2) Each representation and warranty of the Company under the
Contribution and Servicing Agreement and the Subsequent Contract Transfer
Agreement is true and correct as of the date hereof, the Contributor was not
insolvent nor will it be made insolvent by the transfer contemplated herein nor
is it aware of any pending insolvency and the Company is not in breach of any
covenant under the Subsequent Contract Transfer Agreement;
(3) Each Contract contributed pursuant hereto is an Eligible
Contract;
(4) On or prior to the Subsequent Contract Transfer Date, the
Company shall have delivered to the Trustee the sole original, manually executed
counterpart of each Contract;
(5) The sum of the Discounted Contract Balances as of the
Cutoff Date of the Contracts listed on Schedule 1 attached hereto is
$__________ (calculated using a Discount Rate of _____%);
(6) The Commitment Period has not terminated as of the date
hereof;
A-1
<PAGE>
(7) When the Contracts are added to the Trust Property, all
representations and warranties of the Company in the Subsequent Contract
Transfer Agreement will be true and correct as of the date set forth in the
heading of this Subsequent Contract Transfer Form unless any breach of such
representations and warranties resulting from the inclusion of such Contract
shall have been waived in advance by Securityholders evidencing more than 50% of
the Voting Rights; and
(8) The Contributor has delivered to the Trustee (i)
amendments to, or executed originals of, the UCC financing statements referred
to in Section 1.01(d) of the Contribution and Servicing Agreement reflecting the
addition of the Contract(s) and (ii) an amendment to the Contract Schedule.
All terms and conditions of the Subsequent Contract Transfer
Agreement with respect to the Company and the Contracts have been complied with
and are hereby ratified, confirmed and incorporated herein, PROVIDED that in the
event of any conflict, the provisions of this Subsequent Contract Transfer Form
shall control over the conflicting provisions of the Contribution and Servicing
Agreement.
Terms capitalized herein and not defined herein shall have
their respective meanings as set forth in the Subsequent Contract Transfer
Agreement and if not defined therein, then as such terms are defined in Appendix
I to the Contribution and Servicing Agreement.
DVI RECEIVABLES CORP. VIII
By:_____________________________
Name:
Title:
DVI _______________________
By: _____________________________
Name:
Title:
A-2
Exhibit 5.1
-----------
March 22, 1999
DVI Receivables Corp. VIII
500 Hyde Park
Doylestown, PA 18901
Re: DVI Receivables Corp. VIII
Asset-Backed Notes or Certificates
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We are counsel to DVI Receivables Corp. VIII, a Delaware
corporation (the "Registrant"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of Asset-Backed Notes or
Certificates and the related preparation and filing of a Registration Statement
on Form S-3 (the "Registration Statement"). The Notes are issuable in series
under indentures (each such agreement, an "Indenture") between an issuer and an
indenture trustee, to be identified in the prospectus supplement for such series
of Notes. The Certificates are issuable in series under trust agreements (each
such agreement, a "Trust Agreement") between a depositor and a trustee, to be
identified in the prospectus supplement for such series of Certificates. Each
Indenture or Trust Agreement will be substantially in the form filed as an
Exhibit to the Registration Statement.
In connection with rendering this opinion letter, we have
examined the forms of the Agreements incorporated by reference in the
Registration Statement, the Registration Statement and such records and other
documents as we have deemed necessary. As to matters of fact, we have examined
and relied upon representations or certifications of officers of the Registrant
or
<PAGE>
DVI Receivables Corp. VIII
March 22, 1999 Page 2.
public officials. We have assumed the authenticity of all documents submitted to
us as originals, the genuineness of all signatures, the legal capacity of
natural persons and the conformity to the originals of all documents. We have
assumed that all parties, other than the Registrant, had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties, we also have assumed the enforceability of such documents.
In rendering this opinion letter, we express no opinion as to
the laws of any jurisdiction other than the laws of the State of New York and
the corporate laws of the State of Delaware, nor do we express any opinion,
either implicitly or otherwise, on any issue not expressly addressed below. In
rendering this opinion letter, we have not passed upon and do not pass upon the
application of "doing business" or the securities laws of any jurisdiction. This
opinion letter is further subject to the qualification that enforceability may
be limited by (i) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other laws affecting the enforcement of the rights of
creditors generally and (ii) general principles of equity, whether enforcement
is sought in a proceeding in equity or at law.
We note the actual form of the disclosure under the heading
"Material Federal Income Tax Consequences" in any prospectus and prospectus
supplement used after the date of this letter will be revised from the version
appearing in the forms of prospectus and prospectus supplements included or
incorporated by reference in the Registration Statement to reflect the federal
income tax law applicable to any series of Notes or Certificates as of the date
of the issuance of such series. Our opinion expressed below is subject to the
assumption that the above-mentioned revisions will have been made.
Based on the foregoing, we are of the opinion that:
1. When an Indenture for a series of Notes or a Trust
Agreement for a series of Certificates has been duly authorized by all necessary
action and duly executed and delivered by the parties thereto, such Indenture or
Trust Agreement, as applicable, will be a legal and valid obligation of the
applicable issuer.
2. When an Indenture for a series of Notes or a Trust
Agreement for a series of Certificates has been duly authorized by all necessary
action and duly executed and delivered by the parties thereto, and when the
Notes or Certificates of such series have been duly executed and authenticated
in accordance with the provisions of that Indenture or Trust Agreement, as
applicable, and issued and sold as contemplated in the Registration Statement
and the prospectus and prospectus supplement delivered in connection therewith,
such Notes or Certificates will be legally and validly issued and outstanding,
fully paid and non-assessable, and the holders of such Notes or Certificates
will be entitled to the benefits of that Indenture or Trust Agreement, as
applicable.
<PAGE>
DVI Receivables Corp. VIII
March 22, 1999 Page 3.
3. The description of the material federal income tax
consequences appearing under the heading "Material Federal Income Tax
Consequences" in the prospectus contained in the Registration Statement, while
not purporting to discuss all possible federal income tax consequences of an
investment in the Notes or Certificates, as applicable, is accurate with respect
to those tax consequences that are discussed.
We hereby consent to the filing of this opinion letter as an
Exhibit to the Registration Statement, and to the use of our name in the
prospectus and prospectus supplements included in the Registration Statement
under the heading "Legal Matters", and in the prospectus included in the
Registration Statement under the heading "Material Federal Income Tax
Consequences", without admitting that we are "experts" within the meaning of the
Act, and the rules and regulations thereunder, with respect to any part of the
Registration Statement, including this Exhibit. It is our position that we are
not experts within the meaning of Section 11 of the Securities Act of 1933, or
persons within the meaning of Section 11(a)(4) thereof, with respect to any
portion of the Registration Statement.
Very truly yours,
EXHIBIT 24.1
------------
DVI RECEIVABLES CORP. VIII
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints any of Lisa J. Cruikshank or Steven R.
Garfinkel as his true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as director and/or officer of DVI
Receivables Corp. VIII), to sign any Registration Statement on Form S-3 and any
or all amendments thereto (including post-effective amendments) of DVI
Receivables Corp. VIII under the Securities Act of 1933, as amended, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that said attorney-in-fact and agent, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Director, Chief Executive March 12, 1999
/s/ John P. Boyle Officer and Vice President
- ------------------------------
John P. Boyle
Executive Vice President and March 12, 1999
/s/ Steven R. Garfinkel Chief Financial Officer
- ------------------------------
Steven R. Garfinkel
Director and Vice President March 12, 1999
/s/ Lisa J. Cruikshank
- ------------------------------
Lisa J. Cruikshank
Director March 12, 1999
/s/ Jeffrey M. Medaglio
- ------------------------------
Jeffrey M. Medaglio
Director
/s/ William A. Norris, III
- ------------------------------
William A. Norris, III March 12, 1999
</TABLE>
