<PAGE>
As filed with the Securities and Exchange Commission on July 2, 1999
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
FORM S-1
-----------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Fidelity Leasing, Inc.
(Exact Name of Registrant as Specified in its Charter)
----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Pennsylvania 6159 23-2842671
(State or Other Jurisdiction of Incorporation (Primary Standard Industrial Classification (I.R.S. Employer Identification No.)
or Organization) Code Number)
1255 Wrights Lane
West Chester, Pennsylvania 19380
(610) 719-4500
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's
Principal Executive Offices)
Abraham Bernstein
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
(610) 719-4500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
-----------------------
Copies to:
J. Baur Whittlesey, Esq. Paul K. Risko, Esq.
Ledgewood Law Firm, P.C. Sidley & Austin
1521 Locust Street 875 Third Avenue
Philadelphia, PA 19102 New York, NY 10022
(215) 735-0663 (212) 906-2244
---------------------
</TABLE>
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the registration statement becomes effective.
If any of the securities being registered in this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
1
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box an list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. / /
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Share Price Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par 4,472,222 $19.00 $84,972,218 $23,622
value
=============================================================================================================
</TABLE>
-----------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
2
<PAGE>
The information in this prospectus is not complete and may be changed. We cannot
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 is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED July 2, 1999
[LOGO]
FIDELITY LEASING, INC.
3,888,889 Shares
Common Stock
We are offering 3,888,889 shares of our common stock. This is our
initial public offering and no public market currently exists for our shares. We
estimate that the initial public offering price will be between $17.00 and
$19.00 per share. We will file an application to qualify the shares we are
offering for quotation on the Nasdaq National Market under the symbol "FLCO."
Shares may be reserved for sale at the initial public offering price to our
employees, directors and other persons related to us. These employees, directors
and other persons may purchase, in the aggregate, not more than 5% of the shares
in this offering. See "Underwriting."
---------------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 10.
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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price.................................................. $ $
Underwriting Discounts and Commissions................................. $ $
Total Proceeds to Fidelity Leasing..................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We have granted the underwriters a 30-day option to purchase up to an
additional 583,333 shares of common stock to cover over-allotments. The
underwriters expect to deliver the shares of common stock to purchasers on
_______ __, 1999.
------------------------
BANCBOSTON ROBERTSON STEPHENS
FRIEDMAN BILLINGS RAMSEY
U.S. BANCORP PIPER JAFFRAY
FIRST UNION CAPITAL MARKETS CORP.
The date of this prospectus is _______________, 1999
1
<PAGE>
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. We are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
Until ______________ ___, 1999, all dealers that buy, sell or trade our
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This requirement is in addition to the dealers'
obligations to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................................................3
Risk Factors..............................................................................................10
Use of Proceeds...........................................................................................19
Dividend Policy...........................................................................................19
Capitalization............................................................................................19
Dilution..................................................................................................20
Selected Consolidated Financial, Pro Forma and Operating Information......................................21
Management's Discussion and Analysis of Financial Condition and Results of Operations.....................27
Business..................................................................................................39
Management................................................................................................54
Certain Transactions......................................................................................60
Principal Shareholders....................................................................................61
Description of Capital Stock..............................................................................63
Shares Eligible for Future Sale...........................................................................64
Underwriting..............................................................................................65
Legal Matters.............................................................................................66
Experts...................................................................................................67
Where You Can Find More Information.......................................................................67
Financial Statements......................................................................................68
</TABLE>
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2
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, the common stock being sold in this offering
and our financial statements and notes to the financial statements appearing
elsewhere in this prospectus.
Fidelity Leasing
We are an equipment finance company which leases technology equipment
to the small business market through a sophisticated e-commerce technology
platform using computer and telecommunications systems and the Internet. We
specialize in financing equipment within a price range of $5,000 to $250,000.
The equipment we finance includes communications technology, industrial
technology, information technology and office automation equipment.
We reach the small business market by forming strategic marketing
alliances and other program relationships with equipment vendors. Equipment
vendors may be manufacturers, distributors or resellers of technology equipment.
We classify a vendor program as a strategic alliance when the marketing of our
financing is integrated into the vendor's marketing process and either the
program literature and documentation is private labeled in the vendor's name or
co-branded with both the name of the vendor and our name.
The equipment vendors in our strategic marketing alliances and in our
other vendor relationships offer small businesses a total solution for their
equipment acquisition needs by providing equipment and financing in one package.
We provide the vendors in our programs with the ability to offer our financing
as part of their equipment marketing package. We also provide small business
leasing programs to commercial banks that want to offer a lease financing
product to their small business customers but do not want to invest in a leasing
infrastructure. Participants in our strategic marketing alliances and banking
programs include:
<TABLE>
<CAPTION>
<S> <C> <C>
o Convergent Capital Corporation o Huntington Leasing Corporation o Minolta Business Systems
o Emtec, Inc. o IBM Credit Corporation o Mitsui Machine Technology, Inc.
o FISI Madison Financial Corporation o Ingram Micro, Inc. o Quincy Compressor
o Green Pages, Inc. o Lucent Technologies, Inc. o Tech Data Corporation
o GTE Leasing Corporation o Midwest Micro Corporation o Telrad Telecommunications, Inc.
</TABLE>
Our technology platform allows vendors and banks to integrate their
e-commerce process with ours through hyperlinks from their web sites. Currently,
three of our strategic marketing alliance participants are building hyperlinks
so that they can access our web site and refer their customers to us for
financing. They are Emtec, Ingram Micro and Tech Data. Another strategic
marketing alliance participant, IBM, is establishing a separate web site address
under its own name that provides a window for its equipment vendors to access
our lease process. As more equipment vendors and banks develop web sites, we
will seek to link them to our technology platform and, thus, to the lease
financing we offer.
As of March 31, 1999, we serviced a portfolio of 26,636 equipment
leases with an original equipment cost of $674.0 million. The average equipment
cost for leases originated during the six months ended March 31, 1999 was
approximately $14,000 and the average lease term was 46 months with a weighted
average yield of 11.9%. Our leases are full payout leases with the rentals
returning 100% of the equipment cost plus an interest charge. For the fiscal
year ended September 30, 1998, we originated 8,832 leases involving equipment
with an aggregate cost of $88.7 million. For the six months ended March 31,
1999, we originated 7,683 leases involving equipment with an aggregate cost of
$107.4 million.
Our Strategy
Our objective is to become the leading technology equipment lease
finance provider for small businesses. Key elements of our strategy include:
3
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<PAGE>
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o developing additional strategic marketing alliances with leading
technology equipment vendors and commercial banks to expand our share
of our targeted small business market;
o enhancing our technology platform and integrating it through Internet
connections with the marketing processes of vendor and bank
participants in our strategic marketing alliances;
o giving our vendors and their customers outstanding service through
the use of our FastFunds business process;
o maintaining a singular competitive focus - one product, the small
ticket lease, for one market, small business, thus optimizing
utilization of our resources and skills;
o increasing national recognition of our corporate identity as a small
business lessor with a comprehensive e-commerce capability; and
o expanding our market beyond the United States.
Corporate Information
We were incorporated as a Pennsylvania corporation on March 4, 1996 and
commenced lease underwriting in August 1996. In February 1999, we acquired JLA
Credit Corporation ("JLA"), the U.S. small ticket leasing subsidiary of Japan
Leasing Corporation. JLA, which is now our wholly-owned subsidiary, serves
several technology sectors that are similar to ours and also uses strategic and
other marketing alliances with vendors as a marketing strategy.
Our headquarters are located at 1255 Wrights Lane, West Chester,
Pennsylvania 19380. Our telephone number at that location is (610) 719-4500, or
toll free at (800) 400-4766. Our web site address is www.fidelityleasing.com.
The information contained in our web site is not part of this prospectus.
The Offering
<TABLE>
<S> <C>
Common stock offered................................................... 3,888,889 shares
Common stock to be outstanding after this offering..................... 11,175,000 shares
Use of proceeds........................................................ For the continued growth of our
leasing business, including lease originations,
enhancement and expansion of our technology
infrastructure, start-up costs for international
operations, working capital and for general corporate
purposes. In addition, we will reimburse Resource
America for its costs and expenses incurred in
connection with this offering and our acquisition of
JLA, including an allocation of employee compensation.
Such costs and expenses are estimated to be
approximately $1,000,000.
Proposed Nasdaq National Market symbol................................. FLCO
</TABLE>
Additional shares may be issued after this offering upon the exercise
of options.
You should be aware that we are permitted, and in some cases obligated,
to issue shares of common stock in addition to common stock to be outstanding
after this offering. If and when we issue these shares, the percentage of common
stock you own may be diluted. The following is a summary of these additional
shares of common stock:
4
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<PAGE>
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o 329,343 shares of common stock will be issued upon exercise of
outstanding options for these shares, with a weighted average
exercise price of $0.94 per share;
o 6,293 shares of common stock that have been reserved for future
issuance under our 1996 stock option plan; and
o 775,000 shares of common stock that will be reserved for future
issuance under our 1999 stock option plan which will be adopted
before the closing of this offering.
Unless otherwise indicated, all information in this prospectus:
o assumes that the underwriters do not exercise their option to
purchase additional shares after the closing of this offering;
o includes the performance of JLA only since we acquired it on February
4, 1999;
o reflects a 0.6992 for 1 reverse stock split of our common stock that
was effected on June 25, 1999. This reverse stock split of our common
stock will not impact the number of shares being offered and will not
have any impact on the purchasers of shares in this offering;
o except where the context otherwise requires, refers to Resource
America, Inc. on a consolidated basis with its wholly-owned
subsidiary, Resource Leasing, Inc., our direct parent;
o assumes that, immediately prior to the closing of this offering,
Resource America, Inc., our ultimate parent, contributes $30.0
million of intercompany debt to our capital, exchanges the balance of
its intercompany debt for an unsecured note, and receives 279,697
shares of our common stock; and
o assumes exercise of options to acquire an aggregate of 713,228 shares
of our common stock before the closing of this offering by three of
our senior executive officers at a price of $0.32 per share.
5
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<PAGE>
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Summary Consolidated Financial, Pro Forma and Operating Data
The summary consolidated financial data set forth below has been
derived from the consolidated financial statements, selected financial
information and pro forma financial information relating to the acquisition of
JLA which appear elsewhere in this prospectus. This data should be read in
conjunction with our consolidated financial statements and the related notes and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" which are included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from
March 4,
1996
(Inception)
through
September
---------
30, Year Ended September 30, Six Months Ended March 31,
--- ------------------------ --------------------------
1998 Pro 1999 Pro
1996 1997 1998 Forma(1)(2) 1998 1999(1) Forma(1)(2)
------ ------- ------- ----------- ------ -------- -----------
Statement of Operations Data: (unaudited) (unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Interest and fee income ................. $ 7 $ 1,080 $ 3,481 $45,277 $1,362 $ 9,371 $27,196
Gains on sales of leases and
terminations(3)......................... - 3,710 7,598 7,598 3,883 5,064 1,209
------ ------- ------- ------- ------ ------- -------
Total revenues...................... 7 4,790 11,079 52,875 5,245 14,435 28,405
Costs and Expenses:
Operating expenses ..................... 454 2,535 5,184 17,032 2,705 7,188 10,755
Interest expense........................ - 690 1,689 24,633 738 4,760 13,016
------ ------- ------- ------- ------ ------- -------
Total expenses...................... 454 3,225 6,873 41,665 3,443 11,948 23,771
------ ------- ------- ------- ------ ------- -------
Income (loss) before provision for
income taxes and cumulative effect
of a change in accounting
principle(4)........................ (447) 1,565 4,206 11,210 1,802 2,487 4,634
Net income (loss) ...................... $ (295) $ 960 $ 2,406 $ 6,326 $1,031 $ 934 $ 2,275
====== ======= ======= ======= ====== ======= =======
Net income (loss) per common share-
basic(5)............................ $(0.05) $ 0.15 $ 0.38 $ 1.01 $ 0.16 $ 0.15 $ 0.36
====== ======= ======= ======= ====== ======= =======
Net income (loss) per common share-
diluted(6)........................... $(0.05) $ 0.14 $ 0.33 $ 0.88 $ 0.14 $ 0.13 $ 0.31
====== ======= ======= ======= ====== ======= =======
</TABLE>
6
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<PAGE>
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<TABLE>
<CAPTION>
September 30, March 31,
----------------------------------
1997 1998 1999(1)
------- ------- --------
(in thousands)
Balance Sheet Data:
<S> <C> <C> <C>
Net investment in leases and notes receivable ................................ $ 8,153 $24,978 $312,668
Other assets(7)............................................................... 3,396 7,291 50,857
Total assets.................................................................. 11,549 32,269 363,525
Total debt(8)................................................................. 7,418 23,982 342,207
Other liabilities............................................................. 1,466 3,216 15,313
Total liabilities............................................................. 8,884 27,198 357,520
Shareholder's equity ......................................................... $ 2,665 $ 5,071 $ 6,005
</TABLE>
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception) Year Ended, and as of Six Months Ended, and as of
through, and as of September 30, March 31,
September 30, ----------------------- ---------------------
1996 1997 1998 1998 1999
------------- ----------- --------- ---------- -------
(in thousands, except for average equipment cost and percentages)
Operating Data:
Leases originated:
<S> <C> <C> <C> <C> <C>
Total number of leases(1)................... 41 3,241 8,832 3,348 7,683
Total equipment cost(1)..................... $ 715 $33,985 $ 88,740 $31,788 $107,388
Weighted average yield (all sectors)(1)(9) 12.7% 13.6% 13.2% 13.5% 11.9%
Average equipment cost (all sectors)(1)..... $17,439 $10,486 $ 10,048 $ 9,495 $ 13,977
Total managed portfolio:
Total gross receivables(1).................. $847 $36,094 $117,025 $65,781 $533,248
Managed Portfolio Quality Data:
Delinquencies at end of period as a
percentage total outstanding managed
receivables:
Current receivables...................... 100.0% 96.0% 97.9% 97.9% 97.6%
31-60 days............................... --- 2.8 1.2 1.2 1.4
61-90 days............................... --- 0.8 0.4 0.3 0.5
Over 90 days............................. --- 0.4 0.5 0.6 0.5
Total delinquencies...................... --- 4.0% 2.1% 2.1% 2.4%
Allowance for possible losses as a
percentage of total outstanding
managed receivables(1)(10)............. 0.8% 0.7% 1.4% 1.3% 1.8%
Operating Ratios:
Return on equity(1)(11)................. (34.6%) 43.9% 62.2% 57.5% 33.7%
Return on assets(1)(12)................. (32.6%) 14.4% 11.0% 13.0% 0.9%
Ratio of total debt to shareholder's
equity(1)(13)........................... --- 2.8x 4.7x 2.9x 57.0x
Net write-offs as a percentage of average
managed receivables(14)............... --- 0.1% 0.1% 0.2% 0.4%
</TABLE>
7
<PAGE>
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(1) On February 4, 1999, we acquired all of the common stock of JLA. We
accounted for this transaction as a purchase and, consequently, allocated
the purchase price to assets acquired and liabilities assumed based upon
the fair value at the date of acquisition. JLA accounts for a substantial
amount of the assets and debt included in our March 31, 1999 consolidated
balance sheet, resulting from JLA's practice of structuring its
securitizations as on balance sheet transactions, as well as our on balance
sheet securitization of JLA's leases. As a consequence of the JLA
acquisition, our results of operations for the six months ended March 31,
1999 may not be comparable to the results of operations for the six months
ended March 31, 1998. In particular, the JLA portfolio has a larger average
equipment cost and longer lease terms, resulting in a lower yield than
ours.
(2) These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments to (a) depreciation and
amortization expense attributable to allocation of the purchase price of
JLA; (b) selling, general and administrative expenses for certain cost
reductions realized from the combining of operations; (c) interest expense
for additional borrowings; (d) equipment leasing revenue as a result of the
purchase price allocation of JLA and (e) provision for income taxes to
reflect the above adjustments at our tax rate. They do not purport to be
indicative of the results of operations which actually would have resulted
had the combination been consummated on October 1, 1997, or of future
results of operations of the consolidated entities.
(3) Gains on sales of equipment leases are recorded at the date of sale in the
amount by which the sales price exceeds the carrying value of the
underlying lease interest sold.
(4) In fiscal 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." SOP 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. We elected to
adopt the provisions of SOP 98-5 effective October 1, 1998, and
accordingly, start up costs of $753,000 ($413,000 net of income tax) which
had been capitalized at September 30, 1998 were charged to operations on
October 1, 1998 and are reflected in the consolidated statement of
operations for the six months ended March 31, 1999 as a cumulative effect
of a change in accounting principle.
(5) Basic earnings per share are determined by dividing net income by the
weighted average number of common shares outstanding during the period.
(6) Diluted earnings per share are computed by dividing net income by the sum
of the weighted average number of shares outstanding and dilutive potential
common shares issuable during the period. Dilutive potential common shares
consist of the excess of common shares issuable under the terms of various
stock option agreements over the number of such shares that could have been
acquired with the proceeds received from the exercise of the options.
(7) Included in other assets is cash of $2.0 million, $3.7 million and $20.5
million as of September 30, 1997 and 1998 and March 31, 1999 respectively,
and goodwill of $18.3 million as of March 31, 1999, which arose as a result
of the acquisition of JLA.
(8) Total debt as of March 31, 1999 consists of warehouse debt of $2.5 million,
nonrecourse debt of $259.7 million, affiliate debt of $67.6 million and
other debt of $12.4 million.
8
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(9) Weighted average yields on individual leases are weighted by original
equipment cost. Yields on individual leases are calculated by computing the
internal rate of return based on the scheduled cash flows at lease
inception date.
(10) We maintain an allowance for possible losses for all leases for which we
have an ongoing at risk position. The allowance is determined by our
estimate of future uncollectable lease contracts based upon our historic
loss experience, industry trends and equipment characteristics. Our policy
is to charge off to the allowance those leases which are in default and for
which we believe the probability of collection is remote. Recoveries on
leases previously charged off are restored to the allowance.
(11) Calculated as annualized net income divided by average shareholder's
equity.
(12) Calculated as annualized net income divided by average total assets.
(13) Calculated as total debt divided by ending shareholder's equity.
(14) Calculated as annualized net write-offs divided by averaged managed
receivables.
9
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<PAGE>
RISK FACTORS
You should consider carefully the factors discussed below among others
before investing in our common stock. The risks and uncertainties described
below are not the only ones we face. If any of the following risks actually
occur, our business, financial condition and results of operations would likely
suffer. In this case, the market price of our common stock could decline, and
you may lose all or part of your investment.
The discussion in this prospectus contains certain forward looking
statements that involve risks and uncertainties such as statements of our plans,
objectives, expectations and intentions. Forward looking statements typically
are identified by use of terms such as "may," "will," "expect," "anticipate,"
"estimate" and similar words, although some forward looking statements are
expressed differently. The cautionary statements made in this prospectus,
including the risk factors discussed below, should be read as being applicable
to all related forward looking statements wherever they appear in this
prospectus. Our actual results may differ materially from those discussed in
this prospectus. Factors that could cause or contribute to such differences
include those discussed below, as well as those discussed elsewhere in this
prospectus.
Risks Related to Our Operations
We have a limited operating history upon which you can evaluate our business
We commenced operations in 1996, and therefore have a limited history
of operations upon which you can evaluate our business. While we have had two
consecutive years of increasing profitability, there can be no assurance that we
will remain profitable in future periods, nor can we offer investors any
assurance that we will successfully implement our growth strategy.
Our business is dependent upon our relationships with equipment vendors and
others
We market our leasing programs through strategic marketing alliances
and other vendor program relationships with manufacturers, distributors,
dealers, resellers and other vendors of equipment and commercial banks as
described in "Business--Marketing and Originations." Many of these relationships
are not formalized in written agreements. Moreover, most of the relationships
that are formalized by written agreements are terminable at will. None of our
strategic marketing alliances or other relationships commits a vendor or bank to
provide a minimum number of lease transactions to us nor, with the exception of
one agreement which terminates in September 1999, do our relationships require
the vendors or banks to direct all of their lease transactions to us. For the
six months ended March 31, 1999, three of our strategic marketing alliances
accounted for approximately 26% of our lease originations, measured by equipment
cost, and 15 of our strategic marketing alliances accounted for approximately
40% of our lease originations. Termination of one or more of our principal
relationships, a material adverse change in the financial condition or the
operations of a vendor or bank in one of these relationships or a decision by
one or more of the vendors or banks to refer business to another source could
have a material adverse impact on our ability to originate leases.
Our strategic marketing alliances with IBM Credit Corporation, IBM
Canada Ltd. and Ingram Micro, Inc. are not terminable at will, but are
terminable upon specified events of default. These events include our bankruptcy
and, in the case of IBM Credit and IBM Canada, the departure of Abraham
Bernstein, our Chairman and Chief Executive Officer, and Crit S. DeMent, our
President and Chief Operating Officer. The IBM alliances are also terminable
upon a material change in our ownership. It is possible that this offering may
constitute a material change of ownership within the meaning of the IBM alliance
agreements. The alliances with IBM Credit, IBM Canada and Ingram Micro, in the
aggregate, accounted for less than 5% of our lease originations in the six
months ended March 31, 1999.
10
<PAGE>
Our business is dependent on external financing
Liquidity. Our business requires a substantial amount of cash to
operate. Our primary operating cash requirements include:
o funding of equipment leases;
o interest and principal on borrowings;
o fees and expenses incurred in connection with lease sales and
securitizations;
o income tax payments; and
o administrative and other operating expenses.
These cash requirements will increase if our lease originations
increase. We historically have obtained the cash required for operations through
the following sources:
o borrowings under warehouse revolving lines of credit;
o sales of leases in sales by assignment;
o sales or financing of leases in commercial paper ("CP") conduit
securitization facilities;
o sales or financing of leases through term note securitizations;
o loans from our corporate parent, Resource America;
o lease rentals; and
o servicing and other fees.
After this offering, we do not expect to obtain further loans from
Resource America. We are and will continue to be dependent upon the availability
of funding from our remaining sources to continue to originate leases and to
satisfy our other working capital needs. If any or all of our funding sources
become unavailable on acceptable terms, we may not have access to the funding
necessary to conduct our business. For a description of our funding sources,
including a discussion of our securitizations, you should read "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Warehouse Revolving Lines of Credit. We fund a significant portion of
our lease originations on a short-term basis through warehouse revolving lines
of credit secured by the underlying equipment and our interest in the leases. A
warehouse revolving line of credit provides temporary funding pending the
accumulation of sufficient pools of leases for financing through a CP conduit
securitization or a term note securitization. The lender's commitment to provide
funds under a warehouse facility generally has a short duration. Typically, the
commitment must be replaced or renewed annually. We currently have two warehouse
facilities: a $20.0 million line of credit, for which the commitment to provide
funds terminates in March 2000, and a C$5.0 million line of credit for leases
originated by our Canadian subsidiary, for which the commitment to provide funds
terminates in May 2000. Failure to renew or replace our warehouse facilities
will have an immediate and material adverse effect on our ability to originate
leases.
Borrowings under our warehouse facilities are primarily repaid with the
proceeds from sales or financing of leases in CP conduit facilities and term
note securitizations. During our initial year of operations, we also sold pools
of leases in sales by assignment. Our ability to obtain new warehouse
facilities, maintain or renew our existing warehouse facilities, or reduce
indebtedness under our warehouse facilities could be compromised if we cannot
securitize lease receivables through our CP conduit facilities or through term
note securitizations. Resource America, which has guaranteed our warehouse
facilities, has informed us that it does not anticipate guaranteeing future
warehouse facilities. The absence of Resource America's guarantee could
adversely affect the pricing and other terms of future warehouse facilities.
11
<PAGE>
Further, a failure to obtain or maintain a warehouse facility with acceptable
pricing, advance rates and other terms could have a material adverse effect on
our liquidity and cash flow.
CP Conduit Securitizations. We depend in part on CP conduit
securitizations to repay amounts outstanding under our warehouse facilities and
to generate cash for funding new leases. In these securitizations, we transfer
pools of leases and interests in the related equipment to special purpose,
bankruptcy remote entities. These special purpose entities in turn sell or
pledge their interests in the leases and the related equipment to an
unaffiliated conduit corporation, which generally issues commercial paper to
investors. As of March 31, 1999, we had four CP conduit facilities outstanding.
Two of these CP conduit facilities, with an aggregate commitment of $225.0
million, were structured as revolving facilities in which funding availability
may be restored through term note securitizations, normal amortization of leases
and asset sales. These two facilities had $91.0 million of funding availability
as of March 31, 1999. The lenders' commitments under one of these facilities
ended in June 1999 and their commitments with respect to the second facility
will end in December 1999. The other two CP conduit facilities were not
structured as revolving facilities, and have either been drawn to their maximum
commitment amount or terminated. Our ability to complete CP conduit transactions
and obtain renewals of lenders' commitments is affected by a number of factors,
including:
o conditions in the securities markets generally;
o conditions in the asset-backed securities markets;
o conditions in the market for commercial bank liquidity support for
commercial paper programs;
o the regulatory treatment of liquidity and credit enhancement
facilities provided by commercial banks for CP conduit
securitizations;
o the credit quality of our lease originations;
o the level of lease defaults in prior securitizations;
o compliance of our leases with the eligibility requirements
established in connection with our CP conduit facilities; and
o our ability to service the leases securitized.
A failure to renew our existing CP conduit facilities, increase the funding
commitment under existing CP conduit facilities or to add new CP conduit
facilities could have a material adverse effect on our ability to refinance
leases originated through our warehouse facility and, accordingly, on our
ability to originate leases.
Term Note Securitizations. We depend upon term note securitizations to
refinance amounts outstanding under our CP conduit facilities. A term note
securitization differs from a CP conduit securitization primarily in that it
typically has a fixed term, fixed interest rates and a fixed principal amount.
By reducing outstanding fundings under our revolving CP conduit facilities, term
note securitizations increase the amount of funds available to us under the CP
conduit facilities for additional securitization of leases financed with our
warehouse facilities. An inability to complete term note securitizations would
result in funds for new securitizations under our CP conduit facilities and,
indirectly, funds for new lease originations under our warehouse facilities, not
becoming available to us. Our ability to complete term note securitizations is
affected by factors similar to those affecting securitizations under our CP
conduit facilities.
Common Stock. We may seek to raise funds through the issuance of common
stock or debt securities convertible into or exchangeable for common stock. If,
because of market conditions or our then existing financial condition, we are
unable to issue additional common stock, such an inability may seriously hamper
our ability to finance the growth of our operations.
12
<PAGE>
Our warehouse facilities impose important limitations on us
Our warehouse facilities require us to maintain a specified level of
tangible net worth and restrict us from exceeding specified debt to tangible net
worth and operating cash flow to fixed charges ratios. These restrictions may
limit our ability to obtain additional funds. Furthermore, our warehouse
facilities contain change of control provisions that require Resource America,
our ultimate corporate parent, to own, directly or indirectly, a majority of our
voting stock and, in the case of our $20.0 million facility, also require that
Abraham Bernstein continue to act as our Chief Executive Officer. Failure to
comply with these restrictions may result in the occurrence of an event of
default. Upon occurrence of an event of default, a lender may terminate the
warehouse facility and demand immediate payment of all amounts borrowed by us
under that facility.
The occurrence of an event of default under a CP conduit facility could lead to
termination of that facility
Our CP conduit facilities contain customary default provisions for
asset-backed securities relating to, among other things, lease delinquency and
lease default levels. In addition, a change in our Chairman and Chief Executive
Officer, President or Senior Vice President, or a merger or consolidation with
another company in which we are not the surviving entity, is an event of
default. An event of default under a CP conduit facility could result in
termination of further funds availability under the facility, an accelerated
payment schedule for amounts outstanding under the facility, foreclosure on all
or a portion of the leases financed by the facility or our removal as a servicer
of the leases financed by the facility. This would reduce our revenues from
servicing and, by delaying any cash payment allowed to us under the facility
until the lenders have been paid in full, reduce our liquidity and cash flow.
An event of default under any of our recourse indebtedness could cause an event
of default under our warehouse lines of credit and CP conduit facilities
Our warehouse lines of credit and CP conduit facilities contain "cross
default" provisions under which, among other things, our failure to timely pay
aggregate recourse indebtedness of $250,000, in the case of the warehouse
facilities, or $1.0 million, in the case of the CP conduit facilities, would be
an event of default under the warehouse facilities and the CP conduit
facilities. An event of default under our warehouse facilities could result in
termination of the facilities and a demand for immediate payment of all amounts
borrowed by us. An event of default under a CP conduit facility could lead to
foreclosure on all or a portion of the leases financed by the facility and to
termination of the facility or our removal as servicer of the leases.
Our business is dependent on the creditworthiness of lessees
We specialize in leasing equipment having original acquisition costs
ranging from $5,000 to $250,000 to small businesses. Small businesses may be
more vulnerable to economic downturns and often need substantial additional
capital to expand or compete. Moreover, the success of a small business and its
ability to make lease payments typically depends upon the management talents and
efforts of one person or a small group of persons at the business. The death,
disability or resignation of one or more of these persons could have an adverse
impact on the operations of that business. Small business leases, therefore, may
entail a greater risk of non-performance and more delinquencies and losses than
leases entered into with larger, more creditworthy lessees. In addition, there
is typically only limited publicly available financial and other information
about small businesses and they often do not have audited financial statements.
Accordingly, in making credit decisions, our small business underwriting relies
upon the accuracy of information about these small businesses obtained from
third party sources, primarily credit agencies. If the information we obtain
from these sources is incorrect, our underwriting will not be effective and our
ability to make appropriate credit decisions will be impaired.
Delinquent and defaulted leases do not qualify as collateral against
which advances may be made under our warehouse or CP conduit facilities and we
cannot include them in term note securitizations. This can reduce the funding
available to us under our warehouse or CP conduit facilities and amounts we can
obtain through term note securitizations. Higher than expected lease
delinquencies or defaults will result in additional charges to operations, which
will adversely affect our earnings, possibly materially. In addition, increasing
rates of delinquencies or charge-offs could result in adverse changes in the
structure of our future warehouse facilities, CP conduit securitizations and
term note securitizations, including increased interest rates payable to
investors and the imposition of more burdensome credit enhancement requirements.
Any of these occurrences could have a material adverse effect on our business,
financial condition and results of operations.
13
<PAGE>
Losses from leases could exceed our reserve coverage
In connection with our financing of leases, we record an allowance for
credit losses to provide for estimated losses. Our allowance for credit losses
is based on past collection experience, industry data, lease delinquency data
and our assessment of prospective risks. Although the allowance for credit
losses reflected in our consolidated balance sheet at March 31, 1999 is
considered by us to be adequate, we can offer no assurance that this allowance
will be adequate to cover losses in connection with our portfolio of leases.
This allowance may prove to be inadequate due to unanticipated adverse changes
in the economy or discrete events adversely affecting specific lessees or
industries. Losses in excess of this allowance would cause us to increase our
provision for credit losses, reducing our operating income.
Our financial condition and results of operations will depend on our ability to
manage effectively any future growth
We have grown significantly since we commenced operations. Our ability
to sustain continued growth depends on our ability to originate, evaluate,
finance and service increasing volumes of leases of suitable yield and credit
quality. Accomplishing such a result on a cost-effective basis is largely a
function of our marketing capabilities, our management of the leasing process,
our ability to provide competent, attentive and efficient servicing, our access
to financing sources on acceptable terms and the capabilities of our technology
platform. As we grow, we will also be required to hire, train, supervise and
manage new employees. Failure to manage effectively any future growth could have
a material adverse effect on our business, financial condition and results of
operations.
Failure to realize the projected value of residual interests in equipment we
finance could have a material adverse effect on our business
An equipment lease may be separated into two financial components:
o rental payments required under the lease, which are sometimes
referred to as "lease receivables," and
o the estimated amount to be received at lease termination from lease
extensions, remarketing or other disposition of the leased equipment,
which is sometimes referred to as the "residual" or "residual
interest."
Before April 1, 1998, we securitized both the lease receivables and the
related residual interests. For leases securitized after April 1, 1998, we have
securitized the lease receivables while retaining the related residual interests
for accounting purposes. Our retained residual interest for these purposes
consists of our residual interest in the balance of a securitization pool after
all obligations to securitization lenders have been paid. The present value of
these retained residual interests is reflected on our balance sheet as a part of
the line item "investment in leases and notes receivable." Our recorded residual
values are estimates based on industry data about lease extensions, lessee
purchases of equipment at the end of the lease term and resale of used equipment
in the open market. Because we have a relatively short operating history, our
current experience with respect to realization of residual interests may not be
indicative of what realizations may be in the future. We may incur significant
losses in the future in seeking to realize our residual interests.
Realization of residual values depends on numerous factors, most of
which are outside of our control, including:
o the general market conditions at the time of expiration of the lease;
o the cost of comparable new equipment;
o the obsolescence of the leased equipment;
o any unusual or excessive wear and tear on the equipment;
o the effect of any additional or amended government regulations; and
o the foreclosure by a secured party of our interest in a defaulted
lease.
14
<PAGE>
We review our estimates of the value of our residual interests from
time to time to determine whether they are above the fair market value of the
residual interests. If the fair market values are less than our estimates, the
difference would be charged to operations. If, upon sale or re-lease of the
underlying equipment, the amount obtained is less than our recorded estimate,
the difference also would be charged to operations. These charges will reduce
our operating income.
Changes in interest rates may affect our financial condition and results of
operations
Because we generally fund our leases through warehouse lines of credit,
CP conduit facilities and term note securitizations, our operating margins could
be adversely affected by an increase in interest rates. Each of our leases is
structured so that the sum of all scheduled lease payments will equal the cost
of the equipment to us plus a return on the amount of our investment. This
return is known as an "implicit yield." The implicit yield on our leases is
fixed because the scheduled payments are fixed at the time of lease origination.
When we originate or acquire leases, we base our pricing in part on the "spread"
we expect to achieve between the implicit yield rate on each lease and the
effective interest rate we will pay when we finance the lease. To the extent
that a lease is financed with floating-rate funding, increases in interest rates
during the term of a lease could narrow or eliminate the spread, or result in a
negative spread. A negative spread is an interest cost greater than the lease's
implicit yield. Currently, all of our warehouse lines of credit and CP
facilities have floating rates. We typically enter into interest rate swap
agreements to hedge against the risk of interest rate increases in our CP
conduit securitizations. You should read "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Interest Rate Risk and
Hedging" for a more detailed explanation of our hedging practices. Such hedging
activities limit our ability to participate in the benefits of lower interest
rates with respect to the hedged portfolio. In addition, our hedging activities
may not protect us from interest rate-related risks in all interest rate
environments, including interest rate increases after a lease origination but
before CP conduit securitization.
The business of equipment leasing is highly competitive
The business of small ticket equipment lease financing is highly
fragmented and competitive. We compete with:
o a large number of national, regional and local finance companies;
o captive finance and leasing companies affiliated with major equipment
manufacturers; and
o other sources of financing, including traditional financial services
companies such as commercial banks, savings and loan associations and
credit unions.
Many of our competitors are substantially larger and have considerably
greater financial, technical and marketing resources than we do. For example,
some competitors may have a lower cost of funds and access to funding sources
that are not available to us. A lower cost of funds could enable a competitor to
offer leases with implicit yields which are less than those we use to price our
leases, potentially forcing us to lower our implicit yields or lose origination
volume. In addition, certain of our competitors may have higher risk tolerances
or different risk assessments, which could allow them to establish more vendor
and lessee relationships and build their market share. We can offer you no
assurance that we will continue to be able to compete effectively.
Our quarterly operating results may fluctuate significantly
Our operating results may differ from fiscal quarter to fiscal quarter,
and these differences may be significant. Factors that may cause these
differences include changes in the volume of lease applications, acceptances and
originations, changes in interest rates, the timing of securitizations,
availability of capital, competition and other factors. The results of any one
fiscal quarter may not indicate what our performance in the future may be.
15
<PAGE>
An economic downturn could affect our operating results
An economic downturn may adversely affect small businesses, which are
our primary market. This could result in a decline in the demand for some or all
of the types of equipment we finance and a decline in our lease origination
volume. A downturn could also adversely affect our ability to obtain capital to
fund leases or to complete securitizations. In addition, a downturn could result
in an increase in delinquencies and defaults by our lessees beyond the levels
forecasted by us, which could have an adverse effect on our cash flow and
earnings as well as on our ability to securitize leases. As of March 31, 1999,
approximately 33% of the outstanding receivables in our managed portfolio was
represented by leases originated in California, primarily as a result of our
acquisition of JLA, and an aggregate of approximately 24% of the outstanding
receivables in our portfolio was represented by leases originated in Florida,
New Jersey, New York and Texas. Economic conditions in these states, and in
California in particular, may affect the level of collections from, as well as
delinquencies and defaults by, these lessees.
We may not be able to integrate JLA into our business operations effectively
Prior to our acquisition of JLA in February 1999, JLA was an
independent operating subsidiary of another company, and had developed its own
operating, underwriting, processing and servicing policies and procedures. While
the process of integrating JLA's operations into ours has begun, the process may
result in unforeseen operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for the
implementation of our business strategy.
We are dependent upon our key management personnel for our future success
Our future success depends to a significant extent on the continued
service and coordination of our management team, particularly Abraham Bernstein,
our Chairman and Chief Executive Officer, and Crit S. DeMent, our President and
Chief Operating Officer. We do not currently have employment agreements with
members of management other than our Chief Executive Officer, President and
Senior Vice President of Operations. For a description of those agreements,
including rights of the respective officers to terminate their agreements, you
should read "Management--Employment Agreements." The departure of any of our
executive officers or key employees could materially adversely affect our
ability to implement our business strategy.
Regulatory and legal uncertainties could affect our strategy
Laws or regulations may be adopted with respect to our equipment
leases, the equipment leasing process or the Internet. For example, laws or
regulations could be adopted seeking to apply usury laws to implicit yields
under our leases, impose new taxes, impose liability on us for information
retrieved from or transmitted over the Internet, or to regulate domain name
registration, online content, user privacy, and quality of products and
services. Any new legislation or regulation, or changes in the interpretation of
existing laws which affect the equipment leasing industry or our strategy of
using e-commerce technologies to conduct our business, could have a material
adverse effect on our business, financial condition and results of operations.
Risks Associated with Our Technology Platform
Our technology platform is not protected by patent or copyright
We believe that one of our competitive advantages is our platform of
operating systems that allows us to automate substantial portions of our lease
application, credit evaluation, documentation and servicing processes. This
platform is not protected by patents, copyrights or other means and,
accordingly, there are no legal barriers preventing persons from developing
similar systems and competing with us to provide small ticket leasing to small
businesses. See "Business--Competition."
16
<PAGE>
Our technology platform could fail
Our operations depend on our ability to protect our technology platform,
particularly our computer and telecommunications equipment, against damage from
fire and water, power loss, telecommunications failure or a similar unexpected
adverse event. Moreover, if the capacity of our software or hardware is exceeded
due to an increase in the volume of products and services delivered through our
servers, we may have slower response times and, possibly, system failures.
Vendors with whom we have relationships, and their customers, may become
dissatisfied as a result of any system failure that interrupts our ability to
provide our lease financing. Sustained or repeated system failures would reduce
the attractiveness of our financing process. To the extent that we do not
effectively address any system failures or capacity constraints, vendors could
seek other lease finance providers.
We could face losses and potential liability if intrusions, viruses or similar
disruptions to our technology platform impede our service or jeopardize our
confidential information or that of our customers
Although we have implemented, and will continue to implement, security
measures, our technology platform is vulnerable to intrusion, computer viruses
or similar disruptive problems caused by or transmitted through Internet users.
Computer viruses or similar disruptions could lead to interruptions, delays or
cessation in our leasing processes. It is possible that lessees or others could
assert claims of liability against us as a result of such failure. In addition,
the misappropriation of proprietary personal information or the purchase or
lease of products through fraud could also expose us to a risk of loss or
litigation. Furthermore, until more comprehensive security technologies are
developed, the security and privacy concerns of existing and potential customers
may inhibit the growth of Internet commerce, which would adversely affect our
business strategy.
We may not be able to adapt as technologies and customer demands continue to
evolve
To be successful, we must continue to develop our technology platform to
address the changing needs of our business, participants in our strategic
marketing alliances, their distributors, dealers or resellers and the end users
of their equipment. If we fail to adapt our technology in a timely manner in
response to changing market conditions or customer requirements, our ability to
successfully compete could be materially adversely affected.
We may not be able to execute our business strategy if use of the Internet for
equipment lease financing does not develop
While our lease originations from vendors and resellers using the Internet
were less than 3%, measured by equipment cost, of lease originations in April
1999, our business strategy assumes that use of the Internet to originate leases
will account for a growing and ultimately significant portion of our revenues.
However, the use of the Internet for leasing transactions may not develop or
become economically sustainable.
We are subject to risks associated with Year 2000 compliance
The year 2000 issue is the result of computer programs and embedded hardware
systems having been developed using two digits rather than four to define the
applicable year. These computer programs or hardware that have date-sensitive
software or embedded chips may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in system failures or
miscalculations causing disruptions or failure of our operations including,
among other things, a temporary inability to transact new business or
communicate with our customers online. We have substantially completed our year
2000 compliance review, which included obtaining certifications from third party
software vendors regarding the year 2000 compliance of their software
applications, testing our core operating systems and identifying and repairing
any problems, and we believe that we are year 2000 compliant. However, we may
experience degradation in the performance of our systems or complete systems
failure if our assessment is erroneous or if we encounter unforeseen
difficulties. Any of these events, whether occurring in our systems, the systems
of participants in our strategic marketing alliances or the systems of others,
including equipment lessees, could have a material adverse effect on our
business, financial condition and results of operations. You should read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000" for a more detailed explanation of our state of readiness
and potential risks regarding year 2000 compliance.
17
<PAGE>
Risks Relating to this Offering
After the completion of this offering, we will continue to be controlled by
Resource America with whom we may have conflicts of interest
We are currently an indirect wholly-owned subsidiary of Resource America.
After this offering, 58.8% of our common stock, 55.9% if the underwriters
exercise their over-allotment option in full, will be owned indirectly by
Resource America through its wholly-owned subsidiary, Resource Leasing. Resource
America will thus have voting control over all matters upon which shareholders
vote, including election or removal of directors, amendment of our articles of
incorporation and bylaws, mergers, sale of substantially all of our assets,
increase of the common stock we are authorized to issue, issuance of "blank
check" preferred stock which may have an anti-takeover effect and dissolution.
Conflicts of interest with Resource America may arise. For example, Resource
America may have a conflict with us if we seek to issue more common stock which
might dilute Resource America's ownership percentage. In addition, as of March
31, 1999, Resource America had loaned us approximately $67.6 million in
connection with our acquisition of JLA and to fund our lease origination needs.
Resource America has agreed that, immediately before the closing of this
offering:
o it will contribute $30.0 million of this debt to our capital;
o it will exchange the balance of this debt for an amended and restated
unsecured note; and
o it will receive 279,697 shares of our common stock.
Neither the terms of the original funding nor the terms of the capital
contribution, the note or the number of shares of common stock Resource America
will receive were negotiated on an arm's-length basis. In addition, we will
reimburse Resource America for its costs and expenses incurred in connection
with this offering and our acquisition of JLA, including an allocation of
employee compensation. Such costs and expenses are estimated to be approximately
$1,000,000. For a description of the capital contribution, the note and share
issuance, you should read "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operation--Liquidity and Capital
Resources."
We do not anticipate paying cash dividends on our shares in the foreseeable
future
We have never declared or paid any cash dividends on our shares. We intend
to retain any future earnings to fund the operation and expansion of our
business and, therefore, we do not anticipate paying cash dividends on our
shares in the foreseeable future.
Purchasers in this offering will immediately experience substantial dilution in
net tangible book value
The initial public offering price is substantially higher than the net
tangible book value per share of the outstanding common stock immediately before
this offering. As a result, purchasers of shares of our common stock in this
offering will experience immediate and substantial dilution of $10.75 in net
tangible book value per share, or approximately 59.7% of the assumed offering
price of $18.00 per share. The assumed per share offering price represents the
midpoint of the range set forth on the cover of this prospectus. In contrast,
existing shareholders paid an average price of $4.42 per share and employees
have options to purchase 329,343 shares of common stock after this offering at
prices ranging from $0.32 to $3.82 per share. You should read "Dilution" for a
more detailed explanation of the dilution purchasers in this offering will
experience.
Common stock available for future sale by our shareholders may adversely affect
our stock price
If our shareholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. These sales could also make it more difficult for us to sell equity
or equity related securities in the future at the time and place that we deem
appropriate. You should read "Shares Eligible for Future Sale" for a more
detailed discussion of when and how many additional shares of our common stock
may be sold after this offering.
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<PAGE>
Shares of our common stock may be difficult to resell; you may not be able to
resell shares of our common stock at or for more than the price you paid
Before this offering, you could not buy or sell our common stock publicly.
We cannot assure investors that any trading market for our common stock will
exist following this offering, or that investors will be able to resell shares
our of common stock at or above the offering price. The offering price for
shares of our common stock will be determined through negotiations between us
and the underwriters and may not be indicative of the market price of the common
stock after the offering. Prices for shares of our common stock after the
offering may be influenced by a number of factors, including:
o the liquidity of the market for our common stock;
o investor perceptions of the equipment financing industry in general and
our company in particular;
o actual or anticipated fluctuations in our operating results;
o changes in expectations as to our future financial performance, or changes
in financial estimates of securities analysts;
o technological innovations by our existing or future competitors;
o departures of key personnel;
o the operating and stock price performance of comparable companies; and
o general economic and other conditions.
The stock markets in general have experienced volatility which has often
been unrelated to the operating performance of particular companies. If these
fluctuations continue, they may adversely affect the market price of our common
stock regardless of our actual operating performance.
USE OF PROCEEDS
The net proceeds to us from this offering are estimated to be $63.0 million
at an assumed initial public offering price of $18.00 per share, which is the
midpoint of the range set forth on the cover of this prospectus, after deducting
the underwriting discounts and estimated offering expenses payable by us. The
net proceeds will be $72.8 million if the underwriters' over-allotment option is
exercised in full.
We intend to use these proceeds for the continued growth of our leasing
business, including lease originations, enhancement and expansion of our
technology infrastructure, start-up costs for international operations, working
capital and for general corporate purposes. Pending such application, the net
proceeds will be invested in bank certificates of deposit and other short-term,
interest-bearing, investment grade securities. In addition, we will reimburse
Resource America for its costs and expenses incurred in connection with this
offering and our acquisition of JLA, including an allocation of employee
compensation. Such costs and expenses are estimated to be approximately
$1,000,000.
DIVIDEND POLICY
We have never declared or paid a cash dividend on our common stock. We
currently intend to retain any earnings to fund the development and growth of
our business. Therefore, we do not anticipate paying any cash dividends for the
foreseeable future. Our board of directors will determine whether to pay cash
dividends based upon our results of operations, cash flows, financial condition
and liquidity.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999 and:
o our capitalization as adjusted to give effect to: (a) the contribution to
capital of a portion of the intercompany debt held by Resource America
immediately before the close of this offering, (b) the issuance to
Resource America of 279,697 shares of our common stock in connection with
that contribution, and (c) the exercise of options by three of our senior
officers to acquire an aggregate of 713,228 shares of our common stock
immediately before the close of this offering; and
o our capitalization as further adjusted to give effect to the sale of
3,888,889 shares of our common stock in the offering at an assumed
offering price of $18.00 per share, after deducting the underwriting
discounts and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
March 31, 1999
-------------------------------------------------
As Further
Actual As Adjusted Adjusted
------ -------------- ----------
(in thousands)
Debt:
<S> <C> <C> <C>
Warehouse debt............................... $ 2,500 $ 2,500 $ 2,500
Nonrecourse debt............................. 259,743 259,743 259,743
Affiliate debt............................... 67,596 37,596 37,596
Other debt................................... 12,368 12,368 12,368
-------- -------- --------
Total debt................................... 342,207 312,207 312,207
Shareholders' equity:
Preferred stock, no par value; 1,000,000 shares
authorized; no shares issued and outstanding
actual and as adjusted, and as further
adjusted.................................... -- -- --
Common stock, no par value; 40,000,000 shares
authorized; 6,293,186 shares issued and
outstanding; 7,286,111 shares issued and
outstanding as adjusted, 11,175,000 shares
issued and outstanding as further adjusted.. 2,000 32,227 95,227
Retained earnings................................ 4,005 4,005 4,005
-------- ------ ------
Total shareholders' equity................... 6,005 36,232 99,232
-------- ------ ------
Total capitalization............................. $348,212 $348,439 $411,439
======== ======== ========
</TABLE>
DILUTION
The difference between the initial public offering price per share of our
common stock and the net tangible book value per share of our common stock after
this offering constitutes the dilution to investors in this offering. Net
tangible book value (deficit) per share is determined by dividing our net
tangible book value (deficit) by the number of outstanding shares of common
stock. Our net tangible book value is our total assets less our intangible
assets and total liabilities.
At March 31, 1999, we had an actual net tangible book (deficit) of $(12.2
million) or $(1.95) per share. At March 31, 1999, after giving effect to the
contribution to capital by Resource America and sale of the common stock in this
offering at an assumed offering price of $18.00 per share, less underwriting
discounts and commissions and estimated expenses of this offering, our net
tangible book value would be $7.25 per share. This represents an immediate
increase in our net tangible book value of $9.20 per share to existing
shareholders and an immediate dilution of $10.75 per share to new investors. Our
new investors will therefore experience dilution of approximately 59.7% of the
offering price of $18.00 per share.
20
<PAGE>
The following table illustrates the per share dilution to new investors:
<TABLE>
<CAPTION>
<S> <C>
Initial public offering price per share............................................. $18.00
Pro forma net tangible book value (deficit) per share as of March 31, 1999....... ($1.95)
Pro forma increase per share attributable to new investors....................... 9.20
-----
Pro forma net tangible book value per share after this offering..................... 7.25
------
Dilution per share.................................................................. $10.75
======
</TABLE>
The following table sets forth, on a pro forma basis as of March 31, 1999,
the number of shares of common stock purchased, the total consideration paid to
us and the average price per share paid to us by existing shareholders and by
investors purchasing shares of common stock in this offering, before deducting
estimated underwriting discounts and commissions and estimated offering expenses
of this offering:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
-------------------------- ---------------------- -------------
Number(1)(2) Percent Amount Percent Per Share
------------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............. 7,286,111 65.2% $32,226,644 31.5% $ 4.42
New investors...................... 3,888,889 34.8 $70,000,000 68.5 18.00
---------- ----- ----------- ----- ------
Total......................... 11,175,000 100.0% 102,226,644 100.0% $ 9.15
========== ===== =========== ===== ======
</TABLE>
- -------------------------
(1) If the underwriters' over-allotment option is exercised in full, the number
of shares of common stock held by new investors will increase to 4,472,222
shares, or 38% of the total shares of common stock outstanding after this
offering and the percentage of total shares outstanding held by existing
shareholders will be reduced to 62%.
(2) As of March 31, 1999, options to purchase a total of 1,042,571 shares at a
weighted average exercise price of $0.51 per share were outstanding. The
above table reflects the exercise of 713,228 options before completion of
this offering. After the contemplated exercise, options to purchase a total
of 329,343 shares at a weighted average exercise price of $0.94 per share
would be outstanding. To the extent all of these options are exercised,
there will be further dilution to new investors.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL, PRO FORMA AND OPERATING INFORMATION
Set forth below is selected consolidated financial and operating information
from March 4, 1996 (inception) to September 30, 1998 and for the six months
ended March 31, 1998 (unaudited) and 1999. Also set forth is pro forma financial
information for the year ended September 30, 1998 and the six months ended March
31, 1999 relating to the acquisition of JLA, which assumes that the acquisition
took place at the beginning of the respective periods. The selected consolidated
financial information has been derived from the consolidated financial
statements which appear elsewhere in this prospectus. This data should be read
in conjunction with our consolidated financial statements and the related notes
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" which are included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception)
through
September 30, Year Ended September 30, Six Months Ended March 31,
------------- -------------------------------- -----------------------------
1998 Pro 1999 Pro
1996 1997 1998 Forma(1)(2) 1998 1999(1) Forma(1)(2)
---- ---- ---- ------------ ---- ------- -----------
(unaudited) (unaudited) (unaudited)
(in thousands, except per share data)
Statement of Operations Data:
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......................... $ 7 $ 859 $2,525 $39,716 $1,013 $ 8,039 $14,435
Other income............................ -- 221 956 5,561 349 1,332 12,761
Gains on sales of leases and
terminations(3)........................ -- 3,710 7,598 7,598 3,883 5,064 1,209
------ ------ ------ ------- ------ ------ -------
Total revenues...................... 7 4,790 11,079 52,875 5,245 14,435 28,405
Costs and Expenses:
Provision for possible losses........... 7 253 1,422 4,691 625 1,523 2,536
Depreciation and amortization........... 36 232 425 1,874 190 594 1,076
Selling, general and administrative..... 411 2,050 3,337 10,467 1,890 5,071 7,143
Interest expense(4)..................... -- 690 1,689 24,633 738 4,760 13,016
------ ------ ------ ------- ------ ------ -------
Total expenses...................... 454 3,225 6,873 41,665 3,443 11,948 23,771
Income (loss) before provision (benefit)
for income taxes and cumulative effect
of a change in accounting principle.... (447) 1,565 4,206 11,210 1,802 2,487 4,634
Provision (benefit) for income taxes.... (152) 605 1,800 4,884 771 1,140 1,946
------ ------ ------ ------- ------ ------ -------
Income (loss) before cumulative effect
of a change in accounting principle.... $ (295) $ 960 $2,406 $ 6,326 $1,031 $1,347 $ 2,688
Cumulative effect of a change in
accounting principle(5)................ -- -- -- -- -- (413) (413)
------ ------ ------ ------- ------ ------ -------
Net income (loss) ...................... $ (295) $ 960 $2,406 $6,326 $1,031 $ 934 $2,275
====== ====== ====== ======= ====== ====== =======
Income (loss) per common share before
cumulative effect of a change in
accounting principle--basic(6)......... $(0.05) $ 0.15 $ 0.38 $ 1.01 $ 0.16 $ 0.21 $ 0.43
====== ====== ====== ======= ====== ====== =======
Net income (loss) per common
share--basic(6)........................ $(0.05) 0.15 $ 0.38 $ 1.01 $ 0.16 $ 0.15 $ 0.36
====== ====== ====== ======= ====== ====== =======
Weighted average shares outstanding..... 6,293 6,293 6,293 6,293 6,293 6,293 6,293
====== ====== ====== ======= ====== ====== ======
Income (loss) per common share before
cumulative effect of a change in
accounting principle--diluted(7)....... $(0.05) $ 0.14 $ 0.33 $ 0.88 $ 0.14 $ 0.19 $ 0.37
====== ====== ====== ======= ====== ====== =======
Net income (loss) per common
share--diluted(7)...................... $(0.05) $ 0.14 $ 0.33 $ 0.88 $ 0.14 $ 0.13 $ 0.31
====== ====== ====== ======= ====== ====== =======
Weighted average shares................. 6,338 6,653 7,219 7,219 7,199 7,247 7,247
====== ====== ====== ======= ====== ====== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
September 30,
------------------------ March 31,
1997 1998 1999
--------- -------- ---------
(in thousands)(1)
Balance Sheet Data:
Assets:
<S> <C> <C> <C> <C>
Gross investment in leases and notes receivable(8)......................... $ 9,334 $30,641 $385,445
Unearned lease income(9)................................................... (933) (4,061) (63,167)
Allowance for possible losses(10).......................................... (248) (1,602) (9,610)
------- ------- --------
Investment in leases and notes receivable............................... 8,153 24,978 $312,668
------ ------- --------
Cash and cash equivalents.................................................. 1,970 3,680 20,504
Other assets(11)........................................................... 1,426 3,611 12,101
Goodwill(12)............................................................... -- -- 18,252
------- ------- --------
Total assets $11,549 $32,269 $363,525
======= ======= ========
Liabilities and shareholder's equity:
Liabilities:
Warehouse debt............................................................. $ -- $ -- $ 2,500
Nonrecourse debt........................................................... -- -- 259,743
Affiliate debt(4).......................................................... 7,418 23,982 67,596
Other debt................................................................. -- -- 12,368
Other liabilities.......................................................... 1,466 3,216 15,313
------- ------- --------
Total liabilities....................................................... 8,884 27,198 357,520
------- ------- --------
Shareholder's equity....................................................... 2,665 5,071 6,005
------- ------- --------
Total liabilities and shareholder's equity.............................. $11,549 $32,269 $363,525
======= ======= ========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception)
through Year Ended Six Months Ended
September 30, September 30, March 31,
------------- -------------------- ------------------------
1996 1997 1998 1998(1) 1999(1)
------------- ------ -------- ---------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Operating Data:
Leases originated, by equipment type:
Number of leases:
Communications.............................. 13 1,156 2,965 1,270 1,823
Industrial.................................. 1 3 31 2 392
Information................................. 3 182 918 230 1,720
Office...................................... 18 1,744 3,905 1,599 2,970
Other....................................... 6 156 1,013 247 778
---- ----- ----- ----- -----
Total number of leases...................... 41 3,241 8,832 3,348 7,683
==== ===== ===== ===== =====
Equipment cost:
Communications.............................. $122 $12,052 $28,480 $12,076 $18,784
Industrial.................................. 15 41 523 268 19,102
Information................................. 28 2,542 12,806 3,364 26,646
Office...................................... 306 17,713 36,108 14,010 32,362
Other....................................... 244 1,637 10,823 2,070 10,494
---- ------- ------- ------- --------
Total equipment cost........................ $715 $33,985 $88,740 $31,788 $107,388
==== ======= ======= ======= ========
Weighted Average yield(13):
Communications............................. 12.6% 13.7% 13.5% 13.7% 12.7%
Industrial................................. 11.1 14.5 12.6 13.0 9.7
Information................................ 18.3 14.3 13.8 14.7 12.8
Office..................................... 11.9 13.4 13.0 13.2 12.1
Other...................................... 13.3 13.2 12.6 13.1 11.8
Average yield (all sectors)................ 12.7% 13.6% 13.2% 13.5% 11.9%
Leases originated, by purchase option:
Number of leases:
Fair market value purchase option.......... 21 1,649 4,514 1,775 3,667
Fixed price purchase option................ 6 259 572 259 394
Nominal cost purchase option............... 14 1,333 3,746 1,314 3,622
---- ------- ------- ------- --------
Total number of leases..................... 41 3,241 8,832 3,348 7,683
==== ======= ======= ======= ========
Equipment cost:
Fair market value purchase option.......... $370 $18,886 $50,201 $19,365 $47,730
Fixed price purchase option................ 171 2,125 4,844 1,948 4,979
Nominal cost purchase option............... 174 12,974 33,695 10,475 54,679
--- ------ ------ ------ ------
Total equipment cost....................... $715 $33,985 $88,740 $31,788 $107,388
==== ======= ======= ======= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception)
through, and as of Year Ended, and as of Six Months Ended, and as of
September 30, September 30, March 31,
------------- -------------------- ------------------------
1996 1997 1998 1998(1) 1999(1)
------------- ------ -------- ---------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Weighted average yield(13):
Fair market value..................... 12.2% 13.7% 13.1% 13.3% 12.4%
Fixed price purchase option........... 13.9 14.4 14.2 14.6 12.6
Average yield (all sectors)........... 12.7 13.6 13.2 13.5 11.9
Total managed portfolio:
Total gross receivables............... $847 $36,094 $117,025 $65,781 $533,248
Managed portfolio quality data:
Delinquencies at end of period as a percentage
of total outstanding managed receivables:
Current receivables.................. 100.0% 96.0% 97.9% 97.9% 97.6%
31-60 days........................... -- 2.8 1.2 1.2 1.4
61-90 days........................... -- 0.8 0.4 0.3 0.5
Over 90 days......................... -- 0.4 0.5 0.6 0.5
Total delinquencies.................. -- 4.0 2.1 2.1 2.4
Allowance for possible losses as a
percentage of total managed
receivables(10)....................... 0.8% 0.7% 1.4% 1.3% 1.8%
Net write-offs............................ -- ($12) ($68) ($46) ($715)
Operating Ratios:
Return on equity (1)(14).............. (34.6%) 43.9% 62.2% 57.5% 33.7%
Return on assets (1)(15).............. (32.6%) 14.4% 11.0% 13.0% 0.9%
Ratio of total debt to shareholder's -- 2.8x 4.7x 2.9x 57.0x
equity(1)(16).......................
Ratio of allowance for possible
losses to net write-offs(17).......... -- 20.7x 23.6x 18.0x 13.4x
Ratio of net write-offs as a percentage
of managed receivables(18) ......... -- 0.1% 0.1% 0.2% 0.4%
</TABLE>
23
<PAGE>
- ---------------------------------
(1) On February 4, 1999, we acquired all of the common stock of JLA. We
accounted for this transaction as a purchase and, consequently, allocated
the purchase price to assets acquired and liabilities assumed based upon
the fair value at the date of acquisition. JLA accounts for a substantial
amount of the assets and debt included in our March 31, 1999 consolidated
balance sheet, resulting from JLA's practice of structuring its
securitizations as on balance sheet transactions, as well as our on balance
sheet securitization of JLA leases. As a consequence of the JLA
acquisition, our results of operations for the six months ended March 31,
1999 may not be comparable to the results of operations for the six months
ended March 31, 1998. In particular, the JLA portfolio has a larger average
equipment cost and longer lease terms, resulting in a lower yield than
ours.
(2) These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments to (a) depreciation and
amortization expense attributable to allocation of the purchase price of
JLA; (b) selling, general and administrative expenses for certain cost
reductions realized from the combining of operations; (c) interest expense
for additional borrowings; (d) equipment leasing revenue as a result of the
purchase price allocation of JLA; and (e) provision for income taxes to
reflect the above adjustments at our tax rate. They do not purport to be
indicative of the results of operations which actually would have resulted
had the combination been consummated on October 1, 1997, or of future
results of operations of the consolidated entities.
(3) Gain on sales of equipment leases are recorded at the date of sale in the
amount by which the sales price exceeds the carrying value of the
underlying lease interest sold.
(4) As of March 31, 1999, the Company had $67.6 million of affiliate debt.
$46.9 million of the affiliated debt is subordinated and bears interest at
a rate of 10% per annum; $18.5 million bears interest at a rate of one
month LIBOR plus 1.50%; the balance of $2.2 million is a tax liability that
bears no interest. Affiliate interest expense was $588,000 for the six
months ended March 31, 1998 and $1.6 million for the six months ended March
31, 1999. For the year ended September 30, 1997, the interest expense was
$457,000, and for 1998, the interest expense was $1.3 million.
(5) In fiscal 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." SOP 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. We elected to
adopt the provisions of SOP 98-5 effective October 1, 1998, and
accordingly, start up costs of $753,000 ($413,000 net of income tax) which
had been capitalized at September 30, 1998 were charged to operations on
October 1, 1998 and are reflected in the consolidated statement of
operations for the six months ended March 31, 1999 as a cumulative effect
of a change in accounting principle.
(6) Basic earnings per share are determined by dividing net income by the
weighted average number of common shares outstanding during the period.
(7) Diluted earnings per share are computed by dividing net income by the sum
of the weighted average number of shares outstanding and dilutive potential
common shares issuable during the period. Dilutive potential common shares
consist of the excess of common shares issuable under the terms of various
stock option agreements over the number of such shares that could have been
acquired with the proceeds received from the exercise of the options.
(8) Gross investments in leases and notes receivables consist of the sum of the
total future minimum lease payments receivable, the estimated unguaranteed
residual value of leased equipment, initial direct costs incurred in
consummating a lease and interest bearing notes receivable from a purchaser
of leases.
(9) Unearned lease income is recognized as interest income over the term of the
lease by the effective interest method and represents the excess of the
total future minimum lease payments plus the estimated unguaranteed
residual value to be received at the end of the lease term over the cost of
the related equipment.
24
<PAGE>
(10) We maintain an allowance for possible losses for all leases for which we
have an ongoing at risk position. The allowance is determined by our
estimate of future uncollectable lease contracts based upon our historic
loss experience, industry trends and equipment characteristics. Our policy
is to charge off to the allowance those leases, which are in default and
for which we believe the probability of collection is remote.
Recoveries on leases previously charged off are restored to the allowance.
(11) Included in other assets are repossessed equipment held for resale, which
is stated at the lower of cost or market, deferred financing costs, which
are being amortized on a straight line basis over the lives of the related
debt and furniture and equipment at cost less.
(12) Goodwill, which arose through the acquisition of JLA, represents the excess
of the acquisition cost over the fair value of the net assets of the
business acquired and is being amortized over a period of 15 years, using
the straight line method.
(13) Weighted average yields on individual leases are weighted by original
equipment cost. Yields on individual leases are calculated by computing the
internal rate of return based on the scheduled cash flows at lease
inception date.
(14) Calculated as annualized net income divided by average shareholder's
equity.
(15) Calculated as annualized net income divided by average total assets.
(16) Calculated as total debt divided by ending shareholder's equity.
(17) Calculated as allowance for possible losses (ending balance) as a
percentage of net write-offs incurred during the period.
(18) Calculated as net write-offs divided by average managed receivables.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements, which are
subject to risks and uncertainties. Our actual results could differ materially
from those discussed. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below, as well as those
discussed elsewhere in this prospectus. We undertake no obligation to disclose
publicly the result of any revisions to those forward-looking statements that
may be made to reflect events or circumstances after the date of this prospectus
or to reflect the occurrence of unanticipated events. The following discussion
and analysis should be read in conjunction with "Selected Consolidated
Financial, Pro Forma and Operating Information" and our consolidated financial
statements and the related notes, which are included elsewhere in this
prospectus.
Overview
General. We are an equipment finance company which leases technology
equipment to the small business market through a sophisticated e-commerce
technology platform using computer and telecommunications systems and the
Internet. We specialize in financing equipment within a price range of $5,000 to
$250,000. The equipment we finance includes communications technology,
information technology, industrial technology and office automation equipment.
We have experienced continued growth in our business since our inception on
March 4, 1996. In February 1999, we acquired JLA, the U.S. small ticket leasing
subsidiary of Japan Leasing Corporation. See "--Acquisition of JLA." The JLA
acquisition accelerated our growth. The results of operations of JLA are
included in our consolidated results of operations from February 4, 1999. Our
growth has been characterized by substantial increases in lease originations. On
a consolidated basis, we entered into 7,683 lease transactions involving
equipment with an aggregate cost of $107.4 million during the six months ended
March 31, 1999. This included 7,219 lease transactions for an aggregate cost of
$84.6 million attributable to Fidelity Leasing and 464 lease transactions
involving equipment with an aggregate cost of $22.8 million attributable to JLA.
This compares to 3,348 lease transactions involving equipment with an aggregate
cost of $31.8 million that are entered into during the six months ended March
31, 1998. In fiscal 1998, we entered into 8,832 transactions involving equipment
with an aggregate cost of $88.7 million, in fiscal 1997 we entered into 3,241
transactions involving equipment with an aggregate cost of $34.0 million, and in
fiscal 1996 we entered into 41 transactions involving equipment with an
aggregate cost of $715,000.
We use a variety of funding techniques to acquire our leases. We use
warehouse facilities and working capital to fund leases on a short term basis.
Our medium term financing needs are met through our CP conduits. Our long term
financing strategy entails securitizing our leases in the term market.
We initially fund our lease originations through our warehouse facilities
and working capital. We generally repay borrowings under warehouse facilities
with the proceeds from lease sales or refinancing provided through CP conduit
securitizations. When one of our CP conduit facilities reaches its capacity, we
will seek either to obtain additional CP conduit facilities or to reduce the
amount outstanding under the existing facilities by securitizing lease
receivables in a term note securitization. Our lease sales and CP conduit
securitizations historically have been structured to qualify for treatment as
sales under generally accepted accounting principles. As a consequence of this
structure, our CP conduit securitizations were deemed to be "off balance sheet,"
that is, for accounting purposes, the leases sold were no longer deemed to be
our assets, and the related securitization obligations were no longer deemed to
be our indebtedness. This treatment was partially modified effective April 1,
1998 when we elected to retain the residual interests in our securitized lease
pools. The residual interests retained were deemed to be our assets for
accounting purposes and thus remained "on balance sheet." On April 1, 1999, we
elected to further modify the structure of our future securization transactions.
These modifications will result in future securitizations no longer qualifying
for treatment as sales under generally accepted accounting principles.
Accordingly, our leases and the related securitization indebtedness in
securitizations after April 1, 1999 will be retained on balance sheet as assets
and debt, respectively. These changes do not, however, apply to the sales
facilities relating to our strategic marketing alliances with IBM Credit and IBM
Canada. See "--Gains on Sales of Leases." The CP conduit securitization we
entered into in February 1999 to finance the acquisition of JLA was accounted
for as an on balance sheet transaction. See "--Overview--Acquisition of JLA." We
subsequently
26
<PAGE>
paid this facility down to a balance of $18.1 million with the proceeds of our
June 1999 term note securitization, which was also accounted for as an on
balance sheet transaction. See "--Liquidity and Capital Resources--Term Note
Securitizations."
Acquisition of JLA. On February 4, 1999, we acquired all of the common stock
of JLA for its book value of $38.0 million. In addition, we assumed $147.5
million in liabilities, refinanced $154.0 million of long term debt and incurred
$1.3 million in costs. This resulted in a total acquisition cost of $340.8
million. We accounted for this transaction as a purchase, and consequently,
allocated the purchase price to assets acquired and liabilities assumed based
upon their fair value at the date of acquisition. The fair value of the non-cash
assets acquired was $315.5 million. Funds used for the equity acquisition, long
term debt repayment and related expenses were provided through a CP conduit
securitization of $143.0 million, a seller's note of $6.7 million, a loan of
$43.6 million from Resource America and the assumption of $147.5 million in
liabilities, for a total of $340.8 million.
As of March 31, 1999, $307.3 million of our total assets and $270.7 million
of our total liabilities, excluding debt from Resource America, were
attributable to JLA. The substantial amount of assets and debt attributable to
JLA results, in part, from JLA's practice of structuring its securitizations as
on balance sheet transactions, as well as our on balance sheet securitization of
JLA leases. As a consequence of the JLA acquisition, our results of operations
for the six months ended March 31, 1999 may not be comparable to the results of
operations for the six months ended March 31, 1998.
As part of the acquisition process, we performed a due diligence examination
of JLA's books and records before the closing and conducted a post-closing
audit. After the closing, we discovered that 79 leases, with a net book value of
$5.5 million, had been restructured in the three months before closing. Although
the affected leases are currently performing in accordance with their
restructured terms, we are evaluating whether there is an incremental risk that
the lessees will default. We believe that our allowance in connection with these
leases is adequate to cover any potential incremental loss. We are also
exploring any claims we may have against the seller of JLA in connection with
the restructured leases.
Gains on Sales of Leases and Terminations
Through March 31, 1999, we structured a substantial part of our lease
financing transactions, other than our warehouse revolving lines of credit and
certain financings relating to JLA (see "--Liquidity and Capital Resources--CP
Conduit Securitizations" and "--Term Note Securitizations"), to meet the
criteria for treatment as sales under generally accepted accounting principles.
Thus, for all such transactions completed through that date, we recorded gains
on sales and terminations. These gains have been material: $3.7 million in
fiscal 1997, $7.6 million in fiscal 1998, $3.9 million for the six months ended
March 31, 1998 and $5.1 million for the six months ended March 31, 1999. On
April 1, 1999, as referred to in "--Overview--General," we elected to alter the
structure of our future securitizations so that we retain leases that we
securitize as long-term investments on our balance sheet and record the related
securitization indebtedness as on balance sheet debt for accounting purposes. We
also modified our $100.0 million CP conduit facility so that we would retain
leases as investments and record related securitization indebtedness as debt on
our balance sheet. The primary effect of these modifications is that we will
recognize income over the lives of the lease receivables rather than recognize
an immediate gain upon the sale of the lease receivables. Our cash flow, which
is influenced by the advance rates and discount rates provided for by the CP
conduit facilities, was unaffected by these modifications.
We currently have two sales facilities, one with IBM Credit and one with IBM
Canada, that, as a result of the requirements of IBM Credit and IBM Canada in
connection with those facilities, continue to be structured in a way that
requires us to treat transactions under the facilities as sales for accounting
purposes. All leases generated through these alliances must be sold to these
facilities.
Other Accounting Considerations
Direct Financing Leases. Leases are classified under accounting rules as
either capital or operating leases. For lessors, capital leases are further
subclassified as sales-type leases, leveraged leases or direct financing leases.
Our leases meet the criteria for classification as direct financing leases.
Direct financing leases transfer substantially all of the benefits and risks of
equipment ownership to the lessee. A lease is a direct financing lease if the
creditworthiness of the lessee and the collectibility of lease payments are
reasonably certain and the lease meets one of the following criteria:
27
<PAGE>
o it transfers ownership of the equipment to the lessee by the end of the
lease term;
o it contains a bargain purchase option;
o the term at inception is at least 75% of the estimated economic life of
the leased equipment; or
o the present value of the minimum lease payments is at least 90% of the
fair market value of the leased equipment at inception of the lease.
Our investment in leases consists of the sum of the total future minimum
lease payments receivable, the estimated unguaranteed residual value of leased
equipment and initial direct costs, less unearned lease income. Unearned lease
income consists of the excess of the total future minimum lease payments
receivable plus the estimated unguaranteed residual value expected to be
realized at the end of the lease term over the cost of the related equipment. We
typically structure a lease so that the present value of the minimum lease
payments exceeds the fair market value of the equipment at lease inception and
the lessee has an option at lease termination to purchase the equipment at its
fair market value or at a stated percentage of the cost of the equipment.
However, as a result of our acquisition of JLA, a substantial portion of our
managed leases provide the lessee with the option to purchase the underlying
equipment for a nominal amount.
Residual Value. Unguaranteed residual value in leases that do not have
bargain purchase options represents the estimated amount to be received at lease
termination from lease extensions or disposition of the leased equipment. We
base these estimates on available industry data and on our senior management's
experience with respect to comparable equipment. Current estimates of residual
values may vary from the original recorded estimates. We review residual values
from time to time to determine if the fair market value of the equipment is
below the recorded estimate of the residual value. If required, we adjust
residual values downward to reflect adjusted estimates of fair market value;
generally accepted accounting principles do not permit upward adjustments to
residual values.
Securitizations and Other Lease Sales. We initially fund lease originations
through warehouse revolving lines of credit and through working capital. We
thereafter refinance the leases through securitization transactions as follows:
o Sales by Assignment. From December 1996 through September 1997, we sold
leases and interests in the related equipment and residuals to
unaffiliated bankruptcy remote, special purpose entities, which in turn
sold these assets to an institutional purchaser.
o CP Conduit Securitizations. In these transactions, we sell lease
receivables and interests in the related equipment to special purpose,
bankruptcy remote entities. Beginning in April 1998, these entities have
been our wholly-owned subsidiaries. The special purpose entity, in turn,
securitizes the leases by selling or pledging its interest in the lease
receivables and equipment to a CP conduit. The CP conduit funds the
securitization by issuing commercial paper secured, in part, by the
leases.
o Term Note Securitizations. In these transactions, our special purpose,
wholly-owned subsidiary obtains the lease receivables previously sold or
pledged to a CP conduit. Interests in these leases are ultimately sold or
pledged to a trust that issues notes to investors secured by payments
under the leases and the related equipment.
To date, we have retained the right to service all of the leases we have
securitized.
In each securitization transaction, we receive, as consideration for
transferring the leases, cash equal to a substantial percentage of the aggregate
present value of the adjusted future cash flows from such leases. In addition,
where we account for securitizations as sales, we retain a non-certificated
undivided interest in the remaining future cash flow from securitized leases
after all obligations to securitization lenders have been paid, including the
equipment residual values. Our balance sheet includes, as part of our investment
in leases and notes receivable, the retained interest from our securitizations.
To date, the retained interest has been approximately 10% to 12% of the present
value of the aggregate future cash flows due under the pools of leases
28
<PAGE>
securitized in CP conduit securitizations and no more than 6% of the present
value of the aggregate future cash flows due under the pools of leases
securitized in term note securitizations. However, where we account for
securitizations as financings, both the securitized leases and the related
securitization indebtedness are recorded on our balance sheet. Securitization
indebtedness is recorded as the remaining balance due to the noteholders.
Over the life of a securitized lease pool, we are eligible to receive the
excess cash flow attributable to the retained interest resulting from the
excess, if any, of the lease payments and collections on equipment residuals
received, net of defaults, over the sum of (i) servicing, backup servicing,
trustee, custodial and insurance and credit enhancement fees, if any, and other
securitization and sale expenses and (ii) either (a) the portion of the lease
payments and collections in equipment residuals due to the purchaser of the
securitized leases or (b) amounts of principal and interest due to the
noteholders to whom securitized leases have been pledged as collateral. As a
result, our retained interest in our securitized lease pools, including
equipment residual values, if any, are effectively subordinated. Consequently,
all credit losses incurred on the entire portfolio of leases transferred in a
particular securitization or sale transaction are borne by us to the extent of
our retained interest. Accordingly, relatively small fluctuations between
estimated and actual charge-off rates could be material in relation to our
retained interest and could have an adverse effect on our ability to realize our
recorded basis in the retained interest. In the event of an increase in
anticipated charge-offs, we would be required to reduce the carrying amount of
the retained interest and record a charge to earnings in the period in which the
event occurred or became known to us.
Revenues
Interest Income. We recognize unearned lease income as interest income over
the term of the lease using the effective interest method. The effective
interest method of income recognition is applied by using a discount rate that
reflects a constant rate of interest recognized over the life of the lease. We
capitalize initial direct costs incurred in originating a lease and amortize
them over the lease term as a reduction in yield.
Other Income. Other income primarily consists of income we derive from the
fees we receive for servicing our portfolio of managed leases. Fee income also
includes payments under leases other than lease rentals, such as late payment
fees. We anticipate that our fee income will increase as our portfolio of owned
and managed leases increases.
Sales of Leases. We continue to generate gain on sale income from sales of
our leases to third party financing sources in connection with our strategic
marketing alliances with IBM Credit and IBM Canada as a result of their
requirements. See "--Gains on Sales of Leases."
Significant Costs and Expenses
Selling, General and Administrative. As a result of our growth, including
the JLA acquisition, the dollar amount of salaries and overhead expense has
increased significantly. We believe that our core management team, facilities
and systems are sufficient to support additional growth during the remainder of
fiscal 1999 and in fiscal 2000. We believe that staff growth during the period
will occur with respect to those activities which are volume related, such as
client service, while remaining relatively stable in support activities, such as
accounting. We also expect selling, general and administrative expenses
attributable to JLA to decline during the remainder of fiscal 1999 and fiscal
2000 as we complete the integration of JLA's operations and the resultant
reduction in office facilities and personnel.
Provision for Possible Losses. We maintain an allowance for possible losses
in connection with payments due under leases held in our portfolio and our
retained interest in leases securitized or sold. The allowance constitutes our
estimate of future uncollectible leases based on our historical loss experience,
including that of JLA, an analysis of delinquencies, economic conditions and
trends and our expectations of future trends, industry statistics, lease
portfolio characteristics and assumptions of future losses. Our policy is to
charge off those leases which are delinquent and for which we have made a
determination that the probability of collection is remote. We restore to the
allowance recoveries on leases previously charged off. Our provision for
possible losses and, as a consequence, our allowance for possible losses, has
increased significantly since 1996 as a result of the growth in our portfolio of
owned and managed leases, including growth resulting from the acquisition of
JLA. In addition, as a result of our short operating history, leases in our
portfolio, excluding leases acquired in the JLA acquisition, have generally not
reached the expiration of their initial terms. As a consequence, our historical
losses and delinquencies have been low relative to industry averages. We expect
that our recorded losses and delinquencies as a percentage of our aggregate
lease receivables will increase as our portfolio matures.
29
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the dollar amount
and the percentage of revenues represented by each of the items in our statement
of operations:
<TABLE>
<CAPTION>
Period from
March 4, 1996
(inception)
through Year ended September 30,
September 30, -------------------------------------------
1996 1997 1998
--------------- ------------------- ------------------
Amount Percent(1) Amount Percent(1) Amount Percent(1)
------ ------- ------ ------- ------ -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Interest income ................ $ 7 100.0% $ 859 17.9% $2,525 22.8%
Other income ................... -- -- 221 4.6 956 8.6
Gains on sales of
leases and
terminations .................. -- -- 3,710 77.5 7,598 68.6
----- ----- ------ ----- ------ -----
Total revenues ........... 7 100.0% 4,790 100.0 11,079 100.0
Costs and Expenses:
Provision for
possible losses ............. 7 --(2) 253 5.3 1,422 12.8
Depreciation and
amortization .............. 36 --(2) 232 4.8 425 3.8
Selling, general and
administrative ............ 411 --(2) 2,050 42.8 3,337 30.1
Interest expense ............. -- -- 690 14.4 1,689 15.2
----- ----- ------ ----- ------ -----
Total expenses ......... 454 --(2) 3,225 67.3 6,873 62.0
----- ----- ------ ----- ------ -----
Income (loss) before
provision (benefit)
for income taxes
and cumulative
effect of a change
in accounting
principle ..................... (447) --(2) 1,565 32.7 4,206 38.0
Provision (benefit) for income
taxes ......................... (152) --(2) 605 12.7 1,800 16.3
----- ----- ------ ----- ------ -----
Income (loss) before
cumulative effect of
a change in accounting
principle ................... (295) --(2) 960 20.0 2,406 21.7
Cumulative effect of a
change in accounting
principle ................... -- -- -- -- -- --
----- ----- ------ ----- ------ -----
Net income (loss) .............. $(295) --(2) $ 960 20.0% $2,406 21.7%
===== ===== ====== ===== ====== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended March 31,
------------------------------------------
1998 1999
------------------ -----------------
Amount Percent(1) Amount Percent(1)
------ ------- ------ -------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Interest income ................ $1,013 19.3% $ 8,039 55.7%
Other income ................... 349 6.7 1,332 9.2
Gains on sales of
leases and
terminations .................. 3,883 74.0 5,064 35.1
------ ---- ------- -----
Total revenues ........... 5,245 100.0 14,435 100.0
Costs and Expenses:
Provision for
possible losses ............. 625 11.9 1,523 10.6
Depreciation and
amortization .............. 190 3.6 594 4.1
Selling, general and
administrative ............ 1,890 36.0 5,071 35.1
Interest expense ............ 738 14.1 4,760 33.0
------ ---- ------- -----
Total expenses ......... 3,443 65.6 11,948 82.8
------ ---- ------- -----
Income (loss) before
provision (benefit)
for income taxes
and cumulative
effect of a change
in accounting
principle ..................... 1,802 34.4 2,487 17.2
Provision (benefit) for income
taxes ......................... 771 14.7 1,140 7.9
------ ---- ------- -----
Income (loss) before
cumulative effect of
a change in accounting
principle ................... 1,031 19.7 1,347 9.3
Cumulative effect of a
change in accounting
principle ................... -- -- (413) 2.8
------ ---- ------- -----
Net income (loss) .............. $1,031 19.7% $ 934 6.5%
====== ==== ======= =====
</TABLE>
- --------------------
(1) Expressed as a percent of total revenues.
(2) Our revenues in this period were de minimus. Accordingly, expressing
expenses as a percent of revenues is not meaningful.
30
<PAGE>
Six Months Ended March 31, 1999 Compared to the Six Months Ended March 31, 1998
Interest and Other Income. Interest and other income increased 588% to $9.4
million in the six months ended March 31, 1999 from $1.4 million in the six
months ended March 31, 1998. This increase was attributable primarily to an
increase in our portfolio of managed leases resulting from the acquisition of
JLA and its seasoned on balance sheet portfolio and, to a lesser extent, the
increased volume of lease originations, which resulted in increased servicing
fees, late fees and other fee income. JLA recognized interest and other income
of $6.5 million from the date we acquired it through March 31, 1999.
Gains on Sales of Leases and Terminations. Gains on sales of leases and
terminations increased by 30% to $5.1 million in the six months ended March 31,
1999 from $3.9 million in the six months ended March 31, 1998. The sale proceeds
for the 1998 period included a note with a face value of $8.0 million. Payment
on the note is subject to the level of lease delinquencies and realization of
residuals on sold leases. The increase in the gains on sales of leases was due
to the increased volume of lease originations during the six months ended March
31, 1999, partially offset by discontinuing the sale of residual interests.
Interest Expense. Our interest expense increased 545% to $4.8 million in the
six months ended March 31, 1999 from $738,000 in the six months ended March 31,
1998. The increase was attributable primarily to the financing we obtained for
the acquisition of JLA and $3.0 million of interest expense attributable to
JLA's leasing operations from February 4, 1999 through March 31, 1999 as a
result of the on balance sheet structure of JLA's prior securitizations. See
"--Overview--Acquisition of JLA."
Provision for Possible Losses. Our provision for possible losses increased
144% to $1.5 million in the six months ended March 31, 1999 from $625,000 in the
six months ended March 31, 1998. The increase was attributable primarily to the
growth in our lease originations and in our managed lease portfolios, including
growth attributable to the acquisition of JLA.
Depreciation and Amortization. Our depreciation and amortization increased
213% to $594,000 in the six months ended March 31, 1999 from $190,000 in the six
months ended March 31, 1998. The increase was due primarily to the expansion of
our leasing business, the volume of leases included on our balance sheet, and
$276,400 in depreciation and amortization expenses incurred by JLA from the date
we acquired it through March 31, 1999.
Selling, General and Administrative Expense. Our selling, general and
administrative expense increased 168% to $5.1 million in the six months ended
March 31, 1999 from $1.9 in the six months ended March 31, 1998. The increase
was due primarily to the increase in lease originations and applications and the
acquisition of JLA, which incurred $1.6 million in selling, general and
administrative expense from the date we acquired it through March 31, 1999. The
increase was also due to start-up costs of $607,800 which were expensed during
the six months ended March 31, 1999.
Provision for Income Taxes. Our provision for income taxes increased 48% to
$1.1 million before the benefit of a cumulative effect of a change in accounting
principle, in the six months ended March 31, 1999 from $771,000 in the six
months ended March 31, 1998. The effective tax rate increased to 46.1% in the
six months ended March 31, 1999 from 42.8% in the six months ended March 31,
1998. Through September 30, 1998, we filed a consolidated federal income tax
return with our ultimate parent, Resource America. We recorded a current
provision for, or benefit from, federal income taxes in the amount that would
have been payable or refundable at Resource America's incremental rate on our
book income or loss.
Cumulative Effect of a Change in Accounting Principle. We elected to adopt
the provisions of the AICPA's Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities," effective October 1, 1998. As a result, $753,000
of start up costs, or $413,000 net of income tax, which had been capitalized at
September 30, 1998, were charged to operations on October 1, 1998. These charges
are reflected in the consolidated statement of operations for the six months
ended March 31, 1999 as a cumulative effect of a change in accounting principle.
31
<PAGE>
Net Income. As a result of the forgoing, our net income decreased 9% to
$934,000 in the six months ended March 31, 1999 from $1.0 million for the six
months ended March 31, 1998.
Year Ended September 30, 1998 Compared to Year Ended September 30, 1997
Interest and other Income. Interest and other income increased 222% to $3.5
million in fiscal 1998 from $1.1 million in fiscal 1997. This increase was
attributable primarily to the increased volume of lease originations.
Gains on Sales of Leases and Terminations. Gains on sales of leases and
terminations increased 105% to $7.6 million for fiscal 1998 from $3.7 million in
fiscal 1997. Sales proceeds in fiscal 1998 included a note with a face value of
$8.0 million, while the sales proceeds in fiscal 1997 included a note with a
face value of $13.3 million. Payments on the notes are subject to the level of
lease delinquencies and realization of residuals on the sold leases. The
increase in our gains on sales of leases and terminations was due to the
increased volume of lease originations.
Interest Expense. Interest expense increased 145% to $1.7 million in fiscal
1998 from $690,000 in fiscal 1997. The increase was attributable primarily to
our increased borrowings from Resource America to fund lease originations. These
borrowings increased 223% to $24.0 million at September 30, 1998 from $7.4
million at September 30, 1997.
Provision for Possible Losses. Our provision for possible losses increased
462% to $1.4 million during fiscal 1998 from $253,000 in fiscal 1997. The
increase was fully attributable to the increased volume of lease originations.
Depreciation and Amortization. Depreciation and amortization increased 83%
to $425,000 during fiscal 1998 from $232,000 in fiscal 1997. The increase was
due primarily to the expansion of our leasing business and the volume of leases
included on our balance sheet, and to the purchase of equipment to manage this
flow.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased 63% to $3.3 million during fiscal 1998 from
$2.1 million in fiscal 1997. The increase was primarily due to the increased
volume of lease applications and originations, and the addition of 42 employees
during fiscal 1998 as our volume of lease originations increased.
Provision for Income Taxes. Our provision for income tax increased 198% to
$1.8 million in fiscal 1998 from $605,000 in fiscal 1997. The effective tax rate
increased to 42.8% in fiscal 1998 from 38.7% in fiscal 1997. Through fiscal
1998, we filed a consolidated federal income tax return with our ultimate
parent, Resource America. A current provision for, or benefit from, federal
income taxes was recorded in the amount that would have been payable at Resource
America's incremental rate on our book income had we remitted the provision to
or received the benefit from Resource America.
Net Income. As a result of the foregoing, our net income increased 151% to
$2.4 million in fiscal 1998 from $960,000 in fiscal 1997.
Year Ended September 30, 1997 Compared to Year Ended September 30, 1996
We were incorporated as a Pennsylvania corporation on March 4, 1996 and
began underwriting small ticket leases in August 1996. During the short 1996
fiscal year, we originated an immaterial amount of leases as compared to fiscal
1997, when we had a full year of operations. See "--Overview--General." As a
consequence, the results of operations for fiscal 1997 are not comparable to
those of fiscal 1996.
Liquidity and Capital Resources
General. Our primary liquidity needs are for the continued expansion of our
business. Equipment leasing is capital intensive and requires access to
short-term, medium-term and long-term financing to fund new equipment leases.
Historically, we have financed our business through warehouse facilities, CP
conduit facilities, intercompany borrowings from Resource America and term note
securitizations. Although Resource America does not expect to provide further
loans to us, we will continue to require access to substantial amounts of
capital from third-party sources to maintain and grow our business.
32
<PAGE>
Our uses of cash include the origination of equipment leases, expansion and
investment in technology, repayment of principal and interest under our
warehouse facilities and intercompany debt, operating and administration
expenses and income taxes.
As of March 31, 1999, we had 13 funding sources with commitments in the
aggregate amount of $603.0 million. Our borrowings and sales under these sources
totaled approximately $495.2 million as of that date. The following table sets
forth information concerning our sources of funding as of March 31, 1999.
<TABLE>
<CAPTION>
Aggregate
Total Amounts
Amount of Aggregate Available for
Number of Commitment/ Amounts Funding at
Sources Funded Outstanding March 31, 1999 Maturities
--------- ----------- ----------- -------------- ----------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Sales by Assignment............... 1 $ 13.4 $ 13.4 $ -- --
Facilities:
Warehouse facilities........... 1 20.0 2.5 17.5 3/00
CP conduits.................... 4 372.7 281.8 90.9 6/99 - 12/99
Sales facilities .............. 2 --(1) 0.6 --(1) --
Term note securitizations......... 2 116.9 116.9 -- --
Term loans........................ 2 12.4 12.4 -- 3/02 - 2/06
Intercompany debt................. 1 67.6 67.6 -- --
------ ------ ------ ------
Total........................... 13 $603.0(2) $495.2 $108.4(2)
====== ====== ====== ======
</TABLE>
- -------------
(1) Subject to certain conditions, we are required to finance all leases
originated under the IBM Credit and IBM Canada alliances with these
facilities. There is no stated limit to either of these facilities.
(2) Excludes facilities with IBM Credit and IBM Canada, neither of which have a
stated limit.
Warehouse Facilities. In December 1996, we entered into a line of credit for
$20.0 million of warehouse financing with First Union National Bank ("First
Union"). We use this facility to fund our daily lease originations. In September
1998, the parties amended the facility to add European American Bank ("EAB") as
an additional lender. First Union has committed $12.5 million and EAB has
committed $7.5 million under the facility. Their commitments expire March 31,
2000. Borrowings under the facility are at variable interest rates equal to, at
our election, either the LIBOR market index rate or LIBOR plus 150 basis points.
We pledged as collateral all of the receivables of, and the equipment subject to
leases funded through, the facility. The facility requires that Resource America
or Abraham Bernstein, our Chairman and Chief Executive Officer, own a majority
of our outstanding voting stock and that Mr. Bernstein continue to act as our
Chief Executive Officer, and restricts us from incurring or guaranteeing further
indebtedness other than subordinated indebtedness, trade debt in the ordinary
course of business, non-recourse debt and unsecured intercompany debt that does
not exceed 300% of the outstanding principal of our subordinated indebtedness.
These restrictions on indebtedness do not restrict our ability to securitize our
leases through special purpose subsidiaries. In addition, the facility requires
us to maintain a certain level of tangible net worth, and restricts us from
exceeding certain debt to tangible net worth and operating cash flow to fixed
charges ratios. It also requires us to continue to engage in substantially the
same line of business, among other covenants. Our failure to comply with these
requirements or to make payments due under the facility or certain other
recourse indebtedness on a timely basis, among other defaults, could result in
termination of the facility and acceleration of the then outstanding
indebtedness. Resource America guaranteed the performance of our obligations
under this facility.
In May 1999, Fidelity Leasing Canada, Inc. ("Fidelity Canada"), our
operating subsidiary in Canada, established a C$5.0 million (equivalent to $3.4
million based on the value of the Canadian dollar on May 31, 1999) line of
credit with the Bank of Montreal to finance leases originated in Canada under
our strategic marketing alliance with IBM Canada. The interest rate under this
facility is a variable rate equal to the Banker's Acceptance Rate plus 2% or the
lender's prime rate plus 0.75%. The facility expires on May 31, 2000. This
facility contains covenants and restrictions similar to those described in the
preceding paragraph, including change of control provisions. In addition,
termination of or amendment to our vendor program agreement with IBM Canada
constitutes an event of default absent the lender's prior written consent to
such termination or amendment. Together with Resource America, we are
guaranteeing Fidelity Canada's obligations under the facility. Fidelity Canada
will sell leases financed under this facility to IBM Canada on a periodic basis.
33
<PAGE>
Sales by Assignment. Beginning in December 1996 and in each quarter
thereafter through September 1997, we entered into sales transactions where we
sold lease receivables and interests in the related equipment and residuals to
an unaffiliated special purpose entity, for an amount equal to 100% of the
present value of the lease receivables and a note equal to the present value of
the residual interests. The special purpose entity resold the lease receivables
to Centre Square Funding Corporation. Resource America provided to Centre Square
a guaranty of payment of a portion of the lease receivables due under any
defaulted leases and of our performance as servicer. Centre Square subsequently
sold the lease receivables to a CP conduit administered by CoreStates Bank.
These transactions were accounted for as sales for financial reporting purposes.
CP Conduit Securitizations. In December 1997, we again sold lease
receivables and interests in the related equipment and residual interests to an
unaffiliated entity on terms similar to those of the sales by assignment, except
that we received from the special purpose entity cash equal to a substantial
portion of the present value of the lease receivables and a promissory note in
an amount equal to the balance of the present value of the lease receivables and
the present value of the residual interests. The special purpose entity resold
the receivables to a CP conduit administered by CoreStates Bank. The transaction
was accounted for as a sale for financial reporting purposes. The lenders'
commitment on this facility terminated in April 1999.
In June 1998, we established a revolving CP conduit facility having a
funding commitment of $100.0 million with a conduit administered by First Union.
This facility was later amended to increase the funding commitment to $125.0
million. With this facility, we began retaining the residual interests in the
securitized lease pools on our balance sheet for accounting purposes and the
purchaser under this facility is our special purpose subsidiary. This facility
contains events of default which are triggered when lease delinquencies or
defaults in the securitized portfolio exceed specified thresholds. In addition,
an event of default would occur if there is a change in our Chairman and Chief
Executive Officer, President or Senior Vice President or if we merge or
consolidate with another company and are not the survivor. The lenders'
commitment on this facility expired in June 1999. Because assets transferred
under this facility are treated as sales for financial reporting purposes, we do
not intend to renew this facility in its present form.
In December 1998, we entered into a revolving CP conduit facility,
administered by PNC Bank, that has a funding commitment of $100.0 million. The
commitment period expires in December 1999, but is subject to annual renewal at
the option of the CP conduit and its liquidity banks. This facility contains
provisions regarding events of default which are substantially similar to our
$125.0 million facility described in the immediately preceding paragraph. This
facility was recently amended to permit us to treat additional securitizations
we make under it as financings for financial reporting purposes.
In February 1999, we established a $143.0 million CP conduit facility
administered by First Union in order to finance our acquisition of JLA. In
connection with this facility, we sold a portfolio of JLA originated lease
receivables to a special purpose subsidiary, which pledged the receivables to
the CP conduit. This facility contains default provisions substantially similar
to our $125.0 million and $100.0 million facilities. We treated this transaction
as a financing for financial reporting purposes. This facility does not revolve
and was paid down to $18.1 million, primarily with the proceeds of our June 1999
term note securitization. See "--Term Note Securitizations." As of June 4, 1999,
we have paid it down to $8.6 million.
Sales Facilities. In December 1998, we entered into agreements with IBM
Credit and IBM Canada that allow us to finance, on a monthly basis, all of the
leases we originate under our strategic marketing alliances with them. We formed
two special purpose subsidiaries for purposes of these sales, one for lease
originations in the U.S. and the other for lease originations in Canada. IBM
Credit and IBM Canada require us to account for these transfers as sales for
financial reporting purposes.
34
<PAGE>
Term Note Securitizations. In June 1997, JLA securitized leases in a $75.0
million private placement of floating rate notes. The transaction has a 20%
optional repurchase feature, allowing us to treat the securitization as a
financing for tax and accounting purposes. In February 1998, JLA securitized
leases in a $125.0 million private placement of fixed and floating rate notes.
This transaction also has a repurchase option which permits us to treat the
securitization as a financing for financial reporting purposes.
In June 1999, we privately placed $158.8 million of fixed rate notes through
First Union Capital Markets Corp. This transaction effectively refinanced a
substantial portion of the $143.0 million CP conduit facility we established at
the time of our acquisition of JLA. See "--CP Conduit Securitizations." As
servicer, we have the right to prepay the outstanding notes when the remaining
balance of the leases is approximately $23.8 million. The transaction was
accounted for as a financing for financial reporting purposes.
Term Loans. As part of the consideration for our acquisition of JLA, we gave
the seller a promissory note with an original principal amount of $6.7 million,
which bears interest at the Treasury Rate plus 2.5% for the first two years and
at the Treasury Rate plus 4.0% until maturity in February 2004. The note is
payable in quarterly installments and is subordinate to all of our other
indebtedness, including our intercompany debt. At the closing of the JLA
acquisition, the seller was unable to deliver complete lease files on certain of
JLA's assets. As a consequence, the originally bargained for $8.8 million note
was reduced by $2.1 million to $6.7 million. To the extent that any lease files
are subsequently completed, we must add a portion of the lease's net investment
value to the outstanding principal balance on the note, up to an aggregate of
$2.1 million. As of June 30, 1999, the principal balance of the note has been
increased by $1.5 million as a result of lease files having been completed.
In addition, as part of the JLA acquisition, we acquired a small pool of
automobile leases. To finance this portfolio, we entered into a 36 month term
loan with First Union for $5.7 million which bears interest at LIBOR plus 1.0%.
Intercompany Debt. As of March 31, 1999, we had $67.6 million of unsecured
indebtedness to Resource America. Of this amount, $46.9 million is classified as
subordinated debt and carries an interest rate of 10%. The indebtedness is
subordinated to repayment of our First Union warehouse facility and the December
1997, June 1998 and February 1999 First Union CP conduit facilities. Of the
remaining $20.7 million of intercompany debt, $18.5 million carries an interest
rate of one month LIBOR plus 1.5% and the remaining $2.2 million is an
intercompany tax liability that bears no interest. The proceeds of these loans
were used for the acquisition of JLA and for general corporate purposes,
including funding lease originations. We currently add accrued interest to the
outstanding principal of the note. Immediately before the closing of this
offering, Resource America will contribute $30.0 million of the indebtedness to
our capital. The balance of the indebtedness will be exchanged for a note,
bearing interest at the rate of 8% per year and due after one year. We will have
eight six-month renewal options. A fee of 2% of the outstanding balance and
accrued interest of the note at the end of the expiring term must be paid to
Resource America for each extension. The note will be unsecured and will not be
subordinated.
Interest Rate Risk and Hedging
Our CP conduit facilities, which are at variable rates of interest, require
us to enter into interest rate swap agreements for the benefit of the purchaser
of the leases. Because the cost of funding under the CP conduit facility is
floating and the rental stream is fixed, an interest rate swap is needed to
hedge the resulting risk. Under an interest rate swap, the related special
purpose entity agrees to pay a fixed rate of interest and receive payment of a
floating rate from a counterparty. If short-term interest rates increase, then
the fixed rate of interest the special purpose entity is paying under the swap
will be less than the short-term rate it is receiving, resulting in a payment to
the special purpose entity. This payment will be used to offset the higher
borrowing costs under the commercial paper borrowings. If short-term rates fall,
then the fixed rate of interest the special purpose entity is paying under the
swap will be higher than the short-term rate it is receiving, resulting in a
payment to the counterparty. Therefore, the interest rate swap has the effect of
fixing the interest rate of the borrowings during the securitization period.
35
<PAGE>
We also use interest rate swaps from our CP conduit facilities to manage
interest rate risk resulting from our term note securitizations. This risk
arises because benchmark fixed rates of interest, including yields on treasury
bonds and asset-backed bonds, are subject to normal market fluctuations.
Consequently, it is possible that fixed interest rates payable on asset-backed
securities may have increased since the time a lease was originated, and that
the prevailing market rate, and thus the rate paid on our term note
securitizations, may approach or exceed the implicit interest rate of the leases
securitized. Interest rate swaps can mitigate this risk.
An interest rate swap permits a special purpose entity to terminate a swap
in connection with the transfer of leases from a CP conduit facility to a term
note securitization. Upon termination, the swap counterparty determines the
amount due from or owed to the special purpose entity in order to terminate the
swap. The amount of such payment is based on the prevailing market rates for
interest rate swaps. For example, if benchmark fixed rates of interest have
increased significantly since the commencement of the terminated swap, and all
other relevant factors have remained constant, the counterparty would most
likely be required to make a payment to the special purpose entity upon
termination. This payment would, in part, offset the negative impact of
securitizing the lease in a term note securitization at a time when fixed
interest rates for asset-backed securities have increased when compared to
benchmark fixed interest rates prevailing at the time the lease was originated.
In contrast, if benchmark fixed rates of interest have decreased significantly
since the commencement of the terminated swap, and all other relevant factors
have remained constant, the special purpose entity would most likely be required
to make a payment to the counterparty upon termination. This payment by the
special purpose entity would have the effect of offsetting the otherwise
positive impact of securitizing the lease in a lower fixed interest rate
environment.
Interest rate hedge agreements outstanding at March 31, 1999 for our CP
conduit securitizations had an aggregate notional value of approximately $295.7
million, required payments based on fixed rates ranging from 5.2% to 5.8% and
had a negative estimated fair market value of $83,383.
Interest Rate Sensitivity
The table below provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates, including interest rate swaps and debt obligations. For debt
obligations, the table presents principal cash flows and related weighted
average interest rates by expected maturity dates. For interest rate swaps, the
table presents notional amounts and weighted average interest rates by expected
(contractual) maturity dates. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract. Weighted average
variable rates are based on LIBOR as of March 31, 1999.
36
<PAGE>
<TABLE>
<CAPTION>
Expected Maturity Date
----------------------------------------------------------------------------
4/99-3/00 4/00-3/01 4/01-3/02 4/02-3/03 4/03-3/04 Thereafter Total
--------- --------- --------- --------- --------- ---------- -----
(in thousands, except percentage amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Long-term debt:
Fixed rate....................... $ 65,593 $69,868 $38,097 $10,879 $ 2,306 $2,258 $189,001
Average interest rate.......... 7.67% 8.14% 7.51% 6.60% 6.89% 7.26% 7.74%
Variable (commercial paper)...... $111,218 $83,411 $54,501 $32,681 $15,303 $3,934 $301,048
Average interest rate.......... 6.36% 6.36% 6.37% 6.37% 6.37% 6.37% 6.36%
Interest Rate Derivatives:
Interest rate swaps:
Variable to fixed................ $103,166 $84,872 $55,229 $33,071 $15,381 $3,946 $295,666
Average pay rate .............. 5.32% 5.34% 5.35% 5.35% 5.36% 5.27% 5.34%
Average receive rate (LIBOR) .. 5.01% 5.01% 5.01% 5.01% 5.01% 5.01% 5.01%
</TABLE>
Year 2000
The year 2000 issue is the result of computer programs and embedded hardware
systems having been developed using two digits rather than four to define the
applicable year. Those computer programs or hardware systems that have
date-sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in system failures or
miscalculations causing disruptions or failure of our operations including,
among other things, a temporary inability to receive new business or communicate
with our customers through our technology platform. Failure of our internal
operating systems or third party software, or of any systems maintained by third
parties that interface with our systems, to operate properly with regard to the
year 2000 and thereafter could cause system interruptions and loss of data. Any
of these events could have a material adverse effect on our business, financial
condition and results of operations.
Our business is very dependent on computer and telecommunications systems.
See "Risk Factors--Our technology platform could fail" and "Business--Our
Technology." Our year 2000 compliance review included assessing where problems
may occur, contacting third party software vendors to obtain certifications
regarding the year 2000 compliance of their software applications, testing our
core operating systems and remediating any problems. In December 1998, we
purchased a new telephone system and a building security system which were
developed to be year 2000 compliant. Because all of our computer systems and
software applications have been purchased from third parties, we have obtained
certifications from all of our major software vendors as to the year 2000
compliance of their products. We have also tested all of our servers and core
operating systems. We have booked leases that expire in and after the year 2000
into the system with no unresolved problems in our booking system. As a result,
we believe that our servers and operating systems are year 2000 compliant. To
date, the costs we have incurred in connection with year 2000 compliance have
not been material.
Although we are not aware of any material year 2000 compliance problems with
our systems and software applications that have not already been addressed, we
can offer no assurance that we will not discover year 2000 compliance problems
that will require substantial revisions or replacements. Further, we can offer
no assurance that governmental agencies, utility companies, Internet access
providers, smaller third party providers that interface with us and others
outside our control will be year 2000 compliant. We have attempted to mitigate
the risks of outside entity failures by contracting with large, established
companies such as Sprint for Internet access and Bell Atlantic for phone
service. This is, however, no guarantee that our Internet and telephone access
will not fail due to these companies having unforeseen year 2000 problems.
We are continuing to assess and test our year 2000 readiness but have not
adopted a formal contingency plan. We have back up servers and alternative
credit agencies available in the event that one is unreachable. Access to our
services is always available either by telephone or Internet. If our computer
systems are unable to process data, we will have to enter data manually. We will
hire temporary employees, if necessary, to enter such data.
37
<PAGE>
BUSINESS
Overview
We are an equipment finance company which leases technology equipment
to the small business market through a sophisticated e-commerce technology
platform using computer and telecommunications systems and the Internet. We
specialize in financing equipment within a price range of $5,000 to $250,000.
The equipment we finance includes communications technology, industrial
technology, information technology and office automation equipment.
We reach the small business market by forming strategic marketing
alliances and other program relationships with equipment vendors. Equipment
vendors may be manufacturers, distributors or resellers of technology equipment.
We classify a vendor program as a strategic alliance when the marketing of our
financing is integrated into the vendor's marketing process and the program
literature and documentation is private labeled with the name of the vendor or
co-branded with both the name of the vendor and our name.
The equipment vendors in our strategic marketing alliances and in our
other vendor relationships offer small businesses a total solution for their
equipment acquisition needs by providing equipment and financing in one package.
We provide the vendors in our programs with the ability to offer our financing
as part of their equipment marketing package. We also provide small business
leasing programs to commercial banks that want to offer a lease financing
product to their small business customers but do not want to invest in a leasing
infrastructure. Participants in our strategic marketing alliances and bank
programs include:
<TABLE>
<CAPTION>
<S> <C> <C>
o Convergent Capital Corporation o Huntington Leasing Corporation o Minolta Business Systems
o Emtec, Inc. o IBM Credit Corporation o Mitsui Machine Technology, Inc.
o FISI Madison Financial Corporation o Ingram Micro, Inc. o Quincy Compressor
o Green Pages, Inc. o Lucent Technologies, Inc. o Tech Data Corporation
o GTE Leasing Corporation o Midwest Micro Corporation o Telrad Telecommunications, Inc.
</TABLE>
We facilitate the equipment vendors' sales processes by offering them a
choice of three ways to complete a financing transaction:
o using our e-commerce platform, equipment vendors can submit a credit
application, receive a credit decision or a request for additional
information, receive a lease document and receive a purchase and
shipping authorization, all on the Internet, all within minutes of
submission of the credit application;
o using our facsimile platform, equipment vendors can submit a credit
application to our e-commerce center which we then enter into our
system for processing; we complete our processing through the
Internet and our technology platform, that is, make a credit decision
or a request for additional information, produce a lease document and
produce a purchase and shipping authorization, all in less than one
hour; or
o using our Call Center facility, equipment vendors can telephonically
submit a credit application which we then enter into our system for
processing; the processing is completed as explained in the
immediately preceding bullet point.
JLA's response times are currently not as fast as those of Fidelity
Leasing. JLA's e-commerce capability is being modified so that it will have the
same response times as Fidelity Leasing. Modifications are scheduled for
completion by the end of September 1999.
39
<PAGE>
Our technology platform allows vendors and banks to integrate their
e-commerce process with ours through hyperlinks from their web sites. Currently,
three of our strategic marketing alliance participants are building hyperlinks
so that they can access our web site and refer their customers to us for
financing. They are Emtec, Ingram Micro and Tech Data. Another strategic
marketing alliance participant, IBM, is establishing a separate web site address
under its own name that provides a window for its equipment vendors to access
our lease process. As more equipment vendors and banks develop web sites, we
will seek to link them to our technology platform and, thus, to the lease
financing we offer
As of March 31, 1999, we serviced a portfolio of 26,636 equipment
leases with an original equipment cost of $674.0 million. The average equipment
cost for our leases during the six months ended March 31, 1999 was approximately
$14,000 and the average lease term was 46 months with a weighted average yield
of 11.9%. All of our leases are full payout leases with the rentals returning
100% of the equipment cost plus an interest charge. For the fiscal year ended
September 30, 1998, we originated 8,832 leases involving equipment with an
aggregate cost of $88.7 million. For the six months ended March 31, 1999, we
originated 7,683 leases involving equipment with an aggregate cost of $107.4
million.
We were incorporated as a Pennsylvania corporation on March 4, 1996 and
commenced lease underwriting in August 1996. In February 1999, we acquired JLA,
the U.S. small ticket leasing subsidiary of Japan Leasing Corporation, which has
contributed significantly to our growth. JLA, which is now a wholly-owned
subsidiary of Fidelity Leasing, serves several technology sectors that are
similar to ours and also uses strategic and other marketing alliances with
vendors as a marketing strategy. The processes to complete a financing
transaction currently in use by Fidelity Leasing are being adopted for use by
JLA; we anticipate that the transition will be completed by the end of September
1999.
Industry Overview
Market Size. According to the Department of Commerce and the Department
of Labor in 1996, small businesses, defined as enterprises with fewer than 500
employees, employed 53% of the non-form private work force and contributed 47%
of all sales in the country. Small business-dominated industries produced an
estimated 64% of the new jobs in 1996 according to a 1997 report of the Small
Business Administration. As of 1996, there were approximately 23 million
enterprises classified as small businesses by the Small Business Administration.
According to the 1998 National Small Business United/Arthur Andersen's
Enterprise Group Survey of small and medium size business owners' conduct, 94%
of small and medium size businesses have computers. Of those businesses with
computers, 65% use the Internet, up from 49% in 1997. At the same time, business
to business e-commerce continues to grow. In the United States, according to
data published by Forrester Research in November 1998, business to business
e-commerce reached an estimated $43.0 billion in 1998 and is projected to reach
$109 billion in 1999.
The 1993 National Survey of Small Business Finances, sponsored jointly
by the Small Business Administration and the Federal Reserve Board, found that a
total of $668.0 billion in small business credit was outstanding in 1993 from
traditional sources, such as commercial banks and finance companies. The Small
Business Administration has reported that the number of loans in amounts less
than $100,000 grew by 26.8% from 1996 to 1997. The 1994 National Survey of Small
Business Finances found that, in 1994, 56% of all small businesses used credit
lines, mortgage loans or equipment leases. In addition, according to a survey
conducted jointly by Arthur Andersen's Enterprise Group and National Small
Business United, the percentage of owners of small and mid-sized businesses who
cited leasing as a source of financing more than doubled from 16% in 1997 to 36%
in 1998.
Equipment lease financing in the United States represents a large
market. The Equipment Leasing Association of America, using Department of
Commerce data, estimates that approximately $183.4 billion of the $593.0 billion
spent on equipment purchases by businesses in 1998 was financed through leasing.
Market Characteristics. The equipment leasing market is traditionally
segmented by the cost of the leased equipment:
o small ticket equipment involves equipment with costs ranging from
$5,000 to $250,000;
40
<PAGE>
o middle ticket equipment involves equipment with costs ranging from
$250,000 to $5,000,000; and
o large ticket equipment involves equipment with costs over $5,000,000.
The small ticket equipment segment in which we operate has unique
characteristics that influence our strategy. The marketing of small ticket
equipment typically occurs through independent distribution channels which are
highly fragmented and localized. Dealers and resellers for such equipment are
typically independently owned. While they may be "factory authorized," they are
usually multi-brand dealers.
Few banks, commercial lenders or equipment lessors have developed a
marketing and service program able to reach and serve the equipment financing
needs of small businesses on a national basis. We believe that the relative
absence of national coverage of this business sector results from the following
two factors:
o Marketing directly to small businesses through traditional marketing
techniques, such as field sales representatives, direct mail and
advertising, can be expensive. Small businesses are widely dispersed
in the United States. There are no national media directly accessing
large portions of the small business market.
o Few small businesses have audited or standardized financial
statements. Few banks and other traditional lenders have developed
commercial credit scoring systems permitting them to evaluate credit
capacity when financial statements are unavailable.
Our Solution
We have developed a marketing program and a technology platform that we
believe establishes a cost-effective solution for providing small ticket
equipment financing to small businesses throughout the United States. The key
aspects of our solution are:
Marketing Our Financing Services Through Vendor and Bank Programs. We
market our lease products by entering into strategic marketing alliances and
other relationships with technology equipment vendors and commercial banks. By
developing and maintaining these vendor programs, we are able to use the sales
forces of alliance participants and their distributors, dealers and resellers to
market our leasing products and services to the highly dispersed population of
small businesses. When coupled with our e-commerce and Internet capabilities,
our vendor programs allow us to provide equipment financing to small businesses
without the need to maintain a large field sales force.
Using Our Credit Evaluation Systems. Both Fidelity Leasing and JLA have
developed credit evaluation systems designed to address the inability of most
small businesses to provide audited or standardized financial statements. Key
elements of our systems include:
o automatic extraction of credit information from online data bases
such as those maintained by TRW, Dun & Bradstreet, Equifax and Trans
Union;
o credit scoring for smaller transactions; and
o credit analyst review only of larger transactions and transactions
where credit scoring does not provide a clear acceptance or
rejection.
Our credit scoring systems operate by assigning point values to various
factors such as business longevity, type of business, payment history, bank
account balances, lawsuits, judgments, liens and credit ratings. These point
values are weighted based upon their correlation to default predictiveness, and
then added to arrive at a credit score for the applicant. The scoring system
either grants or declines approval, or refers the application to a credit
analyst, based upon thresholds established from statistical correlations between
scores and payment performance derived from proprietary algorithms using
industry and other data. Approximately 70% of the credit decisions made by
Fidelity Leasing, measured by number of applications, are made through credit
scoring.
41
<PAGE>
JLA, whose lease originations typically involve equipment costs
substantially in excess of the equipment costs for Fidelity Leasing-originated
leases, has also developed a proprietary system of specific underwriting
criteria for its larger transactions, called "risk acceptance criteria" or
"RACs," that an application must meet for credit approval. RACs are modified
slightly for each equipment type and for various transaction size categories.
Applicants not meeting a particular criterion may provide a credit analyst with
additional information to explain the non-compliance. The analyst may thereafter
approve the application if the explanation is satisfactory. Substantially all of
JLA's credit decisions are made through credit scoring or RACs.
Our Business Strategy
Our objective is to become the leading technology equipment lease
finance provider for small businesses. Key elements of our strategy include:
Developing New Strategic Marketing Alliances. We have developed
strategic marketing alliances with leading technology equipment manufacturers
and vendors and commercial banks. For the six months ended March 31, 1999,
approximately 40% of our lease originations, measured by equipment costs, came
from our strategic marketing alliances. These relationships enable us to reach
our targeted small business market as a designated lease financing source of
these companies and as a lease financing provider to which they refer their
distribution networks. We intend to build on that marketing position by
expanding the formation of strategic marketing alliances with other leading
technology providers.
Expanding Our Technology Platform and Integrating it with the Marketing
Processes of Participants in Our Strategic Marketing Alliances. We have
developed a sophisticated technology platform to deliver our lease finance
services. Currently, our Internet application enables us to establish a
hyperlink between a manufacturer's or distributor's web site and our web site to
permit them, or their authorized dealers and resellers, to do the following:
o complete a leasing application;
o receive credit approval and purchase authorization or, alternatively,
a request for further information;
o request a computer generated lease or a priced financial proposal;
and
o print out the lease documents online.
It also enables us to establish a separate web address that links an equipment
vendor to a customized window with an alliance participant's name or co-branded
with the participant's name and our name. This customized window allows the
equipment vendors to access our technology platform. We intend to expand our
technology platform by offering additional services to participants in our
strategic marketing alliances such as customer data mining, lessee asset
management and lease products in which lease payments are based upon use, as,
for example, copier lease payments based upon the number of copies made. We
intend to enhance our Internet capabilities by adding such products as a master
lease line of credit in which a previously approved lessee can directly draw
down on a lease line of credit for additional equipment acquisitions.
42
<PAGE>
Serving the Customer through Technology. We have developed a
computer-based lease processing and accounting system which automates a
substantial portion of the leasing process, giving us the capability of
underwriting and servicing high volumes of small ticket leases. We intend to
continue our development of this system to maintain and enhance our ability to
service the lease financing needs of our vendors and their customers rapidly and
efficiently. For leases involving equipment costs of under $50,000, we have
developed our FastFunds rapid response process. FastFunds has currently been
implemented at Fidelity Leasing; integration of JLA into the FastFunds process
is not expected to be completed until August 1, 1999. FastFunds features
include:
o one hour guaranteed credit response;
o one page, plain language form of lease;
o electronic preparation and transmission of lease documents;
o rapid funding to the vendor upon verification of equipment
installation and lessee acceptance; and
o single company contact for the vendor.
Under FastFunds, Fidelity Leasing provides a credit response--an
acceptance, decline or solicitation for additional information--within one hour.
During fiscal 1998, Fidelity Leasing responded to approximately 58% of the
20,615 credit requests it received within 30 minutes. The form of lease used by
Fidelity Leasing is written in easily understood language designed not to
intimidate small business lessees. The administrative process of Fidelity
Leasing has been designed to avoid the difficulties a small business lessee or
its vendor may encounter in obtaining responses to its inquiries from a
multi-department financial institution by providing a single client manager as
the sole point of contact throughout the lease term. We believe that our
FastFunds program gives us a significant competitive advantage over other
financing companies which target the small business market.
Maintaining a Singular Competitive Focus--One Product for One Market.
We intend to maintain our singular competitive focus on small ticket leasing of
technology equipment to small businesses. We believe that this focus
distinguishes us from many of our competitors and results in significant
competitive advantages. It allows for:
o one set of operating systems;
o one skill set for our employees; and
o consistent credit underwriting processes, operating policies and
transaction documents.
This focus is directed at serving the lease financing needs of small businesses
without the distraction of dealing with other products, services and markets. As
a result, we believe that we can reach a larger share of the small business
lease financing market by offering better service to vendors and lessees at a
lower cost and underwrite lease financings with greater predictability of lease
receivables performance. Moreover, the small size of a typical transaction
relative to our total lease portfolio reduces our credit risk exposure from any
particular transaction.
Increasing Recognition of Our Corporate Identity. We intend to actively
develop our presence at the dealer and reseller level by establishing national
name recognition for Fidelity Leasing as a premier provider of lease financing
to the small business customers of technology equipment manufacturers and
vendors. We intend to establish our name recognition through an emphasis on
co-branding our lease finance services with the names of leading technology
equipment manufacturers and vendors, thus positioning ourselves with these
manufacturers and vendors, and their products, as a designated financial
services provider. We will also seek to link our financial services with these
manufacturers and vendors through our technology platform and web site
hyperlinks. We believe that establishing national name recognition with
manufacturers and vendors in the small business sector will enable us to
increase our market share.
43
<PAGE>
Expanding Our Market Beyond the United States. We believe that the
Internet enables us to access substantial opportunities for small ticket lease
financing in non-U.S. markets. In 1998, we commenced operations in Canada
through Fidelity Canada. We intend to develop our presence internationally by
developing international strategic marketing alliances, by expanding domestic
strategic marketing alliances internationally and by establishing international
sales offices.
The Growth of Our Business
General. Our small ticket leasing activities have grown substantially
since the inception of our leasing operations. The number of our leases funded
rose 161%, as measured by equipment cost, or 173%, as measured by the number of
leases, from fiscal 1997 to fiscal 1998. As of March 31, 1999, we had formed
strategic marketing alliances with 15 leading manufacturers and resellers of
technology equipment and financial institutions, had formal and informal
arrangements with approximately 2,000 other vendors and had underwritten leases
in all 50 states and the District of Columbia. In October 1998, we commenced
operations in Canada through our subsidiary, Fidelity Canada. As part of our
alliance with IBM Canada, Fidelity Canada assumed the management of a $39.4
million small business lease portfolio formerly serviced by Newcourt Credit
Group. At the request of one our strategic marketing alliance participants, we
plan to originate leases in Puerto Rico. To that end, in April 1999 obtained a
license from the Commissioner of Financial Institutions of Puerto Rico which
permits us to provide lease financing there.
Acquisition of JLA. On February 4, 1999, we acquired JLA, which
significantly added to our growth and lease origination capabilities. As of
March 31, 1999, $307.3 million, as measured by the total assets attributable to
JLA. From the date of acquisition through March 31, 1999, JLA originated 464
leases with an equipment cost of $22.8 million which accounted for 21% of our
lease originations, as measured by original equipment costs, for the period.
JLA, which is our wholly-owned subsidiary, is engaged principally in
small ticket lease financing throughout the United States. Prior to February 4,
1999, JLA was the United States small ticket leasing subsidiary of Japan Leasing
(U.S.A.), Inc., a wholly-owned subsidiary of Japan Leasing Corporation. JLA's
principal office is located in Torrance, California. Before we acquired it, JLA
had organized its leasing business by equipment category and market segment. Its
four groups were hard asset equipment, high tech equipment, wholesale leasing
and Japanese lessees. After our acquisition, the organization has been changed
to reflect Fidelity Leasing's marketing approach of organizing by technology
group. JLA currently has technology groups for:
o computer hardware and software;
o communications equipment and other technology equipment; and
o industrial technology.
In addition, JLA has retained the Japanese lessee and wholesale groups.
The Japanese group services corporate clients with Japanese parent
organizations. Lessees are generally affiliates or subsidiaries of large
companies, including Japanese banks, investment banks, and manufacturers. The
Japanese group also handles U.S. domestic clients for whom an understanding of
the Japanese language and culture is important. The wholesale group originates
or acquires contracts through other lessors who are typically smaller than JLA
and, to a lesser extent, through contracted brokers. The majority of the
business of this group comes from fewer than 10 sources. Equipment types for
both the Japanese and wholesale groups are similar to those leased through JLA's
technology groups.
44
<PAGE>
As part of our normal course of operations, we expect from time to time
to consider the possibility of further acquisitions; however, we do not expect
to rely on acquisitions for future growth.
Leasing Operations Growth. The following table sets forth the growth in
our leasing operations for the period March 4, 1996 (date of inception) through
September 30, 1996, the years ended September 30, 1997 and 1998 and the six
months ended March 31, 1999 (including growth attributable to our acquisition of
JLA):
<TABLE>
<CAPTION>
Period from
March 4, 1996 Six Months
(Inception) Year Ended September 30, Ended
through September 30, --------------------------- March 31,
1996 1997 1998 1999
--------------- ------------ ------------ ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Leases funded............................... 41 3,241 8,832 7,683
Original cost of equipment leased........... $ 715 $ 33,985 $ 88,740 $ 107,388
Managed receivables serviced(1) ............ $ 847 $ 36,094 $ 117,025 $ 533,248
</TABLE>
- ---------------------------------
(1) Stated as of period end.
Our Lease Products
We seek to reduce the financial risk associated with our lease
transactions through the use of full-payout leases. A "full-payout lease" is a
lease under which the non-cancelable rental payments due during the initial
lease term are at least sufficient to recover the purchase price of the
underlying equipment, related acquisition fees and, typically, a minimum return
on our invested capital. The initial non-cancelable term of the lease is equal
to or less than the equipment's estimated economic life. Initial terms of the
leases in our portfolio generally range from 12 to 72 months, and had an average
initial term of 46 months as of March 31, 1999.
The terms and conditions of all of our leases are substantially
similar. In general, they require lessees to:
o maintain, service and operate the equipment in accordance with the
manufacturer's and government-mandated procedures;
o insure the equipment against property and casualty loss;
o pay all taxes associated with the equipment; and
o make all scheduled contract payments regardless of the performance of
the equipment.
Throughout the term of a lease, we will charge late fees, prepayment penalties,
loss and damage waiver fees and other service fees, when applicable, which
enhance the profitability of the lease. Our standard lease forms provide that in
the event of a default by the lessee, we can require payment of liquidated
damages and can seize and remove the equipment for subsequent sale, refinancing
or other disposal at our discretion, subject to any limitations imposed by
applicable law. Any additions, modifications or upgrades to the equipment,
regardless of the source of payment, are automatically incorporated into and
deemed a part of the equipment financed.
To the extent possible, we seek to increase the realization on our
residual interest in leased equipment through amounts received upon exercise of
lessee purchase options, re-marketing the equipment in the secondary market or
continued leasing of the equipment after expiration of the initial lease term.
Our leases require lessees to provide notice of termination 30 days before the
end of their lease terms to enable us to arrange for disposition of the
underlying equipment. If notification is not provided, we treat the lease as a
month-to-month lease and bill the lessee for rent until the equipment is
returned for disposition to a location designated by us. Lessees also have the
right to purchase equipment leased to them at the end of the lease term. The
purchase price is either the "fair value" of the lease, a specified percentage
of the original equipment cost, or a bargain purchase that permits a lessee to
buy the leased equipment for a nominal amount. The lessee selects one of these
options at the time it applies for the lease. We charge lower implicit interest
rates on leases with fair value or percentage of cost options than we do on
leases with bargain purchase options. If equipment is returned to us at the end
of a lease term, or earlier upon a default and repossession by us, we sell it
either to the original vendor or to a used equipment dealer.
45
<PAGE>
Asset Quality
The table below sets forth lease delinquencies for our equipment lease
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
September 30, March 31, 1999
---------------------------------------------------------------- -------------------
1996 1997 1998 1999
------------------ ------------------ --------------------- -------------------
Amount Percent Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- --------- ------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net managed receivables....... $ 847 100.0% $ 36,094 100.0% $117,025 100.0% $533,248 100.0%
Current....................... 847 100.0 34,665 96.0 114,596 97.9 520,260 97.6
Delinquencies:
31-60 days past due........... -- -- 1,007 2.8 1,407 1.2 7,657 1.4
61-90 days past due........... -- -- 274 0.8 450 0.4 2,469 0.5
Over 90 days past due......... -- -- 147 0.4 572 0.5 2,863 0.5
------ ----- --------- ----- -------- ----- -------- ------
Total delinquencies........ $ -- --% $ 1,428 4.0% $ 2,429 2.1% $ 12,989 2.4%
------ ----- ======== ===== ======== ===== ======== ======
</TABLE>
The following table sets forth our allowance for credit losses as of
September 30, 1996, 1997 and 1998 and as of March 31, 1999, and the related
provisions for credit losses, write-offs and recoveries for such periods and as
a percentage of the average gross investment in leases:
<TABLE>
<CAPTION>
Allowance
Amount
---------
<S> <C>
Fiscal 1996:
Balance at beginning of period.................................................................... $ ---
Provision for losses.............................................................................. 7
Net write-offs.................................................................................... --
------
Balance at end of period.......................................................................... $ 7
======
Percentage of managed receivables................................................................. 0.8%
======
Fiscal 1997:
Balance at beginning of period.................................................................... $ 7
Provision for losses.............................................................................. 253
Net write-offs.................................................................................... (12)
-------
Balance at end of period.......................................................................... $ 248
=======
Percentage of managed receivables................................................................. 0.7%
=======
Fiscal 1998:
Balance at beginning of period.................................................................... $ 248
Provision for losses.............................................................................. 1,422
Net write-offs.................................................................................... (68)
-------
Balance at end of period.......................................................................... $ 1,602
=======
Percentage of managed receivables................................................................. 1.4%
=======
Six Months Ended March 31, 1999:
Balance at beginning of period.................................................................... $ 1,602
Acquisition of subsidiary......................................................................... 7,200
Provision for losses.............................................................................. 1,523
Net write-offs.................................................................................... (715)
-------
Balance at end of period.......................................................................... $ 9,610
=======
Percentage of managed receivables................................................................. 1.8%
=======
</TABLE>
46
<PAGE>
Portfolio Composition
Equipment Type. The table below sets forth the distribution of
equipment we have leased, by technology type and by percentage of dollar value
of equipment purchased, during the fiscal years ended September 30, 1996, 1997
and 1998 and for the six months ended March 31, 1999:
Equipment Volume by Technology Type
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception) Six Months
through Year Ended September 30, Ended
September 30, ------------------------ March 31,
1996 1997 1998 1999
-------------- ----- ----- -----------
(percent by dollar volume of equipment purchased)
<S> <C> <C> <C> <C>
Communications technology............ 17.1% 35.5% 32.1% 17.5%
Industrial technology................ 2.1 0.1 0.6 17.8(1)
Information technology.............. 3.9 7.5 14.4 24.8
Office automation.................... 42.8 52.1 40.7 30.1
Other equipment...................... 34.1 4.8 12.2 9.8
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
- -------------------------
(1) The increase in this sector resulted from the acquisition of JLA on February
4, 1999.
Communications technology equipment includes telephone systems and
related equipment. Industrial technology equipment includes printing,
woodworking, materials handling and industrial compressor equipment. Information
technology equipment includes computers, printers, computer software, point of
sale and audio/visual equipment. Office automation equipment includes copiers,
facsimile machines, accounting machines and office security systems. Other
equipment includes medical, dental and laboratory testing equipment.
Geographic Distribution. As of March 31, 1999, the geographic
distribution of our leases, based on the location of the lessees, was as
follows:
<TABLE>
<CAPTION>
Percentage Measured by
Outstanding
State Receivables
- ----- ----------------------
<S> <C>
California................................................................... 32.5%
Texas........................................................................ 7.4
New York..................................................................... 6.9
Florida...................................................................... 5.6
New Jersey................................................................... 3.7
Georgia...................................................................... 3.6
Illinois..................................................................... 3.4
North Carolina............................................................... 2.9
Ohio......................................................................... 2.4
Pennsylvania................................................................. 2.4
Other........................................................................ 29.2
-----
100.0%
=====
</TABLE>
Customer Mix. We have a broad lessee and vendor base. As of March 31,
1999, measured by the dollar amount of lease receivables, no single lessee
accounted for more than 0.37% of our managed lease portfolio and our 25 largest
lessees accounted for less than 6% of our managed lease portfolio. Except for
two vendors which accounted for 5.2% and 4.3% of our managed lease portfolio
measured by equipment cost at March 31, 1999, no single vendor accounted for
more than 3.8% of our managed lease portfolio, measured by equipment cost, and
our top 25 vendors accounted for 41% of our managed lease portfolio.
47
<PAGE>
Marketing and Originations
We market our equipment lease products through the use of strategic and
other marketing alliances and other relationships consisting primarily of:
o vendor programs with equipment manufacturers, distributors and
resellers; and
o programs offered through banks directly to their customers.
Vendor Programs. Our vendor programs give us two marketing paths to
equipment end users. First, in a typical manufacturer or distributor
arrangement, the manufacturer or distributor will recommend us to its resellers
as an approved source of financing. We jointly develop marketing and lease
financing application materials which in most cases are co-branded to identify
both the manufacturer or distributor and Fidelity Leasing or JLA, as the case
may be. We then solicit the manufacturer's or distributor's authorized dealers
and resellers directly. Second, we have the capability of offering direct web
site links with vendors. An authorized dealer or reseller can do all of the
following online:
o access our web site through a hyperlink from the web site of the
manufacturer or distributor;
o submit a customer credit application;
o use our finance calculator to choose the appropriate finance
structure and to calculate interest rates and monthly payments;
o receive credit approval; and
o complete lease documentation and a purchase and install
authorization.
We also have the capability of establishing a separate web address
either under the name of a manufacturer or distributor, or co-branded with the
manufacturer's or distributor's name, that provides a window for its equipment
vendors to access our technology platform. The separate web address is referred
to in the manufacturer's or distributor's web site, but is not connected to it
by a hyperlink.
We concentrate on establishing relationships with well established
manufacturers with recognizable brand names and with reputations for producing
high quality equipment. We believe that concentrating on leasing high quality
equipment, together with warranties from reputable manufacturers, reduces our
credit and collateral risk.
We have a Business Development Department that focuses on identifying
new technology providers and establishing them as participants in strategic
marketing alliances with us. Once a strategic marketing alliance has been
established, we offer our leasing products and services to the alliance
participant's distributors, dealers and resellers through our Telemarketing
Sales Group and through our Field Manager Group. Our Telemarketing Sales Group
focuses on information and communications technology equipment, while our Field
Manager Group focuses on industrial technology equipment. To expand our
relationships with participants in strategic marketing alliances, we have a
Program Management Department, including a program manager for our Canadian
subsidiary, which works closely with our alliance participants to develop new
marketing strategies and sales support programs.
By offering a vendor timely, convenient and competitive financing for
its equipment sales, we facilitate the vendor's sales process and become a part
of its overall sales approach to equipment purchases. The vendor is thus
offering not only the equipment, but our lease financing. This allows us to use
the vendor's sales organization as a sales force on our behalf to increase our
lease originations. To further assist vendors in their marketing and sales
process, we offer value added marketing services, which include training the
vendor's sales and management staffs to use leasing as a sales tool and
participating actively in the vendor's sales and marketing efforts, including
promotions, trade show activities and sale meetings.
48
<PAGE>
Bank Programs. Our bank programs are designed for banks or other
financial institutions which want to provide lease financing to their small
business customers as a financing alternative or an additional service but which
do not want to invest in the highly automated systems and processes required for
small ticket leasing. Typically, a participating bank agrees that we will be the
provider of small ticket leasing services, under the bank's name, to commercial
customers of the bank which are seeking lease financing. We develop a marketing
plan for the bank and provide the bank with training and marketing material to
support the program. Lease application forms are available to bank customers at
the bank in point-of-sale displays, and may also be made available by e-mail or
possibly, in the future, through a hyperlink to our web site. Banks may also
have us maintain a "vanity" toll-free number, a number that is answered in the
bank's name, through which bank customers can make inquiries, process lease
applications and obtain assistance in selecting an appropriate lease program.
Through March 31, 1999, we had signed program agreements with three banks,
including Huntington Bank, a $28.3 billion (total assets at December 31, 1998)
bank based in Columbus, Ohio. In addition, we have a program with FISI Madison
Financial Corporation, a company marketing to banks which is a subsidiary of
Cendant Corporation, to provide small business lease financing to its 24 client
banks enrolled in its BusinessEdge program.
Other. In addition, the wholesale group of JLA originates or acquires
contracts through independent equipment lessors and, to a lesser extent, through
contracted brokers. See "Business--The Growth of Our Business--Acquisition of
JLA." JLA's wholesale group accounted for less than 5.1% of our lease
originations for the six months ended March 31, 1999.
Our Technology
We are committed to implementing sophisticated technologies to
streamline and automate the lease application and approval process. We typically
customize off-the-shelf software applications and hardware as we believe that
such off-the-shelf products can be scaled to various lease funding volumes, are
generally more stable and less costly than products we might develop for our own
use, and are easier to integrate with other commercially available products.
We have designed our technology platform to accomplish three primary
objectives:
Process Large Volumes of Small Ticket Leases in a Low Cost Environment.
We use six functionally integrated systems that provide fully automated, low
cost processing of small ticket leases:
o A management system that allows us to establish strategic alliances
with technology equipment manufacturers and vendors without having to
develop new software for each new program developed.
o Sales and marketing database management systems that provide vendor
sales relationship development and tracking tools. The systems, which
have the capacity to track more than one million files, track and
manage sales activities that drive lease volume and allow us to
analyze these activities to manage sales more effectively.
o An application management system that we have designed to process
high volumes of lease applications.
o A credit scoring model for Fidelity Leasing, to which we expect JLA
will be converted by September 1999, that automates the task of
evaluating high volumes of small ticket lease applications.
49
<PAGE>
o A contract management system that provides us with a stable, fully
automated array of portfolio management tools including electronic
invoice generation, payment posting technologies and extensive
collections and customer service screens, enabling efficient
portfolio servicing.
o An accounting and financial management system that provides accurate
and efficient financial management of our portfolio from
securitization reporting to financial pro forma generating tools.
Use a Scalable Open Architecture. Based on the IBM RS/6000 and AS/400
series of Unix and web based servers, the computer hardware of our technology
platform features an open and scalable architecture that permits us to
significantly expand our business without the necessity of substantial
additional capital investment in core systems or software development. All
systems interface to a single IBM AS/400E server in a seamless, highly secure
platform that has undergone rigorous volume and hack scan security testing. Our
current lease accounting system is capable of handling a portfolio of 125,000
leases. We plan to increase our server capacity to manage a portfolio of 300,000
leases before the end of 1999.
Operate a Web-based System. We have implemented an interactive web site
and related systems and protocols that enable us to complete lease transactions
through a direct, online system with equipment vendors. The online system allows
to electronically transmit lease applications to the computer system located in
our headquarters. The application is then automatically scored using proprietary
algorithms and, if approved, lease documentation is electronically sent to the
lessor for execution. In addition, we provide the electronic commerce engine
that allows manufacturers to provide leasing icons on their web sites. This icon
enables vendors to provide our lease financing directly to their customers
entirely over the Internet.
Underwriting
Fidelity Leasing. We have developed credit underwriting policies and
procedures that we believe have been effective in managing our credit risks. We
address the credit approval process by segregating transactions into three
groups according to dollar size:
o lease applications involving equipment which costs less than $25,000
are evaluated primarily through credit scoring;
o lease applications involving equipment which costs from $25,000 to
$50,000 are evaluated based both on credit scoring and review by a
credit analyst; and
o lease applications involving equipment which costs more than $50,000
are evaluated by a credit analyst.
The approval process begins with the submission by telephone, facsimile
or electronic transmission of a credit application for the lessee by the
equipment vendor. Our system automatically extracts credit information from the
lease application and retrieves reports from online credit databases such as
those maintained by TRW, Dun & Bradstreet, Equifax and Trans Union. Information
with respect to applications involving equipment that costs less than $25,000 is
analyzed through our proprietary automated computer scoring model to assess the
credit of the applicant. The model utilizes a statistical formula that evaluates
the characteristics of the applicants, rather than relying solely on the
evaluation skills and judgment of credit analysts in making a credit decision.
The formula has been developed using our customer demographics and credit
history data as well as available industry data. The formula uses information
relating to various factors such as business longevity, types of business,
payment history, bank account balances, lawsuits, judgments, liens and credit
ratings. If there is insufficient information from the application and online
data to evaluate credit, or if the scoring process results in a credit score
that is neither an automatic acceptance or rejection, the application is
referred to a credit analyst for review and decision. Applications involving
equipment which costs from $25,000 to $50,000 are credit scored and then
automatically referred to a credit analyst who reviews additional information,
including comprehensive credit bureau reports, trade references and, in some
cases, financial statements or Comprehensive Credit Score and Financial Stress
Score analyses prepared by Dun & Bradstreet. Applications involving equipment
costs of more than $50,000 are reviewed by a credit analyst based upon financial
statements or, if financial statements are not available, tax returns, credit
reports on the business, credit reports on the principals, and bank and trade
references. Credit analysts have the authority up to specified limits to reject
or accept transactions based upon our defined criteria and consideration of any
mitigating factors. Applications not meeting these criteria or involving
equipment which costs in excess of an analyst's credit authority are referred to
a senior officer, usually our Vice President of Credit or Vice President of
Asset Management, with a higher credit authority for review and decision.
50
<PAGE>
We assign a master number to each lessee or other party, such as a
guarantor, and reference each transaction with that lessee or party to the
master number. We assess our exposure to the lessee or other party on a
cumulative basis, and our computer software is set up to track multiple
transactions with the same lessee or party to permit evaluation of our
cumulative exposure. We review new business from existing accounts in the
context of total exposure; for example, a new application for a $10,000 item to
a lessee with an existing exposure of $45,000 would be treated as a $55,000
credit decision.
Credit approval authorizations are based upon experience, skill and
position. Individual credit authority levels are approved by the Credit
Committee upon the recommendation of the Vice President of Asset Management. The
Credit Committee is composed of our Chairman and Chief Executive Officer,
President, Senior Vice President of Operations, and Vice President of Asset
Management. The Credit Committee reviews and approves all transactions involving
equipment costs of $250,000 or more; each decision must be unanimous.
The credit authority for single transactions and customer exposures is
as follows:
<TABLE>
<CAPTION>
Position Credit Authority
- -------- ----------------
<S> <C>
Credit Manager....................................... Up to $50,000 individually
Up to $150,000 jointly with Vice President of
Credit
Vice President of Credit............................. Up to $150,000 individually
Up to $250,000 jointly with Vice President of
Asset Management or President
Vice President of Asset Management................... Up to $150,000 individually
Up to $250,000 jointly with President or the
Vice President of Credit
Credit Committee..................................... Credit Committee will approve all transactions
or customer exposures greater than $250,000
</TABLE>
Credit analysts and managers review credit applications in excess of
their credit authority and make recommendations, but only an individual with
appropriate credit authority may approve a credit application. If the terms of a
particular transaction are changed after approval, the revised transaction must
be resubmitted for re-evaluation.
JLA Credit Corporation. The underwriting criteria used by JLA are
similar to those at Fidelity Leasing. The principal difference is that JLA's
process uses different equipment cost breakpoints for credit analysis and,
because of the larger number of applications involving equipment costs in excess
of $25,000, calls for a greater role for credit analysts in the evaluation and
decision-making process.
The JLA underwriting process begins with the submission of a credit
application by an equipment vendor, typically by mail or by facsimile. Credit
information is obtained from the lease application and from on-line credit
databases such as TRW, Dun & Bradstreet, Equifax and Trans Union. Bank and trade
references and credit reports are typically used for transactions involving
equipment costs in excess of $25,000. JLA also considers concentration risk and
exposure to existing lessees and other obligors who apply for additional leases
or other financing arrangements. In the case of technology equipment,
transactions with equipment costs of less than $25,000 are credit scored using a
third party model. We expect that JLA will shift to the Fidelity Leasing credit
scoring model by September 1999. Transactions with equipment costs in excess of
$25,000 are analyzed through JLA's RAC system. See "Business--Our
Solution--Using Our Credit Evaluation Systems."
51
<PAGE>
For transactions in which equipment costs will be in excess of
$150,000, JLA performs a comprehensive review and financial analysis, which
normally includes a review of financial statements or tax returns for the prior
two to three years. If customers cannot provide audited financial statements
required by underwriting guidelines, JLA attempts to obtain tax returns for
periods corresponding to available reviewed or compiled statements. Credit
analysts complete a financial ratio analysis and credit write-ups on these
transactions, which include a narrative description of the applicant's business,
relative collateral value, applicant's payment habits, payment habits of any
guarantor, applicant's industry and applicant's management. JLA generally
processes these transactions through credit approval in two to three days.
As with Fidelity Leasing, credit approval authorizations are
established based on experience, skill and position. Individual credit authority
levels are approved by JLA's Credit Committee based upon the recommendations of
Fidelity's Vice President of Asset Management. The JLA Credit Committee is
composed of Fidelity Leasing's Chairman and Chief Executive Officer, President,
Chief Financial Officer and Vice President of Asset Management and JLA's Vice
President of Credit. The JLA Credit Committee approves all transactions
involving equipment costs of $250,000 or more; such approvals must be made by at
least four members of the Credit Committee, including either the Chief Executive
Officer or the President, and decisions must be unanimous. Credit approval
authority for single transactions and customer exposures is the same as at
Fidelity Leasing.
Servicing and Administration
General. We service all of the leases we originate, including leases we
securitize. Our lease processing and accounting system, into which JLA's system
has been integrated, has been designed to automate the many functions associated
with servicing high volumes of small ticket leases, including the following:
o integrated Uniform Commercial Code filing;
o lease invoicing and accounting management;
o lease renewals;
o status reports to equipment vendors;
o sales and use tax compliance;
o equipment insurance compliance;
o securitization management and reports; and
o security against unauthorized access and data back-up.
Collection Management. Our Collection Department is supported by an
automated collection tracking system, into which JLA's system has been
integrated, that accesses all account-related information stored on our main
computers. The tracking system prioritizes and queues delinquent accounts by age
and dollar amount. The system permits collectors to record all correspondence
and discussions with lessees. The system also generates management reports which
allow us to assess the quality and quantity of collections by individual service
representatives, supervisory units or the Collection Department as a whole.
52
<PAGE>
Our collections policy is designed to identify payment problems early
enough to permit us to address delinquencies quickly and, when necessary, to act
to preserve our interest in the equipment leased. We begin collection activity
on the eleventh day after a payment due date with a telephone call to the
lessee. If the account is not brought current within seven days after the
initial contact, we place a second call to the lessee and contact any guarantor.
If the account is delinquent after the second call and there is no agreement to
bring the account current, we send a notice of potential default to all parties
to the lease.
We place accounts that are delinquent for a period of 60 days after a
payment due date into default and commence efforts to recover the equipment. If
an account is 90 days delinquent, we stop income recognition and determine
whether to pursue collections through assignment to a collection agency or
outside legal counsel. All accounts must be written off and charged to our
allowance for possible losses if they are 180 days delinquent unless we believe
that there is a reasonable certainty that the delinquency can be cured or some
portion of the account recovered. We will charge to our allowance for possible
losses any amount over that recovery estimate. Collection efforts will continue
on accounts which are 180 days delinquent if there is a likelihood of some
recovery.
Receivables Management. Our receivables management system, into which
JLA's system has been integrated, is a fully automated and integrated invoicing,
accounts receivable and cash application system. The system generates
receivables schedules according to the lease master records for terms and
payment schedules and generates invoices three weeks before the payment due
date. The system receives remittance information daily, updates individual lease
receivable records and automatically posts information to our books.
Insurance Management. We maintain an umbrella insurance policy that
covers all leases involving equipment costing under $100,000. In the event a
lessee does not provide proof of insurance coverage within 30 days of request,
we have the right to impose a monthly insurance charge, along with service fees.
Fidelity Leasing currently has elected not to impose such charges; JLA, however,
does impose such charges. On leases involving equipment costing $100,000 or
more, both Fidelity Leasing and JLA require proof of insurance detailing loss
payee clauses in favor of Fidelity Leasing or JLA, as the case may be, as well
as specific liability coverages. We perform an annual review of lessee insurance
coverages and require renewal certificates. We have the right to impose monthly
insurance charges and service fees to lessees which do not deliver renewal
certificates to us. Both Fidelity Leasing and JLA will impose such charges.
Competition
The business of small ticket equipment lease financing is highly fragmented and
competitive. We compete with:
o a large number of national, regional and local finance companies;
o captive finance and leasing companies affiliated with major equipment
manufacturers; and
o other sources of financing including traditional financial services
companies such as commercial banks, savings and loan associations and
credit unions.
Many of our competitors, such as GE Capital Corporation, Newcourt
Capital USA, Inc., DeLage Landen Finance Inc. (formerly Tokai Financial) and
Copelco Capital Inc., are substantially larger and have considerably greater
financial, technical and marketing resources than we do. For example, some of
these competitors may have a lower cost of funds and access to funding sources
that are not available to us. A lower cost of funds could enable a competitor to
offer leases with implicit yields which are less than the implicit yields we use
to price our leases, which may force us to lower our implicit yields or lose
origination volume. In addition, certain of our competitors may have higher risk
tolerances or different risk assessments which could allow them to establish
more vendor and lessee relationships and build their market share. We compete
based on the quality of the service we provide to both our lessees and our
vendors, bank participants and other lease originators. We have and will
continue to encounter significant competition and there can be no assurance that
we will be able to successfully compete in our chosen market. However, we
believe that our singular focus on small business and the high level of services
provided by our technology platform, together with our strategic marketing
alliances, allow us to penetrate our targeted market and build market share.
53
<PAGE>
Government Regulation
Although most states do not regulate the equipment lease financing
business, certain states and Puerto Rico require licensing of lenders and
finance companies, impose limitations on interest rates and other charges,
mandate disclosure of certain contract terms and constrain certain collection
practices and remedies. Under certain circumstances, we may also be required to
comply with the Equal Credit Opportunity Act and the Fair Credit Reporting Act.
These acts require notice to credit applicants of their right to receive a
written statement of reasons an application for credit is denied. We believe
that we are currently in material compliance with applicable statutes and
regulations.
Employees
As of March 31, 1999, we had 196 employees, of which 56 were engaged in
origination operations, 70 were engaged in sales and 70 were engaged in a
variety of administrative, lease servicing and managerial functions. We believe
that our relations with our employees are good. None of our employees is a
member of a collective bargaining unit in connection with his or her employment
by us.
Facilities
We lease our West Chester headquarters, consisting of 20,000 square
feet of office space, at an average monthly rental of $31,279 as of March 31,
1999. The lease expires in December 2004. We also have an office in Torrance,
California, which consists of 7,325 square feet of office space at an average
monthly rental of $11,113 as of March 31, 1999. The lease expires in May 2004,
but is subject to one five-year renewal option. In addition, we lease a sales
office in San Ramon, California, consisting of 6,651 square feet. The monthly
rent is $1,393, which will increase to $1,401 effective January 1, 2000. The
lease expires in March 2002. Fidelity Canada leases 3,021 square feet of office
space in suburban Toronto. The monthly rental on that space is C$2,392 through
October 2003 and will increase to C$2,895 thereafter until expiration. The lease
expires October 2008 and is subject to one five year renewal option. We believe
that these and other offices are adequate for our current needs.
Legal Proceedings
In the course of our business operations, we become involved in a
variety of routine litigation, typically concerning the enforcement of our
leases. We do not believe that any such litigation is material to us either
individually or in the aggregate.
54
<PAGE>
MANAGEMENT
Executive Officers, Directors and Other Significant Employees
Our executive officers, directors and other significant employees, and
their ages as of June 24, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Executive Officers:
Abraham Bernstein(1)(4).......................... 66 Chairman of the Board of Directors and Chief
Executive Officer
Crit S. DeMent(1)................................ 46 President, Chief Operating Officer and Director
Joseph T. Ellis, Jr.............................. 38 Senior Vice President and General Manager of
Operations
Colin Brevik..................................... 55 Vice President of Marketing
Nicholas Capparelli.............................. 40 Vice President and General Manager of the
Industrial Technology Group
John L. Dale..................................... 38 Vice President and Chief Financial Officer
David H. English................................. 48 Vice President of Asset Management
Miles Herman..................................... 39 Vice President of Electronic Commerce
Directors:
Debbi Hurd Baptist(4)............................ 49 Director
Daniel G. Cohen(1)(4)............................ 30 Director
Edward E. Cohen(1)(2)............................ 60 Director
Anthony S. Courakis(3)........................... 55 Director
Steven J. Elgart(3).............................. 51 Director
Darshan V. Patel(1)(2)........................... 28 Director
Blanche G. Ross(2)............................... 72 Director
Other Significant Employees:
Maryellen Barbarish.............................. 39 Vice President of Information Technologies
Robert Hunter.................................... 37 Vice President of Sales
Charles J. Santangelo............................ 49 Controller
</TABLE>
- ----------------
(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Nominating Committee
Abraham Bernstein has been Chairman of the Board of Directors and Chief
Executive Officer since 1996. From 1996 to 1998, Mr. Bernstein was also
President. From 1982 to 1993, he was the President and Chief Executive Officer
of Tokai Financial Services, Inc. ("Tokai"), the equipment leasing subsidiary of
Tokai Bank of Japan. From 1993 to 1995, the contractual period during which Mr.
Bernstein's restrictive covenant with Tokai was in effect, Mr. Bernstein was a
Managing Director of the Rittenhouse Consulting Group, a financial consulting
company. Mr. Bernstein is a past director of the Equipment Leasing Association.
Crit S. DeMent has been President since 1998, a director since 1997 and
Chief Operating Officer since 1996. Mr. DeMent has been in the leasing finance
industry for over 20 years. Immediately prior to joining Fidelity Leasing, from
1987 through 1996 he was Vice President--Marketing for Tokai.
Joseph T. Ellis, Jr. has been Senior Vice President and General Manager
of Operations since 1998. From 1996 to 1998, he was Director of Vendor Services.
From 1992 to 1996, he held various marketing and sales positions with Tokai,
most recently as the Director of Program Management and Strategic Market
Development. From 1991 to 1992, Mr. Ellis was a National Accounts Executive at
Copelco Capital Corporation and, from 1989 to 1991, he was Vice President at
Norwest Financial Leasing, Inc.
55
<PAGE>
Colin Brevik has been Vice President of Marketing since March 1999.
From 1998 to 1999, he was Senior Vice President Sales at JLA where he directed
business development and led High Technology and Hard Asset Sales. From 1994 to
1998, Mr. Brevik was Group Vice President of Business Development of National
Accounts with AT&T Capital Leasing Services, Inc. Mr. Brevik owned Sierra
Leasing Company from 1992 to 1993. Mr. Brevik served as Vice President at Chase
Manhattan Leasing Company from 1987 to 1991 and in a number of positions at
United States Leasing Corporation from 1971 to 1987, most recently as Senior
Vice President, Business Systems for the Telelease small ticket division.
Nicholas Capparelli has been Vice President and General Manager of the
Industrial Technology Group since February 1999. From 1996 to 1999, he was Vice
President of Sales and Operations for Softmart, an international computer
reseller headquartered in suburban Philadelphia, Pennsylvania, where he was
responsible for strategic sales and operations. From 1985 to 1996, Mr.
Capparelli served in a number of positions at Tokai, most recently as Vice
President of Sales.
John L. Dale has been Chief Financial Officer since April 1999. From
1998 to 1999, he was Senior Vice President in charge of Capital Markets at
American Business Financial, Inc., an equipment leasing and financial services
company based in suburban Philadelphia, Pennsylvania, where he was responsible
for the asset backed programs for leasing and mortgage related assets. From 1994
to 1998, Mr. Dale was a managing director of CoreStates Capital Markets where he
created and ran the asset securitization group. Prior to that, Mr. Dale served
as Vice President, Securitization at Prudential Home Mortgage from 1992 to 1994,
and as Director of Asset Securitization for the Resolution Trust Corporation
from 1990 to 1992.
David H. English has been Vice President of Asset Management since
1996. From 1991 to 1996 he held various credit and operational positions with
Tokai, most recently as Director of Credit for the small ticket leasing
division. Mr. English served in credit management positions with the Commercial
Equipment Finance Division of General Electric Capital Corporation from 1990 to
1991 and the Equitable Life Leasing Corporation from 1985 through 1990.
Miles Herman has been Vice President of Electronic Commerce since 1998.
From 1990 to 1998, he held various operational, marketing, program management,
business development and sales positions with Tokai, most recently as Director
of Capital Markets. Before that, he served as Vice President, Operations and
Sales at LSI Leasing Services, Inc. from 1989 to 1990, and as a manager of
operations at Master Lease Corporation from 1984 to 1989.
Debbi Hurd Baptist has been a director since June 1999. Ms. Hurd
Baptist has been President and Chief Executive Officer of City First Bank of
D.C., the first community development bank in Washington, D.C., and CFBanc
Corporation since November 1998. From 1992 to 1998, she was a director of the
Community Development Investment Group at the Federal Home Loan Mortgage
Corporation, a private secondary market financial services company known as
Freddie Mac. Ms. Hurd Baptist was Vice President, Regional Manager of National
Cooperative Bank of Washington, D.C. from 1987 to 1992, and Vice President for
Development of CMS, Inc., a mortgage servicing company, from 1985 until 1987.
Ms. Hurd Baptist currently serves on the Board of TRM Corporation, a provider of
copying and ATM services, on which Messrs. Edward E. and Daniel G. Cohen also
serve.
Daniel G. Cohen has been a director since 1996. Mr. Cohen has been a
director of Resource America since 1997 and President and Chief Operating
Officer of Resource America since 1998. From 1997 to 1998 he was an Executive
Vice President of Resource America and from 1995 to 1997 he was a Senior Vice
President of Resource America. He has been of director of TRM Corporation, on
which Edward Cohen and Ms. Hurd Baptist also serve, since 1998. Prior to joining
Resource America in November 1995, Mr. Cohen was principally engaged in graduate
studies. Mr. Cohen is a son of Edward Cohen.
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<PAGE>
Edward E. Cohen has been a director since June 1999. He has been
Chairman of the Board of Resource America since 1990 and Chief Executive Officer
of Resource America since 1988. He has also been a director of JeffBanks, Inc.,
a bank holding company, since 1981 and Chairman of the Board of Directors of TRM
Corporation, a provider of self-service photocopying and ATM machines on whose
board of directors Daniel Cohen and Ms. Hurd Baptist also serve, since 1998. He
was a principal of Ledgewood Law Firm, P.C. from 1991 to 1994 and of counsel
from 1995 to 1996. Mr. Cohen is the father of Daniel G. Cohen.
Anthony S. Courakis has been a director since June 1999. Dr. Courakis
is Head of Economics and a member of the Governing Body and Executive Counsel at
Brasenose College, University of Oxford, Oxford, England. He has been an
Official Fellow in economics at Brasenose College since 1974. He has been a
consultant to a number of financial institutions, central banks and
international organizations, and a visiting professor to various (mostly
European) universities. He is a Trustee of the John Hicks Foundation for
Economics (England), which he founded in 1992, and a member of the Governing
Council of the Cultural Foundation of the Ionian Bank (Greece).
Steven J. Elgart has been a director since June 1999. Since 1981,
except for the years 1987 to 1991, Mr. Elgart has been a financial consultant to
businesses and institutions in the financial services, biotechnology,
pharmaceutical and computer services industries. Mr. Elgart was Chief Financial
Officer of Magainin Pharmaceuticals from 1989 to 1991 and Chief Financial
Officer of Digene Diagnostics from 1987 to 1989. In addition, Mr. Elgart was a
founder and director of Chase Econometrics from 1971 to 1980, which became the
economic services subsidiary of Chase Manhattan Bank.
Blanche G. Ross has been a director since June 1999. Mrs. Ross has been
retired since 1992. During 1992, she was a consultant with the Fischer/Ross
Group. From 1980 to 1991, Mrs. Ross was President of Ross Associates Speakers
Bureau, the first speakers bureau representing women, which she founded.
Darshan V. Patel has been a director since June 1999. Mr. Patel is an
attorney specializing in commercial litigation at Berman, Paley, Goldstein &
Kannry in New York, New York. From 1996 to 1998, Mr. Patel practiced law at
Glynn & Associates in Flemington, New Jersey. Mr. Patel graduated from
Washington College of Law, American University, Washington, D.C. in 1995.
Maryellen Barbarish has been Vice President of Information Technologies
since May 1998 and was Director of Information Technologies from 1996 to 1998.
From 1992 to 1996, Ms. Barbarish was Director of Information Technologies for an
affiliated entity, FL Partnership Management, Inc. and, from 1988 to 1991, was
Assistant Director of Information Technologies for FL Partnership Management,
Inc.
Robert Hunter has been Vice President of Sales since 1998. Mr. Hunter
served in a number of sales positions at Tokai from 1988 to 1998, most recently
as Director, Medical Division. Before that, Mr. Hunter was a National Account
Manager at Minolta Corporation from 1985 to 1988.
Charles J. Santangelo has been Controller since February 1999. Prior to
joining us, Mr. Santangelo was Director of Accounting of Tokai from 1994 to 1998
and Manager of Accounting from 1985 to 1994.
57
<PAGE>
Board Committees
We currently have four Board committees:
o The Executive Committee, currently composed of Messrs. Daniel G.
Cohen (chair), Bernstein, Edward E. Cohen, DeMent and Patel,
exercises all power and authority of the Board, subject to certain
limitations of Pennsylvania statutory law, between meetings of the
Board.
o The Audit Committee, composed of Messrs. Courakis (chair) and Elgart,
reviews our internal accounting procedures and consults with, and
reviews the services provided by, our independent accountants.
o The Compensation Committee, currently composed of Messrs. Edward E.
Cohen (chair) and Patel and Mrs. Ross, establishes salaries,
incentives and other forms of compensation for our executive officers
and administers our benefit plans.
o The Nominating Committee, currently composed of Messrs. Daniel G.
Cohen (chair) and Bernstein and Ms. Hurd Baptist, evaluates and
proposes nominees for election to, and to fill vacancies on, the
Board of Directors.
Directors' Compensation
Each outside director who is not an officer or employee of ours or of
one of our affiliates is entitled to receive a cash retainer of $1,000 per month
plus an additional $500 per month if the outside director is chairman of a board
committee. In addition, outside directors receive $500 for each board or
committee meeting they attend in person, and $250 for each such meeting they
attend telephonically. We reimburse all of our directors for expenses incurred
in attending meetings.
Compensation Committee Interlocks and Insider Participation
Abraham Bernstein, our Chairman and Chief Executive Officer, was a
member of the Compensation Committee of our Board of Directors during fiscal
1998. During fiscal 1998, none of our executive officers was a director or
executive officer of any entity for which any member of our Compensation
Committee was a director or executive officer.
Employment Agreements
Mr. Bernstein serves as our Chairman and Chief Executive Officer under
an employment agreement for a term ending on March 4, 2002. The agreement
automatically renews at the end of any term for an additional one-year term
unless either of us gives notice of termination at least two months before the
end of the then current term. Mr. Bernstein receives a base salary of $300,000.
This base salary may be increased by our Board of Directors. Mr. Bernstein also
is entitled to incentive compensation equal to 2.75% of our net annual after-tax
earnings, to a maximum of 2.0% of pre-tax earnings. This incentive compensation
is payable only if our after-tax earnings exceed 10% of shareholders' equity as
shown on our financial statements. If shareholders' equity changes in any year,
it will be calculated as the average of the amounts of shareholders' equity on
the last day of each fiscal quarter. Incentive compensation is payable annually.
We may terminate the agreement if Mr. Bernstein becomes physically or mentally
disabled for more than 90 days in the aggregate during any 365-day period. We
may also terminate the agreement for cause. For purposes of the agreement, cause
means commission of fraud, gross negligence or material misconduct adversely
affecting us, commission of a felony or unapproved conflict of interest or
material self-dealing, or failure to follow written directions from our Board of
Directors. If we terminate the agreement, Mr. Bernstein will receive his base
salary and benefits through the date of termination. Mr. Bernstein may terminate
the agreement for "good reason." The agreement defines good reason as a change
in Mr. Bernstein's duties inconsistent with the agreement, breach of the
agreement by us, a failure to continue his coverage under our benefit plans, or
Edward E. Cohen being neither an officer nor the owner, directly or indirectly,
of at least 5% of the Class A voting stock of Resource America. If the agreement
is terminated for good reason, Mr. Bernstein will receive periodic payments in
the aggregate equal to one year's compensation (including the incentive
compensation which would have been earned had termination not occurred) and he
will continue to receive all benefits during the period. The agreement prohibits
Mr. Bernstein from competing with us for two years following termination of his
employment unless the agreement is terminated for good reason or by mutual
consent. In addition, upon expiration of the agreement or its termination for
good reason, Mr. Bernstein will receive $100,000 per year for 10 years after the
expiration or termination for consulting services. Such payments will terminate
upon Mr. Bernstein's death or upon breach of his non-competition covenant. In
the event of the sale of all or substantially all of our assets, or Resource
America's sale of a controlling interest in us, Mr. Bernstein will be entitled
to a bonus equal to the lesser of $1.5 million or 1% of the excess of the net
sales price of such stock or assets over the book value of our assets.
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<PAGE>
In addition, Mr. Bernstein received options to purchase up to 699,243
shares at an aggregate price of $222,000 and, should we declare a dividend, will
receive payments on the options in an amount equal to the dividends that would
have been paid on the shares subject to the options had they been issued. The
options issued to Mr. Bernstein vest 25% per year beginning in March 1997,
becoming fully vested in March 2000, and terminate in March 2005. The options
become fully vested and immediately exercisable in the event Edward E. Cohen
ceases to be either an officer or at least a 5% stockholder, directly or
indirectly, of Resource America. Mr. Bernstein has certain rights, commencing
after March 5, 2000, to require Fidelity Leasing to register his option shares
under federal securities laws. Mr. Bernstein intends to exercise his options to
purchase 524,432 shares of common stock before the closing of this offering.
Mr. DeMent serves as our President and Chief Operating Officer pursuant
to an employment agreement with a term ending on June 30, 2002. The agreement
automatically renews at the end of any term for an additional one year term
unless either of us gives notice of termination not less than two months before
the end of the then current term. Mr. DeMent receives a base salary of $220,000
and is eligible for incentive compensation at the discretion of our Board of
Directors. This base salary may be increased by our Board of Directors. We may
terminate the agreement for cause. For the purposes of the agreement, cause
means commission of fraud, illegal conduct or gross misconduct adversely
affecting us, conviction of a felony, willful and continued failure to perform
his duties or failure to follow written directions of our Board. Mr. DeMent may
terminate the agreement for "good reason." The agreement defines good reason as,
generally, a change in Mr. DeMent's duties inconsistent with the agreement or a
breach of the agreement by us. If Mr. DeMent is terminated by us other than for
cause or by reason of Mr. DeMent's death, or if Mr. DeMent terminates his
employment for good reason, Mr. DeMent will receive periodic payments of the
compensation payable to him under the agreement through the end of the then term
or one year, whichever is longer. He will continue to receive all benefits
during the period. Mr. DeMent also will be paid an amount equal to the prorated
incentive compensation he received in the fiscal year immediately before
termination. All options and shares of common stock received by him under any
plan will become fully vested. In the event of the sale of substantially all of
our assets or stock constituting control of us, Mr. DeMent will be entitled to a
bonus equal to the lesser of $1.5 million or 1% of the amount by which the net
sales price of such stock or assets exceed the book value of our assets. The
agreement prohibits Mr. DeMent from competing with us for, in the case of
termination of his employment for any reason except cause, the longer of one
year following termination and the unexpired term of the agreement.
Mr. Ellis serves as Senior Vice President and General Manager of
Operations pursuant to an employment agreement with a term ending on June 30,
2002. The agreement automatically renews at the end of any term for an
additional one year term unless either of us gives notice of termination not
less than two months before the end of the then current term. Mr. Ellis receives
a base salary of $180,000 and is eligible for incentive compensation at the
discretion of our Board of Directors. We may terminate the agreement for cause
or, without cause, upon 45 days prior written notice. For the purposes of the
agreement, cause means commission of fraud, illegal conduct or gross misconduct
adversely affecting us, conviction of a felony, willful and continued failure to
perform his duties or failure to follow written directions of our Board. Mr.
Ellis may terminate the agreement for good reason. Good reason is defined,
generally, as a change in Mr. Ellis' duties inconsistent with the agreement or
breach of the agreement by us. Upon termination by Mr. Ellis for good reason, by
us without cause or by reason of non-renewal, Mr. Ellis is entitled to receive
periodic payments of the compensation payable to him under the agreement through
the end of the then term or one year, whichever is greater. Mr. Ellis will also
continue to receive all benefits during the period and will receive an amount
equal to the prorated incentive compensation he received in the fiscal year
immediately before termination. The agreement prohibits Mr. Ellis from competing
with us for, in the case of termination of his employment for any reason except
cause, the longer of one year following termination and the unexpired term of
the agreement.
Executive Officer Compensation
Summary Compensation of Named Executives. The following table sets
forth certain information concerning the compensation we paid or accrued during
each of our last three fiscal years to our Chief Executive Officer and each of
our other most highly compensated executive officers whose aggregate salary and
bonus exceeded $100,000 during fiscal 1998.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Compensation
Annual Compensation Awards
-------------------------------- ---------------------
Securities Underlying All Other
Name and Principal Position Year Salary Bonus Options/SARs Compensation
--------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Abraham Bernstein....................... 1998 $207,692 $ 30,000 -- $612
Chairman and Chief Executive Officer 1997 145,847 25,000 -- 612
1996 84,279 -- 699,243 612
Crit S. DeMent.......................... 1998 $186,923 $ 30,000 -- $612
President and Chief Operating Officer 1997 141,816 12,500 -- 612
1996 91,730 -- 209,773 599
Joseph T. Ellis, Jr..................... 1998 $146,596 $ 30,000 -- $215
Senior Vice President of Operations 1997 93,642 20,000 -- 234
1996 46,604 -- 41,955 119
</TABLE>
Option Grants and Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. During fiscal 1998, there were no option grants to, or option exercises
by, our officers and directors.
The following table sets forth the number of unexercised options held by the
executive officers listed in the Summary Compensation Table. The value of the
unexercised in-the-money options is based upon a value of $18.00 per share of
our common stock, which is the midpoint of the range of the anticipated public
offering price. Amounts reflected are based upon the assumed value minus the
exercise price multiplied by the number of shares acquired on exercise. Messrs.
Bernstein, DeMent and Ellis intend to exercise vested options immediately before
the closing of this offering.
1998 Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised in-the-Money
Name Unexercised Options/SARs at FY-End Options/SARs at FY-End
- ---- ---------------------------------- ---------------------------------
Vested Unvested Vested Unvested
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Abraham Bernstein............... 349,622 349,622 $6,182,086 $6,182,086
Crit S. DeMent.................. 104,887 104,887 1,854,633 1,854,633
Joseph T. Ellis, Jr............. 20,978 20,978 370,937 370,937
</TABLE>
Stock Incentive Plans
We have adopted two stock option plans that provide for both incentive and
non-qualified options to purchase shares of our common stock. A maximum of
1,048,864 shares in the aggregate are issuable under these plans, of which
1,042,571 have been issued. The plans are administered by our Compensation
Committee, which determines to whom options are granted and the terms of the
options, except that the options may not have a term greater than 10 years or an
exercise price that is less than the fair market value of our common stock on
the date the option is granted. The plans permit the Compensation Committee to
make option grants under which option holders may elect to convert all or some
of their options into stock appreciation rights. These rights permit the holder
to receive cash equal to the difference between the fair market value of the
shares underlying the converted options and the exercise price of the options.
Mr. Bernstein's option grant includes this conversion privilege; however, he
cannot exercise this privilege until March 2000. All of the outstanding options
vest over a four year period from the date of grant. The purpose of the option
plans is to provide performance based compensation to our key employees. Because
all of the options issuable under the existing option plans have been issued or
committed, we intend to seek, before the closing of this offering, shareholder
approval for a new option plan for __________ shares.
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<PAGE>
CERTAIN TRANSACTIONS
We finance our operations in part through warehouse lines of credit, term
loans and securitizations. Since we have been a wholly-owned subsidiary of
Resource America, our obligations under four of these facilities have been
guaranteed by Resource America. Resource America guaranteed a portion of the
lease receivables due under any defaulted leases with respect to a fifth
facility. In addition, we have obtained substantial amounts of financing for our
operations from Resource America. Immediately before the closing of this
offering, Resource America will contribute $30.0 million of this debt to our
capital, exchange the balance of the debt to an unsecured note and receive
279,697 shares of our common stock. See "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources-Intercompany Debt." Edward E. Cohen,
one of our directors, is the Chairman and Chief Executive Officer of Resource
America, and Daniel G. Cohen, also a director, is a director, President and
Chief Operating Officer of Resource America. We do not expect that Resource
America will provide additional funding to us or provide further guarantees
following this offering. We will reimburse Resource America for its costs and
expenses incurred in connection with this offering and our acquisition of JLA,
including an allocation of employee compensation. Such costs and expenses are
estimated to be approximately $1,000,000.
We maintain an account for operating expenses, payroll and taxes with
Jefferson Bank. In addition, from time to time we also maintain temporary
investment accounts with Jefferson Bank. Daniel Cohen, one of our directors, is
a director of Jefferson Bank; Betsy Z. Cohen, Daniel Cohen's mother, is Chairman
and Chief Executive Officer of the Bank. Edward E. Cohen, one of our directors,
is the spouse of Betsy Z. Cohen; Mr. Edward E. and Mrs. Cohen are directors and
Mrs. Cohen is Chief Executive Officer of the holding company of Jefferson Bank,
and they are principal shareholders of that holding company.
PRINCIPAL SHAREHOLDERS
The following table sets forth the number and percentage of shares of our
common stock owned, as of June 25, 1999, by:
o each person who is known by us to be the beneficial owner of 5% or more of
our common stock;
o each of our directors;
o each of our executive officers; and
o all of our executive officers and directors as a group.
This information is reported in accordance with the beneficial ownership rules
of the SEC under which a person is deemed to be the beneficial owner of a
security if that person has or shares voting power or investment power with
respect to such security or has the right to acquire such ownership within 60
days of the date of this prospectus. Shares of our common stock issuable
pursuant to options are deemed to be outstanding for purposes of computing the
percentage of the person or group holding such options but are not deemed to be
outstanding for purposes of computing the percentage of any other person. Except
as indicated in the footnotes to this table, each shareholder named in the table
has sole voting and investment power with respect to the shares set forth
opposite such shareholder's name.
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<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Before Offering Owned After Offering
--------------------- --------------------
Name of Beneficial Owner Number Percent Number Percent
- ------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Directors and executive officers(1):
Abraham Bernstein.......................... 524,432(2) 7.5% 524,432 4.7%
Crit S. DeMent............................. 157,330(2) 2.2 157,330 1.4
Joseph T. Ellis, Jr........................ 31,466(2) * 31,466 *
Colin Brevik............................... -- -- -- --
Nicholas Capparelli........................ -- -- -- --
John L. Dale............................... -- -- -- --
David H. English........................... -- -- -- --
Miles Herman............................... -- -- -- --
Debbi Hurd Baptist......................... -- -- -- --
Daniel G. Cohen............................ 6,572,883(3) 100 6,572,883 58.8
Edward E. Cohen............................ 6,572,883(3) 100 6,572,883 58.8
Anthony S. Courakis........................ -- -- -- --
Steven J. Elgart........................... -- -- -- --
Darshan V. Patel........................... -- -- -- --
Blanche G. Ross............................ -- -- -- --
Executive officers and directors as a
group (15 persons)....................... 7,286,111 100 7,286,111 65.2
Other owners of 5% or more of our outstanding our common stock:
Resource America(4)........................ 6,572,883 100 6,572,883 58.8
</TABLE>
- -------------------------
* Less than 1%
(1) The address of each person is c/o Fidelity Leasing, Inc., 1255 Wrights Lane,
West Chester, Pennsylvania 19380, except that the address for Messrs. Cohen
and Cohen is c/o Resource America, 1521 Locust Street, Philadelphia,
Pennsylvania 19102.
(2) Currently exercisable options. Messrs. Bernstein, DeMent and Ellis intend to
exercise their options before the closing of this offering.
(3) The amount beneficially owned by Messrs. Cohen and Cohen reflects 6,572,883
shares owned by Resource America, of which they are directors and executive
officer; it includes receipt of 279,697 shares prior to the offering.
(4) The address of Resource America is 1521 Locust Street, Philadelphia,
Pennsylvania 19102.
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 41,000,000 shares of capital stock, consisting of
40,000,000 shares of common stock, no par value, and 1,000,000 shares of
preferred stock, no par value. As of June 25, 1999, there were 6,293,186 shares
of common stock outstanding and no shares of preferred stock outstanding.
Common Stock
Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a shareholder vote but do not have cumulative
voting rights. Holders of common stock are entitled to share in all dividends
and other distributions in cash, stock or property that our Board of Directors,
in its discretion, declares from legally available funds. In any liquidation,
each outstanding share entitles its holder to participate pro rata in the assets
that remain after we pay our liabilities. Shareholders have no preemptive or
other rights to subscribe for or purchase additional shares of common stock, nor
are there any redemption or sinking fund provisions that relate to the common
stock. All outstanding shares of common stock are, and the shares underlying all
warrants and options will be, validly issued, fully paid, and nonassessable at
the time we issue them.
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Preferred Stock
Preferred stock may be issued from time to time in one or more series and
our Board of Directors, without further approval of the shareholders, is
authorized to fix the dividend rights and terms, conversation rights, voting
rights, redemption rights and terms, liquidation preferences, sinking funds and
any other rights, preferences, privileges and restrictions applicable to each
such series of preferred stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of the
holders of common stock and, under certain circumstances, make it more difficult
for a third party to gain control of us. We have no current plan to issue any
preferred stock.
Anti-takeover Provisions of Pennsylvania Law
As a Pennsylvania corporation, we are governed by the Pennsylvania Business
Corporation Law (the "BCL"). The BCL contains several provisions regulating
fundamental corporate transactions that are applicable to us which may have an
anti-takeover effect, including provisions:
o preventing shareholders from calling a shareholders' meeting, except for
"interested" shareholders, who are generally defined as shareholders
owning at least 20% of our common stock;
o restricting mergers or other business combinations with an interested
shareholder;
o requiring interested shareholders, upon demand from another shareholder,
to purchase the other shareholder's shares at fair value;
o restricting voting rights of the holder of "control shares," generally
shares with 20%, 33-1/3% or 50% of a company's voting power, depending
upon the voting rights being restricted;
o requiring a "controlling person," generally a person who owns or
discloses that he is seeking 20% or more of a company's voting interest
to disgorge any profit made upon resale of such person's shares within 18
months of becoming a controlling person; and
o permitting the adoption of certain provisions that may have an
anti-takeover effect, such as a classified or "staggered" board of
directors and, under certain circumstances, treating a class of
shareholders designated by the board of directors differently from the
treatment accorded other shareholders.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. Furthermore, due to contractual
and legal restrictions on resale, only a limited number of shares will be
available for sale shortly after this offering. After these restrictions lapse,
sales of substantial amounts of our common stock in the public market could
adversely affect the prevailing market price and our ability to raise equity
capital.
Upon completion of this offering, we will have 11,175,000 outstanding shares
of common stock. Of these shares, the 3,888,889 shares sold in the offering,
plus any shares issued upon exercise of the underwriters' over-allotment option,
will be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates" as that term is defined in Rule 144 of the
Securities Act.
The remaining 7,286,111 shares of common stock outstanding are "restricted
securities" within the meaning of Rule 144. Restricted shares may be sold in the
public market only if registered with the SEC or if they qualify for an
exemption from registration under Rule 144, Rule 144(k) or Rule 701 of the
Securities Act, all of which are summarized below. Sales of the restricted
shares in the public market, or the availability of shares for sale, could
adversely affect the market price of our common stock.
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<PAGE>
Resource America, our principal shareholder, and each of our officers,
directors and employees who own our stock or options to purchase our stock have
entered agreements in which they have agreed that they will not, without the
prior written consent of BancBoston Robertson Stephens Inc., offer, sell,
contract to sell or grant any option to purchase or otherwise dispose of their
shares of our common stock for a period of 180 days following the effective date
of the registration statement filed pursuant to this offering. These agreements
are often referred to as lock-up agreements. Because of these contractual
restrictions, shares subject to lock-up agreements may not be sold until such
lock-up agreements expire or are waived by BancBoston Robertson Stephens Inc.
Taking into account the lock-up agreements, and assuming BancBoston Robertson
Stephens Inc. does not release any of the parties from these agreements, the
following shares will be eligible for sale in the public market at the following
time:
o beginning on the effective date, only the shares sold in the offering will
be immediately available for sale in the public market;
o beginning 180 days after effective date, approximately ________ shares
will be eligible for sale; of these ___ shares--all of which are owned by
Resource Leasing--are subject to the restrictions of Rule 144; and
o an additional ________ shares will be eligible for sale pursuant to Rule
144 after ______ 2000.
Under Rule 144, the number of shares that may be sold by our affiliates is
subject to volume restrictions. In general, under Rule 144, and beginning after
the expiration of the lock-up agreements, a person who has beneficially owned
restricted shares, including shares that are aggregated to such person or
persons, for at least one year would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
o one percent of the number of shares of our common stock then outstanding,
which will equal approximately ________ shares immediately after this
offering; or
o the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
In order to sell shares under Rule 144, the selling shareholder must comply with
manner of sale provisions and notice requirements and current public information
about us must be available.
Under Rule 144(k), a person who was not an affiliate of ours during the
three months preceding a sale and who beneficially owned the shares proposed to
be sold for at least two years would be entitled to sell his or her shares
without complying with the manner of sale, public information, number of shares
limitation or notice provisions of Rule 144.
As part of the lock-up agreements, our officers, directors and employees
holding common stock or stock options may not sell shares acquired upon exercise
of their options until 180 days after the effective date. Beginning 180 days
after the effective date, any person who purchased his or her shares pursuant to
a written compensatory plan or contract may be entitled to rely on the resale
provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding period requirements of
Rule 144. Rule 701 further provides that non-affiliates may sell their shares in
reliance on Rule 144 without having to comply with the holding period, public
information, number of shares limitation or notice provisions of Rule 144. In
addition, we intend to file one or more registration statements under the
Securities Act as promptly as possible after the effective date to register
shares to be issued under our stock option plan. As a result, any options
exercised under our stock option plan or any other benefit plan after the
effectiveness of a registration statement will also be freely tradable in the
public market, unless the shares are held by affiliates of ours. Shares held by
our affiliates will still be subject to the number of shares limitation, manner
of sale, notice and public information requirements of Rule 144 unless the
shares may otherwise be sold under Rule 701. As of June 25, 1999, there were
outstanding options for the purchase of 1,042,571 shares, 723,018 of which were
exercisable. Messrs. Bernstein, DeMent and Ellis intend to exercise options and
purchase an aggregate of 713,228 shares before the closing of this offering. See
"Risk Factors--Purchasers in this offering will immediately experience
substantial dilution in net tangible book value" and "Management--Executive
Officer Compensation."
64
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Friedman, Billings, Ramsey & Co., Inc., U.S.
Bancorp Piper Jaffray Inc. and First Union Capital Markets Corp., have severally
agreed with us, subject to the terms and conditions set forth in the
underwriting agreement, to purchase from us the number of shares of common stock
set forth opposite their names below. The underwriters are committed to purchase
and pay for all such shares if any are purchased.
Underwriter Number of Shares
----------- ----------------
BancBoston Robertson Stephens Inc. ....................
Friedman, Billings, Ramsey & Co., Inc. ................
U.S. Bancorp Piper Jaffray Inc. .......................
First Union Capital Markets Corp. .....................
Total................................................
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain securities dealers at such
price less a discount not in excess of $[______] per share. Those securities
dealers may resell any shares purchased from the underwriters to other brokers
or dealers at the public offering price less a discount not in excess of
$_______ per share. If all the shares are not sold at the initial offering
price, the representatives may change the offering price and other selling
terms. The shares of common stock are offered by the underwriters as stated
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Option to Purchase Additional Shares. We have granted the underwriters an
option, exercisable during the 30-day period after the date of this prospectus,
to purchase up to __________ additional shares of common stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus. To the extent that the underwriters exercise this
option, each of the underwriters will have a firm commitment to purchase
approximately the same percentage of such additional shares that the number of
shares of common stock to be purchased by it shown in the above table represents
as a percentage of the shares offered in this prospectus. If purchased, such
additional shares will be sold by the underwriters on the same terms as those in
which the shares of common stock offered in this prospectus are being sold. We
will be obligated, pursuant to the option, to sell shares to the extent the
option is exercised. The underwriters may exercise the option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered hereby. If such option is exercised in full, the total public offering
price, underwriting discounts and commissions and proceeds to us will be
$____________, $______________and $___________, respectively.
65
<PAGE>
The following table summarized the compensation we will pay the
underwriters; assuming both no exercise and full exercise of the underwriters'
over-allotment option:
<TABLE>
<CAPTION>
Total
----------------------------------
Without With
Per Share Over-allotment Over-allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions payable
by us.............................................
</TABLE>
We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $__________.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities under the Securities
Act and liabilities arising from breaches of representations and warranties
contained in the underwriting agreement.
Lock-Up Agreements. Pursuant to the terms of lock-up agreements, each of our
officers and directors and other holders of shares of our common stock have
agreed with the representatives of the underwriters, for a period of 180 days
after the date of this prospectus, subject to certain exceptions, not to offer
to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any shares of common stock, or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock owned as of the date of this
prospectus or thereafter acquired directly by such holders or with respect to
which they have or hereafter acquire the power of disposition, without the prior
written consent of BancBoston Robertson Stephens Inc. However, BancBoston
Robertson Stephens Inc. may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to the lock-up
agreements. There are no existing agreements between the representatives of the
underwriters and any of our shareholders providing consent to the sale of shares
prior to the expiration of the 180-day-lock-up period.
Future Sales. In addition, we have agreed that we will not, until 180 days
after the date of this prospectus, without the prior written consent of
BancBoston Robertson Stephens Inc., subject to certain exceptions, (1) consent
to the disposition of any shares held by shareholders subject to agreements not
to sell shares prior to the expiration of the 180-day period or (2) issue, sell,
contract to sell or otherwise dispose of any shares of common stock, any options
or warrants to purchase shares of common stock or any securities convertible
into, exercisable for or exchangeable for shares of common stock other than our
sale of shares in this offering, the issuance of shares of common stock upon the
exercise of outstanding options and warrants and the granting of options to
purchase shares under existing stock option and incentive plans, provided such
options do not vest prior to the expiration of the 180-day period. See "Shares
Eligible for Future Sale."
Offer to Certain Employees. At our request, the underwriters have reserved
__ percent of the shares of common stock to be issued by us and offered hereby
for sale, at the initial offering price to our directors, officers, employees,
business associates, and related persons. The number of shares of common stock
available for sale to the general public will be reduced to the extent these
individuals purchase such reserved shares. Any reserved shares which are not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered by this prospectus.
Listing. Application has been made to have our common stock approved for
quotation on the Nasdaq National Market under the symbol "FLCO."
No Prior Public Market. There has been no public market for our common stock
before this offering. Consequently, the public offering price for the common
stock offered by this prospectus will be determined through negotiations among
us and the representatives of the underwriters. Among the factors to be
considered in such negotiations are prevailing market conditions, our financial
information market valuations of other companies that we and the representatives
believe to be comparable to our company, estimates of our business potential,
the present state of our development and other factors deemed relevant.
<PAGE>
Stabilization. The representatives of the underwriters have advised us that,
pursuant to Regulation M under the Securities Act, certain persons participating
in this offering may engage in transactions, including stabilizing bids,
syndicate covering transactions or the imposition of penalty bids, that may have
the effect of stabilizing or maintaining the market price of the shares of
common stock at a level above that which might otherwise prevail in the open
market. A "stabilizing bid" is a bid for or the purchase of the shares of common
stock on behalf of the underwriters for the purpose of fixing or maintaining the
price of the shares of common stock. A "syndicate covering transaction" is the
bid for or the purchase of the shares of common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with this offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the shares
of common stock originally sold by such underwriter or syndicate member is
purchased by the representatives in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The representatives have advised us that such transactions may be effected on
the Nasdaq National Market or otherwise and, if commenced, may be discontinued
at any time.
LEGAL MATTERS
The validity of our common stock offered in this prospectus and certain
other legal matters will be passed upon for us by Ledgewood Law Firm, P.C.,
Philadelphia, Pennsylvania. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Sidley & Austin, New York,
New York.
EXPERTS
Our consolidated financial statements as of September 30, 1996, 1997, and
1998 and March 31, 1999 and for the period from March 4, 1996 (inception) to
September 30, 1996 and for each of the two years in the period ended September
30, 1998 and for the six months period ended March 31, 1999, and the
consolidated financial statements of JLA and subsidiaries as of December 31,
1998 and for the year then ended included in this prospectus have been so
included in reliance upon the reports of Grant Thorton LLP, independent
certified public accountants, upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of JLA as of December 31, 1996 and
1997 and for each of the two years in the period ended December 31, 1997
included in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect to
those financial statements, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act with
respect to the common stock offered hereby. This prospectus does not contain all
of the information set forth in the registration statement and the exhibits and
schedules to the registration statement. For further information about us and
the common stock offered hereby, please refer to the registration statement and
the exhibits and schedules filed as part of it. Statements contained in this
prospectus concerning the contents of any contract or any other document are not
necessarily complete and are qualified by reference to each such contract or
other document which is filed as an exhibit to the registration statement. You
can inspect the registration statement, including its exhibits and schedules,
without charge at the SEC's principal office in Washington, D.C., and you can
obtain copies of all or any part of it from the Public Reference Room of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the SEC's regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New
York 10048 after payment of fees prescribed by the SEC. For information on the
operation of the Public Reference Room, call the SEC at 1-800-SEC-0330. The SEC
also maintains a web site which provides online access to reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC at the address http://www.sec.gov. Prior to this
offering, we were not subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended.
66
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholder and Board of Directors
Fidelity Leasing, Inc.
We have audited the accompanying consolidated balance sheets of
Fidelity Leasing, Inc. and subsidiaries as of March 31, 1999 and September 30,
1998 and 1997 and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for the six months ended March 31, 1999,
for the years ended September 30, 1998 and 1997 and for the period March 4, 1996
(inception) through September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Fidelity Leasing, Inc. and subsidiaries as of March 31, 1999 and September 30,
1998 and 1997, and the results of its operations and its cash flows for the six
months ended March 31, 1999, for the years ended September 30, 1998 and 1997 and
for the period March 4, 1996 (inception) through September 30, 1996 in
conformity with generally accepted accounting principles.
/s/Grant Thornton LLP
Cleveland, Ohio
June 18, 1999 (except for Note 10,
as to which the date is June 25, 1999)
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Resource Leasing, Inc.)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, March 31,
------------------------ ---------
1997 1998 1999
--------- --------- --------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents............................................ $ 1,970 $ 3,680 $ 20,504
Investments in leases and notes receivable
(less allowance for possible losses
of $248, $1,602, and $9,610)...................................... 8,153 24,978 312,668
Prepaid expenses and other assets.................................... 597 2,238 8,747
Furniture and equipment
(less accumulated depreciation of $156, $410, and $669)............ 829 1,373 3,354
Goodwill
(less accumulated amortization of $201)............................ - - 18,252
--------- --------- --------
Total assets................................................... $ 11,549 $ 32,269 $363,525
========= ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Debt:
Warehouse debt..................................................... $ - $ - $ 2,500
Non recourse debt.................................................. - - 259,743
Affiliate debt..................................................... 7,418 23,982 67,596
Other debt......................................................... - - 12,368
Other liabilities:
Accounts payable and other accrued liabilities..................... 588 879 12,106
Security deposits on leased equipment.............................. 751 2,055 3,029
Deferred income.................................................... 54 37 28
Estimated state income taxes....................................... 73 245 150
--------- --------- --------
Total liabilities.............................................. 8,884 27,198 357,520
Commitments and contingencies........................................ - - -
Stockholder's equity:
Preferred stock, no par value: 1,000,000 shares authorized....... - - -
Common stock, no par value: 40,000,000 shares authorized
6,293,186 shares issued and outstanding......................... 2,000 2,000 2,000
Retained earnings................................................. 665 3,071 4,005
--------- --------- --------
Total stockholder's equity.................................. 2,665 5,071 6,005
--------- --------- --------
Total liabilities and stockholder's equity.................. $ 11,549 $ 32,269 $363,525
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements
F-1
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Resource Leasing, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception)
through Year Ended Six Months Ended
September 30, September 30, March 31,
------------- ----------------- -----------------
1996 1997 1998 1998 1999
------- ------ ------ ------ ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Interest income................................. $ 7 $ 859 $2,525 $1,013 $8,039
Other income.................................... - 221 956 349 1,332
Gains on sales of leases and terminations....... - 3,710 7,598 3,883 5,064
------- ------ ------ ------ ------
Total revenues................................ 7 4,790 11,079 5,245 14,435
Costs and expenses:
Provision for possible losses................... 7 253 1,422 625 1,523
Depreciation and amortization................... 36 232 425 190 594
Selling general and administrative.............. 411 2,050 3,337 1,890 5,071
------- ------ ------ ------ ------
454 2,535 5,184 2,705 7,188
Interest expense:
Affiliate ...................................... - 457 1,344 588 1,588
Other........................................... - 233 345 150 3,172
------- ------ ------ ------ ------
Total interest expense........................ - 690 1,689 738 4,760
------- ------ ------ ------ ------
Total expenses................................ 454 3,225 6,873 3,443 11,948
------- ------ ------ ------ ------
Income (loss) before provision (benefit) for
income taxes and cumulative effect of a
change in accounting principle.................. (447) 1,565 4,206 1,802 2,487
Provision (benefit) for income taxes............... (152) 605 1,800 771 1,140
-------- ------ ------ ------ ------
Income (loss) before cumulative effect of a change
in accounting principle......................... (295) 960 2,406 1,031 1,347
Cumulative effect of a change in accounting
principle (Note 2).............................. - - - - (413)
-------- ------ ------ ------ ------
Net income (loss).................................. $ (295) $ 960 $2,406 $1,031 $ 934
======== ====== ====== ====== ======
Earning (loss) per common share:
Basic:
Income (loss) before cumulative effect of a
change in accounting principle.............. $ (0.05) $ 0.15 $ 0.38 $ 0.16 $ 0.21
======= ====== ====== ====== ======
Net income (loss)............................. $ (0.05) $ 0.15 $ 0.38 $ 0.16 $ 0.15
======= ====== ====== ====== ======
Weighted average shares outstanding........... 6,293 6,293 6,293 6,293 6,293
======= ====== ====== ====== ======
Dilutive:
Income (loss) before cumulative effect of a
change in accounting principle.............. $ (0.05) $ 0.14 $ 0.33 $ 0.14 $ 0.19
======= ====== ====== ====== ======
Net income (loss)............................. $ (0.05) $ 0.14 $ 0.33 $ 0.14 $ 0.13
======= ====== ====== ====== ======
Weighted average shares....................... 6,338 6,653 7,219 7,199 7,247
======= ====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Resource Leasing, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
PERIOD FROM MARCH 4, 1996 (Inception) TO MARCH 31, 1999
(in thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Retained Total
------------------------ Earnings Stockholder's
Shares Amount (Deficit) Equity
----------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Balance at March 4, 1996............ - $ - $ - $ -
Common stock issued............ 6,293,186 2,000 - 2,000
Net loss....................... - - (295) (295)
----------- ---------- ------------- -----------
Balance at September 30, 1996....... 6,293,186 2,000 (295) 1,705
Net income..................... - - 960 960
----------- ---------- ------------- ----------
Balance at September 30, 1997....... 6,293,186 2,000 665 2,665
Net income..................... - - 2,406 2,406
----------- ---------- ------------- ----------
Balance at September 30, 1998....... 6,293,186 2,000 3,071 5,071
Net income..................... - - 934 934
----------- ---------- ------------- ----------
Balance at March 31, 1999........... 6,293,186 $ 2,000 $ 4,005 $ 6,005
=========== ========== ============= ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly-Owned Subsidiary of Resource Leasing, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception)
through Year Ended Six Months
September 30, September 30, Ended March 31,
-------------- ----------------- -----------------
1996 1997 1998 1998 1999
------------- ------- ------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (295) $ 960 $ 2,406 $ 1,031 $ 934
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 36 232 425 190 594
Provision for possible losses.......................... 7 253 1,422 625 1,523
Gains on sales of leases............................... - (3,710) (7,598) (3,883) (5,064)
Cumulative effect of change in accounting principle.... - - - - 413
Changes in operating assets and liabilities:
Increase in prepaid expenses and other assets.......... (97) (433) (1,230) (936) (736)
Increase in accounts payable and other liabilities..... 93 495 514 152 4,465
Increase in security deposits on leased equipment...... 11 739 1,305 655 974
(Decrease) increase in deferred income................. - 54 (17) (9) (9)
Increase (decrease) in estimated state income taxes.... - 73 171 355 (95)
------- ------- ------- ------- ---------
Net cash provided by (used in) operating activities.. (245) (1,337) (2,602) (1,820) 2,999
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash acquired in business acquisition................. - - - - 17,221
Capital expenditures...................................... (506) (479) (798) (328) (1,696)
Cost of equipment acquired for lease...................... (732) (34,568) (92,648) (32,966) (115,217)
Principal payments on (additions to) notes secured
by equipment leases.................................... 8,514 73 (509) 373
Proceeds from sales of leases............................. - 20,624 78,030 27,755 89,995
Payments received in excess of revenue
recognized on leases................................... (6) 1,394 3,539 1,159 28,990
Decrease (increase) in other assets....................... (159) 83 (376) - (279)
Decrease in other liabilities............................. - - - - (236)
-------- ------- ------- ------- ---------
Net cash provided by (used in) in investing
activities........................................ (1,403) (4,432) (12,180) (4,889) 19,151
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock.................................. 2,000 - - - -
Borrowings under credit facilities........................ - 16,900 33,800 15,000 56,100
Principal payments on credit facilities................... - (16,900) (33,800) (15,000) (69,651)
Increase in borrowings - affiliate........................ - 7,419 16,563 6,547 8,473
(Increase) decrease in other assets....................... - (32) (71) 24 (248)
------- -------- -------- ------- ---------
Net cash provided by (used in) financing activities.. 2,000 7,387 16,492 6,571 (5,326)
Increase (decrease) in cash and cash equivalents.......... 352 1,618 1,710 (138) 16,824
Cash and cash equivalents, beginning of period............ - 352 1,970 1,970 3,680
------- ------- ------- ------- --------
Cash and cash equivalents, end of period............. $ 352 $ 1,970 $ 3,680 $ 1,832 $ 20,504
======= ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Fidelity Leasing, Inc. (the "Company" or "FLI") is an equipment finance
company which leases technology equipment to the small business market. FLI was
incorporated in Pennsylvania on March 4, 1996 and is a wholly owned subsidiary
of Resource Leasing, Inc. ("RLI"), which is a wholly owned subsidiary of
Resource America, Inc. ("RAI"). RAI is a publicly traded company (trading under
the symbol REXI on the NASDAQ system) operating in the real estate finance,
leasing and energy business sectors. On February 4, 1999, the Company acquired
JLA Credit Corporation ("JLA") another entity involved in the "small ticket"
equipment leasing business (see Note 9). FLI specializes in financing equipment
in four technology sectors: communications technology, industrial technology,
information technology and office automation. FLI provides leasing services by
forming marketing alliances with manufacturers, distributors and resellers of
equipment technologies and with banks that do not intend to have internal lease
financing programs for small business customers. Through March 31, 1999, the
Company sold its leasing portfolio on a servicing retained basis.
Equipment leases are subject to the risk of default in payment by
lessees. The Company seeks to control its credit risk through the use of credit
scoring systems in evaluating the credit risk of applicants.
The Company's ability to maintain and build its leasing business is
dependent on its ability to obtain sufficient financing. A warehouse credit
facility, borrowings from RAI, commercial paper conduits, term securitized
funding facilities, and proceeds from the sales of equipment leases have
provided the working capital needed to fund operations.
The ability to continue to complete securitization and other structured
finance transactions depends upon a number of factors, including general
conditions in the credit markets, the size and liquidity of the market for types
of receivable-backed securities issued or placed in securitizations sponsored by
the Company and the overall performance of the Company's lease portfolio.
F-5
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
transactions have been eliminated. All share and per share data have been
adjusted retroactively to reflect the .6992-for-1 reverse stock split on June
25, 1999 (see Note 10). All footnote information and tables referring to the
year ended September 30, 1996 relate to the period March 4, 1996 (inception)
through September 30, 1996.
Use of Estimates
Preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include the estimated residual values
and the allowance for possible losses discussed below. Actual results could
differ from those estimates.
Impairment of Long-Lived Assets. The Company reviews its long-lived
assets for impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable. If it is determined that an
asset's estimated future cash flows will not be sufficient to recover its
carrying amount, an impairment charge will be recorded to reduce the carrying
amount for that asset to its estimated fair value.
Revenue Recognition
Direct Financing Leases. The Company's lease transactions are
classified as direct financing leases (as distinguished from sales-type or
operating leases). These leases transfer substantially all benefits and risks of
equipment ownership to the customer. A lease is a direct financing lease if the
creditworthiness of the customer and the collectibility of lease payments are
reasonably certain and it meets one of the following criteria: (i) the lease
transfers ownership of the equipment to the customer at the end of the lease
term; (ii) the lease contains a bargain purchase option: (iii) the lease term at
inception is at least 75% of the estimated economic life of the leased
equipment: or (iv) the present value of the minimum lease payments is at least
90% of the fair market value of the leased equipment at inception of the lease.
The Company's investments in leases consists of the sum of the total future
minimum lease payments receivable, and the estimated unguaranteed residual value
of leased equipment, less unearned lease income. Unearned lease income, which is
recognized as revenue over the term of the lease by the effective interest
method, represents the excess of the total future minimum lease payments plus
the estimated unguaranteed residual value expected to be realized at the end of
the lease term over the cost of the related equipment. Initial direct costs
incurred in consummating a lease are capitalized as part of the investment in
direct finance leases and amortized over the lease term as a reduction in the
yield.
F-6
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Residual Values. Unguaranteed residual value represents the estimated
amount to be received at lease termination from lease extensions or disposition
of the leased equipment. The estimates are based upon available industry data
and senior management's prior experience with respect to comparable equipment.
The estimated residual values are recorded as investment in direct financing
leases, on a net present value basis. Residual values are reviewed periodically
to determine if the current estimate of the equipment's fair market value
appears to be below its recorded estimate. If required, residual values are
adjusted downward to reflect adjusted estimates of fair market values. Generally
accepted accounting principles do not permit upward adjustments to residual
values.
Securitization of Leases. The Company sells a large percentage of the
leases it originates through securitization transactions and other structured
finance techniques. In a securitization transaction, the Company sells and
transfers a pool of leases to a bankruptcy remote entity (an "Intermediate
Purchaser"). Typically, the Intermediate Purchaser in turn simultaneously
transfers its interest in the leases to one or more investors in return for cash
equal to a percentage of the aggregate present value of the finance lease
receivables being sold. The intermediate purchaser typically retains a residual
interest in the pool of leases transferred to investors consisting of the excess
of collections on the leases and related equipment over the amount of
collections required by investors to recover the consideration paid for the
transfer plus an agreed upon rate of interest. The consideration received by the
Company for each pool of leases sold consists of the cash received by the
Intermediate Purchaser from the financial institution plus an interest-bearing
note from the Intermediate Purchaser.
Through March 1998, the Company's lease sales included residual values.
In June 1998, the Company established a revolving CP Conduit facility. With this
facility, the Company began retaining the residual interests in the securitized
leases on its balance sheet for financial reporting purposes. The Company
anticipates that it will derive a significant portion of its leasing profits (if
any) from residuals. Currently, repayment of notes received by the Company from
Intermediate Purchasers in earlier sales depends, to a significant extent, on
realization of residuals. The Company anticipates that residuals will
principally involve the original end-users; however, equipment not sold or
re-leased to end-users will be disposed of in the secondary market. While
residual realization is generally higher with original end-users than in the
secondary market, the secondary market (essentially, networks of distributors
and dealers in various equipment categories) is well developed in the product
categories the Company currently pursues and transactions in these product
categories have historically resulted in residual recoveries, on average, equal
to the book value of the equipment. Equipment reacquired by the Company prior to
lease termination (through lease default or otherwise) will be sold in the
secondary market.
Gains on the sales of equipment leases are recorded at the date of sale
in the amount by which the sales price exceeds the carrying value of the
underlying leases interest sold. Subsequent to a sale, the Company has no
remaining interest in the pool of the leases or equipment except for residuals
retained on post-March 1998 sales and security interests retained in the lease
pool sold when a note is received as part of the sale proceeds. Under certain
circumstances, the Company may have recourse obligations to replace
non-performing leases in the pool.
F-7
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Allowance for Possible Losses. The Company maintains an allowance for
possible losses in connection with payments due under leases held in the
Company's portfolio, its retained interest in leases securitized or sold and its
recourse obligation for non-performing leases sold. The allowance is determined
by management's estimate of future uncollectable lease contracts, based on
factors including the Company's historical loss experience, an analysis of
contractual delinquencies, economic conditions and trends, industry statistics
and lease portfolio (including leases under the Company's management)
characteristics. The Company's policy is to charge off to the allowance those
leases which are in default and for which management has determined the
probability of collection to be remote. Recoveries on leases previously charged
off are restored to the allowance.
Prepaid Expenses and Other Assets
Included in prepaid expenses and other assets are repossessed equipment
held for resale which is stated at the lower of cost or market and deferred
financing costs which are being amortized on a straight line basis over the
lives of the related debt.
Interest Rate Swap Agreements
Interest rate swap agreements are entered into as a means of managing
interest rate risk. Net settlements are accrued over the term of the swap
agreements as an adjustment to interest expense. Swaps under each conduit
facility may be terminated upon consummation of term note securitizations.
Payments or receipts upon termination of the swaps are recognized as an
adjustment of the interest expense on securitizations accounted for as
financings.
Stock-Based Compensation
The Company has adopted the disclosure only provisions under SFAS No.
123, "Accounting for Stock Based Compensation." As such, the Company recognizes
compensation expense with respect to stock options granted to employees using
the intrinsic value method prescribed by Accounting Principles Board Opinion No.
25
Income Taxes
The Company through the fiscal year ended September 30, 1998, filed a
consolidated Federal income tax return with its ultimate parent, RAI. The
Company will continue to file a consolidated Federal income tax return with RAI
through the date of the public offering contemplated herein, at which time the
Company will no longer qualify to be included in RAI's consolidated return since
RAI will own less than 80% of the Company's outstanding common stock. Through
March 31, 1999, the Company recorded a provision or benefit for Federal income
taxes in an amount equal to the product of its pre-tax book income and RAI's
incremental federal income tax rate. Separate company state tax returns are
filed in those states in which the Company is registered to do business.
F-8
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Furniture and Equipment
Furniture and equipment are carried at cost, less accumulated
depreciation. Such assets are depreciated using the straight-line method over
their estimated useful lives (generally five years).
Goodwill
Goodwill, which arose through the acquisition of JLA, represents the
excess of the acquisition cost over the fair value of the net assets of the
business acquired and is being amortized over a period of fifteen years using
the straight line method.
Cumulative Effect of a Change in Accounting Principle
In fiscal 1998, the AICPA issued Statement of Position 98-5, Reporting
on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires costs of
start-up activities and organization costs to be expensed as incurred. The
Company elected to adopt the provisions of SOP 98-5 effective October 1, 1998,
and accordingly start up costs of $753,000 ($413,000 net of income tax) which
had been capitalized at September 30, 1998 were charged to operations on October
1, 1998 and are reflected in the consolidated statement of operations for the
six months ended March 31, 1999 as a cumulative effect of a change in accounting
principle.
Cash Flow Statements
The Company considers temporary investments with maturity at the date
of acquisition of 90 days or less to be cash equivalents.
F-9
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Supplemental Disclosure of Cash Flow Information
Information for six months ended March 31, 1999 and 1998 and the years
ended September 30, 1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended September 30, March 31,
-------------------------- ----------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Cash paid during the year for:
Interest............................. $ - $ 628 $ 1,672 $ 703 $2,254
======= ======= ======= ====== ======
Income taxes......................... $ - $ - $ 123 $ 72 $ 632
======= ======= ======= ====== ======
Non-cash activities:
Sales and replacements for leases in
exchange for notes................... $ - $13,275 $ 9,277 $8,843 $ 160
======= ======= ======= ====== ======
</TABLE>
New Accounting Standards
Effective October 1, 1998, the Company became subject to the provisions
of Statements of Financial Accounting Standards No. 130 and No. 131 (SFAS 130
and SFAS 131).
SFAS 130, "Reporting Comprehensive Income" requires disclosure of
comprehensive income and its components. Comprehensive income includes net
income and all other changes in equity of a business during a period from
transactions and other events and circumstances from non-owner sources. These
changes, other than net income, are referred to as "other comprehensive income".
The Company has no material elements of comprehensive income, other than net
income to report.
SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information," prescribes the manner in which an entity determines the operating
segments it must report and also requires the disclosure of additional segment
information. The Company operates in only one business segment and, therefore,
no segment disclosure is required.
In June 1998 the Financial Accounting Standards Board (FASB) issued
statement of Financial Accounting Standard No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging. SFAS 133 will require the Company to
recognize all derivatives as either assets or liabilities in its consolidated
balance sheet and to measure those instruments at fair value. The Company is
required to adopt SFAS 133 effective October 1, 1999, however, FASB has issued
an exposure draft which, if adopted, would extend that date to October 1, 2000.
The effect of adopting SFAS 133 on the Company's consolidated financial
position, results of operations and cash flows will be dependent on the extent
of future hedging activities and fluctuations in interest rates.
F-10
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Uninsured Bank Balances
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of periodic temporary
investments of excess cash. The Company places its temporary excess cash
investments in high quality short-term money market instruments at high quality
institutions. Portions of these instruments are in excess of the Federal Deposit
Insurance Corporation ("FDIC") limit. At March 31, 1999, the Company had
deposits of $18.9 million in seven institutions of which $17.8 million is over
the FDIC limit. No losses have been experienced on such investments.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
estimating the fair value of each class of financial instruments for which it is
practicable to estimate fair value.
For cash and cash equivalents, receivables and payables, the carrying
amounts approximate fair value because of the short maturity of these
instruments. For long-term debt, including current maturities, the fair value of
the Company's long-term debt approximates historically recorded cost since
interest rates approximate market.
Based upon available market information and appropriate valuation
methods, the Company believes the carrying cost of investments in direct
financing leases approximates fair value.
Earnings Per Share
Basic earnings per share are determined by dividing net income by the
weighted average number of common shares outstanding during the period. Earnings
per share - diluted are computed by dividing net income by the sum of the
weighted average number of shares outstanding and dilutive potential common
shares issuable during the period. Dilutive potential common shares consist of
the excess of common shares issuable under the terms of various stock option
agreements over the number of such shares that could have been acquired (at the
weighted average price of the Company's Common Stock during the period) with the
proceeds received from the exercise of the options and warrants.
F-11
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The computations of basic and diluted earnings (loss) per share for
each period follow:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended September 30, March 31
----------------------------------- ------------------------
1996 1997 1998 1998 1999
---------- --------- --------- ----------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Net income (loss)............................ $ (295) $ 960 $ 2,406 $ 1,031 $ 934
========== ========= ========= =========== ========
Basic average shares of common stock
outstanding................................ 6,293 6,293 6,293 6,293 6,293
Dilutive effective of stock option and
award plans................................ 45 360 926 906 954
--------- --------- ----------- -------- --------
Dilutive weighted average shares of common
stock...................................... 6,338 6,653 7,219 7,199 7,247
========= ========= ========= ========== ========
</TABLE>
3. INVESTMENTS IN LEASES AND NOTES RECEIVABLE
Components of the investments in leases and notes receivable as of
March 31, 1999, September 30, 1998 and 1997, as well as future minimum lease
payments receivable, including residual values, are as follows:
<TABLE>
<CAPTION>
As of September 30, As of March 31,
------------------------ ---------------
1997 1998 1999
-------- --------- ---------------
(in thousands)
<S> <C> <C> <C>
Total future minimum lease payments receivable.. $ 4,186 $ 10,011 $ 350,925
Initial direct costs, net of amortization....... 75 153 824
Unguaranteed residual........................... 310 6,338 19,149
Unearned lease income........................... (933) (4,061) (63,167)
-------- ---------- ---------
Investments in leases, net................ 3,638 12,441 307,731
Notes receivable................................ 4,763 14,139 14,547
Allowance for possible losses................... (248) (1,602) (9,610)
-------- ---------- ---------
Investments in leases and notes
receivable.............................. $ 8,153 $ 24,978 $ 312,668
======== ========== =========
</TABLE>
The future minimum lease payments receivable for the next five
succeeding years ending March 31st are as follows: 2000 - $135.9 million; 2001 -
$100.9 million; 2002 - $62.6 million; 2003 - $33.7 million; and 2004 - $12.1
million, and thereafter $5.7 million.
The amount of unguaranteed residual value actually realized at contract
termination will depend on the then fair market value of the related equipment
and may vary from the recorded estimate. Residual values are reviewed from time
to time to determine if the equipment's fair market value is below its recorded
value (see Note 2).
Certain of the leases include options to purchase the underlying
equipment at the end of the lease term at fair value or the stated residual
which is not less than the book value at termination.
A summary of the activity in the Company's allowance for possible
losses in connection with payments due under leases held in the Company's
portfolio, its retained interest in leases securitized or sold, and its
replacement obligation for non-performing leases sold for the six months ended
March 31, 1999 and for the years ended and September 30, 1998 and 1997 are as
follows:
F-12
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
September 30, March 31,
----------------------------- ---------
1996 1997 1998 1999
------ ------- ------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period .......... $ - $ 7 $ 248 $1,602
Balance of acquired subsidiary ........ - - - 7,200
Provision for possible losses ......... 7 253 1,422 1,523
Write-offs ............................ - (12) (68) (715)
------ ------- ------- -------
Balance, end of period ................ $ 7 $ 248 $1,602 $9,610
====== ====== ====== ======
</TABLE>
The types of equipment financed consist of the following in the
approximate percentages shown below:
<TABLE>
<CAPTION>
As of September 30, As of March 31,
---------------------- ---------------
1997 1998 1999
------ ------ --------------
<S> <C> <C> <C>
Communications technology .................. 38% 38% 18%
Industrial technology....................... - - 12
Information technology ..................... 8 11 24
Office automation .......................... 52 50 43
Other ...................................... 2 1 3
------ ----- -----
Total....................................... 100% 100% 100%
====== ===== =====
</TABLE>
The Company's leasing transactions with customers located in California
measured by original equipment cost represent approximately 36% of the minimum
lease balance, as of March 31, 1999. There was no other geographical
concentration greater than 10%. In addition, no customer balance exceeded 10% of
the minimum lease balance.
The net investment in non-earning receivables which are included in the
Company's direct financing lease portfolio were approximately $1.7 million at
March 31, 1999.
F-13
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Sales of Leases
Commencing in fiscal 1997, the Company began to sell leases on a
servicing retained basis for a combination of cash and notes as follows:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
September 30, March 31,
---------------------- ---------------------
1997 1998 1998 1999
--------- --------- -------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C>
Proceeds:
Cash............................... $ 20,624 $ 78,030 $ 27,755 $ 89,705
Notes.............................. 13,275 7,956 7,956 -
--------- --------- -------- --------
33,899 85,986 35,711 89,705
Book value........................... (30,189) (78,388) (31,828) (84,906)
--------- --------- -------- --------
Gain................................. $ 3,710 $ 7,598 $ 3,883 $ 4,799
========= ========= ======== ========
</TABLE>
The notes accrue interest at 9% per annum. The remaining unpaid
balances on the notes are due and payable at dates ranging from April 1, 2003
through July 1, 2004.
4. SECURITIZATION PROGRAMS
The Company initially funds the origination of leases from working
capital, warehouse facilities from banks, and borrowings from RAI. From time to
time, depending on market conditions, the Company securitizes the leases in its
portfolio that meet pre-established eligibility criteria by packaging them into
a pool and selling the lease receivables, as described below.
Sales by Assignment. In June and September of 1997, the Company entered
into sales transactions where it sold lease receivables and its interests in the
related equipment and residuals to an unaffiliated special purpose entity, for
an amount of cash equal to 100% of the present value of the lease receivables
and a note equal to 100% of the present value of the estimated residual
interests. The special purpose entity resold the lease receivables to Centre
Square Funding Corporation ("Centre Square"), a commercial paper conduit
administered by CoreStates Bank, N.A. (now First Union). RAI provided a guaranty
to Centre Square for payment of a portion of the lease receivables due under the
defaulted leases and for the Company's performance as servicer. In December
1997, Centre Square sold the lease receivables to an institutional investor. The
transaction was accounted for as a sale for financial reporting purposes.
CP Conduit Securitization. In December 1997, the Company sold
additional lease receivables and interests in the related equipment and
residuals to an unaffiliated entity on terms similar to those of the June and
September 1997 sales, except that it received cash equal to a substantial
portion of the present value of the lease receivables and a promissory note in
an amount equal to the remainder of the present value of the lease receivables
and 100% of the estimated present value of the residual interests. The entity
resold the receivables to a CP conduit administered by First Union Bank. The
transaction was accounted for as a sale for financial reporting purposes.
F-14
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In June 1998, the Company established a CP conduit facility for $100.0
million ($125.0 million as amended) with Variable Funding Credit Corp. ("VFCC"),
a First Union administered conduit. This facility may be terminated if lease
delinquencies or defaults in the securitized portfolio exceed specified
thresholds. This facility has a 364 day commitment period, which expires in June
1999, with annual renewals at the option of VFCC and its liquidity providers.
The transaction was accounted for as a sale for financial reporting purposes.
The Company does not intend to renew this facility in its present form.
In December 1998, the Company entered into a $100.0 million facility
with a CP conduit administered by PNC Bank. The commitment period expires in
December 1999, but is subject to annual renewal. This facility contains
provisions which are substantially similar to the Company's $125.0 million
facility. This facility was recently amended to permit the Company to treat
future transfers of leases made under it as financing for financial reporting
purposes.
In February 1999, the Company established a $143.0 million CP conduit
facility with First Union in order to finance the acquisition of JLA. In
connection with this facility, the Company sold a portfolio of JLA originated
lease receivables to a special purpose subsidiary, which pledged the receivables
to the CP conduit. The Company treated this transaction as financing for
financial reporting purposes. This facility was paid down to $18.1 million,
primarily with the proceeds of a term note securitization in June 1999.
Sales Facilities. In December 1998, the Company entered into agreements
with IBM Credit and IBM Canada that allowed the Company to finance, on a monthly
basis, all of the leases originated under the Company's strategic marketing
alliances with IBM Credit and IBM Canada. The Company formed two special purpose
subsidiaries for purposes of these sales, one for lease originations in the U.S.
and the other for lease originations in Canada. The Company treated these
transfers as sales for financial reporting purposes.
Term Note securitizations. In June 1997, JLA securitized leases in a
$75.0 million private placement of floating rate notes. This transaction has a
20% optional repurchase feature. In February 1998, JLA securitized leases in a
$125.0 million private placement of fixed and floating rate notes. This
transaction also has a repurchase option. The Company treated both the
securitizations as financings for financial reporting purposes.
F-15
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Interest Rate Risk and Hedging. The Company's conduit facilities, which
are at variable rates of interest, require the Company to enter into interest
rate swap agreements for the benefit of the purchaser of the leases. Because the
cost of funding under the CP conduit facility is floating and the rental stream
is fixed, an interest rate swap is needed to hedge this risk. Under an interest
rate swap, the related special purpose entity agrees to pay a fixed rate of
interest and receive payment of a floating rate from a counterparty. If
short-term interest rates increase, then the fixed rate of interest the special
purpose entity is paying under the swap will be less than the short-term rate it
is receiving, resulting in a payment to the special purpose entity. This payment
will be used to offset the higher borrowing costs under the commercial paper
borrowings. The interest rate swap has the effect of fixing the interest rate of
the borrowings during the securitization period.
FLI terminates the interest rate swaps in their CP conduit facilities
when it removes assets from the conduit and into the term note securitization.
Interest rate hedge agreements outstanding at March 31, 1999 for the
Company's CP conduit securitizations had an aggregate notional value of
approximately $284.9 million, required payments based on fixed rates ranging
from 5.2% to 6.0% and had a negative estimated fair market value of $83,000.
5. DEBT
Total debt consisted of the following:
<TABLE>
<CAPTION>
As of September 30, As of March 31,
-------------------------- ---------------
1997 1998 1999
----------- ---------- --------------
(in thousands)
<S> <C> <C> <C>
Warehouse debt:
First Union/European American Bank.......... $ - $ - $ 2,500
----------- ---------- -----------
Nonrecourse debt:
JLA securitized term facilities............. - - 116,953
CP conduit facilities:
First union (JLA acquisition)........... - - 134,513
PNC..................................... - - 8,277
----------- ---------- -----------
Total nonrecourse debt...................... - - 259,743
----------- ---------- -----------
Affiliate debt:
Subordinated................................ 4,447 6,000 46,876
Warehouse................................... 2,971 16,147 18,500
Tax liability to affiliate.................. - 1,835 2,220
----------- ---------- -----------
Total affiliate debt........................ 7,418 23,982 67,596
----------- ---------- -----------
Other debt:
Term loan................................... - - 5,695
Seller financing (JLA acquisition).......... - - 6,673
----------- ---------- -----------
Total other debt............................ - - 12,368
----------- ---------- -----------
Total debt....................................... $ 7,418 $ 23,982 $ 342,207
=========== ========== ===========
</TABLE>
The Company classifies its indebtedness as either nonrecourse debt or
debt based on the structure of the debt instrument that defines the Company's
obligations. Nonrecourse debt includes amounts outstanding related to leases
included in securitized term facilities, CP conduit facilities, or individual or
groups of leases funded under nonrecourse funding arrangements with specific
F-16
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
financing sources. Amounts outstanding in these instances are classified as
nonrecourse debt because the Company has no obligation to ensure that investors
or funding sources receive the full amount of principal and interest which may
be due to them under their funding arrangement. In these instances, the
investors or financing sources may only look to specific leases and the
associated cash flows for the ultimate repayment of amounts due to them. In the
event the cash flow associated with specific leases funded under circumstances
are insufficient to fully repay amounts due, the investor or financing source
bears the full risk of loss.
The Company primarily finances its operations with a warehouse line of
credit, securitized term facilities, commercial paper conduit facilities, and
borrowings from RAI. Following is a description of borrowing arrangements in
place at March 31, 1999, and September 30, 1998 and 1997.
Warehouse Debt. In September, 1998, FLI entered into a new secured
revolving credit and term loan agreement that provides for an aggregate
borrowing limit of up to $20.0 million. Revolving credit loans bear interest, at
FLI's election, at (a) an adjusted LIBOR rate plus 150 basis points or (b) the
rate for one month U.S. dollar deposits as reported by Telerate (London) plus
150 basis points, while term loans bear interest at the adjusted LIBOR rate plus
150 basis points. Borrowings under this facility are collateralized by the
leases being financed and on the underlying equipment being financed and are
guaranteed by RLI and RAI. The agreement contains certain covenants pertaining
to FLI and its affiliates including the maintenance of certain financial ratios
and restrictions on changes in the Company's ownership and a key management
position. Outstanding borrowings under the facility were $2.5 million at March
31, 1999. There were no outstanding borrowings under the facility at September
30, 1998 or 1997. The facility expires on March 31, 2000 but may be renewed for
additional 18 month periods by the lenders.
Nonrecourse Debt. The JLA securitized term facilities debt was assumed
by the Company when it acquired JLA. This debt is expected to be paid as the
Company receives payments on the underlying securitized contract receivables.
The contract receivables collateralize the notes, and other creditors of the
Company would be subordinate to the note holders with respect to these
securitized receivables. The timing and amount of the repayment of the notes are
dependent upon the ultimate collection of the securitized lease receivables. As
of March 31, 1999, interest rates on these asset backed borrowings range from
4.94% to 6.80%, and the weighted average interest rate was 5.26% (see Note 4).
The First Union facility established in order to finance the
acquisition of JLA (see Notes 4 and 9) bears interest at the VFCC commercial
paper rate plus 1.00% and is payable on a monthly basis.
F-17
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In December 1998, the Company established a $100.0 million CP conduit
with Market Street Funding, administered by PNC Bank. (see Note 4) The facility
bears interest at Market Street's commercial paper rate plus 0.65% and has $87.5
million of availability at March 31, 1999.
Affiliate Debt. As of March 31, 1999, September 30, 1998 and 1997, the
Company had $67.6 million, $24.0 million and $7.4 million of indebtedness to
RAI, respectively. Of this amount, $46.9 million, $6.0 million and $4.4 million
is subordinated at March 31, 1999, September 30, 1998 and 1997, respectively to
repayment of the First Union warehouse facility and the December 1997, June
1998, and February 1998 First Union CP conduit facilities. The subordinated debt
bears interest at the rate of 10.00% per annum and the remaining unsubordinated
Affiliated Debt bears interest at the one month LIBOR rate plus 1.50%. The
unsubordinated debt has a 30 day maturity and other terms comparable to a bank
facility. (see Note 4) The proceeds of these loans were used for the acquisition
of JLA and for general corporate purposes, including funding lease originations.
Accrued interest to date has been added to the principal balance of these
obligations. The tax liability to the parent does not bear interest and is due
on demand.
Other Debt. In addition, as part of the JLA acquisition, the Company
acquired a small pool of automobile leases. To finance this portfolio, the
Company entered into a 36 month term loan with First Union for $5.7 million,
which bears interest at LIBOR plus 100 basis points.
As part of the consideration of the acquisition of JLA (see Note 9),
the Company gave the seller a promissory note with an original principal amount
of $6.7 million, which bears interest at the Treasury Rate plus between 250 and
400 basis points. The note is payable in quarterly installments, matures in
February 2004, and contains customary events of default.
Annual debt principal payments over the next 5 years ending March 31
are as follows: 2000 - $110.0 million, 2001 - $77.0 million, 2002 - $49.0
million, 2003 - $25.0 million, and 2004 - $9.0 million.
6. EMPLOYEE BENEFIT PLANS
Employee Savings Plan
After one year of service, the Company's employees are eligible to
participate in RAI's Employee Retirement Savings Plan and Trust under Section
401(k) of the Internal Revenue Code which allows employees to defer up to 10% of
their income (subject to certain limitations) on a pretax basis through
contributions to the savings plan. The Company matches up to 100% of each
employee's contribution. The Company's contributions for the periods ending
March 31, 1999 and 1998 amounted to $86,000 and $35,000 and for the years ended
September 30, 1998, 1997, and 1996 amounted to $97,000, $18,000, and $0.
F-18
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock Options
In conjunction with the formation of the Company, the Chairman and
Chief Executive Officer ("CEO") of the Company was granted an option to purchase
10% of the Company's common stock (699,243 shares) at an aggregate price of
$222,000. Additionally, he is entitled to receive payments on the options in an
amount equal to the dividends, if any, declared by the Company that would have
been paid on the shares subject to the options had they been issued. In the
event that, prior to becoming a public company, the Company issues stock to
anyone other than its parent or the CEO, the CEO is entitled to receive options
for the number of additional shares that will allow him to maintain a 10% equity
position in the Company upon exercise of all options held by him (excluding
shares issuable pursuant to the employee option plan referred to below), at an
exercise price equal to the price paid or value received in the additional
issuance. The options granted vest 25% per year beginning in March 1997
(becoming fully vested in March 2000), and terminate in March 2005.
Additionally, the options would fully vest and immediately become exercisable in
the event of a change in control of the Company. After March 2000, the employee
can require the Company to register his option shares under the Securities Act
of 1933. Also, should the Company not become a public company by March 5, 2001,
the CEO may require that the Company thereafter buy from him, for cash, the
Company shares subject to his options at a price equal to ten times the
Company's net earnings (as defined in the agreement) per share for the fiscal
year ended immediately prior to the giving of notice of his exercise of this
right. The Company is required to purchase 25% of such employee's shares in each
year following such employee's exercise of this right.
F-19
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company has established another option plan providing for the
granting of options, at the discretion of the Company's Board of Directors, for
up to 349,621 shares of common stock to other employees of the Company. As March
31, 1999, options for 343,328 shares had been issued. Transactions for both
stock option plans are as follows:
<TABLE>
<CAPTION>
Six Months
Year Ended September 30, Ended March 31,
--------------------------------------------------------- ------------------
1996 1997 1998 1999
--------- -------- --------- -------
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Exercise Exercise Exercise
Shares Price Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of period...... - $ - 950,971 $0.32 974,046 $ 0.32 990,128 $ 0.33
Granted ........................ 950,971 $0.32 23,075 $0.32 16,082 $ 1.52 52,443 $ 3.82
Exercised ........................ - $ - - $ - - $ - - $ -
Canceled ........................ - $ - - $ - - $ - - $ -
-------- ----- -------- ----- -------- ------ -------- ------
Outstanding, end of period............ 950,971 $0.32 974,046 $0.32 990,128 $ 0.33 1,042,571 $ 0.51
======== ===== ======== ===== ======== ====== ========= ======
Exercisable, end of period............ - $ - 237,743 $0.32 481,254 $ 0.33 660,086 $ 0.33
======== ===== ======== ===== ======== ====== ======== ======
Available for grant................... 97,893 $ - 74,818 $ - 58,736 $ - 6,293 $ -
======== ===== ======== ===== ======== ====== ======== ======
Weighted average fair value per share of
options granted during the period.. $0.14 $0.16 $ 0.72 $ 7.31
===== ===== ====== ======
</TABLE>
The following information applies to options outstanding at March 31,
1999:
Outstanding Exercisable
---------------------------- -----------
Contractual
Exercise Prices Shares Life (Years) Shares
--------------- ------ ------------ ------
$0.32 974,045 6.51 656,065
$1.52 16,082 8.32 4,021
$3.82 52,444 9.13 -
--------- -------
1,042,571 660,086
========= =======
As discussed in Note 2, the Company accounts for its stock-based awards
using the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and its related
interpretations. Because options granted prior to February 24, 1999 had an
exercise price equal to the estimated market value of the underlying shares at
the date of grant, no compensation expense was recognized on the granting of
such options. For the options to purchase 13,985 shares, issued on February 24,
1999 at an exercise price of $3.82 per share, the Company has recognized a
compensation element in view of the change in the Company resulting from the JLA
acquisition and the estimated selling price of $18.00 per share in the
contemplated public offering. The total compensation of $198,000 is being
amortized over the 4 year vesting period, and $4,000 has been charged to
operations during the six month period ended March 31, 1999. The effect on net
income for the years ended September 30, 1998 and 1997, had the Company adopted
the provisions of SFAS No. 123, would not have been material.
F-20
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. COMMITMENTS AND CONTINGENCIES
The Company entered into an operating lease agreement for office space
with RAI, which terminated in December 1998. Rent expense under this lease for
the six months ended March 31, 1999, and years ended September 30, 1998 and 1997
was $189,000 and $124,000, and $70,000, and $34,000 respectively. The Company
signed two new lease agreements after September 1998 with unaffiliated entities
for its leasing operations and for its Canadian subsidiary.
Future minimum annual rental payments under non-cancelable operating
leases are as follows:
Operating
Year Ending March 31, Leases
--------------------- -----------
2000 .......................................... $ 650,000
2001 .......................................... 732,000
2002 .......................................... 750,000
2003 .......................................... 559,000
2004 .......................................... 579,000
-----------
$ 3,270,000
===========
As of March 31, 1999 the Company had outstanding commitments to fund
the purchase of equipment, which it intends to lease, with an aggregate cost of
$24.8 million. The Company believes, based on its past experience, that
approximately $11.4 million will be funded.
At March 31, 1999, the Company had guaranteed approximately $1.0
million of lease receivables with respect to leases sold. RLI and RAI have
provided additional guarantees.
8. INCOME TAXES
The provision (benefit) for income taxes for each period consists of the
following:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended September 30, March 31,
------------------------------------ ----------------------
1996 1997 1998 1998 1999
--------- ------- --------- --------- ---------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Federal.................... $ (152) $ 532 $ 1,455 $ 346 $ 726
State and local............ - 73 345 425 414
--------- ------- --------- --------- ---------
$ (152) $ 605 $ 1,800 $ 771 $ 1,140
========== ======== ========= ========= =========
</TABLE>
As discussed in Note 2, the Company's federal income tax provision
(benefit) has been an allocation from RAI, whose consolidated tax return
included the Company. The provision (benefit) allocated to the Company is not
materially different from what the total provision (benefit) would have been had
the Company filed a separate federal income tax return.
F-21
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
RAI recorded current and deferred tax liabilities on its books and the
Company's allocation was settled through increases or decreases to Affiliated
Debt balances. When the contemplated public offering is completed, the Company
will no longer be eligible to be included in RAI's consolidated income tax
return. Any unsettled deferred tax assets and liabilities related to the Company
at that time will be transferred back to the Company and Affiliate Debt will be
adjusted to reflect the transfer.
At September 31, 1998, the Company's deferred tax assets and
liabilities would have approximated the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Assets related to
State income taxes......................................................... $ 89
Reserve for possible losses................................................ 606
---------
$ 695
=========
Liabilities related to
Depreciation of furniture and equipment and assets subject to
financing leases......................................................... $ 596
Other...................................................................... 66
---------
$ 662
=========
Net asset.................................................................. $ 33
=========
</TABLE>
9. ACQUISITION
On February 4, 1999, the Company acquired all of the common stock of
JLA, in exchange for cash and assumption of JLA debt as described below.
The acquisition was recorded as a purchase and accordingly the results
of JLA's operations are included in the Company's consolidated financial
statements from the date of acquisition. The purchase price has been allocated
to assets acquired and liabilities assumed based on their fair market values, at
the date of acquisition as summarized below (in thousands).
Fair market value of assets acquired.... $ 315,466
Debt issued (including $38,889 by RAI).. (185,153)
Debt assumed............................ (147,534)
-----------
Net cash acquired....................... $ (17,221)
===========
F-22
<PAGE>
FIDELITY LEASING, INC. AND SUBSIDIARIES
(A Wholly Owned Subsidiary of Resource Leasing, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table reflects unaudited pro forma combined results of
operations of the Company and JLA presented as if the acquisition had taken
place on October 1, 1997:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended September 30, March 31,
1998 1999
----------------------- ----------------
(in thousands, except per share amounts)
<S> <C> <C>
Revenue.......................................... $ 52,875 $ 28,405
Net income ...................................... 6,326 2,687
Net income per common share diluted.............. $ 0.88 $ 0.37
Shares used in computation....................... 7,219 7,247
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments to: (i) depreciation and
amortization expense attributable to allocation of the purchase price; (ii)
general and administrative expenses for certain cost reductions realized from
the combining of operations; (iii) interest expense for additional borrowings;
(iv) equipment leasing revenue as a result of the purchase price allocation; and
(v) provision for income taxes to reflect the above adjustments and the
Company's tax rate. They do not purport to be indicative of the results of
operations which actually would have resulted had the combination been
consummated on October 1, 1997, or of future results of operations of the
consolidated entities.
10. STOCKHOLDER'S EQUITY
On June 25, 1999, the Company's stockholder authorized an amendment to
the Articles of Incorporation of the Company to increase the total authorized
capital stock to 41.0 million shares, of which 40.0 million shares were Common
Stock and 1.0 million shares were Preferred Stock, and to change common stock
from $0.01 par value to no par value. Furthermore, the Board of Directors
authorized a .6992-for-1 reverse stock split. This stock split resulted in the
reduction of 2,706,814 shares of Common Stock. Earnings per share weighted
average shares outstanding and stock option data reflect the above transactions.
F-23
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
JLA Credit Corporation
We have audited the accompanying consolidated balance sheet of JLA
Credit Corporation (a Delaware corporation) and Subsidiaries as of December 31,
1998, and the related consolidated statements of earnings and retained earnings,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of JLA
Credit Corporation and Subsidiaries as of December 31, 1998, and the
consolidated results of their operations and their consolidated cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ Grant Thorton LLP
San Francisco, California
April 9, 1999
F-24
<PAGE>
JLA Credit Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 28,462,252
Investment in direct financing leases, net 312,139,555
Other assets 16,378,076
------------
Total assets $356,979,883
============
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Borrowings from banks $154,015,000
Asset backed borrowing 140,124,909
Accrued interest 833,537
Due to parent 11,944,554
Other liabilities 11,697,917
------------
Total liabilities 318,615,917
Commitments and contingencies
Shareholder's equity
Common stock, par value $500 per share; 64,000 shares authorized,
60,000 shares issued and outstanding 30,000,000
Additional paid-in capital 250,375
Retained earnings 8,113,591
------------
Total shareholder's equity 38,363,966
============
Total liabilities and shareholder's equity $356,979,883
============
</TABLE>
The accompanying notes are an integral part of this statement.
F-25
<PAGE>
JLA Credit Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
Year ended December 31, 1998
Revenues
Earned income on direct financing leases $29,516,605
Interest income 2,538,238
Other income 3,435,590
-----------
Total revenues 35,490,433
Expenses
Interest expense 20,609,830
Provision for doubtful receivables 3,268,935
General and administrative expenses 9,261,702
-----------
Total expenses 33,140,467
-----------
Income before provision for income taxes 2,349,966
Provision for income taxes 1,036,647
-----------
NET EARNINGS 1,313,319
Retained earnings at beginning of year 6,800,272
-----------
Retained earnings at end of year $ 8,113,591
===========
The accompanying notes are an integral part of this statement.
F-26
<PAGE>
JLA Credit Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities
Net earnings $ 1,313,319
Adjustments to reconcile net income to net cash used in
operating activities
Depreciation and amortization 802,434
Provision for doubtful receivables 3,268,935
Gain on sale of direct financing leases (1,850,873)
Changes in assets and liabilities
Other assets (7,978,458)
Accrued interest (1,648,181)
Other liabilities (222,088)
-------------
Net cash used in operating activities (6,314,912)
Cash flows from investing activities
Collections on direct financing leases 136,809,538
Collections on notes and loans receivable 6,833,885
Purchase of direct financing lease equipment (180,972,825)
Capital expenditures (188,039)
-------------
Net cash used in investing activities (37,517,441)
Cash flows from financing activities
Payments of borrowings from banks, net (23,845,000)
Proceeds from securitization 120,041,027
Payments of borrowings from securitizations (12,912,096)
Payments of loans from affiliate, net (12,641,347)
-------------
Net cash provided by financing activities 70,642,584
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 26,810,231
Cash and cash equivalents at beginning of year 1,652,021
-------------
Cash and cash equivalents at end of year $ 28,462,252
=============
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the year for:
Interest $ 21,798,097
Income taxes $ (149,563)
Supplemental disclosures of noncash investing and financing activities
Transfer of note receivable to affiliate loan $ 8,175,267
</TABLE>
F-27
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE A - ORGANIZATION
JLA Credit Corporation (JLA) was incorporated in the state of Delaware on
August 27, 1985, and is engaged principally in funding direct financing
leases, loan originations and participations as a creditor. Effective January
1, 1992, JLA became a wholly-owned subsidiary of Japan Leasing (USA), Inc.
(JLUS). JLA's former shareholder made contributions of all of JLA's
outstanding common stock to JLUS in exchange for newly issued common stock of
JLUS.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
o Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
o Principles of Consolidation
The consolidated financial statements include the accounts of JLA and its
wholly-owned subsidiaries; JLA Funding Corporation (JLA FC), JLA Funding
Corporation II (JLA FC II), and JLA Funding Corporation III (JLA FC III),
collectively, the Company. All significant intercompany transactions and
balances have been eliminated in consolidation.
o Income Recognition
Income on notes and loans receivable is accrued as earned based on the
interest method. For direct financing leases, unearned income is amortized
over the lease term to produce a constant rate of return on the net
investment. Accrual of interest income is suspended when collection on an
account becomes doubtful, generally after the account becomes 90 days
delinquent. Income recognition is generally resumed when the account
balance has been brought current.
o Allowance for Doubtful Receivables
Based on a periodic review of the lease and loan portfolio, an allowance
for doubtful receivables is maintained at a level that is estimated by the
Company to be sufficient to reasonably provide for expected losses in the
present portfolio of leases and notes and loans receivable.
o Repossessed Equipment Held for Resale
Repossessed equipment held for resale is stated at the lower of cost or
market and is included in other assets on the consolidated balance sheet.
F-28
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o Income Taxes
The Company files a consolidated federal income tax return with JLUS and
files separate state and local income tax returns for all taxing
authorities except California and New York. The Company continues to
provide for all taxes on a stand-alone basis and settles all federal taxes
currently payable through intercompany accounts, due from/due to
affiliates, on the consolidated balance sheets.
Deferred taxes are provided for temporary differences between the tax
basis and financial reporting basis of assets and liabilities, computed at
current tax rates. Any future change in those rates would result in an
adjustment to the recorded balance of deferred taxes. The Company reviews
the realization of the deferred tax asset to determine if a reserve is
necessary.
o Interest Rate Swap Agreements
Interest rate swap agreements are entered into as a means of managing
interest rate risk. Net settlements are accrued over the term of the swap
agreements as an adjustment to interest expense. Certain interest rate
swap agreements were terminated in 1998 (see Note J) and the remaining
interest rate swap agreemnts were terminated upon the sale of the Company
(see Note M).
o Cash and Cash Equivalents
Cash and cash equivalents include short-term highly liquid investments
with original maturities of three months or less that are readily
convertible into cash. At December 31, 1998, the Company had $18.2 million
funds restricted as to use under terms of the securitizations.
o Defined Contribution Plan
The Company provides a defined contribution plan (the "Plan") under
section 401k of the Internal Revenue Code. The Plan covers all employees
that have completed at least six months of service and are at least 21
years of age. The Company has a discretionary employer contribution which
historically has been equal to a dollar for dollar match of the employees
contribution up to 5% of the employees compensation. The Company match is
vested over a period of seven years at which time the matched amount is
fully vested. All employee contributions and earnings are fully vested at
the time of contribution or earning. All investment selections are made
directly by the employees. The Company's contribution for the year was
$159,155.
F-29
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE C - NET INVESTMENT IN DIRECT FINANCING LEASES
Direct financing leases consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Nonsecuritized minimum lease payments receivable $ 210,913,615
Securitized minimum lease payments receivable 155,589,253
---------------
Total minimum lease payment receivable 366,502,868
Less
Unearned income, nonsecuritized (30,153,901)
Unearned income, securitized (23,125,440)
Allowance for doubtful receivables (5,613,693)
Deferred initial direct costs 4,529,721
---------------
Net investment in direct financing leases $ 312,139,555
===============
The minimum lease payments receivable are due in the following installments:
Year ending
December 31,
1999 $ 126,325,711
2000 109,031,798
2001 70,422,840
2002 38,631,859
2003 15,974,929
Thereafter 6,115,731
---------------
$ 366,502,868
===============
The types of equipment financed consist of the following in the approximate
percentages shown below:
Industrial equipment 50%
Computer equipment 29
Other 11
Office equipment 7
Cars and trucks 3
------
100%
======
</TABLE>
The Company's leasing transactions with customers located in California
represent approximately 47 percent of the minimum lease balance. There was no
other geographical concentration greater than 10 percent. In addition, no
customer balance exceeded 10 percent of the minimum lease balance. When
entering into a leasing transaction, the Company generally does not require
any additional collateral other than the security interest in the property
leased. The contract receivables are pledged as collateral on the securitized
borrowings and the borrowings from banks.
F-30
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE C - NET INVESTMENT IN DIRECT FINANCING LEASES (continued)
The net investment in nonearning receivables, which are included in the
Company's direct financing lease portfolio, were approximately $5 million.
In 1997, the Company entered into an agreement (the Agreement) whereby it
obtained the right to issue up to $75 million principal balance of direct
financing leases through JLA FC II. During the year the Company securitized
$48.3 million principal balance of direct financing leases through JLA FC II
and received proceeds of $46.2 million. The transaction was accounted for as
a collateralized borrowing, accordingly, the principal balance of securitized
leases remains on the Company's balance sheet.
In March 1998, the Company entered into an agreement (the "Agreement")
whereby it obtained the investor commitments to issue up to $125,000,000 of
notes payable by securitizing the principal balance of financing contracts
through JLA Funding Corporation III ("JLA FC III"), a special-purpose
subsidiary. During 1998, the Company securitized $84,591,032 principal
balance of financing contracts through JLA FC III and received proceeds from
the securitization of these contracts of $80,385,460. A cash collateral
reserve account equal to 1% of the contract receivables is also maintained
with the Trustee. The Note Issuance Period under the Agreement terminated
January 16, 1999, with no additional note issuances. The transaction was
accounted for as a collateralized borrowing; accordingly, the principal
balance of the securitized contracts remained on the Company's balance sheet.
The proceeds received in connection with the Agreements consisted of notes
payable to various domestic and foreign investors. These notes are expected
to be paid of as the Company receives aggregate payments on the securitized
contract receivables. The contract receivables collateralize the notes, and
other creditors of JLA would be subordinate to the note holders with respect
to the securitized receivables. The timing and amount of the repayment of the
notes are dependent upon the ultimate collection of the securitized lease
receivables.
NOTE D - ALLOWANCE FOR DOUBTFUL RECEIVABLES
The table below shows the activity in allowance for doubtful receivables for
the year.
Balance at beginning of year $ 5,030,078
Charged to operations, net 3,268,935
Amount written off (2,685,320)
--------------
Balance at end of year $ 5,613,693
==============
The Company provides for both a general reserve and a specific reserve. A
specific reserve is provided if management believes it is probable that a
loss will be sustained on a specific account and that the loss can be
reasonably estimated. The Company's assessment of the future value of
collateral is inherently subjective, as it requires material estimates that
may be susceptible to significant change.
F-31
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE E - BORROWINGS FROM BANKS
The interest rates on the borrowings from banks ranged from 5.41% to 8.35%,
and the weighted average interest rate, before considering any interest rate
swap agreements was 7.26%. The borrowings were paid off in full in February
1999, with proceeds from borrowings obtained by the purchaser (see Note M).
NOTE F - ASSET BACKED BORROWINGS
The interest rates on the asset backed borrowings range from 5.91% to 7.0%,
and the weighted average interest rate was 6.59%.
The maturities for assets backed borrowings is as follows:
Year ending
December 31,
-----------
1999 $ 55,816,150
2000 38,404,587
2001 29,313,768
2002 13,322,874
2003 3,267,530
---------------
$ 140,124,909
===============
NOTE G - DUE TO PARENT
The Company has amounts outstanding to the Parent in the form of revolving
advances and a note payable. The amounts borrowed are used for working
capital. At December 31, 1998, the outstanding balances of the revolving
advances and the note payable were $689,701 and $11,221,966, respectively.
The note bears interest at LIBOR plus .75% (6.6% at December 31, 1998). The
entire outstanding amount was repaid subsequent to year-end as a result of
the sale of the Company (see note N). The total interest expense on the notes
was $1,678,505.
F-32
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE H - INCOME TAXES
The provision (benefit) for income taxes for the year ended consists of the
following:
Current
Federal $ 905,677
State and local 185,500
---------------
1,091,177
Deferred
Federal (45,260)
State and local (9,270)
---------------
(54,530)
---------------
$ 1,036,647
===============
The provision for income tax differs from the federal statutory income tax
rate of 35 percent principally due to state income taxes.
Net deferred tax assets, which are included in other assets, approximate
$3,153,000 and primarily relate to the allowance for doubtful receivables.
The Company has historically filed a consolidated federal tax return with its
parent. Cumulative amounts due to the parent for income taxes, net of the
deferred tax assets, were settled in connection with the sale of the Company
(see note M) for $3.5 million.
NOTE I - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Company, using
available market information and valuation methodologies, as described below.
Changes in these assumptions or estimation methods may significantly affect
the estimated fair values. Accordingly, management provides no assurance that
the estimates presented herein would necessarily be realized in an immediate
sale or settlement of the instruments.
Book values of cash equivalents and other current amounts receivable and
payable approximate fair value due to the short maturity of the instruments.
The Company generally borrows funds from banks through three to six months
revolving lines of credits. The estimated fair values of debts approximate
carrying cost due to the short maturity.
The securitized borrowings reflect current fair value as the borrowing rate
approximates current market conditions. The rates are covered by short-term
swap arrangements which assist the rates to approximate current conditions.
F-33
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE J - RELATED PARTY TRANSACTIONS
In November 1998, the Company transferred all of its rights and obligations
to certain Residual Value Position Pool Agreements to the Parent. The total
value transferred was $8,175,267 for which the Company received a reduction
in the amount due to Parent.
The Parent was the guarantor of the Company's interest rate swap agreements.
During the year, the Company was forced to terminate certain swap agreements
due to the financial condition of the Parent. The applicable termination fee
of approximately $1,600,000 was paid and the cost was borne by the Parent on
behalf of the Company.
NOTE K - COMMITMENTS AND CONTINGENCIES
The Company rents the office facilities for all office locations.
Rental expense for the year ended was approximately $385,858.
The minimum rental commitments under noncancelable leases are as follows:
Year ending
December 31,
1999 $ 314,682
2000 268,147
2001 244,879
2002 94,420
2003 44,267
---------------
$ 966,395
===============
NOTE L - YEAR 2000 COMPLIANCE
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business
partners will not be fully determinable until the Year 2000 and thereafter.
If Year 2000 modifications are not properly completed either by the Company
or entities with which the Company conducts business, the Company's revenues
and financial condition could be adversely impacted.
F-34
<PAGE>
JLA Credit Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
NOTE M - SUBSEQUENT EVENTS
On February 4, 1999, the Company's parent sold all of the Company's common
shares to Fidelity Leasing, Inc., a wholly-owned subsidiary of Resource
America, Inc. ("RAI"). RAI is a publicly held, Delaware corporation. The
purchase price of $39 million, (including $1 million in acquisition related
costs) is payable in cash at the closing date. In connection with the sale,
certain assets and liabilities were transferred to the Company's parent prior
to closing.
The accompanying notes are an integral part of this statement.
F-35
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
JLA Credit Corporation:
We have audited the accompanying consolidated balance sheets of JLA Credit
Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations and retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management.. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plans and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also included
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred top above
presenting fairly, in all material respects, the financial position of JLA
Credit Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
San Francisco, California,
March 18, 1998
F-36
<PAGE>
JLA CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,652,021 $ 18,421,711
Investment in direct financing lease:
Investment in nonsecuritized direct financing leases 240,465,456 222,545,823
Investment in securitized direct, financing leases 33,958,952 -
Allowance for doubtful receivables (5,030,078) (2,827,437)
------------ ------------
Net investment in direct financing leases 269,394,330 219,718,386
Notes and loans receivable 15,009,152 17,842,889
Due from affiliates 58,846 8,627,325
Other real estate owned - 15,000,000
Other assets 8,154,132 7,270,538
Office furniture and equipment, net of accumulated depreciation
of $1,369,507 and $1,223,491 in 1997 and 1996, respectively 859,881 1,431,969
------------ ------------
$295,128,362 $288,312,818
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Borrowings from banks $177,860,000 $156,889,130
Asset-backed borrowing 32,995,978 -
Accrued interest payable 2,481,718 1,796,426
Due to affiliates 32,820,014 87,980,061
Other liabilities 11,920,005 7,426,485
------------ ------------
Total liabilities 258,077,715 254,092,102
------------ ------------
Commitments and contingencies
Shareholder's equity:
Common stock, par value $500 per share; 64,000 shares
authorized, 60,000 shares issued and outstanding 30,000,000 30,000,000
Additional paid-in capital 250,375 250,375
Retained earnings 6,800,272 3,970,341
------------ ------------
Total shareholder's equity 37,050,647 34,220,716
------------ ------------
Total liabilities and shareholder's equity $295,128,362 $288,312,818
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-37
<PAGE>
JLA CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Earned income on direct financing leases $25,664,537 $15,774,050
Interest income on notes and loans receivable 2,186,724 5,000,785
Other income 5,312,850 2,785,174
----------- -----------
Total revenues 33,164,111 23,560,009
----------- -----------
EXPENSES:
Interest expense 15,530,726 12,033,126
Provision for doubtful receivables 4,945,243 2,004,204
Losses on repossessed equipment 27,824 974,345
General and administrative expenses 7,342,885 5,853,008
Other expenses 315,000 427,895
----------- -----------
Total expenses 28,161,678 21,292,578
----------- -----------
Income before provision for income taxes 5,002,433 2,267,431
PROVISION FOR INCOME TAXES 2,172,502 979,480
----------- -----------
Net income 2,829,931 1,287,951
RETAINED EARNINGS, beginning of year 3,970,341 2,682,390
----------- -----------
RETAINED EARNINGS, end of year $ 6,800,272 $ 3,970,341
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-38
<PAGE>
JLA CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,829,931 $ 1,287,951
------------- -------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,017,046 459,171
Provision for doubtful receivables 4,945,243 2,004,204
Losses on repossessed equipment 27,824 974,346
Changes in assets and liabilities:
Other assets (883,594) (415,827)
Accrued interest payable 685,291 559,524
Other liabilities 4,493,520 3,044,931
------------- -------------
Total adjustments 10,285,330 6,626,349
------------- -------------
Net cash provided by operating activities 13,115,261 7,914,300
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on direct financing leases 111,537,085 52,883,062
Collections on notes and loans receivable 4,564,636 25,768,353
Originations of notes and loans receivable (1,759,444) (49,144,504)
Originations of direct financing lease equipment (151,165,855) (116,827,209)
Purchase of fixed assets (466,529) (454,465)
------------- -------------
Net cash used in investing activities (37,290,107) (87,774,763)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings from banks 35,645,071 37,557,479
Repayments of borrowings from banks (14,674,201) (47,285,135)
Proceeds from securitization 32,995,978 -
Proceeds from (repayments of) loans from affiliate, net (46,561,692) 100,367,611
------------- -------------
Net cash provided by financing activities 7,405,156 90,639,955
------------- -------------
Net increase (decrease) in cash and cash equivalents (16,769,690) 10,779,492
CASH AND CASH EQUIVALENTS, beginning of year 18,421,711 7,642,219
------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 1,652,021 $ 18,421,711
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 14,707,418 $ 11,473,602
Income taxes 1,156,007 274,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-39
<PAGE>
JLA CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,1997 AND 1996
1. ORGANIZATION:
JLA Credit Corporation (JLA) was incorporated in the state of Delaware on August
27,1985, and engaged principally in funding direct financing leases, loan
originations and participations as a creditor. Effective January 1, 1992, JLA
became a wholly owned subsidiary of Japan Leasing (USA), Inc. (JLUS). JLA's
former shareholder made contributions of all of JLA's outstanding common stock
to JLUS in exchange for newly issued common stock of JLUS.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
In preparing the financial statements in conformity with generally accepted
accounting principles management is required to make estimates and assumptions
that affect the amount of reported assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements.
The same is true of revenues and expenses reported for the period. Actual
results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of JLA and its wholly
owned subsidiaries, JLA Funding Corporation and JLA Funding Corporation II
(collectively, the Company). All significant intercompany transactions and
balances have been eliminated in consolidation.
Income Recognition
Income on notes and loans receivable is accrued as earned based on the interest
method. For direct financing leases, unearned income is amortized over the lease
term to produce a constant rate of return on the net investment. Accrual of
interest income is suspended when collection on an account becomes doubtful,
generally after the account becomes 90 days delinquent. Income recognition is
generally resumed when the account balance has been brought current.
Allowance for Doubtful Receivables
Based on a periodic review of the lease and loan portfolio, an allowance for
doubtful receivables is maintained at a level that is estimated by the Company
to be necessary to provide for expected losses in the present portfolio of
leases, notes and loans receivable.
F-40
<PAGE>
Repossessed Equipment Held for Resale
Repossessed equipment held for resale is stated at the lower of cost or market
and is included in other assets on the consolidated balance sheets.
Income Taxes
The Company files a consolidated federal income tax return with JLUS and files
separate state and local income tax returns for all taxing authorities except
California and New York. The Company continues to provide for all taxes on a
stand-alone basis and settles all federal taxes currently payable through
intercompany accounts, due from/due to affiliates, on the consolidated balance
sheets.
Deferred taxes are provided for temporary differences between the tax basis and
financial reporting basis of assets and liabilities, computed at current tax
rates. Any future change in those rates would result in an adjustment to the
recorded balance of deferred taxes. The Company reviews the realization of the
deferred tax asset to determine if a valuation allowance is necessary.
Interest Rate Swap Agreements
Interest rate swap agreements are entered into as a means of managing interest
rate risk. Net settlements are accrued over the term of the swap agreements as
an adjustment to interest expense.
Cash and Cash Equivalents
Cash and cash equivalents include short-term highly liquid investments with
original maturities of three months or less that are readily convertible into
cash.
Reclassification
Certain reclassifications have been made to 1996 financial statements to conform
with the current year's presentation.
3. NET INVESTMENT IN DIRECT FINANCING LEASES:
Leases, which are classified as direct financing leases as of December 31, 1997
and 1996, consist of the following:
1997 1996
---- ----
Nonsecuritized minimum lease payments receivable $280,979,123 $263,091,757
Securitized minimum lease payments receivable 40,657,854 -
------------ ------------
Total minimum lease payments receivable 321,636,977 263,091,757
Less:
Unearned income, nonsecuritized (43,270,026) (41,746,957)
Unearned income, securitized (7,363,200) -
Allowance for doubtful receivables (5,030,078) (2,827,437)
Deferred initial direct costs 3,420,657 1,201,023
------------ ------------
Net investment in direct financing leases $269,394,330 $219,718,386
============ ============
F-41
<PAGE>
The minimum lease payments receivable as of December 31, 1997, are due in the
following installments:
Year Ending
December 31 (000s)
----------- --------
1998 $112,105
1999 91,002
2000 63,939
2001 37,353
2002 13,238
Thereafter 4,000
--------
$321,637
========
At December 31, 1997 and 1996, the types of equipment financed consist of the
following:
1997 1996
---- ----
Industrial equipment 49% 51%
Office equipment 15 10
Computer equipment 19 24
Cars and trucks 7 5
Other 10 10
--- ---
100% 100%
=== ===
The Company's leasing transactions with customers located in California and New
York represent approximately 49 percent and 9 percent of the minimum lease
receivable balance as of December 31, 1997, and 46 percent and 11 percent as of
December 31, 1996. There was no other geographical concentration greater than 10
percent. In addition, there was no customer with a balance greater than 10
percent of the minimum lease receivable balance. When entering into a leasing
transaction, the Company generally does not require any additional collateral
other than the security interest in the property leased or, in certain cases,
personal guarantees.
At December 31, 1997 and 1996, net investment in nonearning assets, which were
included in the Company's direct financing lease portfolio, were approximately
$4.0 million and $3.3 million, respectively.
1994 Securitization
In July 1994, the Company securitized $24,084,000 principal balance of direct
financing leases and loans receivable (the Receivables) through JLA Funding
Corporation, a special-purpose subsidiary. The Company received proceeds of
$20,069,000 and retained subordinated certificates receivable in the amount of
$3,823,000. The transaction was accounted for as a sale; accordingly, the
Receivables were removed from the Company's balance sheets. The income statement
impact was nominal.
F-42
<PAGE>
Upon closing, the Company established a cash collateral account as required by
the agreement and recorded an excess servicing fee receivable. At December 31,
1996, the cash collateral account and excess servicing fee receivable were
$201,000 and $77,000, respectively.
The Company continued to service the Receivables and receive a fee in accordance
with the servicing agreement. Servicing fees recognized during 1997 and 1996
were $24,000 and $123,000, respectively, and are included in other income on the
consolidated statements of operations and retained earnings. At December 31,
1996, the outstanding balance of the Receivables was $3,089,000.
In August 1997, the Company exercised a cleanup call option whereby it acquired
the remaining principal balance of the Receivables (on the 1994 securitization)
and extinguished the respective liabilities associated with the original sale of
the Receivables. The outcome of the exercise of the clean-up call was to
recognize previously deferred income in the amount of $290,000. This amount is
included in other income. At the time of the cleanup call, the outstanding
balance of the Receivables in the amount of $1,311,000 was recorded by the
Company.
1997 Securitization
In September 1997, the Company entered into an agreement (the Agreement) whereby
it obtained the investor commitments to securitize up to $75,000,000 principal
balance of direct financing leases through JLA Funding Corporation II (JLA FC
II), a special-purpose subsidiary. During 1997, the Company securitized
$35,115,673 principal balance of direct financing leases through JLA FC II,
received proceeds of $32,995,978 and contributed equity in the amount of
$2,119,695. In addition, the Company contributed additional cash collateral
equaling 1 percent of total collateral. As of December 31, 1997, the balance of
the cash collateral account was $351,157. As of December 31, 1997, net
investment in securitized direct financing leases, including deferred initial
direct costs, was $33,958,952. The transaction was accounted for as a
collateralized borrowing; accordingly, the principal balance of securitized
leases remained on the Company's balance sheet.
The proceeds received in connection with the Agreement consisted of notes
payable to various domestic and foreign investors. These notes are expected to
be paid off as the Company receives aggregate payments of the securitized lease
receivables. The lease receivables collateralize the notes, and other creditors
of JLA would be subordinate to the note holders with respect to the securitized
receivables. The timing and the amount of the repayment of the notes are
dependent upon the ultimate collection of the securitized lease receivables. The
interest rate on the notes is tied to the one-month LIBOR rate, and as of
December 31, 1997, for Class A senior securities was 6.27 percent and for Class
B subordinated securities was 6.61 percent. The weighted average interest rates
for 1997 were 6.03 percent for Class A securities and 6.45 percent for Class B
securities. The notes were subject to an interest rate cap agreement at 7.5
percent until March 1998, when the cap was terminated and replaced with an
interest rate swap agreement. The interest rate swap agreement calls for
interest to be paid on the Class A securities at 6.34 percent and on the Class B
securities at 7 percent.
F-43
<PAGE>
The estimated repayment schedule for the next five years for the notes payable
based upon the underlying receivables as of December 31, 1997, is as follows:
Year Ending
December 31
-----------
1998 $ 5,950,844
1999 9,260,879
2000 8,594,933
2001 6,917,100
2002 2,272,222
-----------
$32,995,978
===========
4. NOTES AND LOANS RECEIVABLE:
Notes and loans receivable as of December 31, 1997 and 1996, consist of the
following:
1997 1996
---- ----
Notes and loans receivable $15,009,152 $17,842,889
Interest receivable - -
Less: Allowance for doubtful
receivables - -
----------- -----------
$15,009,152 $17,842,889
=========== ===========
The projected annual receipts for notes and loans receivable as of December 31,
1997, are as follows:
Year Ending
December 31
-----------
1998 $ 6,443,798
1999 6,927,435
2000 1,637,919
-----------
$15,009,152
===========
At December 31,1994, the Company had a note receivable of $52.3 million from a
partnership that owned land on which the partnership intended to further develop
a real estate project. The note was secured by the land and guaranteed by Japan
Leasing Corporation (JLC), the Company's ultimate parent.
On May 1, 1995, the Company foreclosed on the property and recorded the land as
held for sale at an estimated fair value of $15 million. The difference between
the book value of the note receivable at that time and the fair value of the
land was settled by transferring cash from JLC under the guarantee. In March
1997, the Company disposed of the property in a sale transaction. The difference
between the carrying value of the property and proceeds received from the sale
as adjusted for closing costs resulted in a net gain on sale in the amount of
$2,027,236. This gain was recorded in other income.
F-44
<PAGE>
5. ALLOWANCE FOR DOUBTFUL RECEIVABLES:
The table below shows the activity in allowance for doubtful receivables during
1997 and 1996:
Direct Financing Leases
-----------------------
1997 1996
---- ----
Balance, beginning of year $ 2,827,437 $ 2,079,521
Charge to operations, net 4,945,243 2,004,204
Amount written off (2,742,602) (1,256,288)
----------- -----------
Balance, end of year $ 5,030,078 $ 2,827,437
=========== ===========
The Company provides for both a general reserve and a specific reserve. A
specific reserve is provided if management believes it is probable that a loss
will be sustained and that the loss can be reasonably estimated. The Company's
assessment of the future value of collateral is inherently subjective, as it
requires material estimates that may be susceptible to significant change.
6. BORROWINGS FROM BANKS:
At December 31, 1997 and 1996, the interest rates on the borrowings from banks
ranged from 6.25 percent to 7.21 percent and 6.0 percent to 6.4 percent,
respectively, and the weighted average interest rates, before considering any
interest rate swap agreements, were 6.47 percent for 1997 and 6.07 percent for
1996.
The repayment schedule for the next five years and thereafter for borrowings
from banks as of December 31, 1997, is as follows:
Year Ending
December 31
-----------
1998 $162,760,000
1999 6,920,000
2000 8,180,000
------------
$177,860,000
============
The Company has developed relationships with several domestic branch operations
of foreign owned banks. These relationships have enabled the Company to extend
credit facilities, generally for one year, as they become due. In management's
opinion, debt scheduled for repayment in 1998 will be extended, as appropriate,
to meet the Company's cash flow requirements for 1998, although no formal
agreements have been arranged in anticipation of these extensions. In addition,
the Company through an affiliate has the ability to refinance the current
portion of the debt as it becomes due.
F-45
<PAGE>
7. INTEREST RATE INSTRUMENTS:
The Company enters into interest rate swap and cap agreements to reduce the
impact of changes in interest rates on its floating rate debt. The swap
agreements are contracts to exchange floating rate for fixed interest payments
periodically without the exchange of the underlying notional amounts. The
counterparties to these instruments are major financial institutions. The
notional amounts of interest rate agreements are used to measure the interest to
be paid or received and do not represent the amount of exposure to credit loss.
The differential to be paid or received is accrued as interest rates change and
is recognized as an adjustment to interest expense in the income statement. The
related accrued receivable or payable is included in other assets or
liabilities.
At December 31,1997 and 1996, the Company had $140 million and $110 million of
aggregate notional principal amounts outstanding, respectively, for the purpose
of converting floating rate debt to fixed rate debt.
At December 31, 1997 and 1996, the agreements effectively changed the interest
rate exposure on $140 million and $110 million of floating rate borrowing to
fixed rates ranging from 5.18 percent to 6.38 percent due through 1997 and from
5.23 percent to 8.37 percent due through 1996, and the weighted average interest
rates were 5.98 percent and 5.80 percent, respectively.
Interest rate caps are used to lock in a maximum rate if rates rise, but enable
the Company to otherwise pay lower market rates. The Company had interest rate
caps in place protecting $35 million and $30 million of bank borrowings at
December 31, 1997 and 1996, respectively. The cap rates ranged between 5.5
percent and 6.5 percent on the underlying LIBOR. The cost of interest rate caps
is amortized to interest expense over the life of the caps. The unamortized cost
of the interest rate caps is included in other assets.
8. INCOME TAXES:
The provision (benefit) for income taxes for the years ended December 31, 1997
and 1996, consists of the following:
1997 1996
---- ----
Current:
Federal $1,996,844 $1,051,161
State and local 956,081 521,469
---------- ----------
2,952,925 1,572,630
---------- ----------
Deferred:
Federal (527,742) (424,210)
State and local (252,681) (168,940)
---------- ----------
(780,423) (593,150)
---------- ----------
$2,172,502 $ 979,480
========== =========
The provision for income tax for 1997 and 1996 differs from the federal
statutory income tax rate principally due to state income taxes.
F-46
<PAGE>
The components of the net deferred income tax assets at December 31, 1997 and
1996, are as follows:
1997 1996
---- -----
Gross deferred tax assets $3,098,432 $2,362,653
Gross deferred tax liabilities - (81,444)
---------- ----------
Net deferred tax assets $3,098,432 $2,281,209
========== ==========
Deferred tax assets mainly relate to allowance for doubtful receivables; at
December 31, 1996, deferred tax liabilities mainly relate to depreciation of
fixed assets. No other significant deferred tax assets or liabilities existed at
December 31, 1997 and 1996. Management believes that the realization of the net
deferred tax asset is reasonably assured. The net deferred tax assets are
included in other assets.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value amounts have been determined by the Company, using
available market information and valuation methodologies, as described below.
Changes in these assumptions or estimation methods may significantly affect the
estimated fair values. Accordingly, management provides no assurance that the
estimates presented herein would necessarily be realized in an immediate sale or
settlement of the instruments.
Book values of cash equivalents and other assets and liabilities approximate
fair value due to the short maturity of the instruments.
The estimated fair value of fixed rate loans is based on discounted future cash
flows using current rates for similar instruments having comparable credit risk
and maturity dates.
The Company generally borrows funds from banks through three to six months
revolving lines of credit. The estimated fair values of debts approximate fair
value due to the short maturity.
Interest rate swap agreements were valued by discounting future cash flows the
Company would receive (pay) to reverse the effect of the agreements, taking into
consideration current interest rates adjusted for risks and maturity.
December 31, 1997 December 31, 1996
------------------ -----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- -------- --------
(000s omitted)
Notes and loans receivable $ 15,009 $ 15,009 $ 17,843 $ 17,843
Borrowing from banks and notes payable 210,856 210,856 156,889 156,889
Interest rate swap agreements - (448) - (110)
Interest rate cap agreements 458 278 382 502
F-47
<PAGE>
10. RELATED-PARTY TRANSACTIONS
Due to affiliates includes funds that the Company borrowed from JLUS for working
capital purposes. The outstanding loan balance at December 31, 1997, is
$32,217,287. The outstanding loan balance at December 31, 1996, was $78,700,756.
Interest expense realized on these loans during 1997 and 1996 amounted to
approximately $2,989,909 and $2,033,000, respectively. At December 31, 1997 and
1996, the interest rate on the loan balance was 6.5 percent and 6.56 percent,
respectively.
At December 31,1997 and 1996, the Company had loans receivable of $15.0 million
and $17.8 million, respectively, from an affiliate. Under the guarantee
agreements between the Company and JLC, the principal and accrued interest on
these loans were guaranteed by JLC. Guarantee fees payable to JLC consist of
certain percentages of outstanding loan balances and residual proceeds, if any.
Guarantee fee expense incurred under this arrangement was approximately $169,000
and $126,000 in 1997 and 1996, respectively.
11. COMMITMENTS AND CONTINGENCIES:
Rental expense for office space for the years ended December 31, 1997 and 1996,
was approximately $321,000 and $280,000, respectively.
The minimum rental commitments under noncancelable leases as of December 31,
1997, are as follows:
Year Ending
December 31
-----------
1998 $ 280,387
1999 265,817
2000 228,926
2001 201,757
2002 50,439
Thereafter -
----------
$1,027,326
==========
12. SUBSEQUENT EVENTS:
Subsequent to December 31, 1997, in accordance with the Agreement, the Company
securitized an additional $31,225,083 principal balance of direct financing
leases through JLA FC II and received proceeds of $30,105,418 and contributed
equity in the amount of $1,119,665. In March 1998, Class B securities totaling
$3,092,000 that were held by the Company were sold for $3,076,385.
In March 1998, the Company entered into a securitization agreement whereby it
will securitize its lease receivables and receive proceeds of up to $200
million. This securitization is expected to close by the end of March 1998. The
proceeds of this securitization will be used to finance and acquire new
equipment contracts.
F-48
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Registration and Filing Fees:
Securities and Exchange Commission $23,622
NASD 8,500
-------
Total Registration and Filing Fees $32,122
-------
Printing and Engraving*
Legal*
Accounting*
Transfer Agent*
Total Other Expenses* ________
Total Expenses
- ---------
* Estimate
Item 14. Indemnification of Directors and Officers
As permitted by the Pennsylvania Business Corporation Law of 1988,
Registrant's Bylaws provide that directors of Registrant shall not be personally
liable to Registrant or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's fiduciary duty to Registrant or its shareholders and the breach
constitutes self-dealing, willful misconduct or recklessness and (ii) for acts
or omissions not in good faith or which involve a knowing violation of law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and persons controlling Registrant pursuant
to the foregoing provisions, or otherwise, Registrant has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
Resource America, Registrant's corporate parent (which will be the owner of
a majority of Registrant's common stock following this offering), maintains
directors' and officers' liability insurance which also covers the directors and
executive officers of Registrant. The insurance provides coverage against any
actual or alleged error, misstatement, misleading statement, act, omission,
neglect or breach of duty by any director or officer, excluding certain matters
including fraudulent, dishonest or criminal acts or self-dealing.
Item 15. Recent Sales of Unregistered Securities.
Registrant has issued options to purchase an aggregate of 1,042,571 shares
of its common stock to certain key employees. These options vest over a period
of four years from the date of issue and are exercisable at prices ranging from
$0.32 to $3.82 per share. The issuance of the stock options was exempt from
registration pursuant to Section 4(2) of the Securities Act.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
a. Exhibits.
1.* Form of Underwriting Agreement
2.1 Stock Purchase Agreement, dated as of December 15, 1998, between
Japan Leasing (U.S.A.), Inc. and Registrant
Omitted schedules:
Exhibit 1: Accounting Policies
Seller Disclosure Letter
Exhibit 6.12(b): Promissory Note
Exhibit 6.16: Employee Escrow Agreement
Exhibit 7.1(g): Consents
Exhibit 7.1(h): Escrow Agreement
Exhibit 7.1(i): Security Agreement
Exhibit 7.1(j): Assignment and Assumption of Interests in
Receivables
Exhibit 7.2(j): Skadden Arps opinion
Exhibit 7.2(p): Secretary's Certificate
2.2 Amendment No. 1 to Stock Purchase Agreement, dated as of December
31, 1998
2.3 Amendment No. 2 to Stock Purchase Agreement, dated as of January
12, 1998
2.4 Amendment No. 3 to Stock Purchase Agreement, dated as of February
2, 1999
Omitted schedules:
Exhibit 4.28: Seller Disclosure
Exhibit 6.12(b): Promissory Note
Exhibit A: Guarantee
Exhibit 7.1(i): Security Agreement
Exhibit 7.2(j): Skadden Arps opinion
Exhibit 7.2(r): Minerva opinion
Exhibit 7.2(s): Reiko Kasano opinion
2.5 Amendment No. 4 to Stock Purchase Agreement, dated as of January 3,
1999
Omitted schedules:
Schedule 2.4: Leases without original documentation
3.1 Articles of Incorporation of Registrant.
3.2 Articles of Amendment of Registrant
3.3 Amended and Restated Bylaws of Registrant
4.* Form of certificate for common stock
5.* Opinion of Ledgewood Law Firm, P.C., as to the legality of the
securities
10.1 Amended and Restated Loan and Security Agreement, dated September
30, 1998, between Registrant and First Union National Bank, as
agent
10.2 Joinder and Amendment to Amended and Restated Loan and Security
Agreement, dated March 26, 1999, among First Union National Bank,
European American Bank, Registrant, JLA Credit Corporation,
Resource America, Resource Leasing, Inc., FL Partnership
Management, Inc. and FL Financial Services, Inc.
10.3 Stock Pledge Agreement, dated March 26, 1999, between First Union
National Bank, as agent, and Registrant
II-2
<PAGE>
10.4 Amendment to Amended and Restated Loan and Security Agreement,
dated May 18, 1999, among First Union National Bank, as agent,
Registrant, JLA Credit Corporation, Resource America, Resource
Leasing, Inc., FL Partnership Management, Inc. and FL Financial
Services, Inc.
10.5 Credit Agreement, dated as of May 19, 1999, between Fidelity
Leasing Canada, Inc. and Bank of Montreal.
10.6 Guarantee, dated May 19, 1999, from Registrant and Resource America
to Bank of Montreal.
10.7 Purchase and Sale Agreement, dated December 18, 1997, between
Registrant and SW Leasing Portfolio IV, Inc.
10.8 Receivables Purchase Agreement, dated December 18, 1997, among SW
Leasing Portfolio IV, Inc., Registrant, Variable Funding Capital
Corporation, First Union Capital Markets Corp., First Union
National Bank, Harris Trust and Savings Bank and others
10.9 Purchase and Sale Agreement, dated June 24, 1998, between
Registrant and Fidelity Leasing SPC I, Inc.
10.10 Receivables Purchase Agreement, dated June 24, 1998, among Fidelity
Leasing SPC I, Inc., Registrant, Variable Funding Capital
Corporation, First Union Capital Markets, First Union National
Bank, Harris Trust and Savings Bank and others
10.11 Amended and Restated Purchase and Sale Agreement, dated February 5,
1999, between Registrant, JLA Credit Corporation and Fidelity
Leasing SPC II, Inc.
10.12 Receivables Purchase Agreement, dated December 29, 1998, among
Fidelity Leasing SPC II, Inc., Registrant, Market Street Funding
Corporation, PNC Bank, National Association and Harris Trust and
Savings Bank (conformed as amended on February 5, 1999 and March 8,
1999)
10.13 Purchase and Sale Agreement, dated February 4, 1999, among
Registrant, Fidelity Leasing SPE III, LLC, and JLA Credit
Corporation
10.14 Receivables Credit Agreement, dated February 4, 1999, among
Fidelity Leasing SPE III, LLC, Registrant, Variable Funding Capital
Corporation, First Union Capital Markets, First Union National
Bank, Harris Trust and Savings Bank and others
10.15 Guaranty, dated February 4, 1999, among Registrant, First Union
Capital Markets and Variable Funding Capital Corporation
10.16* Indenture, dated August 15, 1997, among JLA Funding Corporation II,
JLA Credit Corporation and LTCB Trust Company
10.17* Sale and Servicing Agreement, dated August 15, 1997, between JLA
Credit Corporation and JLA Funding Corporation II
10.18* Indenture, dated March 30, 1998, among JLA Funding Corporation III,
JLA Credit Corporation and LTCB Trust Company
II-3
<PAGE>
10.19* Sale and Servicing Agreement, dated March 30, 1998, between JLA
Credit Corporation and JLA Funding Corporation III
10.20 Transfer and Sale Agreement, dated as of June 2, 1999, between
Registrant and Fidelity Equipment Lease Depositor I, LLC
10.21 Indenture, dated June 2, 1999, between Fidelity Equipment Lease
Trust 1999-1 and Harris Trust and Savings Bank
10.22 Sale and Servicing Agreement, dated as of June 2, 1999, among
Fidelity Equipment Lease Depositor I, LLC, Registrant and Harris
Trust and Savings Bank
10.23 Lease Agreement between Bryn Mawr Associates and Registrant
10.24 Lease Addendum
10.25 Fidelity Leasing, Inc. 1996-1 Key Employee Stock Option Plan
10.26 Contribution Agreement, dated March 5, 1996, between Resource
Leasing, Inc. and Abraham Bernstein
10.27 Amendment No. 1 to Contribution Agreement, dated June 30, 1999
10.28 Registration Rights Agreement, dated March 5 1996 between
Registrant and Abraham Bernstein
10.29 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-1 Key Employee Stock Option Plan, dated March 5, 1996, between
Registrant and Abraham Bernstein
10.30 Fidelity Leasing, Inc. 1996-2 Key Employee Stock Option Plan
10.31 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-2 Key Employee Stock Option Plan, dated May 9, 1996, between
Registrant and Crit S. DeMent
10.32 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-2 Key Employee Stock Option Plan, dated May 9, 1996, between
Registrant and Joseph T. Ellis, Jr.
10.33 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-2 Key Employee Stock Option Plan, dated October 8, 1998,
between Registrant and Joseph T. Ellis, Jr.
10.34 Employment Agreement, dated March 5, 1996, between Registrant and
Abraham Bernstein
10.35 Amendment No. 1 to Employment Agreement, dated as of March 4, 1999
10.36 Employment Agreement, dated as of June 30, 1999, between Registrant
and Crit S. DeMent
10.37 Employment Agreement, dated as of June 30, 1999, between Registrant
and Joseph T. Ellis, Jr.
II-4
<PAGE>
11. Statement re: computation of per share earnings
21. Subsidiaries of Registrant
23.1 Consent of Grant Thornton LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ledgewood Law Firm, P.C. (included in Exhibit 5)
24. Power of Attorney (included as part of signature pages to this
registration statement)
27 Financial Data Schedule
b. Financial Statements.
Included within the prospectus are the following:
o Consolidated balance sheets, statements of operations, statements of
changes in stockholder's equity and statements of cash flows for
Registrant for the fiscal years ending September 30, 1996, 1997 and 1998
and for the six months ended March 31, 1998 (unaudited) and March 31,
1999.
o Consolidated balance sheets, statements of operations and retained
earnings and statements of cash flows for JLA Credit Corporation for the
fiscal years ended December 31, 1996, 1997 and 1998.
- ---------------
*To be filed by amendment.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters,
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions of Registrant's Articles of Incorporation,
Bylaws or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of 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, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant undertakes that:
1. For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of West Chester,
Commonwealth of Pennsylvania, on July 1, 1999
FIDELITY LEASING, INC.
By: /s/Abraham Bernstein
---------------------------------------
Chairman of the Board of Directors and
Chief Executive Officer
II-6
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below in so signing also makes,
constitutes and appoints Abraham Bernstein, Crit S. DeMent and John L. Dale, and
each of them acting alone, his or her true and lawful attorney-in-fact, with
full power of substitution, for him or her in any and all capacities to execute
and cause to be filed with the Securities and Exchange Commission any and all
amendments and post-effective amendments to this registration statement with
exhibits thereto and other documents in connection therewith, and hereby
ratifies and confirms all that said attorney-in-fact or said attorney-in-fact's
substitute or substitutes may do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Abraham Bernstein
- ---------------------------------------- Date: July 1, 1999
Abraham Bernstein, Chairman of the
Board and Chief Executive Officer
/s/ Crit S. DeMent
- ---------------------------------------- Date: July 1, 1999
Crit S. DeMent, President and Director
/s/ John L. Dale
- ---------------------------------------- Date: June 30, 1999
John L. Dale, Chief Financial Officer
/s/Joseph T. Ellis
- ---------------------------------------- Date: July 1, 1999
Joseph T. Ellis, Senior Vice
President for Operations
/s/ Charles J. Santangelo
- ---------------------------------------- Date: July 1, 1999
Charles J. Santangelo, Controller
/s/ Debbi Hurd Baptist
- ---------------------------------------- Date: June 25, 1999
Debbi Hurd Baptist, Director
/s/ Daniel G. Cohen
- ---------------------------------------- Date: July 1, 1999
Daniel G. Cohen, Director
/s/ Edward E. Cohen
- ---------------------------------------- Date: July 1, 1999
Edward E. Cohen, Director
/s/ Anthony Courakis
- ---------------------------------------- Date: June 30, 1999
Anthony Courakis, Director
/s/ Steven J. Elgart
- ---------------------------------------- Date: June 29, 1999
Steven J. Elgart, Director
/s/ Darshan V. Patel
- ---------------------------------------- Date: June 25, 1999
Darshan V. Patel, Director
/s/ Blanche G. Ross
- ---------------------------------------- Date: July 1, 1999
Blanche G. Ross, Director
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- -------- -----------
1.* Form of Underwriting Agreement
2.1 Stock Purchase Agreement, dated as of December 15, 1998, between
Japan Leasing (U.S.A.), Inc. and Registrant
Omitted schedules:
Exhibit 1: Accounting Policies
Seller Disclosure Letter
Exhibit 6.12(b): Promissory Note
Exhibit 6.16: Employee Escrow Agreement
Exhibit 7.1(g): Consents
Exhibit 7.1(h): Escrow Agreement
Exhibit 7.1(i): Security Agreement
Exhibit 7.1(j): Assignment and Assumption of Interests in
Receivables
Exhibit 7.2(j): Skadden Arps opinion
Exhibit 7.2(p): Secretary's Certificate
2.2 Amendment No. 1 to Stock Purchase Agreement, dated as of December
31, 1998
2.3 Amendment No. 2 to Stock Purchase Agreement, dated as of January
12, 1998
2.4 Amendment No. 3 to Stock Purchase Agreement, dated as of February
2, 1999
Omitted schedules:
Exhibit 4.28: Seller Disclosure
Exhibit 6.12(b): Promissory Note
Exhibit A: Guarantee
Exhibit 7.1(i): Security Agreement
Exhibit 7.2(j): Skadden Arps opinion
Exhibit 7.2(r): Minerva opinion
Exhibit 7.2(s): Reiko Kasano opinion
2.5 Amendment No. 4 to Stock Purchase Agreement, dated as of January 3,
1999
Omitted schedules:
Schedule 2.4: Leases without original documentation
3.1 Articles of Incorporation of Registrant.
3.2 Articles of Amendment of Registrant
3.3 Amended and Restated Bylaws of Registrant
4.* Form of certificate for common stock
5.* Opinion of Ledgewood Law Firm, P.C., as to the legality of the
securities
10.1 Amended and Restated Loan and Security Agreement, dated September
30, 1998, between Registrant and First Union National Bank, as
agent
10.2 Joinder and Amendment to Amended and Restated Loan and Security
Agreement, dated March 26, 1999, among First Union National Bank,
European American Bank, Registrant, JLA Credit Corporation,
Resource America, Resource Leasing, Inc., FL Partnership
Management, Inc. and FL Financial Services, Inc.
10.3 Stock Pledge Agreement, dated March 26, 1999, between First Union
National Bank, as agent, and Registrant
<PAGE>
10.4 Amendment to Amended and Restated Loan and Security Agreement,
dated May 18, 1999, among First Union National Bank, as agent,
Registrant, JLA Credit Corporation, Resource America, Resource
Leasing, Inc., FL Partnership Management, Inc. and FL Financial
Services, Inc.
10.5 Credit Agreement, dated as of May 19, 1999, between Fidelity
Leasing Canada, Inc. and Bank of Montreal.
10.6 Guarantee, dated May 19, 1999, from Registrant and Resource America
to Bank of Montreal.
10.7 Purchase and Sale Agreement, dated December 18, 1997, between
Registrant and SW Leasing Portfolio IV, Inc.
10.8 Receivables Purchase Agreement, dated December 18, 1997, among SW
Leasing Portfolio IV, Inc., Registrant, Variable Funding Capital
Corporation, First Union Capital Markets Corp., First Union
National Bank, Harris Trust and Savings Bank and others
10.9 Purchase and Sale Agreement, dated June 24, 1998, between
Registrant and Fidelity Leasing SPC I, Inc.
10.10 Receivables Purchase Agreement, dated June 24, 1998, among Fidelity
Leasing SPC I, Inc., Registrant, Variable Funding Capital
Corporation, First Union Capital Markets, First Union National
Bank, Harris Trust and Savings Bank and others
10.11 Amended and Restated Purchase and Sale Agreement, dated February 5,
1999, between Registrant, JLA Credit Corporation and Fidelity
Leasing SPC II, Inc.
10.12 Receivables Purchase Agreement, dated December 29, 1998, among
Fidelity Leasing SPC II, Inc., Registrant, Market Street Funding
Corporation, PNC Bank, National Association and Harris Trust and
Savings Bank (conformed as amended on February 5, 1999 and March 8,
1999)
10.13 Purchase and Sale Agreement, dated February 4, 1999, among
Registrant, Fidelity Leasing SPE III, LLC, and JLA Credit
Corporation
10.14 Receivables Credit Agreement, dated February 4, 1999, among
Fidelity Leasing SPE III, LLC, Registrant, Variable Funding Capital
Corporation, First Union Capital Markets, First Union National
Bank, Harris Trust and Savings Bank and others
10.15 Guaranty, dated February 4, 1999, among Registrant, First Union
Capital Markets and Variable Funding Capital Corporation
10.16* Indenture, dated August 15, 1997, among JLA Funding Corporation II,
JLA Credit Corporation and LTCB Trust Company
10.17* Sale and Servicing Agreement, dated August 15, 1997, between JLA
Credit Corporation and JLA Funding Corporation II
10.18* Indenture, dated March 30, 1998, among JLA Funding Corporation III,
JLA Credit Corporation and LTCB Trust Company
<PAGE>
10.19* Sale and Servicing Agreement, dated March 30, 1998, between JLA
Credit Corporation and JLA Funding Corporation III
10.20 Transfer and Sale Agreement, dated as of June 2, 1999, between
Registrant and Fidelity Equipment Lease Depositor I, LLC
10.21 Indenture, dated June 2, 1999, between Fidelity Equipment Lease
Trust 1999-1 and Harris Trust and Savings Bank
10.22 Sale and Servicing Agreement, dated as of June 2, 1999, among
Fidelity Equipment Lease Depositor I, LLC, Registrant and Harris
Trust and Savings Bank
10.23 Lease Agreement between Bryn Mawr Associates and Registrant
10.24 Lease Addendum
10.25 Fidelity Leasing, Inc. 1996-1 Key Employee Stock Option Plan
10.26 Contribution Agreement, dated March 5, 1996, between Resource
Leasing, Inc. and Abraham Bernstein
10.27 Amendment No. 1 to Contribution Agreement, dated June 30, 1999
10.28 Registration Rights Agreement, dated March 5 1996 between
Registrant and Abraham Bernstein
10.29 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-1 Key Employee Stock Option Plan, dated March 5, 1996, between
Registrant and Abraham Bernstein
10.30 Fidelity Leasing, Inc. 1996-2 Key Employee Stock Option Plan
10.31 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-2 Key Employee Stock Option Plan, dated May 9, 1996, between
Registrant and Crit S. DeMent
10.32 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-2 Key Employee Stock Option Plan, dated May 9, 1996, between
Registrant and Joseph T. Ellis, Jr.
10.33 Grant of Incentive Stock Option Pursuant to Fidelity Leasing, Inc.
1996-2 Key Employee Stock Option Plan, dated October 8, 1998,
between Registrant and Joseph T. Ellis, Jr.
10.34 Employment Agreement, dated March 5, 1996, between Registrant and
Abraham Bernstein
10.35 Amendment No. 1 to Employment Agreement, dated as of March 4, 1999
10.36 Employment Agreement, dated as of June 30, 1999, between Registrant
and Crit S. DeMent
10.37 Employment Agreement, dated as of June 30, 1999, between Registrant
and Joseph T. Ellis, Jr.
<PAGE>
11. Statement re: computation of per share earnings
21. Subsidiaries of Registrant
23.1 Consent of Grant Thornton LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ledgewood Law Firm, P.C. (included in Exhibit 5)
24. Power of Attorney (included as part of signature pages to this
registration statement)
27 Financial Data Schedule
- ---------------
*To be filed by amendment.
<PAGE>
STOCK PURCHASE AGREEMENT
by and between
FIDELITY LEASING, INC.
and
JAPAN LEASING (U.S.A.), INC.
dated as of
December 15, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions 2
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Sale and Transfer of Shares 12
Section 2.2 Purchase Price 13
Section 2.3 Purchase Price Adjustment 13
ARTICLE III
THE CLOSING
Section 3.1 Closing 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 4.1 Organization 16
Section 4.2 Capitalization 17
Section 4.3 Authorization; Validity of Agreement 18
Section 4.4 No Violations; Consents and Approvals 19
Section 4.5 Financial Statements 20
Section 4.6 Absence of Certain Changes 21
Section 4.7 No Undisclosed Liabilities 21
Section 4.8 Litigation; Compliance with Law 22
Section 4.9 Employee Benefit Plans; ERISA 22
Section 4.10 Real Property 26
Section 4.11 Intellectual Property 28
Section 4.12 Computer Software 29
Section 4.13 Material Contracts 29
Section 4.14 Taxes 31
Section 4.15 Affiliated Party Transactions; Sensitive Payments 32
Section 4.16 Environmental Matters 33
Section 4.17 No Brokers 33
Section 4.18 Receivables, Inventory and Payables 34
Section 4.19 Disclosure 34
Section 4.20 Tangible Personal Property 34
Section 4.21 Permits 35
Section 4.22 Insurance; No Casualty Events 35
Section 4.23 Employees; Labor Relations 36
Section 4.24 Registration Rights 38
Section 4.25 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities 38
Section 4.26 Financing Contracts 38
Section 4.27 Accurate and Complete Disclosure 40
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1 Organization 40
Section 5.2 Authorization: Validity of Agreement 41
Section 5.3 No Violations; Consents and Approvals 41
Section 5.4 Litigation; Compliance with Law 42
Section 5.5 No Brokers 43
Section 5.6 Investigation by Purchaser 43
Section 5.7 Investment Intent 44
ARTICLE VI
COVENANTS
Section 6.1 Conduct of the Business by the Company Pending the Closing 44
Section 6.2 Access to Information 47
Section 6.3 Best Efforts 48
Section 6.4 Consents 49
Section 6.5 HSR Filings 49
Section 6.6 Public Announcements 50
Section 6.7 Employee Receivables and Payables 50
Section 6.8 Employee Benefits 51
Section 6.9 Notification of Certain Matters 51
Section 6.10 Tax Matters 52
Section 6.11 Seller Non-Competition and Non-Solicitation Covenants 58
Section 6.12 Payment of Company Debt; Release of Guaranties 59
Section 6.13 Powers of Attorney; Accounts 61
Section 6.14 Inquiries and Negotiations 62
Section 6.15 Delivery of November Financial Statements and December
Financial Statements 65
Section 6.16 Employee Bonuses 65
Section 6.17 Collection of Certain Receivables and Partial Remittance 66
Section 6.18 Assignment 67
Section 6.19 Commitment Letter; Certain Termination Rights 67
<PAGE>
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Seller's Obligations 68
Section 7.2 Conditionsto Purchaser's Obligations 70
ARTICLE VIII
DOCUMENTS TO BE DELIVERED AT THE CLOSING
Section 8.1 Documents to Be Delivered by Seller 72
Section 8.2 Documents to Be Delivered by Purchaser 72
ARTICLE IX
TERMINATION
Section 9.1 Termination 73
Section 9.2 Effect of Termination 74
ARTICLE X
SURVIVAL OF OBLIGATIONS; INDEMNIFICATION; REMEDIES
Section 10.1 Indemnification by Seller 75
Section 10.2 Indemnification by Parent and Purchaser 76
Section 10.3 Certain Other Indemnity Matters 76
Section 10.4 Time Limitations 77
Section 10.5 Limitations on Amount 78
Section 10.6 Procedure for Indemnification; Third Party Claims 78
Section 10.7 Security for Indemnification 81
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.1 Fees and Expenses 81
Section 11.2 Amendments 82
Section 11.3 Notices 82
Section 11.4 Interpretation 83
Section 11.5 Headings 84
Section 11.6 Counterparts 84
Section 11.7 Entire Agreement 84
Section 11.8 Severability 84
Section 11.9 Governing Law 84
Section 11.10 Assignment 84
Section 11.11 Specific Performance; Submission to Jurisdiction 85
Section 11.12 Waiver 86
Section 11.13 Time of Essence 86
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
December 15, 1998, by and between, Fidelity Leasing, Inc., a Pennsylvania
corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a Delaware
corporation ("Seller"),
W-I-T-N-E-S-S-E-T-H:
WHEREAS, Resource America, Inc., a Delaware corporation ("Parent"),
owns all of the issued and outstanding capital stock of Resource Leasing, Inc.,
a Delaware corporation, which in turn owns all of the issued and outstanding
capital stock of Purchaser; and
WHEREAS, Seller owns all of the issued and outstanding capital stock of
JLA Credit Corporation, a Delaware corporation (the "Company"); and
WHEREAS, the Company is a specialty commercial finance company engaged
in the business of originating, acquiring, securitizing and servicing
non-cancellable, full-payout equipment leases in the United States (the
"Business"); and
WHEREAS, Purchaser desires to purchase from Seller all of the issued
and outstanding capital stock of the Company (the "Shares") upon and subject to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions . As used in this Agreement, each of the
following terms shall have the respective meaning set forth below:
Term Defined in Section
- ---- ------------------
Accounting Dispute Notice 2.3(b)
Agreement Preamble
Approvals 4.10(d)
Acquisition Transaction 6.14(a)
Audited Financial Statements 4.5
Barclays 10.1(b)
Benefit Arrangement 4.9(a)
Business Recitals
Change-in-Control Amounts 6.16(a)
Closing 3.1
Closing Date 3.1
Commitment Letter 6.19
Commitment Letter Due Date 6.19
Company Recitals
Company Employee 4.13(a)
Company Insurance Policies 4.22
Company Lenders 6.12(a)
Confidentiality Agreement 6.2(b)
Consents 6.4
Contract 4.13(a)
DAF Report 2.3(b)
Damages 10.1(a)
Date of Notice of Claim 10.6(d)
Election 6.10(a)
Employment Agreements 6.16(a)
Environmental Laws 4.16
Existing Employee 6.8
Financial Statements 4.5
Governmental Entity 4.4(b)
Information 6.2(b)
Intellectual Property 4.11
Leases 4.10(b)
Material Contracts 4.13(a)
2
<PAGE>
Material Lease 4.10(b)
Material Leased Real Property 4.10(b)
Modified ADSP 6.10(b)
Net Asset Value Report 2.3(a)
Notice of Claim 10.6(a)
Owned Real Property 4.10(a)
Parent Recitals
PBGC 4.9(a)
Plans 4.9(a)
Promissory Note 6.12(b)
Purchase Price 2.2
Purchaser Preamble
Purchaser Indemnified Persons 10.1(a)
Purchaser's Closing Documents 8.2
Section 6.19(b) Last Termination Date 6.19(b)
Seller Preamble
Seller Disclosure Letter Article IV
Seller Indemnified Persons 10.2
Seller's Closing Documents 8.1
Seller Tax Returns 6.10(d)(ii)
Shares Recitals
Special Contingent Liability 10.1(b)
Tax Audit 6.10(f)(i)
Unaudited Financial Statements 4.5
"Affiliate," with respect to any Person, shall include (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person and (ii) in the case of Seller, the
Company, each Company Subsidiary, and its respective directors and officers. For
purposes of this definition, "control," when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings that
correspond to the foregoing.
3
<PAGE>
"Antitrust Law" means the Sherman Act, each the Clayton Act, the HSR
Act, the Federal Trade Commission Act, each as amended, and all other federal,
state and foreign statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines, and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
"Assignment" means the Assignment and Assumption of Interests in
Receivables, to be executed and delivered at the Closing by the Company, on the
one hand, and Seller, on the other hand, in substantially the form of Exhibit
7.1(j).
"Bankruptcy Exception" means, in respect of any agreement, contract,
commitment or obligation, any limitation thereon imposed by any bankruptcy,
insolvency, fraudulent conveyance, reorganization, receivership, moratorium or
similar law affecting creditors' rights and remedies generally and, with respect
to the enforceability of any agreement, contract, commitment or obligation, by
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing, regardless of whether enforcement is sought in a
proceeding at law or in equity.
"Business Day" means each day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Change in Control" has the meaning set forth in Section 6 of each of
the Employment Agreements.
"Closing Date Balance Sheet" means the consolidated balance sheet for
the Company and the Company Subsidiaries prepared as of the close of business on
the Closing Date before giving effect to the Closing or any of the other
transactions contemplated hereby to occur on the Closing Date and in accordance
with GAAP applied on a basis consistent with the preparation of the Audited
Financial Statements.
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"Closing Date Net Asset Value" means the amount by which the total
assets of the Company and the Company Subsidiaries on a consolidated basis
exceeds the total liabilities of the Company and the Company Subsidiaries on a
consolidated basis, in each case as derived from the Closing Date Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Material Adverse Effect" means any event, condition or
circumstance that would be reasonably likely to have a material adverse effect
on (A) the business, results of operations or financial condition of the Company
and the Company Subsidiaries, taken as a whole, but excluding any such effect
resulting from any bankruptcy or similar filings made, as of the date hereof, by
Seller or any of its Affiliates (other than the Company or any of the Company
Subsidiaries), including any defaults or cross-defaults caused by such filings
under any agreements to which the Company or any of its Affiliates is a party
and the defaults disclosed in the Seller Disclosure Letter or (B) the ability of
Seller to perform any of its obligations under this Agreement or consummate the
transactions contemplated hereby.
"Company Subsidiary" means any of JLA Funding Corporation, JLA Funding
Corporation II or JLA Funding Corporation III.
"Corporate Affiliate" means an Affiliate that is not a natural person.
"Credit Enhancement" means any (i) security deposit, unapplied advance
rental payment or dealer investment, (ii) investment certificate, certificate of
deposit, authorization to hold funds, hypothecation of account or like
instrument, (iii) letter of credit, repurchase agreement, agreement of
indemnity, guarantee, lease guarantee bond or postponement agreement, (iv)
recourse agreement, (v) security agreement, (vi) property, (vii) certificate
representing shares or the right to purchase shares in the capital of any
corporation, (viii) Financing Contract or (ix) bond or debenture, in each case
pledged, assigned, mortgaged,
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made, delivered or transferred as security for the performance of any obligation
under or with respect to a Financing Contract or Non-Recourse Note.
"December Financial Statements" means the unaudited consolidated
balance sheet and the related unaudited consolidated income statement of the
Company and the Company Subsidiaries for the twelve months ending December 31,
1998, to be delivered by Seller to Purchaser following the date hereof pursuant
to Section 6.15.
"Designated Accounting Firm" means PriceWaterhouseCoopers LLP, or if
PriceWaterhouseCoopers LLP shall decline or otherwise be unable to perform the
engagement in question, another firm of independent certified public accountants
of nationally recognized standing (other than the Purchaser Accountants and the
Seller Accountants) mutually acceptable to the parties hereto.
"DOJ" means the Antitrust Division of the United States Department of
Justice.
"Employee Escrow Agreements" means two agreements, each in
substantially the form of Exhibit 6.16, to be executed and delivered by the
Company and the relevant Company Employee at the Closing.
"Employment Agreements" means the Employment Agreements, effective as
of the first day of January, 1998 and existing as of the date hereof, between
the Company, on the one hand, and each of Allan Hauskens and Steven A. Dietsch,
on the other hand.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" means an agreement in substantially the form of
Exhibit 7.1(h), to be executed and delivered by Purchaser and Seller at the
Closing.
"Financing Contract" means any contract (including any schedule or
amendment thereto or assignment, assumption, renewal or novation thereof) in
existence on or prior to the Closing Date and any ancillary agreements relating
thereto which is in the form of a lease
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or rental agreement with respect to property, or any sale contract (including an
installment sale contract or conditional sale agreement) arising out of the sale
of property or any secured or unsecured financing of property, or any secured or
unsecured loan with respect to which the Company and/or a Company Subsidiary is
either (i) the lessor, seller, lender, secured party or obligee (whether
initially or as an assignee) or (ii) the holder of a Non-Recourse Note secured
thereby.
"Financing Records" means all material records in the possession or
control of the Company or any Company Subsidiary relating to the Financing
Contracts and any Credit Enhancement with respect thereto, including
applications, agreements, promissory notes, security agreements, insurance
policies and any other collateral security of any nature whatsoever held by the
Company or any Company Subsidiary, including any relevant documents or
instruments held by the Company or any Company Subsidiary as collateral
security, credit files, computer records, correspondence, collection histories,
underwriting criteria and policy and procedure manuals.
"FTC" means the Federal Trade Commission.
"GAAP" means generally accepted accounting principles in effect in the
United States of America at the time of any determination, and which are applied
on a consistent basis during the periods involved, as adjusted in the case of
the Closing Date Balance Sheet by the accounting policies set forth in Exhibit
1. Any accounting term or other term used in this Agreement with respect to an
accounting matter shall have the meaning given to that term by GAAP, unless
otherwise defined herein or the context of this Agreement otherwise requires.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
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"Income Tax" means any federal, state, local or foreign Tax (a) based
upon, measured by or calculated with respect to net income, profits or receipts
(including capital gains Taxes and minimum Taxes) or (b) based upon, measured by
or calculated with respect to multiple bases (including corporate franchise
taxes) if one or more of the bases on which such Tax may be based, measured by
or calculated with respect to, is described in clause (a), in each case together
with any interest, penalties or additions to such Tax.
"JLC" means Japan Leasing Corporation, a Japanese corporation.
"Knowledge" of Seller, the Company or any Company Subsidiary, "known"
to Seller, the Company or any Company Subsidiary, matters of which Seller, the
Company or any Company Subsidiary is "aware" and language of similar import
shall mean all matters actually known by any of Mitsumasa Sakka, Allan Hauskens,
Steven A. Dietsch, Katsuro Hamada, Jun Ogihara or Chiaki Kojima.
"Liens" means all mortgages, claims, charges, liens, security
interests, pledges, options, easements, rights of way, or other encumbrances of
any nature whatsoever.
"Net Asset Value" means the amount by which (i) the total assets of the
Company and the Company Subsidiaries on a consolidated basis exceeds (ii) the
total liabilities of the Company and the Company Subsidiaries on a consolidated
basis, in each case as derived in reliance on the accounting principles and the
methods of applying such principles used in preparing the Financial Statements.
"Non-Recourse Note" means (i) a promissory note or assignment of
chattel paper issued by (and the obligor on which is) an owner of a Financing
Contract, which note or assignment is secured by a security interest in (and
collateral assignment of) such Financing Contract and all proceeds thereof or
(ii) an assignment of a stream of current and/or future
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payments due under a Financing Contract, which assignment is secured by a
security interest in (and collateral assignment of) such Financing Contract and
all proceeds thereof.
"November Financial Statements" means the unaudited consolidated
balance sheet and the related unaudited consolidated income statement of the
Company and the Company Subsidiaries for the eleven months ending November 30,
1998, to be delivered by Seller to Purchaser following the date hereof pursuant
to Section 6.15.
"October Financial Statements" means the unaudited consolidated balance
sheet and the related unaudited consolidated income statement of the Company and
the Company Subsidiaries for the ten months ending October 31, 1998 delivered by
Seller to Purchaser prior to the date hereof.
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental Entity.
"Permitted Liens" means (i) those liens set forth in Section 4.10 of
the Seller Disclosure Letter, (ii) (A) any state of facts that would be set
forth in the public records of a Governmental Entity, (B) Liens for current
water and sewage charges and current Taxes not yet due and payable or being
contested in good faith, and (C) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's and other similar Liens arising or incurred in the
ordinary course of business, in each case that do not materially interfere with
the operation of the Company and the Company Subsidiaries, taken as whole, or
(iii) Liens arising or resulting from any action taken by Purchaser or any of
its Affiliates.
"Person" means a natural person, partnership, joint venture, trust,
corporation, limited liability company or other entity (including any government
or political subdivision or any agency, department or instrumentality thereof).
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"Pre-Closing Period" means any taxable period ending on or prior to the
Closing Date.
"Purchaser Accountants" means Grant Thorton LLP.
"Purchaser Material Adverse Effect" means any event, condition or
circumstance that would be reasonably likely to have a material adverse effect
on the ability of Purchaser to perform any of its obligations under this
Agreement or consummate the transactions contemplated hereby.
"Purchaser Plans" means employee benefit plans, as defined in Section
3(3) of ERISA, or such nonqualified employee benefit or deferred compensation
plans, stock option, bonus or incentive plans or other employee benefit or
fringe benefit programs that may be in effect generally for employees of
Purchaser or its Subsidiaries from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitized 90+ Contracts" means Financing Contracts of any of the
Company Subsidiaries with payments more than 90 days past due as of the date
that is two Business Days prior to the Closing Date.
"Security Agreement" means an agreement in substantially the form of
Exhibit 7.1(i), to be executed and delivered by Purchaser and Seller at the
Closing for the purpose of securing the Promissory Note.
"Seller Accountants" means Arthur Andersen LLP.
"Straddle Period" means any taxable period that begins before and ends
after the Closing Date.
"Subsidiary" of a Person means any entity of which the securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person or such Person otherwise has
the right to vote or to direct the vote of such securities or other ownership
interests.
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"Target Net Asset Value" means $38,000,000.
"Tax Affiliate" means any entity that is a member of an affiliated
group of corporations (within the meaning of Section 1504(a) of the Code) filing
a consolidated U.S. federal Income Tax Return, and a group of corporations
filing a consolidated or combined Tax Return for state, local or foreign Tax
purposes (each, a "Consolidated Group"), if the Company could be held liable for
the Taxes of such entity or of such Consolidated Group.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, net worth, payroll, franchise, license, gains,
customs, transfer and recording taxes, imposed by any taxing authority, and
shall include any interest, penalties or additions to tax.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority with
respect to Taxes.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Sale and Transfer of Shares. Subject to the terms and
conditions set forth in this Agreement, at the Closing, Seller shall sell,
convey, assign, transfer and deliver the Shares to Purchaser, free and clear of
all Liens (other than restrictions arising under the Securities Act or any other
applicable state securities laws), and Purchaser shall purchase, acquire and
accept the Shares from Seller.
Section 2.2 Purchase Price. Subject to the terms and conditions of
this Agreement, in consideration of the aforesaid sale, conveyance, assignment,
transfer and delivery of the
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Shares, Purchaser agrees to pay to Seller at the Closing the sum of $38,000,000
(the "Purchase Price"), which sum shall be payable in immediately available
funds by (a) a wire transfer in the amount of $5,000,000 to such bank account as
may be specified in writing by the Escrow Agent (as defined in the Escrow
Agreement) to Purchaser prior to the Closing for deposit in accordance with the
terms of the Escrow Agreement and (b) a wire transfer in the amount of
$33,000,000 to such bank account as may be specified in writing by Seller to
Purchaser prior to the Closing.
Section 2.3 Purchase Price Adjustment.
(a) As promptly as practicable, but not later than 60 days
after the Closing Date, Purchaser shall cause to be prepared and delivered to
Seller (i) the Closing Date Balance Sheet audited by the Purchaser Accountants
and (ii) a report (the "Net Asset Value Report") setting forth a calculation of
the Closing Date Net Asset Value. Purchaser shall, and shall cause the Purchaser
Accountants to, make available to Seller and the Seller Accountants all books
and records of the Company and each Company Subsidiary and all work papers used
in connection with the preparation and audit of the Closing Date Balance Sheet
or the preparation of the Net Asset Value Report. The Closing Date Balance Sheet
and the Net Asset Value Report delivered pursuant to this Section 2.3 shall not
be binding on Seller if Seller timely exercises its right to dispute the same
pursuant to the procedures set forth in this Section 2.3. If Seller does not
exercise such right with respect to the Closing Date Balance Sheet or the Net
Asset Value Report on a timely basis under this Section 2.3, then Seller shall
be deemed to have accepted the same as delivered pursuant to this Section 2.3.
(b) If Seller disputes any item in the Net Asset Value Report,
then Seller shall, within 30 days after the delivery of the Closing Date Balance
Sheet and Net Asset Value Report, give Purchaser written notice of such dispute
(an "Accounting Dispute Notice")
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setting forth in reasonable detail each of the items in dispute. If no
Accounting Dispute Notice is given to Purchaser within such 30-day period, the
Closing Date Net Asset Value as set forth in the Net Asset Value Report shall be
deemed to be final and binding upon all the parties hereto. In the event that an
Accounting Dispute Notice is given to Purchaser within such 30-day period,
Seller and Purchaser shall attempt to resolve in good faith and by mutual
agreement the items in dispute within 15 days after the delivery of such
Accounting Dispute Notice to Purchaser. Failing agreement on all items in
dispute within such 15-day resolution period, Purchaser and Seller shall submit
such items in dispute for resolution to the Designated Accounting Firm. The
Designated Accounting Firm shall be instructed to resolve such disputed items,
based solely on written presentations by Purchaser and Seller and not by
independent review, and to deliver a written report to the parties hereto upon
such disputed items (the "DAF Report") in accordance with Section 11.3, all
within 15 days after the submission of such disputed items to it. The DAF Report
shall be (i) within the range of proposals established for such dispute by
Purchaser and Seller and (ii) deemed to be an agreement between Seller and
purchaser with respect to the issues in dispute, and upon the delivery of the
DAF Report to Purchaser and Seller, the Closing Date Net Asset Value as set
forth in the DAF Report shall be deemed to be final, conclusive and binding upon
all the parties hereto.
(c) The fees and expenses of the Designated Accounting Firm
incurred in connection with the resolution of a dispute pursuant to Section
2.3(b) shall be borne equally by Purchaser and Seller.
(d) If the Closing Date Net Asset Value (as deemed to be final
and binding pursuant to Section 2.3(b)) is less than the Target Net Asset Value,
then the principal amount payable under the Promissory Note shall be reduced by
the amount by which the
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Target Net Asset Value exceeds the Closing Date Net Asset Value; provided,
however, that in the event that the amount by which the Target Net Asset Value
exceeds the Closing Date Net Asset Value is less than $250,000, no adjustment
shall be made to the principal amount payable under the Promissory Note.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The sale and transfer of the Shares by Seller to
Purchaser (the "Closing") shall take place at the offices of Ledgewood Law Firm,
Philadelphia, Pennsylvania at 10:00 a.m., local time, on January 19, 1999 or, if
the conditions to close set forth in Article VII have not been satisfied or
waived by such date, two Business Days following the satisfaction or waiver of
all conditions to close set forth in Article VII (the "Closing Date"), unless
another date or place is agreed to in writing by the parties hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise disclosed to Purchaser in those sections of a
letter delivered to Purchaser by Seller prior to the execution hereof relating
to the following representations and warranties (the "Seller Disclosure
Letter"), Seller represents and warrants to Purchaser as follows:
Section 4.1 Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the
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business conducted by it makes such qualification or licensing necessary. Seller
has heretofore delivered to Purchaser a complete and correct copy of each of the
Company's Certificate of Incorporation and Bylaws, as currently in effect.
(b) Section 4.1(b) of the Seller Disclosure Letter lists (i)
the name of each Company Subsidiary and the jurisdiction of its incorporation,
(ii) the amount of its authorized, and its issued and outstanding, capital stock
or other equity interests and (iii) the principal lines of business in which
each Company Subsidiary is participating or engaged. Each Company Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Each Company Subsidiary is duly qualified
or licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of the business conducted by it makes such
qualification or licensing necessary. Seller has heretofore delivered to
Purchaser a complete and correct copy of each of the Company Subsidiary's
Certificate of Incorporation and Bylaws, as currently in effect. All of the
outstanding shares of capital stock of or other equity interests in each Company
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned, beneficially and of record, by the Company free
and clear of all Liens. Neither the Company nor any of the Company Subsidiaries
owns, directly or indirectly, of record or beneficially, any equity,
partnership, limited liability company, joint venture or other interest in any
Person or has any obligation, direct or indirect, present or contingent, (i) to
purchase or subscribe for any interest in, advance or loan money to, or in any
way make investments in, any Person or (ii) to share any profits or capital
investments or both.
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(c) The stock and minute books of the Company and each Company
Subsidiary contain accurate and complete records of all requisite meetings and
consents in lieu of meetings of the respective board of directors (and any
committee thereof) and of stockholders since the time of each of their
incorporation and accurately reflect all transactions referred to therein.
Section 4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
64,000 shares of Common Stock, par value $500 per share. Sixty thousand shares
of Common Stock are issued and outstanding (and such shares of Common Stock
constitute the "Shares"), all of which are owned of record and beneficially by
Seller, free and clear of all Liens, and no shares of Common Stock are issued
and held in the treasury of the Company. All of the Shares are duly authorized,
validly issued, fully paid and nonassessable. There are no existing (i) options,
warrants, calls, preemptive rights, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating the Company or
any Company Subsidiary to issue, transfer, sell or otherwise dispose of any
shares of capital stock of, or other equity interest in, the Company or any
Company Subsidiary, or which restrict the transfer of such shares, (ii)
contractual obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any capital stock of the Company or any Company
Subsidiary, or (iii) voting trusts or similar agreements to which the Company,
any Company Subsidiary or Seller is a party with respect to the voting of the
capital stock of the Company or any Company Subsidiary.
Section 4.3 Authorization; Validity of Agreement. Seller has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Seller of this
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Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Seller, and no other
corporate proceedings on the part of Seller are necessary to authorize the
execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Seller and, assuming due authorization, execution
and delivery of this Agreement by Purchaser, is a valid and binding obligation
of Seller enforceable against Seller in accordance with its terms, except as may
be limited by the Bankruptcy Exception.
Section 4.4 No Violations; Consents and Approvals.
(a) The execution, delivery or performance of this Agreement by
Seller does not, and the consummation by Seller of the transactions contemplated
hereby will not, (i) violate any provision of the Certificate of Incorporation
or Bylaws of Seller, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any material note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, license, contract,
agreement or other instrument to which Seller, the Company or any Company
Subsidiary is a party or by which any of them or any of their properties or
assets may be bound or otherwise subject or (iii) violate any order, writ,
judgment, injunction, decree, law, statute, rule or regulation applicable to the
Seller, the Company or any Company Subsidiary or any of their respective
properties or assets, except in the case of clauses (ii) or (iii) for such
violations, breaches or defaults that become applicable as a result of the
business or activities in which Purchaser or its Affiliates is or proposes to be
engaged or as a result of any acts or omissions by, or the status of any facts
pertaining to, Purchaser or its Affiliates.
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(b) No filing or registration with, notification to, or
authorization, consent or approval of, any court, legislative, executive or
regulatory authority or agency (each a "Governmental Entity") is required in
connection with the execution, delivery and performance of this Agreement by
Seller or the consummation by Seller of the transactions contemplated hereby,
except for filings with the FTC and with the DOJ pursuant to the HSR Act.
Section 4.5 Financial Statements. Seller has furnished the Purchaser
with (i) true and complete copies of the audited consolidated financial
statements of the Company and the Company Subsidiaries (including the related
notes) for the fiscal years ending December 31, 1996 and 1997 (the "Audited
Financial Statements"), and (ii) the unaudited consolidated balance sheet and
the related unaudited consolidated income statement of the Company and the
Company Subsidiaries for the nine months ended September 30, 1998 (the
"Unaudited Financial Statements" and, together with the Audited Financial
Statements, the "Financial Statements"). The Audited Financial Statements fairly
present in all material respects the financial position, results of operations
and cash flows of the Company and the Company Subsidiaries as of the dates and
for the periods specified therein, all in conformity with GAAP. The Unaudited
Financial Statements and the October Financial Statements fairly present, and
the November Financial Statements and the December Financial Statements shall
fairly present, in all material respects the consolidated combined results of
operations and cash flows of the Company and the Company Subsidiaries for the
periods specified therein, all in conformity with GAAP (subject to normal
year-end audit adjustments that will not have or reflect a Company Material
Adverse Effect) and except as otherwise noted therein. The books and records of
the Company and each Company Subsidiary are complete and correct in all material
respects, have been maintained in accordance with good business practices and
GAAP, and accurately reflect the basis for the financial condition and results
of
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operations as set forth in the Financial Statements. Throughout the periods
covered by the Financial Statements, there has been no change in the accounting
principles followed by the Company or any of the Company Subsidiaries or the
methods of applying such principles. Except as expressly provided in this
Section 4.5, no representation is made by Seller as to any financial information
of the Company or the Company Subsidiaries provided to Purchaser, including any
financial information set forth in the Confidential Memorandum dated July 1998
regarding the Company and the Company Subsidiaries provided to Purchaser by
Piper Jaffray, Inc. Without limiting the generality of the foregoing, no
representation is made as to the accuracy, fairness or reasonableness of any
projections regarding the Company or any Company Subsidiary provided to
Purchaser or the assumptions used in preparing the same or as to the likelihood
that such projections will be achieved.
Section 4.6 Absence of Certain Changes. Except as (a) disclosed in the
Financial Statements or (b) expressly required by this Agreement, between
September 30, 1998 and the date hereof, (i) no event that would result in a
Company Material Adverse Effect has occurred and (ii) the Company has not taken
action that, if taken after the date hereof, would constitute a violation of
Section 6.1.
Section 4.7 No Undisclosed Liabilities. Except for liabilities and
obligations incurred in the ordinary course of business, between September 30,
1998 and the date hereof, neither the Company nor any Company Subsidiary has
incurred any liabilities or obligations that would be required to be disclosed,
reflected or reserved against in a consolidated balance sheet of the Company
(including the related notes thereto, where appropriate) prepared in accordance
with GAAP.
Section 4.8 Litigation; Compliance with Law. As of the date hereof,
there is no action, suit or proceeding pending or,
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to the Knowledge of Seller, any investigation pending or, to the Knowledge of
Seller, any action, suit or proceeding threatened, involving the Company or any
Company Subsidiary, by or before any court, Governmental Entity or arbitration
panel or any other Person. The business and the operations of the Company and
the Company Subsidiaries are not being conducted in violation of any applicable
law, ordinance, rule, regulation, decree or order of any court or Governmental
Entity or other regulatory authority, or arbitration panel. Neither the Company
nor any Company Subsidiary has been the subject of any investigation or
proceeding by any Governmental Entity within the past three years.
Section 4.9 Employee Benefit Plans; ERISA.
(a) Section 4.9(a) of the Seller Disclosure Letter lists any
"employee pension benefit plan" or "employee welfare benefit plan" within the
meaning of Sections 3(1) and 3(2) of ERISA established or maintained or
contributed to by the Company or any Company Subsidiary, or in respect of which
the Company or any Company Subsidiary is considered an "employer" under Section
414 of the Code, in each case which provides benefits for an employee of the
Company or any Company Subsidiary (collectively, "Plans"). None of the Company
or any Company Subsidiary is required, or was required within the immediately
preceding five years, to make any contribution to any "multiemployer plan"
within the meaning of Section 3(37) of ERISA. None of the Company or any Company
Subsidiary has any unpaid liability to the Pension Benefit Guaranty Corporation
("PBGC") in respect of any Plans established or maintained and to which
contributions are or were made by it.
Section 4.9(a) of the Seller Disclosure Letter also lists each
deferred compensation plan, bonus plan, stock option plan, employee stock
purchase plan and any other employee benefit plan, agreement, arrangement or
commitment not required under the preceding paragraph to be listed on Section
4.9(a) of the Seller Disclosure Letter (other than normal policies concerning
holidays, vacations and salary continuation during short absences for illness
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or other reasons) maintained by the Company or any of the Company Subsidiaries
(together with the Plans, collectively, "Benefit Arrangements").
(b) No Plan (i) has incurred any "accumulated funding
deficiency," as defined in Section 412 of the Code (whether or not waived), or
(ii) has incurred any liability to the PBGC. None of the Company or any Company
Subsidiary has breached any of the responsibilities, obligations or duties
imposed on it by ERISA or the Code with respect to any Plan maintained by it,
which breach has given rise to, or would reasonably be expected in the future to
give rise to, an obligation of the Company or such Company Subsidiary to pay a
sum of money, including the obligation to make contributions to any Plan that
has become due prior to the date hereof for any Plan year ending prior to the
Closing Date. There is no contribution due for any Plan for the year in which
the Closing occurs. None of the Company or any Company Subsidiary or, to the
Knowledge of the Seller or the Company, any "party in interest," as defined in
Section 3(14) of ERISA, in respect of any such Plan has engaged in any
non-exempt prohibited transaction described in Sections 406 and 408 of ERISA or
Section 4975 of the Code which would reasonably be expected to have a
significant adverse effect on the Company or any Company Subsidiary. No
reportable event, as defined in Section 4043 of ERISA (other than any reportable
event as to which the 30-day notice period has been waived by statute or
regulation), has occurred with respect to any Plan; and no Plan subject to Title
IV of ERISA has been terminated by the plan administrator thereof or by the
PBGC. None of the Company or any Company Subsidiary has incurred any unpaid
liability with respect to any Plan under Title IV of ERISA.
(c) No action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to the assets of any Plan (other than the
routine claims for benefits made in the ordinary course of Plan administration
for which plan administrative review procedures
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have not been exhausted) is pending or has been threatened against such Plan,
the Company or any Company Subsidiary, or, to the Knowledge of the Seller, any
fiduciary (as defined in ERISA ss.3(21)) of the Plan (including any action,
suit, grievance, arbitration or other manner of litigation, or claim regarding
conduct which allegedly interferes with the attainment of rights under the
plan), and to the Seller's knowledge, no facts exist which would reasonably be
expected to give rise to any such action, suit, grievance, arbitration or other
manner of litigation, or claim.
(d) None of the Company or any Company Subsidiary has
communicated to any employee any intention or commitment to modify any Benefit
Arrangement (except as required by law or by contract in effect as of the date
hereof and described on Section 4.9(d) of the Seller Disclosure Letter) or to
establish or implement any other employee or retiree benefit or compensation
arrangement not listed in Section 4.9(a) of the Seller Disclosure Letter.
(e) None of the Company or any Company Subsidiary (i) maintains
or contributes to any Plan which provides, or has any liability to provide, life
insurance, medical, severance or other employee welfare benefits to any employee
upon such employee's retirement or termination of employment, except as may be
required by Section 4980B of the Code; or (ii) has ever represented, promised,
or contracted (whether in oral or written form) to any employee (either
individually or to employees as a group) that such employee(s) would be provided
with life insurance, medical, severance or other employee welfare benefits upon
their retirement or termination of employment, except to the extent required by
Section 4980B of the Code.
(f) The consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) (i)
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constitute an event under any Benefit Arrangement as in effect as of the date
hereof that will result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, or (ii)
result in the triggering or imposition of any restrictions or limitations on the
right of the Company or any Company Subsidiary to amend or terminate any Benefit
Arrangement and, as applicable with respect to any employee pension benefit
plan, receive the full amount of any excess assets remaining or resulting from
such amendment or termination, subject to applicable taxes. No payment or
benefit which will be made by the Company or any Company Subsidiary with respect
to an employee pursuant to any Benefit Arrangement as in effect as of the date
hereof will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
(g) No Benefit Arrangement is funded by a trust described in
Section 501(c)(9) of the Code.
(h) With respect to each Plan that is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA, all claims incurred
(including claims incurred but not reported) by employees thereunder prior to
the Closing for which the Company or any Company Subsidiary is, or will become,
liable are (i) insured pursuant to a contract of insurance whereby the insurance
company bears any risk of loss with respect to such claims; (ii) covered under a
contract with an insurer pursuant to which the insurer bears the liability for
such claims; or (iii) will be reflected as a liability or accrued for on the
Financial Statements.
(i) None of the Company or any Company Subsidiary has any
liability, contingent or otherwise, to, or with respect to any benefit plan
(other than the Benefit Arrangements),
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which is now or previously has been sponsored, maintained, contributed to, or
required to be contributed to, by the Company or any Company Subsidiary.
(j) Each of the Company and the Company Subsidiaries have
provided, or will have provided prior to the Closing, to individuals entitled
thereto, all required notices and coverage pursuant to Sections 601 through 609
of ERISA or Section 4980B of the Code with respect to any "qualifying event" (as
defined in Section 4980B(f)(3) of the Code) occurring prior to the Closing Date,
and no tax payable on account of Section 4980B of the Code has been incurred
with respect to any current or former employees (or their beneficiaries).
Section 4.10 Real Property.
(a) Section 4.10(a) of the Seller Disclosure Letter is a list
of all real property owned by the Company or any Company Subsidiary (the "Owned
Real Property"). Either the Company or a Company Subsidiary has good and
marketable title to the Owned Real Property in fee subject to no Liens, except
for Permitted Liens.
(b) Section 4.10(b) of the Seller Disclosure Letter is a list
(including all amendments) of all leases and subleases of real property under
which the Company or any Company Subsidiary is tenant or subtenant (the
"Leases") that in any 12-month period of lease term requires total lease or rent
payments by the Company or any Company Subsidiary of more than $10,000 (each
such Lease, a "Material Lease"), including the date of the Material Lease, the
premises demised thereunder, the name of the lessee and lessor, the commencement
date and expiration date of such Material Lease and the annual rent payable by
the lessee under such Material Lease. As used herein, the term "Material Leased
Real Property" shall mean the real property demised by Material Leases.
(c) Copies of the Material Leases have been made available to
Purchaser by Seller. The Material Leases are in full force and effect and are
enforceable in all material
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respects in accordance with their respective terms, except as such
enforceability may be subject to or limited by the Bankruptcy Exception. None of
the Material Leases has been amended since August 1998. Neither the Company nor
any Company Subsidiary has assigned, pledged or otherwise transferred, or has
sublet the premises demised by, any Material Lease. Either the Company or a
Company Subsidiary is in possession of the premises demised by the Material
Leases. No event has occurred or failed to occur that, with the giving of notice
or the passage of time, or both, would constitute a default by the lessee under
any Material Lease. No security deposit in excess of $5,000 is being held under
any Material Lease. As of the date of this Agreement, no lessor or lessee under
any Material Lease has exercised any option or right to (i) cancel or terminate
such Material Lease or shorten the term thereof, (ii) lease additional premises,
(iii) reduce or relocate the premises demised by such Material Lease or (iv)
purchase any property.
(d) All licenses, Permits and permanent certificates of
occupancy (the "Approvals"), if any, needed in connection with the construction,
use, occupancy and maintenance of any Owned Real Property or any Material Leased
Real Property are in full force and effect in accordance with the respective
terms thereof.
(e) The Owned Real Property and the Material Leased Real
Property, including all building systems, structural components, and building
equipment, are in good condition and repair, normal wear and tear excepted.
Section 4.11 Intellectual Property . Section 4.11 of the Seller
Disclosure Letter lists all material trademarks, trade names, service marks,
service names, mark registrations, logos, assumed names and copyright
registrations, patents and all applications therefor owned by the Company or any
Company Subsidiary and used in the business and operations of the Company or any
Company Subsidiary, as currently conducted (collectively, the "Intellectual
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Property"). As of the date hereof, there are no pending or threatened claims, of
which Seller has been given written notice, by any Person relating to the
Company's use, or any Company Subsidiary's use, of any Intellectual Property.
The Company or a Company Subsidiary has such ownership and use (free and clear
of all Liens) of, or rights by license, lease or other agreement to use (free
and clear of all Liens), the Intellectual Property as are necessary to permit
the Company and the Company Subsidiaries to conduct the business and the
operations of the Company and the Company Subsidiaries, as currently conducted,
and neither the Company nor any Company Subsidiary is obligated to pay any
royalty or similar fee to any Person in connection with the Company's use, or
any Company Subsidiary's use, or license of any of the Intellectual Property.
Section 4.12 Computer Software. The Company and the Company
Subsidiaries have such title or such rights by license, lease or other agreement
to the computer software programs, including application software, used by the
Company and the Company Subsidiaries and material to the conduct of the business
and operations of the Company and the Company Subsidiaries, as currently
conducted, as are necessary to permit the conduct of such business and
operations.
Section 4.13 Material Contracts.
(a) Except for Financing Contracts, Non-Recourse Notes and
Credit Enhancements, Section 4.13 of the Seller Disclosure Letter sets forth, as
of the date hereof, a true, complete and correct list of every contract,
agreement, loan, lease, license, guarantee, understanding or commitment (each
such item, a "Contract") to which the Company or any Company Subsidiary is a
party or by which it is bound that (i) provides for aggregate future payments by
the Company or any Company Subsidiary, or to the Company or any Company
Subsidiary, of more than $50,000 and has an unexpired term exceeding one year
and may not
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be canceled upon 60 days' notice without any liability, penalty or premium
(excluding purchase orders and invoices entered into or incurred in the ordinary
course of business); (ii) was entered into by the Company or a Company
Subsidiary with a stockholder, officer, director or significant employee of the
Company, a Company Subsidiary or Seller (other than contracts identified in
Section 4.9 of the Seller Disclosure Letter); (iii) is a collective bargaining
or similar agreement; (iv) guarantees or indemnifies or otherwise causes the
Company or any Company Subsidiary to be liable or otherwise responsible for the
obligations or liabilities of any other Person or provides for a charitable
contribution by the Company or any Company Subsidiary; (v) involves an agreement
with any bank, finance company or similar organization for borrowed money or
indebtedness of the Company or any Company Subsidiary; (vi) materially restricts
the Company or any Company Subsidiary from engaging in any business or activity
anywhere in the world; (vii) is an employment agreement, consulting agreement or
similar arrangement with any Person who is an employee or former employee of the
Company or any Company Subsidiary (each, a "Company Employee"), or any other
Person (other than Contracts identified in Section 4.9 of the Seller Disclosure
Letter); (viii) is an agreement for the purchase or sale of a portfolio of
Financing Contracts or Non-Recourse Notes with an aggregate value in excess of
$500,000; (ix) is an agreement pursuant to which any Person is entitled or
obligated to (A) manage, service, administer, enforce or make collections on any
Financing Contract or Non-Recourse Note or (B) repossess or otherwise convert
the ownership of any Portfolio Property or to sell or otherwise dispose of
Portfolio Property; (x) is an agreement with a collection agency for the
collection of past-due payments under Financing Contracts or Non-Recourse Notes;
or (xi) is an agreement or commitment by investors to purchase any Non-Recourse
Notes or Financing Contracts, or interests on participations therein, or an
agreement or commitment to sell any Non-Recourse
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Notes or Financing Contracts, or interests or participations therein (the
foregoing, collectively, "Material Contracts"). For purposes hereof, Material
Contracts shall not include Material Leases. True, complete and correct copies
of all Material Contracts have been made available to Purchaser.
(b) As of the date hereof, (i) there is not and, to Seller's
Knowledge, there has not been claimed or alleged by any Person, with respect to
any Material Contract, any existing default or event that, with notice or lapse
of time or both, would constitute a default or event of default on the part of
the Company or any Company Subsidiary or, to Seller's Knowledge, on the part of
any other party thereto, and (ii) no consent, approval, authorization or waiver
from, or notice to, any Governmental Entity or other Person is required in order
to maintain in full force and effect any of the Material Contracts, other than
such consents and waivers that have been obtained and are unconditional and in
full force and effect and such notices that have been duly given.
Section 4.14 Taxes.
(a) The Company and each Company Subsidiary has (A) duly and
timely filed with the appropriate governmental authorities all Tax Returns
required to be filed by it, and such Tax Returns are true, correct and complete
in all material respects, and (B) duly and timely paid in full or made provision
for such payment in accordance with GAAP for the payment of all Taxes shown to
be due on such Tax Returns.
(b) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending or
proposed (in each case, in writing) with regard to any Taxes or Tax Returns of
the Company or any Company Subsidiary.
(c) There are no Liens for Taxes upon any property or assets of
the Company or any Company Subsidiary, except for Permitted Liens.
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(d) The federal income Tax Returns of or including the Company
or any Company Subsidiary have been examined by the Internal Revenue Service (or
the applicable statutes of limitation for the assessment of federal income Taxes
for such periods have expired) for all periods through the taxable year ended
1995 but excluding the taxable year 1994.
(e) There are no agreements in effect to extend (A) the time to
file any Tax Return of the Company or any Company Subsidiary, (B) the period of
limitations for the assessment or collection of any Taxes for which the Company
or any Company Subsidiary would be liable or (C) the time for the assessment of
any deficiency or adjustment for any year for the Company or any Company
Subsidiary.
(f) All deficiencies of Taxes asserted or proposed (in each
case, in writing) have been paid, adequate provision therefore has been made on
the Financial Statements or are being contested in good faith.
(g) The Company and each Company Subsidiary is a member of a
U.S. consolidated return filing group of which Seller is the common parent.
Section 4.15 Affiliated Party Transactions; Sensitive Payments. No
contracts or agreements in which the amount involved, either alone or together
with all similar items, exceeds $100,000 are in effect as of the date hereof
between the Company or any Company Subsidiary, on the one hand, and Seller or
its Affiliates, on the other hand. To the Knowledge of the Seller, none of the
Company, any Company Subsidiary, or any director, officer, employee or agent of
the Company or any Company Subsidiary has made, on behalf of the Company or any
Company Subsidiary, directly or indirectly, since January 1, 1993 any illegal
contribution, gift, bribe, rebate, payoff, kickback or other payment to any
Person, whether in money, property or services.
<PAGE>
Section 4.16 Environmental Matters. (a) The Company and each Company
Subsidiary is in material compliance with all applicable federal, state and
local laws governing pollution or the protection of human health or the
environment ("Environmental Laws"), (b) neither the Company nor any Company
Subsidiary has received any written notice with respect to the business or
operations of the Company or any Company Subsidiary or to any property owned or
leased by the Company or any Company Subsidiary from any Governmental Entity or
third party alleging that the Company or any Company Subsidiary is not in
material compliance with any Environmental Law, and (c) no Hazardous Substance,
as that term is defined in the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601 et seq., has been stored or
disposed of on any real property owned, leased or occupied by the Company or any
Company Subsidiary that is used in the business and operations of the Company
and the Company Subsidiaries, as currently conducted, except as permitted by or
in accordance with applicable law.
Section 4.17 No Brokers. Except for Piper Jaffray, Inc., whose fees
shall be borne solely by Seller, Seller has not employed any broker, finder or
similar agent or incurred any liability for any brokerage or investment banking
fees, commissions, finders' fees or other similar fees in connection with the
transactions contemplated by this Agreement.
Section 4.18 Receivables, Inventory and Payables. All accounts
receivable (including lease receivables), inventory and accounts payable of the
Company or any Company Subsidiary have arisen, and as of the Closing Date will
have arisen, from bona fide transactions in the ordinary course of business
consistent with past practice.
Section 4.19 Disclosure. For purposes of the representations and
warranties of Seller contained herein, disclosure in any Section of the Seller
Disclosure Letter or other document delivered pursuant to this Agreement of any
facts or circumstances shall be
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deemed to be adequate response and disclosure of such facts or circumstances
with respect to all representations or warranties by Seller calling for
disclosure of such information, whether or not such disclosure is specifically
associated with or purports to respond to one or more or all of such
representations or warranties. The inclusion of any information in any Section
of the Seller Disclosure Letter or other document delivered by Seller pursuant
to this Agreement shall not be deemed to be an admission or evidence of the
materiality of such item, nor shall it establish a standard of materiality for
any purpose whatsoever.
Section 4.20 Tangible Personal Property. Either the Company or a
Company Subsidiary is in possession of and has good and marketable title to, or
has valid leasehold interests in or valid rights under contract to use, all
tangible personal property used in the conduct of the Business as currently
conducted, including (a) all equipment reflected on the balance sheet included
in the Unaudited Financial Statements and (b) all equipment acquired by the
Company or such Company Subsidiary since September 30, 1998 (in each case other
than equipment disposed of since such date in the ordinary course of business
consistent with past practice or the terms of this Agreement). All such tangible
personal property is free and clear of all Liens, other than Permitted Liens,
and is adequate and suitable for the conduct by the Company and the Company
Subsidiaries of the Business presently conducted by them, and is in good working
order and condition, ordinary wear and tear excepted.
Section 4.21 Permits. Section 4.21 of the Seller Disclosure Letter
contains a true and complete list of all Permits used in and material to the
conduct of the Business, setting forth the issuing jurisdiction, the function
and (where applicable) the expiration date of each. Either the Company or a
Company Subsidiary owns or validly holds all Permits that are material to the
conduct of the Business. Each Permit listed in Section 4.21 of the Seller
Disclosure Letter is valid, binding and in full force and effect, and neither
the Company nor any Company Subsidiary is, or has received any notice that it
is, in default (or with the giving of notice or lapse of time or both, would be
in default) under any such Permit.
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Section 4.22 Insurance; No Casualty Events. Section 4.22 of the Seller
Disclosure Letter contains a true and complete list (including policy numbers)
of all liability, property, workers' compensation, directors' and officers'
liability and other insurance policies (including self-insurance programs, if
any) (the "Company Insurance Policies") currently in effect that insure the
business, operations, employees, officers or directors of the Company or any
Company Subsidiary or affect or relate to the ownership, use or operation of any
of the assets and properties of the Company or any Company Subsidiary. Each of
the Company Insurance Policies has been issued to the Company or a Subsidiary
thereof and the insurance coverage provided by the Company Insurance Policies
will not terminate or lapse by reason of the transactions contemplated by this
Agreement. Each of the Company Insurance Policies is valid and binding and in
full force and effect in all material respects, all premiums due thereunder have
been paid when due, and none of the Seller, the Company or any Company
Subsidiary has received any notice of cancellation or termination in respect of
any such policy.
Section 4.23 Employees; Labor Relations.
(a) (i) Neither the Company nor any Company Subsidiary is
engaged in any unfair labor practice, (ii) no unfair labor practice complaint is
pending or, to the Knowledge of the Seller, threatened against either the
Company or a Company Subsidiary before the National Labor Relations Board, (iii)
no grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is pending or, to the Knowledge of the Seller, threatened
against the Company or any Company Subsidiary, (iv) no strike, labor dispute,
slowdown or stoppage is pending or, to the Knowledge of the Seller, threatened
against the Company or any Company Subsidiary, (v) no union representation
question exists with respect to employees of the Company or any Company
Subsidiary and, to the Knowledge of the Seller, no union organizing activities
are taking place with respect to any such employees or have taken place within
the last three years, and (vi) neither the Company nor any Company Subsidiary is
a party to, or has any obligation under, any collective bargaining agreement or
other labor union contract, white paper or side agreement with any labor union
or organization, or has any obligation to recognize or deal with any labor union
or organization.
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(b) The Company and each Company Subsidiary has at all times
since January 1, 1995 been in material compliance with all applicable laws
relating to employment, wages, hours, compensation, benefits, occupational
health and safety, and payment and withholding of taxes in connection with
employment. Each of the Company and the Company Subsidiaries has withheld all
amounts required by law or agreement to be withheld by it from wages, salaries
and commissions, and neither the Company nor any Company Subsidiary is liable
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing. As of the date hereof, there are no actions or proceedings
pending or, to the Knowledge of the Seller, threatened against the Company or
any Company Subsidiary before any Governmental Entity involving or relating to
any past or present employee or applicant for employment of the Company or any
Company Subsidiary, or relating to any acts, omissions or practices of the
Company or any Company Subsidiary relating to employment, wages, hours,
compensation or benefits. Neither the Company nor any Company Subsidiary is
party to or bound by any order of any kind respecting the employment, wages,
hours, compensation or benefits of any employees or prospective employees of the
Company or any Company Subsidiary.
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(c) Section 4.23 of the Seller Disclosure Letter sets forth
the name and current annual rate of compensation (including bonuses) paid by the
Company and each Company Subsidiary to each officer or employee of the Company
and each director, officer and employee of any Company Subsidiary.
Section 4.24 Registration Rights. None of the Seller, the Company or
any Company Subsidiary has granted registration rights to any holder of any of
the securities of the Company or any Company Subsidiary.
Section 4.25 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of the Purchaser set forth in Section 5.7 hereof are true and correct in all
material respects, the offer and sale of the Shares made pursuant to this
Agreement is exempt from the registration requirements of the Securities Act.
None of the Seller, the Company, the Company Subsidiaries or any Person
authorized to act on behalf of any of them has, in connection with the offering
of the Shares, engaged in (a) any form of general solicitation or general
advertising (as those terms are used in Rule 502(c) under the Securities Act),
(b) any action involving a "public offering" within the meaning of Section 4(2)
of the Securities Act, or (c) any action that would require the registration
under the Securities Act of the offering and sale of the Shares pursuant to this
Agreement or that would violate applicable state securities or "blue sky" laws.
None of the Seller, the Company, the Company Subsidiaries or any Person
authorized to act on behalf of any of them has made, directly or indirectly, any
offer or sale of any of the Shares or of securities of the same or a similar
class as the Shares that could cause the offer and sale of the Shares
contemplated hereby to fail to be entitled to exemption from the registration
requirements of the Securities Act. As used herein, the terms "offer" and "sale"
have the meanings specified in Section 2(3) of the Securities Act.
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Section 4.26 Financing Contracts.
(a) Section 4.26 of the Seller Disclosure Letter includes a
list of each Financing Contract as of the date hereof. All Financing Records
relating to the Financing Contracts, including any Credit Enhancements with
respect thereto, have been furnished or made available for inspection by
Purchaser. The Company or a Company Subsidiary has in its possession (i) an
executed original or a true, correct and complete copy of any lease, note or
chattel paper relating to each Financing Contract, (ii) an executed original or
a true, correct and complete copy of all other documents relating to each such
Financing Contract and each Credit Enhancement relating thereto and (iii) all
other documents reasonably necessary to enforce such Financing Contracts and
Credit Enhancements or perfect the security interest thereunder.
(b) Each Financing Contract, and each Credit Enhancement
relating thereto, is valid, binding and enforceable by the Company or the
appropriate Company Subsidiary against the lessee, obligor or borrower
thereunder in accordance with its written terms, except as may be limited by the
Bankruptcy Exception, and (ii) arose out of a bona fide business transaction
entered into in the ordinary course of business; provided, however, that Seller
makes no representation or warranty with respect to the ability of the obligor
under any Financing Contract or Credit Enhancement to discharge its payment
obligations thereunder.
(c) (i) There are no payments under any Financing Contract
that are more than 90 days past due as of December 1, 1998, (ii) the Company or
the appropriate Company Subsidiary is not in breach or default of any of its
material obligations under any Financing Contract or Credit Enhancement related
thereto and (iii) neither the Company nor any Company Subsidiary has received
any notice of (A) any event other than a payment default which is, or with
notice and/or lapse of time would constitute, a material default under any
Financing Contract or Credit Enhancement related thereto by any other party
thereto or (B) any claim that any obligation to the Company or the appropriate
Company Subsidiary under any Financing Contract or Credit Enhancement related
thereto is subject to any defense, offset, claim, right of rescission or
counterclaim of any party.
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Section 4.27 Accurate and Complete Disclosure. The written information
furnished to Purchaser by employees of the Company in connection with its
investigation of the Company and the Company Subsidiaries, whether before or
after the date of this Agreement, is true and correct in all material respects,
and no representation or warranty of Seller contained herein contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
Section 5.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so existing and in good standing or to
have such power and authority would not in the aggregate have a Purchaser
Material Adverse Effect. Purchaser is qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified, licensed and in
good standing, to have such power and authority or to be so qualified or
licensed would not have a Purchaser Material Adverse Effect. Purchaser has
heretofore delivered to Seller complete and correct copies of its Certificate of
Incorporation and Bylaws, in each case, as currently in effect.
Section 5.2 Authorization: Validity of Agreement. Purchaser has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Purchaser of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Purchaser, and no other corporate proceedings on the
part of Purchaser are necessary to authorize the execution, delivery and
performance of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and, assuming due authorization, execution and delivery
of this Agreement by Seller, is a valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms, except as such
enforceability may be subject to or limited by the Bankruptcy Exception.
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Section 5.3 No Violations; Consents and Approvals.
(a) The execution, delivery or performance of this Agreement
by Purchaser does not, and the consummation by Purchaser of the transactions
contemplated hereby will not, (i) violate any provision of the Certificate of
Incorporation or Bylaws of Purchaser, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, license, contract,
agreement or other instrument to which Purchaser is a party or by which
Purchaser or any of its properties or assets may be bound or otherwise subject
or (iii) violate any order, writ, judgment, injunction, decree, law, statute,
rule or regulation applicable to Purchaser, or any of its properties or assets,
except in the case of clauses (ii) and (iii) for violations, breaches or
defaults that would not have a Purchaser Material Adverse Effect.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement by
Purchaser or the consummation by Purchaser of the transactions contemplated
hereby, except for (i) filings with the FTC and with the DOJ pursuant to the HSR
Act and (ii) such other consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings the failure of which to
be obtained or made would not have a Purchaser Material Adverse Effect.
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Section 5.4 Litigation; Compliance with Law. There is no action, suit
or proceeding pending or, to the Knowledge of Purchaser, any investigation
pending or, to the Knowledge of Purchaser, any action, suit or proceeding
threatened, that in any way involves or affects Purchaser, by or before any
court, Governmental Entity or arbitration panel or any other Person that would
have a Purchaser Material Adverse Effect. The business and operations of
Purchaser are not being conducted in violation of any applicable law, ordinance,
rule, regulation, decree or order of any court or Governmental Entity except for
violations that, individually or in the aggregate, would not have a Purchaser
Material Adverse Effect.
Section 5.5 No Brokers. Purchaser has not employed any broker, finder
or similar agent or incurred any liability for any brokerage or investment
banking fees, commissions, finders' fees or other similar fees in connection
with any of the transactions contemplated by this Agreement.
Section 5.6 Investigation by Purchaser. Purchaser has conducted its
own independent review and analysis of the businesses, assets, condition,
operations and prospects of the Company and the Company Subsidiaries and
acknowledges that Purchaser has been provided access to the properties, premises
and records of the Company and each Company Subsidiary for this purpose. In
entering into this Agreement, Purchaser has relied upon its own investigation
and analysis, and Purchaser agrees, to the fullest extent permitted by law, that
none of Seller or its Subsidiaries, or any of their respective directors,
officers, employees, affiliates, controlling persons, agents or representatives,
will have any liability or responsibility whatsoever to Purchaser, its
directors, officers, employees, affiliates, controlling persons, agents or
representatives on any basis (including in contract or tort, under federal or
state securities laws or otherwise) based upon any information provided or made
available, or statements made, to Purchaser or its directors, officers,
employees, affiliates, controlling persons, agents or representatives (or any
omissions therefrom) except as and only to the extent expressly set forth in the
representations, warranties, covenants and agreements of Seller contained herein
and pursuant to the rights to indemnification by Seller provided for herein,
subject in each case to the limitations and restrictions contained herein and in
the Seller Disclosure Letter.
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Section 5.7 Investment Intent. Following the Closing, the Shares shall
not be transferred by Purchaser except in a transaction registered or exempt
from registration under the Securities Act.
ARTICLE VI
COVENANTS
Section 6.1 Conduct of the Business by the Company Pending the Closing.
During the period from the date hereof to the Closing, unless Purchaser will
otherwise agree in writing, except as required by applicable law or as otherwise
contemplated by this Agreement, Seller shall cause the Company and each Company
Subsidiary to conduct its respective business in the ordinary course and
consistent with past practice. Without limiting the generality of and in
addition to the foregoing, and except as set forth in the Seller Disclosure
Letter or as otherwise provided in this Agreement, prior to the Closing, Seller
shall cause the Company and each Company Subsidiary not to, without the prior
written consent of Purchaser (which consent shall not be unreasonably withheld
or delayed): (a) amend its Certificate of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock or redeem or otherwise acquire any of its securities;
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(d) (i) incur or assume any material long-term debt or, except
in the ordinary course of business under existing lines of credit, incur or
assume any material short-term debt; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for any material obligations of any other Person; or (iii) make any
material loans, advances or capital contributions to, or investments in, any
other Person (other than customary loans or advances to employees in accordance
with past practices);
(e) enter into, adopt or (except as otherwise required by law
or existing contract disclosed in the Seller Disclosure Letter) materially amend
or terminate any Benefit Arrangement or (except for normal increases in the
ordinary course of business that are consistent with past practice) increase in
any manner the compensation or fringe benefits of any Company Employee or pay
any benefit not required by any existing Benefit Arrangement;
(f) acquire, sell, lease, transfer or dispose of any of its
properties or assets except in the ordinary course of business and consistent
with past practice or any of its properties or assets that are material,
individually or in the aggregate, to the business or operations of the Company
or any Company Subsidiary or enter into any material commitment or transaction
except in the ordinary course of business and consistent with past practice;
(g) modify any policy or procedure with respect to credit to
customers or collection of receivables;
(h) pay, discharge or satisfy before it is due any material
claim or liability of the Company or any Company Subsidiary, or fail to pay any
such item in a timely manner given the Company's or any Company Subsidiary's
prior practices;
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(i) cancel any material debts or waive any claims or rights of
substantial value;
(j) except to the extent required by applicable law or as is
customary in the ordinary course of business, change any accounting principle or
method or make any election for foreign, federal, state or local Income Tax
purposes;
(k) take or suffer any action that would result in the
creation, or consent to the imposition, of any Lien on any of the properties or
assets of the Company or any Company Subsidiary;
(l) make any capital expenditure or commitment for additions
to property, plant, equipment or other capital assets in excess of $30,000;
(m) except in the ordinary course of business consistent with
past practice, amend, waive, surrender or terminate or agree to the amendment,
waiver, surrender or termination of any Material Contract, Material Lease or
Approval;
(n) except in the ordinary course of business consistent with
past practice, exercise any right or option under any Lease or extend or renew
any Material Contract or Material Lease; or
(o) take, or agree in writing or otherwise to take or consent
to, any of the foregoing actions.
Section 6.2 Access to Information.
(a) Between the date of this Agreement and the Closing, during
normal business hours, Seller shall give Purchaser and its authorized
representatives reasonable access to all offices and other facilities and to all
books and records of Seller with respect to the Company and each Company
Subsidiary, and the Company will permit Purchaser to make such
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inspections as it may reasonably require and will cause its officers and those
of each Company Subsidiary to furnish Purchaser with such financial and
operating data and other information as Purchaser may from time to time
reasonably request. Purchaser and its authorized representatives will conduct
all such inspections in a manner which will minimize any disruptions of the
business and operations of the Company or any Company Subsidiary.
(b) Purchaser and Seller agree that the provisions of the
confidentiality agreement between Seller and Purchaser, dated August 27, 1998
(the "Confidentiality Agreement") shall remain binding and in full force and
effect until the Closing, that the information contained herein, in the Seller
Disclosure Letter and provided to Purchaser or its authorized representatives
pursuant hereto shall be subject to the Confidentiality Agreement as
"Information" (as defined therein) until the Closing and that, for that purpose
and to that extent, the terms of the Confidentiality Agreement are incorporated
herein by reference.
(c) Following the Closing, Purchaser shall cause the Company
and each Company Subsidiary to provide to Seller, in a timely manner and at the
Company's expense, such financial and other information as the Seller may
reasonably require in order to account properly for the financial results and
operations of the Company and each Company Subsidiary prior to the Closing.
(d) Following the Closing and for so long as Purchaser's
obligations under Section 6.17 are in effect, Purchaser shall give Seller and
its authorized representatives, during normal business hours, reasonable access
to all books and records of Seller with respect to the Company and each Company
Subsidiary, and the Company will permit Seller and its authorized
representatives to make such inspections as it may reasonably require and will
cause its officers and those of each Company Subsidiary to furnish Seller with
such financial and operating data and other information as Seller may from time
to time reasonably request, in each case in order to permit Seller to account
for any obligation it may owe to Purchaser, or Purchaser may owe to it, pursuant
hereto. Purchaser and its authorized representatives will conduct all such
inspections in a manner which will minimize any disruptions of the business and
operations of the Company or any Company Subsidiary.
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(e) Unless otherwise consented to in writing by Seller, at no
time after the Closing shall Purchaser cause or permit the Company or any
Company Subsidiary to destroy or otherwise dispose of any of its respective
books and records that (i) exist as of the Closing and (ii) are less than five
years old at the time of such destruction or disposition.
Section 6.3 Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Section 6.4 Consents. Seller and Purchaser shall cooperate, and use
their respective best efforts, in as timely a manner as is reasonably
practicable, to make all filings with, and obtain all licenses, Permits,
consents, approvals, authorizations, qualifications and orders from, all
Governmental Entities and other Persons necessary or required to be obtained for
Purchaser and Seller, as applicable, to consummate the transactions contemplated
by this Agreement (collectively, the "Consents"). Each of the parties hereto
shall furnish to the other party such necessary information and reasonable
assistance as such other Persons may reasonably request in connection with the
foregoing and shall provide the other party with (i) copies of all filings made
by such party with any Governmental Entity or other Person or any other
information supplied by such party in connection with this Agreement and the
transactions contemplated hereby and (ii) all consents obtained from any third
party to any Contract or any Material Lease and any Approval with respect to any
Material Leased Real Property and the Owned Real Property.
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Section 6.5 HSR Filings.
(a) In addition to and without limiting the agreements of the
parties contained in Section 6.4, Seller and Purchaser shall (i) take promptly
all actions necessary to make the filings required of them or any of their
Affiliates under the HSR Act and seek early termination of the waiting period
thereunder, (ii) comply at the earliest practicable date with any request for
additional information or documentary material received by Seller or Purchaser,
as applicable, or any of their Affiliates from the FTC or DOJ pursuant to the
HSR Act, (iii) cooperate with each other in connection with any filing under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement commenced by the FTC,
DOJ or any attorney general and (iv) use all reasonable commercial efforts to
resolve such objections, if any, as may be asserted under any Antitrust Law with
respect to the transactions contemplated by this Agreement.
(b) Each of Seller and Purchaser shall promptly inform the
other party of any material communication received by such party from the FTC,
DOJ or any other Governmental Entity regarding any of the transactions
contemplated hereby, and of any understandings, undertakings or agreements (oral
or written) that such party proposes to make or enter into with the FTC, DOJ or
any other Governmental Entity in connection with the transactions contemplated
hereby.
(c) Seller and Purchaser shall each pay one-half of the HSR
filing fee at the time of filing.
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Section 6.6 Public Announcements. Purchaser and Seller shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law.
Section 6.7 Employee Receivables and Payables. Seller shall ensure
that (a) any receivable due to the Company or any Company Subsidiary from any
employee of the Company will be paid in full on or before the Closing Date and
(b) any payable due from the Company or any Company Subsidiary to any employee
of the Company, excluding such payables as become payable in the ordinary course
of business, will be waived or paid on or before the Closing Date.
Section 6.8 Employee Benefits. Each employee of the Company or any
Company Subsidiary as of the Closing Date (an "Existing Employee") who continues
as an employee of the Company or a Company Subsidiary shall be entitled to
participate in all Purchaser Plans. For purposes of determining the level of
benefits to which an Existing Employee is entitled and the vesting of such
benefits, all years (or any portion thereof) of service of such Existing
Employee while in the employ of the Company or a Company Subsidiary shall be
counted.
Section 6.9 Notification of Certain Matters.
(a) Subject to Section 6.9(b), Seller shall give prompt notice
to Purchaser, and Purchaser shall give prompt notice to Seller, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would cause any representation or warranty contained in this Agreement
(including the Seller Disclosure Letter) to be untrue or inaccurate in any
material respect at the Closing and (ii) any material failure of the Seller or
Purchaser, as the case may be, to comply with or satisfy any covenant, warranty,
obligation, condition or agreement to be observed, complied with or satisfied by
it hereunder.
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(b) Seller may from time to time prior to or on the Closing
Date by notice in accordance with this Agreement supplement or amend the Seller
Disclosure Letter, including one or more supplements or amendments to correct
any matter that would otherwise constitute a breach of any representation,
warranty or covenant contained herein. If a supplement or amendment of any
section of the Seller Disclosure Letter materially and adversely affects the
benefits to be obtained by Purchaser under this Agreement, then Purchaser shall
have the right to terminate this Agreement with such termination being
Purchaser's sole remedy relating to matters set forth in amendments to
supplements to any section of the Seller Disclosure Letter. Notwithstanding any
other provision hereof, the Seller Disclosure Letter and the representations and
warranties made by the Seller shall be deemed to include and reflect such
supplements and amendments as of the date hereof and as of the Closing Date.
Section 6.10 Tax Matters.
(a) With respect to the Company and the Company Subsidiaries,
Seller and Purchaser shall jointly make the election provided for by Section
338(h)(10) of the Code and Section 1.338(h)(10)-1 of the Treasury Regulations
and any comparable election under state or local tax law (the "Election"). As
soon as practicable after the Closing, with respect to such Election, Seller and
Purchaser shall mutually prepare a Form 8023-A, with all attachments, and Seller
and Purchaser shall sign such Form 8023-A. Purchaser and Seller shall cooperate
with each other to take all actions necessary and appropriate (including filing
such additional forms, returns, elections, schedules and other documents as may
be required to effect and preserve timely the Election in accordance with the
provisions of Section 1.338(h)(10)-1 of the Treasury Regulations (or any
comparable provisions of state or local tax law) or any successor provisions).
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(b) With respect to the Election, Purchaser and Seller shall
agree upon the modified Aggregate Deemed Sales Price (the "modified ADSP") and
allocate the modified ADSP among the assets of the Company pursuant to Treasury
Regulation 1.338(h)(10)-1. Purchaser shall provide to Seller a schedule and
supporting material reflecting such allocation. The parties shall take no action
inconsistent with, or fail to take any action necessary for the validity of, the
Election, and shall adopt and utilize the asset values determined from such
allocation for the purpose of all Tax Returns filed by them, and shall not
voluntarily take any position inconsistent therewith upon examination of any
Return, in any refund claim, in any litigation or otherwise with respect to such
Returns.
(c) Seller and Purchaser shall and shall cause their
respective Affiliates to provide the requesting party with such assistance and
documents as may be reasonably requested by such party in connection with (i)
the preparation of any Tax Returns of the Company, (ii) the conduct of any Tax
Audit relating to liability for or refunds or adjustments with respect to Taxes,
and (iii) any other Tax-related matter that is a subject of this Agreement.
(d) (i) For purposes of this Agreement, (x) the amount of
Taxes attributable to the pre-closing portion of a Straddle Period shall be
determined based on an interim closing of the books as of the close of the
Closing Date, except that the amount of any such Taxes that are imposed on a
periodic basis shall be determined by reference to the relative number of days
in the pre-closing and post-closing portions of such Straddle Period and (y) the
taxable year of any partnership or other pass-through entity in which the
Company is partner or other beneficial interest holder shall be deemed to
terminate on the Closing Date.
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(ii) Purchaser shall cause the Company to join, for
all Pre-Closing Periods for which the Company is required or eligible to do so,
in all consolidated, combined or unitary federal, state or local Income Tax or
franchise Tax Returns of Seller (or any Tax Affiliate) for all Pre-Closing
Periods, and shall, in each jurisdiction where this is required or permissible
under applicable law, cause the taxable year of the Company to terminate as of
the close of the Closing Date. Seller shall cause to be prepared and timely
filed all Tax Returns relating to Pre-Closing Periods ("Seller Tax Returns") and
shall cause to be timely paid all Taxes shown to be due on such Seller Tax
Returns.
(iii) Purchaser shall cause to be prepared and timely
filed all Income Tax Returns of the Company other than those referred to in
Sections 6.10(d)(ii) and all other Tax Returns of the Company required to be
filed for the Straddle Period.
(iv) The Tax Returns referred to in Section
6.10(d)(ii) and (iii) shall be prepared in a manner consistent with past
practice, unless a contrary treatment is required by an intervening change in
applicable law. Purchaser shall cause each such Tax Return that covers any
Straddle Period, together with all relevant work papers and other information,
to be made available to Seller for its review and approval no later than 30 days
prior to the due date for the filing of such Tax Return (taking into account
proper extensions).
(e) (i) Without duplication, Seller shall indemnify, defend
and hold the Purchaser Indemnified Persons harmless from and against any and all
Damages that may be suffered or incurred by them in respect of or relating to,
directly or indirectly (i) Taxes of or attributable to the Company with respect
to all Pre-Closing Periods, (ii) Taxes of or attributable to the Company with
respect to the pre-closing portion of any Straddle Period, (iii) Taxes payable
by the Company with respect to any Pre-Closing Period or Straddle Period by
reason of the Company being severally liable for the Tax of any Tax Affiliate
pursuant to
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Treasury Regulation Section 1.1502-6 or any analogous state or local Tax law,
and (iv) any liability for Taxes attributed to breaches by Seller with respect
to its obligations under Sections 6.10(a) and 6.10(b); provided, however, that
payment pursuant to this Section 6.10(e)(i) shall be made by Seller only if, and
to the extent that, any Damages attributable to such Taxes exceed (x) the total
aggregate amount of Taxes accrued on the Closing Date Balance Sheet less (y) any
amounts paid to Seller pursuant to Section 6.10(d) (ii) of this Agreement; and
provided, further, that Damages shall not include, and the Purchaser shall not
be entitled to indemnification with respect to, any amounts paid to Seller
pursuant to Section 6.10(d)(ii) of this Agreement.
(ii) Without duplication, Purchaser shall indemnify,
defend and hold the Seller Indemnified Persons harmless from and against any and
all Damages that may be suffered or incurred by them in respect of or relating
to, directly or indirectly (i) Taxes of or attributable to the Company with
respect to all Post-Closing Periods, (ii) Taxes of or attributable to the
Company with respect to the post-Closing portion of any Straddle Period, and
(iii) any liability for Taxes attributable to breach by Purchaser with respect
to its obligations under Section 6.10(a) and 6.10(b).
(iii) Any payment required to be made pursuant to
this Section 6.10(e) shall be made within 15 Business Days after written request
therefor.
(f) (i) Each of Seller and Purchaser shall notify the other
party in writing within 30 days of receipt of written notice of any pending or
threatened examination, audit or other administrative or judicial proceeding (a
"Tax Audit") that could reasonably be expected to affect the liability for Taxes
of such other party pursuant to this Agreement. If the recipient of such notice
of a Tax Audit fails to provide such prompt notice to the other party, it shall
not be entitled to indemnification for any Taxes arising in connection with such
Tax Audit.
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(ii) If a Tax Audit relates to any period ending on or prior
to the Closing Date or for any Taxes for which the Seller is liable in full
hereunder, Seller shall at its expense control the defense and settlement of
such Tax Audit. If such Tax Audit relates to any period beginning after the
Closing Date or for any Taxes for which Purchaser is liable in full hereunder,
Purchaser shall at its expense control the defense and settlement of such Tax
Audit. The party not in control of the defense shall have the right to observe
the conduct of any Tax Audit at its own expense, including through its own
counsel and other professional experts. Purchaser and Seller shall jointly
represent the Company in any Tax Audit relating to a Straddle Period, and fees
and expenses related to such representation shall be paid by Purchaser and
Seller in proportion to each party's liability for such Taxes as determined
pursuant to this Agreement.
(g) In the event that a dispute arises between Seller and
Purchaser as to the amount of Taxes or indemnification or any other matter
relating to Taxes, the parties shall attempt in good faith to resolve such
dispute, and any agreed upon amount shall be paid to the appropriate party. If
such dispute is not resolved within 15 days, the parties shall submit the
dispute to the national office of the Designated Accounting Firm for resolution,
which resolution shall be final, conclusive and binding on the parties hereto.
Notwithstanding anything in this Agreement to the contrary, the fees and
expenses of the Settlement Accountants in resolving the dispute shall be borne
equally by Seller and the Buyer, other than fees and expenses relating to a
dispute as to the amount of the Taxes owed by either of the Parties with respect
to the Straddle Period Tax Return, in which case such fees and expenses shall be
paid by Seller and Purchaser in proportion to each party's respective liability
for Taxes as determined by the Settlement Accountants. Following the decision of
the Settlement Accountants, the parties shall each take or cause to be taken any
action that is necessary or appropriate to implement such decision of the
Settlement Accountants, including the prompt payment of underpayments or
overpayments, with interest calculated on such underpayments or overpayments at
the rate specified under Section 6621(a)(2) of the Code from the date that such
payment was due through the date such underpayment or overpayment is due or
refunded.
(h) Any Tax sharing agreement or contract between the Company
and any other Person shall be terminated on, and effective as of, the Closing
Date, and no Person shall have any rights or obligations under such Tax sharing
agreement or contract after such termination, and no such rights or obligations
shall be included in the Closing Date Balance Sheet.
(i) Purchaser shall be responsible for any and all sales or
use Taxes, real or personal property transfer Taxes, recording fees and charges
and all other similar charges and transfer Taxes imposed by any taxing authority
upon or by reason of the transactions to be effected pursuant to this Agreement.
(j) Any refunds or credits of Taxes of the Company plus any
interest received with respect thereto from the applicable taxing authorities
for any Pre-Closing Period (including refunds or credits arising from amended
returns filed after the Closing Date) shall be for the account of Seller and
shall be paid by Purchaser to Seller within 10 days after Purchaser receives
such refund or after the relevant Tax Return is filed in which the credit is
applied against Purchaser or the Company's liability for Taxes. Any refunds or
credits of Taxes of the Company for any Straddle Period shall be apportioned
between Seller and Purchaser in the same manner as the liability for such Taxes
is apportioned pursuant to Section 6.10(d)(i).
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(k) Notwithstanding anything to the contrary in this
Agreement, the covenants of the parties contained in this Section 6.10 shall
survive the Closing until the date 90 days after the expiration of any
applicable statute of limitations, including extensions.
Section 6.11 Seller Non-Competition and Non-Solicitation Covenants .
Seller agrees that, for a period of three years following the Closing, Seller
shall not, and Seller shall cause its Corporate Affiliates (it being understood
that for the purposes of this Section only that JLC shall be deemed to be the
ultimate parent of Seller) not to, directly or indirectly, (a) engage or
participate (other than for existing arrangements) as an owner, partner,
shareholder, joint venturer or in any other capacity calling for the making of
any investment or the rendering of any services or any acts of management,
operation or control in any business in the United States that is the same as,
similar to or competitive with the Business as it has been or is being conducted
as of the date hereof or (b) materially alter the Company's or any Company
Subsidiary's relationship with, take away or employ (or attempt to materially
alter the Company's or any Company Subsidiary's relationship with, solicit,
divert, take away or employ) any of the customers, business or employees
(excluding Mitsumasa Sakka and Ario Sato) of the Company or any Company
Subsidiary; provided, however, that during such three-year period neither Seller
nor any Corporate Affiliate of Seller shall employ Mitsumasa Sakka or Ario Sato
in the United States except with the Company's consent or pursuant to a
consulting agreement with the Company. Notwithstanding anything contained in the
foregoing sentence, nothing in this Section 6.11 shall, during such three-year
period or otherwise, prevent or otherwise limit (a) Seller or any Corporate
Affiliate of Seller from continuing to engage in cross-border leasing
transactions into the United States where such transactions involve one or more
items of equipment and each such item of equipment has a cost of $2,500,000 or
more, (b) Seller or any Corporate Affiliate of Seller from employing [outside
the United States] any former employee of the Company or any Company Subsidiary
whose employment has been terminated by the Company or such Company Subsidiary
without cause, or (c) any Person (including any of such Person's Affiliates)
that may, following the date hereof, control JLC from engaging in any of the
prohibited activities described herein.
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Section 6.12 Payment of Company Debt; Release of Guaranties.
(a) Purchaser agrees that prior to or at the Closing, it shall
(i) pay, or cause to be paid, to the Persons, including Affiliates of the
Company other than Seller, (collectively, the "Company Lenders") listed in
Section 6.12 of the Seller Disclosure Letter the amount necessary to discharge
and terminate the debt obligations of the Company to the Company Lenders and
(ii) shall secure, or cause to be secured, the release by the Company Lenders of
the guaranties and letters of awareness listed in Section 6.12 of the Seller
Disclosure Letter. Not less than five Business Days prior to the Closing Date,
Seller shall deliver, or cause to be delivered, to Purchaser copies of payoff
letters and waivers of payment of any interest at default rates, late payment
fees and Company Lender expenses from each of the Company Lenders.
(b) Purchaser agrees that, at the Closing, Purchaser shall
execute and deliver to Seller a promissory note in substantially the form of
Exhibit 6.12(b) (the "Promissory Note") in a principal amount equal to (i) the
amount necessary to discharge and terminate all outstanding indebtedness of the
Company or any Company Subsidiary to Seller as of the Closing, including
$3,500,000 in respect of federal and state income Tax liabilities of the Company
payable to Seller, less (ii) an amount equal to the book value of the
Securitized 90+ Contracts on a net investment basis as of the date that is two
Business Days prior to the Closing Date. Each of the parties hereto acknowledges
that, in determining the principal amount of the Promissory Note pursuant to
this Section 6.12(b), (i) the amount of $3,500,000 set forth in the foregoing
sentence shall account for the entire indebtedness of the Company to Seller in
respect of federal and state income Tax liabilities as of the Closing (it being
understood that such amount is in lieu of the actual net of (A) aggregate
federal and state income Tax benefits of the Company and (B) aggregate federal
and state income Tax liabilities of the Company, which aggregate benefits and
liabilities netted $3,774,326 at October 31, 1998, as disclosed in the October
Financial Statements) and (ii) the outstanding indebtedness of the Company and
the Company Subsidiaries to Seller as of the Closing will be reduced by the sum,
as set forth on Schedule A of the Assignment, of the book values (on a net
investment basis) of the Financing Contracts set forth on Schedule A of the
Assignment. In connection with the foregoing, each of the parties hereto further
acknowledges that no amounts received by the Company following the date hereof
in respect of any income Tax refund from the State of California shall be deemed
an indebtedness of the Company or any Company Subsidiary to Seller and,
accordingly, shall not be payable to Seller pursuant hereto. For purposes of
determining the principal amount of the Promissory Note pursuant to this Section
6.12(b), not less than one Business Day prior to the Closing Date, Seller shall
deliver, or cause to be delivered, to Purchaser (i) a statement of all
outstanding indebtedness of the Company or any Company Subsidiary to Seller as
of the Closing (without giving effect to any of the transactions contemplated
hereby to occur on the Closing Date), (ii) Schedule A to the Assignment,
including a statement of the book value (on a net investment basis) of each
Financing Contract set forth thereon as of the date that is two Business Days
prior to the Closing Date, and (iii) a separate schedule setting forth a list of
the Securitized 90+ Contracts, including a statement of the book value (on a net
investment basis) of each such contract as of the date that is two Business Days
prior to the Closing Date.
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Section 6.13 Powers of Attorney; Accounts. Seller shall cause to be
prepared and provided to Purchaser at least seven Business Days prior to the
Closing Date a schedule setting forth a list of the names and addresses of all
persons holding a power-of-attorney on behalf of the Company or any Company
Subsidiary, the names and addresses of all banks or other financial institutions
at which the Company or any Company Subsidiary has any account, deposit, lockbox
or safe-deposit box, with the names of all persons authorized to draw on such
accounts or deposits or to have access to such boxes and the account or other
box numbers thereof. Seller shall, on or before the Closing Date, take all
actions reasonably necessary to remove those persons who are signatories or
holders of powers-of-attorney in respect of any such accounts, deposits,
lockboxes or safe-deposit boxes (except such as shall be specified in writing by
Purchaser) and otherwise to extinguish their signing authority or access with
respect thereto. To the extent requested in writing by Purchaser at least five
Business Days prior to the Closing Date, Seller shall, on or before the Closing
Date, (i) terminate any and all arrangements pursuant to which the Company's and
the Company Subsidiaries' funds or receipts are swept into or otherwise
transferred into any bank account or other deposit account maintained by or
under the control of Seller or any of its affiliates, (ii) use its reasonable
best efforts to transfer and close any deposit accounts relating to lockboxes
maintained by the Company or any Company Subsidiary and (iii) take all actions
necessary to terminate any other powers-of-attorney made by the Company and any
Company Subsidiary in favor of any person.
Section 6.14 Inquiries and Negotiations.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, prior to receipt from Purchaser of a copy of the Commitment Letter,
Seller shall be entitled to (i) continue existing, and solicit and initiate new,
activities, discussions and negotiations with
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any Person in respect of the acquisition of all or any substantial part of the
business and properties of the Company and the Company Subsidiaries, whether by
sale of assets or the Shares, or by merger, consolidation, recapitalization,
liquidation or similar transaction (each, an "Acquisition Transaction") and (ii)
accept an offer for an Acquisition Transaction and enter into a definitive
agreement in respect thereof. Notwithstanding anything to the contrary set forth
in this Agreement, prior to receipt from Purchaser of a copy of the Commitment
Letter, (i) Seller, and Seller's officers, employees, representatives and
agents, shall be permitted, directly and indirectly, to (A) solicit and initiate
discussions and negotiations with, and provide any non-public information to,
any Person concerning an Acquisition Transaction, and (B) otherwise solicit,
initiate and encourage inquiries and the submission of any proposal
contemplating an Acquisition Transaction and (ii) Seller shall be under no
obligation to communicate to Purchaser the terms of any inquiry or proposal that
it may receive in respect of an Acquisition Transaction. The parties hereto
hereby acknowledge that (i) at any time prior to Seller's receipt from Purchaser
of a copy of the Commitment Letter, Seller shall be entitled to terminate this
Agreement by paying to Purchaser Two Million Dollars as liquidated damages and
(ii) upon the making of such liquidated damages payment, this Agreement shall be
deemed automatically terminated, null and void and without further force or
effect..
(b) Upon receipt from Purchaser of a copy of the Commitment
Letter, Seller shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Person conducted theretofore in
respect of any and all Acquisition Transactions. Following receipt from
Purchaser of a copy of the Commitment Letter, Seller shall not, and shall not
permit its officers, employees, representatives or agents to, directly or
indirectly, (i) solicit or initiate discussions or negotiations with, or provide
any non-public
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information to, any Person other than Purchaser or its Affiliates concerning an
Acquisition Transaction, or (ii) otherwise solicit, initiate or encourage
inquiries or the submission of any proposal contemplating an Acquisition
Transaction. Following receipt from Purchaser of a copy of the Commitment
Letter, Seller shall promptly communicate to Purchaser the terms of any inquiry
or proposal that it may receive in respect of an Acquisition Transaction, or has
received or solicited, directly or indirectly, after the date of such receipt.
Seller's notification under this Section 6.14(b) shall include the identity of
the Person making such proposal or any other such information with respect
thereto as Purchaser may reasonably request. Nothing contained in this Agreement
shall be construed to prohibit Seller, following receipt from Purchaser of a
copy of the Commitment Letter, from (i) if advised in writing by counsel to be
required by fiduciary obligations under applicable law, providing non-public
information to, and participating in negotiations with, a Person who has made a
bona fide offer to effect an Acquisition Transaction for a purchase price in
excess of the Purchase Price and payment of all amounts required by Section 6.12
and (ii) accepting an offer for an Acquisition Transaction which the Board of
Directors of Seller, on the advice in writing of its financial advisor, believes
is more favorable to the Seller than the transaction contemplated hereby. If an
offer for an Acquisition Transaction is accepted pursuant to clause (ii) of the
immediately preceding sentence, Seller shall immediately upon acceptance of such
offer pay to Purchaser Four Million Dollars as liquidated damages. The parties
hereto hereby acknowledge that, upon the making of such liquidated damages
payment, this Agreement shall be deemed automatically terminated, null and void
and without further force or effect. THE PARTIES HEREBY ACKNOWLEDGE THAT THE
EXTENT OF DAMAGES TO PURCHASER OCCASIONED BY THE FAILURE OF THIS TRANSACTION TO
BE CONSUMMATED FOLLOWING DELIVERY OF A COPY OF THE COMMITMENT LETTER BY
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PURCHASER TO SELLER WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND
THAT FOUR MILLION DOLLARS IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES
UNDER THE CIRCUMSTANCES AND DOES NOT CONSTITUTE A PENALTY.
Section 6.15 Delivery of November Financial Statements and December
Financial Statements . Seller hereby agrees to deliver to Purchaser promptly
upon completion, and in any event not later than December 15, 1998 and January
15, 1999, respectively, copies of the November Financial Statements and the
December Financial Statements.
Section 6.16 Employee Bonuses.
(a) Seller agrees to pay to the Company at the Closing (i) all
amounts (the "Change-in-Control Amounts") required to be placed into escrow
pursuant to Section 6 of the Employment Agreements in view of the Change in
Control to be constituted by the consummation of the transactions contemplated
by this Agreement and (ii) an amount equal to the sum of the escrow agent fees
expressly set forth in Paragraph 18 of each of the Employee Escrow Agreements.
In addition, at the Closing, Seller shall cause the Company to (i) execute and
deliver each of the Employee Escrow Agreements and (ii) deposit into escrow in
accordance with the terms of each such agreement the applicable
Change-in-Control Amount. Following the Closing, Seller shall reimburse the
Company, promptly following receipt of copies of invoices of the Escrow Agent
(as defined in the Employee Escrow Agreements) reasonably satisfactory to
Seller, for all reasonable out-of-pocket expenses incurred by the Escrow Agent
in performing its duties under the Employee Escrow Agreements. Any amounts in
respect of such out-of-pocket expenses incurred by the Escrow Agent not paid by
Seller within ten days following receipt of such invoices shall be paid by the
Purchaser and shall be deducted from the principal amount payable under the
Promissory Note.
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(b) Following the Closing, Purchaser shall cause the Company
to honor the terms of each of the Employment Agreements.
(c) Seller agrees to pay when due any "retention" bonuses that
may become due to any Existing Employees resulting from any agreement or promise
existing prior to the Closing. Any amounts due but not paid by Seller within ten
days following the applicable due date shall be paid by Purchaser and shall be
deducted from the principal amount payable under the Promissory Note.
Section 6.17 Collection of Certain Receivables and Partial Remittance.
(a) Following the Closing, Purchaser shall cause the Company
(i) to use its reasonable best efforts consistent with its own practices at that
time to recover all amounts due under the Financing Contracts transferred to
Seller pursuant to the Assignment and (ii) to remit to Seller, within 15 days
following the end of each calendar quarter to an account to be designated by
Seller, 85% of all payments received under or arising out of such Financing
Contracts during the immediately preceding calendar quarter, whether as
contractual obligations, damages, insurance proceeds, condemnation awards or
otherwise.
(b) Following the Closing, Purchaser shall cause the Company
and the Company Subsidiaries (i) to use their reasonable best efforts consistent
with their own practices at that time to recover all amounts due under the
Securitized 90+ Contracts and (ii) to remit to Seller, within 15 days following
the end of each calendar quarter to an account to be designated by Seller, 85%
of all payments received under or arising out of the Securitized 90+ Contracts
during the immediately preceding calendar quarter, whether as contractual
obligations, damages, insurance proceeds, condemnation awards or otherwise.
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(c) Seller agrees to pay the reasonable costs and expenses of
the Company in carrying out the collection activities provided for in Sections
6.17(a) and 6.17(b).
Section 6.18 Assignment. Immediately prior to the Closing, Seller
shall (a) cause the Company to execute and deliver the Assignment to Seller and
(b) on behalf of itself, execute and deliver the Assignment to the Company.
Section 6.19 Commitment Letter; Certain Termination Rights.
(a) Purchaser agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to have sufficient funds available, in
cash and pursuant to a firm commitment letter to be issued by First Union
Capital Markets, Inc. (the "Commitment Letter"), to purchase all the Shares for
the Purchase Price, to pay all amounts required pursuant to Section 6.12, and to
perform all of its obligations hereunder. Purchaser agrees to use its reasonable
best efforts to obtain the Commitment Letter, and to cause a copy thereof to be
delivered to Seller, on or before December 31, 1998 (the "Commitment Letter Due
Date").
(b) If Purchaser fails to obtain the Commitment Letter on or
before the Commitment Letter Due Date, Purchaser shall thereafter have the right
to terminate this Agreement at any time on or before the date (the "Section
6.19(b) Last Termination Date") that is two Business Days following the
Commitment Letter Due Date.
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(c) If Purchaser fails to deliver the Commitment Letter to
Seller on or before the Commitment Letter Due Date and elects not to terminate
this Agreement pursuant to Section 6.19(b) on or before the Section 6.19(b) Last
Termination Date, Seller shall thereafter have the right to terminate this
Agreement at any time on or before the date that is two Business Days following
the Section 6.19(b) Last Termination Date.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Seller's Obligations. The obligations of
Seller to consummate the transactions contemplated hereby are subject to the
satisfaction or waiver by Seller, at or prior to the Closing, of the following
conditions:
(a) The representations and warranties of Purchaser contained
in this Agreement will be true and correct in all respects (without reference to
any materiality qualifications contained therein) as of the date made and as of
the Closing Date as if made on and as of the Closing Date (except to the extent
that any representation or warranty is made expressly as of a specific date, in
which case such representation or warranty will be true and correct as of such
specified date) unless the failure of such representations of warranties to be
true and correct as of any of such dates would not in the aggregate have a
Purchaser Material Adverse Effect;
(b) Purchaser will have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof, including without limitation, payment
of the amounts necessary under Section 6.12 hereof;
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(c) Seller will have received a certificate of the President
or the Chief Financial Officer of Purchaser as to the satisfaction of the
conditions set forth in Section 7.1(a) and (b);
(d) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act will have expired or been
terminated;
(e) There will be no order, decree or injunction of a court of
competent jurisdiction or other governmental entity that prevents the
consummation of the transactions contemplated by this Agreement;
(f) Seller will have received Purchaser's Closing Documents in
form and substance reasonably satisfactory to Seller and its counsel;
(g) Seller will have received the Consents set forth in
Exhibit 7.1(g);
(h) The Escrow Agreement will have been executed and delivered
by Purchaser to Seller;
(i) Each of the Promissory Note and the Security Agreement
will have been executed and delivered by Purchaser to Seller; and
(j) The Assignment will have been executed and delivered by
Seller and the Company.
Section 7.2 Conditions to Purchaser's Obligations. The obligations of
Purchaser to consummate the transactions contemplated hereby are subject to the
satisfaction or waiver by Purchaser, at or prior to the Closing, of the
following conditions:
(a) The representations and warranties of Seller contained in
this Agreement will be true and correct in all respects (without reference to
any materiality qualifications contained therein) as of the date made and as of
the Closing Date as if made on and as of the Closing Date (except to the extent
that any representation or warranty is made expressly
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as of a specific date, in which case such representation or warranty will be
true and correct as of such specified date) unless the failure of such
representations of warranties to be true and correct as of any of such dates
would not in the aggregate reasonably be likely to have a Company Material
Adverse Effect;
(b) Seller will have performed in all material respects each
of its obligations under this Agreement required to be performed by it at or
prior to the Closing pursuant to the terms hereof;
(c) Purchaser will have received a certificate of the
President of Seller as to the satisfaction of the conditions set forth in
section 7.2(a), (b), and (g);
(d) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act will have expired or been
terminated;
(e) There will be no order, decree or injunction of a court of
competent jurisdiction or other governmental entity that prevents the
consummation of the transactions contemplated by this Agreement;
(f) Purchaser will have received Seller's Closing Documents in
form and substance reasonably satisfactory to Purchaser and its counsel;
(g) No Company Material Adverse Effect will have occurred
since the date hereof;
(h) Purchaser will have received the Consents set forth in
Exhibit 7.1(g);
(i) The Escrow Agreement will have been executed and delivered
by Seller to Purchaser;
(j) Purchaser will have received an opinion of Counsel from
Skadden, Arps, Slate, Meagher & Flom LLP, dated as of the Closing Date, in
substantially the form attached as Exhibit 7.2(j);
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(k) Except as otherwise requested by Purchaser, Purchaser
shall have received the written resignation, effective as of the Closing Date,
of each of the directors and officers of the Company and the Company
Subsidiaries;
(l) Purchaser will have received the November Financial
Statements and the December Financial Statements pursuant to Section 6.15;
(m) The Company will have deposited the Change-in-Control
Amounts into escrow in accordance with the Employee Escrow Agreements;
(n) Seller will have paid to the Company in cash amounts
sufficient to pay, to the extent waivers have not been received in respect
thereof, excess interest accrued at default rates, late payment fees and Company
Lender expenses, if any, due on the indebtedness of the Company to the Company
Lenders outstanding as of the Closing Date;
(o) The Assignment will have been executed and delivered by
Seller and the Company; and
(p) Purchaser will have received a certificate of an officer
of Seller in substantially the form of Exhibit 7.2(p).
ARTICLE VIII
DOCUMENTS TO BE DELIVERED AT THE CLOSING
Section 8.1 Documents to Be Delivered by Seller. At the Closing,
Seller shall deliver, or cause to be delivered, to Purchaser the following
("Seller's Closing Documents"):
(a) stock certificates representing the Shares, duly endorsed
in blank or accompanied by stock transfer powers and with all requisite stock
transfer tax stamps attached;
(b) the certificate referred to in Section 7.2(c);
(c) the Escrow Agreement; and
(d) the Security Agreement.
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Section 8.2 Documents to Be Delivered by Purchaser . At the Closing,
Purchaser shall deliver to Seller the following ("Purchaser's Closing
Documents"):
(a) evidence of payment of the Purchase Price in accordance
with Section 2.2;
(b) the certificate referred to in Section 7.1(c);
(c) the Escrow Agreement;
(d) the Promissory Note; and
(e) the Security Agreement.
ARTICLE IX
TERMINATION
Section 9.1 Termination. Notwithstanding anything herein to the
contrary, this Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of Purchaser and Seller;
(b) by Purchaser, on the one hand, or Seller, on the other
hand, if the Closing will not have occurred on or before February 28, 1999.
(c) by Purchaser, on the one hand, or Seller, on the other
hand, if any court of competent jurisdiction or other Governmental Entity will
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby and such
order, decree, ruling or other action will have become final and nonappealable;
(d) by Purchaser, if (i) there has been a violation or breach
by Seller of any agreement, representation, warranty or covenant of Seller
contained in this Agreement (including the Seller Disclosure Letter), which
violation or breach would have a Company Material Adverse Effect and which
violation or breach is not curable or, if curable, is not cured within 30 days
after written notice of such violation or breach is given by Purchaser or Seller
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and such violation or breach has not been waived by
Purchaser or (ii) there has been any Company Material
Adverse Effect;
(e) by Seller, if there has been a violation or breach by
Purchaser of any agreement, representation, warranty or covenant of Purchaser
contained in this Agreement, which violation or breach would have a Purchaser
Material Adverse Effect and which violation or breach is not curable or, if
curable, is not cured within 30 days after written notice of such violation or
breach is given by Seller to Purchaser, and such violation or breach has not
been waived by Seller;
(f) by Purchaser pursuant to Section 6.9(b);
(g) by Seller by paying the liquidated damages payment
provided for in Section 6.14(a);
(h) by Seller by paying the liquidated damages payment
provided for in Section 6.14(b);
(i) by Purchaser pursuant to Section 6.19 (b); or
(j) by Seller pursuant to Section 6.19(c).
Section 9.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 9.1, written notice thereof shall
forthwith be given to the other party or parties specifying the Section of this
Agreement pursuant to which such termination is made, and upon any such
permitted termination this Agreement shall forthwith terminate and become null
and void, without liability on the part of Purchaser or Seller except (a) as set
forth in Sections 6.2(b) and 11.1, which provisions shall not be affected by
such termination, and (b) as set forth in Section 6.14(b). Nothing contained in
this Section 9.2 shall relieve any party from liability for any material and
willful breach of this Agreement prior to such termination; provided, however,
that (a) Seller shall have no liability (except with respect to the liquidated
damages payment provided for in Section 6.14(a) or Section 6.14(b), as the case
may be) for any such breach that does not result in a Company Material Adverse
Effect and (b) Purchaser shall have no liability for any such breach that does
not result in a Purchaser Material Adverse Effect.
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ARTICLE X
SURVIVAL OF OBLIGATIONS; INDEMNIFICATION; REMEDIES
Section 10.1 Indemnification by Seller.
(a) Except as otherwise set forth herein, Seller shall
indemnify, defend and hold harmless Purchaser and the Company, and each of their
respective representatives, employees, officers, directors, stockholders,
controlling persons and Affiliates (collectively, the "Purchaser Indemnified
Persons"), for, and shall pay to the Purchaser Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including interest, penalties, costs of investigation and
defense and the reasonable fees and expenses of attorneys and other
professionals and experts) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), directly or indirectly, arising
from or in connection with (i) any breach by Seller of any covenant,
representation, warranty, agreement or obligation of Seller contained in this
Agreement, (ii) any contingent liabilities disclosed by Seller to Purchaser
pursuant to Section 6.9 after the date hereof that do not materially or
adversely affect the benefits to be obtained by Purchaser under this Agreement,
(iii) any claim by any Person that the transactions contemplated by this
Agreement may be a fraudulent transfer, or (iv) any claims in respect of
Change-in-Control Amounts arising out of Section 6 of the Employment Agreements.
(b) Without duplication and subject to the terms and
limitations set forth in this Section 10.1(b), Seller shall indemnify, defend
and hold harmless the Company for,
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and shall pay to the Company or any Company Subsidiary the amount of any Damages
actually incurred by the Company or such Company Subsidiary following the
Closing relating to any amounts actually paid by the Company to Barclays Bank
PLC ("Barclays") on or before January 31, 1999 in respect of a"swap breakage
amount" (such amounts, the "Special Contingent Liability").
Section 10.2 Indemnification by Parent and Purchaser. Parent and
Purchaser shall, jointly and severally, indemnify, defend and hold harmless
Seller, the Company and each Company Subsidiary, and each of their respective
representatives, employees, officers, directors, stockholders, controlling
persons and Affiliates (collectively, the "Seller Indemnified Persons"), for,
and shall pay to the Seller Indemnified Persons the amount of any Damages,
directly or indirectly, arising from, attributable to or in connection with any
breach by Purchaser of any covenant, representation, warranty, agreement or
obligation of Purchaser contained in this Agreement; provided, however, that the
representations and warranties of Purchaser set forth in Section 5.1 shall not
survive the Closing.
Section 10.3 Certain Other Indemnity Matters. Notwithstanding anything
to the contrary contained in this Agreement, if the Closing occurs, (i) no claim
for indemnification may be asserted by a Purchaser Indemnified Person against
Seller under this Article X if any fact, event or circumstance giving rise to
such claim was discovered by or known to Purchaser on or before the Closing
Date, and not known to Seller, the Company or any Company Subsidiary, and (ii)
no claim for indemnification may be asserted by any Purchaser Indemnified Person
with respect to any breach by Seller of any representation or warranty set forth
in this Agreement or in the Seller Disclosure Letter if such breach or
information regarding such breach will have been disclosed in writing at or
prior to the Closing; provided, however, that nothing in this Section 10.3 shall
limit or otherwise affect Purchaser's right to be indemnified by Seller with
respect to the Special Contingent Liability in accordance with the terms of
Section 10.1(b). For purposes of this Section, "known to Purchaser" shall mean
all matters actually known by any of Daniel Cohen, Abraham Bernstein, Freddie
Kotek, Crit DeMent, David English or Michael Riesenbach.
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Section 10.4 Time Limitations.
(a) If the Closing occurs, Seller shall have no liability
under Section 10.1(a), other than with respect to the representations and
warranties in Sections 4.2, 4.9 and 4.14 as provided below, unless on or before
the date that is 14 months following the Closing Date, Purchaser notifies Seller
of a claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Purchaser. A claim with respect to representations and
warranties in Section 4.2 may be made at any time without any time limitation. A
claim with respect to the representations and warranties in Section 4.9 may be
made at any time prior to the third anniversary of the Closing Date. A claim
with respect to the representations and warranties in Section 4.14 may be made
within the time limits set forth in Section 6.10(k).
(b) If the Closing occurs, neither Parent nor Purchaser shall
have any liability under Section 10.2 unless on or before the date that is 14
months following the Closing Date, Seller notifies Purchaser of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Seller.
Section 10.5 Limitations on Amount.
(a) Seller shall have no liability (for indemnification or
otherwise) with respect to the matters described in Section 10.1(a), other than
those representations and warranties in Sections 4.9, 4.14 and 4.17, until the
total of all Damages with respect to such matters exceeds $500,000, and then
Seller shall be responsible to the extent and by the
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amount that the aggregate amount of all Damages incurred as a result of such
breaches exceeds $500,000; provided, however, Seller shall have no liability for
and to the extent that the aggregate amount of all Damages exceeds the Purchase
Price.
(b) Neither Parent nor Purchaser shall have any liability (for
indemnification or otherwise) with respect to the matters described in Section
10.2, other than with respect to claims arising under Section 6.17, the
Promissory Note or the Escrow Agreement, until the total of all Damages with
respect to such matters exceeds $500,000, and then Parent and Purchaser shall be
responsible to the extent and by the amount that the aggregate amount of all
Damages incurred as a result of such breaches exceeds $500,000; provided,
however, other than with respect to claims arising under Section 6.17, the
Promissory Note or the Escrow Agreement, neither Parent nor Purchaser shall have
any liability for and to the extent that the aggregate amount of all Damages
exceeds $7,000,000.
Section 10.6 Procedure for Indemnification; Third Party Claims.
(a) Promptly after receipt by an indemnified party under
Section 10.1 or 10.2 of written notice (a "Notice of Claim") of the commencement
of any action, suit or proceeding against it, or written threat thereof, such
indemnified party shall, if a claim is to be made against an indemnifying party
under either of said Sections, as applicable, give notice to the indemnifying
party of the commencement of such action, suit or proceeding. The indemnified
party shall furnish to the indemnifying party in reasonable detail such
information as the indemnified party may have with respect to such
indemnification claims (including copies of any summons, complaint or other
pleading that may have been served on it and any written claim, demand, invoice,
billing or other document evidencing or assenting the same). Subject to the
limitations set forth in this Section 10.6(a), no failure or delay by the
indemnified party in the performance of the foregoing shall reduce or otherwise
affect the obligation of
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the indemnifying party to indemnify and hold the indemnified party harmless,
except to the extent that such failure or delay will have adversely affected the
indemnifying party's ability to defend against, settle or satisfy any action,
suit or proceeding against it, damage, loss, claim or demand for which the
indemnified party is entitled to indemnification hereunder.
(b) If the claim or demand set forth in the Notice of Claim
given by the indemnified party is a claim or demand asserted by a third party,
the indemnifying party shall have 30 days after the Date of Notice of Claim to
notify the indemnified party in writing of its election to defend such
third-party claim or demand on behalf of the indemnified party. If the
indemnifying party elects to defend such third-party claim or demand, the
indemnified party shall make available to the indemnifying party and its agents
and representatives all records and other materials that are reasonably required
in the defense of such third-party claim or demand and shall otherwise cooperate
with, and assist the indemnifying party in the defense of, such third-party
claim or demand, and so long as the indemnifying party is defending such
third-party claim in good faith, the indemnified party shall not pay, settle or
compromise such third-party claim or demand. If the indemnifying party elects to
defend such third-party claim or demand, the indemnifying party shall have the
right to control the defense of such third-party claim or demand, at the
indemnifying party's own expense. If the indemnifying party does not elect to
defend such third-party claim or demand or does not defend such third-party
claim or demand in good faith, the indemnified party shall have the right, in
addition to any other right or remedy it may have hereunder, to defend such
third-party claim or demand at the indemnifying party's expense.
(c) In the event any indemnified party shall have a claim
under Section 10.1 or 10.2 against any indemnifying party that does not involve
a third party claim, the indemnified party shall deliver a notice with
reasonable promptness to the indemnifying party. The
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failure by any indemnified party to give an indemnity notice shall not impair
such party's rights hereunder except to the extent that an indemnifying party
demonstrates that is has been materially prejudiced thereby. If the indemnifying
party notifies the indemnified party that it does not dispute the claim
described in such notice or fails to notify the indemnified party within 30
calendar days whether the indemnifying party disputes the claim described in
such indemnity notice, the amount specified in the notice will be conclusively
deemed a liability of the indemnifying party under Section 10.1 or 10.2 and the
indemnifying party shall pay or agree to release from escrow, as the case may
be, the amount of such loss to the indemnified party on demand. If the
indemnifying party has timely disputed its liability with respect to such claim,
the indemnifying party and the indemnified party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiation
within 30 calendar days of timely response by the indemnifying party, such
dispute shall be resolved by litigation in a court of competent jurisdiction.
(d) The term "Date of Notice of Claim" shall mean the date the
Notice of Claim is effective pursuant to Section 11.3 of this Agreement.
(e) To the extent this Section 10.6 is inconsistent with
Section 6.10(e)(iii), (f), or (g), Section 6.10 shall govern matters related to
Taxes.
Section 10.7 Security for Indemnification. Seller shall deposit the
sum of $5,000,000 in escrow pursuant to the Escrow Agreement for the purpose of
providing security for the satisfaction of the obligation to make payment
hereunder (a) in respect of the Special Contingent Liability and (b) of Damages.
After termination of the Escrow Account (as defined in the Escrow Agreement),
the principal amount payable under the Promissory Note shall be reduced to the
extent of any Damages subject to indemnification hereunder and attributable to
breaches of Sections 4.2, 4.9 or 4.14.
73
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.1 Fees and Expenses. Except as otherwise expressly set forth
in this Agreement, all costs and expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses, and the Company shall not pay any of
the costs of this Agreement or the transactions contemplated hereby incurred on
behalf of Seller (including the fees and expenses of Seller's attorneys, tax and
accounting advisors and investment bankers). Without limiting the foregoing,
Seller shall pay all costs and expenses related to obtaining the Consents listed
on Exhibit 7.1(g), including any unusual costs or charges expressly payable
pursuant to any of the agreements to which such Consents relate that are
directly attributable to the consummation of the transactions contemplated
hereby.
Section 11.2 Amendments. This Agreement can be amended, supplemented or
modified only by a written instrument signed by each of the parties hereto
making specific reference to this Agreement.
Section 11.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five Business Days after the day when mailed in the United States by certified
or registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as may be specified by like notice) (a) if to
Seller, to:
Japan Leasing (U.S.A.), Inc.
1251 Avenue of the Americas, 48th Fl.
New York, New York 10020
74
<PAGE>
Attn: Mr. Jun Ogihara
Facsimile: (212) 403-3150
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Attn: Kenton J. King, Esq.
Facsimile: (650) 470-4570
(b) if to Purchaser before December 21, 1998, to:
Fidelity Leasing, Inc.
7 E. Skippack Pike
Ambler, Pennsylvania 19002
Facsimile: (215) 619-2830
Attn: Abraham Bernstein
if to Purchaser on or after December 21, 1998, to:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Facsimile: (888) 682-0600
Attn: Abraham Bernstein
in either case, with a copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street - 8th Floor
Philadelphia, Pennsylvania 19102
Facsimile: (215) 735-2513
Attn: Richard J. Abt, Esquire
Section 11.4 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrase "made available" when used in this
Agreement shall mean that the information referred to has been made available by
the party to whom such information is to be made available.
75
<PAGE>
Section 11.5 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall be considered one and the same agreement.
Section 11.7 Entire Agreement. This Agreement, together with the
Confidentiality Agreement, constitutes the entire agreement, and supersedes all
other prior or contemporaneous negotiations, commitments, agreements and
understandings (whether written or oral) between the parties with respect to the
subject matter hereof.
Section 11.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 11.10 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Purchaser may assign its rights
to purchase the Shares to any of its Affiliates; provided, however, that
Purchaser shall remain liable for all its obligations hereunder regardless of
any such assignment. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by, the parties and
their respective successors and assigns, and except to the extent necessary to
enforce the provisions of Section 6.16, the provisions of this Agreement are not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
76
<PAGE>
Section 11.11 Specific Performance; Submission to Jurisdiction. Each
of the parties hereto acknowledges and agrees that in the event of any breach of
this Agreement, each nonbreaching party would be irreparably and immediately
harmed and could not be made whole by monetary damages. It is accordingly agreed
that the parties hereto (a) shall waive, in any action for specific performance,
the defense of adequacy of a remedy at law and (b) shall be entitled (without
having to post a bond or other security), in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in any state or federal district
court sitting in Wilmington, Delaware. Each of the parties hereto consents to
submit itself to the personal jurisdiction of any state or federal court located
in Wilmington, Delaware and irrevocably agrees that it will not bring any action
or proceeding relating to this Agreement in any court other than a state or
federal court located within Wilmington, Delaware. Each of the parties hereto
furthermore consents to service of process upon it in the manner set forth in
Section 11.3 and accepts for itself and in connection with its respective
properties, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement.
77
<PAGE>
Section 11.12 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party hereto of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, whether under this Agreement or afforded by law or otherwise, shall be
cumulative and not alternative.
Section 11.13 Time of Essence. Each of the parties hereto agrees that,
with regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
78
<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by and subject
to the provisions of, and otherwise a party to, Article X.
RESOURCE AMERICA, INC.
By:
Name:
Title:
79
<PAGE>
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This Amendment No. 1 to Stock Purchase Agreement ("Amendment No. 1") is
made as of December 31, 1998 by and between Fidelity Leasing, Inc., a
Pennsylvania corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a
Delaware corporation ("Seller"), in connection with that certain Stock Purchase
Agreement, dated as of December 15, 1998, by and between Purchaser and Seller
(the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set forth on the
signature page of the Stock Purchase Agreement, Resource America, Inc., a
Delaware corporation, constitute all of the parties to the Stock Purchase
Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides that the
Stock Purchase Agreement can be amended, supplemented or modified only by a
written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement desire to amend in
accordance with this written instrument certain terms of the Stock Purchase
Agreement; and
WHEREAS, each of the parties hereto has authorized the execution of this
Amendment No. 1.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein shall
have the respective meanings assigned to such terms in the Stock Purchase
Agreement.
2. Amendment of Section 6.19. The last sentence of section 6.19(a) of the Stock
Purchase Agreement is hereby amended to read in its entirety as follows:
"Purchaser agrees to use its reasonable best efforts to obtain the
Commitment Letter, and to cause a copy thereof to be delivered to
Seller, on or before January 8, 1999 (the "Commitment Letter Due
Date")."
3. Effect on Stock Purchase Agreement. Except as set forth in this Amendment No.
1, all terms and provisions of the Stock Purchase Agreement shall remain in full
force and effect in accordance with the terms thereof.
4. Counterparts. This Amendment No. 1 may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be executed and delivered by their duly authorized representatives as of the day
and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by and subject to
the provisions of, and otherwise a party to, Article X of the Stock Purchase
Agreement, as amended by this Amendment No. 1.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
This Amendment No. 2 to Stock Purchase Agreement ("Amendment No. 2") is
made as of January 12, 1999 by and between Fidelity Leasing, Inc., a
Pennsylvania corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a
Delaware corporation ("Seller"), in connection with that certain Stock Purchase
Agreement, dated as of December 15, 1998, by and between Purchaser and Seller
(the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set forth on the
signature page of the Stock Purchase Agreement, Resource America, Inc., a
Delaware corporation, constitute all of the parties to the Stock Purchase
Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides that the
Stock Purchase Agreement can be amended, supplemented or modified only by a
written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement have previously
amended the Stock Purchase Agreement pursuant to that certain Amendment No. 1 to
Stock Purchase Agreement, dated as of December 31, 1998 ("Amendment No. 1"); and
WHEREAS, the parties to the Stock Purchase Agreement desire to amend in
accordance with this written instrument certain terms of the Stock Purchase
Agreement; and
WHEREAS, each of the parties hereto has authorized the execution of this
Amendment No. 2.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein shall
have the respective meanings assigned to such terms in the Stock Purchase
Agreement.
<PAGE>
2. Amendment of Section 6.12. The last sentence of section 6.12(a) of the
Stock Purchase Agreement is hereby amended to read in its entirety as follows:
"Seller shall use its reasonable best efforts to deliver, or cause to be
delivered, to Purchaser not less than two Business Days prior to the
Closing Date copies of payoff letters and waivers of payment of any
interest at default rates, late payment fees and Company Lender expenses
from each of the Company Lenders."
3. Deletion of Section 6.19(b). Section 6.19(b) of the Stock Purchase
Agreement is hereby deleted in its entirety, it being understood that Purchaser
shall have no rights or obligations thereunder whatsoever.
4. Deletion of Section 6.19(c). Section 6.19(c) of the Stock Purchase
Agreement is hereby deleted in its entirety, it being understood that Seller
shall have no rights or obligations thereunder whatsoever.
5. Amendment of Section 7.2. Section 7.2 of the Stock Purchase Agreement is
hereby amended by (i) deleting the word "and" appearing at the end of Section
7.2(o), (ii) replacing the period at the end of Section 7.2(p) with a semi-colon
followed by the word "and", and (iii) adding the following subsection to the end
of such section:
(q) Purchaser will have received a copy of each of the payoff letters
described in Section 6.12(a) reasonably in advance of the Closing to permit
Purchaser to deliver payment instructions necessary to the perfomance by
Purchaser of its payment obligations under Section 6.12(a)."
6. Effect on Stock Purchase Agreement. Except as set forth in this
Amendment No. 2, all terms and provisions of the Stock Purchase Agreement, as
previously amended by Amendment No. 1, shall remain in full force and effect in
accordance with the terms thereof.
7. Counterparts. This Amendment No. 2 may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be executed and delivered by their duly authorized representatives as of the day
and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by
and subject to the provisions of, and otherwise a party to, Article X of the
Stock Purchase Agreement, as amended by Amendment No. 1 and this Amendment No.
2.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
AMENDMENT NO. 3 TO STOCK PURCHASE AGREEMENT
This Amendment No. 3 to Stock Purchase Agreement ("Amendment No. 3") is
made as of February 2, 1999 by and between Fidelity Leasing, Inc., a
Pennsylvania corporation ("Purchaser"), and Japan Leasing (U.S.A.), Inc., a
Delaware corporation ("Seller"), in connection with that certain Stock Purchase
Agreement, dated as of December 15, 1998, by and between Purchaser and Seller
(the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set forth on the
signature page of the Stock Purchase Agreement, Resource America, Inc., a
Delaware corporation, constitute all of the parties to the Stock Purchase
Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides that the
Stock Purchase Agreement can be amended, supplemented or modified only by a
written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement have previously
amended the Stock Purchase Agreement pursuant to that certain Amendment No. 1 to
Stock Purchase Agreement, dated as of December 31, 1998 ("Amendment No. 1"), and
that certain Amendment No. 2 to Stock Purchase Agreement, dated as of January
12, 1999 ("Amendment No. 2"); and
WHEREAS, the parties to the Stock Purchase Agreement desire to amend in
accordance with this written instrument certain terms of the Stock Purchase
Agreement; and
WHEREAS, each of the parties hereto has authorized the execution of this
Amendment No. 3.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Stock Purchase
Agreement.
<PAGE>
2. Additional Defined Terms. Section 1.1 of the Stock Purchase Agreement is
hereby amended by adding the following definitions to the end of such section:
"Insurance Proceeds" means proceeds paid pursuant to any Insurance
Policy and amounts (exclusive of rebated premiums or amounts used to
restore or repair the Equipment) paid by any insurer under any other
insurance policy related to the Equipment.
"Obligor" means each obligor under an Unsecuritized Financing Contract
and its permitted assigns.
"Equipment" means any new or used equipment, together with all
accessions thereto and replacement parts, accessories and repairs with
respect thereto, which is the subject of an Unsecuritized Financing
Contract.
"Uniform Commercial Code" or "UCC" means, 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.
"Principal Balance" means, with respect to any Unsecuritized Financing
Contract on any day, (i) the unamortized portion of the purchase price paid
by the Company for the related Equipment, and amounts paid by the Company
in respect of taxes and origination costs and fees, as of the Closing Date.
"Unsecuritized Financing Contract Payment" means, with respect to each
Unsecuritized Financing Contract, the scheduled monthly payment for the
Equipment leased to or otherwise financed by the Obligor under such
Unsecuritized Financing Contract.
"Defaulted Unsecuritized Financing Contract" means, an Unsecuritized
Financing Contract (i) as to which Seller has, in accordance with its
customary servicing procedures, prior to the Closing Date, written off any
amount to be paid thereunder as uncollectible or placed into the pending
writeoff or workout category or (ii) as to which any payment remains unpaid
for 181 days or more from the original due date for such payment or (iii)
rejected by or on behalf of the related Obligor in a bankruptcy proceeding.
<PAGE>
"Unsecuritized Financing Contract Assets" means the Unsecuritized
Financing Contracts (exclusive of any Administrative Fees and all amounts
due or becoming due under such Unsecuritized Financing Contract prior to
the Closing Date), together with (i) a perfected security interest, if any,
in the Equipment; (ii) amounts representing Security Deposit Offsets
applied to unpaid Unsecuritized Financing Contract Payments due after the
Closing Date; (iii) any guaranty relating to a Unsecuritized Financing
Contract; (iv) each Insurance Policy, if any, covering Equipment, including
all rights to any Insurance Proceeds received on or after the Closing Date;
and (v) all proceeds of the foregoing.
"Administrative Fees" mean, with respect to any Unsecuritized Financing
Contract, any late, prepayment, extension, insurance, property tax or
administrative fees or similar charges paid by the Obligor pursuant to the
terms of such Unsecuritized Financing Contract.
"Security Deposit Offset" shall mean the application by the Company to
one or more Unsecuritized Financing Contract Payments under a Defaulted
Unsecuritized Financing Contract of the amount required to be deposited
with the Company by the Obligor as security for payment of amounts due
under such Unsecuritized Financing Contract.
"Insurance Policies" means all theft and physical damage and all other
insurance policies covering the Equipment.
3. Amendment of Section 3.1. Section 3.1 of the Stock Purchase Agreement is
hereby amended to read in its entirety as follows:
"Section 3.1 Closing . The sale and transfer of the Shares by Seller to
Purchaser shall take place at the offices of Ledgewood Law Firm,
Philadelphia, Pennsylvania at 10:00 a.m., local time, on February 4, 1999
or, if the conditions to close set forth in Article VII have not been
satisfied or waived by such date, two Business Days following the
satisfaction or waiver of all conditions to close set forth in Article VII,
unless another date or place is agreed to in writing by the parties hereto.
Notwithstanding the foregoing sentence, for all purposes of this Agreement
other than the foregoing sentence, the "Closing" shall be deemed to have
occurred as of 11:59 p.m. on January 31, 1999 and such date shall be deemed
to be the "Closing Date"."
<PAGE>
4. Amendment of Section 4.5. The third sentence of Section 4.5 of the Stock
Purchase Agreement is hereby amended to read in its entirety as follows:
"The Unaudited Financial Statements and the October Financial Statements
fairly present, and the November Financial Statements and the December
Financial Statements shall fairly present, in all material respects the
financial position, results of operations and cash flows of the Company and
the Company Subsidiaries for the periods specified therein, all in
conformity with GAAP (subject to normal year-end audit adjustments that
will not have or reflect a Company Material Adverse Effect) and except as
otherwise noted therein."
5. Amendment of Article IV. Article IV of the Stock Purchase Agreement is
hereby amended by adding the following section to the end of such article:
"Section 4.28 Unsecuritized Financing Contracts. The Seller hereby makes
the following representations and warranties as to each Financing Contract other
than (i) the Financing Contracts to be transferred by the Company to Seller
pursuant to the Assignment and (ii) Financing Contracts of any of the Company
Subsidiaries, (each such Financing Contract, an "Unsecuritized Financing
Contract"). Such representations and warranties shall be deemed to be made for
each Unsecuritized Financing Contract as of the Closing unless otherwise
specified, but shall survive the Closing (and the transfer of such Unsecuritized
Financing Contracts by Purchaser to a special purpose entity or a trustee for
securitization) for the period specified in Section 10.4(a) hereof.
(a) The Company is the legal and beneficial owner of all right, title and
interest in and to the Unsecuritized Financing Contracts and the Unsecuritized
Financing Contract Assets, including the rights to the Unsecuritized Financing
Contract Payments and the Insurance Proceeds with respect to the Unsecuritized
Financing Contracts, free from any Lien of any Person (except for (i) any Lien
which will have been waived or released by any Person on or prior to the Closing
Date, (ii) the rights of Obligors to Insurance Proceeds on account of
reimbursements for equipment repairs and (iii) rights of certain Obligors to the
residual value, if any, of the related Equipment).
<PAGE>
(b) The Company is the owner of each item of Equipment that is subject to
any Unsecuritized Financing Contract that is not a finance lease and the Company
has a perfected security interest in, or is the owner of, each item of Equipment
that is the subject of any other Unsecuritized Financing Contract, with a Lien
or ownership that is prior to the interest of any other Person; provided,
however, that, (i) the Company's Lien or ownership may not be prior to a Lien
which will have been waived or released by any Person on or prior to the Closing
Date or the rights of the Obligors with regard to the Equipment under the
Unsecuritized Financing Contracts and any liens arising from action of Obligors
and (ii) the Company will have filed UCC financing statements covering the
related Equipment only in connection with transactions in which the Principal
Balance of the Unsecuritized Financing Contract is greater than $25,000.
(c) The Company (i) has in its possession the original copy of the
Unsecuritized Financing Contract that constitutes "chattel paper" under the
Uniform Commercial Code and (ii) has in its possession, with respect to each
other Unsecuritized Financing Contract, a copy of the master contract, certified
by the seller or other transferor of the Unsecuritized Financing Contract to the
Company, and an original executed copy of the relevant contract schedule or
assignment agreement, and (iii) has provided Purchaser with access to original
copies of all the Unsecuritized Financing Contracts, including any amendments
thereto and any documents related thereto, and those copies will have been true
and complete copies of the Unsecuritized Financing Contracts and such amendments
and related documents, and no provision of any Unsecuritized Financing Contract
will have been amended, modified or waived other than by documents included in
the original copies to which Purchaser has been given access.
(d) Neither the Company nor, to the Knowledge of the Company, any Obligor
has done or failed to do anything (other than Unsecuritized Financing Contract
Payment delinquencies of 60 days or less as of December 31, 1998) which would or
might permit any Obligor or the Company to terminate any Unsecuritized Financing
Contract or suspend or reduce any payments or obligations due or to become due
thereunder by reason of default by the other party to such Unsecuritized
Financing Contract, except for amounts which are not material. Neither the
rights and interests of the Company in any Unsecuritized Financing Contract nor
the obligations of the Obligor under any Unsecuritized Financing Contract are
subject to any defense, offset, counterclaim, claim or right of rescission, and
none of the foregoing have been asserted or alleged against the Company as to
any Unsecuritized Financing Contract.
<PAGE>
(e) The Unsecuritized Financing Contract is a legal, valid and binding
obligation of the Obligor under such Unsecuritized Financing Contract and of the
Company, enforceable against each of them in accordance with its terms, except
as such enforceability may be affected by the Bankruptcy Exception.
(f) The Company has granted Purchaser full access to its books and records,
which contain a complete and correct statement of the Unsecuritized Financing
Contract Payments payable by the Obligor under each Unsecuritized Financing
Contract and with respect to the related Equipment, separately setting forth
such amounts with respect to each Unsecuritized Financing Contract for each
month for the number of months of anticipated Unsecuritized Financing Contract
Payments under such Unsecuritized Financing Contract.
(g) The Unsecuritized Financing Contract complied at the time it was
originated or made, and at the Closing Date will comply, in all material
respects with all requirements of applicable federal, state and local law and
regulations thereunder, including usury laws, the Federal Truth-in-Lending Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and S and other equal credit opportunity and
disclosure laws, in each case to the extent applicable to non-consumer
transactions.
(h) As of the Closing Date, each Unsecuritized Financing Contract (i) has
not been terminated, is not a Defaulted Unsecuritized Financing Contract and is
not more than 60 days past due as of the date that is two Business Days prior to
the Closing Date as to any amount required to be paid thereunder, (ii) is a
direct financing lease, if the Unsecuritized Financing Contract is a lease,
(iii) relates to an item of Equipment that is located in the United States is
not in repossession by the creditor or subject to procedures for obtaining
repossession by the creditor or possession by any other Person, (iv) relates to
an Obligor that (A) is a natural person residing in the United States or a
corporation, limited liability company or limited liability partnership
organized under the laws of the United States or any state thereof, (B) is not
the United States or a state or any agency or instrumentality thereof and (C)
has not been disapproved by the Company (based, in the Company's reasonable
judgment, upon the creditworthiness of such Obligor), (v) constitutes "chattel
paper" within the meaning of Section 9-105 of the UCC as in effect in the state
of New York and there is only one original executed copy of each Unsecuritized
Financing Contract, (vi) is denominated in United States dollars and is payable
in the United States in United States dollars, (vii) is not a "consumer lease"
as defined in Section 2A-103(l)(e) of the UCC, and (viii) has been determined by
the Company to satisfy all applicable approval requirements of the Company
including the obligations of the Obligor to maintain casualty insurance or to
self insure and to maintain the Equipment in good working order.
<PAGE>
(i) The Obligor under the Unsecuritized Financing Contract is, to the
Knowledge of the Seller, not the subject of a bankruptcy or insolvency
proceeding.
(j) No facts exist which would give rise to any right of rescission,
setoff, counterclaim or defense, nor have any been asserted, or to the best of
Seller's knowledge after due inquiry, threatened, with respect to the
Unsecuritized Financing Contract.
(k) The Unsecuritized Financing Contract has not been sold, transferred,
assigned or pledged by the Company to any Person.
(l) The Unsecuritized Financing Contract does not require the prior written
consent of the Obligor for, or contain any other restrictions on, the transfer
or assignment of the Unsecuritized Financing Contract.
(m) The Unsecuritized Financing Contract provides that the Obligor's
obligations under the Unsecuritized Financing Contract including, without
limitation, the obligation to make Unsecuritized Financing Contract Payments,
are absolute and unconditional and shall continue without any claim, defense,
set-off, counterclaim, reduction, or abatement of any kind whatsoever and
regardless of any inability of the Obligor to use the Equipment or any part
thereof because of any reason whatsoever including damage to or destruction
thereof.
(n) The Unsecuritized Financing Contract provides that the Obligor shall
maintain the Equipment in good operating condition, repair and appearance, and
protect it from deterioration other than normal wear and tear.
(o) The Unsecuritized Financing Contract was not previously transferred to
or owned by Purchaser.
(p) If the Unsecuritized Financing Contract is a lease which was not
originated by the Company but was acquired by the Company in a purchase
transaction then such Unsecuritized Financing Contract (i) constitutes a
"finance lease" under generally accepted accounting principles, (ii) does not by
its terms permit, on or after the Closing Date, the creditor (or any transferee)
to require the predecessor owner or other transferor to repurchase such
Unsecuritized Financing Contract or otherwise provide credit support for
payments due under the Unsecuritized Financing Contract.
<PAGE>
(q) The Company has no actual or contingent liability under Title IV of
ERISA or Section 4980B of the Code with respect to any employee pension benefit
plan or employee welfare benefit plan sponsored by any entity that, together
with the Company, would be treated as a "single employer" for purposes of
Section 4001(b) of ERISA or Section 414(b) or (c) of the Code."
6. Amendment of Section 7.2. Section 7.2 of the Stock Purchase Agreement is
hereby amended by (i) deleting the word "and" appearing at the end of Section
7.2(p), (ii) replacing the period at the end of Section 7.2(q) with a
semi-colon, and (iii) adding the following two subsections to the end of such
section:
"(r) Purchaser will have received an opinion of counsel from Minerva
Attorneys-at-Law, dated as of the Closing Date, in substantially the form
attached as Exhibit 7.2(r); and
(s) Purchaser will have received an opinion of counsel from Reiko
Kasano, Attorney at Law, dated as of the Closing Date, in substantially the
form attached as Exhibit 7.2(s)."
7. Amendment of Exhibit 6.12(b). Exhibit 6.12(b) to the Stock Purchase
Agreement is hereby amended to read in its entirety as set forth as Exhibit
6.12(b) hereto, and any and all references to "Exhibit 6.12(b)" in the Stock
Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 6.12(b) hereto.
8. Amendment of Exhibit 7.1(i). Exhibit 7.1(i) to the Stock Purchase
Agreement is hereby amended to read in its entirety as set forth as Exhibit
7.1(i) hereto, and any and all references to "Exhibit 7.1(i)" in the Stock
Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.1(i) hereto.
9. Amendment of Exhibit 7.2(j). Exhibit 7.2(j) to the Stock Purchase
Agreement is hereby amended to read in its entirety as set forth as Exhibit
7.2(j) hereto, and any and all references to "Exhibit 7.2(j)" in the Stock
Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.2(j) hereto.
10. Addition of Exhibit 7.2(r). The Stock Purchase Agreement is hereby
amended by adding thereto Exhibit 7.2(r) hereto.
<PAGE>
11. Addition of Exhibit 7.2(s). The Stock Purchase Agreement is hereby
amended by adding thereto Exhibit 7.2(s) hereto.
12. Addition to the Seller Disclosure Letter. The Seller Disclosure Letter
is hereby amended by adding thereto Exhibit 4.28 hereto; provided, however, that
such addition shall not constitute a supplement or amendment of the Seller
Disclosure Letter for purposes of Section 6.9(b) of the Stock Purchase
Agreement.
13. Effect on Stock Purchase Agreement. Except as set forth in this
Amendment No. 3, all terms and provisions of the Stock Purchase Agreement, as
previously amended by Amendment No. 1 and Amendment No. 2, shall remain in full
force and effect in accordance with the terms thereof.
14. Counterparts. This Amendment No. 3 may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to
be executed and delivered by their duly authorized representatives as of the day
and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by and subject to
the provisions of, and otherwise a party to, Article X of the Stock Purchase
Agreement, as amended by Amendment No. 1, Amendment No. 2 and this Amendment No.
3.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
AMENDMENT NO. 4 TO STOCK PURCHASE AGREEMENT
This Amendment No. 4 to the Stock Purchase Agreement
("Amendment No. 4") is made as of February 3, 1999 by and between Fidelity
Leasing, Inc., a Pennsylvania corporation ("Purchaser"), and Japan Leasing
(U.S.A.), Inc., a Delaware corporation ("Seller"), in connection with that
certain Stock Purchase Agreement, dated as of December 15, 1998, by and between
Purchaser and Seller (as previously amended, the "Stock Purchase Agreement").
RECITALS
WHEREAS, Purchaser, Seller and, for the limited purposes set
forth on the signature page of the Stock Purchase Agreement, Resource America,
Inc., a Delaware corporation, constitute all of the parties to the Stock
Purchase Agreement; and
WHEREAS, Section 11.2 of the Stock Purchase Agreement provides
that the Stock Purchase Agreement can be amended, supplemented or modified only
by a written instrument signed by each of the parties thereto making specific
reference thereto; and
WHEREAS, the parties to the Stock Purchase Agreement have
previously amended the Stock Purchase Agreement pursuant to that certain
Amendment No. 1 to Stock Purchase Agreement, dated as of December 31, 1998
("Amendment No. 1"), that certain Amendment No. 2 to Stock Purchase Agreement,
dated as of January 12, 1999 ("Amendment No. 2"), and that certain Amendment No.
3 to Stock Purchase Agreement, dated as of February 2, 1999 ("Amendment No. 3");
and
WHEREAS, the parties to the Stock Purchase Agreement desire to
amend in accordance with this written instrument certain terms of the Stock
Purchase Agreement; and
WHEREAS, each of the parties hereto has authorized the
execution of this Amendment No. 4.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants and agreements set forth herein and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to such terms in the
Stock Purchase Agreement.
<PAGE>
2. Amendment of Section 2.3(a). The first sentence of Section
2.3(a) of the Stock Purchase Agreement is hereby amended by replacing the
expression "60 days" where it appears therein with the expression "90 days".
3. Amendment of Article II. Article II of the Stock Purchase
Agreement is hereby amended by adding to the end thereof the following sections:
"Section 2.4. Withdrawal from Escrow. On the Closing Date
Seller and Buyer shall give the Escrow Agent joint
instructions directing the Escrow Agent to pay out of escrow
the amount of $4,043,059.00 in respect of the Unsecuritized
Financing Contracts set forth on Schedule 2.4 (the "Schedule
2.4 Contracts").
"Section 2.5 Restoration of Escrow and the Promissory Note.
(a) To the extent an executed original of any Schedule 2.4
Contract is located by Purchaser or the Company on or before
the last Business Day of the calendar month that is the
fourteenth month after the month in which the Closing occurs
(the "Release Date"), Purchaser shall, on or before the third
Business Day in the calendar month immediately following the
calender month in which such contract is located (each such
date a "Restoration Date"), remit to the bank account (the
"Escrow Account") specified in writing by the Escrow Agent for
deposit in accordance with the terms of the Escrow Agreement
an amount equal to 66.15% of the net investment value of such
contract as of the time of such remittance. At the time of
such remittance, Purchaser shall increase the principal sum of
the Promissory Note by an amount equal to the amount of such
net investment value not remitted to the Escrow Account
pursuant to the foregoing sentence.
(b) To the extent an executed original of any Schedule 2.4
Contract is located by Purchaser or the Company after the
Release Date and at such time no claim for indemnification
under Section 10.1(a) of the Stock Purchase Agreement is then
in existence, Purchaser shall, on or before each Restoration
Date, remit to the bank account (the
<PAGE>
"Seller Account") specified in writing by Seller an amount
equal to 66.15% of the net investment value of such contract
as of the time of such remittance. At the time of such
remittance, Purchaser shall increase the principal sum of the
Promissory Note by an amount equal to the amount of such net
investment value not remitted to the Seller Account pursuant
to the foregoing sentence.
(c) To the extent an executed original of any Schedule 2.4
Contract is located (a "Location") by Purchaser or the Company
after the Release Date and at such time a claim for
indemnification under Section 10.1(a) of the Stock Purchase
Agreement is then in existence, Purchaser shall, on or before
each Restoration Date, notify Seller in writing of a Location
and shall thereafter deposit an amount equal to 66.15% of the
net investment value of such contract as of the time of such
remittance into an escrow account with an escrow agent under
an escrow agreement with terms substantially identical to the
Escrow Agreement. At the time of such remittance, Purchaser
shall increase the principal sum of the Promissory Note by an
amount equal to the amount of such net investment value not
remitted to such escrow account pursuant to the foregoing
sentence.
(d) To the extent any payment is received by the Company under
a Schedule 2.4 Contract on or before the Release Date,
Purchaser shall, on or before the third Business Day in the
calendar month immediately following the calender month in
which such payment is received (the "Payment Receipt Date"),
remit to the Escrow Account for deposit in accordance with the
terms of the Escrow Agreement an amount equal to 66.15% of the
total amount of such payment. At the time of such remittance,
Purchaser shall increase the principal sum of the Promissory
Note by an amount equal to the total amount of such payment
not remitted to the Escrow Account pursuant to the foregoing
sentence.
(e) To the extent any payment is received by the Company under
a Schedule 2.4 Contract after the Release Date and at such
time no claim for indemnification under Section 10.1(a) of the
Stock Purchase Agreement is then in existence, Purchaser
shall, on or before the Payment Receipt Date, remit to the
Seller Account an amount equal to 66.15% of the total amount
of such payment. At the time of such remittance, Purchaser
shall increase the principal sum of
<PAGE>
the Promissory Note by an amount equal to the total amount of
such payment not remitted to the Seller Account pursuant to
the foregoing sentence.
(f) To the extent any payment is received (a "Payment Event")
by the Company under a Schedule 2.4 Contract after the Release
Date and at such time a claim for indemnification under
Section 10.1(a) of the Stock Purchase Agreement is then in
existence, Purchaser shall, on or before the first Payment
Receipt Date for any Schedule 2.4 contract, notify Seller in
writing of a Payment Event and shall thereafter deposit an
amount equal to 66.15% of the amount of such payment as of the
time of such remittance into an escrow account with an escrow
agent under an escrow agreement with terms substantially
identical to the Escrow Agreement. At the time of such
remittance, Purchaser shall increase the principal sum of the
Promissory Note by an amount equal to the total amount of such
payment not remitted to such escrow account pursuant to the
foregoing sentence."
4. Amendment of Section 6.12(b). The first sentence of Section
6.12(b) of the Stock Purchase Agreement is hereby amended by (i) deleting the
period appearing at the end thereof and (ii) adding the following words to the
end thereof:
"and the amount of $2,069,247.82 in respect of the Schedule
2.4 Contracts."
5. Amendment of Exhibit 6.12(b). Exhibit 6.12(b) to the Stock
Purchase Agreement is hereby amended to read in its entirety as set forth as
Exhibit 6.12(b) hereto, and any and all references to "Exhibit 6.12(b)" in the
Stock Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 6.12(b) hereto.
6. Amendment of Exhibit 7.1(h). Exhibit 7.1(h) to the Stock
Purchase Agreement is hereby amended to read in its entirety as set forth as
Exhibit 7.1(h) hereto, and any and all references to "Exhibit 7.1(h)" in the
Stock Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.1(h) hereto.
<PAGE>
7. Amendment of Exhibit 7.1(i). Exhibit 7.1(i) to the Stock
Purchase Agreement is hereby amended to read in its entirety as set forth as
Exhibit 7.1(i) hereto, and any and all references to "Exhibit 7.1(i)" in the
Stock Purchase Agreement (including all Exhibits and Schedules thereto) shall
hereafter be deemed to refer to Exhibit 7.1(i) hereto.
8. Effect on Stock Purchase Agreement. Except as set forth in
this Amendment No. 4, all terms and provisions of the Stock Purchase Agreement,
as previously amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3,
shall remain in full force and effect in accordance with the terms thereof.
9. Counterparts. This Amendment No. 4 may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 4 to be executed and delivered by their duly authorized
representatives as of the day and year first above written.
FIDELITY LEASING, INC.
By:
Name:
Title:
JAPAN LEASING (U.S.A.), INC.
By:
Name:
Title:
THE UNDERSIGNED ACKNOWLEDGES AND AGREES that it is bound by
and subject to the provisions of, and otherwise a party to, Article X of the
Stock Purchase Agreement, as amended by Amendment No. 1, Amendment No. 2,
Amendment No. 3 and this Amendment No. 4.
RESOURCE AMERICA, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 6.12(b)
PROMISSORY NOTE
---------------
$6,672,741.58 (plus the Amounts listed February 4, 1999
on Schedule I hereto, as such
schedule is amended from time to time prior to
the Maturity Date)
FOR VALUE RECEIVED, and intending to be legally bound,
Fidelity Leasing, Inc., a Pennsylvania corporation ("Maker"), promises to pay to
Japan Leasing (U.S.A.), Inc., a Delaware corporation ("Payee"), in lawful money
of the United States of America, on or prior to February 3, 2004 (the "Maturity
Date"), the principal sum of six million six hundred seventy-two thousand seven
hundred forty-one dollars and fifty-eight cents ($6,672,741.58) plus the amounts
listed on Schedule I hereto, as such schedule is amended from time to time prior
to the Maturity Date with such amendments serving to increase the principal
amount of this Note from time to time (all such amounts, collectively, the
"Principal Amount"), which sum shall be payable quarterly in twenty-one
successive installments, (i) the first eight of which shall be in an amount such
that equal quarterly payments of interest and principal would amortize the
entire unpaid principal balance of this Note, at the time of payment of each
such installment, over the number of quarterly payments obtained by subtracting
the number of installments previously paid from the number twenty-eight (28)
(such result, the "Notional Quarterly Payments"), at the Initial Interest Rate
(as defined below), (ii) the next twelve of which shall each be in an amount
such that equal quarterly payments of interest and principal would amortize the
Principal Amount outstanding at the time of each such installment, over the
Notional Quarterly Payments, at the Repayment Incentive Interest Rate (as
defined below), such quarterly payments commencing with April 30, 1999, and
(iii) the last of which shall be in an amount equal to the unpaid Principal
Amount and shall be payable on the Maturity Date. The interest rate applicable
to each quarterly payment shall be an annual rate equal to the Treasury notes
(five year) interest rate as reported by the Federal Reserve Board on a
weekly-average basis and as published in the Wall Street Journal on the date of
this Note, plus (i) two-hundred and fifty basis points for each of the first
eight payments (the "Initial Interest Rate"), and (ii) four-hundred basis points
for each remaining payment (the "Repayment Incentive Interest Rate"), each such
installment of principal and each such payment of interest to be payable in
immediately available funds by wire transfer to such bank accounts as may be
specified in writing by Payee to Maker and otherwise as provided below.
<PAGE>
This Note has been executed and delivered pursuant to and in
accordance with the terms and conditions of the Stock Purchase Agreement, dated
as of December 15, 1998 (as may have been amended, supplemented or otherwise
modified from time to time, the "Agreement"), by and among Payee and Maker.
1. Payments.
1.1 Interest. Interest shall be calculated on the basis of a year
of 365 days and charged for the actual number of days elapsed through and
including each relevant date of payment with respect to each portion of the
Principal Amount. In the event that, and for so long as, any Event of Default
(as hereinafter defined) shall have occurred and be continuing, the outstanding
principal amount of this Note and, to the extent permitted by law, overdue
interest in respect of this Note, shall bear interest at a rate per annum equal
to 2% above the then applicable interest rate provided above.
1.2 Manner of Payment. All payments of principal and interest on
this Note shall be made by wire transfer of immediately available funds to The
Chase Manhattan Bank, NA, New York, New York, ABA No. 021 000 021, A/C Japan
Leasing (U.S.A.), Inc., Acct. No. 904 732 347, Contact: Chiaki Kojima. If any
payment of principal or interest on this Note is due on a day which is not a
Business Day, such payment shall be due on the next succeeding Business Day, and
such extension of time shall be included in the period of time used for purposes
of calculating the amount of interest payable under this Note. "Business Day"
means any day other than a Saturday, Sunday or legal holiday in the State of
Delaware.
1.3 Prepayment. Maker may, without premium or penalty, at any time
and from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid, calculated as of the
date of such prepayment.
1.4 Security. This Note is secured by the Collateral as defined
below.
1.5 Obligations Absolute. The obligations of Maker hereunder shall
be unconditional and irrevocable, and shall be performed in accordance with the
terms of this Note. Without limiting the generality of the foregoing, payment
hereunder shall be made by Maker notwithstanding:
(a) any lack of validity or enforceability of this Note
or the Agreement; or
(b) the existence of any claim, set-off, defense or
other right which Maker may have at any time against Payee, whether in
connection with the Agreement or the transactions contemplated therein, except
for claims arising under Sections 2.3, 4.2, 4.9, 4.14 or 6.16 of the Agreement.
<PAGE>
2. Defaults.
2.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default hereunder ("Event of
Default"):
(a) If Maker shall fail to make any payment of principal
or interest hereunder within ten (10) days after becoming due.
(b) Any representation of Maker in the Agreement or this
Note shall have been untrue in any material respect when made.
(c) Any other agreement of Maker shall not be complied
with within 30 days after receipt of notice from Payee of such failure of
compliance.
(d) If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against
Maker, in an involuntary case; (iii) consent to the appointment of a trustee,
receiver, assignee, liquidator or similar official; (iv) make an assignment for
the benefit of Maker's creditors; or (v) admit in writing Maker's inability to
pay Maker's debts as they become due;
(e) If a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that (i) is for relief against Maker in an
involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or
similar official for Maker or substantially all of Maker's properties or (iii)
orders the liquidation of Maker, and in each case the order or decree is not
dismissed within 60 days.
2.2 Notice by Maker. Maker shall notify Payee in writing promptly
of the occurrence of any Event of Default of which Maker receives notice.
2.3 Remedies. Upon the occurrence of an Event of Default specified
in items (a), (d) and (e) under Section 2.1 hereof, the principal of this Note,
together with all unpaid interest and all other amounts payable hereunder, shall
become due and payable forthwith, without presentment, demand, notice, protest
or other requirement of any kind, all of which are expressly waived by Maker.
Upon the occurrence of an Event of Default specified in item (b) or (c) under
Section 2.1 hereof (unless all Events of Default have been cured or waived by
Payee), Payee may, at its option, by written notice to Maker, declare the entire
unpaid principal balance of this Note, together with all accrued interest
thereon, immediately due and payable regardless of any prior forbearance. In
either such case, subject to Section 4 hereof, Payee may exercise any and all
rights and remedies
<PAGE>
available to it under applicable law, including, without limitation, the right
to collect from Maker all sums due under this Note. Maker shall pay all
reasonable costs and expenses of collection incurred by or on behalf of Payee as
a result of an Event of Default, including, without limitation, reasonable
attorneys' fees.
3. Representations, Warranties and Agreements of Maker.
3.1 Organization and Qualification. Maker (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, (ii) has the power and authority to own its
properties and assets and to transact the businesses in which it presently is,
or proposes to be, engaged and (iii) is duly qualified and is authorized to do
business and is in good standing in each jurisdiction where it presently is, or
proposes to be, engaged in business.
3.2 Authority. Maker has the requisite corporate power and
authority to execute, deliver and perform this Note. All corporate action
necessary for the execution, delivery and performance of this Note has been
taken.
3.3 Enforceability. This Note is the legal, valid and binding
obligation of Maker, enforceable in accordance with its terms.
3.4 No Conflict. The execution, delivery and performance of this
Note by Maker are not in contravention of any requirement of law or any
indenture, contract, lease, agreement, instrument or other commitment to which
it is a party or by which it or any of its properties are bound and will not,
except as contemplated herein, result in the imposition of any Liens (as defined
in Section 4.8) upon any of its properties.
3.5 Consents and Filings. No consent, authorization, delivery and
performance of this Note, or the continuing operations of Maker, except those
that have been obtained or made.
3.6 Government Regulation. Maker is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
requirement of law that limits its ability to incur indebtedness or its ability
to consummate the transactions contemplated in this Note.
3.7 No Judgments or Litigation. Except as disclosed in the
Agreement, no judgments, orders, writs or decrees are outstanding against Maker
nor is there now pending or, to the best of Maker's knowledge after diligent
inquiry, threatened, any litigation, contested claim, investigation,
arbitration, or governmental proceeding by or against Maker.
<PAGE>
3.8 No Defaults. Maker is not in default under any term of any
indenture, contract, lease, agreement, instrument or other commitment to which
it is a party or by which it is bound. Maker knows of no dispute regarding any
such indenture, contract, lease, agreement, instrument or other commitment.
3.9 Corporate Existence. Maker shall (i) maintain its corporate
existence, (ii) maintain in full force and effect all licenses, bonds,
franchises, leases, trademarks and qualifications to do business, and all
patents, contracts and other rights necessary or advisable to the profitable
conduct of its business, (iii) continue in, and limit its operations to, the
same general lines of business as presently conducted by it and (iv) comply with
all requirements of law.
3.10. Guarantee. Maker shall deliver, prior to the execution
of this Note or concurrently herewith, the Guarantee (as defined below) whereby
the Guarantor (as defined below) as parent of Maker shall execute the Guarantee
in favor of Payee, guaranteeing payment of the outstanding principal, accrued
interest and all costs, fees and expenses arising hereunder.
3.11 Further Assurances. Maker shall take all such further
actions and execute all such further documents and instruments as Payee may at
any time reasonably determine to be necessary or desirable to further carry out
and consummate the transactions contemplated by this Note, or to cause the
execution, delivery and performance of this Note to be duly authorized.
Subordination to Senior Obligations.
4. Subordination.
4.1 (a) Agreement to Subordinate. Payee agrees, for itself
and each subsequent holder of this Note or the indebtedness evidenced hereby
(collectively, the "Debt"), that the Debt is expressly "subordinate and junior
in right of payment" (as that phrase is defined in clause (b) below) to all
Senior Obligations (as defined in Section 4.8). Payee by accepting this Note
acknowledges and agrees that these subordination provisions set forth in this
Article 4 are, and are intended to be, an inducement and a consideration to each
holder of any Senior Obligation, whether such Senior Obligation was created or
acquired before or after the issuance of this Note, to acquire and continue to
hold, or to continue to hold, such Senior Obligation and such holder of Senior
Obligations shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or continuing to hold, such
Senior Obligations.
<PAGE>
(b) "Subordinate and junior in right of payment" means
that:
(i) no part of the Debt shall have any claim to
the assets of Maker on a parity with or prior to the claim of the Senior
Obligations;
(ii) unless and until the Senior Obligations have
been paid in full and any commitment to lend in respect thereof has been
terminated, without the express prior written consent of each holder of Senior
Obligations, Payee will not take, demand (including by means of any legal
action) or receive from Maker, and Maker will not make, give or permit, directly
or indirectly, by set-off, redemption, purchase or in any other manner, any
payment of or security for (except for such security granted herein) the whole
or any part of the Debt; provided, however, that (x) at any time, except when a
default in the performance or observance of any term or condition relating to
any Senior Obligation has occurred and is continuing or would result therefrom,
Maker may make, and Payee may receive, scheduled payments or mandatory
repayments in accordance with Section 2.3 of this Note on account of principal
of and interest on the Debt in accordance with the terms hereof and (y) upon the
acceleration of the maturity of any Senior Obligations, Payee may accelerate the
scheduled maturities of the Debt if and to the extent permitted hereby at such
time but such acceleration shall not give Payee any right to take, demand
(including by means of any legal action) or receive from Maker, or Maker the
right to make, give or permit, directly or indirectly, by set-off, redemption,
purchase or in any other manner, any payment of or security for the whole or any
part of the Debt unless and until the Senior Obligations have been paid in full;
and
(iii) without limitation on any other provision of
this Section 4, the security interest of the Payee on the Collateral will be
junior in priority to any interest of any holder of Senior Obligations therein
as defined in the Security Agreement.
(c) The expressions "prior payment in full", "payment
in full", "paid in full" and any other similar terms or phrases when used herein
with respect to the Senior Obligations shall mean the payment in full in cash,
in immediately available funds, of all of the Senior Obligations.
4.2 Additional Provisions Concerning Subordination.
(a) Payee and Maker agree that upon any payment or
distribution of the assets of Maker upon a total or partial liquidation or a
total or partial dissolution of Maker or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to Maker or its
property:
<PAGE>
(i) all Senior Obligations shall be paid in full
before any payment or distribution is made with respect to the Debt; and
(ii) any payment or distribution of assets of Maker,
whether in cash, property or securities, to which Payee would be entitled except
for the provisions hereof, shall be paid or delivered by Maker, or any receiver,
trustee in bankruptcy, liquidating trustee, disbursing agent or other person or
entity making such payment or distribution, directly to the holders of the
Senior Obligations or their representative, ratably in accordance with the
amounts thereof, to the extent necessary to pay in full all Senior Obligations,
before any payment or distribution shall be made to Payee.
(b) If any payment or distribution from the assets of
Maker, whether consisting of money, property or securities, be collected or
received by Payee in respect of the Debt, except payments of principal or
interest permitted to be made at the time of payment as provided in Section
4.1(b) (ii)(x) above, Payee forthwith shall deliver the same to the holders of
the Senior Obligations or their representative, ratably in accordance with the
amounts thereof, if required, to be applied to the payment or prepayment of the
Senior Obligations until the Senior Obligations are paid in full. Until so
delivered, such payment or distribution shall be held in trust by Payee as the
property of such holders of the Senior Obligations, segregated from other funds
and property held by Payee.
4.3 Subrogation. Subject to the payment in full of the Senior
Obligations, Payee shall be subrogated to the rights of the holders of the
Senior Obligations to receive payments or distributions of assets of Maker in
respect of the Senior Obligations until the Senior Obligations shall be paid in
full.
4.4 Consent of Payee.
(a) Payee consents that, without the necessity of any
reservation of rights against Payee, and without notice to or further assent by
Payee:
(i) any demand for payment of any Senior Obligations
made by any holder of Senior Obligations may be rescinded in whole or in part by
or on behalf of such holder, and any Senior Obligation may be continued, and the
Senior Obligations, or the liability of Maker or any guarantor or any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, or any obligation or liability
of Maker or any other party under any agreement, may, from time to time, in
whole or in part, be renewed, extended, modified, accelerated, compromised,
waived, surrendered, or released by or on behalf of any holder of Senior
Obligations; and
<PAGE>
(ii) the terms and conditions of any Senior
Obligation may be amended, increased, modified, supplemented or terminated, in
whole or in part, as the holders thereof may deem advisable from time to time,
and any collateral security at any time held for the payment of any of the
Senior Obligations may be sold, exchanged, waived, surrendered or released, in
each case all without notice to or further assent by Payee, which will remain
bound under this Agreement, and all without impairing, abridging, releasing of
affecting the subordination provided for herein.
(b) Payee waives any and all notice of the creation,
renewal, extension, increase or accrual of any of the Senior Obligations and
notice of or proof of reliance by the holders thereof upon this Note. The Senior
Obligations, and any of them, shall be deemed conclusively to have been created,
contracted or incurred in reliance upon this Agreement, and all dealings between
Maker and the holders of the Senior Obligations shall be deemed to have been
consummated in reliance upon this Agreement. Payee acknowledges and agrees that
the holders of the Senior Obligations have relied upon the subordination
provided for herein in entering into any agreement with respect to the Senior
Obligations. Payee waives notice of or proof of reliance on this Agreement and
protest, demand for payment and notice of default.
4.5 Senior Obligations Unconditional. All rights and interest of the
holders of the Senior Obligations hereunder, and all agreements and obligations
of Payee and Maker hereunder, shall remain in full force and effect irrespective
of:
(a) any lack of validity or enforceability of any
document, instrument or agreement relating to any Senior Obligation;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Senior Obligations, or any amendment
or waiver or other modification, whether by course of conduct or otherwise, of
the terms of any Senior Obligations;
(c) any exchange, release or nonperfection of any security
interest in any collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise, of all or
any of the Senior Obligations or any guarantee thereof; or
(d) any other circumstances which otherwise might
constitute a defense available to, or a discharge of, Maker in respect of the
Senior Obligations or this Note.
<PAGE>
4.6 Further Assurances. Payee and Maker at their own expense and at
any time from time to time, upon the written request of the holders of any
Senior Obligations or their representative, will promptly and duly execute and
deliver such further instruments and documents and take such further actions as
such holders of the Senior Obligations or their representative reasonably may
request for the purposes of obtaining or preserving the full benefits hereof and
of the rights and powers herein granted.
4.7 Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this Article 4 are coupled with an interest and are
irrevocable until the Senior Obligations are paid in full and all commitments in
respect thereof are terminated.
4.8 Certain Terms Defined.
(a) "Senior Obligations" shall mean the collective
reference to the unpaid principal of and interest on all Indebtedness of Maker
(including, without limitation, interest accruing at the then applicable rate
after the maturity of any Indebtedness and interest accruing at the then
applicable rate after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
Maker, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, such Indebtedness of Maker, whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise.
(b) "Indebtedness" shall mean (a) all indebtedness of
Maker for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of Maker which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of Maker under capitalized leases, (d) all
obligations of Maker in respect of acceptances issued or created for the account
of Maker, (e) all liabilities secured by any Lien on any property owned by Maker
even though Maker has not assumed or otherwise become liable for the payment
thereof and (f) all obligations of Maker in respect of interest rate or currency
exchange hedging agreements or arrangements including swaps.
(c) "Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge
or other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any capitalized lease having substantially the same economic
effect as any of the foregoing).
<PAGE>
(d) "Collateral" shall mean all property and interests in
property now owned or hereafter acquired in or upon which a Lien has been or is
purported or intended to be have been granted to the Payee under the Security
Agreement.
(e) "Security Agreement" shall mean the security agreement
executed by the Maker, Payee and Debtor (as defined in the Security Agreement)
dated as of the date hereof (as amended, modified or supplemented from time to
time).
(g) "Guarantor" shall mean Resource America, Inc., a
Delaware corporation, and parent of Maker.
(f) "Guarantee" shall mean the Guarantee dated as of the
date hereof, executed by the Guarantor for the benefit of the Payee, and
attached hereto as Exhibit A.
5. Miscellaneous.
5.1 Waiver. The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. No failure to
exercise, delay in exercising, or single or partial exercise of any right or
remedy by Payee, and no course of dealing between Maker and Payee, shall
constitute a waiver of, or shall preclude any other or further exercise of the
same right or remedy. Maker hereby waives presentment, demand, protest and
notice of dishonor and protest.
5.2 Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 11.3 of the Agreement.
5.3 Severability. If any provision in this Note is construed to be
invalid, illegal or unenforceable, then the remaining provisions shall not in
any way be affected thereby and shall be enforced without regard thereto.
5.4 Governing Law; Waiver of Trial by Jury. THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. MAKER HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND
DELAWARE STATE COURTS LOCATED IN THE CITY OF WILMINGTON IN CONNECTION WITH ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS NOTE OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. MAKER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY
<PAGE>
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. MAKER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO MAKER AT
ITS NOTICE ADDRESS SET FORTH IN SECTION 11.3 OF THE AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF PAYEE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE AGAINST MAKER IN ANY OTHER
JURISDICTION.
THE RIGHT TO TRIAL BY JURY IS HEREBY WAIVED BY MAKER AND PAYEE.
5.5 Parties in Interest. This Note shall bind Maker and its
successors and assigns. This Note may be assigned or transferred by Payee
without the consent of Maker.
5.6 Section Headings. The section and subsection headings in this
Note are for convenience of reference only, do not constitute a part of this
Note, and shall not affect its interpretation.
5.7 References. All words used in this Note shall be construed to be
of such number and gender as the context requires or permits. Unless a
particular context clearly provides otherwise, the words "hereof" and
"hereunder" and similar references refer to this Note in its entirety and not to
any specific section or subsection hereof.
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first stated above.
FIDELITY LEASING, INC.,
a Pennsylvania corporation
By:__________________________________
<PAGE>
EXHIBIT A
---------
GUARANTEE
THIS GUARANTEE (this "Guarantee"), dated as of February 4,
1999, is executed by Resource America, Inc., a Delaware corporation (the
"Guarantor"), for the benefit of Japan Leasing (U.S.A.), Inc., a Delaware
corporation (the "Lender") under the Promissory Note (as defined below).
Capitalized terms used but not otherwise defined herein shall have the meanings
provided for such terms in the Promissory Note.
RECITALS:
---------
WHEREAS, it is a condition to the effectiveness of that
certain Promissory Note (as amended, supplemented or otherwise modified from
time to time, the "Promissory Note"), dated as of February 4, 1999, executed by
Fidelity Leasing, Inc., a Pennsylvania corporation (the "Borrower"), in favor of
the Lender that the Guarantor execute and deliver this Guarantee; and
WHEREAS, it is in the best interests of the Guarantor to
execute this Guarantee inasmuch as the Guarantor will derive substantial
benefits from the transactions contemplated by the Promissory Note.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor hereby irrevocably and unconditionally guarantees:
(a) the full and prompt payment when due (whether
at maturity, by optional or mandatory prepayment, upon acceleration or
otherwise) of the principal and interest payable on the Promissory Note
in accordance with the terms, conditions and covenants contained
therein;
(b) the payment of all other obligations and
indebtedness (including, without limitation, indemnities, fees and
interest thereon and all obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code and the operation of
Sections 502(b) and 506(b) of the Bankruptcy Code, 11 U.S.C. ss.502(b)
and ss.506 (b), would become due) of the Borrower now existing or
hereafter incurred under, arising out of, or in connection with the
Promissory Note;
(c) the due performance and compliance by the
Borrower with all of the terms, conditions and agreements contained in
the Promissory Note;
<PAGE>
GUARANTEE
(d) the payment of all sums advanced by the Lender
under or pursuant to the Promissory Note, with interest thereon from
the due date thereof, until paid, at the rate specified in the
Promissory Note; and
(e) all renewals, extensions, amendments and
changes of, or substitutions or replacements for, all or any part of
the foregoing (all such principal, premiums, interest, obligations,
indebtedness, performance, compliance and payments, collectively, the
"Guaranteed Obligations").
All payments by the Guarantor under this Guarantee shall be made
on the same basis as payments by the Borrower under the Promissory Note.
This guarantee is a primary obligation of the Guarantor and is
a guarantee of payment, and not merely of collection.
2. The Lender may, at any time and from time to time, without
the consent of, or notice to, the Guarantor, without incurring responsibility to
the Guarantor and without impairing or releasing the obligations of the
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability
incurred in respect thereof, and the guarantee herein made shall apply
to the Guaranteed Obligations as so changed, extended, renewed or
altered;
(b) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred in respect thereof or hereof, and/or any
offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower, any other guarantor or others, or otherwise act or refrain
from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred in respect thereof or hereof, and may subordinate the payment
of all or any part thereof to the payment of any liability (whether due
or not) of the Borrower to creditors of the Borrower other than the
Lender and the Guarantor;
<PAGE>
GUARANTEE
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Lender regardless
of what liabilities or liabilities of the Borrower remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, the Promissory Note, or otherwise amend, modify or
supplement the Promissory Note; or
(g) act or fail to act in any manner referred to in this
Guarantee which may deprive the Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guarantee.
3. The liability of the Guarantor hereunder is exclusive and
independent of any security for or other guarantee of the indebtedness of the
Borrower whether executed by such Guarantor, any other guarantor or by any other
Person, and the liability of the Guarantor hereunder shall not be affected or
impaired by any circumstance or occurrence whatsoever, including, without
limitation: (a) any direction as to the application of payment by the Borrower
or any other Person; (b) any other continuing or other guarantee, undertaking or
maximum liability of the Guarantor or of any other Person as to the indebtedness
of the Borrower; (c) any payment on or in reduction of any such other guarantee
or undertaking (it being understood that the payment obligations under the
Promissary Note may be reduced by any such payment under any such other
guarantee or undertaking); (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower; (e) any payment made to the
Lender in respect of the Guaranteed Obligations which the Lender repays the
Borrower or the Guarantor pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
the Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding; (f) any action or
inaction by the Lender as contemplated by Section 2 hereof; or (g) any
invalidity, irregularity or unenforceability of all or part of the Guaranteed
Obligations or any security therefor. Notwithstanding the foregoing, the
Guarantor agrees that this Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any payment (in whole or in part)
of any of the Guaranteed Obligations is rescinded or must otherwise be restored
by the Lender, upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, as though such payment had not been made.
4. The obligations of the Guarantor hereunder are independent
of the obligations of any other guarantor or the Borrower, and a separate action
or actions may be brought and prosecuted against the Guarantor whether or not
action is brought against any other guarantor or the Borrower, and whether or
not any other guarantor or the Borrower be joined in any such action or actions.
<PAGE>
GUARANTEE
5. In order to induce the Lender to make the loan pursuant to
the Promissory Note, the Guarantor makes the following representations,
warranties and agreements:
5.1 The Guarantor (a) is a duly organized and validly existing
corporation in good standing under the laws of the state of Delaware, (b) has
the corporate power and authority to own its property and assets and to transact
the business in which it is engaged and (c) is duly qualified as a foreign
corporation and in good standing in each jurisdiction where the ownership,
leasing or operation of property or the conduct of its business requires such
qualification, except where failure to so qualify would not reasonably be
expected to have a material adverse effect on the performance, business,
properties, assets, nature of assets or condition (financial or otherwise) of
the Guarantor.
5.2 The Guarantor has the corporate power to execute, deliver
and perform the terms and provisions of this Guarantee and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of this Guarantee. The Guarantor has duly executed and delivered this
Guarantee, and this Guarantee constitutes the legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and by general equitable
principles (regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law).
5.3 Neither the execution, delivery or performance by the
Guarantor of this Guarantee, nor compliance by it with the terms and provisions
hereof, (a) will contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, (b) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
the Guarantor pursuant to the terms of any material indenture, mortgage, deed of
trust, credit agreement, loan agreement or any other agreement, contract or
instrument to which the Guarantor is a party or by which it or any of its
property or assets is bound or to which it may be subject or (c) will violate
any provision of the Certificate of Incorporation or By-Laws of the Guarantor.
5.4 No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof (except as
have been obtained or made prior to the date hereof), is required to authorize,
or is required in connection with, the execution, delivery and performance of
this Guarantee or the legality, validity, binding effect or enforceability of
this Guarantee.
<PAGE>
GUARANTEE
5.5 There are no actions, suits or proceedings pending or, to
the best knowledge of the Guarantor, threatened, except as disclosed in
Guarantor's Form 10-K for the year ended September 30, 1998, that are reasonably
likely to have a material adverse effect on the Guarantor's performance
hereunder.
5.6 The Guarantor is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls) except where such noncompliance could not reasonably be expected to
have a material adverse effect on the performance, business, properties, assets,
nature of assets or condition (financial or otherwise) of the Guarantor.
5.7 The Guarantor is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5.8 The Guarantor is not a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6. The Guarantor covenants and agrees that on and after the
date hereof and until the termination of this Guarantee:
6.1 Except as otherwise permitted under the Promissory Note, it
will maintain its existence and rights as a corporation in full force and effect
so long as this Guarantee is outstanding, and will perform all of its
obligations under the terms of each indenture, mortgage, deed of trust, credit
agreement, loan agreement or any other agreement, contract or instrument by
which it is bound.
6.2 It will, at any time and from time to time, upon the request
of the Lender and at the Guarantor's expense, promptly and duly execute and
deliver or cause to be executed and delivered any and all further instruments
and documents and take such further action as the Lender may reasonably request
to effect the purposes of this Guarantee.
7. This Guarantee is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of the Lender in exercising any right, power or privilege hereunder and no
course of dealing between the Guarantor and the Lender shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further
<PAGE>
GUARANTEE
exercise thereof or the exercise of any other right, power or privilege. The
rights, powers and remedies herein expressly provided are cumulative and not
exclusive of any rights, powers or remedies which the Lender would otherwise
have. No notice to or demand on the Guarantor in any case shall entitle the
Guarantor to any other further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Lender to any other or
further action in any circumstances without notice or demand.
8. This Guarantee shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Lender and its
successors and assigns.
9. This Guarantee will terminate upon the payment in full of
the principal, interest, fees, indemnities then due and payable, costs, expenses
and other amounts payable under the Promissory Note, without respect to any
termination of the Promissory Note. Neither this Guarantee nor any provision
hereof may be changed, waived, discharged or terminated except by a writing
signed by the Guarantor and the Lender. In the case of any waiver, the
Guarantor, the Borrower and the Lender shall be restored to their former
position and rights hereunder and under the Promissory Note, and any Event of
Default waived shall be deemed to be cured and not continuing, but no such
waiver shall extend to any subsequent or other Event of Default, or impair any
right consequent thereon.
10. The Guarantor acknowledges that an executed (or conformed)
copy of the Promissory Note has been made available to its principal executive
officers and such officers are familiar with the contents thereof.
11. All notices and other communications hereunder shall be made
at the addresses, in the manner and with the effect provided in Section 5.2 of
the Promissory Note, provided that, for this purpose, the address of the
Guarantor shall be in care of the Borrower or as otherwise specified in writing
by the Guarantor to the Lender.
12. If claim is ever made upon the Lender for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (b) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event the
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon it, notwithstanding any revocation hereof or the
cancellation of the Promissory Note or other instrument evidencing any liability
of the Borrower, and the Guarantor shall be
<PAGE>
GUARANTEE
and remain liable to the aforesaid payees hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such payee.
13. Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise and whether by the Borrower or others
(including the Guarantor), with respect to any of the Guaranteed Obligations
shall, if the statute of limitations in favor of the Guarantor against the
Lender shall have commenced to run, toll the running of such statute of
limitations, and if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
14. This Guarantee and the rights and obligations of the Lender
and the Guarantor hereunder shall be construed in accordance with and governed
by the law of the State of Delaware.
14.1 Any legal action or proceeding with respect to this
Guarantee may be brought in any federal or state court located in the city of
Wilmington, Delaware, and, by execution and delivery of this Agreement, the
Guarantor hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.
14.2 The Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Guarantor at its address set forth opposite its signature below,
such service to become effective 5 days after such mailing. Nothing herein shall
affect the right of the Lender to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Guarantor
in any other jurisdiction.
14.3 The Guarantor hereby irrevocably waives any objection it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Guarantee brought in the
courts referred to above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
15. The Guarantor hereby:
(a) waives any right to require the Lender to proceed against
the Borrower, any other guarantor or any other party, proceed against or
exhaust any security held from the Borrower, any other guarantor or any
other party or pursue any other remedy in the Lender's power whatsoever;
<PAGE>
GUARANTEE
(b) waives any defense based on or arising out of any defense of
the Borrower, any other guarantor or any other party other than payment
in full of the Guaranteed Obligations, including, without limitation,
any defense based on or arising out of the disability of the Borrower,
any other guarantor or any other party, the absence of any other party
in any proceeding or the unenforceability of the Guaranteed Obligations
or any part thereof from any cause, or the cessation from any cause of
the liability of the Borrower other than payment in full of the
Guaranteed Obligations;
(c) agrees that the Lender may, at its election, foreclose on
any security held by it by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable
(to the extent such sale is permitted by applicable law), or exercise
any other right or remedy the Lender may have against the Borrower or
any other party, or any security, without affecting or impairing in any
way the liability of the Guarantor hereunder, and waives any defense
arising out of any such election by the Lender, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of the Guarantor against the
Borrower or any other party or any security;
(d) waives all presentments, demands for performance, protests
and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Guarantee, and notices of the existence, creation or incurring of new
or additional indebtedness;
(e) assumes all responsibility for being and keeping itself
informed of the financial condition and assets of the Borrower, and of
all other circumstances bearing upon the risk of non-payment of the
Guaranteed Obligations and the nature, scope and extent of the risks
the Guarantor assumes and incurs hereunder, and agrees that the Lender
shall have no duty to advise the Guarantor of information known to it
regarding such circumstances or risks;
(f) so long as any of the Guaranteed Obligations remain unpaid,
the Guarantor hereby agrees that it will not claim and hereby
irrevocably waives for such period all rights of subrogation it may at
any time otherwise have as a result of this Guarantee (whether
contractual, under Section 509 of the United States Bankruptcy Code, or
otherwise) to the claims of the Lender against the Borrower or any
other guarantor of the Guaranteed Obligations (collectively, the "Other
Parties") and all contractual, statutory or common law rights of
reimbursement, contribution or indemnity from any Other Party it may at
any time otherwise have as a result of this Guarantee;
<PAGE>
GUARANTEE
(g) waives any right to enforce any other remedy that the Lender
now has or may hereafter have against any Other Party, any endorser or
any other guarantor of all or any part of the Guaranteed Obligations
and any benefit of, and any right to participate in, any security or
collateral given to or for the benefit of the Lender to secure payment
of Guaranteed Obligations; and
(h) waives all claims (as such term is defined in the United
States Bankruptcy Code) it may at any time otherwise have against the
Borrower arising from any transaction whatsoever, including, without
limitation, its right to assert or enforce any such claims.
The Guarantor warrants and agrees that each of the waivers set forth in this
Guarantee is made with full knowledge of its significance and consequences and
that if any of such waivers are determined to be contrary to any applicable law
or public policy, such waivers shall be effective only to the maximum extent
permitted by law.
<PAGE>
GUARANTEE
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to
be executed and delivered as of the date first above written.
RESOURCE AMERICA, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit 7.1(h)
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (this "Agreement") is dated this 4th day of
February, 1999, by and among Fidelity Leasing, Inc., a Pennsylvania corporation
("Buyer"), Japan Leasing (U.S.A.), Inc., a Delaware corporation ("Seller"), and
Wilmington Trust Company, a Delaware banking corporation ("Escrow Agent").
WHEREAS, pursuant to a Stock Purchase Agreement (the "Purchase
Agreement") dated December 15, 1998 by and between Buyer and Seller, Seller has
agreed to deposit in escrow a total of $5,000,000 for the purpose of providing
security for the satisfaction of the obligation to make payment (a) in respect
of the Special Contingent Liabilities and (b) of Damages;
WHEREAS, the parties hereto have designated the Escrow Agent to act as
escrow agent under this Agreement; and
WHEREAS, a copy of the Purchase Agreement has been delivered to the
Escrow Agent and the Escrow Agent is willing to become the Escrow Agent in
connection therewith pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to them in the Purchase Agreement.
2. Appointment of Escrow Agent. The Escrow Agent is hereby appointed by the
other parties hereto to act as escrow agent hereunder. The Escrow Agent hereby
accepts such appointment and agrees to hold and administer the Escrow Fund (as
defined below) in accordance with the terms and subject to the conditions set
forth herein.
3. Establishment of Escrow Fund and Deposit of Cash. Upon the execution of
this Escrow Agreement, Seller shall deliver to the Escrow Agent funds in the
amount of $5,000,000 and, upon prior notice from Buyer to the Escrow Agent Buyer
may deliver to the Escrow Agent additional funds at any time prior Release Date
(all of such funds, collectively, the "Escrow Fund"). The Escrow Fund shall be
held by the Escrow Agent in accordance with the terms and conditions hereinafter
set forth.
<PAGE>
4. Escrow and Indemnification. Upon the terms and subject to the conditions of
this Agreement, the Escrow Fund shall secure the indemnification obligations of
Seller pursuant to Sections 10.1(a) and 10.1(b) of the Purchase Agreement.
5. Investment of Escrow Fund. The Escrow Agent shall, as soon as reasonably
practical after it receives the Escrow Fund from Seller, and from time to time
during the term hereof, invest the Escrow Fund, including any interest generated
thereby and other distributions or earnings paid in respect thereof, in the U.S.
Government Portfolio of the Rodney Square Fund, a registered money market mutual
fund the investment advisor of which is an affiliate of the Escrow Agent and the
fees of such interment advisor paid by the Fund are addition to the fees of the
Escrow Agent hereunder. Escrow Agent may also invest the Escrow Fund in bank
money market accounts, bank short-term certificates of deposit, short-term
United States Government securities, or other interest-bearing accounts and
funds as the Escrow Agent shall select giving due regard to the protection and
preservation of principal, provided that any such certificates of deposit and
short-term securities shall have a maturity not more than 30 days after
purchase. The Escrow Agent shall hold the Escrow Fund in escrow upon the terms
and subject to the conditions of this Agreement. The Escrow Agent shall not be
responsible for any loss suffered from any investment except loss resulting from
its gross negligence or willful misconduct.
6. Interest, Etc.
(a) All interest, distributions and other earnings generated
by or paid in respect of the Escrow Fund shall be added to the Escrow Fund after
setting aside reserves sufficient for the payment of any Federal income taxes
imposed thereon and the parties hereto agree that such interest, distributions
or other earnings shall constitute additional security for the indemnification
obligations referred to in Paragraph 4.
(b) The parties hereto agree that (i) the Escrow Fund
established by this Agreement shall be treated for Federal income tax purposes
as a trust, all of which is deemed to be owned by Seller, under subpart E of
Part I of subchapter J of the Code, and (ii) Seller shall report for Federal,
state and local income tax purposes all income or other tax items derived from
the investment of or otherwise with respect to the Escrow Fund. Prior to the
filing by Seller of any income tax return that includes income reportable
pursuant to the preceding sentence, the Escrow Agent shall pay to Seller an
amount equal to 45% of such income promptly after delivery of a request and
instructions for payment to the Escrow Agent.
7. Payments from the Escrow Fund. Payment shall be made from the Escrow Fund
promptly upon Escrow Agent's receipt of, and in accordance with, written
instructions signed jointly by Buyer and Seller and delivered in accordance with
Paragraph 19. In order to be
<PAGE>
effectively given, any such written instructions shall refer to the particular
Section of the Purchase Agreement pursuant to which Seller is indemnifying Buyer
out of the Escrow Fund. Upon delivery of such written instructions to the Escrow
Agent, payment may be made to Buyer, Seller or any third party designated by
them therein.
8. Release to Seller from Escrow. On the last Business Day of the calendar
month that is the fourteenth month after the month in which the Closing occurs
(the "Release Date"), the Escrow Agent shall disburse to Seller all remaining
amounts, including all interest, distributions and other earnings, held in the
Escrow Fund; provided, however, that if the Escrow Agent shall have received,
prior to the Release Date, a notice from Purchaser of any claim against the
Escrow Fund that it may have under Section 10.1(a) of the Purchase Agreement,
then the Escrow Agent shall continue to hold the amount of such claim in the
Escrow Fund until such claim is finally resolved; and provided, further, that in
the event any such claim by Purchaser is determined by the party resolving such
claim to have been frivolous, then Purchaser shall be required to pay to Seller
interest on any amount held in the Escrow Fund in respect of such frivolous
claim, from and after the Release Date to the date such amount is released to
Seller, at a rate of 12.5% per annum. The Escrow Agent shall pay any and all
amounts to due to Seller in accordance with written instructions delivered to
the Escrow Agent by Seller in accordance with Paragraph 19.
9. Termination of Escrow. This Agreement shall terminate upon the later of (i)
the release by the Escrow Agent of all amounts contained in the Escrow Fund in
accordance with this Agreement, and (ii) the Release Date; provided, however,
that the provisions of Paragraphs and 10(g) and 20 shall survive such
termination or the resignation or removal of the Escrow Agent pursuant to
Paragraph 11(a).
10. Responsibilities and Liabilities of Escrow Agent. The acceptance by the
Escrow Agent of its duties hereunder is subject to the following terms and
conditions, which the parties hereto hereby agree shall govern and control with
respect to the Escrow Agent's rights, duties, liabilities and immunities.
(a) The Escrow Agent shall not have any duty or obligation hereunder other
than to take such specific actions as are required of it from time to time under
the provisions hereof.
(b) The Escrow Agent shall be protected in acting upon any written notice,
request, waiver, consent, receipt or other paper or document furnished to it
pursuant to and in accordance with the provisions of this Escrow Agreement, not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained which it in good faith believes to be genuine and what it
<PAGE>
purports to be. The Escrow Agent shall not be under any duty to accept or to act
upon any notice, request or other paper or document given, made or furnished
which is not given, made or furnished pursuant to or in accordance with the
provisions of this Escrow Agreement.
(c) The Escrow Agent shall not be liable for any error of judgment, or for
any act done or steps taken or omitted by it in good faith, or for any mistake
of fact or law, or for anything which it may do or refrain from doing in
connection herewith, except its own gross negligence or willful misconduct,
following a final order by a court of competent jurisdiction.
(d) The Escrow Agent may consult with, and obtain advice from legal counsel
in the event of any question regarding its rights, duties, liabilities and
immunities hereunder, and it shall incur no liability and shall be fully
protected in acting or refusing to act in good faith in accordance with the
opinion and instructions of such counsel.
(e) The Escrow Agent shall not be bound by any notice of a claim, or demand
with respect thereto, or any waiver, modification, amendment, termination or
rescission of this Escrow Agreement, unless received by it in writing in
accordance with the provisions of this Escrow Agreement, and, if its duties
herein are affected thereby, unless it shall have given its prior written
consent thereto.
(f) Should any controversy arise between Buyer, Seller and/or the Escrow
Agent with respect to this Agreement or any rights to delivery or payment of the
Escrow Fund or any portion thereof, the Escrow Agent shall have the right to
institute a bill of interpleader or other appropriate legal action in any court
of competent jurisdiction to determine the rights of the parties. The cost of
such services shall be deemed an expense of the Escrow Agent hereunder.
(g) The Escrow Agent shall be entitled to be indemnified, held harmless and
defended, jointly and severally by Buyer and Seller, from and against any and
all losses, claims, liabilities and expenses, including the reasonable fees of
its counsel, which it may suffer or incur hereunder or in connection herewith,
except such as shall result from its gross negligence or willful misconduct, as
found in a final order by a court of competent jurisdiction. If any such losses,
claims, liabilities or expenses result from any acts or omissions of Buyer or
Seller, the Escrow Agent shall have the right to recover such losses, claims,
liabilities and expenses from Buyer or Seller, as the case may be. The Escrow
Agent shall have a first lien on the Escrow Fund to secure its rights under this
subparagraph 10(g).
11. Successor Escrow Agent.
<PAGE>
(a) In the event the Escrow Agent becomes unavailable or
unwilling to continue in its appointed capacity hereunder, the Escrow Agent may
resign and be discharged from its duties or obligations hereunder by giving
notice of resignation to each of the parties hereto, specifying a date not less
than 60 days following such notice date when such resignation will take effect;
provided, however, that such resignation shall in no event take effect before
the successor to the Escrow Agent will have been appointed pursuant to this
Paragraph 11. Buyer and Seller shall mutually agree upon the appointment of a
successor to the Escrow Agent. The Escrow Agent shall promptly transfer the
Escrow Fund to such designated successor.
(b) Any corporation into which the Escrow Agent in its
individual capacity 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 Escrow Agent in its individual capacity will be a
party, or any corporation to which substantially all of the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Agreement without further act.
12. Assignment and Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, representatives, successors and assigns.
13. Amendments. This Agreement may be amended or modified at any time or from
time to time in a writing executed by all of the parties hereto; provided,
however, that in the event the Escrow Agent does not agree to an amendment
otherwise agreed by each of Buyer and Seller, the Escrow Agent shall resign and
a successor escrow agent shall be appointed in accordance with Paragraph 11(a).
14. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
15. Entire Agreement. This Agreement and the Purchase Agreement together
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, written or oral, between the parties hereto with respect to the
subject matter hereof.
16. Waivers. No waiver by any party hereto of any condition or of any breach
of any provision of this Agreement shall be effective unless in writing and
signed by a duly authorized representative of the party or parties granting such
waiver. No waiver by any party of any such condition or breach in any one
instance shall be deemed to be a further or continuing waiver of such condition
or breach or a waiver of any other condition or breach of any other provision
contained herein.
<PAGE>
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
18. Consent to Jurisdiction. With respect to any dispute arising under this
Agreement relating to (i) the delivery, ownership or right of possession of the
Fund or any portion thereof, (ii) the facts forming the basis of any
determination by the Escrow Agent hereunder, (iii) the duties of the Escrow
Agent hereunder or (iv) any other question arising hereunder, each of the
parties hereto consents to submit itself to the personal jurisdiction of any
state or federal court located in Wilmington, Delaware and irrevocably agrees
that it will not bring any action or proceeding relating to this Agreement in
any court other than a state or federal court located within Wilmington,
Delaware. Each of the parties hereto furthermore consents to service of process
upon it in the manner set forth in Paragraph 19 and accepts for itself and in
connection with its respective properties, generally and unconditionally, the
exclusive jurisdiction of the aforesaid courts and waives any defense of forum
non conveniens, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement.
19. Notices. All notices, requests, demands, notice of claims and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand with receipt or upon
receipt when mailed by certified mail, return receipt requested, postage
prepaid, properly addressed as follows, or to such other persons or addresses as
may be specified in a notice given in accordance herewith:
If to the Escrow Agent:
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890
Facsimile: 302-651-8882
Attention: Richard M. Sutton, Corporate Trust Administration
If to Buyer:
Fidelity Leasing, Inc.
7 E. Skippack Pike
Ambler, Pennsylvania 19002
<PAGE>
Facsimile: 215-619-2830
Attention: Abraham Bernstein
If to Seller:
Japan Leasing (U.S.A.), Inc.
1251 Avenue of the Americas, 48th Floor
New York, New York 10020
Facsimile: 212-403-3150
Attention: Mr. Jun Ogihara
20. Escrow Agent Compensation. Escrow Agent shall be entitled to compensation
equal to (i) the sum of Five Thousand Eight Hundred Dollars ($5,800) (the
"Initial Fee") and an additional Four Hundred Sixteen Dollars ($416) per month
(the "Monthly Fee") for each month, if any, that it continues to act as Escrow
Agent hereunder after the Release Date ( the"Escrow Agent Fee") and (ii)
reimbursement for all reasonable out-of-pocket expenses incurred in performing
its duties under this Agreement, which fee and expenses shall be paid equally by
Buyer and Seller. The Initial Fee shall be payable at Closing and the Monthly
Fee shall be billed and due promptly upon receipt of an invoice. To the extent
not paid, the Escrow Agent shall be entitled to deduct amounts due from the
Escrow Fund.
21. The Escrow Agent may have other account relationships with the parties
hereto, none of which shall disqualify the Escrow Agent from serving hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the day and year first above written.
WILMINGTON TRUST COMPANY, Escrow Agent
By: _____________________________
Name:
Title:
FIDELITY LEASING, INC., Buyer
By: ______________________________
Name:
Title:
JAPAN LEASING (U.S.A.), INC., Seller
By: ______________________________
Name:
Title:
<PAGE>
Exhibit 7.1(i)
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February 4, 1999 (as the same may from
time to time be amended, restated, supplemented or otherwise modified, this
"Security Agreement"), is entered into among Fidelity Leasing, Inc., a
Pennsylvania corporation (the "Borrower"), JLA Credit Corporation, a Delaware
Corporation (the "Debtor"), and Japan Leasing (U.S.A.), Inc., a Delaware
corporation (together with its successors and permitted assigns, the "Secured
Party").
W I T N E S S E T H:
A. Borrower has concurrently with the execution of this Security Agreement,
delivered to the Secured Party a Promissory Note dated as of the date hereof (as
amended, restated, supplemented or otherwise modified, the "Promissory Note").
B. The Debtor has and will have derived substantial direct and indirect
benefit from the Promissory Note and loans made to the Borrower thereunder.
C. It is a condition precedent to the acceptance by the Secured Party of
the Promissory Note that the Debtor execute and deliver this Security Agreement.
D. To provide assurance for the payment of the obligations of Borrower
under the Promissory Note, the Debtor hereby provides to the Secured Party a
security interest in certain tangible property now owned or hereafter acquired
by the Debtor, as more fully described herein.
NOW, THEREFORE, in consideration of the premises, the agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in order to induce the Secured Party to
accept the Promissory Note, the Debtor hereby jointly and severally agrees with
the Secured Party as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Promissory
Note.
"Account Debtor" shall mean the person who is obligated on a Receivable.
<PAGE>
"Accounts" shall mean "accounts" as such term is defined in Section 9-106
of the UCC.
"Chattel Paper" shall mean "chattel paper" (as such term is defined in
Section 9-105(1)(b) of the UCC) related to the Collateral.
"Collateral" shall have the meaning assigned to it in Article II hereof.
"Collateral Records" shall mean books, records, computer software, computer
printouts, customer lists, blueprints, technical specifications, manuals, and
similar items which relate to any Collateral.
"Documents" shall mean "documents" as such term is defined in Section
9-105(1)(f) of the UCC.
"Indebtedness" shall mean (a) all indebtedness of the Debtor, for borrowed
money or for the deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (b) any other indebtedness of
the Debtor, which is evidenced by a note, bond, debenture or similar instrument,
(c) all obligations of the Debtor, under capitalized leases, (d) all obligations
of the Debtor, in respect of acceptances issued or created for the account of
the Debtor, (e) all liabilities secured by any Lien on any property owned by the
Debtor, even though the Debtor has not assumed or otherwise become liable for
the payment thereof, and (f) all obligations of the Debtor, in respect of
interest rate or currency exchange hedging agreements or arrangements, including
swaps.
"Instruments" shall mean "instruments" (as such term is defined in Section
9-105(1)(i) of the UCC) related to the Collateral.
"Knowledge" shall mean, with respect to any Person, the current actual
knowledge of a natural person or the officers or similar agents of any Person
that is a corporation.
"Lease Contract" shall mean each of the lease contracts (as may be amended,
supplemented or otherwise modified from time to time), listed in the schedule
attached hereto as Schedule I, between the Debtor and its customers.
"Material Adverse Effect" means, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), a materially adverse effect on:
(a) the financial condition, operations or prospects of the Debtor
taken as a whole; or
<PAGE>
(b) the ability of the Debtor to timely and fully perform any of its
respective material payment obligations or other material obligations under this
Security Agreement or any other credit document to which it is a party.
"Money" shall mean "money" as such term is defined in Section 1-201(24) of
the UCC.
"Permitted Lien" shall mean Liens which secure Senior Obligations.
"Person" shall mean and include any natural person, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Proceeds" shall mean "proceeds" as such term is defined in Section
9-306(1) of the UCC.
"Receivables" shall mean, with respect to the Collateral, all rights to
payment for goods sold or leased or services rendered, whether or not earned by
performance and all rights in respect of the Account Debtor, including, without
limitation, all such rights in which the Debtor has any right, title or interest
by reason of the purchase thereof by the Debtor and including, without
limitation, all such rights constituting or evidenced by any Account, Chattel
Paper, Instrument, note, contract (including any lease or rental agreement or
sales contract with respect to property or any secured or unsecured loan with
respect to which the Debtor is a lessor, seller, lender, the Secured Party, note
holder or obligee), invoice, purchase order, draft, acceptance, intercompany
account, security agreement, or other evidence of indebtedness or security,
together with (a) any collateral assigned, hypothecated or held to secure any of
the foregoing and the rights under any security agreement granting a security
interest in such collateral, (b) all goods, the sale of which gave rise to any
of the foregoing, including, without limitation, all rights in any returned or
repossessed goods and unpaid seller's rights, (c) all guarantees, endorsements
and indemnifications on, or of, any of the foregoing, and (d) all powers of
attorney for the execution of any evidence of indebtedness or security or other
writing in connection therewith.
"Receivables Records" shall mean (a) all original copies of all documents,
instruments or other writings evidencing the Receivables, (b) all books,
correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to Receivables, including, without
limitation, all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems and other papers and documents relating to the
Receivables, whether in the possession or under the control of the Debtor or any
computer bureau or agent from time to time acting for the Debtor or otherwise,
(c) all evidences of the filing of financing statements and the registration of
other instruments in connection therewith and amendments, supplements or other
modifications thereto, notices to other creditors or secured parties, and
certificates, acknowledgments, or other writings, including, without limitation,
lien search reports, from filing or other registration officers, (d) all credit
information, reports and memoranda relating thereto, and (e) all other written
information related in any way to the foregoing or any Receivable.
<PAGE>
"Secured Obligations" shall mean all obligations, liabilities and
indebtedness of every nature of the Borrower or the Debtor from time to time
owing to the Secured Party now existing or hereafter incurred, arising under or
in connection with the Promissory Note or this Security Agreement.
"Senior Obligations" shall mean all Senior Obligations as defined in
Section 4.8 of the Note, all Indebtedness incurred by the Debtor, and all
ownership interests in the Collateral (through trusts or otherwise) the proceeds
of which are used (i) to fund, or to refinance, the acquisition of assets which
are subject to leases or conditional sales agreements in favor of the Debtor, or
(ii) for the working capital needs of the Debtor.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time
in the State of California.
ARTICLE II
GRANT OF SECURITY INTERESTS
2.1 Grant of Security Interests. As security for the prompt and complete
payment and performance in full of all the Secured Obligations, the Debtor
hereby grants to the Secured Party a security interest in, and continuing lien
on, all of the Debtor's right, title and interest in the Lease Contract, and the
following with respect thereto (excluding any permits, licenses or leased assets
obtained in the ordinary course of business in which a Lien thereon may not be
attached or an interest therein may not be transferred by law or the terms
thereof), in each case, whether now owned or existing or hereafter acquired or
arising, and wherever located (all of which being hereinafter collectively
called the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Collateral Records;
(iv) all Documents;
(v) all Money;
(vi) all Receivables;
(vii) all Receivables Records; and
<PAGE>
(viii) all accessions and additions to any or all of the foregoing, all
substitutions and replacements for any or all of the foregoing and all Proceeds
or products of any or all of the foregoing.
2.2 Subordination.
(a) Agreement to Subordinate. The Secured Party hereby covenants and agrees
that its rights with respect to the Collateral are expressly "subordinate and
junior in priority and in right of payment" as defined below to all Senior
Obligations, including without limitation with respect to the rights of any
holder of Senior Obligations in or to any collateral securing such obligations.
The Secured Party acknowledges and agrees that these subordination provisions
set forth herein are intended to be an inducement and a consideration to each
holder of any Senior Obligation, whether such Senior Obligation was created or
acquired, or whether the lien and security interest in any collateral securing
such obligations was created or perfected, before or after the execution of this
Security Agreement, to continue to hold, or to acquire and continue to hold,
such Senior Obligation and such holder of Senior Obligations shall be deemed
conclusively to have relied on such subordination provisions in continuing to
hold, or acquiring and continuing to hold, such Senior Obligations.
(b) "Subordinate and junior in priority and in right of payment" means
that:
(i) the Secured Party shall not have, by reason of its rights in the
Collateral, any claim to the assets of the Debtor, including without limitation
the Collateral, on parity with or prior to the claim of the Senior Obligations,
including without limitation any claim with respect to collateral securing such
obligations; and
(ii) unless and until the Senior Obligations have been paid in full and
any commitment to lend in respect thereof has been terminated, without the
express prior written consent of each holder of Senior Obligations, the Secured
Party will not exercise its rights under the Security Agreement to foreclose or
realize upon any of the Collateral.
(c) The expressions "prior payment in full", "payment in full", "paid in
full" and any other similar terms or phrases when used herein with respect to
the Senior Obligations shall mean the payment in full in cash, in immediately
available funds, of all of the Senior Obligations.
2.3 Additional Provisions concerning Subordination.
(a) The Secured Party and the Debtor agree that upon any payment or
distribution of the assets of the Debtor upon a total or partial liquidation or
a total or partial dissolution of the Debtor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Debtor or its
property:
<PAGE>
(i) without limitation on Section 2.2(b)(ii), all Senior Obligations
shall be paid in full before any payment or distribution is made to, or any
foreclosure or realization upon the Collateral is effected by, the Secured Party
by reason of its rights under this Security Agreement; and
(ii) any payment or distribution of assets of the Debtor, whether in
cash, property or securities, to which the Secured Party would be entitled
except for the provisions hereof, shall be paid or delivered by the Debtor, or
any receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or
other person or entity making such payment or distribution, directly to the
holders of the Senior Obligations or their representative, ratably in accordance
with the amounts thereof, to the extent necessary to pay in full all Senior
Obligations, before any payment or distribution shall be made to the Secured
Party.
(b) If any payment or distribution from the assets of the Debtor, whether
consisting of money, property or securities, be collected or received by the
Secured Party in respect of its rights under this Security Agreement, the
Secured Party forthwith shall deliver the same to the holders of the Senior
Obligations or their representative, ratably in accordance with the amounts
thereof, if required, to be applied to the payment or prepayment of the Senior
Obligations until the Senior Obligations are paid in full. Until so delivered,
such payment or distribution shall be held in trust by the Secured Party as the
property of such holders of the Senior Obligations, segregated from other funds
and property held by the Secured Party.
2.4 Consent of the Secured Party.
(a) The Secured Party consents that, without the necessity of any
reservation of rights against the Secured Party, and without notice to or
further assent by the Secured Party:
(i) any demand for payment of any Senior Obligations made by any holder
of Senior Obligations may be rescinded in whole or in part by or on behalf of
such holder, and any Senior Obligation may be continued, and the Senior
Obligations, or the liability of the Debtor or any guarantor or any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, or any obligation or liability of the
Debtor or any other party under any agreement, may, from time to time, in whole
or in part, be renewed, extended, modified, accelerated, compromised, waived,
surrendered or released by or on behalf of any holder of Senior Obligations; and
(ii) the terms and conditions of any Senior Obligation may be amended,
increased, modified, supplemented or terminated, in whole or in part, as the
holders thereof may deem advisable from time to time, and any Collateral may be
sold, exchanged, waived, surrendered or released, in each case all without
notice to or further assent by the Secured Party, and all without impairing,
abridging, releasing of affecting the subordination provided for herein.
<PAGE>
(b) The Secured Party waives any and all notice of (i) the creation,
renewal, extension, increase or accrual of any of the Senior Obligations and
notice of or proof of reliance by the holders thereof. The Secured Party
acknowledges and agrees that the holders of the Senior Obligations have relied
upon the subordination provided for herein in entering into any agreement with
respect to the Senior Obligations. The Secured Party waives notice of or proof
of reliance on this Agreement and protest, demand for payment and notice of
default.
2.5 Senior Obligations Unconditional. All rights and interest hereunder of
the holders of Senior Obligations, and all agreements and obligations of the
Secured Party and the Debtor hereunder, shall remain in full force and effect
irrespective of:
(a) any lack of validity or enforceability of any document, instrument or
agreement relating to any Senior Obligation;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Senior Obligations, or any amendment or waiver or
other modification, whether by course of conduct or otherwise, of the terms of
any Senior Obligations;
(c) any exchange, release or nonperfection of any security interest in the
Collateral, or any release, amendment, waiver or other modification, whether in
writing or by course of conduct or otherwise, of all or any of the Senior
Obligations or any guarantee thereof; or
(d) any other circumstances which otherwise might constitute a defense
available to, or a discharge of, the Debtor in respect of the Senior Obligations
or this Agreement.
2.6 Further Assurances. The Secured Party and the Debtor at their own
expense and at any time from time to time, upon the written request of the
holders of any Senior Obligations or their representatives, will promptly and
duly execute and deliver such further instruments and documents and take such
further actions as such holders of Senior Obligations or their representatives
reasonably may request for the purposes of obtaining or preserving the full
benefits hereof and of the rights and powers herein granted.
2.7 Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this section are coupled with an interest and are
irrevocable until the Senior Obligations are paid in full and all commitments in
respect thereof are terminated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Party, which
representations and warranties shall survive execution and delivery of this
Security Agreement, as follows:
<PAGE>
3.1 Validity, Perfection and Priority. Upon the proper filing in the
locations identified in Schedule II hereto of UCC-1 Financing Statements naming
the Debtor as debtor and the Secured Party as the Secured Party and identifying
the Collateral, the security interests in the Collateral granted to the Secured
Party hereunder will constitute valid and continuing perfected security
interests in the Collateral to the extent a security interest can be perfected
in such Collateral by filing of a UCC-1 Financing Statement in such locations,
subject to Permitted Liens.
3.2 No Liens; Other Financing Statements. (a) To the best of Debtor's
knowledge, except for the Lien granted to the Secured Party hereunder and
Permitted Liens, the Debtor own or otherwise has rights in and as to all
Collateral, whether now existing or hereafter acquired, will continue to own or
otherwise have rights in each item of the Collateral free and clear of any and
all Liens, rights or claims of all other Persons other than Permitted Liens, and
the Debtor will defend the Collateral against all other claims and demands of
all Persons at any time claiming the same or any interest therein adverse to the
Secured Party.
(b) To the best of the Debtor's knowledge, no financing statement or
other evidence of Lien covering or purporting to cover any of the Collateral is
on file in any public office other than financing statements filed or to be
filed in connection with the security interests granted to the Secured Party
hereunder or in connection with Permitted Liens.
3.3 Chief Executive Office. The chief executive offices of the Debtor is
located at the address set forth on Annex A hereto.
3.4 Receivables.
(a) To the best of the Debtor's knowledge, no Receivables which are
evidenced by Chattel Paper require the consent of the Account Debtor in respect
thereof in connection with assignment hereunder and no other Receivable purports
to prohibit assignment or require the consent of the Account Debtor thereunder
in connection with assignment.
(b) To the best of the Debtor's knowledge, no Receivables are evidenced
by any Instrument which has not been delivered to the Secured Party.
The representations and warranties contained in this Section shall be
deemed to be repeated by the Debtors as of the time when each Receivable arises.
3.5 Fair Labor Standards Act. Any goods and services now or hereafter
produced by the Debtor and included in the Collateral have been and will be
produced in compliance with the requirements of the Fair Labor Standards Act, as
amended.
<PAGE>
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Party that from and after
the date of this Security Agreement:
4.1 Further Assurances. The Debtor will, from time to time at the expense
of the Debtor, promptly execute, deliver, file and record all further
instruments, endorsements and other documents, and take such further action as
the Secured Party may reasonably request in obtaining the full benefits of this
Security Agreement and of the rights, remedies and powers herein granted,
including, without limitation, the following:
(i) the filing of any financing statements, in form acceptable to the
Secured Party under the Uniform Commercial Code in effect in any jurisdiction
with respect to the liens and security interests granted hereby. The Debtor also
hereby authorizes the Secured Party to file any such financing statement without
the signatures of the Debtor to the extent permitted by applicable law. A
photocopy or other reproduction of this Security Agreement shall be sufficient
as a financing statement and may be filed in lieu of the original to the extent
permitted by applicable law. The Debtor will pay or reimburse the Secured Party
for all filing fees and related expenses;
(ii) upon request of the Secured Party, cause the Secured Party to be
listed as the lienholder on the certificate of title or ownership covering any
Collateral covered by such a certificate of title or ownership and to promptly
deliver evidence thereof to the Secured Party;
(iii) furnish to the Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Secured Party may reasonably
request, all in reasonable detail and in form satisfactory to the Secured Party.
4.2 Change of Name; Identity; Corporate Structure; Chief Executive Office.
The Debtor will not change its names, identities, corporate structures or the
locations of its chief executive offices without (i) giving the Secured Party at
least thirty (30) days' prior written notice clearly describing such new names,
identities, corporate structures or new locations and providing such other
information in connection therewith as the Secured Party may reasonably request,
and (ii) taking all action satisfactory to the Secured Party as the Secured
Party may reasonably request to maintain the security interest of the Secured
Party in the Collateral intended to be granted hereby at all times fully
perfected with the same or better priority and in full force and effect.
4.3 Maintain Records. The Debtor will keep and maintain at its own cost and
expense satisfactory and complete records of the Collateral. The Debtor will
permit the Secured Party to review such records at such times and locations as
the Secured Party may reasonably request.
<PAGE>
4.4 Payment of Obligations. The Debtor will pay when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral, as
well as all material claims of any kind (including, without limitation, claims
for labor, materials, supplies and services) against or with respect to the
Collateral (other than Permitted Liens), except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) the
Debtor has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
4.5 Performance by the Secured Party of the Debtor's Obligations;
Reimbursement. If the Debtor fails to perform or comply with any of its
undertakings contained herein and such failure to perform or comply results in
an Event of Default, or an Event of Default otherwise exists, the Secured Party,
upon prior written notice to the Debtor, may, but is not obligated to, perform
or comply or cause performance or compliance therewith and the expenses of the
Secured Party incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to the default rate
referred to in the Promissory Note, shall be payable by the Debtor to the
Secured Party on demand and such reimbursement obligation shall be secured
hereby.
4.6 Delivery of Instruments. Unless the Debtor shall have delivered the
same in connection with Permitted Liens, if any Instrument shall at any time
comprise any portion of the Collateral, the Debtor shall within 10 days notify
the Secured Party thereof and, upon request, promptly deliver such Instrument to
the Secured Party appropriately indorsed or assigned or to the order of the
Secured Party or in such other manner as shall be reasonably satisfactory to the
Secured Party.
4.7 Delivery of Chattel Paper. Unless the Debtor shall have delivered the
same in connection with Permitted Liens, if Chattel Paper shall at any time
comprise any portion of the Collateral, the Debtor shall within 10 days notify
the Secured Party thereof and, upon request, promptly deliver such Chattel Paper
to the Secured Party.
4.8 Receivables. (a) Other than (i) in the ordinary course of business as
generally conducted by them over a period of time and (ii) while no Default or
Event of Default shall have occurred and be continuing, the Debtor shall not (w)
grant any extension or renewal of the time of payment of any material
Receivable, (x) compromise or settle any dispute, claim or legal proceeding with
respect to any material Receivable for less than the total unpaid balance
thereof, (y) release, wholly or partially, any Person liable for the payment
thereof, or (z) allow any material credit or discount thereon.
<PAGE>
(b) The Debtor shall use its reasonable efforts (including, without
limitation, prompt and diligent exercise of each material right they may have
under any Receivable) to cause to be collected from each Account Debtor, as and
when due (including, without limitation, amounts which are delinquent, such
amounts to be collected in accordance with the Debtor's past practices and
ordinary course of business and generally accepted lawful collection procedures)
any and all amounts owing under or on account of any Receivable. The reasonable
costs of collection, whether incurred by the Debtor or the Secured Party shall
be borne by the Debtor and if incurred by the Secured Party shall be reimbursed,
together with interest thereon at a rate equal to the Default Rate, to the
Secured Party upon demand, and such reimbursement obligation shall be secured
hereby.
ARTICLE V.
POWER OF ATTORNEY
5.1 Attorney-in-Fact. The Debtor hereby irrevocably appoints the Secured
Party as the Debtor's attorney-in-fact, with full authority in the place and
stead of the Debtor and in the name of the Debtor or otherwise, from time to
time, during the continuation of an Event of Default, in the Secured Party's
reasonable discretion to take any action and to execute any instrument,
including but not limited to financing and continuation statements, which the
Secured Party may deem necessary or advisable, subject to the terms and
conditions of this Security Agreement, to accomplish the purposes of this
Security Agreement, including, without limitation, (a) to receive, endorse and
collect all instruments made payable to the Debtor representing any distribution
in respect of the Collateral or any part thereof and to give full discharge for
the same, and (b) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral, and to file any claims or take any action or
institute any proceedings which the Secured Party may deem necessary or
desirable for the collection of any of the Collateral or to enforce the rights
of the Secured Party with respect to any of the Collateral. Secured Party hereby
acknowledges and agrees that the Power of Attorney granted herein is and shall
be subject to Section 2.2 (b)(ii) of this Agreement.
5.2 Ratification. The Debtor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. The power of attorney granted
pursuant to Section 5.1 is a power coupled with an interest and shall be
irrevocable.
<PAGE>
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
6.1 Rights and Remedies Generally. If an Event of Default shall occur and
be continuing, then and in every such case, the Secured Party shall have all the
rights of a the Secured Party under the UCC or the Uniform Commercial Code in
any applicable jurisdiction, shall have all rights now or hereafter existing
under all other applicable laws, and, subject to any mandatory requirements of
applicable law then in effect, shall have all the rights set forth in this
Security Agreement and all the rights set forth with respect to the Collateral
or this Security Agreement in any other agreement between the parties, provided
that the exercise of such rights shall be subject to Section 2.2(b)(ii) of this
Agreement. Such rights shall include, without limitation, the right to:
(a) recover the reasonable fees and expenses incurred by the Secured
Party in the enforcement of the Secured Obligations and this Security Agreement,
including reasonable fees, expenses and disbursements of agents and counsel to
the Secured Party;
(b) personally, or by agents or attorneys, immediately take possession
of the Collateral or any part thereof, from the Debtor or any other Person who
then has possession of any part thereof with or without notice or process of
law, and for that purpose may enter upon the Debtor's premises where any of the
Collateral is located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities of the Debtor;
(c) sell, assign or otherwise liquidate, or direct the Debtor to sell,
assign or otherwise liquidate, any or all of the Collateral or any part thereof,
and take possession of the proceeds of any such sale or liquidation;
(d) use, manage, operate and control the Collateral and the Debtor's
businesses and properties to preserve the Collateral or its value, including,
without limitation, the rights to take possession of all of the Debtor's
premises and property, to exclude any third parties, whether or not claiming
under the Debtor, from such premises and property, to make repairs,
replacements, alterations, additions and improvements to the Collateral, and to
dispose of all or any portion of the Collateral in the ordinary course of the
Debtor's business; and
(e) instruct the obligor or obligors on any agreement, instrument or
other obligation constituting the Collateral to make any payment required by the
terms of such instrument, agreement or obligation directly to the Secured Party.
Notwithstanding the foregoing, the terms of the UCC or any other applicable law,
no such instruction or notice shall be given prior to an Event of Default under
Section 2.1 of the Promissory Note, notice thereof, and seven (7) days advance
notice to the Debtor of the proposed delivery of such instruction or notice.
<PAGE>
6.2 Assembly of Collateral. If an Event of Default shall occur and be
continuing, upon ten (10) days' notice to the Debtor, the Debtor shall, at its
own expense, assemble the Collateral (or from time to time any portion thereof)
and make it available to the Secured Party at any place or places designated by
the Secured Party.
6.3 Disposition of Collateral. The Secured Party shall give the Debtor
reasonable notice of the time and place of any public sale of the Collateral or
any part thereof or of the time after which any private sale or any other
intended disposition thereof is to be made. The Debtor agrees that the
requirements of reasonable notice to them shall be met if such notice is mailed,
postage prepaid to the addresses specified in Section 5.2 of the Promissory Note
(or such other addresses that the Debtor may provide to the Secured Party in
writing) at least ten (10) days before the time of any public sale or after
which any private sale may be made.
6.4 Recourse. The Debtor shall remain jointly and severally liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to satisfy the Secured Obligations. The Debtor shall also be
jointly and severally liable for all expenses of the Secured Party incurred in
connection with collecting such deficiency, including, without limitation, the
reasonable fees and disbursements of any attorneys employed by the Secured Party
to collect such deficiency.
6.5 Expenses; Attorneys Fees. The Debtor shall reimburse the Secured Party
for all its expenses in connection with the exercise of its rights hereunder,
including, without limitation, all reasonable attorneys' fees and legal expenses
incurred by the Secured Party. All such expenses shall be secured hereby.
6.6 Limitation on Duties Regarding Preservation of Collateral. (a) the
Secured Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account.
(b) The Secured Party shall have no obligation to take any steps to
preserve rights against prior parties to any Collateral.
(c) Neither the Secured Party nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Debtor or otherwise.
<PAGE>
ARTICLE VII
SPECIAL PROVISIONS REGARDING RECEIVABLES
7.1 The Debtor Remains Liable under Receivables. Anything herein to the
contrary notwithstanding (including without limitation the grant of any rights
to the Secured Party), the Debtor shall remain liable under each of the
Receivables to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Receivable. The Secured Party shall not have
any obligation or liability under any Receivable (or any agreement giving rise
thereto) or by reason of or arising out of this Security Agreement or the
receipt by the Secured Party of any payment relating to such Receivable pursuant
hereto, nor shall the Secured Party be obligated in any manner to perform any of
the obligations of the Debtor under or pursuant to any Receivable (or any
agreement giving rise thereto), to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Receivable (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
7.2 Notice to Account Debtor. Subject to the prior rights of any holder of
Senior Obligations, at any time while an Event of Default shall have occurred
and be continuing, (a) the Secured Party may, and upon request of the Secured
Party, the Debtor shall, notify each Account Debtor that the Accounts have been
assigned to the Secured Party and that payments in respect thereof shall be made
directly to the Secured Party and (b) the Secured Party may in its own name or
in the name of others communicate with each Account Debtor and parties to verify
with them to its satisfaction the existence, amount and terms of any
Receivables.
ARTICLE VIII
MISCELLANEOUS
8.1 Indemnity. The Debtor agrees to indemnify, reimburse and hold the
Secured Party and its officers, directors, employees, representatives and agents
("Indemnitees") harmless from any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs or expenses or
disbursements (including reasonable attorneys' fees and expenses) for whatsoever
kind or nature (other than those relating to or arising out of willful
misconduct or grossly negligent acts or omissions of the Secured Party or its
agents or employees) which may be imposed on, asserted against or incurred by
any of the Indemnitees in any way relating to or arising out of this Security
Agreement or the transactions contemplated hereby or the exercise of rights or
remedies hereunder. The obligations of the Debtor under this Section shall be
secured hereby and shall survive payment and performance or discharge of the
Secured Obligations and the termination of this Security Agreement.
<PAGE>
8.2 Governing Law. THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAW THEREOF.
8.3 Notices. Except as otherwise expressly provided herein, all notices,
requests and demands to or upon the respective parties hereto to be effective
shall be governed by the provisions of Section 5.2 of the Promissory Note.
8.4 Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of the Debtor, the Secured Party, all future holders of
the Secured Obligations and their respective successors; provided, however, that
the Debtor may not assign or transfer any of its rights or obligations under
this Security Agreement without the prior written consent of the Secured Party.
8.5 Waivers and Amendments. None of the terms or provisions of this
Security Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the party against whom enforcement is
sought.
8.6 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Secured Party in exercising any right, power or privilege hereunder, and no
course of dealing between the Debtor and the Secured Party, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Secured Party would otherwise have on any
future occasion. The rights and remedies herein expressly provided are
cumulative and may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by security
agreement or now or hereafter existing under applicable law. No notice to or
demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Party to any other or future action in any
circumstances without notice or demand.
8.7 Termination; Release. This Security Agreement shall terminate upon the
date upon which the Secured Obligations have been indefeasibly paid and
performed in full and the Promissory Note has terminated. Upon termination of
this Security Agreement, the Secured Party, at the request and sole expense of
the Debtor, shall execute and deliver to the Debtor the proper instruments,
agreements, statements and acknowledgments (including UCC termination
statements) acknowledging the termination of this Security Agreement, and shall
duly assign, transfer and deliver to the Debtor, without recourse,
representation or warranty of any kind whatsoever, such of the Collateral as may
be in possession of the Secured Party and has not theretofore been disposed of,
applied or released.
<PAGE>
8.8 Headings Descriptive. The headings of the several Sections and
subsections of this Security Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Security Agreement.
8.9 Severability. In case any provision in or obligation under this
Security Agreement or the Secured Obligations shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
8.10 Borrower's Assurance of Performance of Secured Obligations. The
Borrower hereby covenants that it shall, or shall cause the Debtor to, perform
all Secured Obligations hereunder in accordance with their terms.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be duly executed and delivered as of the date first above
written.
Fidelity Leasing, Inc., as Borrower
By: __________________________________
Name:
Title:
<PAGE>
JLA Credit Corporation, as Debtor
By: __________________________________
Name:
Title:
<PAGE>
Japan Leasing (U.S.A.), Inc., as the Secured Party
By: __________________________________
Name:
Title:
<PAGE>
SCHEDULE II
to Security Agreement
UCC-1 FILING JURISDICTIONS
--------------------------
A. JLA Credit Corporation
1. California Secretary of State
<PAGE>
Microfilm Number 9616-1285 Filed with the Department of State on Mar 04, 1996
--------- ------------
Entity Number 2682482
-------
ARTICLES OF INCORPORATION - FOR PROFIT
DSCB:15-1306/2102/2303/2702/2903/7102a (Rev 90)
Indicate type of domestic corporation (check one):
<TABLE>
<CAPTION>
<S> <C>
_X_Business-stock (15 Pa.C.S. ss.1306) ___Management (15 Pa.C.S. ss.2702)
___Business-nonstock (15 Pa.C.S. ss.2102) ___Professional (15 Pa.C.S. ss.2903)
___Business-statutory close (15.Pa.C.S. ss.2303) ___Cooperative (15 Pa.C.S. ss.7102A)
</TABLE>
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations) the
undersigned, desiring to incorporate a corporation for profit hereby state(s)
that:
1. The name of the corporation is: Fidelity Leasing, Inc.
----------------------
2. The (a) address of this corporation's initial registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is:
(a) 1521 Locust Street, 4th Floor Philadelphia PA 1910 Philadelphia
- --------------------------------------------------------------------------------
Number and Street City State Zip County
(b)c/o:__________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The corporation is incorporated under the provisions of the Business
Corporation Law of 1988.
4. The aggregate number of shares authorized is: 20,000,000 (other provisions,
----------
if any, attach 8 1/2 x 11 sheet)
5. The name and address, including street and number, if any, of each
incorporator is: Diane Vecchio, c/o Ledgewood Law Firm, P.C., 1521 Locust
Street, Philadelphia, PA 19102
6. The specified effect date, if any, is________________________________________
month day year hour, if any
7. Any additional provisions of the articles, if any, attach an 8 1/2 x 11
sheet.
8. Statutory close corporation only: Neither the corporation nor any shareholder
shall make an offering of any of its shares of any class that would constitute a
"public offering" within the meaning of the Securities Act of 1933 (15 U.S.C.
ss.77a et seq.).
9. Cooperative corporations only: (Complete and strike out inapplicable term)
The common bond of membership among its members/shareholders is:
IN TESTIMONY WHEREOF, the incorporator has signed these Articles of
Incorporation this 1st day of March, 1996.
____________________________________ ____________________________________
(Signature) (Signature)
ls\ \art.inc
<PAGE>
Microfilm Number______ Filed with the Department of State on June 25, 1999
Entity Number 2682482 ___________________________________________________
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 54 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby state(s) that:
1. The name of the corporation is: Fidelity Leasing, Inc.
________________________________________________________________________________
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the following
information to conform to the records of the Department):
1255 Wrights Lane West Chester Pennsylvania 19380 Chester
- --------------------------------------------------------------------------------
Number and Street City State Zip County
- --------------------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office
provider, the county in (b) shall be deemed the county in which the corporation
is located for venue and official publication purposes.
3. The Statute by or under which it was incorporated is: 15 Pa.C.S.ss.1306
-----------------
4. The date of incorporation is: March 4, 1996
-------------
5. (Check and, if appropriate, complete one of the following):
_x_ The Amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
___ The Amendment shall be effective on , 199 , at o'clock.
6. (Check one of the following):
_x_ The Amendment was adopted by the shareholders(or members) pursuant to
15 Pa.C.S.ss.1914(a) and (b).
___ The Amendment was adopted by the board of directors pursuant to
15 Pa.C.S. ss. 1914(c).
7. (Check and, if appropriate, complete one of the following):
___ The Amendment, adopted by the corporation, set forth in full, is as
follows:
_x_ The Amendment adopted by the corporation as set forth in Exhibit A is
attached hereto and made a part hereof.
8. (Check if the amendment restates the Articles):
___ The restated articles of incorporation superseded the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof
this_________ day of June, 1999.
Fidelity Leasing, Inc
-------------------------------
(name of corporation)
By:____________________________
(signature)
TITLE:_________________________
<PAGE>
EXHIBIT A
TO
ARTICLES OF AMENDMENT
OF
FIDELITY LEASING, INC.
a) Article 4 is hereby deleted and the following is substituted
therefor:
"The total number of shares of capital stock which the Corporation
shall have authority to issue is forty-one million (41,000,000) shares, of which
one million (1,000,000) shares shall be of preferred stock ("Preferred Stock"),
and forty million (40,000,000) shares shall be of common stock ("Common Stock").
As of the effective time of this amendment, each share of common
stock authorized immediately prior to this amendment shall be split and changed
into 0.6992 of a share of Common Stock.
At any time, and from time to time, the Preferred Stock may be
divided into and issued in one or more classes of further classes of shares, or
one or more series of shares, each of which classes or series shall be so
designated as to distinguish the shares thereof from the shares of all other
classes or series. All shares within any class of preferred stock shall be
identical except as to the following relative rights and preferences, in respect
of any or all of which there may be variations between different series of such
class, namely, the rate of dividend, the right of redemption, and the price at
which, and the terms and conditions on which, shares may be redeemed, the
amounts payable upon shares in the event of voluntary or involuntary
liquidation, sinking fund provisions for the redemption or purchase of shares,
the right of conversion, the terms and conditions on which shares may be
converted in the event the shares of any class or series of stock are issued
with the privilege of conversion, and the voting rights.
The Board of Directors of the Corporation is hereby expressly
vested with the authority, by resolution, from time to time to divide the
preferred stock of the Corporation into one or more classes or series as
aforesaid and to fix and determine the variable rights and preferences of any
class or series so established."
b) Article 7 is hereby added to read as follows:
"Non-Cumulative Voting. Voting for directors by the shareholders
entitled to vote shall be on a non-cumulative basis."
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
FIDELITY LEASING, INC.
Article 1
CORPORATION OFFICE
Section 1.1: Registered Office. The Corporation shall have and
continuously maintain in the Commonwealth of Pennsylvania a registered office at
an address to be designated from time to time by the Board of Directors which
may, but need not, be the same as its place of business.
Section 1.2: Other Offices. The Corporation may also have offices at
such other places as the Board of Directors may from time to time designate or
the business of the Corporation may require.
Article 2
SHAREHOLDER MEETINGS
Section 2.1: Place of Meeting. All meetings of the shareholders shall
be held at such time and place, within or without the Commonwealth of
Pennsylvania, as may be determined from time to time by the Board of Directors.
Section 2.2: Annual Meeting. An annual meeting of the shareholders for
the election of directors and the transaction of such other business as may
properly be brought before the meeting shall be held in each calendar year at
such time and place as may be determined by the Board of Directors.
Section 2.3: Special Meetings. Special meetings of the shareholders may
be called at any time by (i) the Chairman or President or (ii) the Board of
Directors. Except as required by law, the shareholders shall not be entitled to
call a special meeting of the shareholders.
<PAGE>
Section 2.4: Notice. Written notice of each meeting other than an
adjourned meeting of shareholders, stating the place and time, and, in the case
of a special meeting of shareholders, the general nature of the business to be
transacted, shall be provided to each shareholder of record entitled to vote at
the meeting at such address as appears on the books of the Corporation. Such
notice shall be given, in accordance with the provisions of Article 19 of these
Bylaws, at least (i) ten days prior to the day named for a meeting to consider a
fundamental change under Chapter 19 of the Pennsylvania Business Corporation Law
of 1988 (the "BCL") or (ii) five days prior to the day named for the meeting in
any other case.
Section 2.5: Use of Conference Telephone or Other Equipment. The Board
of Directors may provide by resolution with respect to a specific meeting or
with respect to a class of meetings that one or more shareholders may
participate in such meeting or meetings by means of conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear one another. Participation in the meeting by such means
shall constitute presence in person at the meeting. Any notice otherwise
required to be given in connection with any meeting at which participation by
conference telephone or other communications equipment is permitted shall so
specify.
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Article 3
QUORUM OF SHAREHOLDERS
Section 3.1: Quorum Required. A meeting of shareholders duly called
shall not be organized for the transaction of business unless a quorum is
present.
Section 3.2: Quorum Constituted. The presence, in person or by proxy,
of shareholders entitled to cast at least one-third of the votes that all
shareholders are entitled to cast on a particular matter to be acted upon at the
meeting shall constitute a quorum for purposes of consideration and action on
such matter.
Section 3.3: Withdrawal of Shareholders. The shareholders present at a
duly organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 3.4: Adjournment. If a meeting of shareholders cannot be
organized because a quorum is not present, those present in person or by proxy,
may, except as otherwise provided by statute, adjourn the meeting to such time
and place as they may determine, without notice other than an announcement at
the meeting, until the requisite number of shareholders for a quorum shall be
present in person or by proxy.
Article 4
VOTING RIGHTS
Section 4.1: Voting Rights. Except as may be otherwise provided by the
Corporation's Articles of Incorporation, at every meeting of shareholders, every
shareholder entitled to vote thereat shall be entitled to one vote for every
share having voting power standing in his name on the books of the Corporation
on the record date fixed for the meeting. Except as otherwise provided in the
Corporation's Articles of Incorporation, in each election of directors every
shareholder entitled to vote shall have the right to multiply the number of
votes to which he may be entitled by the number of directors to be elected in
the same election by the holders of the class or classes of shares of which his
shares are a part and he may cast the whole number of his votes for one
candidate or he may distribute them among any two or more candidates.
3
<PAGE>
Section 4.2: Action by Shareholders. Except as otherwise provided by
statute, at any duly organized meeting of shareholders the vote of the holders
of a majority of the votes cast shall decide any question brought before such
meeting.
Section 4.3: Voting by Ballot. Unless required by vote of the
shareholders before the voting for election of directors begins, the election of
such directors need not be by ballot.
Section 4.4: Nominations for Directors. No shareholder shall be
permitted to nominate a candidate for election as a director unless such
shareholder shall provide to the Secretary of the Corporation (a) information
about such candidate which is equivalent to the information concerning the
candidates nominated by the Board of Directors which was contained in the
Corporation's proxy statement for the immediately preceding annual meeting of
shareholders at which directors were elected if the Corporation distributed a
proxy statement to its shareholders in connection with such election of
directors or (b) if the Corporation did not distribute such a proxy statement,
the following information about such candidate: name, age, any position or
office held with the Corporation, a description of any arrangement between the
candidate and any other person(s) (naming such person(s)) pursuant to which he
was nominated as a director, principal occupation for the five years prior to
the election, the number of shares of the Corporation's stock beneficially owned
by the candidate and a description of any material transaction or series of
transactions to which the Corporation or any of its affiliates is a party and in
which the candidate or any of his affiliates has a direct or indirect material
interest, which description shall specify the candidate's interest in the
transaction, the amount of the transaction and, where practicable, the amount of
the candidate's interest in the transaction. Such information shall be provided
in writing not later than 120 days before the first anniversary of the preceding
annual meeting of shareholders.
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<PAGE>
Article 5
PROXIES
Section 5.1: Authorization of a Proxy; Revocation. Every shareholder
entitled to vote at a meeting of shareholders, or to express consent or dissent
to corporate action in writing without a meeting, may authorize another
shareholder or shareholders to act for him by proxy. Every proxy shall be
executed in writing by the shareholder or his duly authorized attorney-in-fact
and filed with the Secretary of the Corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the recovation of a proxy shall not
be effective until written notice thereof has been given to the Secretary of the
Corporation. An unrevoked proxy shall not be valid after three years from the
date of its execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker, unless
before the vote is counted or the authority is exercised, written notice of such
death or incapacity is given to the Secretary of the Corporation.
Section 5.2: Multiple Proxies. Where two or more proxies of a
shareholder are present, the Corporation shall, unless otherwise expressly
provided in the proxy, accept as the vote of all shares represented thereby the
vote cast by a majority of them and, if a majority of the proxies cannot agree
whether the shares represented shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally among those persons.
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<PAGE>
Article 6
RECORD DATE
Section 6.1: Fixing Record Date. The Board of Directors may fix a time
prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall not be
more than 90 days prior to the date of the meeting of the shareholders. Only
shareholders of record on the date so fixed shall be entitled to notice of, or
to vote at, such meeting, notwithstanding any transfer of shares on the books of
the Corporation after any record date fixed as aforesaid. The Board of Directors
may similarly fix a record date for the determination of shareholders of record
for any other purpose, such as the payment of a distribution or a conversion or
exchange of shares.
Section 6.2: Certification by Nominee. The Board of Directors may by
resolution adopt a procedure whereby a shareholder of the Corporation may
certify in writing to the Corporation that all or a portion of the shares
registered in such shareholder's name are held for the account of a specified
shareholder or shareholders. Such resolution may set forth: (a) the
classification of shareholder who may certify; (b) the purpose or purposes for
which the certification may be made; (c) the form of certification and
information to be contained therein; (d) if the certification is with respect to
a record date, the time after the record date within which the certification
must be received by the Corporation; and (e) such other provisions with respect
to the procedure as are deemed necessary or desirable. Upon receipt by the
Corporation of a certification complying with this procedure, the shareholders
specified in the certification shall be deemed, for the purposes set forth in
the certification, to be the holders of record of the number of shares specified
in place of the shareholder making the certification.
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<PAGE>
Article 7
SHAREHOLDER LIST
Section 7.1: Shareholder List. The officer or agent having charge of
the share transfer books of the Corporation shall make a complete alphabetical
list of the shareholders entitled to vote at any meeting, with their addresses
and the number of shares held by each. The list shall be produced and kept open
at the time and place of the meeting for inspection by any shareholder during
the entire meeting except that if the Corporation has 5,000 or more
shareholders, in lieu of the making of the list the Corporation may make the
information available at the meeting by other means.
Section 7.2: Effect of List. Failure to comply with the provisions of
Section 7.1 of these Bylaws shall not affect the validity of any action taken at
a meeting prior to a demand at the meeting by any shareholder entitled to vote
threat to examine the list.
Section 7.3: Prima Facie Evidence. The original transfer books for
shares of the Corporation, or a duplicate thereof kept in the Commonwealth of
Pennsylvania, shall be prima facie evidence as to who are the shareholders
entitled to examine the list or transfer books for shares or to vote at any
meeting.
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Article 8
JUDGES OF ELECTION
Section 8.1: Appointment. Prior to any meeting of shareholders, the
Board of Directors may appoint judges of election, who may but need not be
shareholders, to act at such meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of any such meeting may,
and on the request of any shareholder or his proxy shall, make such appointment
at the meeting. The number of judges shall be one or three. No person who is a
candidate for an office to be filled at the meeting shall act as a judge of
election.
Section 8.2: Vacancies. In case any person appointed as a judge of
election fails to appear or fails or refuses to act, the vacancy so created may
be filled by appointment made by the Board of Directors in advance of the
convening of the meeting or at the meeting by the presiding officer thereof.
Section 8.3: Duties. The judges of election shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum and the authenticity, validity and effect
of proxies. The judges of election shall also receive votes or ballots, hear and
determine all challenges and questions in any way arising in connection with the
right to vote, count and tabulate all votes, determine the result and do such
other acts as may be proper to conduct the election or vote with fairness to all
shareholders. The judges of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as practicable. If
there are three judges of election, the decision, act or certificate of a
majority shall be the decision, act or certificate of all.
Section 8.4: Report. On request of the presiding officer of the meeting
or of any shareholder, the judges of election shall make a report in writing of
any challenge, question or matter determined by them and execute a certificate
of any fact found by them. Any report or certificate made by them shall be prima
facie evidence of the facts found by them.
8
<PAGE>
Article 9
DIRECTORS
Section 9.1: Number of Directors. Subject to the rights of the holders
of any series of preferred stock, or any other series of stock as set forth in
the Articles of Incorporation, to elect directors under specified circumstances
(such directors being referred to as "Specified Directors"), the number of
directors shall be determined by the Board of Directors from time to time. The
Chairman of the Board of Directors shall preside at all meetings of shareholders
and directors.
Section 9.2: Selection of Directors. Except as otherwise provided in
Article 11 of these Bylaws, directors shall be selected by the shareholders. The
candidates receiving the highest number of votes from the shareholders of each
class or group of classes, if any, entitled to elect directors separately up to
the number of directors to be elected by the shareholders, or class or group of
classes, if any, shall be elected. The Board of Directors may, by resolution,
divide the directors, other than the Specified Directors, into classes serving
staggered terms.
Article 10
REMOVAL OF DIRECTORS
Section 10.1: Removal by Shareholders. Unless otherwise provided in the
Articles of Incorporation, the entire Board of Directors, or any class of the
Board of Directors or any individual director, may be removed from office by
vote of the shareholders entitled to vote thereon only for cause. If the
Articles of Incorporation do not prohibit cumulative voting, an individual
director shall not be removed (unless the entire Board of Directors or class of
directors is removed) from the Board of Directors if sufficient votes are cast
against the resolution for such director's removal which, if cumulatively voted
as an annual or other regular election of directors, would be sufficient to
elect one or more directors to the Board of Directors or a class thereof. If any
directors are so removed, new directors may be elected at the same meeting. The
Board of Directors may be removed at any time with or without cause by the
unanimous vote or consent of shareholders entitled to vote thereon.
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<PAGE>
Section 10.2: Removal by the Board of Directors. The Board of Directors
may declare vacant the office of a director who has been judicially declared of
unsound mind or who has been convicted of an offense punishable by imprisonment
for a term of more than one year or for any other proper cause.
Article 11
VACANCIES ON BOARD OF DIRECTORS
Vacancies may be filled by the Board of Directors at any time
except as otherwise provided in the Articles of Incorporation with respect to
Specified Directors. Directors may be elected by the shareholders to fill any
vacancy for an unexpired term on the Board of Directors, regardless of how such
vacancy has been created, only if and when authorized by a resolution of the
Board of Directors.
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<PAGE>
Article 12
POWERS OF BOARD
Section 12.1: General Powers. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors,
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are directed or required to be exercised and done by statute,
the Articles of Incorporation or these Bylaws.
Section 12.2: Committees. The Board of Directors may, by resolution
adopted by a majority of the directors in office, establish one or more
committees consisting of one or more directors as may be deemed appropriate or
desirable by the Board of Directors to serve at the pleasure of the Board. Any
committee, to the extent provided in the resolution of the Board of Directors
pursuant to which it was created, shall have and may exercise all of the powers
and authority of the Board of Directors, except that no committee shall have any
power or authority as to the following:
(a) The submission to shareholders of any action requiring approval of
shareholders;
(b) The creation or filling of vacancies in the Board of Directors;
(c) The adoption, amendment or repeal of these Bylaws;
(d) The amendment or repeal of any resolution of the Board of Directors
that by its terms is amendable or repealable only by the Board of Directors; and
(e) Action on matters committed by the Bylaws or resolution of the
Board of Directors to another committee of the Board of Directors.
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<PAGE>
Section 12.3: Status of Committee Action. The term "Board of Directors"
or "Board," when used in any provision of these Bylaws relating to the
organization or procedures of or the manner of taking action by the Board of
Directors, shall be construed to include and refer to any executive or other
committee of the Board of Directors. Any provision of these Bylaws relating or
referring to action to be taken by the Board of Directors or the procedure
required therefor shall be satisfied by the taking of corresponding action by a
committee of the Board of Directors to the extent authority to take the action
has been delegated to the committee pursuant to Section 12.2.
Article 13
MEETINGS OF THE BOARD OF DIRECTORS
Section 13.1: Place; Use of Conference Telephone and Similar Equipment.
Meetings of the Board of Directors shall be held at such times and places within
or without the Commonwealth of Pennsylvania as the Board of Directors may from
time to time appoint or as may be designated in the notice of the meeting. One
or more directors may participate in any meeting of the Board of Directors, or
of any committee thereof, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear one another. Participation in a meeting by such means shall
constitute presence in person at the meeting.
Section 13.2: Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman on one day's notice to each director,
either by telephone, or if in writing, in accordance with the provisions of
Article 19 of these Bylaws. Special meetings shall be called by the Chairman or
Secretary in like manner and on like notice upon the written request of a
majority of the directors in office.
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<PAGE>
Section 13.3: Quorum. At all meetings of the Board of Directors a
majority of the directors in office shall constitute a quorum for the
transaction of business, and the acts of a majority of the directors present and
voting at a meeting at which a quorum is present shall be the acts of the Board
of Directors, except as may be otherwise specifically provided by statute or by
the Articles of Incorporation or by these Bylaws.
Article 14
ACTION BY WRITTEN CONSENT
Any action required or permitted to be taken at a meeting of the Board
of Directors may be taken without a meeting if, prior or subsequent to the
action, a consent or consents thereto signed by all of the directors is filed
with the Secretary of the Corporation.
Article 15
COMPENSATION OF DIRECTORS
Directors, as such, may receive a stated salary for their services or a
fixed sum and expenses for attendance at regular and special meetings, or any
combination of the foregoing as may be determined from time to time by
resolution of the Board of Directors, and nothing contained herein shall be
construed to preclude any director from receiving compensation for services
rendered to the Corporation in any other capacity.
Article 16
OFFICERS
Section 16.1: In General. The Corporation shall have a Chief Executive
Officer, President, Secretary and Treasurer, or persons who shall act as such,
regardless of the name or title by which they may be designated, elected or
appointed and may have such other officers and assistant officers as the Board
of Directors may authorize from time to time. The Treasurer may be a
corporation. It shall not be necessary for the officers to be directors. Any
number of offices may be held by the same person. Each officer shall hold office
at the pleasure of the Board of Directors and until his successor has been
selected and qualified or until his earlier death, resignation or removal. Any
officer may resign at any time upon written notice to the Corporation. The
resignation shall be effective upon receipt thereof by the Corporation or at
such subsequent time as may be specified in the notice of resignation. The
Corporation may secure the fidelity of any or all of the officers by bond or
otherwise.
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Section 16.2: Standard of Care. An officer shall perform his duties as
an officer of good faith, in a manner he reasonably believes to be in the best
interests of the Corporation and with such care, including reasonable inquiry,
skill and diligence, as a person of ordinary prudence would use under similar
circumstances. A person who so performs his duties shall not be liable by reason
of having been an officer of the Corporation.
Section 16.3: Removal. Any officer or agent of the Corporation may be
removed by the Board of Directors with or without cause. The removal shall be
without prejudice to the contract rights, if any, of any person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights. If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Board of Directors.
Section 16.4: Salaries. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors or by authority conferred by resolution
of the Board. The Board also may fix the salaries or other compensation of
assistant officers, agents and employees of the Corporation, but in the absence
of such action this function shall be performed by the President or by others
under his supervision.
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Section 16.5: Chief Executive Officer. The Chief Executive Officer
shall be the chief executive officer of the Corporation. He shall also be the
Chairman of the Board and shall preside at all meetings of the shareholders and
of the Board of Directors. Unless otherwise determined by the Board of
Directors, the Chief Executive Officer shall have full power and authority on
behalf of the Corporation to attend and to act and to vote at any meeting of the
shareholders of any corporation in which this Corporation may hold stock and, at
any such meeting, shall possess and may exercise any and all the rights and
powers incident to the ownership of such stock and which, as the owner thereof,
the Corporation might have possessed and exercised. The Chief Executive Officer
shall also have the right to delegate such power.
Section 16.6: President. The President shall have the general
responsibility for the management of the business of the Corporation and shall
exercise or perform all the powers and duties usually incident to the office of
President.
Section 16.7: Vice President. The Vice President, if any, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President; and if there be more than one Vice President, their
seniority in performing such duties and exercising such powers shall be
determined by the Board of Directors, or in default of such determination, by
the order in which they were first elected or appointed. Each Vice President
also shall have such powers and perform such duties as may be assigned to him by
the Board.
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Section 16.8: Secretary. The Secretary shall attend all sessions of the
Board and all meetings of the shareholders and act as clerk thereof, and record
all the votes and minutes thereof in books to be kept for that purpose; and
shall perform like duties for the executive committee or any other committee of
the Board of Directors when required. He shall give, or cause to be given,
notice of all meetings of the shareholders and of the Board of Directors. He
shall keep in safe custody the corporate seal of the Corporation, and may affix
the same to any instrument requiring it and attest the same.
Section 16.9: Treasurer. The Treasurer may be the chief financial
officer and shall cause full and accurate accounts of receipts and disbursements
to be kept in books belonging to the Corporation. He shall see to the deposit of
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositary or depositaries as may be designated by the Board
of Directors, subject to disbursement or disposition upon orders signed in such
manner as the Board of Directors shall prescribe. He shall render to the Chief
Executive Officer and to the directors, at the regular meetings of the Board or
whenever the Chief Executive Officer or the Board may require it, an account of
all his transactions as Treasurer and the results of operations and financial
condition of the Corporation. Only if required by the Board, the Treasurer shall
give the Corporation a bond in such sum, and with such surety or sureties as may
be satisfactory to the Board for the faithful discharge 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, records, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
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Section 16.10: Delegation of Officers' Duties. Any officer may delegate
duties to his assistant (if any) appointed by the Board; and in case of the
absence of any officer or assistant officer of the Corporation, or for any other
reason the Board of Directors may deem sufficient, the Board may delegate or
authorize the delegation of his powers or duties, for the time being, to any
person.
Article 17
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION
OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 17.1: Limitation of Directors' Liability. No director of the
Corporation shall be personally liable for monetary damages as such for any
action taken or any failure to take any action unless: (a) the director has
breached or failed to perform the duties of such director?s office under
Subchapter B of Chapter 17 of the BCL, and (b) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided, however,
that the provisions of this Section shall not apply to the responsibility or
liability of a director pursuant to any criminal statute, or to the liability of
a director for the payment of taxes pursuant to local, Pennsylvania or federal
law.
Section 17.2: Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(i) Each Indemnitee (as defined below) shall be
indemnified, defended and held harmless by the Corporation for all actions taken
by such Indemnitee and for all failures to take action (regardless of the date
of any such action or failure to take action) to the fullest extent permitted by
Pennsylvania law against all expense, liability and loss (including without
limitation attorneys? fees, judgments, fines, taxes, penalties, and amounts paid
or to be paid in settlement) reasonably incurred or suffered by the Indemnitee
in connection with any Proceeding (as defined below). No indemnification
pursuant to this Section shall be made, however, in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness.
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(ii) The right to indemnification provided in this
Section shall include the right to have the expenses reasonably incurred by the
Indemnitee in defending any Proceeding paid by the Corporation in advance of the
final disposition of the Proceeding to the fullest extent permitted by
Pennsylvania law; provided that, if Pennsylvania law so requires, the payment of
such expenses incurred by the Indemnitee in advance of the final disposition of
a Proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of the Indemnitee, to repay all amounts so advanced
without interest if it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified under this Section or otherwise.
(iii) Indemnification pursuant to this Section shall
continue as to an Indemnitee who has ceased to be a director or officer and
shall inure to the benefit of such person?s heirs, executors and administrators.
(iv) (a) For purposes of this Article, (A) "Indemnitee"
shall mean each current or former director and current or former officer of the
Corporation who was or is a party to, or is threatened to be made a party to, or
is otherwise involved in, any Proceeding, by reason of the fact that such person
is or was a director or officer of the Corporation or is or was serving in any
capacity at the request or for the benefit of the Corporation as a director,
officer, employee, agent, partner, or fiduciary of, or in any other capacity
for, another corporation or any partnership, joint venture, trust, employee
benefit plan, or other enterprise; and (B) "Proceeding" shall mean any
threatened, pending or completed action, suit or proceeding (including without
limitation an action, suit or proceeding by or in the right of the Corporation),
whether civil, criminal, administrative, investigative or through arbitration.
If a director or officer of this Corporation serves as a director, officer,
employee, agent, partner or fiduciary of another entity and (1) this Corporation
has at least a 50% equity interest in such other entity and such person has no
equity interest in such other entity, or (2) such other entity is directly or
indirectly controlled by this Corporation, such person shall be persumed (unless
this Corporation produces clear and convincing evidence to the contrary) to be
serving in the position with the other entity at the request and for the benefit
of this Corporation.
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(b) Indemnification of Employees and Other Persons. The
Corporation may, by action of the Board of Directors and to the extent provided
in such action, indemnify employees and other persons as though they were
Indemnitees. Directors and officers of entities which have merged into, or have
been consolidated with, or have been liquidated into, the Corporation shall not
be Indemnitees with respect to Proceedings involving any action or failure to
act of such director or officer prior to the date of such merger, consolidation
or liquidation, but such persons may be indemnified by the Board of Directors
pursuant to the first sentence of this subsection (b).
(c) Non-Exclusivity of Rights. The rights to indemnification
and to the advancement of expenses provided in this Article shall not be
exclusive of any other rights that any person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation or Bylaws,
agreement, vote of shareholders or directors, or otherwise.
(d) Insurance. The Corporation may purchase and maintain
insurance, at its expense, for the benefit of any person on behalf of whom
insurance is permitted to be purchased by Pennsylvania law against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person under Pennsylvania or other law. The Corporation may also
purchase and maintain insurance to insure its indemnification obligations
whether arising hereunder or otherwise.
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(e) Fund for Payment of Expenses. The Corporation may create a
fund of any nature, which may, but need not be, under the control of a trustee,
or otherwise may secure in any manner its indemnification obligations, whether
arising hereunder, under the Articles, by agreement, vote of shareholders or
directors, or otherwise.
(f) Defense of Certain Proceedings. As soon as practicable
after receipt by any Indemnitee of notice of the commencement of any Proceeding,
such Indemnitee shall, if a claim with respect thereto may be made against the
Corporation under Section 17.2, notify the Corporation in writing of the
commencement of such Proceeding; provided, however, that failure so to notify
the Corporation shall not relieve the Corporation from any liability under
Section 17.2 unless the Corporation shall have been prejudiced by such failure,
or from any other liability which it may have to such Indemnitee other than
under Section 17.2. With respect to any Proceeding, the Corporation may
participate therein at its own expense and, except as otherwise provided herein,
to the extent that it desires the Corporation, jointly with any other
indemnifying party, shall be entitled to assume the defense of Indemnitee in the
Proceeding, with counsel selected by the Corporation to the reasonable
satisfaction of Indemnitee. After notice from the Corporation to Indemnitee of
its election to assume the defense of Indemnitee in the Proceeding, the
Corporation shall not be liable to such Indemnitee under Section 17.2 for any
legal or other expenses subsequently incurred by such Indemnitee in connection
with the defense of Indemnitee in the Proceeding other than as otherwise
provided herein. Indemnitee shall have the right to employ Indemnitee?s own
counsel in such Proceeding where the Corporation has assumed the defense of the
Indemnitee, but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense of Indemnitee in the Proceeding
shall be at the expense of such Indemnitee unless (i) the employment of counsel
by such Indemnitee shall have been authorized by the Corporation; or (ii) such
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Corporation and such Indemnitee in the conduct of the
defense of the Proceeding or that the defense conducted by the Corporation may
not be adequate; or (iii) the Corporation shall not in fact have employed
counsel to assume the defense in such Proceeding. The Corporation shall not be
entitled to assume the defense of any Proceeding brought against an Indemnitee
by or on behalf of the Corporation.
20
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(g) Arbitration. Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under this
Article, except with respect to indemnification for liabilities arising under
the Securities Act of 1933 that the Corporation has undertaken to submit to a
court for adjudication, shall be decided only by arbitration in the metropolitan
area in which the principal executive offices of the Corporation are located at
the time, in accordance with the commercial arbitration rules then in effect of
the American Arbitration Association, before a panel of three arbitrators, one
of whom shall be selected by the Corporation, the second of whom shall be
selected by the Indemnitee and third of whom shall be selected by the other two
arbitrators. In the absence of the American Arbitration Association, or if for
any reason arbitration under the arbitration rules of the American Arbitration
Association cannot be initiated, or if one of the parties fails or refuses to
select an arbitrator or if the arbitrators selected by the Corporation and the
Indemnitee cannot agree on the selection of the third arbitrator within 30 days
after such time as the Corporation and the Indemnitee have each been notified of
the selection of the other's arbitrator, the necessary arbitrator or arbitrators
shall be selected by the presiding judge of the court of general jurisdiction in
such metropolitan area. The party or parties challenging the right of an
Indemnitee to the benefits of this Article shall have the burden of proof. The
Corporation shall reimburse an Indemnitee for the expenses (including attorneys'
fees and disbursements) incurred in successfully prosecuting or defending such
arbitration. Any award entered by the arbitrators shall be final, binding and
nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction, except that the
Corporation shall be entitled to interpose as a defense in any such judicial
enforcement proceeding any prior final judicial determination adverse to the
Indemnitee under Section 17.1(a)(i) in a proceeding not directly involving
indemnification under this Article. This arbitration provision shall be
specifically enforceable.
21
<PAGE>
(h) Certain Exceptions. Notwithstanding anything in the
foregoing to the contrary, the Corporation shall not be obligated to indemnify
any person (i) for any amounts paid in settlement of an action indemnified
against by the Corporation, unless pursuant to prior written consent of the
Corporation, or (ii) except as provided in subsection (g) of these Bylaws, with
respect to proceedings, claims or actions initiated or brought voluntarily by
such person and not by way of defense.
Section 17.3: Amendment. The provisions of this Article relating to the
limitation of directors? liability, to indemnification and to the advancement of
expenses shall constitute a contract between the Corporation and each of its
directors and officers which may be modified as to any director or officer only
with that person?s consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis, and shall not reduce any limitation on the personal liability
of a director of the Corporation, or limit the rights of an Indemnitee to
indemnification or to the advancement of expenses with respect to any action or
failure to act occurring prior to the time of such repeal or amendment.
Notwithstanding any other provision of these Bylaws, no repeal or amendment of
these Bylaws shall affect any or all of this Article so as either to reduce the
limitation of directors? liability or limit indemnification or the advancement
of expenses in any manner unless adopted by (a) the unanimous vote of the
directors of the Corporation then serving, or (b) the affirmative vote of
shareholders entitled to cast not less than a majority of the votes that all
shareholders are entitled to cast in the election of directors; provided that no
such amendment shall have retroactive effect inconsistent with the preceding
sentence.
22
<PAGE>
Section 17.4: Changes in Pennsylvania Law. References in this Article
to Pennsylvania law or to any provision thereof shall be to such law as it
existed on the date this Article was adopted or as such law thereafter may be
changed; provided that (a) in the case of any change which expands the liability
of directors or limits the indemnification rights or the rights to advancement
of expenses which the Corporation may provide, the rights to limited liability,
to indemnification and to the advancement of expenses provided in this Article
shall continue as theretofore to the extent permitted by law; and (b) if such
change permits the Corporation without the requirement of any further action by
shareholders or directors to limit further the liability of directors (or limit
the liability of officers) or to provide broader indemnification rights or
rights to the advancement of expenses than the Corporation was permitted to
provide prior to such change, then liability thereupon shall be so limited and
the rights to indemnification and the advancement of expenses shall be so
broadened to the extent permitted by law.
Article 18
SHARES
Section 18.1: Share Certificates. All shares issued by the Corporation
shall be represented by certificates. The share certificates of the Corporation
shall be numbered and registered in a share register as they are issued; shall
state that the Corporation is incorporated under the laws of the Commonwealth of
Pennsylvania; shall bear the name of the registered holder, the number and class
of shares and the designation of the series, if any, represented thereby, the
par value, if any, of each share or a statement that the shares are without par
value, as the case may be; shall be signed by the Chief Executive Officer,
President or a Vice President, and the Secretary or the Treasurer or any other
person properly authorized by the Board of Directors, and shall bear the
corporate seal, which seal may be a facsimile engraved or printed. Where the
certificate is signed by a transfer agent or a registrar, the signature of any
corporate officer on such certificate may be a facsimile engraved or printed. In
case any officer who has signed, or whose facsimile signature has been placed
upon, any share certificate shall have ceased to be such officer because of
death, resignation or otherwise before the certificate is issued, such share
certificate may be issued by the Corporation with the same effect as if the
officer had not ceased to be such at the date of its issue.
23
<PAGE>
Section 18.2: Transfer of Shares. Upon surrender to the Corporation of
a share certificate duly endorsed by the person named in the certificate or by
attorney duly appointed in writing and accompanied where necessary by proper
evidence of succession, assignment or authority to transfer, a new certificate
shall be issued to the person entitled thereto and the old certificate cancelled
and the transfer recorded on the share register of the Corporation. Except as
otherwise provided pursuant to Section 6.2 hereof, a transferee of shares of the
Corporation shall not be a record holder of such shares entitled to the rights
and benefits associated therewith unless and until the share transfer has been
recorded on the share transfer books of the Corporation. No transfer shall be
made if it would be inconsistent with the provisions of Article I of the
Pennsylvania Uniform Commercial Code.
Section 18.3: Lost Certificates. Where a shareholder of the Corporation
alleges the loss, theft or destruction of one or more certificates for shares of
the Corporation and requests the issuance of a substitute certificate therefor,
the Board of Directors may direct a new certificate of the same tenor and for
the same number of shares to be issued to such person upon such person's making
of an affidavit in form satisfactory to the Board of Directors setting forth the
facts in connection therewith, provided that prior to the receipt of such
request the Corporation shall not have either registered a transfer of such
certificate or received notice that such certificate has been acquired by a bona
fide purchaser. When authorizing such issue of a new certificate the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his
heirs or legal representatives, as the case may be, to advertise the same in
such manner as it shall require and/or give the Corporation a bond in such form
and sum and with surety or sureties, with fixed or open penalty, as shall be
satisfactory to the Board of Directors, as indemnity for any liability or
expense which it may incur by reason of the original certificate remaining
outstanding.
24
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Section 18.4: Voting Trusts. Unless the laws of the Commonwealth of
Pennsylvania or the Articles of Incorporation of the Corporation shall otherwise
provide, one or more shareholders may, by agreement in writing, surrender their
shares to the Corporation and cause new certificates to be issued therefor in
the name of the transferee for the purpose of vesting in such transferee voting
or other rights pertaining to the shares upon the terms and conditions and for
the period stated in the agreement.
Article 19
MANNER OF GIVING WRITTEN NOTICE; WAIVERS OF NOTICE
Section 19.1 Manner of Giving Notice. Whenever written notice is
required to be given to any person under the provisions of these Bylaws, it may
be given to the person either personally or by sending a copy thereof by first
class or express mail, postage prepaid, or by telegram (with messenger service
specified), telex, TWX or telecopier (with answerback received) or courier
service, charges prepaid, or by telecopier, to his address (or to his telex,
TWX, telecopier or telephone number) appearing on the books of the Corporation
or, in the case of written notice to directors, supplied by each director to the
Corporation for the purpose of the notice. If the notice is sent by mail,
telegraph or courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex, TWX or telecopier, when dispatched.
Section 19.2: Waiver of Notice. Any written notice required to be given
to any person under the provisions of statute, the Corporation's Articles of
Incorporation or these Bylaws may be waived in a writing signed by the person
entitled to such notice whether before or after the time stated therein. Except
as otherwise required by statute, and except in the case of a special meeting,
neither the business to be transacted at, nor the purpose of, a meeting need be
specified in the waiver of notice. In the case of a special meeting of
shareholders, the waiver of notice shall specify the general nature of the
business to be transacted. Attendance of any person, whether in person or by
proxy, at any meeting shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened.
25
<PAGE>
Article 20
AMENDMENTS
Section 20.1: Amendment by Shareholders. These Bylaws may be amended or
repealed, and new Bylaws adopted, by the affirmative vote of a majority of the
votes cast by the shareholders at any regular or special meeting duly convened
after written notice to the shareholders that the purpose, or one of the
purposes, of the meeting is to consider the amendment or repeal of these Bylaws
and the adoption of new Bylaws. There shall be included in, or enclosed with,
the notice, a copy of the proposed amendment or a summary of the changes to be
effected thereby.
Section 20.2; Amendment by Board of Directors. Except as provided in
Section 1504(b) of the BCL or otherwise provided herein, these Bylaws may be
amended or repealed, and new Bylaws adopted, by the affirmative vote of a
majority of the members of the Board of Directors at any regular or special
meeting duly convened, subject to the power of the shareholders to change such
action of the Board of Directors.
Approved by the Corporation
by vote of the sole shareholder
and the Board of Directors
effective June 21, 1999
________________________
Secretary
26
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
FIDELITY LEASING, INC.
AND
FIRST UNION NATIONAL BANK
SEPTEMBER 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS AND INTERPRETATION........................................................................2
1.1 Terms Defined...............................................................................2
1.2 Accounting Principles......................................................................12
SECTION 2. THE LOANS............................................................................................12
2.1 Credit Facility - Description..............................................................12
2.2 Advances, Conversions and Payments.........................................................15
2.3 Preconditions to Advances and Assignment of Leases and Leased Property.....................17
2.4 Credit Facility Interest...................................................................19
2.5 Additional Interest Provisions.............................................................23
2.6 Fees.......................................................................................24
2.7 Prepayments................................................................................25
2.8 Use of Proceeds............................................................................27
2.9 Capital Adequacy...........................................................................27
SECTION 3. COLLATERAL...........................................................................................27
3.1 Description................................................................................27
3.2 Lien Documents.............................................................................27
3.3 Other Actions..............................................................................28
3.4 Searches...................................................................................28
3.5 Filing Security Agreement..................................................................29
3.6 Power of Attorney..........................................................................29
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES.........................................................29
4.1 Resolutions, Opinions, and Other Documents.................................................30
4.2 Absence of Certain Events..................................................................31
4.3 Warranties and Representations at Closing..................................................31
4.4 Compliance with this Agreement.............................................................31
4.5 Officers' Certificate......................................................................32
4.6 Closing....................................................................................32
4.7 Non-Waiver of Rights.......................................................................32
SECTION 5. REPRESENTATIONS AND WARRANTIES.......................................................................32
5.1 Corporate Organization and Validity........................................................32
5.2 Places of Business.........................................................................33
5.3 Pending Litigation.........................................................................33
5.4 Title to Collateral........................................................................34
5.5 Governmental Consent.......................................................................34
5.6 Taxes......................................................................................34
5.7 Financial Statements.......................................................................34
5.8 Full Disclosure............................................................................35
5.9 Subsidiaries...............................................................................35
5.10 Guarantees.................................................................................35
5.11 Government Regulations, etc................................................................35
5.12 Names......................................................................................36
5.13 Other Associations.........................................................................37
5.14 Environmental Matters......................................................................37
5.15 Capital Stock..............................................................................37
5.16 Solvency...................................................................................38
5.17 Leases and Leased Property.................................................................38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS.....................................................................42
6.1 Payment of Taxes and Claims................................................................42
6.2 Maintenance of Properties and Corporate Existence..........................................42
6.3 Business Conducted.........................................................................44
6.4 Litigation.................................................................................44
6.5 Taxes......................................................................................44
6.6 Bank Accounts..............................................................................44
6.7 Warranties for Future Advances.............................................................44
6.8 Financial Covenants........................................................................45
6.9 Change of Ownership Interests..............................................................45
6.10 Financial and Business Information.........................................................46
6.11 Officers' Certificates.....................................................................47
6.12 Inspection.................................................................................48
6.13 Tax Returns and Reports....................................................................48
6.14 Material Adverse Developments..............................................................48
6.15 Places of Business.........................................................................48
6.16 Sale of Collateral.........................................................................48
SECTION 7. BORROWER'S NEGATIVE COVENANTS:.......................................................................49
7.1 Merger, Consolidation, Dissolution or Liquidation..........................................49
7.2 Liens and Encumbrances.....................................................................49
7.3 Negative Pledge............................................................................49
7.4 Transactions With Affiliates or Subsidiaries...............................................50
7.5 Guarantees.................................................................................50
7.6 Indebtedness...............................................................................50
7.7 Use of Lenders' Name.......................................................................50
SECTION 8. DEFAULT..............................................................................................51
8.1 Events of Default..........................................................................51
8.2 Cure.......................................................................................53
8.3 Rights and Remedies on Default.............................................................54
8.4 Nature of Remedies.........................................................................55
8.5 Set-Off....................................................................................55
9.1 Appointment and Authorization..............................................................56
9.2 General Immunity...........................................................................56
9.3 Consultation with Counsel..................................................................56
9.4 Documents..................................................................................56
9.5 Rights as a Bank...........................................................................57
9.6 Responsibility of Agent....................................................................57
9.7 Collections and Disbursements..............................................................58
9.8 Indemnification............................................................................59
9.9 Expenses...................................................................................59
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
9.10 No Reliance................................................................................60
9.11 Reporting..................................................................................60
9.12 Removal of Agent...........................................................................60
9.13 Action on Instructions of Lenders..........................................................61
9.14 Several Obligations........................................................................61
9.15 Consent of Banks...........................................................................61
9.16 Participations and Assignments.............................................................63
SECTION 10. MISCELLANEOUS.......................................................................................64
10.1 GOVERNING LAW..............................................................................64
10.2 Integrated Agreement.......................................................................64
10.3 Waiver.....................................................................................64
10.4 Time.......................................................................................65
10.5 Expenses of Agent..........................................................................65
10.6 Brokerage..................................................................................65
10.7 Notices....................................................................................65
10.8 Headings...................................................................................66
10.9 Survival...................................................................................66
10.10 Successors and Assigns.....................................................................67
10.11 Counterparts...............................................................................67
10.12 Modification...............................................................................67
10.13 Signatories................................................................................67
10.14 Third Parties..............................................................................67
10.15 Discharge of Taxes, Borrower's Obligations, Etc............................................67
10.16 Most Favored Lenders.......................................................................68
10.17 Consent to Jurisdiction....................................................................68
10.18 Waiver of Jury Trial.......................................................................68
10.19 Information to Participant.................................................................68
</TABLE>
<PAGE>
EXHIBIT LIST
Exhibit 2.1(b) -- Form of Revolving Credit Note
Exhibit 2.1(c) -- Form of Term Note
Exhibit 2.1(e) -- Form of Borrowing Base Certificate
Exhibit 2.3(b)(ii) -- Form of Assignment Agreement
Exhibit 5.1 -- Borrower's States of Qualifications
Exhibit 5.2 -- Places of Business
Exhibit 5.3 -- Judgments, Proceedings, Litigation and
Orders
Exhibit 5.9 -- Subsidiaries and Affiliates
Exhibit 5.10 -- Existing Guaranties, Investments and
Borrowings, Leases and Employment Agreements
Exhibit 5.12(a) -- Schedule of Names
Exhibit 5.12(b) -- Trademarks, Patents and Copyrights
Exhibit 5.13 -- Other Associations
Exhibit 5.14 -- Environmental Matters
Exhibit 5.15 -- Capital Stock
Exhibit 5.17 -- Form of Lease
Exhibit 6.11 -- Officers' Certificates
<PAGE>
SCHEDULES
Schedule A -- Schedule and Addresses of Lenders
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement ("Agreement") is
dated this 30th day of September, 1998, by and among Fidelity Leasing, Inc., a
Pennsylvania corporation ("Borrower"), First Union National Bank, a national
banking association in its capacity as agent ("Agent") and as lender, and the
financial institutions listed on Schedule A attached hereto and made a part of
this Agreement (as such Schedule may be amended, modified or replaced from time
to time), in their capacity as lenders (singly, each is a "Lender" and
collectively, all are "Lenders").
BACKGROUND
A. On December 24, 1996, Borrower entered into a certain Loan and
Security Agreement among Borrower, CoreStates Bank, N.A. ("CoreStates"), as
agent and as a lender and First Union National Bank ("First Union") as co-agent
and as a lender, as amended from time to time ("Existing Loan Agreement") and
certain other instruments, documents and agreements related thereto, all as
amended from time to time (collectively with the Existing Loan Agreement,
"Existing Loan Documents") pursuant to which certain credit facilities were
extended by CoreStates and First Union to Borrower as set forth therein.
B. CoreStates has merged with First Union with First Union being the
surviving entity and the owner of all of the right, title and interest of the
lenders under the Existing Loan Documents.
C. First Union has agreed to assign to European American Bank a portion
of its interest in the Loans outstanding under the Existing Loan Documents as
well as a portion of its Pro Rata Percentage of the Credit Facility established
thereunder.
D. Borrower wishes, and Agent and Lenders agree, to hereby amend and
restate the Existing Loan Agreement. Lenders are willing to make loans and grant
extensions of credit to Borrower under the terms and provisions hereinafter set
forth.
E. The parties desire to define the terms and conditions of their
relationship to writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
<PAGE>
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms have
the following respective meanings:
Account - Any right to payment for goods sold or leased or for
services rendered which is not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance.
Adjusted Debt to Tangible Net Worth Ratio - At any time means
the ratio of (i) total Liabilities less Nonrecourse Debt to (ii) Borrower's
Tangible Net Worth less an amount equal to fifty percent (50%) of all restricted
cash, restricted receivables and other collateral pledged or sold in connection
with Securitization Transaction(s) (it being understood that for the purposes
hereof, the asset identified on Borrower's balance sheet as of June 30, 1998 as
$14,000,000 in notes secured by equipment leases shall not be considered
restricted receivables provided no additional assets shall be included therein).
Adjusted LIBOR Rate - As applied to a LIBOR Based Rate Loan,
for any LIBOR Interest Period, the rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) determined pursuant to the following formula:
Adjusted LIBOR Rate = LIBOR Rate
------------------------
(1 - Reserve Percentage)
For purposes hereof, "LIBOR Rate" shall mean the arithmetic average of the rates
of interest per annum (rounded upwards, if necessary to the next 1/16 of 1%) at
which the Agent is offered deposits of United States dollars in the London
Interbank market on or about eleven o'clock (11:00) a.m. London time two (2)
Business Days prior to the commencement of such LIBOR Interest Period on amounts
substantially equal to such LIBOR Based Rate Loan as to which the Borrower may
elect the LIBOR Based Rate to be applicable with a maturity of comparable
duration to the LIBOR Interest Period selected by the Borrower for such LIBOR
Based Rate Loan.
Administration Fee - Section 2.6(b).
Advance(s) - Any monies advanced or credit extended to
Borrower by any Lender under the Credit Facility.
Affiliate - As to any Person, each other Person that directly,
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, the Person in question.
-2-
<PAGE>
Agreement - This Amended and Restated Loan and Security
Agreement, as it may hereafter be amended, supplemented or replaced from time to
time.
Assignment Agreement - Section 2.3(b)(ii).
Authorized Officer - Any officer or partner of Borrower
authorized by specific resolution of Borrower to request Advances as set forth
in the incumbency certificate referred to in Section 4.1(d) of this Agreement.
Base Rate - On any date of determination, a per annum rate of
interest which is 225 basis points (in the case of Term Loans) or 175 basis
points (in the case of Revolving Credit Loans) in excess of the CD Rate, on such
date.
Base Rate Loans - Any portion of Loans on which interest
accrues at the Base Rate.
Books and Records - All of Borrower's original ledger cards,
payment schedules, credit applications, Contract Rights, liens, security
instruments, guarantees and other General Intangibles relating in any way to the
Leases or Leased Property.
Borrowing Base - As of any date of determination, an amount
equal to the lesser of:
(i) the Maximum Credit Limit, and
(ii) 80% of the sum of the gross Lease Receivable balance
corresponding to each Eligible Lease (net of any deposits or other advance cash
receipts).
Business Day - Any day that is not a Saturday or Sunday or day
on which Agent or any Lender is required or permitted to close.
CD Rate - On any date of determination, that rate quoted in
the Money Rate Section of The Wall Street Journal on such date, as the average
of top rates given by major New York banks on primary new issues of certificates
of deposit with a maturity of six (6) months. If for any reason The Wall Street
Journal is unavailable, a CD Rate shall be as quoted in another publication of
comparable standing.
Closing - Section 4.6.
-3-
<PAGE>
Closing Date - Section 4.6.
Collateral - All now or hereafter existing Leases and Leased
Property, Books and Records and all cash and noncash proceeds, thereof,
including insurance proceeds.
Contract Rights - All rights under contracts not yet earned by
performance.
Credit Facility - Section 2.1(a).
Current Term - The Initial Term during the period of the
Initial Term, and any renewal or extended term during the term thereof, if
Lenders elect, in their sole discretion, to renew or extend the Credit Facility.
Defaulted Lease - Any Lease where the Lease or Leased Property
associated therewith fails, at any time, to comply with all of the
representations and warranties set forth in Section 5.17 below.
Defaulting Lender - Section 2.2(b)(iii)(C).
Default Rate - Section 2.5(b).
Distribution -
(1) Dividends or other distributions on capital stock of
Borrower; and
(2) The redemption, repurchase or acquisition of such stock or
of warrants, rights or other options to purchase such stock.
Eligible Lease(s) - Each Lease which meets all of the
following specifications: (1) is not subject to any Lien, security interest or
prior assignment other than Agent's security interest for the benefit of Lenders
and the rights of the Lessees thereunder; (2) is a valid and enforceable Lease,
representing the undisputed obligation of the Lessee, with rentals due
thereunder not more than 61 days contractually past due; (3) is not subject to
any defense, set off, counterclaim, deduction, or allowance or adjustment; (4)
unless otherwise agreed to in writing by Agent, provides for the lease of Leased
Property with an aggregate invoice price of less than $1,000,000 except in the
case of Leases to Investment Grade Lessees which may provide for the lease of
Leased Property with an aggregate invoice price of up to $1,500,000; (5)
provides for the lease of Leased Property which has not been returned, rejected,
lost or damaged; (6) arose in the ordinary course of Borrower's business; (7)
Borrower has not received notice of bankruptcy, receivership, reorganization,
insolvency or material adverse change in the financial condition of the Lessee;
(8) the Lessee is not a Subsidiary or Affiliate of Borrower; (9) is not a
Defaulted Lease and complies with all general warranties set forth in Section
5.17 hereof; (10) does not have an initial stated term in excess of sixty (60)
months, provided, however, that lease(s) with an initial stated term of up to 72
months may be considered Eligible Leases so long as the aggregate Lease
Receivable(s) of all such Lease(s) shall, at no time, exceed an amount which is
ten (10%) percent of the outstanding principal balance of the Loans; (11) has
not, in the case of Revolving Credit Loans, been pledged to Agent and/or Lenders
for a period of more than twelve (12) months; (12) contains a provision whereby
the Lessee agrees not to assert any claim or reduction, counterclaim, setoff,
recoupment, or any other claim, allowance or adjustment against any assignee of
Borrower; and(13) is a Lease with a Lease Receivable, which together with all
other Lease Receivables owed by the same Lessee, does not exceed $1,000,000 in
the aggregate.
-4-
<PAGE>
Equipment - The meaning ascribed thereto in the Pennsylvania
Uniform Commercial Code.
ERISA - The Employee Retirement Income Security Act of 1974,
as the same may be amended, from time to time.
Event of Default - Section 8.1.
Expenses - Section 10.5.
Federal Funds Rate - means on any day, the effective rate of
interest charged by the Federal Reserve Bank of Philadelphia for overnight
Federal Funds in Philadelphia as reported by the Federal Reserve Bank in
Philadelphia for such day.
Financial Statements - The financial statements of Borrower
prepared in accordance with GAAP.
Fixed Charge Coverage Ratio - The ratio of Borrower's
operating cash flow (income before taxes, depreciation, amortization and
extraordinary items, plus interest expense) to the sum of (i) interest expense;
(ii) mandatory principal payments and (iii) an amount equal to twenty-five (25%)
percent of the average daily outstanding principal balance of the Revolving
Credit Loans.
GAAP - Generally accepted accounting principles as in effect
on the Closing Date, as may be amended from time to time.
-5-
<PAGE>
General Intangibles - The meaning ascribed thereto in the
Pennsylvania Uniform Commercial Code and shall include, but not be limited to,
all contract rights (including without limitation, all rights under remarketing
agreements), chattel paper, documents, instruments, books, records, ledgers,
journals, check books, print outs, blue prints, designs, computer programs,
computer tapes, punch cards, formulae, drawings, customer lists, choses in
action, claims, goodwill, designs and plans, licenses, license agreements, tax
and all other types of refunds, returned and unearned insurance premiums, rights
and claims under insurance policies, patents, patent application, trademarks,
trade names, trade styles, trademark applications and copyrights.
Good Business Day - Any Business Day when banks in
Philadelphia, Pennsylvania and London, England are open for business.
Guarantors - Resource America, Inc., Resource Leasing, Inc.,
FL Partnership Management, Inc. and FL Financial Services, Inc.
Guaranty - Section 4.1(l).
Hazardous Substance - Section 5.14.
Initial Term - Section 2.1(d).
Inventory - The meaning ascribed thereto in the Pennsylvania
Uniform Commercial Code and shall include all additions, improvements,
accessions, attachments, upgrades, replacements and substitutions thereto or
therefor.
Investment Grade Lessee - A Lessee with a public debt rating
from Moody's Investor Service, Inc. of at least Baa or from Standard & Poor's
Rating Services of at least BBB or an equivalent rating as approved by Agent.
Lease(s) - All of Borrower's Accounts, Documents, General
Intangibles, Instruments and Chattel Paper arising in connection with each and
every equipment lease (whether a "true lease" or a lease intended as security)
and/or schedule to a master lease agreement, assigned to Lenders and/or Agent
for the benefit of Lenders, or now or hereafter designated on any schedule as
being assigned to Lenders and/or Agent for the benefit of Lenders. The term
"Lease" includes (i) all payments to be made thereunder, (ii) all rights of
Borrower therein, and (iii) any and all amendments, renewals, extensions or
guarantees thereof.
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Lease Receivable(s) - With respect to each Lease, the gross
value of the contractual firm term lease payments plus the absolute and
unconditional obligation, if any, of the corresponding Lessee to make a
payment(s) at the end of the stated Lease term.
Leased Property - Any personal property leased or to be leased
or financed by Borrower pursuant to a Lease; the term "Leased Property" includes
all of Borrower's Inventory or Equipment so leased and any and all additions,
improvements, accessions, attachments, upgrades, replacements and substitutions
thereto and therefor.
Lessee - The lessee(s) or obligor(s) responsible for payment
and/or performance under a Lease.
Liabilities - All liabilities of every kind of Borrower and
its Subsidiaries as would be shown on a consolidated financial statement of
Borrower prepared in accordance with GAAP, and all contingent and unmatured
obligations of Borrower and its Subsidiaries pursuant to any and all guarantee,
surety or similar type agreements relating to the debts of Persons outside of
the consolidated group.
LIBOR Based Rate - A rate of interest determined by reference
to the Adjusted LIBOR Rate.
LIBOR Based Rate Loan - Any portion of the Revolving Credit
Loans or any Term Loan on which interest accrues at the LIBOR Based Rate.
LIBOR Based Revolving Loan Rate - The Adjusted LIBOR Rate plus
150 basis points.
LIBOR Market Index Rate - For any day, is the rate (rounded to
the next higher 1/100 of 1%) for one (1) month U.S. dollar deposits as reported
on Telerate page 3750 as of 11:00 a.m. London time, for such day, provided if
such day is not a Good Business Day, the immediately preceding Good Business Day
(or if not so reported, then as determined by Agent from another recognized
source or Interbank quotation plus 150 basis points).
LIBOR Market Index Rate Loan - Any portion of the Revolving
Credit Loans or any Term Loan on which interest accrues at the LIBOR Market
Index Rate.
LIBOR Based Term Loan Rate - The Adjusted LIBOR Rate plus 225
basis points.
LIBOR Interest Period - Section 2.4(c)(i).
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Lien - Any interest of any kind or nature in property securing
an obligation owed to, or a claim of any kind or nature in property by, a Person
other than the owner of the Property, whether such interest is based on the
common law, statute, regulation or contract, and including, but not limited to,
a security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt, a lease, consignment or bailment for security
purposes, a trust, or an assignment.
Loans - All Revolving Credit Loans and Term Loans.
Loan Documents - This Agreement, the Revolving Credit Notes,
the Term Notes, the Guaranty and all agreements, instruments and documents
executed and/or delivered from time to time in connection therewith, as amended
or replaced from time to time.
Majority Lenders - At any time, Lenders holding Pro Rata
Percentages aggregating at least fifty-one (51%) percent of the aggregate amount
outstanding under the Credit Facility at such time; provided, however, that if
there is no outstanding amount under the Credit Facility, the Majority Lenders
shall be determined by those Lenders holding fifty-one(51%) percent of the
Maximum Credit Limit.
Maturity Date - The later of (i) March 31, 2000 or (ii) the
last day of the then Current Term.
Maximum Credit Limit - The sum of the Pro Rata Shares which at
the time of Closing equals Twenty Million Dollars ($20,000,000).
Net Income - The consolidated net income after taxes of
Borrower as such would appear on Borrower's consolidated statement of income,
prepared in accordance with GAAP.
Net Worth - At any time means the amount of stockholders
equity on a consolidated basis plus Borrower's Subordinated Indebtedness.
Nonrecourse Debt - All Liabilities of Borrower which are
non-recourse in nature and treated as non-recourse obligations on Borrower's
Financial Statements. Non-recourse Debt shall not include any Liabilities which
are partially recourse and may be off balance sheet.
Obligations - All existing and future liabilities and
obligations of every kind or nature at any time owing by Borrower to Lenders (or
any of them)and/or to Agent, whether joint or several, related or unrelated,
primary or secondary, matured or contingent, due or to become due, and whether
principal, interest, fees or Expenses, including, without limitation,
obligations in respect of the Revolving Credit Loans and Term Loans and any
extensions, modifications, substitutions, increases and renewals thereof, and
the payment of all reasonable amounts advanced by Agent (or any Lender after the
occurrence of an Event of Default) to preserve, protect and enforce rights
hereunder and in the Collateral and all Expenses incurred by Agent (or any
Lender after the occurrence of an Event of Default) in connection therewith.
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Pennsylvania Uniform Commercial Code or UCC - The Uniform
Commercial Code as enacted in Pennsylvania, as the same shall be amended from
time to time.
Person - An individual, partnership, corporation, limited
liability corporation, trust, unincorporated association or organization, joint
venture or any other entity.
Present Value - The value, from time to time, as of the date
of determination, of the remaining Lease Receivables due under a Lease,
discounted using the applicable interest rate as set forth herein.
Pro Rata Percentage - Section 2.1(a)(iii).
Pro Rata Share - Section 2.1(a)(iii).
Property - Any interest of Borrower in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
Regulation D - Regulation D of the Board of Governors of the
Federal Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
Reserve Percentage - For a Lender, on any day, that percentage
(expressed as a decimal) which is in effect on such day, prescribed by the Board
of Governors of the Federal Reserve System (or any successor or any other
banking authority to which a Lender is subject, including any board or
governmental or administrative agency of the United States or any other
jurisdiction to which a Lender is subject), for determining the maximum reserve
requirement (including without limitation any basic, supplemental, marginal or
emergency reserves) for (a) deposits of United States dollars or (b)
Eurocurrency liabilities as defined in Regulation D, in each case used to fund a
LIBOR Based Rate Loan subject to a LIBOR Based Rate. The Adjusted LIBOR Rate
shall be adjusted automatically on and as of the effective day of any change in
the Reserve Percentage.
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Revolving Credit Loans - Section 2.1(a).
Revolving Credit Notes - Section 2.1(b).
Securitization Transaction - Any transaction for which Agent
has received 30 days prior written notice, using, in part, leases or leased
property to secure notes issued by Borrower or a special purpose subsidiary of
Borrower and in connection with which, Borrower will be subject to no recourse
or limited recourse arising out of a servicing agreement.
Stock Pledge Agreements - Section 4.1(m).
Subordinated Indebtedness - All indebtedness which is
subordinate in all respects to the Obligations pursuant to a subordination
agreement acceptable to Agent in its sole discretion.
Subordination Agreement - Section 4.1(n).
Subsidiary - Any corporation more than fifty percent (50%) of
whose voting stock is legally and beneficially owned by Borrower or owned by a
corporation more than fifty percent (50%) of whose voting stock is legally and
beneficially owned by Borrower.
SuperMajority Lenders - At any time, Lenders holding Pro Rata
Percentages aggregating at least sixty-six and two-thirds (66-2/3%) percent of
the aggregate amount outstanding under the Credit Facility at such time;
provided, however, that if there is no outstanding amount under the Credit
Facility, the SuperMajority Lenders shall be determined by those Lenders holding
sixty-six and two-thirds (66-2/3%) percent of the Maximum Credit Limit.
Tangible Net Worth - Borrower's Net Worth less assets which
would be classified as intangible on a balance sheet prepared in accordance with
GAAP including, without limitation, trademarks, goodwill, deferred closing
costs, loans to shareholders and Affiliates and "start-up" costs except Borrower
may include up to $300,000 worth of intangible assets representing certain
organizational costs and deferred taxes paid for by Borrower prior to September
30, 1996.
Term Loan - Section 2.1(a).
Term Notes - Section 2.1(c).
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Unmatured Event of Default - An event or condition which, with
the passage of time, the giving of notice, or both, would become an Event of
Default.
Unused Line Fee - Section 2.6(a).
1.2 Accounting Principles: Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except as otherwise expressly provided in this Agreement.
SECTION 2. THE LOANS
2.1 Credit Facility - Description:
(a) (i) Subject to the terms and conditions of this Agreement,
each Lender, severally, hereby establishes for the benefit of Borrower, a credit
facility (collectively referred to as "Credit Facility") which shall include
Advances extended by Lenders to or for the benefit of Borrower from time to time
hereunder in the form of revolving credit loans ("Revolving Credit Loans") or
term loans ("Term Loans"). The aggregate outstanding principal amount of all
Loans, at any time, shall not exceed the Borrowing Base. Subject to such
limitation, the outstanding balance of all Revolving Credit Loans may fluctuate
from time to time, to be reduced by repayments made by Borrower and to be
increased by future Revolving Credit Loans which may be made by Lenders. If the
aggregate outstanding amount of all Loans at any time exceeds the Maximum Credit
Limit, Borrower shall immediately repay such excess in full in accordance with
Section 2.7. If the aggregate outstanding amount of all Loans exceeds the
Borrowing Base, Borrower shall within ten (10) days of such occurrence, either
(x) repay such excess in full or (y) pledge additional Eligible Leases in
accordance with the terms hereof. The obligations of Borrower under the Credit
Facility and this Agreement shall at all times be absolute and unconditional.
Advances hereunder shall not exceed the lesser of (x) 95% of the original
invoice amount (net of Asoft costs) for the Leased Property being financed with
the proceeds of the applicable Advance or (y) $500,000 or, in the case of
Advances to finance Leases to Investment Grade Lessees, $1,000,000.
(ii) Subject to the terms and conditions of this
Agreement, and provided that no Event of Default or Unmatured Event of Default
has occurred hereunder, Borrower shall have the option to have any Advance under
the Credit Facility initially be a Revolving Credit Loan or a Term Loan and
Borrower may at any time, in accordance with the terms hereof, convert a
Revolving Credit Loan to a Term Loan. In no event shall the initial principal
amount of any Term Loan be less than $2,000,000 or any Revolving Credit Loan be
less than $500,000. At no time shall Borrower have more than five (5) Term Loans
outstanding.
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(iii) Subject to the terms and conditions of this
Agreement, each Lender severally agrees to lend to Borrower an amount equal to
such Lender's respective percentage (as to each Lender, the percentage of the
Credit Facility set forth opposite its name on Schedule "A" attached hereto and
made a part hereof and referred to as its "Pro Rata Percentage") of the Advance
requested by Borrower. The aggregate outstanding Loans by each Lender shall not
exceed the respective amounts ("Pro Rata Shares") set forth opposite such
Lender's name on Schedule "A".
(b) At Closing, Borrower shall execute and deliver its
promissory note to each Lender for the total principal amount of such Lender's
Pro Rata Share (collectively as may be amended, modified or replaced from time
to time, the "Revolving Credit Notes"). The Revolving Credit Notes shall
evidence Borrower's absolute and unconditional obligation to repay such
Lender(s) for all Revolving Credit Loans made by such Lender(s) under the Credit
Facility, with interest as herein and therein provided. Each and every Revolving
Credit Loan under the Credit Facility shall be deemed evidenced by the Revolving
Credit Notes, which are deemed incorporated herein by reference and made a part
hereof. All Revolving Credit Notes shall be substantially in the form set forth
in Exhibit "2.1(b)" attached hereto and made a part hereof.
(c) In the event Borrower requests any Advance to initially be
a Term Loan, or at any time a Revolving Credit Loan is converted to a Term Loan,
Borrower shall execute and deliver its promissory note to each Lender for the
total principal amount of such Lender's Pro Rata Percentage of such Term Loan
(collectively as may be amended, modified or replaced from time to time, the
"Term Notes"). The Term Notes shall evidence Borrower's absolute and
unconditional obligation to repay such Lender for the Term Loan made by such
Lender under the Credit Facility, with interest as herein and therein provided.
Each and every Term Loan under the Credit Facility shall be evidenced by
separate Term Notes, which shall be deemed incorporated herein by reference and
made a part hereof. All Term Notes shall be substantially in the form set forth
in Exhibit "2.1(c)" attached hereto and made a part hereof.
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(d) The term ("Initial Term") of the Credit Facility shall
expire on March 31, 2000. The Credit Facility may, nonetheless, be renewed at
the end of the then Current Term in Lenders' sole discretion, for additional
eighteen(18) month periods. Borrower's request for such renewal must be made at
least six (6) months prior to the expiration of the then Current Term. After the
Maturity Date, no further Advances shall be available from Lenders.
(e) Borrower shall deliver, at least monthly on the first
Business Day of each month, and with each borrowing request, unless Agent
requests more frequent delivery, a Borrowing Base Certificate in the form of
Exhibit 2.1(e) attached hereto and made a part hereof, executed by an Authorized
Officer, evidencing the availability under the Borrowing Base and compliance
with the respective sublimits.
(f) Borrower hereby confirms and acknowledges that, as of
September 28, 1998, the outstanding principal balance of all Loans, advances and
extensions of credit made by the Bank under the Existing Loan Documents is $0
($0 for Revolving Credit Loans and $0 for Term Loans) and such amount is owing
without defense, setoff, counterclaim, discount, recoupment or charge of any
kind by Borrower and shall be considered as Loans for all purposes hereunder as
though such Loans, advances and extensions of credit had been originally made
under this Agreement.
2.2 Advances, Conversions and Payments:
(a) Except to the extent otherwise set forth in this
Agreement, all payments of principal and of interest on the Credit Facility, the
Unused Line Fee, the Administration Fee, the Expenses, and all other charges and
any other Obligations of Borrower hereunder, shall be made to Agent at its main
Philadelphia banking office First Union National Bank, 1339 Chestnut Street,
Philadelphia, Pennsylvania, in United States dollars, in immediately available
funds. Agent, on behalf of all Lenders, shall have the unconditional right and
discretion to make an Advance under the Credit Facility in the form of a
Revolving Credit Loan (subject to availability existing under the Borrowing
Base) to pay, and/or to charge Borrower's operating account with Agent for all
of Borrower's Obligations as they become due from time to time under this
Agreement including, without limitation, interest, principal, fees and
reimbursement of Expenses.
(b) (i) Advances which may be made by Lenders from time to
time under the Credit Facility shall be made available by crediting such
proceeds to Borrower's operating account with Agent.
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(ii) All Advances requested by Borrower and all requests
by Borrower to convert Revolving Credit Loans to Term Loans must be requested by
11:00 A.M. Eastern time, three (3) Business Days prior to the date of such
requested Advance or conversion. All requests or confirmation of requests for an
Advance or conversion are to be in writing and may be sent by telecopy or
facsimile transmission provided that Agent shall have the right to require that
receipt of such request not be effective unless confirmed via telephone with
Agent.
(iii) A. Upon receiving a request for an Advance or
conversion in accordance with subparagraph (ii) above, as soon as reasonably
practical thereafter, Agent shall notify all Lenders of the request. Each Lender
shall advance its applicable Pro Rata Percentage of the requested Advance to
Agent by remitting federal funds, immediately available, to Agent pursuant to
Agent's instructions prior to 11:00 A.M. Eastern Time on the scheduled date of
the Advance. Subject to satisfaction of the terms and conditions hereof, Agent
shall make the requested Advance available to Borrower by crediting such amount
to Borrower's operating account with Agent as soon as is reasonably practical
thereafter on the day the requested Advance is to be made. In lieu of the
foregoing, Agent may, in its discretion, fund the Pro Rata Percentage of such
Advance on behalf of any one or more Lenders (unconditionally and absolutely
obligating such affected Lender(s) to reimburse Agent in full without deduction
or setoffs for its portion of such Advance) with a settlement of the pro rata
percentages of such Advances of each Lender on the following Business Day under
such procedures as Agent may establish.
B. Neither Agent nor any other Lender shall be
obligated, for any reason whatsoever, to advance the share of any other Lender.
If such corresponding amount is not made available to Agent by such Lender on
the date the Advance is made and Agent elects (at its discretion, without any
obligation to do so) to make such Lender's Pro Rata Percentage of the Advance,
Agent shall be entitled to recover such amount on demand from such Lender
together with interest at the per annum rate equal to the Federal Funds Rate in
respect of the first two days and at the Base Rate in respect of each day
thereafter during the period commencing 2:00 P.M. Eastern Time on the date of
such Advance and ending on (but excluding) the date Agent recovers such amount.
Agent shall also be entitled to recover any and all losses and damages
(including, without limitation, attorneys' fees and costs) from any Lender
failing to so advance upon demand of Agent. Agent may set off the obligations of
a Lender under this paragraph against any distributions or payments of the
Obligations which Agent would otherwise make available to such Lender.
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C. To the extent and during the time period in which
any Lender fails to provide or delays providing its respective payment to Agent
pursuant to subsections A or B above (any such Lender being referred to, during
such period, as a "Defaulting Lender"), such Lender's percentage of all payments
of the Obligations (but not its Pro Rata Percentage of future Advances required
to be funded by such Lender) shall decrease to reflect the actual percentage
which its actual outstanding Loans bear to the total outstanding Loans of all
Lenders. In addition, notwithstanding any definition or other provision of this
Agreement to the contrary, during any period in which a Lender is a Defaulting
Lender, all calculations for voting purposes among the Lenders shall be made as
if the Defaulting Lender were not a Lender and not a party to this Agreement.
2.3 Preconditions to Advances and Assignment of Leases and Leased
Property
(a) Before Lenders will make any Advance:
(i) Borrower will deliver to Agent the following (dated
and signed) in form and substance satisfactory to Agent and its counsel:
A. A borrowing request setting forth the requested
date of the Advance (but no sooner than three (3) Business Days after Agent
receives the request), the requested advance amount, the applicable interest
rate and whether the request is for a Term Loan or a Revolving Credit Loan, a
Borrowing Base Certificate in the form attached hereto as Exhibit "2.1(e)"
setting forth the availability under the Borrowing Base, any information
required by this Agreement and such other information as Agent shall reasonably
request. A borrowing request may be made orally, provided that Borrower confirms
the request in writing within two (2) days thereafter, provided further however,
that Lenders need not make any Advances until Agent receives actual written
confirmation and a Borrowing Base Certificate,
B. Such financial information concerning any of the
Leases, Borrower or any Lessee as Lenders may reasonably request, and
C. Such other instruments, agreements and documents
as Agent reasonably requests to carry out the intent of the parties to this
Agreement.
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(ii) No Event of Default or Unmatured Event of
Default shall have occurred hereunder.
(b) In order to increase the Borrowing Base, Borrower shall
deliver to Agent for the benefit of Lenders the following items:
(i) A description of the collateral package, which
shall include, identification of the Lessee, a description of the Leased
Property, the net cost of the Leased Property, the net remaining principal
balance under the Lease(s), and the terms of and rentals owed under each Lease,
and such other information which Agent or Lenders shall reasonably request,
(ii) An Assignment Agreement signed by Borrower
assigning Borrower's right, title and interest in and to the Leased Property and
Leases to Agent for the benefit of Lenders, in the form attached hereto as
Exhibit "2.3(b)(ii)" ("Assignment Agreement"),
(iii) Invoices showing the true cost of the Leased
Property net of any servicing or maintenance charges, brokers' fees or similar
types of "soft costs",
(iv) If requested by Agent, additional Uniform
Commercial Code ("UCC") financing statements covering, inter alia, the Leased
Property and the Leases listing Agent for the benefit of Lenders, as secured
party and Borrower as debtor, to be filed in locations reasonably required by
Agent,
(v) Copies of all UCC-1 financing statements filed by
Borrower against Lessee(s) and any acknowledgment copies or recording
information Borrower has received back from the recording offices, provided,
however, that Borrower shall not be required to furnish evidence of the filing
of UCC-1 financing statements covering Leased Property leased pursuant to
Lease(s) having an outstanding Lease Receivable value of under $16,000.
(vi) The sole original of each Lease along with all
schedules duly assigned to Agent for the benefit of Lenders,
(vii) For each item of Leased Property with a Lease
Receivable in excess of $20,000, evidence that such item of Leased Property is
insured against such risks, in such amounts, with such insurance, and on such
terms and conditions as shall be satisfactory to Lenders ("Insurance Coverage"),
(viii) A certificate of acceptance or other document
evidencing, or other evidence of oral confirmation, that the Lessee has received
and accepted the Leased Property,
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(ix) Where the initial cost of the Leased Property is
in excess of $100,000 and such Leased Property is to be affixed to real estate
in such a manner as, under applicable law, to become a fixture, a landlord or
mortgagee waiver from all persons having an interest in the real estate on which
the Leased Property will be located, and
(x) An undated notice signed by the Borrower
directing each Lessee to pay all sums due or to become due under each Lease
directly to Agent for the benefit of Lenders ("Lessee Notice") to be used only
following the occurrence of an Event of Default. Agent will hold the Lessee
Notices in escrow and will not release them, unless and until an Event of
Default shall have occurred.
2.4 Credit Facility Interest:
(a) Revolving Credit Loans: The unpaid principal balance of
all or a portion of the Revolving Credit Loans shall bear interest at either the
LIBOR Based Revolving Loan Rate or the LIBOR Market Index Rate. Interest on all
Revolving Credit Loans shall be due and payable monthly in arrears on the first
day of each month and on the last day of the applicable LIBOR Interest Period
with respect to LIBOR Based Rate Loans.
(b) Term Loans: The unpaid principal balance of all or a
portion of the Term Loans shall bear interest at the LIBOR Based Term Loan Rate.
In addition Borrower may request that a Term Loan be converted to a fixed rate
loan for the remaining term of such Term Loan at a rate quoted at the time of
request by Agent and Co-Agent and acceptable to all Lenders. Interest on all
Term Loans shall be due and payable monthly in arrears on the first day of each
month.
(c) (i) LIBOR Based Rate Loans: LIBOR Based Rate Loans shall
be selected for a period of either one (1), two (2), or three (3) months'
duration, as Borrower may elect, during which a LIBOR Based Rate is applicable
("LIBOR Interest Period"); provided, however, that (a) if the LIBOR Interest
Period would otherwise end on a day which shall not be a Good Business Day, such
LIBOR Interest Period shall be extended to the next succeeding Good Business
Day, unless such Good Business Day falls in another calendar month, in which
case such LIBOR Interest Period shall end on the next preceding Good Business
Day subject to clause (c) below; (b) interest shall accrue from and including
the first day of each LIBOR Interest Period to, but excluding, the day on which
any LIBOR Interest Period expires; and (c) with respect to any LIBOR Interest
Period which begins on the last Good Business Day of a calendar month (or on a
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day for which there is no numerically corresponding day in the calendar month at
the end of such LIBOR Interest Period), the LIBOR Interest Period shall end on
the last Good Business Day of a calendar month. All accrued and unpaid interest
on a LIBOR Based Rate Loan must be paid in full on the day the applicable LIBOR
Interest Period expires. No LIBOR Interest Period may end after the Maturity
Date. Subject to all of the terms and conditions applicable to a request that a
new Advance be a LIBOR Based Rate Loan, Borrower may extend LIBOR Based Rate
Loans as of the last day of the applicable LIBOR Interest Period to a new LIBOR
Based Rate Loan. If Borrower does not notify Agent of its desire to extend a
LIBOR Based Rate Loan or repay such Advance prior to the expiration of the
applicable LIBOR Interest Period, such Advance shall automatically be converted
to a LIBOR Market Index Rate Loan.
(ii) The Adjusted LIBOR Rate may be automatically
adjusted by Agent on a prospective basis to take into account the additional or
increased cost of maintaining any necessary reserves for Eurodollar deposits or
increased costs due to changes in applicable law or regulation or the
interpretation thereof occurring subsequent to the commencement of the then
applicable LIBOR Interest Period, including but not limited to changes in tax
laws and changes in the reserve requirements imposed by the Board of Governors
of the Federal Reserve System (or any successor), excluding any such changes
that have resulted in a payment pursuant to Section 2.9 hereof, that increase
the cost to Lenders of funding the LIBOR Based Rate Loan. Agent shall promptly
give the Borrower and each Lender notice of such a determination and adjustment,
which determination shall be conclusive, absent manifest error, as to the
correctness of the fact and the amount of such adjustment. Agent shall furnish
to Borrower a statement setting forth the basis for adjusting such LIBOR Based
Rate and the method for determining the amount of such adjustment.
(iii) In the event that Agent shall have reasonably
determined that Eurodollar deposits equal to the amount of the principal of the
requested LIBOR Based Rate Loan and for the LIBOR Interest Period specified are
unavailable, impractical or unlawful, or a LIBOR Based Rate or a LIBOR Market
Index Rate will not adequately and fairly reflect the cost of making or
maintaining the principal amount of the requested LIBOR Based Rate Loan or LIBOR
Market Index Rate Loan specified by Borrower, or that by reason of circumstances
affecting Eurodollar markets, adequate and reasonable means do not exist for
ascertaining the rate based on the Adjusted LIBOR Rate or the LIBOR Market Index
Rate, Agent shall promptly give notice of such determination to the Borrower
that rates based on the Adjusted LIBOR Rate or the LIBOR Market Index Rate are
not available. A determination by Agent hereunder shall be prima facie evidence
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of the correctness of the fact and amount of such additional costs or
unavailability. Upon such a determination, (i) the right of Borrower to select,
convert to, or maintain a LIBOR Based Rate Loan at the rate based on the
Adjusted LIBOR Rate or a LIBOR Market Index Rate Loan at the rate based on the
LIBOR Market Index Rate shall be suspended until Agent shall have notified the
Borrower that such conditions shall have ceased to exist, and (ii) the LIBOR
Based Rate Loans and LIBOR Market Index Rate Loans shall accrue interest at the
Base Rate.
(iv) In the event that, as a result of any changes in
applicable law or regulation or the interpretation thereof, it becomes unlawful
for a Lender to maintain Eurodollar liabilities sufficient to fund any LIBOR
Based Rate Loan subject to the LIBOR Based Rate, then such Lender shall
immediately notify Agent who shall immediately notify the other Lenders and
Borrower thereof, and such Lender's obligation to make, convert to, or maintain
a LIBOR Based Rate Loan at a LIBOR Based Rate shall be suspended until such time
as such Lender may again cause the LIBOR Based Rate to be applicable to its
share of any LIBOR Based Rate Loans and such Lender's share of the Loans subject
to the LIBOR Based Rate shall accrue interest at the Base Rate. If it becomes
unlawful for a Lender to maintain a LIBOR Based Rate Loan, such Lender may
require that Borrower immediately prepay such Lender's LIBOR Based Rate Loans or
convert such Loans to Base Rate Loans or LIBOR Market Index Rate Loans. Promptly
after becoming aware that it is no longer unlawful for such Lender to maintain
such Eurodollar liabilities, such Lender shall notify Agent who will notify
Borrower thereof and such suspension shall cease to exist. In the event it
becomes unlawful for a Lender to maintain Eurodollar liabilities, Borrower may
seek to have such Lender replaced with a lender for whom maintenance of
Eurodollar liabilities is not unlawful so long as such replacement lender is
satisfactory to Agent and the SuperMajority Lenders (without giving effect to
the potentially replaced Lender), in their sole and absolute discretion.
(v) In the event Borrower prepays (voluntarily or
involuntarily) or converts a LIBOR Based Rate Loan prior to the last day of the
applicable Interest Period, Borrower shall also pay to Agent for the account of
Lenders, on demand, the additional amount, as specified by Agent in a
certificate setting forth the basis of such computation, equal to the amount of
any reasonable fees, costs, expenses or other charges, plus the present value of
an amount which is the difference (if a positive number) between (y) the
aggregate interest which would have been payable to the last day of such
Interest Period on such prepaid amount, and (z) the aggregate interest the
Lenders could expect to earn on such prepaid amount if such amount were invested
for the period from the date of such prepayment to the last day of such Interest
Period in United States Treasury obligations maturing on or closest to the last
day of such Interest Period. Such certificate shall be conclusive except for
manifest error.
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(d) LIBOR Market Index Rate Loan: Up to $5,000,000 in
aggregate principal amount of Revolving Credit Loans and Term Loans may bear
interest from time to time at the LIBOR Market Index Rate provided that no
Revolving Credit Loan or portion of any Term Loan shall bear interest at the
LIBOR Market Index Rate for a period of more than 21 days. Upon or prior to the
expiration of such 21-day period, and subject to all the terms and conditions
applicable to the making of LIBOR Based Rate Loans hereunder, Borrower shall
cause any such Loan(s) to be converted to LIBOR Based Rate Loan(s). If Borrower
does not notify Agent of its desire to extend the applicable LIBOR Market Index
Rate Loan as a LIBOR Based Rate Loan, Borrower will repay such Loan prior to the
expiration of such 21-day period, or such Loan shall automatically be converted
to a LIBOR Based Rate Loan with a one month LIBOR Interest Period (unless such
LIBOR Interest Period would extend beyond the Maturity Date, in which case, the
LIBOR Market Index Rate Loan shall be continued as a LIBOR Market Index Rate
Loan until the Maturity Date). Interest on all LIBOR Market Index Rate Loans
shall be payable monthly, in arrears, on the first day of each calendar month.
The calculation and determination of the LIBOR Market Index Rate shall be made
daily by the Agent and such determination shall, absent manifest error, be
final, conclusive and binding upon all parties hereto. Changes in the LIBOR
Market Index Rate shall become effective on the same day as the Agent determines
a change in such LIBOR Market Index Rate has occurred.
2.5 Additional Interest Provisions.
(a) Calculation of Interest: Interest on the Loans, regardless
of the applicable interest rate, shall be based on a three hundred sixty (360)
day year and charged for the actual number of days elapsed.
(b) Default Rate: After the occurrence and during the
continuance of an Event of Default hereunder and following notice from Agent to
Borrower of the Lenders' intention to apply the Default Rate to the Loans, the
per annum effective rate of interest on all Loans outstanding under the Credit
Facility shall be increased to a per annum rate equal to two (2%) percentage
points in excess of the applicable interest rate ("Default Rate").
(c) Continuation of Interest Charges: All contractual rates of
interest chargeable on outstanding Loans, regardless of the then applicable
interest rate, shall continue to accrue and be paid even after default,
maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind
or the happening of any event or occurrence similar or dissimilar.
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(d) Applicable Interest Limitations: In no contingency or
event whatsoever shall the aggregate of all amounts deemed interest hereunder
and charged or collected pursuant to the terms of this Agreement exceed the
highest rate permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
court determines Lenders have charged or received interest hereunder in excess
of the highest applicable rate, Agent, on behalf of Lenders, shall in its sole
discretion, apply and set off such excess interest received by Lenders against
other Obligations due or to become due and such rate shall automatically be
reduced to the maximum rate permitted by such law.
(e) Limitation on LIBOR Based Rate Loans and LIBOR Market
Index Rate Loans: Upon the occurrence of an Event of Default, and following
written notice from Agent to Borrower, Agent may in its sole discretion, or upon
the instructions of Supermajority Lenders Agent shall, eliminate the
availability of LIBOR Based Rate Loans and LIBOR Market Index Rate Loans.
2.6 Fees:
(a) Unused Line Fee: So long as the Credit Facility is
outstanding and has not been terminated, Borrower shall unconditionally pay to
Agent, for the benefit of Lenders in accordance with their respective Pro Rata
Percentages, a non-refundable fee ("Unused Line Fee") equal to one-quarter of
one percent (1/4%) per annum of the average daily unused portion of the Credit
Facility (which shall be calculated as the Maximum Credit Limit minus the
average daily outstanding balance of all Loans during the quarter for which such
calculation is made). The Unused Line Fee shall be computed and paid on a
quarterly basis, in arrears, on the first day of each January, April, July and
October for the previous quarter for which such computation is made by Agent,
beginning on the first day of October, 1998.
(b) Administration Fee: So long as the Credit Facility is
outstanding and has not been terminated, Borrower shall unconditionally pay to
Agent, for Agent's account, a non-refundable fee ("Administration Fee") equal to
three eighths of one percent (3/8%) per annum of the average daily outstanding
principal balance of all Loans during the quarter for which such calculation is
made). The Administration Fee shall be computed and paid on a quarterly basis,
in arrears, on the first day of each January, April, July and October for the
previous quarter for which such computation is made by Agent, beginning on the
first day of October, 1998.
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2.7 Prepayments:
(a) (i) Base Rate Loans and LIBOR Market Index Rate Loans:
Base Rate Loans and LIBOR Market Index Rate Loans may be prepaid at any time and
from time to time, in whole or in part, without premium or penalty upon no less
than two (2) Business Days notice to Agent. All partial prepayments shall be
applied first to accrued and unpaid interest, fees and Expenses related to such
prepaid Loan and then to the outstanding principal balance of the Loan so
prepaid.
(ii) LIBOR Based Rate Loans: LIBOR Based Rate Loans may
not be prepaid on any date other than the last day of the selected Interest
Period unless Borrower gives Agent written notice of such intention prior to
1:00 p.m. on a Business Day which is no less than two (2) Business Days prior to
the date it intends to make such prepayment (unless such prepayment must be
immediate because of the illegality of LIBOR Based Rate Loans as set forth in
Section 2.4(c)(iv) hereof, in which case Borrower shall not be required to
provide such notice) and pays a prepayment fee in accordance with Section
2.4(c)(v) above. All such prepayments must be of the full amount of the
applicable LIBOR Based Rate Loan plus all accrued but unpaid interest, fees and
Expenses related to such prepaid Loan. Borrower agrees that this fee is an
estimate of Lender's damages and not a penalty.
(iii) Fixed Rate Term Loans: Term Loans bearing interest
at a fixed rate pursuant to Section 2.4(b) hereof may not be prepaid unless
Borrower pays a prepayment fee equal to (the amount of any applicable fees,
costs, Expenses or other charges, plus the present value of an amount which is
the difference (if a positive number) between (y) the aggregate interest which
would have been payable to the last day of such Term Loan on such prepaid
amount, and (z) the aggregate interest Lenders could expect to earn on such
prepaid amount if such amount were invested for the period from the date of such
prepayment to the maturity date of the Term Loan in United States Treasury
obligations maturing on or closest to such maturity date. Borrower agrees that
this fee is our estimate of Lenders' damages and not a penalty. All such
prepayments shall be applied to the prepaid Term Loan, first against all accrued
and unpaid interest, fees and Expenses related to such prepaid Term Loan and
then to installments of the outstanding principal balance of the Term Loan so
prepaid in the inverse order of maturity.
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(b) Proceeds of Collateral: Prior to the occurrence of an
Event of Default, proceeds from Collateral comprising a portion of the Borrowing
Base, to the extent that the aggregate outstanding amount of all Loans exceeds
the Borrowing Base, shall promptly be paid to Agent for the benefit of Lenders
and be first applied to accrued but unpaid interest, fees, costs and Expenses
related to the Credit Facility, and then to the outstanding balance of the
Revolving Credit Loans, the Term Loan and then to Borrower's other Obligations
in such order as Agent may elect in its sole discretion. Following the
occurrence of an Event of Default, all proceeds from the Collateral shall be
immediately delivered to Agent and Agent may apply such proceeds to any of
Borrower's Obligations in such order as Lenders may decide in their sole
discretion.
(c) Mandatory Prepayment: In the event the aggregate
outstanding amount of all Loans at any time exceeds the Maximum Credit Limit,
Borrower shall immediately repay such excess in full and if the aggregate
outstanding amount of all Revolving Credit Loans exceeds the Borrowing Base,
Borrower shall within ten (10) days either (i) repay such excess in full or (ii)
pledge additional Eligible Leases in accordance with the terms hereof. Any such
payments shall first be applied to accrued but unpaid interest, fees, costs and
Expenses related to the Credit Facility, and then to the outstanding balance of
the Revolving Credit Loans, the Term Loans and then to Borrower's other
Obligations in such order as Agent may elect in its sole discretion. Prepayments
of the Term Loans shall be applied against the remaining principal installments
in the inverse order of maturity.
2.8 Use of Proceeds: The extensions of credit under and proceeds of the
Credit Facility shall be used to enable Borrower to purchase Leased Property and
finance Leases associated with such Leased Property.
2.9 Capital Adequacy: If any present or future law, governmental rule,
regulation, policy, guideline, directive or similar requirement (whether or not
having the force of law) imposes, modifies, or deems applicable any capital
adequacy, capital maintenance or similar requirement which affects the manner in
which Commercial banks generally allocate capital resources to their commitments
(including any commitments hereunder), and as a result thereof, in the opinion
of a Lender, the rate of return on such Lender's capital with regard to the
Loans is reduced to a level below that which such Lender could have achieved but
for such circumstances, then in such case and upon notice from Agent and/or such
Lender to Borrower, from time to time, Borrower shall pay such Lender such
additional amount or amounts as shall compensate such Lender for such reduction
in its rate of return. Such notice shall contain the statement of such Lender
with regard to any such amount or amounts which shall, in the absence of
manifest error, be binding upon Borrower. In determining such amount, such
Lender may use any reasonable method of averaging and attribution that it deems
applicable.
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SECTION 3. COLLATERAL
3.1 Description: As security for the payment of the Obligations, and
satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents, Borrower hereby grants to Agent, for the
benefit of Lenders, a continuing first lien on and security interest in, upon
and to the Collateral.
3.2 Lien Documents: At Closing and thereafter as Agent deems necessary,
Borrower shall execute and deliver to Agent, or have executed and delivered (all
in form and substance reasonably satisfactory to Agent):
(a) Financing Statements - Financing statements pursuant to
the UCC, which Agent, on behalf of Lenders, may file in any jurisdiction where
any Collateral is or may be located and where Borrower maintains its chief
executive office; and
(b) Other Agreements - Any other agreements, documents,
instruments and writings, including, without limitation, security agreements and
Assignment Agreements, reasonably required by Agent to evidence, perfect or
protect Agent's and/or Lenders' liens and security interest in the Collateral or
as Agent may reasonably request from time to time.
3.3 Other Actions: In addition to the foregoing, Borrower shall do
anything further that may be lawfully and reasonably required by Agent to secure
Lenders and effectuate the intentions and objects of this Agreement, including,
but not limited to, the execution and delivery of lockbox agreements,
continuation statements, amendments to financing statements, security
agreements, contracts and any other documents required hereunder. Borrower shall
also immediately deliver (with execution by Borrower of all necessary documents
or forms to reflect Agent's Lien for the benefit of Lenders thereon) to Agent as
bailee for Lenders, all items for which Agent and/or Lenders must or may receive
possession to obtain a perfected security interest, including without
limitation, all Leases, notes, certificates and documents of title, chattel
paper, warehouse receipts, instruments, and any other similar instruments
constituting Collateral.
3.4 Searches: Agent shall, prior to or at Closing, and thereafter as
Agent may determine from time to time, at Borrower's sole expense, obtain the
following searches (the results of which are to be consistent with the
warranties made by Borrower in this Agreement):
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(a) UCC Searches: UCC searches with the Secretary of State and
local filing office of each state where Borrower maintains its executive office,
a place of business, or assets;
(b) Judgments, Etc.: Judgment, federal tax lien and corporate
tax lien searches, in all applicable filing offices of each state searched under
subparagraph (a) above.
Borrower shall, prior to or at Closing and at its expense,
obtain and deliver to Agent good standing certificates showing Borrower to be in
good standing in its state of incorporation and in each other state or foreign
country in which it is doing and presently intends to do business for which
Borrower's failure to be so qualified might have material adverse effect on
Borrower's business, financial condition, Property or Agent's and/or Lenders'
rights hereunder.
3.5 Filing Security Agreement: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
3.6 Power of Attorney: Each of the officers of Agent is hereby
irrevocably made, constituted and appointed (such appointment being coupled with
an interest) the true and lawful attorney for Borrower (without requiring any of
them to act as such) with full power of substitution to do the following: (1)
endorse the name of Borrower upon any and all checks, drafts, money orders and
other instruments for the payment of monies that are payable to Borrower and
constitute collections on the Collateral; (2) execute in the name of Borrower
any financing statements, schedules, assignments, instruments, documents and
statements that Borrower is obligated to give Agent hereunder or is necessary to
perfect Agent's and/or Lenders' security interest or Lien in the Collateral,
including without limitation, execute in its own name or in the name of
Borrower, all documentation necessary to have Agent's Lien for the benefit of
Lenders noted on all vehicle titles, to prepare and sign any and all
applications for vehicle titles relating to Leased Property and any registration
documentation with respect to such Leased Property; (3) to verify validity,
amount or any other matter relating to the Collateral by mail, telephone,
telecopy or otherwise; and (4) upon the occurrence of an Event of Default, do
such other and further acts and deeds in the name of Borrower that Agent may
reasonably deem necessary or desirable to enforce any Account or perfect its
liens on, or to protect its interest in, any other Collateral.
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SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all documents to be in form and substance satisfactory to Agent and
its counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrower shall have
delivered to Agent the following:
(a) this Agreement and the Revolving Credit Notes all properly
executed;
(b) each document and agreement required to be executed under
any provision of this Agreement or any related agreement;
(c) certified copies of (i) resolutions of Borrower's board of
directors authorizing the execution of this Agreement, the Revolving Credit
Notes and the Term Notes to be issued hereunder and each document, instrument
and agreement required to be delivered by any Section hereof and resolutions of
each Guarantor's board of directors authorizing the execution and delivery of
the Guaranty and (ii) Borrower's and each Guarantor's Articles of Incorporation
and By-laws;
(d) an incumbency certificate identifying all Authorized
Officers of Borrower and each signatory of the Guaranty on behalf of each
Guarantor authorizing the execution and delivery of the Guaranty, with specimen
signatures;
(e) a written opinion of Borrower's and each Guarantor's
independent counsel addressed to Agent for the benefit of all Lenders;
(f) certification by Borrower's chief financial officer that
there has not occurred any material adverse change in the operations and
condition (financial or otherwise) of Borrower since June 30, 1998;
(g) payment by Borrower of all Expenses associated with the
Credit Facility incurred to the Closing Date;
(h) Uniform Commercial Code, judgment, federal and state tax
lien searches against Borrower, at Borrower's expense, showing that the
Collateral is not subject to any Liens, together with Good Standing and
Corporate Tax Lien Search Certificates showing no tax Liens on Borrower's
Property and showing Borrower to be in good standing in each jurisdiction where
the failure to so qualify might have a material adverse affect on Borrower's
business, financial condition, Property or Agent's and/or Lenders' rights
hereunder;
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(i) An initial borrowing base certificate dated the Closing
Date evidencing Borrower's minimum borrowing availability under the Borrowing
Base as of the Closing Date;
(j) UCC-1 Financing Statements naming Borrower as debtor and
Agent as secured party, to be filed in all locations satisfactory to Agent;
(k) A Guaranty Agreement executed by each of the Guarantors
("Guaranty");
(l) Stock Pledge Agreements for the shares of Borrower and
Resource Leasing, Inc. executed by Resource Leasing, Inc. and Resource America,
Inc. respectively (collectively "Stock Pledge Agreements); and
(m) A subordination agreement ("Subordination Agreement")
among Resource Leasing, Inc., Agent and Borrower whereby Resource Leasing, Inc.
agrees to subordinate all indebtedness owing from Borrower to Resource Leasing,
Inc., on terms and conditions satisfactory to Agent.
4.2 Absence of Certain Events: At the Closing Date, no Event of Default
or Unmatured Event of Default hereunder shall have occurred and be continuing.
4.3 Warranties and Representations at Closing: The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement and any other Loan Document shall be true and correct in all material
respects on the Closing Date with the same effect as though made on and as of
that date. Borrower shall not have taken any action or permitted any condition
to exist which would have been prohibited by any Section hereof.
4.4 Compliance with this Agreement: Borrower shall have performed and
complied with all agreements, covenants and conditions contained herein
including, without limitation, the provisions of Sections 6 and 7 hereof, and
any other Loan Document, which are required to be performed or complied with by
Borrower before or at the Closing Date.
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4.5 Officers' Certificate: Agent shall have received a certificate
dated the Closing Date and signed by an Authorized Officer of Borrower
certifying that all of the conditions specified in this Section have been
fulfilled.
4.6 Closing: Subject to the conditions of this Section 4, the Credit
Facility shall be made available on the date ("Closing Date") this Agreement is
executed and all of the conditions contained in Section 4.1 hereof are completed
(the "Closing").
4.7 Non-Waiver of Rights: By completing the Closing hereunder, or by
making advances hereunder, Agent and Lenders do not thereby waive a breach of
any warranty, representation or covenant made by Borrower hereunder or any
agreement, document, or instrument delivered to Agent or otherwise referred to
herein, including without limitation, the Existing Loan Documents, and any
claims and rights of Agent and/or Lenders resulting from any breach or
misrepresentation by Borrower are specifically reserved by Agent for the benefit
of Lenders.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lenders to complete the Closing and make the initial Advances
under the Credit Facility to Borrower, Borrower warrants and represents to Agent
and Lenders that:
5.1 Corporate Organization and Validity:
(a) Borrower is a corporation duly organized and validly
existing under the laws of its state of incorporation, is duly qualified, is
validly existing and in good standing and has lawful power and authority to
engage in the business it conducts in each state and other jurisdiction where
the nature and extent of its business requires qualification, except where the
failure to so qualify would not have a material adverse effect on Borrower's
business, financial condition, Property or prospects. A list of all states and
other jurisdictions where Borrower is qualified to do business is attached
hereto as Exhibit "5.1" and made a part hereof.
(b) The making and performance of this Agreement and related
agreements, and each document required by any Section hereof will not violate
any law, government rule or regulation, or the charter, minutes or bylaw
provisions of Borrower or violate or result in a default (immediately or with
the passage of time) under any contract, agreement or instrument to which
Borrower is a party, or by which it is bound. Borrower is not in violation of,
nor has knowingly caused any Person to violate, any term of any agreement or
instrument to which it or such Person is a party or by which it may be bound or
of its charter, minutes or bylaws which violation could have a material adverse
effect on Borrower's business, financial condition, Property or prospects.
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(c) Borrower has all requisite corporate power and authority
to enter into and perform this Agreement and to incur the obligations herein
provided for, and has taken all proper and necessary corporate action to
authorize the execution, delivery and performance of this Agreement, and the
documents and related agreements required hereby.
(d) This Agreement, the Revolving Credit Notes and the Term
Notes to be issued hereunder, and all related agreements and documents required
to be executed and delivered by Borrower hereunder, when delivered, will be
valid and binding upon Borrower and enforceable in accordance with their
respective terms.
5.2 Places of Business: The only places of business of Borrower, and
the places where it keeps and intends to keep copies of the Leases and its Books
and Records concerning the Collateral, are at the addresses listed in Exhibit
"5.2" attached hereto and made a part hereof. The name of the record owner of
each property is also set forth on Exhibit "5.2".
5.3 Pending Litigation: There are no judgments or judicial or
administrative orders, proceedings or investigations (civil or criminal)
pending, or to the knowledge of Borrower, threatened, against Borrower in any
court or before any governmental authority or arbitration board or tribunal
except as shown in Exhibit "5.3" attached hereto and made a part hereof, none of
which may materially and adversely affect the business, financial condition,
Property or prospects of Borrower, or the ability of Borrower to perform under
this Agreement. Borrower is not in default with respect to any order of any
court, governmental authority, regulatory agency or arbitration board or
tribunal, the effect of which would materially and adversely affect the
business, financial condition, Property or prospects of Borrower. No shareholder
or executive officer of Borrower has been indicted or convicted in connection
with or is engaging in any criminal conduct, or is currently subject to any
lawsuit or proceeding or under investigation in connection with any
anti-racketeering or other conduct or activity.
5.4 Title to Collateral: Borrower has good and marketable title in fee
simple (or its equivalent under applicable law) to all the Collateral it
respectively purports to own, free from Liens, except those of Agent for the
benefit of Lenders and free from the claims of any other Person other than the
leasehold interests of the Lessees.
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5.5 Governmental Consent: Neither the nature of Borrower or of its
business or Property, nor any relationship between Borrower and any other
Person, nor any circumstance affecting Borrower in connection with the issuance
or delivery of the Revolving Credit Notes or the Term Notes, is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of Borrower in
connection with the execution and delivery of this Agreement or the issuance or
delivery of the Revolving Credit Notes or the Term Notes or other documents
contemplated hereby.
5.6 Taxes: All tax returns required to be filed by Borrower in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and other
governmental charges upon Borrower, or upon any of its Property, income or
franchises, which are shown to be due and payable on such returns have been
paid, except for those taxes being contested in good faith with due diligence by
appropriate proceedings for which appropriate reserves have been maintained
under GAAP.
5.7 Financial Statements: Borrower's annual consolidated audited
balance sheet as of September 30, 1997 and its quarterly consolidated balance
sheet as of March 31, 1998 and the related income statements and statements of
cash flows as of such dates, all accompanied by reports thereon from Borrower's
independent certified public accountants with respect to the annual statements
(complete copies of which have been delivered to Agent), have been prepared in
accordance with GAAP and present fairly, accurately and completely the financial
position of the Borrower as of such dates and the results of its operations for
such periods. The fiscal year for Borrower currently ends on September 30.
Borrower's federal tax identification number is 23-2842671.
5.8 Full Disclosure: Neither the financial statements referred to in
Section 5.7, nor this Agreement or related agreements and documents or any
written statement furnished by Borrower to Agent in connection with the
negotiation of the Credit Facility and contained in any financial statements or
documents relating to Borrower contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained therein or
herein not misleading.
5.9 Subsidiaries: Borrower has no Subsidiaries or Affiliates, except as
listed on Exhibit "5.9" attached hereto and made a part hereof.
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5.10 Guarantees:
Borrower does not own nor hold equity or long term debt
investments in, has any outstanding advances to, or serves as guarantor, surety
or accommodation maker for the obligations of, or has any outstanding borrowings
from, any Person except as described in Exhibit "5.10", attached hereto and a
made part hereof.
5.11 Government Regulations, etc.:
(a) The use of the proceeds of and Borrower's issuance of the
Revolving Credit Notes and the Term Notes will not directly or indirectly
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended or Regulations U, T or X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II. Borrower does not own or intend
to carry or purchase any "margin stock" within the meaning of said Regulation U.
(b) Borrower has obtained all licenses, permits, franchises or
other governmental authorizations necessary for the ownership of its Property
and for the conduct of its business, where the failure to obtain would have a
material adverse effect on the business, financial condition, Property or
prospects of Borrower or Agent's and/or Lenders' rights with respect to the
Collateral.
(c) Borrower is not in violation of, has not received written
notice that it is in violation of, or has knowingly caused any Person to
violate, any applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or of any other
jurisdiction, or of any agency, or department thereof, (including without
limitation, environmental laws and regulations), which may materially and
adversely affect its business, financial condition, Property or prospects or
Agent's and/or Lenders' rights with respect to the Collateral.
(d) Borrower is current with all reports and documents
required to be filed with any state or federal securities commission or similar
agency and is in full compliance in all material respects with all applicable
rules and regulations of such commissions.
5.12 Names:
(a) Within five (5) years prior to the Closing Date, Borrower
has not conducted business under or used any other name (whether corporate or
assumed) except for the names shown on Exhibit "5.12(a)", attached hereto and
made a part hereof. Borrower is the sole owner of all names listed on such
Exhibit "5.12(a)" and any and all business done and all invoices issued in such
trade names are Borrower's sales, leases, business and invoices. Each trade name
of Borrower represents a division or trading style of Borrower and not a
separate corporate subsidiary or affiliate or independent entity.
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(b) All trademarks, patents or copyrights which Borrower uses,
plans to use or has a right to use are listed on Exhibit "5.12(b) attached
hereto and made a part hereof. Borrower is the sole owner of such Property
except to the extent any other Person has claims or rights in such Property, as
such claims and rights are described on such Exhibit "5.12(b)." To the best of
Borrower's knowledge, Borrower is not in violation of any rights of any other
Person with respect to such Property.
5.13 Other Associations: Borrower is not engaged and has no interest in
any joint venture or partnership with any other Person except as described on
Exhibit "5.13" hereto and made a part hereof.
knowledge:
(a) of the presence of any Hazardous Substances on any of the
real property where Borrower conducts operations or has its personal property,
or
(b) of any on-site spills, releases, discharges, disposal or
storage of Hazardous Substances that have occurred or are presently occurring on
any of such real property or where any Collateral is located, or
(c) of any spills, releases, discharges or disposal of
Hazardous Substances that have occurred, are presently occurring on any other
real property as a result of the conduct, action or activities of Borrower.
As used herein, the term "Hazardous Substances" means any substances defined or
designated as hazardous or toxic waste, hazardous or toxic material, hazardous
or toxic substance or similar term, by any environmental statute, rule or
regulation of any governmental entity presently in effect and applicable to such
real property.
5.15 Capital Stock: The authorized and outstanding shares of capital
stock of Borrower is as set forth on Exhibit "5.15" attached hereto and made a
part hereof. All of the capital stock of Borrower has been duly and validly
authorized and issued and is fully paid and non-assessable and has been sold and
delivered to the holders thereof in compliance with, or under valid exemption
from, all Federal and state laws and the rules and regulations of all regulatory
bodies thereof governing the sale and delivery of securities. Except for the
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rights and obligations set forth in Exhibit "5.15", there are no subscriptions,
warrants, options, calls, commitments, rights or agreements by which Borrower or
any of the shareholders of Borrower is bound relating to the issuance, transfer,
voting or redemption of shares of its capital stock or any pre-emptive rights
held by any Person with respect to the shares of capital stock of Borrower.
Except as set forth in Exhibit "5.15", Borrower has not issued any securities
convertible into or exchangeable for shares of its capital stock or any options,
warrants or other rights to acquire such shares or securities convertible into
or exchangeable for such shares.
5.16 Solvency: Borrower is solvent, able to pay its debts as they
become due, and has capital sufficient to carry on its business and all business
in which it is about to engage, and now owns Property having a value both at
fair valuation and at present fair salable value greater than the amount
required to pay its debts. Borrower will not be rendered insolvent by the
execution and delivery of this Agreement or any of the other documents executed
in connection with this Agreement or by the transactions contemplated hereunder
or thereunder.
5.17 Leases and Leased Property: Each Lease reported to Agent and
Lenders as an Eligible Lease and the Leased Property associated therewith shall,
at all times when such Leases are included in the Borrowing Base calculation, be
in compliance with all of the following representations:
(a) Each Lease is in substantially the same form as that
attached as Exhibit 5.17 hereto or has been otherwise approved by Agent in its
reasonable discretion and is genuine, based on contracts that are enforceable in
accordance with its terms against the Lessee and the Leased Property named and
referenced therein, constitutes the entire agreement for the leasing of the
Leased Property thereby covered, has not been altered or amended, except as set
forth in the related schedules, and Borrower's Books and Records relating
thereto are accurate, complete and genuine;
(b) The sole original of each Lease has been delivered to
Agent, and all other counterparts of each Lease shall contain a legend stating
that the Lease has been assigned to First Union National Bank, As Agent,
pursuant to that certain Amended and Restated Loan and Security Agreement dated
September 30, 1998, or contain similar language specifying that such counterpart
is not an original for "chattel paper" purposes under the UCC;
(c) Where the Lease consists of a Master Lease Agreement and
specific schedules which describe the terms of any specific items to be leased
pursuant to such schedule, the sole original schedule shall constitute the sole
original Lease, provided that the terms of the Master Lease Agreement and the
schedule make it clear that the sole original schedule is a separate lease for
"Chattel Paper" purposes under the UCC and that possession of such schedule
constitutes possession of "Chattel Paper" under the UCC;
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(d) Except as otherwise consented to by Agent in writing, the
aggregate amount of Leases with the same Lessee (or its Affiliates) is not in
excess of $250,000;
(e) The original amount and unpaid balance of each Lease shown
on Borrower's Books and Records and on any statement or schedule delivered to
Agent in connection therewith is the true and correct amount actually owed to
Borrower, no portion of which, except as specifically provided for in the Lease,
has been prepaid;
(f) The amount due under each Lease is not subject to, and the
terms of the Lease provide that the Lessee may not assert, any claim or
reduction, counterclaim, setoff, recoupment, or any other claim, allowance or
adjustment and no Lease has been re-negotiated, restructured or compromised
except as renewed in the ordinary course of business;
(g) All security agreements, title retention instruments and
other documents and instruments which are security for any Lease, and/or each
Lease, contain a correct and sufficient description of the Leased Property
covered thereby and all security interests granted therein to Borrower (either
directly or as assignee), if applicable, have been properly perfected and
assigned to Agent for the benefit of Lenders;
(h) Borrower has not and will not enter into any agreement
with a Lessee of any Leased Property which provides, directly or indirectly, for
the crediting of any obligation or liability of Borrower to such Lessee against
future rentals accruing under the Lease;
(i) Each item of Leased Property has been delivered to and, in
all instances, accepted by the Lessee and is in good condition, ordinary wear
and tear excepted, has not been returned, rejected, lost, stolen, destroyed or
damaged and has not been removed from service;
(j) Each Lease has been duly executed by Borrower and each
Lessee, is a valid, legal and binding obligation of Borrower, and such Lessee,
and is enforceable against Borrower and such Lessee in accordance with its
terms. Borrower is the sole owner of each of the Leases and has the authority to
assign all of its right, title and interest therein upon the terms herein set
forth;
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(k) Each of the Leases and all Leased Property which is the
subject matter thereof at the time of its assignment to Agent for the benefit of
Lenders and at all times thereafter, will be free and clear of any and all
assignments, options, rights, or other Liens whatsoever except Lenders' and/or
Agent's and residual sharing arrangements;
(l) Borrower has made its usual credit investigation of each
Lessee and has determined that the credit is satisfactory;
(m) All costs, fees, and expenses incurred in making and
closing each of the Leases has been paid and each Lease is and will be current
at the time of the assignment thereof to Lenders. No default exists or event
exists which with the giving of notice or the passage of time or both, will
result in the occurrence of a default of any obligation, as expressed in any
Lease;
(n) All rentals, fees, costs, expenses and charges paid or
payable by the Lessee under any Lease, including without limitation, any
brokerage and other fees paid to Borrower do not violate any laws relating to
the maximum fees, costs, expenses or charges that can be charged in any state in
which any Leased Property is located or in which the corresponding Lessee is
located, or in which a transaction was consummated, or in any other state which
may have jurisdiction with respect to any such Leased Property, Lease or Lessee;
(o) Agent, for the benefit of Lenders, has a first perfected
lien and security interest in the Collateral (including without limitation each
Lease and the Leased Property) subject to no other Lien. Borrower has taken and
in the future, shall take all steps necessary to maintain Agent's first
perfected lien and security interest in the Collateral, including, if required,
perfecting Borrower's security interest (in the event the Lease is not a "true
lease") through filing financing statements, amendments thereto, or assignments
and/or continuations thereof and recording of the documentation necessary to
perfect Borrower's lien;
(p) For each Lease, with a Lease Receivable in excess of
$16,000, Borrower has either (i) listed Agent for the benefit of Lenders, as
assignee on the UCC-1 Financing Statement so filed, or (ii) after Borrower has
received acknowledgment copies of UCC-1s, deliver to Agent executed UCC-3
Financing Statements naming Agent for the benefit of Lenders as assignee of
Borrower's security interest. Agent agrees not to file the UCC-3 Financing
Statements until such time as an Event of Default or Unmatured Event of Default
occurs under this Agreement, and Agent will return such UCC-3 Financing
Statements to Borrower if such Leases are ultimately sold or refinanced on a
permanent basis with another lender;
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(q) Each Lease is valid and enforceable and presents the
undisputed obligation of the Lessee named therein and is not more than sixty-one
(61) days contractually past due;
(r) Each item of Leased Property leased pursuant to a Lease
with a Lease Receivable in excess of 20,000 has been insured in the ordinary
course of Borrower's or the corresponding Lessee's business;
(s) Borrower has not received notice of a bankruptcy,
receivership, reorganization or insolvency of any Lessee;
(t) No Lessee is a Subsidiary or Affiliate of Borrower, or is
an officer or employee of Borrower;
(u) Each Lease contains a provision whereby the Lessee agrees
not to assert any claim or reduction, counterclaim, setoff, recoupment or any
other claim, allowance or adjustment against any assignee of Borrower; and
(v) The Lessee is not otherwise in default under the
corresponding Lease.
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants that until all of Borrower's Obligations under or in
connection with this Agreement to Lenders and Agent are paid and satisfied in
full and the Revolving Credit has been terminated:
6.1 Payment of Taxes and Claims: Borrower shall pay, before they become
delinquent, all taxes, assessments and governmental charges or levies imposed
upon it or upon Borrower's Property, except for those taxes being contested in
good faith with due diligence by appropriate proceedings for which appropriate
reserves have been maintained pursuant to GAAP.
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6.2 Maintenance of Properties and Corporate Existence:
(a) Property Insurance - Borrower shall maintain or caused to
be maintained insurance on the Collateral against fire, flood, casualty and such
other hazards in such amounts, with such deductibles and with such insurers as
are customarily used by companies operating in the same industry as Borrower or
the corresponding Lessee. At or prior to Closing, Borrower shall furnish Agent
with copies of original insurance binders certified as true and correct and
being in full force and effect as of the Closing Date or such other evidence of
insurance as Agent may require. In the event Borrower fails to procure or cause
to be procured any such insurance or to timely pay or cause to be paid the
premium(s) on any such insurance, Agent (on behalf of Lenders) may do so for
Borrower, but Borrower shall continue to be liable for the same. The policies of
all such casualty insurance shall contain standard Lender's Loss Payable Clauses
issued in favor of Agent (on behalf of Lenders) under which all losses
thereunder shall be paid to Agent (on behalf of Lenders) as Agent's interest may
appear. Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior written notice to
Agent and shall insure Lenders notwithstanding the act or neglect of Borrower.
Borrower hereby appoints Agent as Borrower's attorney-in-fact, exercisable at
Agent's option to endorse any check which may be payable to Borrower in order to
collect the proceeds of such insurance and any amount or amounts collected by
Agent pursuant to the provisions of this paragraph may be applied by Agent to
Borrower's Obligations. Borrower further covenants that all insurance premiums
owing under its current casualty policy have been paid. Borrower also agrees to
notify Agent, promptly, upon Borrower's receipt of a notice of termination,
cancellation, or non-renewal from its insurance company of any such policy.
(b) Public and Products Liability Insurance - Borrower shall
maintain, and shall deliver to Agent upon Agent's request evidence of, public
liability, products liability and business interruption insurance in such
amounts as is customary for companies in the same or similar businesses located
in the same or similar area.
(c) Financial Records - Borrower shall keep current and
accurate books of records and accounts in which full and correct entries will be
made of all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP. Borrower shall not change its respective fiscal year end date without
the prior written consent of Agent.
(d) Corporate Existence and Rights - Borrower shall do (or
cause to be done) all things necessary to preserve and keep in full force and
effect its existence, good standing, rights and franchises.
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(e) Compliance with Laws - Borrower shall be in compliance
with any and all laws, ordinances, governmental rules and regulations, and court
or administrative orders or decrees to which it is subject, whether federal,
state or local, (including without limitation environmental or
environmental-related laws, statutes, ordinances, rules, regulations and notices
and all applicable consumer sale and/or leasing laws and regulations), and shall
obtain and maintain any and all licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its Property or to the
conduct of its businesses, which violation or failure to obtain may materially
adversely affect the business, Property, financial conditions or prospects of
Borrower.
6.3 Business Conducted: Borrower shall continue in the business
presently operated by it using its best efforts to maintain its customers and
goodwill. Borrower shall not engage, directly or indirectly, in any material
respect in any line of business substantially different from the businesses
conducted by it immediately prior to the Closing Date, unless such line of
business is reasonably related to such business so conducted prior to the
Closing Date.
6.4 Litigation: Borrower shall give prompt notice to Agent of any
litigation claiming in excess of $100,000 from Borrower, or which may otherwise
have a material adverse effect on the business, financial condition, Property or
prospects of Borrower.
6.5 Taxes:
(a) Borrower shall pay all taxes (other than taxes based upon
or measured by any Lender's income or revenues), if any, in connection with the
Loans and/or the recording of any Lien Documents. The obligations of Borrower
under this section shall survive the payment of Borrower's Obligations under
this Agreement and the termination of this Agreement. Borrower shall cause to be
paid all taxes incurred in connection with any of the Leases or the acquisition,
sale or lease of any of the Leased Property.
6.6 Bank Accounts: Borrower shall maintain its major depository and
disbursement account(s) with
Agent.
6.7 Warranties for Future Advances: Each request by Borrower for an
Advance under the Credit Facility in any form following the Closing Date shall
constitute an automatic representation and warranty by Borrower to the effect
that:
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(a) There has been no material adverse change in Borrower's
operations or condition (financial or otherwise) since the date of delivery of
Borrower's most recent Financial Statements.
(b) No Event of Default which has not been cured or waived, or
Unmatured Event of Default, then exists;
(c) Each Advance is within and complies with the terms and
conditions of this Agreement including without limitation the notice provisions
contained in Section 2.3 hereof;
(d) No Lien, including, without limitation, any federal tax
Lien, has been imposed on Borrower which may, in any way, take priority over
Agent's and/or Lenders' security interests in or Liens on any Collateral; and
(e) Each representation and warranty set forth in Section 5 of
this Agreement is then true and correct in all material respects.
6.8 Financial Covenants: Borrower shall maintain and comply with the
following financial covenants as reflected on and computed from their Financial
Statements:
(a) Adjusted Debt to Tangible Net Worth Ratio: Borrower shall
have and maintain at all times an Adjusted Debt to Tangible Net Worth Ratio on a
consolidated basis, measured quarterly as of the last day of each fiscal quarter
during each fiscal year, of not more than 5.5 to 1.
(b) Tangible Net Worth: Borrower shall have and maintain a
Tangible Net Worth of not less than $8,000,000 as of June 30, 1998. As of the
last day of each fiscal quarter thereafter, Borrower shall have a Tangible Net
Worth of not less than the amount required hereby for the immediately preceding
fiscal quarter plus an amount equal to 75% of the Borrower's Net Income for the
immediately preceding fiscal quarter (for the purposes of such step-up, Net
Income shall never be less than zero). The amount of Tangible Net Worth required
to be maintained by Borrower pursuant to this Section 6.8(b) shall be adjusted
upon receipt by Borrower of the net proceeds of any capital contribution by an
amount to be agreed upon by Borrower and Agent.
(c) Fixed Charge Coverage Ratio: Borrower shall have and
maintain as of the end of each fiscal quarter, based on financial information
for the twelve-month period ending as of the end of such fiscal quarter, on a
consolidated basis, a Fixed Charge Coverage Ratio of not less than 1.50 to 1.
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6.9 Change of Ownership Interests/Management: Resource America, Inc.
and/or Abraham Bernstein shall at all times own 51% of the aggregate voting
interests of all classes of capital stock of Borrower entitled to vote generally
and Abraham Bernstein shall at all times remain as Chief Executive Officer of
Borrower and have a substantial equity interest (including options) in Borrower.
6.10 Financial and Business Information: Borrower shall deliver to
Agent and each Lender the following:
(a) Financial Statements and Collateral Reports: such data,
reports, statements and information, financial or otherwise, as Agent may
reasonably request, including, without limitation:
(i) within one hundred twenty (120) days after the end
of each fiscal year of Borrower, Financial Statements of Borrower for such year
including the balance sheet of Borrower as at the end of such fiscal year and a
statement of cash flows and income statement for such fiscal year, all on a
consolidated and consolidating basis, setting forth in the consolidated
statements in comparative form, the corresponding figures as at the end of and
for the previous fiscal year, all in reasonable detail, including all supporting
schedules, and audited and certified by independent public accountants of
recognized standing, selected by Borrower and satisfactory to the Agent (Grant
Thornton being deemed satisfactory to Agent), to have been prepared in
accordance with GAAP, and such independent public accountants shall also provide
an unqualified opinion that the Financial Statements present fairly the
Borrower's financial condition. Such independent accountants shall also provide
a statement certifying that nothing has come to their attention to cause them to
believe that calculations contained in the compliance certificate are
inaccurate.
(ii) within fifteen (15) days of the end of each
calendar month, Borrower's Lease receivables aging report, covenant compliance
certificate and such other reports as Agent reasonably deems necessary,
certified by Borrower's chief financial officer or other officer acceptable to
Agent as true and correct, all in form and substance satisfactory to Agent;
(iii) within fifteen (15) days after the end of each
month, Borrower's internally prepared monthly consolidated and consolidating
Financial Statements, including balance sheet, income statement and statements
of cash flows.
(b) Notice of Event of Default - promptly upon becoming aware
of the existence of any condition or event which constitutes a default or an
Event of Default or Unmatured Event of Default under this Agreement, a written
notice specifying the nature and period of existence thereof and what action
Borrower is taking (and proposes to take) with respect thereto;
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(c) Notice of Claimed Default - promptly upon receipt by
Borrower, notice of default, oral or written, given to Borrower by any creditor
for borrowed money in excess of $50,000;
(d) Securities and Other Reports - if Borrower or any
Affiliate shall be required to file reports with the Securities and Exchange
Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, promptly upon its becoming available, one copy of each
financial statement, report, notice or proxy statement sent by Borrower or such
Affiliate to stockholders generally, and, a copy of each regular or periodic
report, and any registration statement, or prospectus in respect thereof, filed
by Borrower with any securities exchange or with federal or state securities and
exchange commissions or any successor agency.
6.11 Officers' Certificates: Along with the set of Financial Statements
delivered to Agent and each Lender at the end of each fiscal quarter and fiscal
year pursuant to Section 6.9(a) hereof, deliver to Agent and each Lender a
certificate (in the form of Exhibit "6.11" attached hereto and made a part
hereof) from the chief financial officer or other officer of Borrower acceptable
to Agent (and as to certificates accompanying the annual statements of Borrower,
also certified by Borrower's independent certified public accountant) setting
forth:
(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether Borrower is in compliance
with the requirements of Sections 6.8 as of the end of the period covered by the
financial statements then being furnished (and any exhibits appended thereto)
under Section 6.10; and
(b) Event of Default - that the signer, in his capacity as an
officer of Borrower, has reviewed the relevant terms of this Agreement, and has
made (or caused to be made under his supervision) a review of the transactions
and conditions of Borrower from the beginning of the accounting period covered
by the Financial Statements being delivered therewith to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or
Unmatured Event of Default or if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Borrower
has taken or proposes to take with respect thereto.
6.12 Inspection: Borrower will permit any of Agent's officers or other
representatives to visit and inspect any of Borrower's locations or where any
Collateral is kept during regular business hours, to examine and audit all of
Borrower's books of account, records, reports and other papers, to make copies
and extracts therefrom and to discuss its affairs, finances and accounts with
its officers, employees and independent certified public accountants. Agent will
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notify Lenders within a reasonable time of each scheduled field examination and
to the extent reasonably practicable, representatives of each Lender may
accompany Agent during each such field examination. Prior to the occurrence of
an Event of Default, up to two (2) such (and after the occurrence of an Event of
Default, all such) examinations shall be at Borrower's expense at the standard
rates charged by the Agent or an outside firm engaged to perform such services,
for such activities (plus the Agent's or such outside firm's out-of-pocket
expenses).
6.13 Tax Returns and Reports: At Agent's or any Lender's request from
time to time, Borrower shall promptly furnish Agent and each Lender with copies
of the annual federal and state income tax returns of Borrower.
6.14 Material Adverse Developments: Borrower agrees that immediately
upon becoming aware of any development or other information which would
reasonably be expected to materially and adversely affect its businesses,
financial condition, Property, prospects or its ability to perform under this
Agreement, it shall give to Agent telephonic or telegraphic notice specifying
the nature of such development or information and such anticipated effect. In
addition, such verbal communication shall be confirmed by written notice thereof
to Agent on the next business day after such verbal notice is given.
6.15 Places of Business: Borrower shall give thirty (30) days prior
written notice to Agent of any changes in the location of any of its respective
places of business, of the places where Books and Records are kept, or the
establishment of any new, or the discontinuance of any existing place of
business.
6.16 Sale of Collateral: Borrower shall mark its Books and Records to
indicate Agent's security interest in the Collateral for the benefit of Lenders,
including the Leases and Leased Property and, unless Agent consents otherwise in
writing, Borrower shall retain title at all times to the Leased Property;
provided however, that so long as no Event of Default or Unmatured Event of
Default has occurred, Borrower may, subject to the prepayment provisions set
forth herein, sell (i) Leases and Leased Property pursuant to Securitization
Transactions or other Nonrecourse Financing of Borrower. So long as no Event of
Default or Unmatured Event of Default has occurred, upon receipt of the proceeds
(if required) from the sale of such Leases and/or Leased Property, Agent shall
execute such documentation as is reasonably necessary to release its security
interest in such Leases and/or Leased Property.
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SECTION 7. BORROWER'S NEGATIVE COVENANTS:
Borrower covenants that until all of Borrower's Obligations under or in
connection with this Agreement to Lenders are paid and satisfied in full and the
Credit Facility has been terminated, that:
7.1 Merger, Consolidation, Dissolution or Liquidation:
(a) Borrower shall not sell, lease, license, transfer or
otherwise dispose of more than 10% of Borrower's aggregate assets during any 12
consecutive month period except in the ordinary course or ordinary operation of
Borrower's business and in Securitization Transactions or other non-recourse
financing.
(b) Borrower shall not enter into any merger, consolidation,
reorganization or recapitalization or acquire all or substantially all of the
assets of any other Person or entity except for a merger, consolidation or
acquisition in which properties and assets of Borrower are transferred to or
combined with, as a single entity, any one Person, so long as (A) no Event of
Default or Unmatured Event of Default has occurred hereunder and that after
giving effect to such merger, consolidation or acquisition, no Event of Default
or Unmatured Event of Default shall have occurred, and (B) Borrower shall be the
surviving corporation.
7.2 Liens and Encumbrances: Borrower shall not: (i) execute a negative
pledge agreement with any Person covering any of the Collateral, or (ii) cause
or permit or agree or consent to cause or permit in the future (upon the
happening of a contingency or otherwise) the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien;
7.3 Negative Pledge: Borrower shall not pledge, grant or permit any
Lien to exist on the common stock of its Subsidiaries nor on any Leases or
Leased Property (except those liens and assignments granted to Agent for the
benefit of Lenders).
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7.4 Transactions With Affiliates or Subsidiaries:
(a) Borrower shall not enter into any transaction with any
Subsidiary or other Affiliate including, without limitation, the purchase, sale,
lease or exchange of Property, or the loaning or giving of funds to any
Affiliate or any Subsidiary (other than a sale to a special purpose Subsidiary
in connection with a Securitization Transaction or other non-recourse sale),
unless (i) such Subsidiary or Affiliate is engaged in a business substantially
related to the business conducted by Borrower and the transaction is in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon terms substantially the same and no less favorable to Borrower
as it would obtain in a comparable arm's-length transactions with any Person not
an Affiliate or a Subsidiary, and (ii) so long as such transaction is not
otherwise prohibited hereunder.
(b) Subject in any event to the limitations of Section 7.4(a)
above, Borrower shall not create or acquire any Subsidiary unless such
Subsidiary engages in a business substantially related to the business of
Borrower as conducted immediately prior to the Closing Date.
7.5 Guarantees: Excepting the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection, Borrower shall not
become or be liable, directly or indirectly, primary or secondary, matured or
contingent, in any manner, whether as guarantor, surety, accommodation maker, or
otherwise, for the existing or future indebtedness of any kind of any Person.
7.6 Indebtedness: Borrower shall not incur or assume any indebtedness
for money borrowed or become a surety, guarantor of, or otherwise responsible or
liable in any manner with respect to, directly or indirectly, the indebtedness
of any Person except for: (i) Subordinated Indebtedness; (ii) trade debt
incurred in the ordinary course of Borrower's business; (iii) Non-Recourse Debt;
and (iv) unsecured intercompany Indebtedness to Affiliates to the extent the
outstanding principal balance thereof is at all times less than three (3) times
the then outstanding principal amount of Borrower's Subordinated Indebtedness.
7.7 Use of Lenders' Name: Borrower shall not use any Lender's name (or
the name of any of any Lender's Affiliates) or Agent's name in connection with
any of its business operations except to identify the existence of the Credit
Facility and the names of the Lenders and Agent in the ordinary course of
Borrower's business. Nothing herein contained is intended to permit or authorize
Borrower to make any contract on behalf of any Lender or Agent.
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SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall constitute an
event of default ("Event of Default") and Agent shall thereupon have the option,
and the SuperMajority Lenders shall have the right to cause Agent, to declare
the Obligations immediately due and payable, all without demand, notice,
presentment or protest or further action of any kind (it also being understood
that the occurrence of any of the events or conditions set forth in
subparagraphs (j), (k) or (l) shall automatically cause an acceleration of the
Obligations):
(a) Payments - if Borrower fails to make any payment of
principal or interest under the Credit Facility within two days after Agent has
given notice that such payment was due; or
(b) Other Charges - if Borrower fails to pay any other
charges, fees, Expenses or other monetary obligations owing to any Lender or
Agent arising out of or incurred in connection with this Agreement within two
days after Agent has given notice that such payment is due and payable; or
(c) Particular Covenant Defaults - if Borrower fails to
perform, comply with or observe any covenant or undertaking contained in this
Agreement, provided, however, that in the case of Borrower's failure to perform,
comply with or observe the covenants contained in Sections 6.1, 6.2, 6.5, 6.10
or 6.11 ("Curable Covenant"), Borrower shall have five (5) days from the date on
which Borrower became aware or should have become aware of its failure to
perform, comply with or observe any such Curable Covenant to cure such
nonperformance or compliance to the satisfaction of Agent; or
(d) Financial Information - if any statement, report,
financial statement, or certificate made or delivered by Borrower or any of its
officers, employees or agents, to Agent or any Lender, is not true and correct,
in all material respects, when made; or
(e) Uninsured Loss - if there shall occur any uninsured damage
to or loss, theft, or destruction in excess of $100,000 with respect to any
portion of any Collateral; or
(f) Warranties or Representations - if any warranty,
representation or other statement by or on behalf of Borrower or any Guarantor
or pledgor contained in or pursuant to this Agreement, or in any document,
agreement or instrument furnished in compliance with, relating to, or in
reference to this Agreement, is false, erroneous, or misleading in any material
respect when made; or
(g) Agreements with Others - if Borrower shall default beyond
any grace period under any agreement with any creditor for borrowed money or in
connection with any Securitization Transaction, each in an amount equal to or
greater than $250,000 and (i) such default consists of the failure to pay any
principal, premium or interest with respect to such indebtedness or (ii) such
default consists of the failure to perform any covenant or agreement with
respect to such indebtedness, if the effect of such default is to cause
Borrower's obligations which are the subject thereof to become due prior to its
maturity date or prior to its regularly scheduled date of payment or would
entitle such creditor to accelerate such obligations; or
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(h) Other Agreements with Lenders - if Borrower breaches or
violates the terms of, or if a default or an Event of Default, occurs under, any
other existing or future agreement (related or unrelated) between or among
Borrower and Agent or any Lender or all Lenders, except with respect to
Non-Recourse Debt; or
(i) Judgments - if any final judgment for the payment of money
in excess of $250,000 which is not fully and unconditionally covered by
insurance shall be rendered; or
(j) Assignment for Benefit of Creditors, etc. - if Borrower
makes or proposes an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by
Borrower which might materially and adversely affect Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of
any action for the dissolution or liquidation of Borrower, or the commencement
of any proceeding to avoid any transaction entered into by Borrower, or the
commencement of any case or proceeding for reorganization or liquidation of
Borrower's debts under the Bankruptcy Code or any other state or federal law,
now or hereafter enacted for the relief of debtors, whether instituted by or
against Borrower; provided, however, that Borrower shall have sixty (60) days to
obtain the dismissal or discharge of involuntary proceedings filed against it,
it being understood that during such sixty (60) day period, no Lender shall be
obligated to make Advances hereunder and Agent may seek adequate protection in
any bankruptcy proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrower or for any of
Borrower's Property; or
(m) Execution Process, Seizure, etc. - the issuance of any
execution or distraint process against Borrower, or any Property of Borrower is
seized by any governmental entity, federal, state or local; or
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(n) Termination of Business - if Borrower ceases any material
portion of its business operations as presently conducted; or
(o) Pension Benefits, etc. - if Borrower fails to comply with
ERISA, so that grounds exist to permit the appointment of a Trustee under ERISA
to administer Borrower's employee plans or to allow the pension benefit
guarantee corporation to institute a proceeding to appoint a trustee to
administer such plan(s), or to permit the entry of a Lien to secure any
deficiency or claim; or
(p) Investigations - any indication or evidence received by
Agent or any Lender that reasonably leads it to believe Borrower may have
directly or indirectly been engaged in any type of activity which, would be
reasonably likely to result in the forfeiture of any Property of Borrower to any
governmental entity, federal, state or local; or
(q) Guarantor Default - Any Guarantor shall default under,
terminate, or disclaim liability under its Guaranty Agreement; or
(r) Stock Pledgor Default - Resource Leasing, Inc. or Resource
America, Inc. shall, default under their respective Stock Pledge Agreement; or
(s) Default under Subordination Agreement - Resource Leasing,
Inc. or Borrower shall default under the terms of the Subordination Agreement.
8.2 Cure - Nothing contained in this Agreement or the Loan Documents
shall be deemed to compel Agent and/or Lenders to accept a cure of any Event of
Default hereunder.
8.3 Rights and Remedies on Default:
(a) In addition to all other rights, options and remedies
granted or available to Agent or Lenders under this Agreement or the Loan
Documents, or otherwise available at law or in equity, upon or at any time after
the occurrence and during the continuance of an Event of Default or Unmatured
Event of Default, Agent may, in its discretion, and the SuperMajority Lenders
shall have the right to cause Agent to, withhold or cease making Advances under
the Credit Facility.
(b) In addition to all other rights, options and remedies
granted or available to Agent under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), Agent may, in its discretion, and
the SuperMajority Lenders shall have the right to cause Agent to, upon or at any
time after the occurrence and during the continuance of an Event of Default,
terminate the Credit Facility.
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(c) In addition to all other rights, options and remedies
granted or available to Agent under this Agreement or the Loan Documents (each
of which is also then exercisable by Agent), Agent may, upon or at any time
after the occurrence of an Event of Default, exercise all rights under the UCC
and any other applicable law or in equity, and under all Loan Documents
permitted to be exercised after the occurrence of an Event of Default, including
the following rights and remedies (which list is given by way of example and is
not intended to be an exhaustive list of all such rights and remedies):
(i) The right to take possession of, and notify all
Lessees of the Agent's and Lenders' security interest in the Collateral and
require payment under the Leases to be made directly to Agent for the benefit of
Lenders and Agent may, in its own name or in the name of Borrower, exercise all
rights of lessor under the Leases and collect, sue for and receive payment on
all Leases, and settle, compromise and adjust the same on any terms as may be
satisfactory to Agent, in its sole and absolute discretion for any reason or
without reason and Agent may do all of the foregoing with or without judicial
process (including without limitation notifying the United States postal
authorities to redirect mail addressed to Borrower to an address designated by
Agent); or
(ii) By its own means or with judicial assistance, subject
to the rights of the Lessees, enter Borrower's premises or location of
Collateral and take possession of the Collateral, or render it unusable, or
dispose of the Collateral on such premises in compliance with subsection (e)
below, without any liability for rent, storage, utilities or other sums, and
Borrower shall not resist or interfere with such action; or
(iii) Require Borrower, at Borrower's sole expense,
subject to the rights of the Lessees, to assemble all or any part of the
Collateral and make it available to Agent at any place designated by Agent; or
(iv) The right to reduce or modify the Maximum Credit
Limit, Borrowing Base or any portion thereof or the advance rates or to modify
the terms and conditions upon which Agent, on behalf of Lenders, may be willing
to consider making Advances under the Credit Facility or to take additional
reserves in the Borrowing Base for any reason.
(e) Borrower hereby agrees that a notice received by it at
least five (5) days before the time of any intended public sale or of the time
after which any private sale or other disposition of the Collateral is to be
made, shall be deemed to be reasonable notice of such sale or other disposition.
If permitted by applicable law, any Collateral which threatens to speedily
decline in value or which is sold on a recognized market may be sold immediately
by Agent without prior notice to Borrower. Borrower covenants and agrees not to
interfere with or impose any obstacle to Agent's exercise of its rights and
remedies with respect to the Collateral, after the occurrence of an Event of
Default hereunder.
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8.4 Nature of Remedies: All rights and remedies granted Agent or
Lenders hereunder and under the Loan Documents, or otherwise available at law or
in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Agent may proceed with any number of remedies at the same time
until all Obligations under or in connection with this Agreement are satisfied
in full. The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and Agent, upon or at any time after the
occurrence of an Event of Default, may proceed against Borrower, at any time,
under any agreement, with any available remedy and in any order.
8.5 Set-Off: If any bank account of Borrower with Agent or any Lender
or any participant is attached or otherwise liened or levied upon by any third
party, Agent or such Lender, as applicable, (and such participant) as agent for
Lenders shall have and be deemed to have, without notice to Borrower, the
immediate right of set-off and may apply the funds or amount thus set-off
against any of Borrower's Obligations hereunder.
SECTION 9. AGENT
As between the Agent, on one hand, and the Lenders, on the other hand,
the Agent and each of the Lenders, who are now or shall become parties to this
Agreement, agree as follows (with the consent and approval of Borrower):
9.1 Appointment and Authorization. Each Lender, and each subsequent
holder of any of the Revolving Credit Notes or Term Notes by its acceptance
thereof, hereby irrevocably appoints and authorizes the Agent to take such
action on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. Except as may be otherwise expressly provided
herein, Borrower is hereby authorized by the Lenders to deal solely with the
Agent in all transactions which affect the Lenders under this Agreement and the
Loan Documents. Provided, however, nothing herein shall prohibit any Lender from
communicating directly with Borrower concerning any matters related to the Loans
or Loan Documents. The rights, privileges and remedies accorded to the Agent
hereunder shall be exercised by the Agent on behalf of all of the Lenders.
9.2 General Immunity. Subject to the provisions of this Agreement, the
Agent will handle all transactions relating to the Loans and all other
Obligations, including, without limitation, all transactions with respect to
this Agreement, the Loan Documents and all related documents in accordance with
their usual banking practices. In performing its duties as Agent hereunder, the
Agent will take the same care as it takes in connection with loans in which it
alone is interested. However, neither the Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them hereunder or in connection herewith except for its or
their own gross negligence or willful misconduct.
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9.3 Consultation with Counsel. The Agent may consult with legal counsel
and any other professional advisors or consultants deemed necessary or
appropriate and selected by Agent and shall not be liable for any action taken
or suffered in good faith by it in accordance with the advice of such counsel.
9.4 Documents. The Agent shall not be under a duty to examine into or
pass upon the effectiveness, genuineness or validity of this Agreement or any of
the Revolving Credit Notes, Term Notes, or any other instrument or document
furnished pursuant hereto or in connection herewith, and the Agent shall be
entitled to assume that the same are valid, effective and genuine and what they
purport to be. In addition, the Agent shall not be liable for failing to make
any inquiry concerning the accuracy, performance or observance of any of the
terms, provisions or conditions of such instrument or document.
9.5 Rights as a Bank. With respect to its applicable Pro Rata
Percentage of the Credit Facility, the Agent shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. Subject to
the provisions of this Agreement, the Agent may accept deposits from, lend money
to, and generally engage in any kind of banking or trust business with Borrower
and its Affiliates as if it were not the Agent.
9.6 Responsibility of Agent. It is expressly understood and agreed that
the obligations of the Agent hereunder are only those expressly set forth in
this Agreement and that the Agent shall be entitled to assume that no Event of
Default and no Unmatured Event of Default has occurred and is continuing, unless
the Agent has actual knowledge of such fact. Except to the extent Agent is
required by the Lenders pursuant to the express terms hereof to take a specific
action, the Agent shall be entitled to use its discretion with respect to
exercising or refraining from exercising any rights which may be vested in it
by, or with respect to taking or refraining from taking any action or actions
that it may be able to take under or in respect of, this Agreement and the Loan
Documents. The Agent shall not incur any liability under or in respect of this
Agreement and the Loan Documents by acting upon any notice, consent,
certificate, warranty or other paper or instrument believed by it to be genuine
or authentic or to be signed by the proper party or parties, or with respect to
anything that either of them may do or refrain from doing in the reasonable
exercise of its judgment, or that may seem to them to be necessary or desirable
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under the circumstances. It is agreed among the Agent and the Lenders that the
Agent shall not have any responsibility to carry out field examinations or
otherwise examine the books and records or properties of Borrower, except as the
Agent, in its sole discretion, deems appropriate. The relationship between the
Agent and each Lender is and shall be that of agent and principal only and
nothing herein shall be construed to constitute the Agent a joint venturer with
any Lender, a trustee or fiduciary for any of the Lenders or for the holder of a
participation therein nor impose on the Agent duties and obligations other than
those set forth herein.
9.7 Collections and Disbursements.
(a) The Agent will have the right to collect and receive all
payments of the Obligations, together with all fees, charges and other amounts
due under this Agreement and the Loan Documents, and the Agent will remit to
each Lender according to applicable Pro Rata Percentages all such payments
actually received by Agent (subject to any required clearance procedures) on the
same Business Day of receipt thereof (but if such payments shall not have been
received by the Agent prior to 12:00 noon Eastern Time on such Business Day
then, on the next Business Day).
(b) On the Business Day for which notice is given Lenders by
Agent with respect to requested Advances (which notice shall state the date and
amount of such payment), each Lender shall remit to the Agent its Pro Rata
Percentage of the payment in respect to such Advance. The obligations of Lenders
hereunder are unconditional, not subject to set-off, and irrevocable and may not
be terminated at any time.
(c) If any such payment received by the Agent is rescinded,
determined to be unenforceable or invalid or is otherwise required to be
returned for any reason at any time, whether before or after termination of this
Agreement and the Loan Documents, each Lender will, upon written notice from the
Agent, promptly pay over to the Agent its Pro Rata Percentage of the amount so
rescinded, held unenforceable or invalid or required to be returned, together
with interest and other fees thereon if also required to be rescinded or
returned.
(d) All payments by the Agent and the Lenders to each other
hereunder shall be in immediately available funds. The Agent will at all times
maintain proper books of account and records reflecting the interest of each
Lender in the Credit Facility, in a manner customary to the Agent's keeping of
such records, which books and records shall be available for inspection by each
Lender at reasonable times during normal business hours, at such Lender's sole
expense. In the event that any Lender shall receive any payments in reduction of
the Obligations in an amount greater than its applicable Pro Rata Percentage in
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respect of indebtedness to the Lenders evidenced hereby (including, without
limitation amounts obtained by reason of setoffs), such Lender shall hold such
excess in trust for Agent (on behalf of all other Lenders) and shall promptly
remit to the Agent such excess amount so that the amounts received by each
Lender hereunder shall at all times be in accordance with its applicable Pro
Rata Percentage. To the extent necessary for each Lender's actual percentage of
all outstanding Loans to equal its applicable Pro Rata Percentage, the Lender
having a greater share of any payment(s) than its applicable Pro Rata Percentage
shall acquire a participation in the applicable outstanding balances of the Pro
Rata Shares of the other Lenders as determined by Agent.
9.8 Indemnification. The Lenders hereby each indemnify the Agent
ratably according to their respective Pro Rata Percentages, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement or any other Loan Document
or any action taken or omitted by the Agent under or related to this Agreement
or the other Loan Documents or the Loans, provided that no Lender shall be
liable to Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. Agent
shall have the right to deduct, from any amounts to be paid by Agent to any
Lender hereunder, any amounts owing to Agent by such Lender by virtue of this
paragraph. Provided all of the Obligations have been satisfied in full, if Agent
shall have received any sums from any of the Lenders pursuant to the terms of
this Section and the indemnified Agent receives additional payments from the
Collateral or elsewhere which could be used by such party pursuant to the terms
of this Agreement, the other Loan Documents, at law or in equity to satisfy the
liability, for which such party was indemnified, such additional payments shall
be applied against the liabilities for which such party was reimbursed and an
equal amount shall be reimbursed to the Lenders on a pro-rata basis based on the
respective amounts of their payments to the Agent made under this Section.
9.9 Expenses.
(a) All out-of-pocket costs and out-of-pocket expenses
incurred by Agent and not reimbursed on demand by Borrower, in connection with
the creation, amendment, administration, termination and enforcement of the
Loans (including, without limitation, field examination expenses, reasonable
counsel fees and expenditures to protect, preserve and defend Agent's and any
Lender's rights and interest under the Loan Documents) shall be shared and paid
on demand by Lenders pro rata, based on their applicable Pro Rata Percentage.
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(b) Agent may deduct from payments or distributions to be made
to Lenders such funds as may be necessary to pay or reimburse Agent for such
costs or expenses.
9.10 No Reliance. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the Loan
Documents solely upon its own independent investigation and is not relying upon
any information supplied by or any representations made by Agent. Each Lender
shall continue to make its own analysis and evaluation of Borrower. Agent makes
no representation or warranty nor assumes any responsibility with respect to the
financial condition or Property of Borrower, any Lessee or any Collateral; the
accuracy, sufficiency or currency of any information concerning the financial
condition, prospects or results of operations of Borrower; or for sufficiency,
authenticity, legal effect, validity or enforceability of the Loan Documents.
Agent assumes no responsibility or liability with respect to the collectibility
of the Obligations or the performance by Borrower of any obligation under the
Loan Documents.
9.11 Reporting. During the term of this Agreement, Agent will promptly
furnish each Lender such financial statements and reports as any Lender may
reasonably request. Agent will notify Lenders within a reasonable period of time
(not to exceed ten (10) Business Days) after it receives actual knowledge of any
Event of Default under the Loan Documents.
9.12 Removal of Agent. The Agent may resign at any time upon giving
thirty (30) days prior written notice thereof to Lenders and Borrower. The Agent
may be removed as Agent hereunder upon the written direction of all Lenders
exclusive of the Agent upon the following: (i) willful misconduct in the
performance of Agent's duties or responsibilities under this Agreement; or (ii)
if a receiver, trustee or conservator is appointed for Agent or any state or
federal regulatory authority assumes management or control of Agent or if, under
applicable law, the administrative or discretionary duties and responsibilities
of Agent hereunder become controlled by or subject to the approval of any state
or federal regulatory authority. Upon any resignation or permitted removal of
Agent, the Lenders shall have the right to appoint a successor Agent by majority
vote of the other Lenders (based upon the percentages of the total Pro Rata
Shares of the Lenders other than the Lender which is the Agent). Upon the
acceptance of the appointment as a successor Agent hereunder by such successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all rights, powers, obligations and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations hereunder.
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9.13 Action on Instructions of Lenders. With respect to any provision
of this Agreement, or any issue arising thereunder, concerning which the Agent
is authorized to act or withhold action by direction of one or more Lenders, the
Agent shall in all cases be fully protected in so acting, or in so refraining
from acting, hereunder in accordance with written instructions signed by the
requisite Lenders. Such instructions and any action taken or failure to act
pursuant thereto shall be binding on all Lenders and on all holders of the
Revolving Credit Notes and Term Notes.
9.14 Several Obligations. The obligation of each Lender is several, and
neither the Agent nor any other Lender shall be responsible for any obligation
or commitment hereunder of any other Lender.
9.15 Consent of Banks.
(a) Subject to this Section 9.15, Agent shall have the sole
and exclusive right to service, administer and monitor the Loans and the Loan
Documents, including without limitation, the right to exercise all rights,
remedies, privileges and options under the Loan Documents.
(b) Notwithstanding anything to the contrary contained in
subparagraph (a) above, Agent shall not, without the prior written consent of
all Lenders: (i) extend or renew the Current Term or, any payment date under the
Credit Facility, (ii) decrease any interest rate on the Credit Facility, (iii)
compromise or settle all or a portion of the Obligations, (iv) release any
obligor from the Obligations except in connection with termination of the Credit
Facility and full payment and satisfaction of all Obligations, (v) increase the
Borrowing Base advance rate, (vi) modify Section 9.15(b) or (c), or (vii)
increase the Maximum Credit Limit; provided however that Agent may increase the
Maximum Credit Limit by first offering the amount of any such increase to each
of the Lenders in accordance with their respective Pro Rata Percentage. To the
extent any Lender(s) may choose not to increase its/their respective Pro Rata
Shares by the amount attributable to its/their Pro Rata Percentage of such
increase, such amount will be offered to the other Lenders on such sharing basis
as Agent may reasonably establish. After each Lender choosing to increase its
Pro Rata Share has agreed to do so, and in conjunction with the modification of
this Agreement to reflect such increase executed by those Lenders sharing in the
increase of the Credit Facility, the Lenders' Pro Rata Percentages will be
adjusted accordingly and all Lenders (whether or not sharing in such increase)
shall be bound by such modification.
(c) Notwithstanding anything to the contrary contained in
subparagraph (a) above and subject to the terms of subparagraph (b) above, Agent
shall not, without the prior written consent of all Lenders: (i) enter into any
written amendment to any of the Loan Documents; (ii) waive Borrower's compliance
with the terms and conditions of the Loan Documents or any Event of Default
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hereunder or thereunder; (iii) consent to Borrower taking any action which, if
taken, would constitute an Event of Default under this Agreement or under any of
the Loan Documents; or (iv) release any Collateral other than Collateral which
Borrower seeks to have released from the Agent's lien (for the benefit of
Lenders) in the ordinary course of Borrower's business.
(d) After an acceleration of the Obligations, Agent shall have
the sole and exclusive right, with communication (to the extent reasonably
practicable under the circumstances) with all Lenders, to exercise or refrain
from exercising any and all rights, remedies, privileges and options under the
Loan Documents and available at law or in equity to protect and enforce the
rights of the Lenders and collect the Obligations, including, without
limitation, instituting and pursuing all legal actions against Borrower or to
collect the Obligations, or defending any and all actions brought by Borrower or
other Person; or incurring Expenses or otherwise making expenditures to protect
the Loans, the Collateral or Lenders' rights or remedies.
(e) To the extent Agent is required to obtain or otherwise
elects to seek the consent of the other or Lenders to an action Agent desires to
take, if Agent or any Lender fails to notify such Person, in writing, of its
consent or dissent to any request of Agent hereunder within seven (7) Business
Days of such Person's actual receipt of such request, the Person whose consent
is sought, shall be deemed to have given its consent thereto.
(f) No provision in Section 9 of this Agreement may be amended
without Agent's prior written consent.
9.16 Participations and Assignments: Borrower hereby acknowledges
and agrees that a Lender may at any time:
(a) grant participations in up to forty-nine percent (49%) (up
to 100% to an Affiliate of such Lender) of its Pro Rata Percentage and Pro Rata
Share or of its right, title and interest therein or in or to this Agreement
(collectively, "Participations") or to any other bank, lending institution or
other entity which the granting Lender reasonably determines has the requisite
sophistication to evaluate the merits and risks of investments in participations
("Participants"); provided, however, that: (i) all amounts payable by the
Borrower to each Lender hereunder shall be determined as if such Lender had not
granted such Participation; and (ii) any agreement pursuant to which any Lender
may grant a Participation: (A) shall provide that such Lender shall retain the
sole right and responsibility to enforce the obligations of the Borrower
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provisions of this Agreement; (B) such
participation agreement may provide that such Lender will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
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Participant if such amendment, modification or waiver would reduce the principal
of or rate of interest on the Loans, increase the amount of the Maximum Credit
Limit, postpone the date fixed for any scheduled payment of principal of or
interest on the Loans or release Collateral for the Loans, subject to Section
9.15 hereof; and (C) shall not relieve such Lender from its obligations, which
shall remain absolute, to make Advances hereunder; and
(b) assign all or any portion of its Pro Rata Share (together
with its rights and obligations with respect thereto), and its right, title and
interest therein or in and to this Agreement and the other Loan Documents to a
Lender or any affiliate of a Lender; or to any other bank or financial
institution, in each case with thirty (30) days prior written notice to Agent
and subject to the prior written consent of the Agent which consent shall not be
unreasonably withheld; provided however that (i) such assignment shall not
result in either the assigning or acquiring Lender having a Pro Rata Share of
less than $5,000,000 and (ii) the parties to such assignment shall execute such
assignment or other documents reasonably requested by Agent and Borrower shall
execute such replacement Revolving Credit Notes as may be requested by Agent,
and (iii) the parties to the assignment shall pay Agent a processing fee of
$2,500 in conjunction with such assignment. All Participations and assignments
hereunder shall be of the Pro Rata Percentage or Pro Rata Share of the Lender
making the assignment or granting the Participation. Notwithstanding the
foregoing or anything else contained in this Agreement or any of the other Loan
Documents, any Lender may assign or pledge all or any portion of its Pro Rata
Share (including, without limitation, its rights with respect thereto), and its
right, title and interest therein or in and to this Agreement and the other Loan
Documents to a Federal Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank.
SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE PROVISIONS OF THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN
ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.
10.2 Integrated Agreement: The Revolving Credit Notes, the Term Notes,
the other Loan Documents, all related agreements, and this Agreement shall be
construed as integrated and complementary of each other, and as augmenting and
not restricting Lenders' and Agent's rights and remedies. If, after applying the
foregoing, an inconsistency still exists, the provisions of this Agreement shall
constitute an amendment thereto and shall control.
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10.3 Waiver:
(a) No omission or delay by Agent or Lenders in exercising any
right or power under this Agreement or any related agreements and documents will
impair such right or power or be construed to be a waiver of any default, or
Event of Default or an acquiescence therein, and any single or partial exercise
of any such right or power will not preclude other or further exercise thereof
or the exercise of any other right, and as to Borrower no waiver will be valid
unless in writing and signed by Agent and then only to the extent specified.
(b) Borrower releases and shall indemnify, defend and hold
harmless Agent and Lenders, and their respective officers, employees and agents,
of and from any claims, demands, liabilities, obligations, judgments, injuries,
losses, damages and costs and expenses (including, without limitation,
reasonable legal fees) resulting from (i) acts or conduct of Borrower or under,
pursuant or related to this Agreement and the other Loan Documents, (ii)
Borrower's breach or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and (iii)
Borrower's failure to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal, state or local,
or court or administrative orders or decrees, (including without limitation
environmental laws, etc.) and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting solely from acts or conduct of
Lenders constituting willful misconduct or gross negligence.
10.4 Time: Whenever Borrower shall be required to make any payment, or
perform any act, on a day which is not a Business Day, such payment may be made,
or such act may be performed, on the next succeeding Business Day. Time is of
the essence in Borrower's performance under all provisions of this Agreement and
all related agreements and documents.
10.5 Expenses of Agent and Lenders: At Closing and from time to time
thereafter, Borrower will pay all reasonable expenses of Agent (and after the
occurrence of an Event of Default, all expenses of Lenders and Agent, or any of
them) on demand (including, without limitation, search costs, audit fees,
appraisal fees, environmental fees and the fees and expenses of legal counsel
for Agent and Lender(s), if applicable) relating to this Agreement, and all
related agreements and documents, including, without limitation, expenses
incurred in the analysis, negotiation, preparation, closing, administration and
enforcement of this Agreement and the other Loan Documents, the enforcement,
protection and defense of the rights of Agent and Lenders in and to the Loans
and Collateral or otherwise hereunder, and any expenses relating to extensions,
amendments, waivers or consents pursuant to the provisions hereof, or any
related agreements and documents or relating to agreements with other creditors,
or termination of this Agreement (collectively, the "Expenses").
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<PAGE>
10.6 Brokerage: This transaction was brought about and entered into by
Agent, Lenders and Borrower acting as principals and without any brokers, agents
or finders being the effective procuring cause hereof. Borrower represents that
it has not committed Agent or any Lender to the payment of any brokerage fee,
commission or charge in connection with this transaction.
10.7 Notices:
(a) Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if delivered in person
or if sent by telecopy or by nationally recognized overnight courier, or via
first class, Certified or Registered mail, postage prepaid, as follows, unless
such address is changed by written notice hereunder:
If to Agent to: First Union National Bank
1339 Chestnut Street
Philadelphia, PA 19107
Attn: Grainne Pergolini
Vice President
Telecopy No.: 215/786-7704
With copies to: Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attn: Lawrence F. Flick, II, Esquire
Telecopy No.: 215/569-5522
If to Borrower to: Fidelity Leasing, Inc.
7 E. Skippack Pike
Ambler, PA 19002
Attn: Abraham Bernstein
Telecopy No.: 215/619-2830
With copies to: Richard Abt, Esquire
Ledgewood Law Firm, P.C.
1521 Locust Street, 4th Floor
Philadelphia, PA 19102
Telecopy No.: 215/735-2513
If to Lenders: to the addresses set forth on Schedule A
(b) Any notice sent by Agent, any Lender or Borrower by any of
the above methods shall be deemed to be given when so received.
(c) Agent shall be fully entitled to rely upon any facsimile
transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
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<PAGE>
10.8 Headings: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
10.9 Survival: All warranties, representations, and covenants made by
Borrower herein, or in any agreement referred to herein or on any certificate,
document or other instrument delivered by it or on its behalf under this
Agreement, shall be considered to have been relied upon by Agent and Lenders,
and shall survive the delivery to Lenders of the Notes, regardless of any
investigation made by Lenders or on their behalf. All statements in any such
certificate or other instrument prepared and/or delivered for the benefit of
Agent and any and all Lenders shall constitute warranties and representations by
Borrower hereunder. Except as otherwise expressly provided herein, all covenants
made by Borrower hereunder or under any other Loan Document shall be deemed
continuing until all Obligations under or in connection with this Agreement are
satisfied in full.
10.10 Successors and Assigns: This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
Borrower may not transfer, assign or delegate any of its duties or obligations
hereunder.
10.11 Counterparts: Two or more duplicate originals of this Agreement
may be signed by the parties, each of which shall constitute an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed in counterparts, all of which counterparts taken together shall
constitute one completed fully executed document.
10.12 Modification: No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by Borrower,
Agent and the Lenders and except as provided in Section 9 hereof. Any
modification in accordance with the terms hereof shall be binding on all parties
hereto, whether or not each is a signatory thereto.
10.13 Signatories: Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
10.14 Third Parties: No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Agent or any Lender of
Borrower's duty of performance, including, without limitation, Borrower's duties
under any Lease, account or contract with any other Person.
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<PAGE>
10.15 Discharge of Taxes, Borrower's Obligations, Etc.: Agent, in its
sole discretion, shall have the right at any time, and from time to time, with
prior notice to Borrower, if Borrower fails to do so five (5) Business Days
after requested in writing to do so by Agent, to: (a) pay for the performance of
any of Borrower's obligations hereunder, and (b) discharge taxes or Liens, at
any time levied or placed on any of Borrower's Property in violation of this
Agreement unless Borrower is in good faith with due diligence by appropriate
proceedings contesting such taxes or Liens and maintaining proper reserves
therefor in accordance with GAAP. Expenses and advances shall be added to the
Revolving Credit, bear interest at the same rate applied to the Revolving
Credit, until reimbursed to Agent. Such payments and advances made by Agent
shall not be construed as a waiver by Agent or Lenders of an Event of Default
under this Agreement.
10.16 Most Favored Lenders: Borrower agrees to promptly notify Agent in
writing if any agreement for borrowed money to which Borrower is a party,
contains or is amended to contain, financial or performance covenants more
restrictive than those contained herein and upon Agent's request, Borrower
agrees to amend this Agreement accordingly so that covenants contained herein
are substantially the same as those contained in such other agreements for
borrowed money so long as such covenants remain applicable to Borrower pursuant
to such other agreements.
10.17 Consent to Jurisdiction: Borrower and each Lender hereby
irrevocably consents to the jurisdiction of the Courts of Common Pleas of
Philadelphia, Commonwealth of Pennsylvania or the United States District Court
for the Eastern District of Pennsylvania in any and all actions and proceedings
whether arising hereunder or under any other agreement or undertaking and
irrevocably agree to service of process by certified mail, return receipt
requested to the address of the appropriate party set forth herein.
10.18 Waiver of Jury Trial: EACH OF BORROWER, LENDERS AND AGENT HEREBY
WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY
LITIGATION COMMENCED BY OR AGAINST AGENT OR ANY LENDER OR LENDERS WITH RESPECT
TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS.
10.19 Information to Participant: Agent and each Lender may divulge to
any participant, co-lender or assignee or prospective participant, co-lender or
assignee it may obtain in the Credit Facility, or any portion thereof, all
information, and furnish to such Person copies of any reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement, or related agreements and documents; provided, however that any
potential participant, co-lender or assignee agrees to hold in confidence all
confidential or proprietary information provided to them by Borrower, Agent or
such Lender except (a) to the extent that the production of such information is
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<PAGE>
required pursuant to any statute, ordinance, regulation, rule or order or any
subpoena or any governmental inquiry or by reason of any bank regulation in
connection with any bank examination, and (b) such potential participant,
co-lender or assignee shall not be prohibited from disclosing any such
information to any of their agents, officers, employees, attorneys, accountants
or consultants who shall be informed of this provision.
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the day and year first above written.
FIDELITY LEASING, INC.
By:________________________________
Title:
Attest:____________________________
(Corporate Seal)
FIRST UNION NATIONAL BANK, as Agent and Lender
By:________________________________
Title:
EUROPEAN AMERICAN BANK, as Lender
By:________________________________
Title:
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<PAGE>
SCHEDULE A
Pro Rata
Lenders Pro Rata Share Percentage
------- -------------- ----------
European American Bank $ 7,500,000 37.5%
400 Oak Street
Garden City, NY 11530
Attn: Christopher Czaja, Vice President
Telecopy No.: (516) 364-3307
First Union National Bank $12,500,000 62.5%
1339 Chestnut Street
Philadelphia, PA 19101
Attn: Ms. Grainne Pergolini
Vice President
Telecopy No.: 215/786-7704
<PAGE>
Exhibit 2.3(b)(ii)
ASSIGNMENT AGREEMENT
Fidelity Leasing, Inc. (hereinafter "Assignor"), does hereby assign to
FIRST UNION NATIONAL BANK, as Agent, for the benefit of the Lenders (as defined
below) (hereinafter "Assignee"), its successors and assigns, all of the right,
title and interest of Assignor in and to (i) the Leases, as identified on the
Schedule "A" attached hereto and made a part hereof, the Leased Property which
is the subject matter of such Leases, and all proceeds thereof; and (ii) all of
the interest of Assignor as loss payee or beneficiary under any insurance
policies issued in connection with any Lease or any Leased Property which is the
subject matter of any Lease.
This Assignment is entered into and delivered in accordance with and is
subject to that certain Loan and Security Agreement dated July __, 1998 among
Assignor, Assignee and the lenders now or hereafter shown on the signature pages
thereof (collectively "Lenders") (hereinafter "Agreement"). Assignee shall have
the right to sue for, collect, and receive all payments due or to become due
under the Leases, in accordance with the Agreement, with power to enforce in its
own name or in Assignor's name any and all rights given to Assignor thereunder.
All capitalized terms not otherwise defined herein shall have the meaning set
forth in the Agreement.
This Assignment and the subject matter hereof, is hereby given as
security for all of Assignor's Obligations.
Delivered herewith are the sole originals of all Leases referred to on
Schedule "A" attached hereto and made a part hereof.
Assignor agrees that Assignee shall not assume any of Assignor's
obligations or liabilities to the lessee/renter under any Leases.
All of the representations and warranties contained in the Agreement
with respect to Assignor, the Leases and the Leased Property are true, correct
and complete as of the date of this Assignment and no Event of Default has
occurred under the Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed by its duly authorized officer this _____ day of _____________________,
19___.
FIDELITY LEASING, INC.
Attest:_____________________ By:___________________________
Title:________________________
- 2 -
<PAGE>
Exhibit 2.1(e)
First Union National Bank, as Agent
Computation of Borrowing Base Availability
for the ________________, 19___ for
Fidelity Leasing, Inc.
- --------------------------------------------------------------------------------
1. Total Eligible Lease Receivables
Currently Pledged to Agent $___________________
2. Additional Eligible Lease
Receivables Pledged to Agent
$________ Date:__________
$________ Date:__________ $___________________
3. Aggregate Sales Of Eligible
Lease Receivables To Date
During This Month
$________ Date:__________
$________ Date:__________ $___________________
4. Total Eligible Lease Receivables
Pledged To Agent (Line 1,
plus line 2, minus 3) $___________________
5. 80% of the sum of the gross
Lease Receivables balance
corresponding to Eligible Leases
pledged to Agent. $___________________
6. Aggregate Revolving Credit $___________________
Note Balances
7. Excess Of Total Eligible Lease
Receivables Over Revolving Credit
Note Balances (Line 5, minus line 6) $___________________
<PAGE>
8. Maximum Availability $ 10,000,000
9. Availability Under Facility
(lesser of (i) line 8, minus
line 6 or (ii) line 7) $___________________
10. Amount Of Borrowing Request $___________________
11. Net Availability (Line 9, minus
line 10) $___________________
Borrower submits this computation pursuant to a certain Loan and Security
Agreement dated September 30, 1998 among Borrower, Agent and the Lenders now or
hereafter identified on the signature pages thereof, as amended from time to
time ("Loan Agreement") and certifies that all information contained herein and
representations and warranties made in the Loan Agreement are true and correct
as of the date hereof.
FIDELITY LEASING, INC.
DATE:_______________ BY:__________________________________
<PAGE>
JOINDER AND AMENDMENT TO AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT
----------------------------------------
This Joinder and Amendment to Loan and Security Agreement ("Amendment")
is made as of the 26th day of March, 1999 by and among First Union National
Bank, a national banking Association in its capacity as agent ("Agent") and as
Lender, and the financial institutions listed on Schedule A attached hereto and
made part hereof, in their capacity as lenders (singly, each as a "Lender" and
collectively, all are "Lenders") and Fidelity Leasing, Inc. ("Existing
Borrower"), JLA Credit Corporation, ("JLA" or "Joining Borrower"and collectively
with Existing Borrower, "Borrowers"), Resource America, Inc., Resource Leasing,
Inc., FL Partnership Management, Inc. and FL Financial Services, Inc. (singly,
each is a "Guarantor"and collectively, all are "Guarantors").
BACKGROUND
----------
A. Existing Borrower, Agent and Lenders are parties to a certain Amended and
Restated Loan and Security Agreement dated September 30, 1998 (as modified and
amended from time to time, the "Loan Agreement") pursuant to which Existing
Borrower established certain financing arrangements with Agent and Lenders. The
Loan Agreement and all instruments, documents and agreements executed in
connection therewith or related thereto are referred to herein collectively as
the "Existing Loan Documents". All capitalized terms not otherwise defined
herein shall have the meaning ascribed thereto in the Loan Agreement.
B. Existing Borrower has informed Agent and Lenders that Existing Borrower
purchased all of the capital stock of Joining Borrower and Joining Borrower has
become a wholly-owned subsidiary of Existing Borrower.
C. In recognition of the benefits and privileges thereunder, Joining Borrower
and Existing Borrowers have requested that Joining Borrower be permitted to join
into the Existing Loan Documents as if an original signatory thereto.
D. Agent and Lenders have consented to Joining Borrower's joining into the
Existing Loan Documents and to certain amendments to the Existing Loan
Documents, subject to the terms and conditions hereof.
E. All obligations of Borrowers to Agent and Lenders under the Existing Loan
Documents shall continue to be guaranteed by Guarantors, on a joint and several
basis.
NOW, THEREFORE, with the foregoing Background incorporated by reference
and made a part hereof, and intending to be legally bound, the parties agree as
follows:
1. Joinder.
--------
<PAGE>
(a) Upon the effectiveness of this Amendment, Joining Borrower joins in as,
assumes the obligations and liabilities of, adopts the obligations, liabilities
and role of, and becomes, a Borrower under the Existing Loan Documents, the
Credit Facility and all Loans. All references to Borrower contained in the
Existing Loan Documents are hereby deemed for all purposes to also refer to and
include Joining Borrower as a Borrower and Joining Borrower, hereby agrees to
comply with all of the terms and conditions of the Existing Loan Documents as if
Joining Borrower were an original signatory thereto.
(b) Without limiting the generality of the provisions of subparagraph (a) above,
Joining Borrower hereby becomes liable, on a joint and several basis, along with
Existing Borrower, for all Obligations, including, without limitation, all
existing and future Loans and other liabilities and obligations incurred at any
time by Existing Borrower under the Existing Loan Documents, as amended hereby
or as may be hereafter amended, modified, supplemented or replaced.
2. Adjusted Debt to Tangible Net Worth Ratio. The Loan Agreement is
hereby amended by deleting the definition of "Adjusted Debt to Tangible Net
Worth" contained in Section 1.1 of the Loan Agreement and replacing it with the
following:
"Adjusted Debt to Tangible Net Worth Ratio - At any time means
the ratio of (i) total Liabilities less Nonrecourse Debt to
(ii) Borrowers' Tangible Net Worth less an amount equal to
fifty percent (50%) of all restricted cash, restricted
receivables and other collateral pledged or sold in connection
with the JLA Securitization II and III or other Securitization
Transactions (it being understood that for the purposes
hereof, the asset identified on Borrowers' balance sheet as of
June 30, 1998 as $14,000,000 in notes secured by equipment
leases shall not be considered restricted receivables provided
no additional assets shall be included therein).
3. Borrowing Base. The Loan Agreement is hereby amended by deleting the
definition of "Borrowing Base" contained in Section 1.1 of the Loan Agreement
and replacing it with the following:
"Borrowing Base - As of any date of determination, an amount
equal to the lesser of:
(i) the Maximum Credit Limit, and
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<PAGE>
(ii) (A) eighty percent (80%) of the sum of gross
Lease Receivable balance corresponding to each Eligible Lease
(net of any deposits or other advances and cash receipts) plus
(B) the lesser of (1) eighty percent (80%) of the sum of gross
Lease Receivable balance corresponding to each Mexican
Eligible Lease (net of any deposits or other advances and cash
receipts) or (2) Three Million Dollars ($3,000,000) plus (C)
one hundred percent (100%) of Facsimile Leases so long as (i)
the aggregate amount of all Lease Receivables corresponding to
Facsimile Leases documented on a Quincy Distributor Vendor
Finance Agreement does not exceed Two Million Dollars
($2,000,000) and (ii) the aggregate amount of all Lease
Receivables corresponding to Facsimile Leases other than those
documented on a Quincy Distributor Vendor Financing Agreement
does not exceed the Facsimile Lease Sublimit. Notwithstanding
the foregoing, Lease Receivables corresponding to Leases
documented on a Quincy Distributor Vendor Finance Agreement
shall be Eligible Leases for Borrowing Bases purposes (subject
to all other terms and conditions of this Agreement) for a
period not to exceed one hundred twenty (120) days after the
effective date of such Lease."
4. Eligible Leases. The Loan Agreement is hereby amended by deleting
the definition of "Eligible Lease(s)" contained in Section 1.1 of the Loan
Agreement and replacing it with the following:
3
<PAGE>
"Eligible Lease(s) - Each Lease which meets all of the
following specifications: (1) is not subject to any Lien,
security interest or prior assignment other than Agent's
security interest for the benefit of Lenders and the rights of
the Lessee's thereunder; (2) is a valid enforceable Lease,
representing the undisputed obligation of the Lessee, with
rentals due thereunder not more than sixty-one (61) days
contractually past due; (3) is not subject to any defense,
setoff, counterclaim, deduction, allowance or adjustment; (4)
unless otherwise agreed to in writing by Agent, provides for
the lease of Leased Property with an aggregate invoice price
of less than $1,500,000; (5) provides for the lease of Leased
Property which has not been returned, rejected, lost or
damaged; (6) arose in the ordinary course of Borrowers'
business; (7) Borrowers have not received notice of
bankruptcy, receivership, reorganization, insolvency or
material adverse change in the financial condition of the
Lessee; (8) the Lessee has not a Subsidiary or Affiliate of
Borrowers; (9) is not Defaulted Lease and complies with all
general warranties set forth in Section 5.17 hereof; (10) does
not have an initial stated term in excess of seventy-two (72)
months, provided, however, that lease(s) with an initial
stated term of up to ninety-six (96) months may be considered
Eligible Leases so long as the aggregate Lease Receivable(s)
of all such Lease(s) shall, at no time, exceed Two Million
Dollars ($2,000,000); (11) has not, in the case of Revolving
Credit Loans, been pledged to Agent and/or Lenders for a
period of more than twelve (12) months; (12) contains a
provision whereby the Lessee agrees not to assert any claim or
reduction, counterclaim, setoff, recoupment, or any other
claim, allowance or adjustment against any assignee of
Borrowers; (13) is a Lease with a Lease Receivable, which
together with all other Lease Receivables owed by the same
Lessee does not exceed One Million Seven Hundred Fifty
Thousand Dollars ($1,750,000) in the aggregate; (14) Borrowers
are in possession of the Lessee's original signatures pages to
the Lease or are in possession of a Facsimile Lease, and (15)
the Lessee's chief executive office and the Leased Property
under such Lease is located in the continental United States."
5. Facsimile Lease. The Loan Agreement is hereby amended by adding the
definition of "Facsimile Lease" to Section 1.1 of the Loan Agreement as follows:
4
<PAGE>
"Facsimile Lease - A Lease which meets all the requirements of
being an Eligible Lease except that Borrowers are in
possession of the facsimile copy of the Lessee's signature and
the original signature of a Borrower to such Lease and such
Lease is governed by a law allowing for a facsimile copy to be
binding upon the parties thereto."
6. Facsimile Lease Sublimit - The Loan Agreement is hereby amended by
adding a definition of "Facsimile Lease Sublimit" to Section 1.1 of the Loan
Agreement as follows:
"Facsimile Lease Sublimit - The sublimit under the Borrowing
Base with respect to Facsimile Leases in an amount not to
exceed two percent (2.0%) of the Lease Receivables owing under
all Eligible Leases."
7. Lease(s). The Loan Agreement is hereby amended by deleting the
definition of "Lease(s)" contained in Section 1.1 of the Loan Agreement and
replacing it with the following:
"Lease(s) - All of Borrowers' Accounts, Documents, General
Intangibles, Instruments and Chattel Paper arising in
connection with each and every equipment lease (whether a
"true lease" or a lease intended as security) and/or schedule
to a master lease agreement or each and every equipment
financing transaction, assigned to Lenders and/or Agent for
the benefit of Lenders, or now or hereafter designated on any
schedule as being assigned to Lenders and/or Agent for the
benefit of Lenders. The term "Lease" includes (i) all payments
to be made thereunder, (ii) all rights of Borrower therein and
(iii) any and all amendments, renewals, extensions or
guarantees thereof."
8. Mexican Eligible Leases. The Loan Agreement is hereby amended by
adding the definition of "Mexican Eligible Leases" to Section 1.1 of the Loan
Agreement as follows:
"Mexican Eligible Lease(s) - A Lease which meets all of the
requirements of being an Eligible Lease(s) except that the
Leased Property is located in Mexico and Borrowers have taken
all steps necessary to perfect its security interest in such
Leased Property under the laws of Mexico (as determined in
Agent's sole and absolute discretion)."
9. Leases and Leased Property. The Loan Agreement is hereby amended by
deleting Section 5.17(d) and replacing it with the following:
5
<PAGE>
"(d) Except as otherwise consented to by Agent in writing, the
aggregate amount of Leases with the same Lessee (or its
Affiliates) is not in excess of $1,500,000;"
Furthermore, the Loan Agreement is hereby amended by deleting Section 5.17(p)
and replacing it with the following:
"(p) For each Lease, with a Lease Receivable in excess of
$25,000, Borrowers have either (i) listed Agent for the
benefit of Lenders, as assignee on a UCC-1 Financing Statement
so filed, or (ii) after Borrowers have received acknowledgment
copies of the UCC-1s, deliver to Agent executed UCC-3
Financing Statements naming Agent for the benefit of Lenders
as assignee of Borrowers' security interest. Agent agrees not
to file the UCC-3 Financing Statements until such time as an
Event of Default or Unmatured Event of Default occurs under
this Agreement, and Agent will return such UCC-3 Financing
Statements to Borrowers if such Leases are ultimately sold or
refinanced on a permanent basis with another lender;"
10. Lease Forms. Exhibit 5.17 of the Loan Agreement is hereby amended
to also include and make a part thereof the lease forms attached hereto as
Exhibit A.
11. Financial Covenants. The Loan Agreement is hereby amended by
deleting Section 6.8 of the Loan Agreement and replacing it with the following:
"6.8 Financial Covenants. Borrowers shall maintain and comply
with the following financial covenants as reflected on and
computed from their Financial Statements:
(a) Adjusted Debt to Tangible Net Worth Ratio: Borrowers shall
have and maintain at all times an Adjusted Debt to Tangible
Net Worth Ratio on a consolidated basis, measured quarterly as
of the last day of each fiscal quarter during each fiscal
year, of not more than 5.50 to 1.
6
<PAGE>
(b) Tangible Net Worth: Borrowers shall have and maintain a
Tangible Net Worth of not less than Fourteen Million Dollars
($14,000,000) as of March 31, 1999. As of the last day of each
fiscal quarter thereafter, Borrowers shall have a Tangible Net
Worth of not less than the amount required hereby for the
immediately preceding fiscal quarter plus an amount equal to
seventy-five percent (75%) of Borrower's Net Income for the
immediately proceeding fiscal quarter (for the purposes of
such step up, Net Income shall never be less than zero). The
amount of Tangible Net Worth required to be maintained by
Borrowers pursuant to this Section 6.8(b) shall be adjusted
upon receipt by Borrowers of the net proceeds of any capital
contribution by an amount to be agreed upon by Borrowers and
Agent.
(c) Fixed Charge Coverage Ratio: Borrowers shall have and
maintain as of the end of each fiscal quarter, based on
financial information for the twelve (12) month period ending
as of the end of such fiscal quarter, on a consolidated basis,
a Fixed Charge Coverage Ratio of not less than 1.25 to 1."
12. Representations and Warranties. Each Borrower and each Guarantor,
including, without limitation, Joining Borrower, represents and warrants to
Agent and Lenders that:
(a) All warranties and representations made to Agent and
Lenders under the Existing Loan Documents are true and correct as of the date
hereof.
(b) The execution and delivery by each Borrower and each
Guarantor of this Amendment and the performance by each of them of the
transactions herein contemplated (i) are and will be within such Borrower's and
such Guarantor's corporate powers, (ii) have been authorized by all necessary
corporate action and (iii) are not and will not be in contravention of any law,
any order of any court or other agency of government, or any other indenture,
agreement or undertaking to which either Borrower or any Guarantor is a party or
by which the property of either Borrower or any Guarantor is bound, or be in
conflict with, result in a breach of, or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement or undertaking or
result in the imposition of any lien, charge or incumbrance of any nature on any
of the properties of either Borrower or any Guarantor.
(c) This Amendment and all allonges, assignments, instruments,
documents, and agreements executed and delivered in connection herewith, will be
valid, binding and enforceable in accordance with their respective terms.
(d) No Unmatured Event of Default or Event of Default has
occurred under any of the Existing Loan Documents.
7
<PAGE>
13. Collateral. As security for the timely payment of the Obligations
and satisfaction by Borrowers (including, without limitation, Joining Borrower)
of all covenants and undertakings contained in the Existing Loan Documents,
Existing Borrower reconfirms the prior security interest and lien on, and
Joining Borrower hereby assigns and grants to Agent for the benefit of Lenders a
continuing first lien on and security interest in, upon and to the Collateral,
including, without limitation, all of the following of each Borrower (including,
without limitation, Joining Borrower), whether now owned or hereafter acquired,
created or arising and wherever located: Leases and Leased Property, Books and
Records and all cash and non-cash proceeds, thereof, including insurance
proceeds. Agent and each Lender hereby agree and acknowledge that the Collateral
does not include those specific vehicle leases shown on Exhibit B attached
hereto and made part hereof which have been pledged to First Union pursuant to
the First Union Loan Agreement.
14. Effectiveness Conditions. This Amendment shall be effective, and
Joining Borrower shall be deemed a Borrower under the Existing Loan Documents,
upon completion of the following conditions precedent (all documents to be in
form and substance satisfactory to Agent and Agent's counsel):
(a) Execution and delivery to Agent of this Amendment;
(b) Execution and delivery to each Lender of an allonge to
such Lender's Revolving Credit Note, joining Joining Borrower to such Revolving
Credit Note;
(c) UCC-1 Financing Statements to be executed by Joining
Borrower and filed in all jurisdictions which Agent may deem appropriate;
(d) Delivery of certified copies of (i) resolutions of each
Borrower's and each Guarantor's board of directors authorizing the execution of
this Amendment and all of the instruments, documents and agreements related
hereto and (ii) Joining Borrower's articles of incorporation and bylaws,
(e) Delivery of incumbency certificates for Joining Borrower
identifying all Authorized Officers with specimen signatures;
(f) Delivery of a written opinion of independent counsel for
Borrowers addressed to Agent for the benefit of all Lenders;
(g) Execution and delivery to Agent of a Stock Pledge
Agreement pursuant to which Existing Borrower shall pledge the stock of Joining
Borrower to Agent for the benefit of Lenders and delivery to Agent of all
original stock certificates issued by Joining Borrower evidencing ownership in
Joining Borrower as well as stock powers for transfer of such stock
certificates, duly endorsed in blank;
(h) Good standing certificates from the Secretary of State of
the State of Delaware showing Joining Borrower to be in good standing in such
state;
8
<PAGE>
(i) No Unmatured Event of Default or Event of Default shall
have occurred under the Existing Loan Documents or shall occur after taking into
account the effects of the Acquisition; and
(j) Delivery of Uniform Commercial Code financing statement,
judgment and state and federal tax lien searches against Joining Borrower
showing no Liens on any of the Collateral.
15. Ratification of Existing Loan Documents. Except as expressly set
forth herein, all of the terms and conditions of the Existing Loan Documents are
hereby ratified and confirmed and continue unchanged and in full force and
effect. All references to the Loan Agreement shall mean the Loan Agreement as
modified by this Amendment.
16. Collateral. Borrowers (including, without limitation, Joining
Borrower) each hereby confirm and agree that all security interests and Liens
granted to Agent for the benefit of Lenders continue in full force and effect
and shall continue to secure the Obligations. All Collateral remains free and
clear of any Liens. Nothing herein contained is intended to in any manner impair
or limit the validity, priority and extent of Agent's existing security interest
in and Liens upon the Collateral.
17. Acknowledgment of Guarantors. By execution of this Amendment, each
Guarantor hereby acknowledges the terms and conditions of this Amendment and
confirms that each remains jointly and severally liable, as surety, for all
Obligations pursuant to the terms and conditions of that certain Surety
Agreement dated as of September 30, 1998.
18. Governing Law. This Amendment shall be governed by, construed and
enforced in accordance with the substantive laws of the Commonwealth of
Pennsylvania.
19. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts together shall constitute one and the same respective
agreement. Counterparts by facsimile shall bind the parties hereto.
20. Waiver of Jury Trial. EACH BORROWER, AGENT, EACH LENDER AND EACH
GUARANTOR HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AMENDMENT OR THE TRANSACTIONS DESCRIBED HEREIN.
9
<PAGE>
SIGNATURES ON FOLLOWING PAGES
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Joinder and
Amendment to Loan and Security Agreement the day and year first above written.
EXISTING BORROWER: FIDELITY LEASING, INC.
By:
Name:
Title:
JOINING BORROWER: JLA CREDIT CORPORATION
By:
Name:
Title:
GUARANTORS: RESOURCE AMERICA, INC.
By:
Name:
Title:
RESOURCE LEASING, INC.
By:
Name:
Title:
FL PARTNERSHIP MANAGEMENT, INC.
By:
Name:
Title:
FL FINANCIAL SERVICES, INC.
By:
Name:
Title:
11
<PAGE>
AGENT: FIRST UNION NATIONAL BANK
By:
Name:
Title:
LENDERS: FIRST UNION NATIONAL BANK
By:
Name:
Title:
EUROPEAN AMERICAN BANK
By:
Name:
Title:
12
<PAGE>
SCHEDULE A
Lender Amount
------ ------
First Union National Bank $12,500,000
European American Bank $ 7,500,000
13
<PAGE>
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement ("Pledge Agreement") is made by Fidelity
Leasing, Inc. ("Pledgor") and delivered to First Union National Bank, as Agent
for the ratable benefit of Lenders (in such capacity, "Pledgee") and is given
and is intended to provide additional security for all indebtedness, obligations
and liabilities of Pledgor to Agent and the Lenders ("Obligations") under a
certain Amended and Restated Loan and Security Agreement dated September 30,
1998 by and among Pledgor and Pledgee and the other parties named therein (as
the same may be amended or modified from time to time, most recently by
amendment even date herewith, the "Loan Agreement").
Pledgor, intending to be legally bound hereby, and for other good and
sufficient consideration, the receipt of which is hereby acknowledged, does
hereby assign, pledge, hypothecate, deliver and set over to Pledgee, its
successors and assigns, the property described in the Schedule of Collateral
attached hereto and made part hereof, including all additions, exchanges,
replacements and substitutions therefor, dividends and distributions with
respect thereto, and the proceeds thereof, (collectively, the "Collateral") and
Pledgor hereby grants to Pledgee a continuing lien and security interest in the
Collateral as collateral security for the payment and performance of the
Obligations.
(1) Pledgor hereby represents and warrants that:
(a) Except as pledged herein, Pledgor has not sold, assigned,
transferred, pledged or granted any option or security interest in or otherwise
hypothecated the Collateral in any manner whatsoever and the Collateral is
pledged herewith free and clear of any and all liens, security interests,
encumbrances, claims, pledges, restrictions, legends, and options;
(b) Pledgor has the full power and authority to execute,
deliver, and perform under this Pledge Agreement and to pledge the Collateral
hereunder;
(c) The execution and delivery of this Pledge Agreement by
Pledgor shall not (i) violate or result in a default or breach (immediately or
with the passage of time) under any contract, agreement or instrument to which
Pledgor is a party or by which Pledgor is bound, (ii) violate or result in a
default or breach under any order, decree, award, injunction, judgment, law,
regulation or rule, (iii) cause or result in the imposition or creation of any
lien upon any property of Pledgor, or (iv) violate or result in a breach of the
articles of incorporation or bylaws of Pledgor;
(d) This Pledge Agreement constitutes the valid and binding
obligation of Pledgor, enforceable in accordance with its terms;
(e) The Collateral has been duly and validly authorized and
issued by the issuer thereof and such Collateral is fully paid for and
non-assessable; and
(f) Pledgor is delivering to Pledgee all certificates
representing or evidencing the Collateral, accompanied by duly executed
instruments of transfer or assignments in blank, to be held by Pledgee in
accordance with the terms hereof.
1
<PAGE>
(2) This Pledge Agreement shall continue in effect to secure all
Obligations from time to time incurred or arising and may not be revoked or
terminated.
(3) If an Event of Default occurs under and as defined in Loan
Agreement, then Pledgee may, at its sole option, exercise from time to time with
respect to the Collateral, any and/or all rights and remedies available to it
hereunder, under the Uniform Commercial Code, or otherwise available to it, at
law or in equity, including without limitation, the right to dispose of the
Collateral at public or private sale(s) or other proceedings, and Pledgor agrees
that, if permitted by law, Pledgee or its nominee may become the purchaser at
any such sale(s).
(4)(a) In addition to all other rights granted to Pledgee herein or
otherwise available at law or in equity, Pledgee shall have the following
rights, each of which may be exercised at Pledgee's sole discretion (but without
any obligation to do so), at any time following the occurrence of an Event of
Default under and as defined in the Loan Agreement, without further consent of
Pledgor, upon written notice from Pledgee to Pledgor that Pledgee has exercised
its rights hereunder: (i) to transfer the whole or any part of the Collateral
into the name of itself or its nominee or to conduct a sale of the Collateral
pursuant to the Uniform Commercial Code as enacted in Pennsylvania or pursuant
to any other applicable law; (ii) to vote the Collateral; (iii) to notify the
persons obligated on any of the Collateral to make payment to Pledgee of any
amounts due or to become due thereon; and (iv) to release, surrender or exchange
any of the Collateral at any time, or to compromise any dispute with respect to
the same. Pledgee may proceed against the Collateral, or any other collateral
securing the Obligations (as defined herein and under the Loan Agreement), in
any order, and against Pledgor and any other obligors, jointly and/or severally,
in any order to satisfy the Obligations (as defined herein and under the Loan
Agreement). Pledgor waives and releases any right to require Pledgee to first
collect any of the Obligations secured hereby from any other collateral of
Pledgor or any other party securing the Obligations (as defined herein and under
the Loan Agreement) under any theory of marshalling of assets, or otherwise. All
rights and remedies of Pledgee are cumulative, not alternative.
(b) Pledgor hereby appoints Pledgee its attorney-in-fact to arrange,
at Pledgee's option, (i) to effectuate the transfer of the Collateral on the
books of the issuer thereof to the name of Pledgee or to the name of Pledgee's
nominee, designee or assignee (ii) to endorse and collect checks payable to
Pledgor representing distributions or other payments on the Collateral, and
(iii) to carry out the terms and provisions hereof.
(5) The proceeds of any Collateral received by Pledgee at any time,
whether from the sale of Collateral or otherwise, may be applied to or on
account of the Obligations and in such order as Pledgee may elect. In addition,
Pledgee may, in its discretion, apply any such proceeds to or on account of the
payment of all costs and expenses (including, without limitation, attorneys'
fees and legal expenses) which may be incurred by Pledgee in the enforcement,
protection, preservation or defense of Pledgee's rights hereunder, including
without limitation, the custody, preservation, use, operation, preparation for
sale or sale of the Collateral.
2
<PAGE>
(6) Pledgor recognizes that Pledgee may be unable to effect, or may
effect only after such delay which would adversely affect the value that might
be realized from the Collateral, a public sale of all or part of the Collateral
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire such securities for their own account, for investment and not with a
view to the distribution or resale thereof. Pledgor agrees that any such private
sale may be at prices and on terms less favorable to Pledgee or the seller than
if sold at public sales, and therefore recognizes and confirms that such private
sales shall not be deemed to have been made in a commercially unreasonable
manner solely because they were made privately. Pledgor agrees that Pledgee has
no obligation to delay the sale of any such securities for the period of time
necessary to permit the issuer of such securities to register such securities
for public sale under the Securities Act of 1933, as amended.
(7) In the event that any stock dividend, reclassification,
readjustment or other change is made or declared in the capital structure of, or
Pledgor acquires or in any other manner receives additional shares of stock in,
any corporation described in the attached Schedule of Collateral, if any, or any
option included within the Collateral is exercised, or both, all new,
substituted and additional shares, or other securities, issued by reason of any
such change or exercise shall be delivered to and held by Pledgee under the
terms hereof in the same manner as the Collateral originally pledged hereunder.
No cash dividends may be paid to or retained by Pledgor unless expressly
permitted in writing by Pledgee.
(8) So long as no Event of Default has occurred and is continuing under
and as defined in the Loan Agreement, and, until Pledgee notifies Pledgor in
writing of the exercise of its rights hereunder, Pledgor shall retain the sole
right to vote the Collateral, if any, on all corporate questions for all
purposes not inconsistent with the terms hereof, as well as retain all other
rights relating to the Collateral not inconsistent herewith, including, without
limitation, subscription rights.
(9) Pledgee shall have no obligation to take any steps to preserve,
protect or defend the rights of Pledgor or Pledgee in the Collateral against
other parties. Pledgee shall have no obligation to sell or otherwise deal with
the Collateral at any time for any reason, whether or not upon request of
Pledgor, and whether or not the value of the Collateral, in the opinion of
Pledgee or Pledgor, is more or less than the aggregate amount of the Obligations
secured hereby, and any such refusal or inaction by Pledgee shall not be deemed
a breach of any duty which Pledgee may have under law to preserve the
Collateral. Unless expressly set forth herein, no duty, obligation or
responsibility of any kind is intended to be delegated to or assumed by Pledgee
at any time with respect to the Collateral.
(10) To the extent Pledgee is required by law to give Pledgor prior
notice of any public or private sale, or other disposition of the Collateral,
Pledgor agrees that five (5) days' prior written notice to Pledgor shall be a
commercially reasonable and sufficient notice of such sale or other intended
disposition. Pledgor further recognizes and agrees that if the Collateral, or a
portion thereof, threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Pledgor shall not be entitled to any
prior notice of sale or other intended disposition.
3
<PAGE>
(11) Pledgor shall indemnify, defend and hold harmless Pledgee from and
against any and all claims, losses and liabilities resulting from any breach by
Pledgor of Pledgor's representations and covenants under this Pledge Agreement.
(12) Pledgor hereby waives notice of (a) acceptance of this Pledge
Agreement, and (b) the existence of any Event of Default under and as defined in
the Loan Agreement, the making of demand, or the taking of any action by Pledgee
under the Loan Agreement.
(13) Pledgor hereby consents and agrees that Pledgee may at any time or
from time to time in its sole discretion (a) extend or change the time of
payment and/or the manner, place or terms of payment of any and all Obligations
(as defined herein and in the Loan Agreement), (b) amend, supplement or replace
the Loan Agreement or any of the other Loan Documents (as defined in Loan
Agreement), (c) renew, extend, modify, increase or decrease loans and extensions
of credit under the Loan Agreement, (d) modify the terms and conditions under
which loans and extensions of credit may be made under the Loan Agreement, (e)
settle, compromise or grant releases for any Obligations (as defined herein and
in the Loan Agreement) and/or any person or persons liable for payment of any
Obligations (as defined herein and in the Loan Agreement), (f) exchange,
release, surrender, sell, subordinate or compromise any collateral of any party
now or hereafter securing any of the Obligations (as defined herein and in the
Loan Agreement) and (g) apply any and all payments received from any source by
Pledgee at any time against the Obligations in any order as Pledgee may
determine; all of the foregoing in such manner and upon such terms as Pledgee
may determine and without notice to or further consent from Pledgor and without
impairing or modifying the terms and conditions of this Pledge Agreement which
shall remain in full force and effect.
(14) This Pledge Agreement shall remain in full force and effect and
shall not be limited, impaired or otherwise affected in any way by reason of (a)
any delay in making demand on Pledgor for or delay in enforcing or failure to
enforce, performance or payment of the Obligations (as defined in the Loan
Agreement), or (b) any failure, neglect or omission on Pledgee's part to perfect
any lien upon, protect, exercise rights against, or realize on, any property of
Pledgor or any other party securing the Obligations (as defined herein and in
the Loan Agreement).
4
<PAGE>
(15) Pledgor covenants and agrees that Pledgor shall not, without the
prior written consent of Pledgee, sell, encumber or grant any lien, security
interest or option on or with respect to any of the Collateral.
(16) Any failure of or delay by Pledgee to exercise any right or remedy
hereunder shall not be construed as a waiver of the right to exercise the same
or any other right or remedy at any other time.
(17) This Pledge Agreement constitutes the entire agreement between the
parties hereto regarding the subject matter hereof and may be modified only by a
written instrument signed by the party or parties against whom any change is
sought to be enforced.
(18) This Pledge Agreement is made in and shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania, and
the provisions hereof shall be deemed severable in the event of the invalidity
of any provision. Pledgor and Pledgee each irrevocably waive any and all right
to a jury trial in any action, proceeding or controversy arising from or
relating to this Pledge Agreement.
(19) All communications which Pledgee may provide to Pledgor herein
shall be sent to Pledgor at the address set forth below in the manner provided
for sending notices under the Loan Agreement.
(20) This Pledge Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns.
This Stock Pledge Agreement is executed this 26th day of March, 1999.
FIDELITY LEASING, INC.
Attest: By:
------------------------ ---------------------------
Name: Name:
------------------------ ---------------------------
Title: Title:
------------------------ ---------------------------
Address:
--------------------------
--------------------------
5
<PAGE>
SCHEDULE OF COLLATERAL
The following Collateral is hereby pledged by Pledgor to Pledgee
pursuant to the Stock Pledge Agreement to which this Schedule is attached:
Company Certificate No. Amount of Shares
------- --------------- ----------------
JLA Credit Corporation 18 60,000
6
<PAGE>
AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
------------------------------------
This Amendment to Loan and Security Agreement ("Amendment") is made as
of the 18th day of May, 1999 by and among First Union National Bank, a national
banking Association in its capacity as agent ("Agent") and as Lender, and the
financial institutions listed on Schedule A attached hereto and made part
hereof, in their capacity as lenders (singly, each as a "Lender" and
collectively, all are "Lenders") and Fidelity Leasing, Inc. and JLA Credit
Corporation (collectively, the "Borrowers"), Resource America, Inc., Resource
Leasing, Inc., FL Partnership Management, Inc. and FL Financial Services, Inc.
(singly, each is a "Guarantor"and collectively, all are "Guarantors").
BACKGROUND
----------
A. Borrowers, Agent and Lenders are parties to a certain Amended and Restated
Loan and Security Agreement dated September 30, 1998 (as modified and amended
from time to time, the "Loan Agreement") pursuant to which Borrowers established
certain financing arrangements with Agent and Lenders. The Loan Agreement and
all instruments, documents and agreements executed in connection therewith or
related thereto are referred to herein collectively as the "Existing Loan
Documents". All capitalized terms not otherwise defined herein shall have the
meaning ascribed thereto in the Loan Agreement.
B. Borrowers have requested and Agent and Lenders have consented to certain
amendment to the Loan Agreement subject to the terms and conditions hereof.
C. All obligations of Borrowers to Agent and Lenders under the Existing Loan
Documents shall continue to be guaranteed by Guarantors, on a joint and several
basis.
NOW, THEREFORE, with the foregoing Background incorporated by reference and
made a part hereof, and intending to be legally bound, the parties agree as
follows:
1. Eligible Leases. The Loan Agreement is hereby amended by deleting the
definition of "Eligible Lease(s)" contained in Section 1.1 of the Loan Agreement
and replacing it with the following:
"Eligible Lease(s) - Each Lease which meets all of the following
specifications: (1) is not subject to any Lien, security interest or
prior assignment other than Agent's security interest for the benefit
of Lenders and the rights of the Lessee's thereunder; (2) is a valid
enforceable Lease, representing the undisputed obligation of the
Lessee, with rentals due thereunder not more than sixty-one (61) days
contractually past due; (3) is not subject to any defense, setoff,
counterclaim, deduction, allowance or adjustment; (4) unless otherwise
agreed to in writing by Agent, provides for the lease of Leased
Property with an aggregate invoice price of less than $1,500,000; (5)
provides for the lease of Leased Property which has not been returned,
rejected, lost or damaged; (6) arose in the ordinary course of
Borrowers' business; (7) Borrowers have not received notice of
bankruptcy, receivership, reorganization, insolvency or material
<PAGE>
adverse change in the financial condition of the Lessee; (8) the Lessee
has not a Subsidiary or Affiliate of Borrowers; (9) is not Defaulted
Lease and complies with all general warranties set forth in Section
5.17 hereof; (10) does not have an initial stated term in excess of
seventy-two (72) months, provided, however, that lease(s) with an
initial stated term of up to ninety-six (96) months may be considered
Eligible Leases so long as the aggregate Lease Receivable(s) of all
such Lease(s) shall, at no time, exceed Five Million Dollars
($5,000,000); (11) has not, in the case of Revolving Credit Loans, been
pledged to Agent and/or Lenders for a period of more than twelve (12)
months; (12) contains a provision whereby the Lessee agrees not to
assert any claim or reduction, counterclaim, setoff, recoupment, or any
other claim, allowance or adjustment against any assignee of Borrowers;
(13) is a Lease with a Lease Receivable, which together with all other
Lease Receivables owed by the same Lessee does not exceed One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000) in the aggregate;
(14) Borrowers are in possession of the Lessee's original signatures
pages to the Lease or are in possession of a Facsimile Lease, and (15)
the Lessee's chief executive office and the Leased Property under such
Lease is located in the continental United States."
2. Equipment Cost. The Loan Agreement is hereby amended by adding the following
definition of "Equipment Cost" to Section 1.1 of the Loan Agreement:
""Equipment Cost" - The price set forth on the manufacturer's and/or
vendor's invoice for the Equipment corresponding to the Lease excluding
any and all (a) associated soft costs, (b) in-house costs or expenses
incurred for delivery and installation of the Equipment and (c)
commissions and sales fees."
3. Leases and Leased Property. The Loan Agreement is hereby amended by deleting
Section 5.17(p) and replacing it with the following:
"(p) For each Lease, with an Equipment Cost in excess of $25,000,
Borrowers have either (i) listed Agent for the benefit of Lenders, as
assignee on a UCC-1 Financing Statement so filed, or (ii) after
Borrowers have received acknowledgment copies of the UCC-1s, deliver to
Agent executed UCC-3 Financing Statements naming Agent for the benefit
of Lenders as assignee of Borrowers' security interest. Agent agrees
not to file the UCC-3 Financing Statements until such time as an Event
of Default or Unmatured Event of Default occurs under this Agreement,
and Agent will return such UCC-3 Financing Statements to Borrowers if
such Leases are ultimately sold or refinanced on a permanent basis with
another lender;"
4. Financial Covenants. The Loan Agreement is hereby amended by deleting Section
6.8 of the Loan Agreement and replacing it with the following:
"6.8 Financial Covenants. Borrowers shall maintain and comply with the
following financial covenants as reflected on and computed from their
Financial Statements:
<PAGE>
(a) Adjusted Debt to Tangible Net Worth Ratio: Borrowers shall have and
maintain at all times an Adjusted Debt to Tangible Net Worth Ratio on a
consolidated basis, measured quarterly as of the last day of each
fiscal quarter during each fiscal year, of not more than 5.50 to 1.
(b) Tangible Net Worth: Borrowers shall have and maintain a Tangible
Net Worth of not less than Twenty Five Million Dollars ($25,000,000) as
of March 31, 1999. As of the last day of each fiscal quarter
thereafter, Borrowers shall have a Tangible Net Worth of not less than
the amount required hereby for the immediately preceding fiscal quarter
plus an amount equal to seventy-five percent (75%) of Borrower's Net
Income for the immediately proceeding fiscal quarter (for the purposes
of such step up, Net Income shall never be less than zero). The amount
of Tangible Net Worth required to be maintained by Borrowers pursuant
to this Section 6.8(b) shall be adjusted upon receipt by Borrowers of
the net proceeds of any capital contribution by an amount to be agreed
upon by Borrowers and Agent.
(c) Fixed Charge Coverage Ratio: Borrowers shall have and maintain as
of the end of each fiscal quarter, based on financial information for
the twelve (12) month period ending as of the end of such fiscal
quarter, on a consolidated basis, a Fixed Charge Coverage Ratio of not
less than 1.25 to 1."
5. Representations and Warranties. Each Borrower and each Guarantor represents
and warrants to Agent and Lenders that:
(a) All warranties and representations made to Agent and
Lenders under the Existing Loan Documents are true and correct as of the date
hereof.
(b) The execution and delivery by each Borrower and each
Guarantor of this Amendment and the performance by each of them of the
transactions herein contemplated (i) are and will be within such Borrower's and
such Guarantor's corporate powers, (ii) have been authorized by all necessary
corporate action and (iii) are not and will not be in contravention of any law,
any order of any court or other agency of government, or any other indenture,
agreement or undertaking to which either Borrower or any Guarantor is a party or
by which the property of either Borrower or any Guarantor is bound, or be in
conflict with, result in a breach of, or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement or undertaking or
result in the imposition of any lien, charge or incumbrance of any nature on any
of the properties of either Borrower or any Guarantor.
(c) This Amendment and all allonges, assignments, instruments,
documents, and agreements executed and delivered in connection herewith, will be
valid, binding and enforceable in accordance with their respective terms.
<PAGE>
(d) No Unmatured Event of Default or Event of Default has
occurred under any of the Existing Loan Documents.
6. Collateral. As security for the timely payment of the Obligations and
satisfaction by Borrowers of all covenants and undertakings contained in the
Existing Loan Documents, Existing Borrower reconfirms the prior security
interest and lien on, in, upon and to the Collateral, including, without
limitation, all of the following of each Borrower whether now owned or hereafter
acquired, created or arising and wherever located: Leases and Leased Property,
Books and Records and all cash and non-cash proceeds, thereof, including
insurance proceeds.
7. Effectiveness Conditions. This Amendment shall be effective upon completion
of the following conditions precedent (all documents to be in form and substance
satisfactory to Agent and Agent's counsel):
(a) Execution and delivery to Agent of this Amendment; and
(b) Execution and delivery of all other documents, agreement
and instruments required by Agent in connection herewith.
8. Ratification of Existing Loan Documents. Except as expressly set forth
herein, all of the terms and conditions of the Existing Loan Documents are
hereby ratified and confirmed and continue unchanged and in full force and
effect. All references to the Loan Agreement shall mean the Loan Agreement as
modified by this Amendment.
9. Collateral. Borrowers each hereby confirm and agree that all security
interests and Liens granted to Agent for the benefit of Lenders continue in full
force and effect and shall continue to secure the Obligations. All Collateral
remains free and clear of any Liens. Nothing herein contained is intended to in
any manner impair or limit the validity, priority and extent of Agent's existing
security interest in and Liens upon the Collateral.
10. Acknowledgment of Guarantors. By execution of this Amendment, each Guarantor
hereby acknowledges the terms and conditions of this Amendment and confirms that
each remains jointly and severally liable, as surety, for all Obligations
pursuant to the terms and conditions of that certain Surety Agreement dated as
of September 30, 1998.
11. Governing Law. This Amendment shall be governed by, construed and enforced
in accordance with the substantive laws of the Commonwealth of Pennsylvania.
12. Counterparts. This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same respective agreement.
Counterparts by facsimile shall bind the parties hereto.
<PAGE>
13. Waiver of Jury Trial. EACH BORROWER, AGENT, EACH LENDER AND EACH GUARANTOR
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AMENDMENT OR THE
TRANSACTIONS DESCRIBED HEREIN.
SIGNATURES ON FOLLOWING PAGES
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to Loan
and Security Agreement the day and year first above written.
BORROWERS: FIDELITY LEASING, INC.
By:
Name:
Title:
JLA CREDIT CORPORATION
By:
Name:
Title:
GUARANTORS: RESOURCE AMERICA, INC.
By:
Name:
Title:
RESOURCE LEASING, INC.
By:
Name:
Title:
FL PARTNERSHIP MANAGEMENT, INC.
By:
Name:
Title:
FL FINANCIAL SERVICES, INC.
By:
Name:
Title:
<PAGE>
AGENT: FIRST UNION NATIONAL BANK
By:
Name:
Title:
LENDERS: FIRST UNION NATIONAL BANK
By:
Name:
Title:
EUROPEAN AMERICAN BANK
By:
Name:
Title:
<PAGE>
SCHEDULE A
Lender Amount
------ ------
First Union National Bank $12,500,000
European American Bank $7,500,000
<PAGE>
FIDELITY LEASING CANADA INC.
As Borrower
- and -
BANK OF MONTREAL
As Lender
CDN. $5,000,000
CREDIT AGREEMENT
MAY 19, 1999
Fraser Milner
P.O. Box 100
1 First Canadian Place
Toronto, Ontario
M5X 1B2
<PAGE>
ARTICLE I......................................................................1
Section 1.1 Defined Terms.................................................1
Section 1.2 Computation of Time Periods..................................17
Section 1.3 Accounting Terms.............................................17
Section 1.4 Incorporation of Schedules...................................17
Section 1.5 Headings.....................................................17
Section 1.6 Singular, Plural, Gender.....................................17
Section 1.7 Conflict.....................................................17
Section 1.8 Currency.....................................................18
Section 1.9 Time.........................................................18
Section 1.10 Control......................................................18
Section 1.11 References to Conversion of Advances.........................18
ARTICLE II....................................................................18
Section 2.1 Credit Facility..............................................18
Section 2.2 Drawdown Availability........................................19
Section 2.3 Renewal of Drawdown Period...................................19
Section 2.4 Advance Requests.............................................20
Section 2.5 Prime Rate Loans.............................................21
Section 2.6 Currency.....................................................21
Section 2.7 Conversion of Advance........................................21
Section 2.8 Certain Provisions Relating to Bankers' Acceptances..........21
Section 2.9 Reduction of Maximum Commitment Level........................25
Section 2.10 Use of Proceeds..............................................25
ARTICLE III...................................................................25
Section 3.1 Interest on Prime Rate Loans.................................25
Section 3.2 Acceptance Fee...............................................26
Section 3.3 Facility Fee.................................................26
Section 3.4 Reimbursement Obligations....................................26
Section 3.5 Yearly Rate Statements.......................................26
ARTICLE IV....................................................................27
Section 4.1 Repayment on Maturity........................................27
Section 4.2 Mandatory Repayment of Credit Facility.......................27
ARTICLE V.....................................................................27
Section 5.1 Maintenance of Accounts......................................27
Section 5.2 Due Date of Payments.........................................27
Section 5.3 Time of Payments.............................................27
Section 5.4 Form and Amount of Payments..................................28
Section 5.5 Charging Borrower's Account..................................28
ARTICLE VI....................................................................28
Section 6.1 Additional Payments..........................................28
Section 6.2 Option to Prepay.............................................29
ARTICLE VII...................................................................30
Section 7.1 Conditions Precedent to Initial Advance......................30
Section 7.2 Conditions Precedent to Each Advance.........................32
<PAGE>
ARTICLE VIII..................................................................33
Section 8.1 Representations and Warranties by the Borrower..............33
Section 8.2 Survival of Representations and Warranties..................39
ARTICLE IX....................................................................39
Section 9.1 Affirmative Covenants.......................................39
Section 9.2 Negative Covenants..........................................43
ARTICLE X.....................................................................46
Section 10.1 Events of Default...........................................46
Section 10.2. Remedies Upon Default.......................................49
Section 10.3. Right of Set-Off............................................50
Section 10.4. Judgment Currency...........................................50
ARTICLE XI....................................................................51
Section 11.1 Evidence of Debt............................................51
Section 11.2 Additional Expenses.........................................51
Section 11.3 Invalidity of any Provisions................................51
Section 11.4 Amendments, Waivers, etc....................................51
Section 11.5 Notices, etc................................................52
Section 11.6 Costs and Expenses..........................................52
Section 11.7 Indemnification.............................................53
Section 11.8 Taxes.......................................................55
Section 11.9 Calculations................................................55
Section 11.10 Assignments and Participations..............................56
Section 11.11 Governing Law...............................................56
Section 11.12 Consent to Jurisdiction.....................................57
Section 11.13 Binding Effect..............................................57
Section 11.14 Interest Savings Clause.....................................57
Section 11.15 Entire Agreement............................................57
Section 11.16 Counterparts................................................57
SCHEDULES
Schedule 2.4(a) Form of Advance Request
Schedule 2.4(c) Form of Borrowing Base Certificate
Schedule 2.4(d) Form of Assignment Agreement
Schedule 8.1(f)(A) Outstanding Encumbrances
Schedule 8.1(f)(B) Places of Business and Locations of Books and Records
Schedule 8.1(g) Subsidiaries and Affiliates of the Borrower
Schedule 8.1(q) Intellectual Property Assets
Schedule 9.1(i) Form of Compliance Certificate
<PAGE>
THIS CREDIT AGREEMENT is made as of the 19th day of May, 1999,
B E T W E E N:
FIDELITY LEASING CANADA INC., a corporation
incorporated under the laws of the Province of Ontario,
as the Borrower hereunder,
- and -
BANK OF MONTREAL, one of the chartered banks of Canada,
as the Lender hereunder
WHEREAS Bank of Montreal has agreed, on and subject to the
terms and conditions hereof, to make available the credit facilities in favour
of Fidelity Leasing Canada Inc. provided for herein in the maximum aggregate
principal amount of Cdn. $5,000,000;
NOW THEREFORE in consideration of these premises and the
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms.
Unless the context otherwise requires, the following
capitalized terms shall have the following respective meanings in this Agreement
and in each of the other Loan Documents:
"Acceptance Fee" means the fee payable in Canadian dollars to
the Lender in respect of the Bankers' Acceptances accepted by the Lender prior
to and as a condition of such acceptance, computed in accordance with Section
3.2;
"Account" has the meaning ascribed to the term "account" in
the PPSA;
"Adjusted Debt to Tangible Net Worth Ratio" has the meaning
ascribed to that term in the FLI Credit Agreement in effect on the date of this
Agreement, as such term may be supplemented, amended, modified or restated from
time to time with the consent of the Lender hereunder;
<PAGE>
"Advance" means any extension of credit by the Lender
hereunder in the form of a Prime Rate Loan or a BA Advance (each of which is
referred to herein as a "Type of Advance"), including the conversion of an
Advance into another Type of Advance or to an Advance pursuant to Section
2.8(h);
"Advance Request" means a request for an Advance duly
completed and executed on behalf of the Borrower by the chief financial officer
of the Borrower or another officer of the Borrower acceptable to the Lender,
substantially in the form of Schedule 2.4(a) hereto;
"Affiliate" has the meaning ascribed thereto in the OBCA;
"Aggregate Eligible Lease Receivable Balance" means as of any
date of determination, the aggregate Lease Receivable Balances of all Eligible
Leases on that date;
"Agreement" means this credit agreement as supplemented,
amended, modified or restated from time to time, and the expressions "Article",
"Section" and "Schedule" followed by a number mean and refer to the specified
Article, Section or Schedule of this Agreement, respectively;
"Assets" means, with respect to any Person, any interest of
such Person in all present or future property, assets and undertaking of such
Person, real or personal, moveable or immovable, tangible or intangible, of
whatsoever nature or kind and wherever situate, including without limitation
anything properly classified as an asset in accordance with Generally Accepted
Accounting Principles;
"Assigned Lease" means a Lease reported by the Borrower to the
Lender as an Eligible Lease and included by the Borrower in calculating the
Borrowing Base set out in a Borrowing Base Certificate;
"Assigned Leased Property" means Leased Property pursuant to
an Assigned Lease;
"Assignee Lender" has the meaning set out in Section 11.10;
"Assignee Lender's Commitment" has the meaning set out in
Section 11.10;
"Assignee Lender's Commitment Percentage" has the meaning set
out in Section 11.10;
"Assignment Agreement" has the meaning set out in Section
2.4(d);
"Available Commitment" means at any time the amount at such
time of the Borrowing Base less the amount of the Outstanding Principal
Obligations at such time;
"BA Advance" means any Advance by way of the acceptance of any
Draft drawn by the Borrower on, and the purchase of the resulting Bankers'
Acceptance by the Lender;
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<PAGE>
"BA Discount Proceeds" means in respect of any Bankers'
Acceptance being purchased by the Lender on any day an amount (rounded to the
nearest whole Canadian cent, and with one-half of one Canadian cent being
rounded up) calculated on such day by multiplying
(a) the Face Amount of such Bankers' Acceptance, by
(b) the quotient equal to one divided by the sum of one plus the
product of:
(A) the BA Reference Rate (expressed as a decimal) applicable
to such Bankers' Acceptance; and
(B) a fraction, the numerator of which is the number of days
remaining in the term of such Bankers' Acceptance and the
denominator of which is 365,
with such quotient being rounded up or down to the nearest
fifth decimal place and .000005 being rounded up,
less the amount of the Acceptance Fee payable to the Lender in respect of, and
as a condition precedent to the issuance by the Lender of, such Bankers'
Acceptance;
"BA Reference Rate" means, as applicable to any Bankers'
Acceptance being purchased by the Lender on any day, the per annum percentage
discount rate (expressed to two decimal places and rounded upward, if necessary,
to the nearest 1/100th of 1%), quoted by the Lender as that at which the Lender
would, in accordance with its normal practice, on such day be prepared to
purchase Bankers' Acceptances in an amount and having a maturity date comparable
to the amount and maturity date of such Bankers' Acceptance;
"Bankers' Acceptance" means a Draft of the Borrower
denominated in Canadian Dollars which has been accepted by the Lender pursuant
to Article II;
"Bankers' Acceptance Liabilities" means, at any time and in
respect of any Bankers' Acceptance, the Face Amount thereof if still outstanding
and unpaid or, following maturity thereof, the aggregate unpaid amount of all
Reimbursement Obligations at that time due and payable in respect of such
Bankers' Acceptance upon maturity;
"Books and Records" means all of the Borrower's original
ledger cards, payment schedules, credit applications, Contract Rights,
Encumbrances, guarantees and other Intangibles relating in any way to the
Assigned Leases or Assigned Leased Property;
"Borrower" means Fidelity Leasing Canada Inc., a corporation
incorporated under the laws of the Province of Ontario, and any successors and
permitted assigns thereof;
"Borrower's Account" means the Canadian Dollar account to be
maintained by the Borrower with the Lender at the Lender's Branch in accordance
with Article V;
"Borrowing Base" means as of any date of determination, an
amount equal to the lesser of:
3
<PAGE>
(a) the Maximum Commitment Limit on that date, and
(b) 75% of the Aggregate Eligible Lease Receivable Balance on that
date;
"Borrowing Base Certificate" means a certificate setting out
the then current Borrowing Base and Available Commitment, duly completed and
executed on behalf of the Borrower by the chief financial officer of the
Borrower or another officer of the Borrower acceptable to the Lender,
substantially in the form of Schedule 2.4(c) hereto;
"Business Day" means any day of the year, other than Saturday
or Sunday or any other day on which banks are closed for normal business in
Toronto, Ontario;
"Canada Treasury Bill Rate" means on any day and for any
discount calculation period the rate for Government of Canada Treasury bills for
a period approximately equal to such discount calculation period appearing on
the "Reuters Screen ISDD Page" (as defined in the International Swap and
Derivatives Association, Inc. definitions, as modified and amended from time to
time) at approximately 10:00 a.m. (Toronto, Ontario time) on such day, or if
such day is not a Business Day then on the immediately preceding Business Day;
"Canadian Dollars" and the symbols "Can. $" and "Cdn. $" mean
lawful money of Canada;
"Canadian Dollar Equivalent" means, at any time, the amount of
Canadian Dollars which could be purchased from the Lender by the payment of a
specified amount of another currency using the Lender's relevant spot rate for
the sale of Canadian Dollars quoted by the Lender's treasury department at such
time;
"Capital Adequacy Guideline" means the capital adequacy
requirements from time to time specified by OSFI or any other applicable
Governmental Authority and published by it as one or more guidelines for
chartered banks in Canada;
"Capital Lease" means any lease of (or other agreement
conveying the right to use) immovable or real property or movable or personal
property, which would be classified as a capital lease under Generally Accepted
Accounting Principles;
"CDOR Rate" means, on any day, the annual rate which is the
rate determined by the Lender as being the arithmetic average (rounded up or
down, if necessary, to the nearest 0.01% and 0.005% being rounded up) of the
discount rates applicable to Canadian Dollar bankers' acceptances for a period
of one month appearing on the "Reuters Screen CDOR Page" (as defined in the
International Swap and Derivatives Association, Inc. definitions, as modified
and amended from time to time) at approximately 10:00 a.m. on such day, or if
such day is not a Business Day then on the immediately preceding Business Day;
provided, however, if such rates do not appear on the Reuters Screen CDOR Page
for such one month period as contemplated, then the CDOR Rate on any day shall
be calculated as the rate as determined by the Lender equal to the BA Reference
Rate that would be applicable to any Drafts required to be purchased by the
Lender on such day and having a term to maturity of 30 days;
4
<PAGE>
"Change of Control" means the occurrence of one or more of the
following events:
(a) in the case of FLI:
(i) RAI shall cease to be the beneficial owner, directly,
or indirectly through wholly owned Subsidiaries, of
at least 51% of all of the issued and outstanding
Voting Shares of FLI; or
(ii) if RAI would not have the ability to elect or appoint
a majority of FLI's Board of Directors;
(b) in the case of the Borrower:
(i) RAI or FLI shall cease to be the beneficial owner,
directly, or indirectly through wholly owned
Subsidiaries, of all of the issued and outstanding
Voting Shares of the Borrower; or
(ii) nominees of RAI or FLI, or their designees, shall
cease to represent a majority of the Borrower's Board
of Directors; and
(c) in the case of FLSCI or any other Subsidiary of the Borrower:
(i) the Borrower shall cease at any time to be the
beneficial owner, directly, or indirectly through
wholly owned Subsidiaries, of all of the issued and
outstanding Voting Shares of such Subsidiary; or
(ii) nominees of the Borrower, or their designees, shall
cease to represent a majority of such Subsidiary's
Board of Directors;
"Chattel Paper" has the meaning ascribed to the term "chattel
paper" in the PPSA;
"Claim" means any claim of any nature whatsoever including,
without limitation, any demand, liability, obligation, cause of action, suit,
proceeding, judgment, award, assessment and reassessment, whether present or
future;
"Closing" means the execution and delivery of this Agreement
and the other Loan Documents by the respective parties thereto;
"Closing Date" means that date on which the Closing shall
occur;
"Closing Financial Statements" means the financial statements
of the Borrower as of;
"Collateral" means all now or hereafter existing Assigned
Leases and Assigned Leased Property, Books and Records and all cash and noncash
proceeds, thereof, including insurance proceeds;
5
<PAGE>
"Commitment" means at any time the obligation of the Lender,
subject to and in accordance with the terms and conditions of this Agreement, to
make Prime Rate Loans and accept and purchase Bankers' Acceptances in an
aggregate amount of Outstanding Principal Obligations at any one time
outstanding up to (but not exceeding) the Borrowing Base at that time;
"Compensating Amount" has the meaning set out in Section 6.1;
"Compliance Certificate" means a certificate duly completed
and executed on behalf of the Borrower by the chief financial officer of the
Borrower or another officer of the Borrower acceptable to the Lender,
substantially in the form of Schedule 9.1(i) hereto;
"Consolidated Capitalization" means at any time the aggregate
(without duplication) of the Subordinated Indebtedness of the Borrower,
unsecured intercompany indebtedness of the Borrower to its Affiliates (other
than any Securitization Subsidiary) and the Consolidated Shareholder Equity of
the Borrower;
"Consolidated Shareholder Equity" of any Person means at any
time, the sum of the following, determined (without duplication) in accordance
with Generally Accepted Accounting Principles:
(a) the stated capital (but for greater certainty excluding any
treasury shares and subscribed but unissued shares) of such
Person, less any amount thereof attributable to any preferred
or special shares of such Person which are subject to any
sinking fund or mandatory redemption provisions under which
any amount must be paid by such Person, or are retractable at
the option of the holder thereof, prior to the Term Date; and
(b) the aggregate amount of the consolidated contributed surplus
and consolidated retained earnings of such Person or, in the
case of a consolidated contributed surplus or consolidated
retained earnings deficit, minus the amount of such deficit;
but excluding (1) any amount attributable to consolidation of any Assets,
revenues, income, contributed capital or surplus or retained earnings of any
Securitization Subsidiary, and (2) any exchange gains or losses arising from the
translation of the financial statements of any Subsidiary and accumulated in the
foregoing;
"Contaminant" means, any pollutants, dangerous substances,
liquid waste, industrial waste, hauled liquid waste, toxic substances, hazardous
wastes, hazardous materials, hazardous substances or contaminants as defined or
dealt with in any Environmental Law;
"Contract Rights" means all rights under contracts not yet
earned by performance;
"Cover" for any Bankers' Acceptance Liabilities shall be
effected by paying to the Lender immediately available and freely transferable
6
<PAGE>
funds in Canadian Dollars in the full amount of such Bankers' Acceptance
Liabilities, which funds shall be held by the Lender in a collateral account
maintained by the Lender and assigned to the Lender as general and continuing
collateral security for the payment of such Bankers' Acceptance Liabilities
using documentation reasonably satisfactory to the Lender. Such funds shall be
retained by the Lender in such collateral account until such time as the
applicable Bankers' Acceptances shall have matured and the related Bankers'
Acceptance Liabilities shall have been fully satisfied; provided, however, that
at such time if an Event of Default has occurred and is continuing, the Lender
shall not be required to release any of the said funds in such collateral
account until such Event of Default shall have been cured or waived;
"Credit Facility" means the revolving credit facility to be
made available to the Borrower hereunder during the Drawdown Period by way of
Advances pursuant to Section 2.1;
"Default" means any event which with the giving of notice, the
passage of time, or both, would constitute an Event of Default;
"Discount" means as applicable to any BA Advance the
difference between the aggregate Face Amount and the aggregate BA Discount
Proceeds of Bankers' Acceptances purchased by the Lender in respect of such BA
Advance;
"Draft" means at any time a bill of exchange, within the
meaning of the Bills of Exchange Act (Canada), drawn by the Borrower on the
Lender and bearing such distinguishing letters and numbers as the Lender may
determine, but which at such time has not been completed or accepted by the
Lender;
"Drawdown Date" means a day which the Borrower has notified
the Lender in an Advance Request as the date on which the Borrower requests an
Advance in accordance with Article II;
"Drawdown Period" means the period from the Closing Date to
1:00 p.m. (Toronto, Ontario time) on the Term Date;
"Eligible Lease" means each Lease which as of any date of
determination, and the Leased Property associated therewith, complies with all
representations and warranties set forth in Section 8.1(r) hereof;
"Encumbrance" means any mortgage, charge, hypothec, legal
hypothec, pledge, security interest, trust, lien or deposit arrangement or any
other encumbrance of any kind or nature, whether fixed or floating, that in
substance secures the payment of any indebtedness or liability or the observance
or performance of any obligation owed to, or a claim of any kind or nature in
property by, a Person, other than (a) the beneficial owner of the property, or
(b) any interest of a Lessee pursuant to the terms of a Lease (and any interest
of any Person claiming through such Lessee provided such interest is subordinate
to the Borrower and the Lender in the Leased Property), regardless of form and
whether consensual or arising by law, statutory or otherwise, on or in, any
property, whether immovable or real, movable or personal, or mixed, tangible or
7
<PAGE>
intangible and including, but not limited to, a conditional sale or other title
retention agreement, lease, consignment or bailment for security purposes;
"Environmental Activity" means any activity, event or
circumstances in respect of a Contaminant, including, without limitation, its
storage, use, holding, collection, purchase, accumulation, assessment,
generation, manufacture, construction, processing, treatment, stabilization,
disposition, handling or transportation, or its Release, escape, leaching,
dispersal or migration into the natural environment, including the movement
through or in the air, land surface or subsurface strata, surface water or
groundwater;
"Environmental Law" means any and all applicable Legal
Requirements relating to pollution or protection of human health or the
environment or any Environmental Activity;
"Equipment" has the meaning ascribed to the term "equipment"
in the PPSA and shall include, without limitation, all additions, improvements,
accessions, attachments, upgrades, replacements and substitutions thereto or
therefor;
"Event of Default" means any of the events specified in
Section 10.1;
"Face Amount" means in respect of a Draft or a Bankers'
Acceptance, the amount stated therein to be payable to the holder thereof on its
maturity;
"Facility Fee" has the meaning specified in Section 3.3;
"Fixed Charge Coverage Ratio" has the meaning ascribed to that
term in the FLI Credit Agreement in effect on the date of this Agreement, as
such term may be supplemented, amended, modified or restated from time to time
with the consent of the Lender hereunder;
"FLI" means Fidelity Leasing, Inc., a corporation incorporated
under the laws of the State of Pennsylvania, and any successors and permitted
assigns thereof;
"FLI Credit Agreement" means the amended and restated loan and
security agreement dated September 30, 1998 among FLI, First Union National
Bank, as agent and as lender, and certain other lending institutions party to
such agreement, as lenders thereunder, as (unless otherwise specified herein)
supplemented, amended, modified or restated from time to time;
"FLI Subordinated Indebtedness" has the meaning ascribed to
the term "Subordinated Indebtedness" in the FLI Credit Agreement in effect on
the date of this Agreement, as such term may be supplemented, amended, modified
or restated from time to time with the consent of the Lender hereunder;
"FLSCI" means FL Sales Canada Inc., a corporation incorporated
under the laws of the Province of Ontario, and any successors and permitted
assigns thereof;
8
<PAGE>
"Generally Accepted Accounting Principles" means, at any time,
accounting principles generally accepted in Canada as recommended in the
Handbook of the Canadian Institute of Chartered Accountants applied on a basis
consistent with prior years;
"Governmental Authority" means any nation or government, and
any political subdivision thereof, and any central bank, agency, department,
commission, board, bureau, court, tribunal or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government;
"Guarantee Liability" means, with respect to any Person, any
Liabilities of another Person which such guaranteeing Person has guaranteed or
in respect of which such guaranteeing Person is liable, contingently or
otherwise, including, without limitation, liable by way of agreement to purchase
property or services, to provide funds for payment, to supply funds to or
otherwise invest in such other Person, or otherwise to assure a creditor of such
other Person against loss, other than endorsements for collection or deposit in
the ordinary course of business;
"Guarantor" means each of RAI and FLI;
"IBM Canada" means IBM Canada Ltd., a corporation incorporated
under the laws of Canada;
"IBM Direction" has the meaning set out in Section 7.1(g);
"IBM Leasing Program Agreements" means, collectively, the
Master Agreement For Sale And Assignment Of Equipment Lease Receivables made as
of February, 1999 between FLSCI, IBM Canada and the Borrower, the Master
Agreement of Sale made as of February, 1999 between the Borrower and FLSCI and
the Small Business Leasing Program Agreement made as of October 6, 1998 between
the Borrower, FLSCI and IBM Canada;
"Indebtedness" means, without duplication, for any Person:
(a) all indebtedness of such Person for or in respect of borrowed
money, credit or other financial accommodation including,
without limitation, obligations evidenced by bonds,
debentures, notes, commercial paper or similar instruments;
(b) all obligations of such Person with respect to letters of
credit, letters of guarantee, banker's acceptances or similar
instruments issued or accepted by banks or other financial
institutions for the account of such Person;
(c) all obligations of such Person to purchase, redeem, retract or
otherwise acquire any securities issued by such Person;
(d) all indebtedness of such Person for or in respect of the
purchase or acquisition price of property or services, whether
or not recourse is limited to the repossession and sale of any
such property, but excluding any such indebtedness incurred in
9
<PAGE>
the ordinary course of business for the purpose of carrying on
the same, consistent with historical practice, owing to the
suppliers of such goods or services;
(e) all obligations, whether or not assumed, secured by
Encumbrances on, or payable out of the proceeds or production
from, property owned by such Person;
(f) all obligations of such Person under a Capital Lease entered
into by such Person as lessee;
(g) all Guarantee Liability of such Person; and
(h) all obligations for exposures (calculated using the mark to
market formula with respect to the applicable agreement or in
the manner specified from time to time by the Lender) under
interest rate protection agreements, currency hedging
agreements, commodity hedging agreements and other risk
management arrangements;
"Instrument" has the meaning ascribed to the term "instrument"
in the PPSA;
"Intangibles" has the meaning ascribed to the term
"intangibles" in the PPSA and shall include, but not be limited to, all Contract
Rights, documents, instruments, books, records, ledgers, journals, cheque books,
print outs, blue prints, designs, computer programs, computer tapes, punch
cards, formulae, drawings, customer lists, choses in action, claims, goodwill,
designs and plans, licenses, license agreements, tax and all other types of
refunds, returned and unearned insurance premiums, rights and claims under
insurance policies, patents, patent application, trademarks, trade names, trade
styles, trademark applications and copyrights;
"Inventory" has the meaning ascribed to the term "inventory"
in the PPSA and shall include, without limitation, all additions, improvements,
accessions, attachments, upgrades, replacements and substitutions thereto or
therefor;
"Investment" means any loan, advance, deposit, extension of
credit, capital contribution or investment to or in any Person, or any purchase
or other acquisition for a consideration of any evidences of Indebtedness,
capital stock or other securities of any Person or the acquisition of assets of
another Person in circumstances which would qualify such acquisition as a bulk
sale of an enterprise;
"Lease" means an equipment lease (whether a "true lease" or a
lease intended as security), rental or other similar agreement under which the
Borrower is the lessor, together with all schedules, supplements, amendments,
renewals or extensions thereof and guarantees of rights and obligations
thereunder;
"Lease Receivable" means, with respect to each Lease as of any
date of determination, an amount equal to the gross value as of that date of the
remaining contractual monthly payments to be made under such Lease during the
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<PAGE>
remaining term of such Lease, plus the absolute and unconditional obligation, if
any, of the Lessee thereunder to make any payments at the end of the stated
Lease term;
"Lease Receivable Balance" means, with respect to each Lease
as of any date of determination, an amount equal to the lesser of:
(a) the Lease Receivable as of that date in respect of such Lease
(net of any deposits or other advance cash receipts and
excluding any portion of the Lease Receivable representing
taxes payable by the Lessee, other than such as represent
reimbursement to the Borrower for such taxes already remitted
by the Borrower to the relevant taxation authority); and
(b) the acquisition cost (excluding Taxes or commissions) to the
Borrower, at the time of creation of the Lease, of the Leased
Property leased or financed pursuant to such Lease;
"Leased Property" means any personal property leased or to be
leased or financed by the Borrower pursuant to a Lease. The term "Leased
Property" includes all of the Borrower's Inventory or Equipment so leased;
"Legal Requirement" means any law, statute, ordinance, decree,
requirement, order, judgment, treaty, rule, guideline, bulletin, license, permit
or regulation, and any applicable determination, interpretation, ruling, order
or decree, of any Governmental Authority, whether presently existing or arising
in the future, including without limitation all Guidelines and Bulletins issued
by OSFI;
"Lender" means Bank of Montreal and the banks and any other
bank or financial institution to which a Commitment in the Credit Facility is
assigned by the Lender or a further permitted assignee thereof in accordance
with Section 11.10, and their respective successors and permitted assigns;
"Lender's Branch" means the Lender's ^ Main Toronto Branch, or
such other branch of the Lender in Canada as the Lender may from time to time
specify to the Borrower;
"Lessee" means the lessee(s) or obligor(s) responsible for
payment and/or performance under a Lease;
"Liabilities" of any Person and its Subsidiaries means any
Indebtedness or liability, contingent or otherwise and whether or not incurred
in the ordinary course of business, which would be shown in consolidated
financial statements of such Person prepared in accordance with Generally
Accepted Accounting Principles;
"Loan Documents" means this Agreement, the Security Documents,
the Required Guarantees and all other documents, certificates, instruments and
agreements to be executed and delivered to the Lender by the Borrower or by any
other Person as contemplated hereunder and thereunder;
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"Loss" means any loss, cost or expense whatsoever, whether
direct or indirect, including, without limitation, any damages, judgments,
penalties, fines, fees, charges, claims, demands, liabilities and any and all
legal and other professional fees and disbursements, and, with respect to any
Advance by the Lender, any loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by the Lender
to fund or maintain such Advance, except any such loss representing loss of
profit;
"Material Adverse Effect" means, when used in relation to the
Borrower, a material adverse effect on the business, operations, Assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole, or on the ability of the Borrower or its Subsidiaries to perform any of
its obligations under this Agreement and the other Loan Documents and, when used
in relation to a Guarantor, means a material adverse effect on the business,
operations, Assets or condition (financial or otherwise) of the Guarantor and
its Subsidiaries taken as a whole, or on the ability of the Guarantor or its
Subsidiaries to perform any of its obligations under the FLI Credit Agreement or
the Loan Documents;
"Material Assets" means any Asset or group of Assets the loss
of which would have a Material Adverse Effect and includes, without limitation,
any Material Contracts and, with respect to the Borrower, the Collateral and the
Investment by the Borrower in FLSCI;
"Material Contracts" means those contracts, agreements,
instruments, leases, licenses or permits to which any Person is a party or by
which it or any of its Assets is bound, the breach, termination or amendment of
which could reasonably be expected to have a Material Adverse Effect and
includes, without limitation, with respect to the Borrower, the IBM Leasing
Program Agreements;
"Maximum Commitment Limit" means the amount of Cdn $5,000,000,
as such amount may be reduced or cancelled from time to time in accordance with
the provisions of this Agreement;
"Minimum Required Amount" means, as of the last day of each
fiscal quarter of FLI, an amount equal to the minimum Tangible Net Worth
required to be maintained by FLI as of such day under the FLI Credit Agreement
in effect on the date of this Agreement, as such amount may be amended or
modified from time to time with the consent of the Lender hereunder;
"Nonrecourse Debt" means all Liabilities of a Person which are
non-recourse in nature and treated as non-recourse obligations in such Person's
financial statements but shall not include any Liabilities in respect of which
such Person is subject to any partial recourse even if treated as off balance
sheet Liabilities in such Person's financial statements;
"OBCA" means the Business Corporations Act (Ontario), as the
same may be amended, replaced or supplemented from time to time;
"Obligations" means, at any time, the sum of (a) the aggregate
principal amount of all Prime Rate Loans advanced to the Borrower and all
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accrued and unpaid interest thereon outstanding and unpaid at such time, (b) the
aggregate Bankers' Acceptance Liabilities of the Borrower at such time in
respect of all Bankers' Acceptances purchased by the Lender at or prior to such
time, including all accrued and unpaid interest on any then outstanding
Reimbursement Obligations in respect of any such Bankers' Acceptances, (c) the
payment of all reasonable amounts advanced by the Lender to preserve, protect
and enforce rights hereunder and in the Collateral and all expenses and costs
incurred by the Lender in connection therewith, and (d) all other then
outstanding liabilities, obligations and indebtedness of the Borrower, whether
joint or several, related or unrelated, primary or secondary, matured or
contingent, due or to become due, to the Lender under this Agreement or any of
the other Loan Documents;
"OSFI" means the Office of the Superintendent of Financial
Institutions (Canada);
"Outstanding Principal Obligations" means, at any time, the
sum of the aggregate principal amount of all Prime Rate Loans advanced to the
Borrower outstanding and unpaid at such time and the aggregate Bankers'
Acceptance Liabilities outstanding and unpaid at such time;
"Past Due Rate" means, on any day, a rate per annum equal to
the Prime Rate plus one percent;
"Permitted Debt" means:
(h) any Indebtedness incurred (whether or not to the transferor),
assumed or arising by operation of law after the date hereof
to provide the obligor with funds to pay the whole or part of
the consideration for the acquisition of any Asset and which
is secured only by the Asset being acquired by the obligor,
and includes the renewal, extension or refinancing of any such
Indebtedness secured thereby upon the same Asset if such
Indebtedness and the security therefor are not increased
thereby; and
(j) any Indebtedness incurred, assumed or arising by operation of
law pursuant to a Securitization Transaction;
"Permitted Encumbrances" means:
(a) any Encumbrance for taxes, assessments and governmental
charges or liens not yet due or, if due, the validity of which
is being diligently contested in good faith and by appropriate
proceedings and in respect of which adequate provision has
been made on the books of the Borrower or the relevant
Subsidiary of the Borrower to the Lender's sole satisfaction;
(b) any mechanics', construction, workers' or repairers' lien or
other like Encumbrance arising in the ordinary course of
business for amounts the payment of which is either not yet
due or, if due, the validity of which is being contested in
good faith and by appropriate proceedings and in respect of
which adequate provision has been made on the books of the
Borrower or Subsidiary of the Borrower to the Lender's sole
satisfaction;
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(c) any Encumbrance arising out of any judgment or award with
respect to which an appeal or proceeding for review is then
being prosecuted in good faith and by appropriate proceedings
and in respect of which adequate provision has been made on
the books of the Borrower or the relevant Subsidiary of the
Borrower to the Lender's sole satisfaction, and with respect
to which there shall have been secured a stay of execution
pending such appeal or proceeding for review;
(d) any servitude, easement, restriction, right-of-way and other
similar right in real or immovable property or any interest
therein which will not in the aggregate materially impair the
value, marketability or use of such property;
(e) any right reserved to or vested in any Governmental Authority,
by the terms of any lease, licence, franchise, grant or permit
acquired by the Borrower or relevant Subsidiary of the
Borrower or by any statutory provision, to terminate any such
lease, license, franchise, grant or permit, or to require
annual or other payments as a condition to the continuance
thereof;
(f) any Encumbrance resulting from the deposit of cash or
securities in connection with any contract, tender or
compensation, surety or appeal bond, or in respect of the
costs of any litigation when required by law;
(g) any Encumbrances given to a public utility or any Governmental
Authority when required to obtain the services of such utility
or other authority in connection with the operations of the
Borrower or the relevant Subsidiary of the Borrower in the
ordinary course of its business;
(h) any Encumbrance given (whether or not to the transferor),
assumed or arising by operation of law after the date hereof
to provide or secure or to provide the obligor with funds to
pay the whole or part of the consideration for the acquisition
of any Asset and which is secured only by the Asset being
acquired by the obligor, and includes the renewal, extension
or refinancing of any such Encumbrance and of the Indebtedness
secured thereby upon the same Asset if such Indebtedness and
the security therefor are not increased thereby;
(i) any Encumbrance given, assumed or arising by operation of law
after the date hereof to provide or secure Nonrecourse Debt
and includes the renewal, extension or refinancing of any such
Encumbrance and of the Nonrecourse Debt secured thereby upon
the same Asset if such Indebtedness and the security therefor
are not increased thereby; and
(j) any Encumbrance given, assumed or arising by operation of law
pursuant to a Securitization Transaction in respect of the
specific Assets of the Borrower used to secure the notes
issued pursuant to such Securitization Transaction;
"Permitted Purpose" means the use by the Borrower of the
proceeds of any Advance hereunder to finance the origination of Eligible Leases
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and the acquisition of Leased Property leased or to be leased or financed by the
Borrower pursuant to an Eligible Lease and for the conversion of Advances to
other Advances hereunder;
"Person" includes an individual, partnership, whether general,
limited or undeclared, corporation, limited liability corporation, joint stock
company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature;
"PPSA" means the Personal Property Security Act (Ontario), as
the same may be amended, replaced or supplemented from time to time;
"Prime Rate" means, on any day, the greater of (a) the
floating rate of interest per annum announced from time to time by the Lender,
and in effect on such day, as the reference rate of interest the Lender will use
to determine rates of interest for Canadian Dollar commercial loans made by the
Lender to borrowers in Canada, and (b) the rate as determined by the Lender
equal to (i) the CDOR Rate, plus (ii) 0.75% per annum;
"Prime Rate Loan" means any Advance made by the Lender to the
Borrower in Canadian Dollars bearing interest by reference to the Prime Rate;
"RAI" means Resource America, Inc., a corporation incorporated
under the laws of the State of Delaware, and any successors and permitted
assigns thereof;
"Refunding BA Advance" means a BA Advance pursuant to Section
2.8(h);
"Refunding Bankers' Acceptance" has the meaning set out in
Section 2.8(h);
"Reimbursement Obligations" means, at any time, without
duplication, the obligations of the Borrower to reimburse to the Lender the Face
Amount of any Bankers' Acceptance drawn by the Borrower upon the Lender on the
maturity thereof;
"Release" means discharge, spray, inject, inoculate, abandon,
deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust,
and when used as a noun has a similar meaning;
"Renewal Acceptance" has the meaning set out in Section 2.3;
"Renewal Request" has the meaning set out in Section 2.3;
"Required Guarantee" has the meaning set out in Section
7.1(g);
"Security Documents" means all agreements, instruments,
indentures and other documents at any time held by the Lender to secure payment
and performance of the Obligations and the indebtedness and liability of the
Borrower and each Guarantor to the Lender hereunder or under the Loan Documents,
including the documentation provided for in Section 7.1(g) and each Assignment
Agreement delivered pursuant to Section 2.4(d);
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"Securitization Subsidiary" means any Subsidiary of the
Borrower that enters, or at any time has entered into, any Securitization
Transaction and includes, without limitation, FLSCI;
"Securitization Transaction" means any securitization
transaction of which the Lender has received 30 days prior written notice,
using, in part, specific Assets of the Borrower to secure notes issued by the
Borrower or a special purpose subsidiary of the Borrower or other securitization
vehicle and in connection with which, the Borrower will be subject to no
recourse or recourse arising out of a servicing agreement limited to such
specific Assets or the lesser of (a) the net realizable, and (b) the book value,
of such specific Assets;
"Subordinated Indebtedness" means all Indebtedness which is
subordinate in all respects to the Obligations pursuant to a subordination
agreement acceptable to the Lender in its sole discretion;
"Subsidiary" of a Person means a company or corporation
controlled by that Person;
"Tangible Net Worth" has the meaning ascribed to that term in
the FLI Credit Agreement in effect on the date of this Agreement, as such term
may be supplemented, amended, modified or restated from time to time with the
consent of the Lender hereunder;
"Tax" or "Taxes" means all taxes, assessments, levies,
imposts, stamp taxes, duties, charges to tax, fees, deductions, withholdings and
any restrictions or conditions resulting in a charge imposed, levied, collected,
withheld or assessed as of the date of this Agreement or at any time in the
future, and all penalty, interest and other payments on or in respect thereof
but does not include any tax on the overall income or capital of the Lender;
"Term Date" means the date that occurs 364 days after the
Closing Date, or, if such date is extended pursuant to Section 2.3(c), the date
to which it has been extended;
"Termination Date" means in respect of a Credit Facility, the
earlier of (a) the Term Date, and (b) the date on which the Obligations shall
automatically, or by virtue of a declaration by the Lender made in accordance
with this Agreement, become due and payable;
"Voting Shares" means the shares of any class or classes of
shares in the capital of a corporation which carry voting rights under any
circumstances provided that, for the purposes hereof, shares which only carry
the right to vote conditionally on the happening of an event shall be considered
Voting Shares only upon the happening of such event and then only while they
retain the right to vote;
"Written" or "in writing" shall include printing, typewriting,
or any electronic means of communication capable of being visibly reproduced at
the point of reception including telegraph and telecopier.
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Section 1.2 Computation of Time Periods.
In this Agreement, in the computation of periods of time from
a specified date to a later specified date, unless otherwise expressly stated
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
Section 1.3 Accounting Terms.
Each accounting term, including all defined terms, used in
this Agreement shall be construed in accordance with Generally Accepted
Accounting Principles and in accordance with the auditing and accounting
recommendations and guidelines issued from time to time by the Canadian
Institute of Chartered Accountants, as amended from time to time, unless
something in the subject matter or the context otherwise is inconsistent
therewith.
Section 1.4 Incorporation of Schedules.
The following Schedules annexed hereto shall, for all purposes
hereof, form an integral part of this Agreement:
Schedule 2.4(a) Form of Advance Request
Schedule 2.4(c) Form of Borrowing Base Certificate
Schedule 2.4(d) Form of Assignment Agreement
Schedule 8.1(f)(A) Outstanding Encumbrances
Schedule 8.1(f)(B) Places of Business and Locations of Books
and Records
Schedule 8.1(g) Subsidiaries and Affiliates of the Borrower
Schedule 8.1(q) Intellectual Property Assets
Schedule 9.1(i) Form of Compliance Certificate
Section 1.5 Headings.
The inclusion of headings and a table of contents in this
Agreement is intended for convenience of reference only and shall not affect in
any way the construction or interpretation hereof.
Section 1.6 Singular, Plural, Gender
As used herein, gender is used as a reference term only and
applies with the same effect whether the parties are masculine, feminine,
corporate or other form, and the singular shall include the plural and the
plural the singular, as the context shall require.
Section 1.7 Conflict.
In the event of a conflict between the provisions of this
Agreement and the provisions of any of the other Loan Documents, the provisions
of this Agreement shall prevail.
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Section 1.8 Currency.
Unless otherwise expressly stated, any reference herein to any
sum of money shall be construed as a reference to Canadian Dollars. Any amount
denominated in another currency required herein to be expressed at any time in
Canadian Dollars shall be so expressed as the Canadian Dollar Equivalent at such
time of such amount.
Section 1.9 Time.
Unless otherwise expressly stated, any reference herein to
time shall be construed as a reference to local time in Toronto, Ontario,
Canada, and time is and shall be construed to be of the essence.
Section 1.10 Control.
For the purposes of this Agreement, a Person or Persons
control(s) a company or corporation if that Person or Persons and/or one or more
of its or their Subsidiaries and/or other Persons controlled directly or
indirectly by that Person or Persons beneficially own(s), directly or
indirectly, an aggregate amount of the Voting Shares of such company or
corporation sufficient to enable it or them to elect a majority of the directors
(or other persons performing similar functions) of that company or corporation
regardless of the manner in which other Voting Shares are voted or has or have,
through the operation of any agreement or otherwise, the ability to elect or
cause the election of a majority of the directors (or other persons performing
similar functions), and the expressions "controlled by" and "under common
control" shall have correlative meanings.
Section 1.11 References to Conversion of Advances.
References to "convert" and "conversion", and other similar
terms, in the context of Advances or Types of Advances, shall, unless the
context otherwise requires, mean and refer to an election to have the
Outstanding Principal Obligations of the referenced Advance or Type of Advance
bear interest or fees on a different basis or fixed rate henceforth and so on
from time to time, and any reference to the conversion of an Advance or Type of
Advance to another Type of Advance includes, without limitation, the conversion
of any BA Advance to a Refunding BA Advance.
ARTICLE II
THE CREDIT FACILITY
Section 2.1 Credit Facility.
Upon and subject to the terms and conditions of this
Agreement, the Lender agrees to extend to the Borrower a revolving credit
facility available from time to time during the Drawdown Period by way of
Advances in an aggregate principal amount such that the maximum aggregate amount
of Outstanding Principal Obligations in respect of such Advances (after giving
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effect to the making of any such Advances, all repayments of Outstanding
Principal Obligations made concurrently with making any such Advances and any
conversion of outstanding Advances from one Advance to another in accordance
with Section 2.7) shall not exceed at any time for all Advances made by the
Lender an amount equal at such time to the Borrowing Base at such time, provided
that the Lender shall have no obligation to make any such Advance if the amount
of the Outstanding Principal Obligations would exceed its then Available
Commitment. The Borrower may borrow, prepay in whole or in part and reborrow
Advances during the Drawdown Period, all in accordance with the terms and
conditions hereof.
Section 2.2 Drawdown Availability.
Subject to the terms and conditions of this Agreement:
(a) the Drawdown Period shall terminate at 1:00 p.m. (Toronto,
Ontario time) on the Term Date;
(b) from and after such time on such Term Date, the Borrower shall
cease to be entitled to obtain any further Advance under the
Credit Facility; and
(c) on such Term Date the Commitment shall automatically be
cancelled on a permanent basis.
Section 2.3 Renewal of Drawdown Period.
(a) The Borrower may request, once annually but at least
twice in total, that the Lender agree to a renewal of the Drawdown Period for an
additional period of 364 days upon the terms and conditions of this Section 2.3
by notice in writing (a "Renewal Request") to the Lender given not less than 60
days and not more than 90 days prior to the then current Term Date.
(b) Upon receipt of any Renewal Request from the Borrower, the
Lender shall undertake a credit assessment of the Borrower consistent with the
Lender's then current credit standards and practices and when the Lender
decides, in its sole and total discretion, to renew or not to renew the Drawdown
Period for an additional 364 day period, the Lender shall give the Borrower
notice in writing of its decision not less than 30 days prior to the then
current Term Date.
(c) If (i) the Lender gives the Borrower a notice in writing
(a "Renewal Acceptance ") as provided above that the Lender has agreed in its
sole and total discretion to renew the Drawdown Period for an additional 364 day
period, then on and as of the date such Renewal Acceptance is given to the
Borrower, the Term Date will automatically be extended to the date that occurs
364 days after the date such Renewal Acceptance is given to and deemed to have
been received by the Borrower pursuant to the terms of this Agreement.
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(d) If (i) the Lender fails to advise the Borrower of its
decision as provided above, or (ii) the Lender shall give the Borrower notice in
writing of its decision not to renew the Drawdown Period pursuant to such
Renewal Request, the provisions of Section 2.2 shall continue to apply to the
Credit Facility up until its then current Term Date and the Borrower may
continue to obtain further Advances during the Drawdown Period ending on the
then current Term Date upon and subject to the terms and conditions of this
Agreement.
(e) The Borrower acknowledges that the Lender has not made any
representations to the Borrower regarding its intention to renew the Drawdown
Period as set forth in this Section 2.3 and that the Lender shall not have any
obligation to renew the Drawdown Period.
Section 2.4 Advance Requests.
(a) The Borrower if it wishes to obtain an Advance, or to
convert an existing Advance to another Type of Advance, shall deliver to the
Lender an Advance Request in writing, substantially in the form of Schedule
2.4(a) hereto, in respect of such Advance not later than 1:00 p.m. (Toronto,
Ontario time) one Business Day prior to the proposed date of such Advance, in
the case of a BA Advance, and on the proposed date of such Advance, in the case
of a Prime Rate Loan, specifying the date of the Advance, which date shall be a
Business Day, the Type of Advance, the aggregate amount thereof and (in the case
of a BA Advance) the term or terms to maturity of the requested Bankers'
Acceptances.
(b) Any such Advance Request, once delivered by the Borrower
to the Lender, shall be binding, and (subject to the conditions precedent
provided for herein conditioning the Borrower's right to obtain the requested,
or any, Advance), the Borrower shall be obligated to take the requested Advance
on the date specified in such Advance Request. The Lender may rely and act upon,
and shall incur no liability under or in respect of this Agreement by in good
faith relying or acting upon, any Advance Request delivered to the Lender
believed by the Lender to be genuine (without any verification inquiries) and to
be signed or sent or given on behalf of the Borrower, or by acting upon any
representation or warranty of the Borrower made or deemed to be made hereunder
by reason of or as a result of such Advance Request.
(c) The Borrower shall deliver with each Advance Request, and
at least monthly on the first Business Day of each month or more frequently if
so requested by the Lender, a Borrowing Base Certificate in writing,
substantially in the form of Schedule 2.4(c) hereto, setting out the then
current Borrowing Base and Available Commitment.
(d) With each Borrowing Base Certificate delivered by the
Borrower to the Lender, the Borrower shall also deliver to the Lender the
following:
(i) an assignment, substantially in the form of Schedule 2.4(d)
hereto (the "Assignment Agreement"), assigning to the Lender
all new Assigned Leases with Lease Receivable Balances
reflected in the calculation of the Borrowing Base and
Available Commitment set out in the Borrowing Base Certificate
(the "New Assigned Leases"), and the Assigned Leased Property
associated therewith, not previously assigned to the Lender
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pursuant to an Assignment Agreement, or the assignment
delivered pursuant to Section 7.1(g)(vi); and
(ii) such other information and documentation concerning the New
Assigned Leases and all Assigned Leased Property and all other
Collateral associated therewith as may be reasonably requested
by the Lender from time to time.
(e) Upon fulfillment of the above conditions set forth in this
Section 2.4 with respect to an Advance, the Lender will make the funds to be
advanced by the Lender to the Borrower in respect of such Advance available to
the Borrower in accordance with Section 5.3.
Section 2.5 Prime Rate Loans.
The aggregate of all Prime Rate Loans to be made by the Lender
in connection with any particular Advance shall not be less than the lesser of
(i) the Available Commitment, and (ii) Cdn. $200,000 or such greater amount
which is an integral multiple of Cdn. $100,000.
Section 2.6 Currency.
Advances under the Credit Facility shall only be denominated
in Canadian Dollars, and any Advance shall be repayable, and all interest and
fees in respect thereof or in connection therewith shall accrue and be payable,
by the Borrower in Canadian Dollars.
Section 2.7 Conversion of Advance.
Subject to the terms and conditions hereof, the Borrower shall
be entitled from time to time to convert any outstanding Advance to any Type of
Advance by giving notice thereof to the Lender in accordance with Section 2.4,
provided that such conversion does not result in the Outstanding Principal
Obligations exceeding the then current Commitment of the Lender.
Any Advance so converted shall cease to bear interest and fees
as the former Advance, and shall begin to bear interest and fees as the new
Advance, on and as of the date of such conversion. If the Borrower gives notice
to the Lender that all or any portion of the principal amount of, or the BA
Discount Proceeds in respect of, any new Advance to be advanced by the Lender to
the Borrower is to be applied to repay Outstanding Principal Obligations in
respect of any outstanding Advance, the Lender may directly apply such amount to
repay such Outstanding Principal Obligations.
Section 2.8 Certain Provisions Relating to Bankers' Acceptances.
(a) Upon and subject to the terms and conditions of this
Agreement, on the requested date of a BA Advance, the Lender agrees to create
Bankers' Acceptances, by completing one or more Drafts in accordance with the
applicable Advance Request and accepting such Drafts, and to purchase the
Bankers' Acceptances thereby created for an amount equal to the BA Discount
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Proceeds thereof and, except in the case of a conversion to a Refunding BA
Advance pursuant to Section 2.8(h), the Lender shall deposit into the Borrower's
Account in immediately available funds on such date the amount of the BA
Discount Proceeds in respect thereof, which amount (for greater certainty) shall
be net of the amount of the Acceptance Fee payable by the Borrower to the Lender
under Section 3.2 in respect of such Draft. In the case of a conversion to a
Refunding BA Advance pursuant to Section 2.8(h), the Borrower shall no later
than 11:00 a.m. (Toronto, Ontario time) on the applicable conversion date pay to
the Lender an amount equal to the Discount applicable to such Refunding BA
Advance, to be applied against the Bankers' Acceptance Liabilities in respect of
the maturing BA Advance being so converted.
(b) Each BA Advance under a Credit Facility shall be
constituted by the creation and purchase of Bankers' Acceptances or the purchase
of Drafts on the same Business Day in a minimum aggregate Face Amount of not
less than Cdn. $200,000, or such greater amount which is an integral multiple of
Cdn. $100,000, effected by the Lender in accordance with Section 2.8(a). Each
determination by the Lender of the Acceptance Fee and BA Discount Proceeds
applicable to any BA Advance shall, in the absence of manifest error, be final,
conclusive and binding on the Borrower and the Lender. No Draft may be made or
accepted or purchased on or after the Termination Date, nor may any Bankers'
Acceptance be prepaid or converted to another Advance, prior to the maturity
date of such Bankers' Acceptance except where the Borrower provides Cover in
respect of such Bankers' Acceptance or otherwise fully indemnifies the Lender,
to the Lender's satisfaction, for any Loss from such prepayment or conversion
prior to maturity.
(c) Drafts presented by the Borrower for purchase pursuant to
this Agreement:
(i) will be denominated in Canadian Dollars, in amounts of
$100,000 or integral multiples thereof;
(ii) will have a term, subject to availability, of 30, 60 or 90
days;
(iii) will mature on a Business Day on or before the Term Date; and
(iv) will be in form and substance satisfactory to the Lender,
acting in accordance with then customary and accepted
practices.
(d) Bankers' Acceptances purchased by the Lender hereunder may
be held by it for its own account until the maturity date of such Bankers'
Acceptance or sold, rediscounted or otherwise disposed by it at any time prior
thereto, in the Lender's sole discretion.
(e) To enable the Lender to make BA Advances in the manner
specified in this Section 2.8, the Borrower shall supply the Lender with such
number of blank forms of Drafts as the Lender may reasonably request, duly
endorsed and executed on behalf of the Borrower. In addition, the Borrower shall
deliver to the Lender powers of attorney, in form satisfactory to the Lender,
whereby the Borrower appoints the Lender as its attorney to sign and endorse on
its behalf, in handwriting or by facsimile or mechanical signature blank forms
of Drafts in accordance with the terms of such powers of attorney. The Borrower
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recognizes and agrees that, in the absence of manifest error, all Bankers'
Acceptances signed and/or endorsed on its behalf by the Lender in accordance
with the terms of such powers of attorney shall bind the Borrower as fully and
effectually as if signed in the handwriting of and duly issued by the proper
signing officer of the Borrower. The Lender is hereby authorized to issue such
Bankers' Acceptances endorsed in blank in such Face Amounts as may be determined
by the Lender provided that the aggregate amount thereof is equal to the
aggregate Face Amount of Drafts required to be purchased by the Lender. The
Lender shall not be responsible or liable for its failure to accept a Bankers'
Acceptance or purchase a Draft if the cause of such failure is, in whole or in
part, due to the failure of the Borrower to provide duly executed and endorsed
Drafts to the Lender on a timely basis nor shall the Lender be liable for any
damage, loss or other claim arising by reason of any loss or improper use of any
such instrument, provided the Lender exercises such care in the custody and
safekeeping of such instruments as it would exercise in the custody and
safekeeping of similar property owned by it. The Lender shall maintain a record
with respect to Drafts (i) received by it from the Borrower in blank hereunder,
(ii) voided by it for any reason, (iii) accepted or purchased by it hereunder,
and (iv) canceled at their respective maturities.
(f) A Draft may be manually signed by any duly authorized
officer of the Borrower or the signature of any duly authorized officer of the
Borrower on a Draft may be mechanically reproduced in facsimile and Bankers'
Acceptances bearing such facsimile signature shall be binding upon the Borrower
as if they had been manually signed by such officers. Notwithstanding that any
of the individuals whose manual or facsimile signature appears on any Bankers'
Acceptance as one of such officers may no longer hold office at the date thereof
or at the date of its acceptance or purchase by, or issue to, the Lender
hereunder or at any time thereafter, any Bankers' Acceptance so signed shall be
valid and binding upon the Borrower, unless, in the case only of blank forms of
Drafts that have not been completed, issued, accepted or purchased hereunder,
the Borrower has given to the Lender in a timely manner written notice to the
contrary.
(g) The Borrower waives presentment for payment and any other
defense to payment of any amounts due to the Lender in respect of a Bankers'
Acceptance accepted or purchased by, or issued to, the Lender pursuant to this
Agreement which might exist solely by reason of such Bankers' Acceptance being
held, at the maturity thereof, by the Lender in its own right and the Borrower
agrees not to claim any days of grace if the Lender as holder sues the Borrower
on any such Bankers' Acceptance for payment of the amount payable by the
Borrower thereunder.
(h) With respect to any outstanding BA Advance, the Borrower,
prior to the occurrence and continuation of an Event of Default, may give notice
to the Lender in accordance with Section 2.4 of the Borrower's intention to
issue one or more Bankers' Acceptances (each a "Refunding Bankers' Acceptance")
on the maturity date of the Bankers' Acceptances in respect of such outstanding
BA Advance to provide for the payment of such maturing Bankers' Acceptances (it
being understood that payments by the Borrower and fundings by the Lender in
respect of each maturing Bankers' Acceptance and the related Refunding Bankers'
Acceptances shall be made on a net basis reflecting the difference between the
Face Amount of such maturing Bankers' Acceptance and the BA Discount Proceeds of
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such Refunding Bankers' Acceptances and shall satisfy the Borrower's
Reimbursement Obligations in respect of such maturing Bankers' Acceptances). If
the Borrower fails to give such notice or to give notice in accordance with this
Agreement of the conversion of such outstanding BA Advance to another Type of
Advance, then subject to satisfaction of the conditions in Section 7.2, the
Borrower shall be irrevocably deemed to have requested and to have been advanced
a Prime Rate Loan in the Face Amount of such maturing Bankers' Acceptance on the
maturity date of such Bankers' Acceptance, which Prime Rate Loan shall
thereafter bear interest as such in accordance with the provisions hereof until
paid in full. Should the Borrower not be entitled to a Prime Rate Loan at all or
in an amount sufficient to fully reimburse the Lender for the Face Amount of
such maturing Bankers' Acceptance, the Face Amount of such maturing Bankers'
Acceptance, shall constitute Reimbursement Obligations of the Borrower to the
Lender due and payable on the maturity date of such maturing Bankers' Acceptance
and shall bear interest in accordance with Section 3.4.
(i) If the Lender determines in good faith and acting
reasonably, which determination shall be final, conclusive and binding upon the
Borrower, and notifies the Borrower that, by reasons of circumstances or changes
affecting the market for bankers' acceptances it is no longer possible to
establish the BA Reference Rate or that the market for bankers' acceptances no
longer exists, is too weak for its normal use by the Lender or is not capable,
in the normal course of business, to absorb Bankers' Acceptances accepted by the
Lender pursuant to this Agreement, then,
(i) the right of the Borrower to request BA Advances
shall be suspended until the Lender determines that
the circumstances causing such suspension no longer
exist and the Lender so notifies the Borrower; and
(ii) any Advance Request for any BA Advance which is
outstanding shall be deemed to constitute a request
for an Advance by way of a Prime Rate Loan.
(j) The Lender shall promptly notify the Borrower of the
suspension of the Borrower's right to request BA Advances and of the termination
of any such suspension.
(k) For the purposes of this Agreement, when calculations are
made to determine the outstanding amount, principal amount or unpaid principal
amount of any BA Advance, the full Face Amount of Bankers' Acceptances related
to such BA Advance shall be used without deduction or adjustment in respect of
applicable Acceptance Fees or any other difference between such Face Amount and
the applicable BA Discount Proceeds.
(l) If an Event of Default shall have occurred and then be
continuing (whether or not any declaration pursuant to Article X is made), the
Borrower shall upon request by the Lender forthwith provide Cover to, and while
such Event of Default is continuing shall maintain Cover with, the Lender in
respect of all outstanding Bankers' Acceptances.
(m) Bankers' Acceptances accepted or purchased by the Lender
under this Agreement after clearing services as provided for in the Depository
Bills and Notes Act (Canada) acceptable to the Lender are available may, at the
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option of the Lender, be issued in the form of a "depository bill" and deposited
with a "clearing house", as each such term is defined in the Depository Bills
and Notes Act (Canada).
Section 2.9 Reduction of Maximum Commitment Level.
(a) The Borrower shall have the right, exercisable by it at
any time and from time to time upon not less than thirty days prior written
notice to the Lender and without penalty, but subject to the terms of this
Section 2.9, to reduce in whole or in part the Maximum Commitment Limit,
provided that any such partial reduction shall be in an amount not less than
Cdn. $200,000 or such greater amount which is an integral multiple of Cdn.
$100,000. Notwithstanding the foregoing, the Borrower shall not be entitled to
thereby (i) reduce the Maximum Commitment Limit below the then Outstanding
Principal Obligations, or (ii) to prepay any outstanding BA Advance, unless the
Borrower shall pay to the Lender all interest accrued to the date of such
prepayment on the Advances so prepaid, provide Cover to and thereafter maintain,
until such time as the applicable Bankers' Acceptances shall have matured and
the related Bankers' Acceptance Liabilities shall have been fully satisfied,
Cover with, the Lender in respect of all outstanding Bankers' Acceptances
related to such BA Advances and on demand pay to the Lender any additional
amounts payable pursuant to Section 11.7. No such reduction of the Commitment
pursuant to this Section may be reinstated without the prior written approval of
the Lender. Concurrently with the giving of any such notice, the Borrower shall
prepay the Facility Fee that will have accrued due on the amount of the
terminated portion of the Commitment to the effective date of such termination.
(b) On the Termination Date, the Commitment shall be
terminated in its entirety.
Section 2.10 Use of Proceeds.
The proceeds of the Advances shall be used by the Borrower
only for Permitted Purposes, provided that as against the Borrower and any other
Person, the Lender shall not have any responsibility as to the use of any such
proceeds.
ARTICLE III
INTEREST AND FEES
Section 3.1 Interest on Prime Rate Loans.
The Borrower shall pay interest on the outstanding principal
amount of each Prime Rate Loan outstanding under the Credit Facility from the
date on which such Prime Rate Loan was made until such outstanding principal
amount shall have been repaid in full, and both before and after maturity,
default and judgment, at a floating rate per annum equal to the Prime Rate in
effect from time to time plus 0.75% per annum, calculated daily and compounded
and payable (a) monthly in arrears on the last Business Day of each month of
each year, and (b) on the date on which such Prime Rate Loan becomes due and
payable or is converted to another Type of Advance as contemplated by Article
II, in each case based on the actual number of days elapsed and a year of 365 or
366 days, as the case may be.
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Section 3.2 Acceptance Fee.
The Borrower shall pay the Lender a fee equal to 2.25% of the
Face Amount of each Bankers' Acceptance accepted or purchased by the Lender
multiplied by a fraction the numerator of which is the term to maturity of such
Bankers' Acceptance, expressed in days, and the denominator of which is 365,
which fee shall be paid as a condition precedent to any obligation on the part
of the Lender to accept or purchase such Bankers' Acceptance.
Section 3.3 Facility Fee.
The Borrower shall pay the Lender a facility fee of Cdn.
$25,000 per annum payable monthly in arrears in equal monthly instalments of
$2,083.33 on the last Business Day of each month and on the Term Date.
Section 3.4 Reimbursement Obligations.
The amount of any Reimbursement Obligation may, if the
applicable conditions precedent specified in Article VII hereof have been
satisfied, be paid with the proceeds of Prime Rate Loans or, as provided in
Section 2.8(h), by the purchase of Refunding Bankers' Acceptances. Pending any
such repayment in full, the Borrower shall pay to the Lender interest on any
Reimbursement Obligation at the Past Due Rate, from and including the date on
which such Reimbursement Obligations arose to the date of payment in full,
calculated daily and compounded monthly in arrears based on the number of days
elapsed and a year of 365 or 366 days, as the case may be, and payable on
demand, both before and after judgement in respect thereof.
Section 3.5 Yearly Rate Statements.
For the purpose of complying with the Interest Act (Canada),
it is expressly stated that:
(a) where interest is calculated pursuant hereto at a rate
based on a 365 day period, the yearly rate or percentage of interest to which
such rate is equivalent is such rate multiplied by the actual number of days in
the year (365 or 366, as the case may be) divided by 365; and
(b) the rates of interest specified in this Agreement are
nominal rates and not effective rates or yields and the parties hereto
acknowledge that there is a material distinction between the nominal and
effective rates of interest, that they are capable of making the calculations
necessary to compare such rates and that the principle of deemed reinvestment of
interest shall not apply to any calculations of interest hereunder.
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ARTICLE IV
REPAYMENT OF OBLIGATIONS
Section 4.1 Repayment on Maturity.
The Obligations shall become due and payable, and shall be
paid in full, on the Termination Date.
Section 4.2 Mandatory Repayment of Credit Facility.
Subject to the terms and conditions hereof, the Outstanding
Principal Obligations, to the extent that for any reason the Outstanding
Principal Obligations exceed the then current Borrowing Base, whether as a
result of oversight or otherwise, shall be repaid forthwith, whether or not
demanded by or on behalf of the Lender, together with all accrued interest to
the date of such repayment on the principal amount so repaid and any other
amounts payable to the Lender by the Borrower hereunder in respect thereof
including, without limitation, pursuant to Section 11.7, provided that any such
repayment of the amount by which the Outstanding Principal Obligations exceed
the Borrowing Base in respect of any BA Advance shall be discounted for the
period to the maturity of the Bankers' Acceptances outstanding in respect of
such BA Advance at the Canada Treasury Bill Rate for such discount calculation
period in effect on the date of such repayment or the Borrower may pay such
amount to the Lender and irrevocably authorize and direct the Lender to apply
such payment as a prepayment of the amount by which the Outstanding Principal
Obligations exceed the Borrowing Base on the next maturity date such that the
Outstanding Principal Obligations, after giving effect to the payment, do not
exceed the Borrowing Base.
ARTICLE V
PAYMENTS AND ACCOUNTS
Section 5.1 Maintenance of Accounts.
The Borrower shall open in its name and maintain the
Borrower's Account with the Lender at the Lender's Branch.
Section 5.2 Due Date of Payments.
Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be, payable on such date.
Section 5.3 Time of Payments.
(a) All payments to be made by the Borrower to the Lender
shall be paid in immediately available funds no later than 1:00 p.m. (Toronto,
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Ontario time) on the date on which such payment is due. Any such payment made
after such time on such date shall be deemed to have been paid on the next
following Business Day.
(b) The funds to be advanced by the Lender to the Borrower in
respect of any Advances shall be credited by the Lender to the Borrower's
Account no later than 5:00 p.m. (Toronto, Ontario time) on the Drawdown Date, in
the case of a Prime Rate Loan where the Advance Request in respect of such Prime
Rate Loan is delivered to the Lender on the Drawdown Date, and in any other
case, no later than 1:00 p.m. (Toronto, Ontario time) on the Drawdown Date.
Section 5.4 Form and Amount of Payments.
All amounts due hereunder, whether for principal, interest, or
otherwise, shall be paid in full by the Borrower in Canadian Dollars, and all
amounts due hereunder in respect of costs and expenses shall be paid in full by
the Borrower in the currency in which such costs or expenses were originally
incurred, in any case without set-off, withholding or deduction of any kind or
nature whatsoever unless required by law, and then subject to Section 11.8.
Section 5.5 Charging Borrower's Account.
The Borrower hereby authorizes the Lender, if and to the
extent that any payment owed to the Lender by the Borrower in respect of such
Obligations is not made when due hereunder, to charge from time to time against
any or all of the Borrower's accounts with the Lender, including without
limitation the Borrower's Account, the full amount of the payment so due.
ARTICLE VI
INCREASED COSTS
Section 6.1 Additional Payments.
If subsequent to the date hereof (a) any change in applicable
law, regulation, rule, treaty, decree or regulatory requirements or any change
in the interpretation or application thereof by any Governmental Authority; or
(b) compliance by the Lender with any change in applicable guidelines,
directions, requests or requirements (whether or not having the force of law) of
any Governmental Authority shall have the effect of:
(i) increasing the cost to the Lender of continuing to provide or
maintain the Credit Facility (including, without limitation,
the costs of maintaining any reserve or special deposit or
similar requirements with respect to this Agreement, or with
respect to its obligations hereunder or thereunder);
(ii) imposing on the Lender or expecting there to be maintained by
the Lender any additional capital adequacy or additional
capital requirement (including, without limiting the
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generality of the foregoing, under any Capital Adequacy
Guideline or any other requirement which affects the Lender's
allocation of capital resources to its obligations) in respect
of the Lender's obligations hereunder;
(iii) reducing any amount paid or payable to the Lender under this
Agreement in any amount it deems material;
(iv) causing the Lender to make any payment or to forego any
return, on a basis calculated by reference to any amount
received or receivable by the Lender under this Agreement; or
(v) directly or indirectly reducing the effective return to the
Lender under this Agreement or on the Lender's overall capital
as a result of entering into this Agreement or as a result of
any of the transactions or obligations contemplated by this
Agreement (other than a reduction resulting from a generally
applicable higher rate of tax imposed on the net income of the
Lender) received or receivable by the Lender under this
Agreement,
the Borrower shall, subject to the terms and conditions hereof, pay such amount
(the "Compensating Amount") as the Lender may specify to be necessary to
compensate the Lender for and will indemnify the Lender against any such
additional cost, reduction, payment or foregone return. The payment by the
Borrower of such Compensating Amount is not, and shall not be deemed to be or
construed as, a repayment on account of any Outstanding Principal Obligations.
The Lender shall, forthwith after the Lender becoming aware of
the occurrence of an event having the effect set out in (i), (ii), (iii), (iv),
or (v) above entitling the Lender to the payment of a Compensating Amount and
the Lender determining to claim such Compensating Amount (which determination
the Lender shall make without undue delay), give notice to the Borrower of the
Compensating Amount claimed with details of the events giving rise thereto and
shall at that time provide to the Borrower a certificate setting out in
reasonable detail a calculation of the Compensating Amount claimed (and where
appropriate the Lender's reasonable allocation to its Advances hereunder of
Compensating Amounts with respect to the aggregate of such similar credits
granted by the Lender affected by such event). The certificate of the Lender
with respect to the Compensating Amount shall be final and conclusive in the
absence of manifest error. The Borrower shall within fifteen days of receipt of
such notice from the Lender pay to the Lender the Compensating Amount. The
obligation to pay such a Compensating Amount for subsequent periods will
continue, subject as herein provided, until the earlier of the payment in full
of the Obligations owed to the Lender and the lapse or cessation of the event
giving rise to the Compensating Amount. The Lender shall notify the Borrower in
writing as soon as reasonably possible of any such lapse or cessation.
Section 6.2 Option to Prepay.
If any notification of a Compensating Amount is given under
Section 6.1 in respect of any Advance, then the Borrower may, by written notice
to the Lender given within fifteen Business Days next following the date of the
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notification, elect to prepay such Advance (in the case of Outstanding Principal
Obligations in respect of any BA Advance, discounted for the period to the
maturity of the Bankers' Acceptances outstanding in respect of such BA Advance
at the Canada Treasury Bill Rate for such discount calculation period in effect
on the date of such prepayment) or to convert all such Advances to any other
Type of Advance, but should it do so the Borrower shall pay to the Lender all
interest accrued to the date of such prepayment on the Advances so prepaid and
on demand all such amounts as are required to compensate the Lender for (a) any
Compensating Amount payable pursuant to Section 6.1, and (b) any additional
amounts payable pursuant to Section 11.7.
ARTICLE VII
CONDITIONS PRECEDENT TO LENDING
Section 7.1 Conditions Precedent to Initial Advance.
The obligation of the Lender to make its initial Advance under
the Credit Facility is subject to the Lender having received the following, each
dated as of a date satisfactory to the Lender and in form and substance
reasonably satisfactory to the Lender, provided that such condition precedent,
being for the sole benefit of the Lender, may be unilaterally waived by it in
whole or in part at any time on or before the date of the initial Advance:
(a) certified copies of the articles and extracts of the by-laws
of the Borrower, FLSCI and each Guarantor relating to the
authority to borrow or guarantee and the execution of
documents, together with a related certificate of
non-restriction;
(b) certified copies of the resolutions of the board of directors
of the Borrower, FLSCI and each Guarantor approving and
authorizing the execution, delivery and performance of each
Loan Document to which it is a party;
(c) a certificate of status or like certificate with respect to
the Borrower, FLSCI and each Guarantor issued by the
appropriate Governmental Authority of the jurisdiction of its
incorporation;
(d) a certificate of a senior officer of the Borrower, FLSCI and
each Guarantor, certifying as to the names and true signatures
of its officers authorized to sign each Loan Document to which
it is a party;
(e) a certificate of a senior officer of the Borrower to the
effect that all representations and warranties of the Borrower
set forth in Article VIII are true in all material respects as
of the initial Drawdown Date;
(f) a certificate of a senior officer of FLSCI and each Guarantor
to the effect that all its representations and warranties set
forth in each Loan Document to which it is a party are true in
all material respects as of the initial Drawdown Date;
(g) the following Security Documents as security for the payment
and performance of the Obligations:
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(i) a general security agreement in favour of the Lender
by the Borrower as security for the Obligations
granting security interests in all of the Borrower's
Assets;
(ii) a guarantee (each a "Required Guarantee") in favour
of the Lender by each of FLI and RAI of the
Obligations;
(iii) an assignment in favour of the Lender by the Borrower
of all of the Borrower's rights under all Assigned
Leases and Assigned Leased Property outstanding as of
the Closing Date, together with such information and
documentation concerning each such Assigned Lease and
all Assigned Leased Property and all other Collateral
associated therewith as may be reasonably requested
by the Lender;
(iv) intercreditor agreement between the Lender, FLSCI and
the Borrower providing for subordination and security
ranking in respect of any Indebtedness or other
Liabilities of the Borrower to FLSCI and Encumbrances
granted by the Borrower to FLSCI;
(v) unless incorporated into the Required Guarantees,
subordination agreements in favour of the Lender by
each of FLI and RAI in respect of any Indebtedness or
other Liabilities of the Borrower to either of them;
(vi) a certified copy of or certificate of insurance
particulars with respect to, and an assignment of,
each of the insurance policies referred to in Section
9.1(c);
(vii) an irrevocable direction (the "IBM Direction") in
writing from the Borrower and FLSCI to IBM Canada,
acknowledged in writing by IBM Canada, providing (1)
that from and after the Closing Date, all payments
from IBM Canada to the Borrower or to FLSCI pursuant
to the IBM Leasing Program Agreements shall be paid
by IBM Canada into the Borrower's Account, and (2)
confirmation by IBM Canada that each of the IBM
Leasing Program Agreements is in full force and
effect, unamended, and that there is no event of
default thereunder;
(h) true copies of all Material Contracts, Assigned Leases and
Books and Records requested by the Lender;
(i) a certificate of a senior officer of each Guarantor (1)
attaching the most currently available audited, and any later
interim unaudited, financial statements of the Guarantor, and
(2) in the case of FLI, attaching the latest certificate of an
officer of FLI delivered pursuant to section 6.11 of the FLI
Credit Agreement;
(j) a Compliance Certificate certifying that no Default or Event
of Default shall have occurred and be continuing, with work
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sheets attached thereto setting forth in reasonable detail the
computations necessary to determine whether a Default or an
Event of Default specified in Section 10.1(u), (v), (w), (x)
or (y) shall have occurred and be continuing;
(k) an opinion of counsel to the Borrower with respect to the
Borrower, the Loan Documents to which the Borrower is a party
and the transactions contemplated thereby;
(l) an opinion of counsel to FLSCI and each Guarantor with respect
to such Person, the Loan Documents to which such Person is a
party and the transactions contemplated thereby;
(m) such other certificates and documentation relating to the
Borrower, FLSCI and each Guarantor or their respective Assets
as the Lender may reasonably request;
(n) results with all aspects of the Lender's review of the
Borrower and its Affiliates, businesses, Assets and capital
structure, the IBM Leasing Program Agreements and the Loan
Documents, including, without limitation, the results of
searches with respect to outstanding Encumbrances;
(o) true copies of any consent, approval, order, authorization,
licence, exemption or designation of or by any Governmental
Authority or other Person required in connection with the
execution, delivery or performance of this Agreement or any
other Loan Document or the incurrence, payment or performance
of the Obligations; and
(p) the favourable report of counsel to the Lender with respect to
the transactions contemplated by the Loan Documents.
Section 7.2 Conditions Precedent to Each Advance.
The obligation of the Lender to make any Advance (including
the initial Advance) under the Credit Facility is subject to the fulfilment of
each of the following conditions precedent to the reasonable satisfaction of the
Lender (provided that each such condition precedent, being for the sole benefit
of the Lender, may be unilaterally waived by it in whole or in part at any time
either generally or with respect to any particular Advance):
(a) the Lender shall have received from the Borrower a duly
completed Advance Request and Borrowing Base Certificate in
accordance with the provisions of this Agreement in that
regard;
(b) the representations and warranties set forth herein and in any
other Loan Document shall be true and correct in all material
respects, both on the date of such Advance Request and on the
requested date of Advance;
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(c) the Borrower and each Guarantor shall have observed and
performed in all material respects all covenants set forth
herein and in any other Loan Document;
(d) no Default or Event of Default shall have occurred and be
continuing or will result from giving effect to such Advance
Request;
(e) the making of the requested Advance shall not be prohibited by
any Legal Requirement;
(f) subject to any Permitted Encumbrances and the Encumbrances
granted under section 3.1 of the FLI Credit Agreement, the
obligations and liabilities of a Guarantor to the Lender under
or in respect of any Required Guarantee shall rank at least
pari passu with the most senior Indebtedness of the Guarantor,
secured or unsecured; and
(g) where any Lessee or any Leased Property under a Lease
identified in the Borrowing Base Certificate delivered with
such Advance Request is located, resident or has an address in
any jurisdiction outside the Province of Ontario, the
Encumbrances provided for in the Security Documents shall be
registered, or notice thereof shall be filed or otherwise
recorded in all such jurisdictions in which, at any time, it
is necessary or desirable in the opinion of the Lender to
obtain a perfected security interest in the Collateral
associated with each such Lease or to protect the interests of
the Lender thereunder.
The submission by the Borrower of an Advance Request shall be
deemed to constitute a representation and warranty by the Borrower that the
conditions precedent to the making of the Advance requested thereby set forth in
this Article VII have been satisfied in full.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1 Representations and Warranties by the Borrower.
The Borrower represents and warrants to the Lender as follows,
and acknowledges that the Lender is relying thereon without independent inquiry
in entering into this Agreement and providing Advances from time to time:
(a) Organization and Qualification. The Borrower and each
Subsidiary of the Borrower is a corporation duly incorporated or amalgamated (as
the case may be), and organized, and is validly existing and up-to-date in the
filing of all corporate, financial and other returns under the laws of its
jurisdiction of incorporation. The Borrower and each Subsidiary of the Borrower
is duly registered, licensed or qualified as an extra-provincial or foreign
corporation, and is up-to-date in the filing of all corporate, financial and
other returns under the laws of each jurisdiction in which it owns Material
Assets or carries on a material portion of its business or where the failure to
be so registered, licenced or qualified could result in a Material Adverse
Effect. The Borrower has delivered to the Lender a complete and correct copy of
the charter documents and by-laws of the Borrower and each Subsidiary of the
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Borrower, in each case as amended to the date of such delivery, and there have
been no amendments to any such charter documents or by-laws other than as have
been disclosed to the Lender;
(b) Corporate Power. The Borrower has full corporate right,
power and authority to enter into and perform its obligations under each of the
Loan Documents and the Borrower and each Subsidiary of the Borrower has full
corporate power and authority to own and operate its Assets and to carry on its
business as now conducted and as presently proposed to be conducted;
(c) Conflict with Other Instruments. The execution and
delivery by the Borrower of the Loan Documents, the performance by the Borrower
of its obligations thereunder and hereunder (as the case may be) and compliance
with the terms, conditions and provisions thereof and hereof do not and will not
after completion of the Closing:
(i) conflict with or result in a breach of any of the terms,
conditions or provisions of (A) the charter documents or
by-laws of the Borrower or any of its Subsidiaries, (B) any
Legal Requirement applicable to the Borrower or any of its
Subsidiaries or any Material Assets, (C) the IBM Leasing
Program Agreements, or (D) except as disclosed to the Lender
in writing, any Material Contract; or
(ii) result in, require or permit (A) the imposition of any
Encumbrance upon or with respect to any Material Assets now
owned or hereafter acquired, (B) the acceleration of the
maturity of any Indebtedness of, binding on or affecting the
Borrower or any of its Subsidiaries or any Material Assets, or
(C) any third party to terminate or acquire rights under the
IBM Leasing Program Agreements or any other Material Contract;
(d) Authorization, Governmental Approvals, etc. The execution
and delivery of each of the Loan Documents by the Borrower and the performance
by the Borrower of its obligations hereunder and thereunder (as the case may be)
have been duly authorized by all necessary corporate action; no consent,
approval, order, authorization, licence, exemption or designation of or by any
Governmental Authority or other Person is required in connection with the
ownership and operation of its Assets and the carrying on of its business as now
conducted and as presently proposed to be conducted or the execution, delivery
and performance by the Borrower of this Agreement or any of the other Loan
Documents except such as have been obtained and true copies of which have been
delivered to the Lender on or prior to the Closing Date; and no registration,
qualification, designation, declaration or filing with any Governmental
Authority is or was necessary to enable or empower the Borrower to own and
operate its Assets and to carry on its business as now conducted and as
presently proposed to be conducted or to enter into and to perform its
obligations under the Loan Documents except such as have been made or obtained
and are in full force and effect, unamended;
(e) Due Execution. The Loan Documents have each been duly
executed and delivered by the Borrower and each constitutes a legal, valid and
binding obligation of the Borrower enforceable in accordance with its terms,
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subject to bankruptcy, insolvency, arrangement and other laws affecting the
enforcement of creditors' rights generally (other than those pertaining to
settlements, fraudulent conveyances, assignments and preferences) and the
availability, in the discretion of a court of competent jurisdiction, of
equitable remedies;
(f) Ownership of Assets and Places of Business. The Borrower
is the absolute beneficial owner of, with good and marketable title to, all
Collateral and all of its Material Assets free and clear of all Encumbrances
other than the Encumbrances set forth in Schedule 8.1(f)A attached hereto and
any other Permitted Encumbrances and leasehold interests of the Lessees
thereunder. The only places of business of Borrower, and the places where it
keeps and intends to keep copies of the Assigned Leases and its Books and
Records concerning the Collateral, are at the addresses listed in Schedule
8.1(f)(B) attached hereto and the name of each owner of record of each such
place of business is also set forth on Schedule 8.1(f)(B);
(g) Subsidiaries and Affiliates. On the Closing Date, the only
Subsidiaries and Affiliates of the Borrower are as set out in Schedule 8.1(g).
None of the Borrower or any of its Subsidiaries has agreed or offered to acquire
any shares in the capital of any other corporation or any ownership interest in
any other Person which after acquisition thereof would amount to a Material
Asset or to acquire or lease any other Material Asset or business operations. No
Person has any agreement or option, or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement or option, for the
purchase from the Borrower, or for the purchase or issue, of any securities of
any Subsidiary of the Borrower;
(h) Indebtedness. None of the Borrower or any of its
Subsidiaries has any outstanding Indebtedness other than:
(i) Indebtedness reflected in the Closing Financial Statements,
including, without limitation, Subordinated Indebtedness and
unsecured intercompany Indebtedness of the Borrower to its
Affiliates;
(ii) Non-Recourse Debt; and
(iii) Indebtedness owed or otherwise incurred to the Lender under
the Loan Documents;
(i) No Default Under Material Contracts. None of the Borrower
or any of its Subsidiaries is in default or breach in any material respect of
any Material Contract to which it is a party or by which it or any of its
Material Assets may be bound and there exists no state of facts which after
notice or the passage of time, or both, would constitute such a default or
breach, and all such Material Contracts are in good standing in all material
respects;
(j) Tax Matters. All Taxes that are or may become payable by
the Borrower or any of its Subsidiaries in respect of any prior period have been
fully paid or fully disclosed and fully provided for in the books and financial
statements of the Borrower and each such Subsidiary of the Borrower. There are
no actions, audits, assessments, reassessments, suits, proceedings,
investigations or claims pending or threatened against the Borrower or any of
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its Subsidiaries in respect of any Taxes or any matters under discussion with
any Governmental Authority relating to any Taxes;
(k) Litigation and Other Proceedings. There is no court,
administrative, regulatory or other proceeding (whether civil, quasi-criminal or
criminal), arbitration or other dispute settlement procedure, or any
investigation or inquiry, by or before any Governmental Authority against or
involving the Borrower or any of its Subsidiaries (whether in progress or
threatened);
(l) Financial Statements.
(i) the Closing Financial Statements of the Borrower and its
Subsidiaries have been prepared in accordance with Generally
Accepted Accounting Principles and present fairly in all
material respects the financial position of each of the
Borrower and its Subsidiaries as at o and the results of their
operations for the period then ended; and
(ii) all other financial statements delivered to the Lender
relating to each of the Borrower and its Subsidiaries have
been prepared in accordance with Generally Accepted Accounting
Principles and present fairly in all material respects the
financial position of each of the Borrower and its
Subsidiaries, as the case may be, and the results of their
operations for the period covered thereby;
(m) Pension Plans. No pension plans are provided by the
Borrower or its Subsidiaries as of the Closing Date;
(n) Compliance with Laws. The Borrower and each of its
Subsidiaries has complied and is complying in all material respects with all
Legal Requirements applicable to its business, property, Assets and operations
in each jurisdiction in which such corporations own any Material Assets or carry
on any material portion of their respective businesses;
(o) Year 2000 Compliance. The Borrower has been informed by
its software and hardware suppliers that all information, communication and
systems technology and all systems and equipment dependent on embedded
microchips or operating or application software, of or used by the Borrower and
its Subsidiaries, including related supporting data and files, will, except
where failure to function correctly could not reasonably be expected to have a
Material Adverse Effect on the Borrower, function correctly when dealing with
dates and times and date or time related data to, without interruption,
accurately process date and time data from, into, and between the twentieth and
twenty-first centuries and the years 1999 and 2000 and perform leap year
calculations and do not, as a result of the processing of such date or time, (i)
create any logical or mathematical inconsistency, (ii) malfunction, or (iii)
cease to function. Accurate processing as referred to above, includes accurately
outputing, extracting, displaying, calculating, comparing, sorting, sequencing
and printing such data;
(p) Disclosure. The Borrower has made available to the Lender
prior to the Closing Date all of the material agreements, arrangements and
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undertakings, both written and oral, relating to the IBM Leasing Program
Agreements and all material information known to it to such date relating to the
IBM Leasing Program Agreements. To the best of the knowledge of the Borrower,
the Guarantors or their respective Affiliates, as the case may be, all such
information, and all other information supplied to the Lender by the Borrower or
the Guarantors or their respective Affiliates (i) with respect to any and all
factual matters, is true and correct in all material respects (except as
otherwise disclosed to the Lender in writing on or before the Closing Date),
(ii) with respect to any projections or forecasts therein and the assumptions on
the basis of which such information was prepared, is believed to be reasonable
in the circumstances (except as otherwise disclosed to the Lender in writing on
or before the Closing Date), and (iii) with respect to any other matters being
the subject of opinion, is believed on reasonable grounds to be true and correct
in all material respects (except as otherwise disclosed to the Lender in writing
on or before the Closing Date). There is no fact known to the Borrower as of the
Closing Date which could reasonably be expected to have a Material Adverse
Effect with respect to the Borrower or any Guarantor which has not been fully
and adequately disclosed to the Lender prior to the Closing Date;
(q) Names. The Borrower has not conducted business under or
used any other name (whether corporate or assumed) except for the names shown on
Schedule 8.1(q), attached hereto. All trademarks, patents or copyrights which
the Borrower or any Subsidiary of the Borrower uses, plans to use or has a right
to use are listed on Schedule 8.1(q) attached hereto and any and all business
done and all invoices issued in such trade names are Borrower's or FLSCI's
sales, leases, business and invoices. The Borrower is the sole owner of such
Assets except to the extent any other Person has claims or rights in such
Assets, as such claims and rights are described on such Schedule 8.1(q). To the
best of the Borrower's knowledge, the Borrower is not in violation of any rights
of any other Person with respect to such Assets;
(r) Assigned Leases and Assigned Leased Property. Each Lease
reported to the Lender as an Eligible Lease and the Leased Property associated
therewith shall, at all times when such Leases are included in the Borrowing
Base calculation, be in compliance with all of the following representations:
(i) each such Lease is genuine, based on contracts that are
enforceable in accordance with their terms against the Lessee
and the Leased Property named and referenced therein,
constitutes the entire agreement for the leasing of the Leased
Property thereby covered, has not been altered or amended, and
Borrower's Books and Records relating thereto are accurate,
complete and genuine;
(ii) each item of such Leased Property has been delivered to and,
in all instances, accepted by the Lessee and is in good
condition, ordinary wear and tear excepted, has not been
returned, rejected, lost, stolen, destroyed or damaged and has
not been removed from service;
(iii) each such Lease has been duly executed by the Borrower and
each Lessee, is a valid, legal and binding obligation of
Borrower and such Lessee, and is enforceable against Borrower
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and such Lessee in accordance with its terms. Borrower is the
sole owner of each of such Leases and has the authority to
assign all of its right, title and interest therein upon the
terms set forth in the Security Documents and the IBM Leasing
Program Agreements but, at any time when such Lease is
included in any Borrowing Base or Available Commitment
calculation, no such Lease or any Lease Receivable under such
Lease, or any Leased Property or other Collateral associated
therewith or any interest therein, shall have been sold or
otherwise disposed to FLSCI, IBM Canada or any other party
pursuant to any IBM Leasing Program Agreement or otherwise;
(iv) each such Lease and all Leased Property which is the subject
matter thereof at the time of its assignment to the Lender
pursuant to a Security Document and at all times thereafter,
will be free and clear of any and all assignments, options,
rights, or other Encumbrances whatsoever other than security
interests for the benefit of the Lender and the rights of the
Lessee(s) thereunder;
(v) all costs, fees, and expenses incurred in making and closing
each such Lease have been paid and each such Lease is and will
be current at the time of the assignment thereof to the Lender
pursuant to a Security Document. No default exists or event
exists which with the giving of notice or the passage of time
or both, will result in the occurrence of a default of any
obligation, as expressed in any such Lease;
(vi) the Lender has a first perfected security interest in the
Collateral associated with each such Lease (including without
limitation each Lease and the Leased Property which is the
subject matter thereof) subject to no other Encumbrance. In
the case of any such Lease in respect of Leased Equipment with
an acquisition cost in excess of Cdn. $ 25,000, Borrower has
taken and in the future, shall take all steps necessary to
maintain Lender's first perfected security interest in the
Collateral, including, if required, perfecting Borrower's
security interest by filing financing statements, amendments
thereto, or assignments and/or continuations thereof and
recording of the documentation necessary to perfect Borrower's
security interest;
(vii) each such Lease represents the undisputed obligation of the
Lessee named therein and no payment required thereunder is
and, at any time during the term of such Lease, has been, more
than thirty (30) days contractually past due;
(viii) each item of Leased Property leased pursuant to each such
Lease has been insured in the ordinary course of Borrower's or
the Lessee's business;
(ix) the Borrower has not received notice of a bankruptcy,
receivership, reorganization or insolvency of any Lessee under
any such Lease or any material adverse change in the financial
condition of any such Lessee;
(x) no Lessee under any such Lease is a Subsidiary or Affiliate of
the Borrower, or is an officer or employee of the Borrower or
of a Subsidiary or Affiliate of the Borrower;
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(xi) each such Lease is not subject to any defense, set off,
counterclaim, deduction, or allowance or adjustment and
contains a provision whereby the Lessee agrees not to assert
any claim or reduction, counterclaim, setoff, recoupment or
any other claim, allowance or adjustment against any assignee
of Borrower;
(xii) the Lessee under any such Lease is not otherwise in default
under such Lease;
(xiii) unless otherwise agreed to in writing by the Lender, each such
Lease provides for the lease of Leased Property with an
aggregate invoice price of less than Cdn. $50,000;
(xiv) each such Lease arose in the ordinary course of the Borrower's
business within the 120 days preceding the date it is reported
to the Lender as an Eligible Lease and will not have been
assigned to the Lender for a period of more than 120 days;
(xv) each such Lease does not have a term in excess of forty-eight
(48) months;
(xvi) each such Lease is a Lease with a Lease Receivable, which
together with all other Lease Receivables owed by the same
Lessee or a Subsidiary or Affiliate of such Lessee, does not
exceed Cdn. $100,000 in the aggregate; and
(xii) Lease Receivables under each such Lease are eligible for
assignment to IBM Canada pursuant to the IBM Leasing Program
Agreements.
Section 8.2 Survival of Representations and Warranties.
The representations and warranties herein set forth or
contained in any certificates or documents delivered to the Lender pursuant
hereto shall survive the execution and delivery hereof and any Advance hereunder
and any investigation at any time made by or on behalf of the Lender. The
representations and warranties shall be deemed to be continuing and repeated by
the Borrower upon each Drawdown Date, and all references to the Closing Date
contained in such representations and warranties shall be deemed to refer to
such Drawdown Date.
ARTICLE IX
COVENANTS OF THE BORROWER
Section 9.1 Affirmative Covenants.
From and after the Closing Date and so long as any Obligations
remain outstanding and unpaid or the Commitment shall continue to exist, the
Borrower shall:
(a) Payment of Obligations to Lender. Duly and punctually pay
to the Lender all amounts payable by the Borrower hereunder as and when the same
become due;
(b) Payment of Taxes, etc. Pay and discharge, and cause each
of its Subsidiaries to pay, before the same shall become delinquent, all Taxes,
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except any such Taxes which are being contested in good faith and by proper
proceedings and for which adequate provision for payment has been made to the
satisfaction of the Lender, acting reasonably;
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Borrower or such Subsidiary, as the case may be,
operates, such policies to show the Lender as loss payee thereof under a
mortgage clause in a form approved by the Insurance Bureau of Canada, and
promptly furnish or cause to be furnished to the Lender evidence of the
maintenance of all such insurance satisfactory to the Lender. In the event the
Borrower fails to procure or cause to be procured any such insurance or to
timely pay or cause to be paid the premiums on any such insurance, the Lender
may do so for the Borrower, but the Borrower shall continue to be liable for the
same;
(d) Preservation of Corporate Existence, etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain, its and
their respective corporate existence and rights (charter and statutory) and
maintain, and cause each of its Subsidiaries to maintain, up-to-date
registrations and licences and filings of all corporate, financial and other
returns under the laws of all jurisdictions where the Borrower or such
Subsidiary owns any Material Assets or carries on a material portion of its
business, where the failure to do so could have a Material Adverse Effect; and
maintain and cause its Subsidiaries to maintain full corporate right, power and
authority to perform their respective obligations under each of the Loan
Documents to which each is a party and to own and operate their respective
Assets and to carry on their respective businesses where the failure to do so
could have a Material Adverse Effect;
(e) Enforceability. Ensure that at all times and from time to
time the execution and delivery of each of the Loan Documents by it and the
performance by it of its obligations thereunder will be, upon the execution and
delivery thereof, duly authorized by all necessary corporate action; that all
consents, approvals, orders, authorizations, licenses, exemptions or
designations of or by any Governmental Authority or other Person required in
connection with the execution, delivery and performance by it of any such
documents have been obtained; and that all registrations, qualifications,
designations, declarations or filings with any Governmental Authority necessary
to enable or empower it to enter into and to perform its obligations under any
such documents have been obtained and continue in full force and effect as
required for such purpose; and that any and all Loan Documents to which it is a
party have been duly executed and delivered by it and that each will constitute
its legal, valid and binding obligation enforceable in accordance with its
terms, subject only to bankruptcy, insolvency, arrangement and other laws
affecting the enforcement of creditors' rights generally (other than those
pertaining to settlements, fraudulent conveyances, assignments and preferences)
and the availability, in the discretion of a court of competent jurisdiction, of
equitable remedies;
(f) Compliance with Laws, etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable Legal
Requirements, and duly observe all valid requirements of any Governmental
Authority;
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(g) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, financial books and records systems in accordance with Generally
Accepted Accounting Principles and all applicable Legal Requirements, and in
such books and records make full and correct entries of all financial
transactions, Assets, liabilities, shareholders equity, participation accounts
and business of the Borrower and each of its Subsidiaries in accordance with
Generally Accepted Accounting Principles;
(h) Maintenance of Assets, etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its or their
Material Assets in all material respects in good repair, working order and
condition (reasonable wear and tear excepted) and, from time to time, make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto, so that the business carried on may be properly and advantageously
conducted at all times in accordance with prudent business management; and,
without limiting the generality of the foregoing, maintain, preserve and
protect, and cause each of its Subsidiaries to maintain, preserve and protect
its or their intangibles, including all trademarks, trade names, copyrights,
licences and other intellectual property, that constitute Material Assets,
without conflict with the rights of others;
(i) Reporting Requirements. Furnish to the Lender:
(i) annually, as soon as available and in any event within 120
days after the end of each fiscal year of the Borrower,
(A) Audited Financial Statements. The audited annual
financial statements of the Borrower and its
Subsidiaries for such fiscal year; and
(B) Compliance Certificate. A Compliance Certificate dated
the date of delivery thereof, with work sheets
attached thereto setting forth in reasonable detail
the computations necessary to determine whether a
Default or an Event of Default specified in Section
10.1(u), (v), (w), (x) or (y) shall have occurred and
be continuing;
(ii) quarterly, as soon as available and in any event within 60
days after the end of each fiscal quarter,
(A) Quarterly Financial Statements. The quarterly
financial statements of the Borrower and its
Subsidiaries for such fiscal quarter; and
(B) Compliance Certificate. A Compliance Certificate dated
the date of delivery thereof, with work sheets
attached thereto setting forth in reasonable detail
the computations necessary to determine whether a
Default or an Event of Default specified in Section
10.1(u), (v), (w), (x) or (y) shall have occurred and
be continuing;
(iii) monthly, as soon as available and in any event within 30 days
after the end of each month,
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(A) Monthly Financial Statements. The monthly financial
statements of the Borrower and its Subsidiaries for
such month; and
(B) Compliance Certificate. A Compliance Certificate dated
the date of delivery thereof, with work sheets
attached thereto setting forth in reasonable detail
the computations necessary to determine whether a
Default or an Event of Default specified in Section
10.1(u), (v), (w), (x) or (y) shall have occurred and
be continuing;
(iv) as soon as available, and in any event, within 10 days after
release of such statements to shareholders or investors or the
public, the audited annual financial statements and quarterly
financial statements of each of RAI and FLI for each fiscal
year and each fiscal quarter of each of RAI and FLI;
(v) promptly after becoming aware thereof, notice of any existing
or threatened action, suit or proceeding by or before any
Governmental Authority which, if adversely decided, could have
a Material Adverse Effect with respect to the Borrower or any
Guarantor;
(vi) promptly on reasonable demand, a Compliance Certificate dated
the date of delivery thereof, with work sheets attached
thereto setting forth in reasonable detail the computations
necessary to determine whether a Default or an Event of
Default specified in Section 10.1(u), (v), (w), (x) or (y)
shall have occurred and be continuing;
(vii) promptly upon becoming aware thereof, notice of any fact or
change which has had, is having or is expected to have a
Material Adverse Effect with respect to the Borrower or any
Guarantor; and
(viii) such other information respecting the Assets, business and
affairs, financial or otherwise, of the Borrower or any of its
Subsidiaries or Affiliates, as the Lender may from time to
time reasonably request, including, without limitation,
details of Collateral distribution, delinquencies, residual
recoveries and loan loss experience;
(j) Cure Defects. Promptly cure or cause to be cured, or cause
its Subsidiaries to cure or cause to be cured, any defects in the execution,
delivery, validity or enforceability of any of the Loan Documents or any of the
other agreements, instruments or documents contemplated thereby or executed
pursuant hereto or thereto and at its expense, execute and deliver or cause to
be executed and delivered all such agreements, instruments and other documents
and make all necessary filings and recordings as the Lender may consider
reasonably necessary or desirable for the foregoing purposes;
(k) Notice of Default, etc.. Notify the Lender forthwith in
writing of the occurrence of a Default, an Event of Default or any fact or
circumstance which has resulted or can reasonably be expected to result in a
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Material Adverse Effect with respect to the Borrower or any Guarantor, and in
such notice and in further notices delivered from time to time thereafter to
(and in any event forthwith in response to any request for such a notice by) the
Lender, provide the Lender with the particulars of the steps being taken to
remedy any such Default, Event of Default or fact or circumstance giving rise to
any such Material Adverse Effect;
(l) Places of Business. Give thirty (30) days prior written
notice to the Lender of any changes in the location of any of its respective
places of business, of the places where Books and Records are kept, or the
establishment of any new, or the discontinuance of any existing place of
business;
(m) Sale of Collateral. Mark its Books and Records to indicate
Lender's security interest in the Collateral and, unless Lender consents
otherwise in writing, Borrower shall retain title at all times to the Assigned
Leased Property; provided however, that so long as no Event of Default or
Default has occurred, Borrower may sell Assigned Leases and Assigned Leased
Property to FLSCI, and FLSCI may sell interests in such Assigned Leases and
Assigned Leased Property and Lease Receivables thereunder to IBM Canada,
pursuant to the IBM Leasing Program Agreements and the IBM Direction and upon
receipt of the proceeds from the sale of such Assigned Leases and/or Assigned
Leased Property and/or Lease Receivables in accordance with the IBM Direction,
the Lender shall execute such documentation as is reasonably necessary to
release its security interest in such Assigned Leases and/or Assigned Leased
Property and/or Lease Receivables;
(n) Inspection. Permit any of the Lender's officers or other
representatives to visit and inspect any of Borrower's locations or where any
Collateral is kept during regular business hours, to examine and audit all of
Borrower's Books and Records, books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss its affairs,
finances and accounts with its officers, employees and accountants or auditors.
All such examinations shall be at Borrower's expense at the standard rates
charged by the Lender or an outside firm engaged to perform such services, for
such activities (plus the Lender's or such outside firm's reasonable
out-of-pocket expenses); and
(o) Further Assurances. At its cost and expense, upon request
of the Lender, duly execute and deliver, or cause to be duly executed and
delivered, to the Lender all such further agreements, instruments, documents and
other assurances and do and cause to be done all such further acts and things as
may be necessary or desirable in the reasonable opinion of the Lender to carry
out more effectually the provisions and purposes of this Agreement or any of the
other Loan Documents.
Section 9.2 Negative Covenants.
From and after the Closing Date and so long as any Obligations
remain outstanding and unpaid or any Commitment shall continue to exist, the
Borrower shall not, without the prior written consent of the Lender, which
consent shall not be unreasonably withheld:
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(a) Indebtedness. Create, incur, assume or suffer to exist, or
permit any of the Subsidiaries to create, incur, assume or suffer to exist any
Indebtedness other than:
(i) Indebtedness owed or otherwise incurred to the Lender under
the Loan Documents;
(ii) Subordinated Indebtedness and unsecured intercompany
Indebtedness of the Borrower to its Affiliates (other than a
Securitization Subsidiary);
(iii) Non-Recourse Debt; and (iv) Permitted Debt;
(b) Encumbrances, etc. Create or suffer to exist, or permit
any of its Subsidiaries to create or suffer to exist, any Encumbrance on any of
its or their respective Assets other than a Permitted Encumbrance;
(c) Sale of Material Assets. Effect, or permit any of its
Subsidiaries to effect, any sale, lease, exchange, transfer, assignment or other
disposition (whether in one transaction or a series of related transactions) of
more than 10% of the aggregate Assets of the Borrower and its Subsidiaries other
than (i) in the ordinary course of business, (ii) pursuant to the IBM Leasing
Program Agreements and the IBM Direction, (iii) pursuant to a Securitization
Transaction, or (iv) for the purpose of effecting a repayment or repayments on
account of the then outstanding Obligations;
(d) Issue or Transfer of Shares. Other than expressly provided
for herein, issue any shares in its capital or any options, warrants or other
rights to purchase any shares in its capital or other equity interests, or
securities exchangeable or convertible into shares in its capital or other
equity interests, or permit any of its Subsidiaries to do so;
(e) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its or their
business;
(f) Mergers, etc. Amalgamate with any other Person or Persons,
or enter into any transaction (whether by way of reconstruction, reorganization,
consolidation, amalgamation, merger, transfer, sale, lease or otherwise) whereby
all or a material portion of its Assets would become the property of any other
Person or, in the case of any such merger, of the continuing corporation
resulting therefrom, or permit any of its Subsidiaries to amalgamate with any
other Person or Persons or to enter into any such transaction;
(g) Investments. Make, or permit any of its Subsidiaries to
make, any Investment which would constitute a Material Asset, otherwise than in
the ordinary course of its business and in compliance with all applicable Legal
Requirements;
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(h) Change of Control. Effect, or permit any of its
Subsidiaries to effect, whether in one transaction or a series of related
transactions, any Change of Control in respect of the Borrower or any of its
Subsidiaries;
(i) Transactions with Affiliates. Except as otherwise
expressly contemplated or permitted by this Agreement, directly or indirectly:
(i) make any Investment, or permit any of its Subsidiaries to make
any Investment, in any Affiliate;
(ii) transfer, sell, lease, assign or otherwise dispose of, or
permit any of its Subsidiaries to transfer, sell, lease,
assign or otherwise dispose of, any Asset to any Affiliate;
(iii) merge into or consolidate with or purchase or acquire any
Assets from, or permit any of its Subsidiaries to merge into,
or consolidate with or purchase or acquire any Assets from,
any Affiliate; or
(iv) enter into, or permit any of its Subsidiaries to enter into,
any other transaction directly or indirectly with or for the
benefit of any Affiliate (including, without limitation, any
guarantee or assumption of any obligation of any Affiliate),
provided that (A) any Affiliate who is an individual may serve as a director,
officer or employee of the Borrower or any of its Affiliates, or any one or more
of them, and receive reasonable compensation in connection with services
rendered by such individual in such capacity, and (B) the Borrower and any of
its Subsidiaries may enter into any such transaction with any Affiliate if such
transaction is in the ordinary course and subject to the reasonable requirements
of its business and if the terms and conditions thereof are at least as
favourable to the Borrower or such Subsidiary as market terms and conditions,
and if such transaction would otherwise be permitted under this Agreement and
all applicable Legal Requirements;
(j) Fiscal Year. Change its fiscal year, or permit any of its
Subsidiaries to change their respective fiscal years, to other than September 30
or to have a fiscal year that does not end on September 30 of each calendar
year;
(k) Minimum Capitalization. Permit the Consolidated
Capitalization to be less than Cdn. $1,000,000; and
(l) Amendments. Supplement, amend, modify, restate or
terminate, or cause or permit any Subsidiary of the Borrower, to supplement,
amend, modify, restate or terminate, or otherwise make, permit, consent to or
acquiesce in any modification of any term or condition of, the IBM Leasing
Program Agreements or the IBM Direction or any obligations or liabilities
arising thereunder or pursuant thereto, unless at least 10 Business Days prior
written notice thereof is given to the Lender.
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ARTICLE X
ACCELERATION
Section 10.1 Events of Default.
If any one or more of the following events (each an "Event of
Default") shall occur and be continuing then the Lender may, (i) terminate the
Lender's obligations to make any further Advance under the Credit Facility, and
(ii) (at the same time or at any time after such termination) declare the
Obligations to be immediately due and payable, provided that should any Event of
Default specified in Sections 10.1(g), 10.1(h), 10.1(i) or 10.1(j) occur then
the Obligations shall, to the extent permitted by applicable law, be and become
immediately due and payable without any declaration or other act on the part of
the Lender:
(a) the Borrower makes default in the payment on the due date
thereof of any amount payable by it hereunder on account of the Outstanding
Principal Obligations under the Credit Facility;
(b) the Borrower makes default in the payment when due of any
amount payable by it hereunder on account of interest, fees, costs, expenses or
other amounts payable by it hereunder, and such default shall continue for five
days after the earlier of the Borrower becoming aware of such default and notice
of such default being given to the Borrower by the Lender;
(c) the Borrower fails to perform any covenant, agreement or
undertaking under this Agreement other than those referred to in paragraphs (a)
and (b) of this Section 10.1 or in any other Loan Document, provided that if
such failure is capable of being remedied or cured within a ten Business Day
period, the Borrower, subject to the other provisions of this Section 10.1,
shall have a period of ten Business Days after the earlier of the Borrower
becoming aware of such default and notice of such default being given to the
Borrower by the Lender within which to remedy or cure such failure;
(d) any representation or warranty made by the Borrower in
this Agreement or in any other Loan Document is incorrect in any material
respect when made (or when deemed to be made hereunder or thereunder), provided
that, notwithstanding any lack of correctness of any such representation or
warranty as so stated as at the Closing Date, if the subject matter of such
representation and warranty is capable of being remedied or cured within a ten
Business Day period such that it would be true if so stated at such later time,
the Borrower, subject to the other provisions of this Section 10.1, shall have a
period of ten Business Days after the earlier of receipt of written notice from
the Lender specifying the representation or warranty concerned and the Borrower
otherwise becoming aware that such representation or warranty is incorrect in
any material respect, within which to remedy or cure such lack of correctness;
(e) FLSCI or a Guarantor makes default in the payment when
due, or otherwise fails to perform any covenant, agreement or undertaking under
a Required Guarantee or other Loan Document, whether before or after the
occurrence of any other Default or Event of Default under this Agreement,
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provided that if such failure is capable of being remedied or cured within a ten
Business Day period, FLSCI or the Guarantor, subject to the other provisions of
this Section 10.1, shall have a period of ten Business Days after the earlier of
FLSCI or the Guarantor becoming aware of such default and notice of such default
being given to FLSCI or the Guarantor by the Lender within which to remedy or
cure such failure;
(f) any representation or warranty made by FLSCI or a
Guarantor to the Lender in a Required Guarantee or other Loan Document is
incorrect in any material respect when made (or when deemed to be made
thereunder), provided that, notwithstanding any lack of correctness of any such
representation or warranty as so stated as at the Closing Date, if the subject
matter of such representation and warranty is capable of being remedied or cured
within a ten Business Day period such that it would be true if so stated at such
later time, FLSCI or the Guarantor, subject to the other provisions of this
Section 10.1, shall have a period of ten Business Days after the earlier of
receipt of written notice from the Lender specifying the representation or
warranty concerned and FLSCI or the Guarantor otherwise becoming aware that such
representation or warranty is incorrect in any material respect, within which to
remedy or cure such lack of correctness;;
(g) the Borrower or any of its Subsidiaries or a Guarantor
ceases or threatens to cease to carry on business or becomes insolvent or
bankrupt or ceases paying its debts generally as they fall due, other than any
such debts which are contested in good faith and by appropriate proceedings and
for which adequate provision has been made to the Lender' sole satisfaction, or
the Borrower or any of its Subsidiaries or a Guarantor commits any act of
bankruptcy or makes an assignment for the benefit of creditors or otherwise
acknowledges its insolvency, or a trustee, receiver, receiver and manager,
liquidator, agent or similar official is appointed for the Borrower or any of
its Subsidiaries or a Guarantor or for any material part of its Assets, or
bankruptcy, reorganization, proposal, arrangement, moratorium, compromise or
similar proceedings shall be instituted by or in respect of the Borrower or any
of its Subsidiaries or a Guarantor under the laws of any jurisdiction;
(h) without limiting the generality of paragraph (g) of this
Section 10.1, any Governmental Authority shall take control of the Borrower or
any of its Subsidiaries or a Guarantor, or shall take control of the Assets of
any such Person or any Material Assets;
(i) any proceeding is instituted by the Borrower or any of its
Subsidiaries or a Guarantor, any order is made or any resolution is passed for
the winding-up of the Borrower or any of its Subsidiaries or a Guarantor;
(j) any petition shall be filed or other action or proceeding
shall be commenced, whether judicial, quasi-judicial or administrative in nature
or by or in respect of the Borrower or any of its Subsidiaries or a Guarantor,
to adjudge the Borrower or any of its Subsidiaries or a Guarantor insolvent or a
bankrupt, or to give notice of, consider or approve any proposal,
reorganization, compromise, moratorium or arrangement with all or any of the
creditors of the Borrower or any of its Subsidiaries or a Guarantor, or to
appoint a trustee, receiver, receiver and manager, liquidator, agent or similar
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official of the Borrower or any of its Subsidiaries or a Guarantor or any of its
Assets or any Material Assets, or to wind-up, dissolve or otherwise liquidate
the Borrower or any of its Subsidiaries or a Guarantor, provided that, if the
Borrower or any of its Subsidiaries or the Guarantor shall be contesting such
petition, action or proceeding in good faith and by appropriate proceedings
based, in the Lender' sole opinion, on reasonable and substantial grounds, the
Borrower and each of its Subsidiaries or the Guarantor, subject to the other
provisions of this Section 10.1, shall have a period of forty-five days after
the date of the filing or commencement of such petition, action or proceeding
within which to obtain or procure an abandonment, dismissal, withdrawal,
quashing or permanent stay of such petition, action or proceeding;
(k) any execution, sequestration or any other process of any
court, any work order or any distress or analogous process becomes enforceable
against the Borrower or any of its Subsidiaries or a Guarantor or any Material
Assets, if enforcement thereof could have a Material Adverse Effect;
(l) the Borrower or any of its Subsidiaries shall permit any
sum in excess of Cdn. $250,000, or RAI or FLI shall permit any sum in excess of
U.S. $250,000, which has been admitted as due by it or is not disputed to be due
by it to remain unpaid for five Business Days after proceedings have been taken
to enforce the same;
(m) the Borrower or any of its Subsidiaries or a Guarantor
makes default under the terms of any agreement or instrument for or in respect
of any Indebtedness in excess of Cdn. $250,000, or in excess of U.S. $250,000,
in the case of RAI or FLI, and such default remains unremedied for the
applicable grace period, if any, specified in such agreement or instrument and
has not been waived by the Person to whom such Indebtedness is owed or by its
authorized representative or agent;
(n) a Material Adverse Effect with respect to the Borrower or
a Guarantor shall occur;
(o) there is any material adverse qualification to any of the
financial statements of the Borrower or any of its Subsidiaries or a Guarantor
by their respective auditors;
(p) a Change of Control shall occur;
(q) this Agreement or a Required Guarantee or other Loan
Document shall cease to be in full force and effect and to constitute a legal,
valid and binding obligation of any of the parties signatory thereto enforceable
against such parties in accordance with its terms, subject to bankruptcy,
insolvency, arrangement and other laws affecting the enforcement of creditors'
rights generally (other than those pertaining to settlements, fraudulent
conveyances, assignments and preferences) and the availability, in the
discretion of a court of competent jurisdiction, of equitable remedies;
(r) the operation of a Required Guarantee or other Loan
Document shall be stayed or the Borrower or FLSCI or a Guarantor shall be
resisting or disputing its obligations thereunder, whether or not pursuant to
court proceedings;
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(s) subject to Permitted Encumbrances, the Lender's rights and
entitlement to be paid the Obligations hereunder shall cease to rank in priority
to all other Indebtedness of the Borrower, secured or unsecured;
(t) subject to any Permitted Encumbrances and the Encumbrances
granted under section 3.1 of the FLI Credit Agreement, the obligations and
liabilities of a Guarantor to the Lender under or in respect of any Required
Guarantee shall cease to rank at least pari passu with the most senior
Indebtedness of the Guarantor, secured or unsecured;
(u) FLI shall at any time fail to maintain an Adjusted Debt to
Tangible Net Worth Ratio on a consolidated basis, measured quarterly as of the
last day of each fiscal quarter of each fiscal year of FLI, of not more than 5.5
to 1;
(v) FLI shall at any time incur, assume or otherwise become
responsible or liable in any manner with respect to unsecured intercompany
Indebtedness to Affiliates of FLI in excess of three (3) times the then
outstanding principal amount of the FLI Subordinated Indebtedness;
(w) FLI shall, as of the last day of each fiscal quarter of
each fiscal year of FLI, fail to maintain Tangible Net Worth at not less than
the Minimum Required Amount;
(x) FLI shall, as of the last day of each fiscal quarter of
each fiscal year of FLI, based on financial information for the twelve month
period ending as of the end of such fiscal quarter, fail to maintain a Fixed
Charge Coverage Ratio of not less than 1.25 to 1;
(y) the Borrower shall, as of the last day of each fiscal
quarter of each fiscal year of the Borrower, fail to maintain the Consolidated
Capitalization at not less than Cdn. $1,000,000; or
(z) any IBM Leasing Program Agreement or the IBM Direction
shall be amended or terminated by any party or parties thereto without the prior
written consent of the Lender.
Section 10.2. Remedies Upon Default.
Upon the occurrence of an Event of Default and acceleration of
the maturity of the Obligations owed to the Lender hereunder, the Lender may,
commence such litigation or proceedings as it may deem expedient, all without
any additional notice, presentation, demand, protest, notice of dishonour,
including entering into of possession of any of the property or assets of the
Borrower, or any other action, notice of all of which the Borrower hereby
expressly waives. In addition to the foregoing in the event of the institution
of any proceeding against the Borrower or the Borrower making an assignment for
the general benefit of creditors or otherwise voluntarily initiating any
proceeding in respect of its property or creditors under any law relating to
bankruptcy, insolvency or organization or relief of debtors the effect of which
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is to cause an automatic stay to come into effect with respect to the Borrower
or an actual or deemed entry of an order for relief with respect to any
proceeding instituted by or against the Borrower under the Bankruptcy and
Insolvency Act (Canada) or the Companies' Creditors Arrangement Act (Canada) (as
amended, supplemented or replaced from time to time), as may be applicable, or
any other applicable bankruptcy or insolvency laws which provide for an
automatic stay, the obligations of the Lender to make any further Advance under
this Agreement shall automatically be terminated and the Obligations shall
automatically become due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly waived by the
Borrower. For greater certainty, the Borrower will be considered to be in
default of its obligations hereunder by the mere lapse of time provided herein
for performing such obligations, without any requirement of further notice or
other act of the Lender unless a notice is specifically required under this
Agreement. The rights and remedies of the Lender hereunder are cumulative and
are in addition to and not in substitution for any other rights or remedies
provided by law. Nothing contained herein or in any Loan Documents now or
hereafter held by the Lender with respect to the Obligations of the Borrower to
the Lender, or any part thereof, nor any act or omission of the Lender with
respect to such Loan Documents, shall in any way prejudice or affect the rights,
remedies and powers of the Lender with respect to any other such Loan Documents.
Section 10.3. Right of Set-Off.
Upon the occurrence of an Event of Default and the
acceleration of the maturity of the Obligations owed to the Lender hereunder,
the Lender is hereby authorized by the Borrower at any time and from time to
time and shall to the fullest extent permitted by law, set off, appropriate and
apply any and all deposits (general or special, time or demand, matured or
unmatured, provisional or final) at any time held and other Indebtedness at any
time owing to or for the credit or the account of the Borrower against any and
all of the Obligations of the Borrower now or hereafter existing hereunder. The
Lender shall promptly notify the Borrower after any such set-off and application
made by the Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Lender
under this Section 10.3 are in addition to all other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.
Section 10.4. Judgment Currency.
The obligation of the Borrower to make payments on any
Obligations to the Lender hereunder in any currency (the "first currency") shall
not be discharged or satisfied by any tender or recovery pursuant to any
judgment expressed in or converted into any other currency (the "second
currency") except to the extent to which such tender or recovery shall result in
the effective receipt by the Lender of the full amount of the first currency
payable, and accordingly the primary obligation of the Borrower shall be
enforceable as an alternative or additional cause of action for the purpose of
recovery in the second currency of the amount (if any) by which such effective
receipt shall fall short of the full amount of the first currency payable and
shall not be affected by a judgment being obtained for any other sum due
hereunder.
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ARTICLE XI
GENERAL
Section 11.1 Evidence of Debt.
The Obligations of the Borrower hereunder, in respect of or in
connection with the Advances under the Credit Facility made from time to time by
the Lender or otherwise, shall, absent manifest error, be conclusively evidenced
by the records of the Lender.
Section 11.2 Additional Expenses.
If during the continuation of an Event of Default the Borrower
should fail to observe or perform any covenant or agreement to be observed or
performed by the Borrower hereunder the Lender may but shall not be obliged to
perform or cause to be performed the same for which purpose the Borrower hereby
appoints the Lender to be the lawful attorney of the Borrower, and all
reasonable expenses incurred or payments made by the Lender in so doing shall be
paid by the Borrower to the Lender forthwith upon demand and any such unpaid
amount shall bear interest, both before and after judgment, at the Past Due
Rate, calculated daily and compounded monthly in arrears and payable on demand,
and the Borrower hereby indemnifies the Lender against any loss incurred by the
Lender in that regard.
Section 11.3 Invalidity of any Provisions.
Any provision of this Agreement or any of the other Loan
Documents which is prohibited by the laws of any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition without
invalidating the remaining terms and provisions hereof or thereof and no such
invalidity shall affect the obligation of the Borrower to pay the Obligations in
full. The rate of interest chargeable or collectable on overdue instalments of
interest shall not exceed the maximum rate permitted by applicable law.
Section 11.4 Amendments, Waivers, etc.
No amendment, modification or waiver of any provision of, and
no waiver of the strict observance, performance or compliance by the Borrower
with any term, covenant, condition or agreement contained in this Agreement and
no indulgence granted by the Lender or consent to any departure by the Borrower
therefrom, shall in any event be effective unless it shall be in writing and
signed by the Lender (and the Borrower in the case of amendments or
modifications or waivers by the Borrower), and then such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it is given. Notwithstanding the
foregoing, no failure to exercise and no delay in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies herein provided are cumulative and not
exclusive of any other rights or remedies available at or provided by law.
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Section 11.5 Notices, etc.
All notices and other communications provided for hereunder
shall, except as otherwise permitted hereunder, be in writing personally
delivered by messenger or courier or facsimile or telecopy transmission, if
(a) to the Borrower, to it at:
Fidelity Leasing Canada Inc.
c/o Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania
19380, USA
Telecopy: (610) 719-4515
for the attention of: John Dale, Chief Financial Officer
(b) to the Lender, to it at:
Bank of Montreal
24th Floor, 1 First Canadian Place
Toronto, Ontario
M5X 1A1
Telecopy: (416) 867-4741
for the attention of: Director, Asset Portfolio Management
or to such other address or facsimile or telecopy number as any party hereto may
from time to time designate to the other parties hereto in such manner. All such
notices and communications shall be effective, and deemed to be received by the
intended recipient, on the date delivered or transmitted, if delivered or
transmitted before 3:00 p.m. (Toronto, Ontario time) on a Business Day, or, in
any other case, on the first Business Day following the date delivered or
transmitted. A copy of any notice or communication sent by facsimile or telecopy
transmission shall also be delivered personally by messenger or courier as
aforesaid but such notice or communication shall be effective, and deemed to be
received by the intended recipient, on the date it is sent by facsimile or
telecopy transmission, if so transmitted before 3:00 p.m. (Toronto, Ontario
time) on a Business Day, or, in any other case, on the first Business Day
following the date it is so transmitted.
Section 11.6 Costs and Expenses.
The Borrower shall pay to the Lender, on demand all reasonable
out of pocket costs and expenses (including, without limitation, all reasonable
legal fees and disbursements) incurred by the Lender in connection with this
Agreement, the other Loan Documents and the Credit Facility including, without
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limitation, (a) the negotiation, preparation, execution, delivery and
interpretation, both prior and subsequent to the Closing Date, of this Agreement
and the other Loan Documents or any agreement or instrument contemplated hereby
or thereby; (b) the performance by the Lender of its obligations and duties
under this Agreement and the other Loan Documents; (c) advice of counsel with
respect to the interpretation of the Credit Facility, the Loan Documents or any
transaction contemplated thereunder; (d) the enforcement of any of the Loan
Documents or the enforcement or preservation of rights under and the
refinancing, renegotiation or restructuring of the Credit Facility under this
Agreement or the other Loan Documents or the bringing of any action, suit or
proceeding with respect to the enforcement of any of the Loan Documents or any
such right or seeking any remedy which may be available to the Lender at law or
in equity; and (e) any amendments, waivers or consents requested by the Borrower
pursuant to the provisions hereof or any other Loan Document. The Borrower shall
supply all statements, reports, certificates, opinions, appraisals and other
documents or information required to be furnished to the Lender pursuant to this
Agreement without cost to the Lender.
Section 11.7 Indemnification.
(a) The Borrower agrees to indemnify the Lender and its
directors, officers and employees from and against any and all Claims and Losses
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Lender or the directors, officers or employees of the
Lender, arising by reason of any default by the Borrower under any Loan
Document, except any such Claims or Losses based upon the Lender's gross
negligence or wilful misconduct, breach of this Agreement or breach of
applicable Legal Requirement.
(b) The Borrower shall pay to the Lender on demand any amounts
required to compensate the Lender for any Loss suffered or incurred by the
Lender as a result of (i) any payment being made (due to acceleration of the
maturity of any Advance pursuant to Article X, a mandatory or optional
prepayment of principal or otherwise) in respect of any Bankers' Acceptance
other than on the maturity date of such Bankers' Acceptance; (ii) the failure of
the Borrower to give any notice in the manner and at the times required by this
Agreement; (iii) the failure of the Borrower to effect an Advance in the manner
and at the time specified in any Advance Request; or (iv) the failure of the
Borrower to make a payment or a mandatory repayment in the manner at the time
specified in this Agreement or any notice given by the Borrower to the Lender in
accordance with this Agreement. A certificate as to the amount of any such Loss,
providing reasonable detail of the calculation of such Loss and submitted in
good faith by the Lender to the Borrower shall be conclusive and binding for all
purposes, absent manifest error.
(c) The Borrower agrees to indemnify and hold the Lender, and
the directors, agents, officers and employees of the Lender (each an
"Indemnified Party") harmless from and against any and all Claims and Losses of
any kind or nature whatsoever which may be imposed on, incurred by, or asserted
against an Indemnified Party by reason of, relating to, arising out of or
resulting from any one or more of the following:
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(i) the Release or the threat of a Release of any Contaminant in
violation of Environmental Laws from, or the presence of any
Contaminant affecting, the property of the Borrower or any
Subsidiary of the Borrower (the "Property") in violation of
Environmental Laws, whether or not the same originates or
emanates from any such Property or any contiguous real
property;
(ii) (A) any costs of removal or remedial action incurred by any
federal, provincial, state, municipal, local or other
government, (B) any costs incurred by any other Person or
damages from injury to, destruction of, or loss of natural
resources, including costs of assessing such injury,
destruction or loss incurred in relation with the Property, or
(C) the operations and activities of the Borrower or any
Subsidiary of the Borrower; in each case as a result of the
violation of Environmental Laws by the Borrower or any
Subsidiary of the Borrower;
(iii) with respect to or as a result of any Environmental Activity
related to the Borrower or any Subsidiary of the Borrower,
liability for personal injury or property damage arising under
any statutory or common or civil law tort or delict theory,
including, without limitation, damages assessed for the
maintenance of a public or private nuisance or for the
carrying on of an Environmental Activity at, near, or with
respect to the Property; and
(iv) any other environmental matter affecting the Property or the
operations and activities of the Borrower or any Subsidiary of
the Borrower within the jurisdiction of any federal
environmental agency, or any provincial, municipal or local
environmental agency;
other than, in respect to an Indemnified Party, any such Claims which shall
arise or be incurred as a result of the gross negligence or wilful misconduct of
such Indemnified Party. In litigation or the preparation therefor, the
Indemnified Parties shall be entitled to select one counsel and, in addition to
such indemnity, the Borrower shall pay promptly the reasonable fees and expenses
of such counsel; provided however that if an Indemnified Party shall have
concluded reasonably that representation of such Indemnified Party by such
counsel would be inappropriate due to actual or potential differing interests
between the Indemnified Parties in the conduct of the defence of such
litigation, the Borrower shall pay promptly the reasonable fees and expenses of
additional counsel for such Indemnified Party.
(d) The provisions of this Section 11.7 shall survive the
termination of this Agreement and the repayment of all Obligations. The Borrower
acknowledges that neither its obligation to indemnify, nor any actual
indemnification by it, of the Lender or any other Indemnified Party hereunder in
respect of such Person's Losses for the legal fees and expenses of such Person's
counsel shall in any way affect the confidentiality or privilege relating to any
information communicated by such Person to its counsel.
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Section 11.8 Taxes.
(a) Any and all payments to the Lender by the Borrower
hereunder (or under any of the other Loan Documents) shall be made free and
clear of and without deduction or withholding for any and all present and future
Taxes, imposed by any Governmental Authority including, without limitation, any
Taxes which arise from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any of the other Loan Documents, unless such
Taxes are required by law or the administration thereof to be deducted or
withheld. If the Borrower shall be required by law or the administration thereof
to deduct or withhold any such Taxes from or in respect of any amount payable
hereunder, (i) the amount payable shall be increased as may be necessary so that
after making all required deductions or withholdings (including deductions or
withholdings applicable to additional amounts paid under this paragraph), the
Lender receives an amount equal to the amount it would have received if no such
deduction or withholding had been made; (ii) the Borrower shall make such
deductions or withholdings; and (iii) the Borrower shall pay forthwith the full
amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law.
(b) The Borrower agrees to indemnify the Lender for the full
amount of Taxes not deducted or withheld and paid by the Borrower in accordance
with Section 11.8 (a) to the relevant taxation or other authority and any Taxes
imposed by any jurisdiction on amounts payable by the Borrower under this
Section 11.8, paid by the Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
any such Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within fifteen days from the date the Lender makes
written demand therefor. A certificate as to the amount of such Taxes, providing
reasonable details of the calculation thereof, and evidence of payment thereof
submitted to the Borrower by the Lender shall be conclusive evidence of the
amount due from the Borrower to the Lender absent manifest error.
(c) The Borrower shall furnish to the Lender the original or a
certified copy of a receipt evidencing any payment of Taxes made by the
Borrower, as soon as such receipt becomes available.
(d) The provisions of this Section 11.8 shall survive the
termination of this Agreement and the repayment of all Obligations.
Section 11.9 Calculations.
Except as otherwise provided herein, the financial statements
and returns to be furnished to the Lender pursuant to this Agreement shall be
made and prepared in accordance with Generally Accepted Accounting Principles
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrower to the
Lender).
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Section 11.10 Assignments and Participations.
(a) The Borrower shall not be entitled to assign its rights
and obligations hereunder or any interest herein without the prior consent of
the Lender.
(b) The Lender, may on and after the occurrence of an Event of
Default, without the prior consent of the Borrower but on notice to the
Borrower, and, in any other case, with the prior consent of the Borrower, such
consent not to be unreasonably withheld or delayed, sell, assign or grant a
participation in all or part of the Lender's Commitments and the Obligations
then owed to the Lender to one or more Persons (each of which is hereinafter in
this Section called the "Assignee Lender") in consideration of the agreement of
each such Assignee Lender to advance or hold that percentage of the Lender's
Commitments and Obligations owed to the Lender as corresponds with the
percentage thereof so assigned to such Assignee (hereinafter called the
"Assignee Lender's Commitment" and the "Assignee Lender's Commitment
Percentage", respectively).
(d) If the Lender assigns all or any part of its Commitment
hereunder to an Assignee Lender as provided above, all references in this
Agreement to the Lender shall thereafter be construed as references to the
Lender and such Assignee Lender to the extent of their respective Commitments
and, if such Assignee Lender is not an Affiliate of the Lender the Borrower
shall thereafter look only to such Assignee Lender (and not to the Lender) in
respect of that proportion of the Lender's Commitment as corresponds to such
Assignee Lenders' Commitment therein and accordingly the Lender's obligation, if
any, to provide Advances in accordance with its Commitment hereunder shall be
reduced correspondingly and such Assignee Lender shall assume a Commitment
equivalent to such reduction in the Lender's Commitment, provided that the
Borrower shall not as a result of such assignment be liable hereunder for the
amount of any costs to the Lender and Assignee Lender hereunder in excess of the
costs that would have been incurred by the Lender hereunder if such assignment
had not occurred.
(e) The Lender may on and after the occurrence of an Event of
Default, without the prior consent of the Borrower but on notice to the
Borrower, and, in any other case, with the prior consent of the Borrower, such
consent not to be unreasonably withheld or delayed, disclose to a potential
participant or potential Assignee Lender such information concerning or
pertaining to the Obligations of the Borrower and its Subsidiaries as is known
to the Lender, and may in addition express to any such Person any opinion it may
have with respect to any matter, provided such potential participant or
potential Assignee Lender covenants in favour of the Borrower and the Lender to
only use such information in connection with its evaluation as to whether to
take any such participation or assignment and, should it do so, in connection
therewith, and to strictly maintain the confidential nature of all such
information.
Section 11.11 Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario and the laws of Canada
applicable therein.
56
<PAGE>
Section 11.12 Consent to Jurisdiction.
The Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of the Courts of the Province of Ontario in respect of any action,
suit or proceeding arising out of or relating to this Agreement and the other
Loan Documents and the Credit Facility hereby extended and hereby irrevocably
agrees that all Claims in respect of any such action, suit or proceeding may be
heard and determined in any such Ontario Court. The Borrower hereby irrevocably
waives, to the fullest extent it and they may effectively do so, the defense of
an inconvenient forum to the maintenance of such action or proceeding. The
Borrower agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in another jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing in this Section 11.12
shall affect the right of the Lender to bring any suit, action or proceeding
against the Borrower or its assets in the courts of any other jurisdiction.
Section 11.13 Binding Effect.
This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and permitted assigns.
Section 11.14 Interest Savings Clause.
Nothing contained in this Agreement or in any promissory notes
made by the Borrower to the Lender or in any of the other Loan Documents shall
be construed to permit the Lender to receive at any time interest, fees or other
charges in excess of the amounts which the Lender is legally entitled to charge
and receive under any law to which such interest, fees or charges are subject.
In no contingency or event whatsoever shall the compensation payable to the
Lender by the Borrower, howsoever characterized or computed, hereunder or under
any other agreement or instrument evidencing or relating to the Obligations of
the Borrower to the Lender hereunder, exceed the highest rate permissible under
any law to which such compensation is subject. There is no intention that the
Lender shall contract for, charge or receive compensation in excess of the
highest lawful rate, and, in the event it should be determined that any excess
has been charged or received, then, ipso facto, such rate shall be reduced to
the highest lawful rate so that no amounts shall be charged which are in excess
thereof; and the Lender shall apply such excess against the Obligations of the
Borrower to the Lender then outstanding and, to the extent of any amounts
remaining thereafter, refund such excess to the Borrower.
Section 11.15 Entire Agreement.
This Agreement, including the Schedules hereto, constitutes
the entire agreement between the Borrower and the Lender and supersedes all
prior agreements, whether oral or written, between the Borrower and the Lender
in respect of the Credit Facility extended hereby.
Section 11.16 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
57
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
FIDELITY LEASING CANADA INC.
Per:_______________________________
Authorized Signing Officer
BANK OF MONTREAL
Per:_______________________________
Authorized Signing Officer
58
<PAGE>
SCHEDULE 2.4(a)
[Date of Request] ,
Bank of Montreal
Attention:
Telecopy:
Dear Sirs:
ADVANCE REQUEST
The undersigned refers to the credit agreement (the "Credit
Agreement") dated as of the o day of o, 1999, between Fidelity Leasing Canada
Inc., as Borrower, and Bank of Montreal, as Lender thereunder. All capitalized
terms used herein shall have the respective meanings attributed thereto in the
Credit Agreement.
The undersigned hereby requests, in accordance with Article II
of the Credit Agreement, the following Advance:
Requested Advance:
Type ____________________________________________________
Amount __________________________________________________
If BA Advance requested,
maturity date of Bankers' Acceptances ___________________
Proposed Drawdown Date of such Advance: _________________
Day/Month/Year
If requested Advance required for conversion of
outstanding Advances identify Type, Outstanding
Principal Amount and dates of outstanding Advances to
be converted
<PAGE>
The undersigned hereby confirms that the Advance requested
hereby complies with the requirements of the Credit Agreement, that this Advance
Request is executed on behalf of the Borrower by representatives of the Borrower
duly authorized in that behalf and that no Default or Event of Default has
occurred and is continuing or will result from giving effect to the Advance
requested hereby.
FIDELITY LEASING CANADA INC.
By: ____________________________
Name:
Title: Chief Financial Officer
<PAGE>
SCHEDULE 2.4(c)
TO: BANK OF MONTREAL (the "Lender")
BORROWING BASE CERTIFICATE
The undersigned is the chief financial officer of Fidelity
Leasing Canada Inc., a corporation incorporated under the laws of the Province
of Ontario (the "Borrower"), and, as such, is authorized to execute and deliver
this certificate on behalf of the Borrower pursuant to the credit agreement (the
"Credit Agreement") dated as of , 1999, as amended from time to time, between
the Borrower and the Lender, and hereby certifies that:
1. [The aggregate of the Lease Receivable Balances of all
Eligible Leases previously assigned to the Lender pursuant to the assignment
delivered pursuant to Section 7.1(g)(vi) of the Credit Agreement is][The
Aggregate Eligible Lease Receivable Balance set out in the last Borrower Base
Certificate delivered to the Lender is]:
Cdn. $
2. The aggregate of the Lease Receivable Balances of all
Eligible Leases assigned to the Lender pursuant to the Assignment Agreement
delivered to the Lender with this Borrowing Base Certificate is:
Cdn. $
3. The aggregate of the Lease Receivable Balances of any Eligible
Leases previously assigned to the Lender, where such Leases or any Lease
Receivables under such Leases, or any Leased Property or other Collateral
associated therewith or any interest therein, shall have been sold or otherwise
disposed to FLSCI, IBM Canada or any other party or determined not to be an
Eligible Lease since the date of the last Borrowing Base Certificate delivered
to the Lender, is:
Cdn. $
4. The Aggregate Eligible Lease Receivable Balance (line 1 plus
line 2, minus line 3) is:
Cdn. $
5. 75% of the Aggregate Eligible Lease Receivable Balance is:
<PAGE>
Cdn. $
6. The Maximum Commitment Limit is:
Cdn. $ [5,000,000]
7. The Borrowing Base (lesser of line 5 and line 6) is:
Cdn. $
8. The Outstanding Principal Obligations are:
Cdn. $
9. The Available Commitment (excess, if any, of line 7 over line
8) is:
Cdn. $
All capitalized terms used herein shall have the respective
meanings attributed thereto in the Credit Agreement.
DATED this day of , .
FIDELITY LEASING CANADA INC.
By: ___________________________
Name:
Title: Chief Financial Officer
2
<PAGE>
SCHEDULE 2.4(d)
FORM OF ASSIGNMENT AGREEMENT
<PAGE>
SCHEDULE 8.1(f)(A)
OUTSTANDING ENCUMBRANCES
PPSA Registration in favour of FL Sales Canada Inc., as secured party, under
file no. 847305477, registration no. 981230 1812 1531 4590, perfecting the
absolute assignment of accounts receivable by Fidelity Leasing Canada Inc. to FL
Sales Canada Inc. pursuant to the IBM Leasing Program Agreements.
<PAGE>
SCHEDULE 8.1(f)(B)
PLACES OF BUSINESS AND LOCATIONS OF
BOOKS AND RECORDS
Books and records are kept at Fidelity Leasing Canada Inc.'s head Canadian
office, Meadowvale Corporate Centre, 2000 Argentia Road, Plaza III, Suite 220,
Mississauga, Ontario, L5N 2R7.
Minute Books are kept at the offices of Stikeman, Elliott, Suite 5300, Commerce
Court West, Toronto, Ontario, M5L 1B9.
<PAGE>
SCHEDULE 8.1(g)
SUBSIDIARIES AND AFFILIATES OF THE BORROWER
Fidelity Leasing, Inc.
FL Canada Leasing Inc., a Subsidiary of Fidelity Leasing, Inc.
FL Sales Canada Inc., a Subsidiary of Fidelity Leasing Canada Inc.
<PAGE>
SCHEDULE 8.1(q)
INTELLECTUAL PROPERTY ASSETS
Trademark applications have been filed with Industry Canada with respect to the
following names:
One Lease and design (filed by Fidelity Leasing, Inc.)
Fidelity Leasing Canada (filed by Fidelity Leasing Canada Inc.)
Fidelity Leasing, Inc. was granted a license to use the trademark "SUCCESSLEASE"
by International Business Machines Corporation by a Trademark License Agreement
dated as of October 6, 1998.
<PAGE>
SCHEDULE 9.1(i)
TO: BANK OF MONTREAL (the "Lender")
COMPLIANCE CERTIFICATE
The undersigned is the chief financial officer of Fidelity
Leasing Canada Inc., a corporation incorporated under the laws of the Province
of Ontario (the "Borrower"), and, as such, is authorized to execute and deliver
this certificate on behalf of the Borrower pursuant to the credit agreement (the
"Credit Agreement") dated as of , 1999, as amended from time to time, between
the Borrower and the Lender, [in the alternative, a certificate of a senior
officer of FLI may be provided with respect to items IV, V, VI and VII below,
and item VIII insofar as it relates to such items] and hereby certifies that:
I. The representations and warranties of the Borrower set
forth in Article VIII of the Credit Agreement and in any documents delivered
pursuant to the Credit Agreement are true and correct with the same effect as
though made on and as of the date of this certificate.
II. The Borrower is in compliance with all of the provisions
contained in the Credit Agreement on its part to be observed and performed and
as of the date of this certificate and after giving effect to any Advance in
respect of which this certificate is delivered, no Default or Event of Default
has occurred and is continuing.
III. As of the date of this certificate, the Consolidated
Capitalization is Cdn. $ .
IV. The Adjusted Debt to Tangible Net Worth Ratio on a
consolidated basis, measured quarterly as of the last day of the last completed
fiscal quarter of FLI is to 1.
V. As of the date of this certificate, the unsecured
intercompany Indebtedness of FLI to its Affiliates is U.S. $ and the
outstanding principal amount of the FLI Subordinated Indebtedness is U.S. $ .
VI. The Tangible Net Worth, as of the last day of the last
completed fiscal quarter of FLI is U.S. $ .
VII. The Fixed Charge Coverage Ratio, as of the last day of
the last completed fiscal quarter of FLI, based on financial information for the
twelve month period ending as of the end of such fiscal quarter, is to 1.
<PAGE>
VIII. Attached to this certificate are work sheets showing the
calculations used to derive the amounts and ratios set out above from the
financial statements of the Borrower and its Subsidiaries and Affiliates.
All capitalized terms used herein shall have the respective
meanings attributed thereto in the Credit Agreement.
DATED this day of , .
FIDELITY LEASING CANADA INC.
By: _____________________________
Name:
Title: Chief Financial Officer
<PAGE>
GUARANTEE
To: BANK OF MONTREAL Date: May __, 1999
To induce Bank of Montreal (the "Bank") to establish financing arrangements
with and consider making loans and extending credit from time to time to
Fidelity Leasing Canada Inc. (the "Borrower") pursuant to the terms and
conditions of a loan agreement dated the date hereof between the Bank and the
Borrower ( the "Loan Agreement"), each of the Undersigned, intending to be
legally bound, hereby, jointly and severally, guarantees to the Bank and becomes
surety for the unconditional and prompt payment and performance of all present
and future debts and liabilities, direct or indirect, now or at any time and
from time to time hereafter due or owing from the Borrower to the Bank (the
"Obligations"). The Undersigned shall also pay or reimburse the Bank on demand
for all reasonable out-of-pocket costs and expenses, including without
limitation, legal fees and costs on a solicitor and client basis incurred by the
Bank at any time to enforce, protect, preserve, or defend its rights hereunder
and with respect to any other security granted by the Borrower to and in favour
of the Bank. Unless otherwise defined herein, all capitalized terms shall have
the respective meanings given to such terms in the Loan Agreement.
Each of the Undersigned further undertakes and agrees as follows:
(1) Each of the Undersigned represents and warrants that:
(a) The Undersigned's execution and performance of this Guarantee
shall not (i) violate or result in a default or breach (immediately or with the
passage of time) under any contract, agreement or instrument to which any of the
Undersigned are a party or by which any of the Undersigned are bound, (ii)
violate or result in a default or breach under any order, decree, award,
injunction, judgment, law, regulation or rule, (iii) cause or result in the
imposition or creation of any lien upon any property of any of the Undersigned,
or (iv) violate or result in a breach of the articles of incorporation or
by-laws of any of the Undersigned.
(b) Each of the Undersigned has the full power and capacity to enter
into and perform under this Guarantee, which has been authorized by all
necessary corporate action on behalf of the Undersigned.
(c) No consent, license or approval of, or filing or registration
with, any governmental authority is necessary for the execution and performance
hereof by the Undersigned.
(d) This Guarantee constitutes the valid and binding obligation of
each of the Undersigned enforceable in accordance with its terms.
<PAGE>
(e) This Guarantee promotes and furthers the business and interests
of each of the Undersigned and the creation of the obligations hereunder will
result in direct financial benefit to each of the Undersigned.
(2) Each of the Undersigned hereby waives all notices with respect to this
Guarantee, including without limitation, notices of (a) acceptance of this
Guarantee, and (b) the existence or incurring from time to time of any
Obligations guaranteed hereunder.
(3) Each of the Undersigned hereby consents and agrees that the Bank may at
any time or from time to time in its sole discretion (a) extend or change the
time of payment, and/or the manner, place or terms of payment of any or all
Obligations, (b) amend, supplement or replace the Loan Agreement or any related
agreements, (c) renew, extend, modify, increase or decrease loans and extensions
of credit to Borrower, (d) modify the terms and conditions under which loans and
extensions of credit may be made to Borrower, (e) settle, compromise, waive or
grant releases, in whole or in part, for liabilities of Borrower and/or any
other person or persons liable with Undersigned for any Obligations, (f)
exchange, release, surrender, sell, subordinate, or compromise any collateral of
any party now or hereafter securing any of the Obligations, and (g) apply any
and all payments received by the Bank at any time against the Obligations in any
order as you may determine; all of the foregoing in such manner and upon such
terms as the Bank may see fit and without notice to or further consent from any
of the Undersigned, who hereby agree to be and shall remain bound under this
Guarantee notwithstanding any such action(s) by the Bank. Without limiting the
generality of the foregoing, the Undersigned shall not be discharged nor shall
the liability of the Undersigned be effected by any act, thing, omission or
means whatsoever which would not have resulted in the discharge or release of
the liability of the Undersigned under the Guarantee if the Undersigned had been
liable for payment of the Obligations as principal debtor.
(4) The liability of the Undersigned hereunder is absolute and
unconditional and joint and several and shall not be reduced, impaired or
affected in any way by reason of (a) any failure to obtain, register, retain,
perfect or preserve, or the lack of prior enforcement of, any rights against any
person or persons (including, without limitation, Borrower and any of the
Undersigned) or in any property, (b) the invalidity or unenforceability of any
Obligations or rights in any Collateral, (c) any delay in making demand upon
Borrower or any delay in enforcing, or any failure to enforce, any rights
against Borrower or in any Collateral even if such rights are thereby lost, (d)
any failure, neglect or omission on behalf of the Bank to obtain or perfect any
lien upon, protect, exercise rights against, or realize on, any property of
Borrower, any of the Undersigned or any other party securing the Obligations,
(e) the existence or nonexistence of any defences which may be available to the
Borrower with respect to the Obligations, (f) the commencement of any
bankruptcy,
-2-
<PAGE>
reorganization, liquidation, dissolution or receivership proceeding or case
filed by or against Borrower, or (g) any change in the corporate existence,
structure, ownership or control of the Borrower (including any of the foregoing
arising from any merger, consolidation, amalgamation, reorganization or similar
transaction). This Guarantee shall be a continuing guarantee and shall secure
the Obligations and any ultimate balance thereof, notwithstanding that the
Borrower may from time to time satisfy the Obligations in whole or in part and
thereafter incur further Obligations.
(5) If any or all payments made from time to time to the Bank with respect
to any Obligation hereby guaranteed are recovered from, or repaid by, the Bank
in whole or in part in any bankruptcy, reorganization, insolvency or similar
proceeding instituted by or against Borrower, this Guarantee shall continue to
be fully applicable to such Obligation to the same extent as if the recovered or
repaid payment(s) had never originally made on such Obligation.
(6) All rights and remedies hereunder and under the Loan Agreement and
related agreements are cumulative and not alternative, and the Bank may proceed
in any order from time to time against Borrower, any of the Undersigned and/or
any other obligor of Borrower's Obligations and their respective assets.
(7) Any and all rights of any nature of the Undersigned to subrogation,
reimbursement or indemnity and any right of the Undersigned to recourse to any
assets or property of Borrower (the "Subordinated Indebtedness") for any reason
shall be unconditionally subordinated to all of the Bank's rights under the Loan
Agreement and none of the Undersigned shall at any time exercise any of such
rights unless and until all of the Obligations have been unconditionally paid in
full. If the Undersigned, now or in the future, holds any security in respect of
the Subordinated Indebtedness (the "Subordinated Security"), the security
interests constituted thereby shall be postponed to all present and future
security interests held by the Bank in respect of the Obligations,
notwithstanding the order of execution, delivery, registration or perfection of
the said security interests, the order of crystallization of the security, or
any other matters which may affect the relative priorities of such security
interests. The Undersigned may not initiate or take any action to enforce the
Subordinated Security without the prior written consent of the Bank. As
additional security for the obligations of the Undersigned to the Bank under
this Guarantee, the Undersigned hereby assigns to and in favour of the Bank the
Subordinated Indebtedness and the Subordinated Security. Notwithstanding the
foregoing provisions of this paragraph 7, unless an Event of Default occurs and
is continuing under the Loan Agreement or an Event of Default under the Loan
Agreement will result from giving effect to any such payment by the Borrower,
the Borrower may pay to a Guarantor, and a Guarantor may receive for its own
account, payments in respect of unsecured intercompany indebtedness of the
Borrower to such Guarantor.
-3-
<PAGE>
(8) The Bank's books and records of any and all of Borrower's Obligations,
absent manifest error, shall be prima facie evidence against the Undersigned of
the indebtedness due the Bank or become due to the Bank hereunder.
(9) This Guarantee shall constitute a continuing surety obligation and the
Bank may continue to act in reliance hereon until all of the Obligations and the
Bank may continue to act in reliance hereon until all of the Obligations have
been paid and satisfied in full. The Bank shall not have any obligation to
proceed against, or exhaust any or all of its rights against, Borrower prior to
proceeding against any of the Undersigned hereunder.
(10) Each of the Undersigned agrees that the Bank shall have a right of
setoff against any and all property of each of the Undersigned now or at any
time in the Bank's possession, including without limitation, deposit accounts,
and the proceeds thereof, as security for the obligations of the Undersigned
hereunder.
(11) If an Event of Default or default occurs and is continuing under the
Loan Agreement, then all of the Undersigneds' liabilities to the Bank hereunder
shall, at the option of the Bank, become immediately due and payable and the
Bank may at any time and from time to time take any and/or all actions and
enforce all rights and remedies available hereunder or under applicable law to
collect the Undersigned's liabilities hereunder.
(12) Failure or delay in exercising any right or remedy against any of the
Undersigned hereunder shall not be deemed a waiver thereof or preclude the
exercise of any other right or remedy hereunder. No waiver of any breach of or
provision of this Guarantee shall be construed as a waiver of any subsequent
breach or of any other provision. The invalidity or unenforceability of any
provision hereof shall not affect the remaining provisions which shall remain in
full force and effect.
(13) This Guarantee shall (a) be legally binding upon each of the
Undersigned and each of the Undersigned's successors and assigns, provided that
the Undersigned's obligations hereunder may not be delegated or assigned without
the Bank's prior written consent and (b) benefit any and all of the Bank's
successors and assigns.
(14) This Guarantee embodies the whole agreement and understanding of the
parties hereto relative to the subject matter hereof. No modification of any
provision hereof shall be enforceable unless approved by the Bank in writing.
(15) This Guarantee shall in all respects be interpreted, construed and
governed by the laws of the Commonwealth of Pennsylvania. Without prejudice to
the right of the Bank to commence any proceedings with respect to this Guarantee
in any other proper jurisdiction, each of the Undersigned hereby irrevocably
attorns and submits to the jurisdiction of the courts of the Province of
Ontario.
-4-
<PAGE>
(16) (a) In any action or proceeding brought by you to enforce the terms
hereof, each of the Undersigned waives personal service of the summons,
complaint, and any motion or other process, and agrees that notice thereof may
be served by registered or certified mail, return receipt requested or by
nationally recognized overnight courier at the address of the applicable
Undersigned set forth on the signature page hereof. Such service shall be deemed
made on the date of delivery at such address.
(b) Any and all notices which may be given to the Undersigned by the
Bank hereunder shall be sent to the applicable Undersigned at the address of
such Undersigned set forth on the signature page hereof and shall be deemed
given to and received (on the date delivered) by the Undersigned if personally
delivered or if sent by facsimile transmission or if sent in the manner provided
for service of process in paragraph 16(a) above.
DATED the date and year first above written.
RESOURCE AMERICA, INC.
By:
---------------------------------------
Name:
Title:
FIDELITY LEASING, INC.
By:
---------------------------------------
Name:
Title:
-5-
<PAGE>
EXECUTION COPY
==============================================================================
SW LEASING PORTFOLIO IV, INC.,
as Buyer
and
FIDELITY LEASING, INC.,
as Seller
==============================================================================
PURCHASE AND SALE AGREEMENT
Dated as of December 18, 1997
==============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I GENERAL................................................................................................1
Section 1.1 Certain Defined Terms........................................................................1
Section 1.2 Other Definitional Provisions................................................................3
ARTICLE II SALE AND CONVEYANCE...................................................................................3
Section 2.1 Sale.........................................................................................3
Section 2.2 Subsequent Contracts.........................................................................5
ARTICLE III PURCHASE PRICE AND PAYMENT; MONTHLY REPORT...........................................................6
Section 3.1 Purchase Price...............................................................................6
Section 3.2 Payment of Purchase Price....................................................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................................7
Section 4.1 Seller's Representations and Warranties......................................................7
Section 4.2 Seller's Representations and Warranties Regarding the Agreement and the Contracts...........11
Section 4.3 Representations and Warranties of the Buyer.................................................12
ARTICLE V COVENANTS.............................................................................................13
Section 5.1 Seller Covenants............................................................................13
ARTICLE VI REPURCHASE OBLIGATION................................................................................15
Section 6.1 Retransfer of Ineligible Contracts..........................................................15
Section 6.2 Retransfer of Purchased Assets..............................................................16
Section 6.3 Adjustments.................................................................................17
Section 6.4 Substitution of Contracts...................................................................17
ARTICLE VII CONDITIONS PRECEDENT................................................................................18
Section 7.1 Conditions to the Buyer's Obligations Regarding Contracts...................................18
ARTICLE VIII TERM AND TERMINATION...............................................................................19
Section 8.1 Termination.................................................................................19
ARTICLE IX MISCELLANEOUS PROVISIONS.............................................................................19
Section 9.1 Amendment...................................................................................19
Section 9.2 Governing Law...............................................................................19
Section 9.3 Notices.....................................................................................19
Section 9.4 Severability of Provisions..................................................................20
Section 9.5 Assignment..................................................................................20
Section 9.6 Further Assurances..........................................................................21
Section 9.7 No Waiver; Cumulative Remedies..............................................................21
Section 9.8 Counterparts................................................................................22
Section 9.9 Binding Effect; Third-Party Beneficiaries...................................................22
Section 9.10 Merger and Integration.....................................................................22
Section 9.11 Headings...................................................................................22
Section 9.12 Schedules and Exhibits.....................................................................22
Section 9.13 No Proceedings.............................................................................22
Section 9.14 Merger or Consolidation of, or Assumption of the Obligations of, the Seller................22
Section 9.15 Costs, Expenses and Taxes..................................................................23
Section 9.16 Recourse Against Certain Parties..........................................................24
</TABLE>
Schedule I List of Contracts
Schedule II Tradenames, Fictitious Names and "Doing Business As" Names
Exhibit A Form of Assignment
Exhibit B Form of Seller Funding Note
-i-
<PAGE>
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of December 18, 1997 by and
between FIDELITY LEASING, INC., a Pennsylvania corporation (the "Seller"), and
SW LEASING PORTFOLIO IV, INC., a Pennsylvania corporation (the "Buyer").
W I T N E S S E T H :
WHEREAS, the Buyer desires to purchase from the Seller and the Seller
desires to sell to the Buyer certain contracts originated or purchased by the
Seller in its normal course of business, together with, among other things the
related rights of payment thereunder and the interest of the Seller in the
related equipment and other interests securing the payments to be made under
such contracts.
NOW, THEREFORE, it is hereby agreed by and between the Buyer and the
Seller as follows:
ARTICLE I
GENERAL
Section 1.1 Certain Defined Terms.
Certain capitalized terms used throughout this Agreement are defined
above or in this Section 1.1. In addition, capitalized terms used but not
defined herein have the meanings given to such terms in the Receivables
Purchase Agreement.
Agreement: Shall mean this Purchase and Sale Agreement, as the same shall be
amended, supplemented, restated or replaced from time to time.
Excess Amount: Shall have the meaning specified in Section 3.2 hereof
Purchase: Any purchase made hereunder pursuant to Section 2.1.
Purchase Date: Any day on which any Purchased Asset is acquired by the Buyer
pursuant to the terms of this Agreement.
Purchase Price: Shall have the meaning specified in Section 3.1 hereof.
Purchased Assets: The interests and property purchased pursuant to Sections
2.1(a) and (b).
Purchased Contracts: The Contracts listed on Schedule I hereto.
<PAGE>
Receivables Purchase Agreement: The Receivables Purchase Agreement dated as of
December 18, 1997 by and among the Buyer, as seller thereunder, Fidelity
Leasing, Inc., as servicer, the investors named therein, Variable Funding
Capital Corporation, as a purchaser, Harris Trust and Savings Bank, as
collateral custodian and backup servicer, First Union Capital Markets Corp.,
as deal agent and First Union National Bank, as liquidity agent, as the same
may be amended, supplemented, restated or replaced from time to time.
Required Lease Cancellation Payment: Shall have the meaning set forth in
Section 6.3(b) hereof.
Residual Value: With respect to any Purchased Contract, the residual value of
any unit of equipment related to such Contract, as agreed to between the
Purchaser and the Seller on the date such Contract becomes a Purchased
Contract; provided, however, such residual value shall not be less than zero;
such Residual Value to be set forth on Schedule I hereto.
Residual Value Adjustment Amount: With respect to any Purchased Contract, the
excess of (a) Residual Value of such Purchased Contract over (b) net proceeds
from the sale, re-lease or other disposition of the equipment related to such
Purchased Contract upon the expiration, or earlier termination, of the term of
such Purchased Contract.
Sale Papers: Shall have the meaning set forth in Section 4.1(a) hereof.
Seller Note: The promissory note, in the form of Exhibit B hereto, issued to
the Seller by the Purchaser pursuant to Section 3.2(a) hereof, which note
shall have a principal balance at all times equal to the Seller Note Principal
Balance and shall bear interest at a rate per annum equal to the Seller Note
Interest Rate.
Seller Note Interest Rate: On any day, the rate per annum equal to 9.0%.
Seller Note Maturity Date: The day that is one year and one day following the
date on which the Aggregate Unpaids have been indefeasibly paid in full in
cash.
Seller Note Principal Balance: On any day an amount equal to (i) the sum of
(a) the Excess Amount on the Closing Date, (b) the aggregate of the Excess
Amounts on each Subsequent Purchase Date and (c) the aggregate of the Residual
Values, minus (ii) the sum of (a) the aggregate Residual Value Adjustment
Amount and (b) all other amounts from time to time received by the Seller in
reduction of the Seller Note Principal Balance; provided, however, that the
Seller Note Principal Balance shall never be less than zero.
Servicer: Initially Fidelity Leasing , Inc., in its capacity as the Servicer
under the Receivables Purchase Agreement, and its permitted successors and
assigns, and thereafter any Person appointed as successor as provided therein
to service the Assets thereunder.
Subsequent Contract List: The list of Contracts to be sold by the Seller to
the Buyer on a Subsequent Purchase Date.
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Subsequent Contracts: On any Subsequent Purchase Date, the Contracts sold by
the Seller to the Buyer on such date as listed on the Subsequent Contact List.
Subsequent Purchase Date: Each Purchase Date other than the Closing Date.
Substitution Date: Any date on which the Seller transfers a Substitute
Contract to the Buyer.
Section 1.2 Other Definitional Provisions.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or any Sale Paper shall refer to this
Agreement as a whole and not to any particular provision of this Agreement;
and Section, Subsection, Schedule and Exhibit references contained in this
Agreement are references to Sections, Subsections, Schedules and Exhibits in
or to this Agreement unless otherwise specified. In the event that any term or
provision contained herein shall conflict with or be inconsistent with any
term or provision contained in the Receivables Purchase Agreement, the terms
and provisions contained herein shall govern with respect to this Agreement.
ARTICLE II
SALE AND CONVEYANCE
Section 2.1 Sale.
(a) On the Closing Date, the Seller hereby sells, transfers, assigns,
sets over and otherwise conveys to the Buyer as of the Closing Date, and the
Buyer hereby purchases from the Seller, without recourse, all right, title and
interest of the Seller in, to and under the following property, whether now
existing or hereafter created or acquired:
(i) the Contracts that are owned by the Seller on
the Closing Date and that are listed on the Contract List, together
with all Collections and all monies due or to become due in payment
of such Contracts after the related Cut Off Date, and any payments in
respect of a Casualty Loss or Early Termination, but excluding any
Scheduled Payments due on or prior to the related Cut Off Date and
any Excluded Amounts;
(ii) the Equipment related to such Contracts,
including all proceeds from any sale or other disposition of such
Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future
specifically with respect to such Contracts or the Obligor thereunder
under any guarantee or similar credit enhancement with respect to
such Contracts;
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(v) all Insurance Proceeds with respect to each
such Contract; and
(vii) all income and proceeds of the foregoing.
(b) On each Subsequent Purchase Date, the Seller will sell, transfer,
assign and set over and otherwise convey to the Buyer and the Buyer will
purchase from the Seller, without recourse, all right, title and interest of
the Seller in, to and under the following property, whether now existing or
hereafter created or acquired:
(i) the Subsequent Contracts identified on the
Subsequent Contract List delivered by the Seller to the Buyer two
Business Days before the applicable Subsequent Purchase Date,
together with all Collections and all monies due or to become due in
payment of such Contracts after the related Cut Off Date, and any
payments in respect of a casualty or early termination, but excluding
any Scheduled Payments due on or prior to the related Cut Off Date
and any Excluded Amounts;
(ii) the Equipment related to such Contracts,
including all proceeds from any sale or other disposition of such
Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future
specifically with respect to such Contracts or the Obligor thereunder
under any guarantee or similar credit enhancement with respect to
such Contracts;
(v) all Insurance Proceeds with respect to each
such Contract; and
(vii) all income and proceeds of the foregoing.
The foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Buyer of any obligation of the Seller or any other Person in connection with
the Contracts or under any agreement or instrument relating thereto including,
without limitation, any obligation to any Obligors.
(c) In connection with the sale of the Purchased Assets, the Seller
agrees (i) to record and file, at its own expense, any financing statements
(and continuation statements with respect to such financing statements when
applicable) with respect to the Purchased Assets, meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect, and maintain the perfection of, the sale of the Purchased Assets
from the Seller to the Buyer on and after the Closing Date, (ii) that such
financing statements shall name the Seller, as seller, and the Buyer, as
purchaser, of the Purchased Assets and (iii) to deliver a file-stamped copy of
such financing statements or other evidence of such filings (excluding
continuation statements, which shall be delivered as filed) to the Buyer on or
prior to the Closing Date, in the case of the Original Contracts and (if any
additional filing is necessary) on or prior to the related Subsequent Purchase
Date, in the case of Subsequent Contracts.
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(d) In connection with the sale of the Purchased Assets, the Seller
further agrees that it will, at its own expense, indicate clearly and
unambiguously in its computer files, on or prior to the Closing Date in the
case of the Original Contracts and on or prior to the related Subsequent
Purchase Date in the case of each Subsequent Contract, that such Contracts
have been sold to the Buyer pursuant to this Agreement. The Seller further
agrees to deliver to the Buyer (i) on the Closing Date, a computer file or
microfiche list containing a true and complete list of all Original Contracts,
identified by account number and Outstanding Balance as of the Cut Off Date
and (ii) on any Subsequent Purchase Date with respect to Subsequent Contracts,
a computer file or microfiche list containing a true and complete list of all
Subsequent Contracts transferred on such date identified by account number and
Outstanding Balance as of the related Additional Cut Off Date. Such file or
list shall be marked as Schedule I to this Agreement, shall be delivered to
the Buyer as confidential and proprietary, and is hereby incorporated into and
made a part of this Agreement.
(e) It is the intention of the parties hereto that the conveyance of
the Contracts and the other Purchased Assets by the Seller to the Buyer as
provided in this Section 2.1 be, and be construed as, an absolute sale,
without recourse, of the Contracts and the other Purchased Assets by the
Seller to the Buyer. Furthermore, it is not intended that such conveyance be
deemed a pledge of the Contracts and the other Purchased Assets by the Seller
to the Buyer to secure a debt or other obligation of the Seller. If, however,
notwithstanding the intention of the parties, the conveyance provided for in
this Section 2.1 is determined to be a transfer for security, then this
Agreement shall also be deemed to be a "security agreement" within the meaning
of Article 9 of the UCC and the Seller hereby grants to the Buyer a "security
interest" within the meaning of Article 9 of the UCC in all of the Seller's
right, title and interest in and to the Contracts and the other Purchased
Assets, now existing and hereafter created, to secure a loan in an amount
equal to the aggregate Purchase Price and each of the Seller's other payment
obligations under this Agreement.
Section 2.2 Subsequent Contracts.
(a) The Seller shall on or prior to any Subsequent Purchase Date with
respect to any Contracts execute and deliver to the Buyer a written assignment
from Seller to the Buyer substantially the form of Exhibit A hereto. From and
after such Subsequent Purchase Date, such Subsequent Contracts shall be deemed
to be Contracts hereunder.
(a) Covenants of the Seller In Connection With Additions. On or
before any Subsequent Purchase Date with respect to any Contracts acquired by
the Buyer as described in subsection 2.1(b), the Seller shall:
(i) clearly indicate in its files that such Contracts have
been sold to the Buyer and deliver to the Buyer a computer file or microfiche
list which the Seller shall represent to contain a true and complete list of
such Subsequent Contracts, identified by account number as of the related Cut
Off Date, which computer file or microfiche list shall be as of such date
incorporated into and made apart of this Agreement;
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(ii) provide the Buyer with an Officer's Certificate
certifying as follows: (A) each such Contract was, as of the related
Subsequent Purchase Date, an Eligible Contract, (B) no selection procedures
believed by the Seller to be materially adverse to the interest of the Buyer
were utilized in selecting such Contracts from the available Eligible
Contracts in the Seller's portfolio, (C) such Contracts and all proceeds
thereof will be conveyed to the Buyer free and clear of any Lien of any Person
claiming through or under the Seller or any of its Affiliates, except for
Liens permitted hereunder and (D) as of the related Subsequent Purchase Date,
(x) no Insolvency Event with respect to the Seller has occurred, (y) the Buyer
is not insolvent and (z) the sale of such Contracts to the Buyer has not been
made in contemplation of the occurrence of any Insolvency Event with respect
to the Seller, and (E) as of the related Subsequent Purchase Date, no
Restricting Event with respect to the Seller has occurred;
(iii) record and file financing statements with respect to
such Contracts meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect the sale of such
Contracts by the Seller to the Buyer.
ARTICLE III
PURCHASE PRICE AND PAYMENT; MONTHLY REPORT
Section 3.1 Purchase Price.
The purchase price for each Contract sold to the Buyer by the Seller
under this Agreement (the "Purchase Price") shall be a dollar amount equal to
the sum of a Residual Value and (b) Discounted Contract Balance determined as
of the related Cut Off Date.
Section 3.2 Payment of Purchase Price.
(a) Each Purchase Price payment shall be paid on the date of such
Purchase by the Purchaser to the Seller in the manner provided below:
(i) in cash, in an amount equal to the lesser of (A) the amount (such
amount being referred to herein as the "Available Funds") of funds
available to the Purchaser on the date of such Purchase pursuant to the
terms of the Receivables Purchase Agreement and (B) the aggregate Purchase
Price of such Contracts; and
(ii) to the extent that the aggregate Purchase Price of Contracts to
be sold to the Buyer on any day exceeds (such excess being hereinafter
referred to as the "Excess Amount") the amount of the cash payment in
(i)(A) above, such excess shall be paid (A) on the Closing Date, by the
issuance to the Seller of the Seller Note in a principal amount equal to
the Excess Amount as of the Closing Date and (B) on each Subsequent
Purchase Date, by increasing the principal balance of the Seller Note by
an amount equal to the Excess Amount for such Purchase Date.
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(b) Unless otherwise specified herein, all payments of the Purchase
Price of any Contract sold hereunder shall be made not later than 3:00 p.m.
(New York City time) on the date specified therefor in lawful money of the
United States of America in same day funds by depositing such amounts in the
bank account designated in writing by the Seller to the Purchaser.
(c) The Seller Note shall bear interest at a rate per annum equal,
from time to time, to the Seller Note Interest Rate.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Seller's Representations and Warranties.
The Seller hereby represents and warrants to the Buyer, as of the
Closing Date and each Subsequent Purchase Date, that:
(a) Organization and Good Standing. The Seller is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its formation and has full corporate power, authority and
legal right to own its properties and conduct its business as such properties
are presently owned and as such business is presently conducted and to
execute, deliver and perform its obligations under this Agreement and each
other document or instrument to be delivered by the Seller hereunder
(collectively, the "Sale Papers").
(b) Due Qualification. The Seller is duly qualified to do business
and is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would have a material adverse effect on its ability to perform its
obligations hereunder or under the Sale Papers.
(c) Due Authorization. The execution and delivery of this Agreement
and each of the Sale Papers, and the consummation of the transactions provided
for herein and therein have been duly authorized by the Seller by all
necessary corporate action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement and
each of the Sale Papers, the performance of the transactions contemplated
hereby and thereby and the fulfillment of the terms hereof and thereof, will
not conflict with, result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or both)
a material default under, any material indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a party or
by which it or any of its property is bound.
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(e) No Violation. The execution and delivery of this Agreement and
each of the Sale Papers, the performance of the transactions contemplated
hereby and thereby and the fulfillment of the terms hereof and thereof
(including, without limitation, the sale of Purchased Assets by the Seller or
remittance of Collections in accordance with the provisions of this
Agreement), will not conflict with or violate, in any material respect, any
Requirements of Law applicable to the Seller.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Seller, threatened against the Seller
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any of the Sale Papers, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Sale Papers, or
(iii) seeking any determination or ruling that could reasonably be expected to
be adversely determined, and if adversely determined, would materially and
adversely affect the performance by the Seller of its obligations under this
Agreement or any of the Sale Papers.
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority
required in connection with the execution and delivery of this Agreement and
the Sale Papers, the performance of the transactions contemplated by this
Agreement and the Sale Papers and the fulfillment of or terms hereof and
thereof, have been obtained.
(h) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by the Seller.
(i) Solvency. The transactions contemplated under this Agreement and
the Sale Papers do not and will not render the Seller insolvent.
(j) Selection Procedures. No selection procedures believed by the
Seller to be materially adverse to the interests of the Buyer were utilized by
the Seller in selecting the Contracts to be sold, assigned, transferred,
set-over and otherwise conveyed hereunder.
(k) Use of Proceeds. No proceeds of the sale of any Contract
hereunder received by the Seller will be used by the Seller to purchase or
carry any margin security.
(l) Not an Investment Company. The Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or is exempt from all provisions of such Act.
(m) Other Names. The legal name of the Seller is as set forth in this
Agreement and within the preceding five years the Seller has not used, and the
Seller currently does not use, any tradenames, fictitious names, assumed names
or "doing business as" names other than those set forth on Schedule II hereto.
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(n) Taxes. The Seller has filed or caused to be filed all tax returns
which, to its knowledge, are required to be filed and has paid all taxes shown
to be due and payable on such returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it
or any of its property by any Governmental Authority (other than any amount of
tax due the validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in accordance with
generally accepted accounting principles have been provided on the books of
the Seller); no tax lien has been filed and, to the Seller's knowledge, no
claim is being asserted, with respect to any such tax, fee or other charge.
(o) Place of Business. The principal executive offices of the Seller
are in Ambler, Pennsylvania and the offices where the Seller keeps its records
concerning the Contracts are in Ambler, Pennsylvania.
(p) No Liens. Each Purchased Asset, together with the Contract
related thereto, shall, at all times, be owned by the Seller free and clear of
any Lien except as provided herein, and upon the sale, transfer or assignment
hereunder, the Buyer shall acquire a valid and perfected first priority
undivided ownership interest in each Purchased Asset then existing or
thereafter arising and in the Collections with respect thereto, free and clear
of any Lien except as provided herein. No effective financing statement or
other instrument similar in effect covering any Purchased Asset or the
Collections with respect thereto shall at any time be on file in any recording
office except such as may be filed in favor of the Buyer relating to this
Agreement.
(q) Special Purpose Entity. The Seller agrees that, for a period of
one year and one day after the Aggregate Unpaids have been paid in full, the
Seller will not cause the Buyer to file a voluntary petition or institute,
cause to be instituted or join in any involuntary petition or proceeding under
the Bankruptcy Code or any other bankruptcy or insolvency laws. Each of the
Buyer and the Seller is aware that in light of the circumstances described in
the preceding sentence and other relevant facts, the filing of a voluntary
petition under the Bankruptcy Code for the purpose of making the assets of the
Buyer available to satisfy claims of the creditors of the Seller would not
result in making such assets available to satisfy such creditors under the
Bankruptcy Code.
(r) Security Interest. The Seller has granted a security interest (as
defined in the UCC) to the Buyer in the Purchased Assets and Collections,
which is enforceable in accordance with the UCC upon execution and delivery of
this Agreement. Upon the filing of UCC-1 financing statements naming the Buyer
as secured party and the Seller as debtor, the Buyer shall have a first
priority perfected security interest in the Purchased Assets and Collections.
All filings (including, without limitation, such UCC filings) as are necessary
in any jurisdiction to perfect the interest of the Buyer in the Purchased
Assets and Collections have been (or prior to the applicable purchase
hereunder will be) made; provided, however, that filings as to related
Equipment have been (or prior to the applicable purchase hereunder will be)
made solely in the Filing Locations and such Equipment filings have been (or
prior to the applicable purchase hereunder will be) made by filing in each
such Filing Location one financing statement listing all Equipment, without
the necessity of making individual filings for each item of Equipment.
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(s) Accounting. The Seller will account for the transfers by it to
the Buyer of interests in Purchased Assets and Collections under this
Agreement as sales of such Purchased Assets in its books, records and
financial statements, in each case consistent with GAAP, as applicable, and
with the requirements set forth herein.
(t) Separate Entity. The Buyer is operated as an entity with assets
and liabilities distinct from those of the Seller and any Affiliates thereof,
and the Seller hereby acknowledges that the Deal Agent and the Purchasers
under the Receivables Purchase Agreement are entering into the transactions
contemplated by the Receivables Purchase Agreement in reliance upon the
Buyer's identity as a separate legal entity from the Seller and from each such
Affiliate of the Seller.
(u) Value Given. The cash payments received by the Seller in respect
of the Purchase Price of each Contract sold hereunder constitutes reasonably
equivalent value in consideration for the transfer to the Buyer of such
Contract under this Agreement, such transfer was not made for or on account of
an antecedent debt owed by the Seller to the Buyer, and such transfer was not
and is not voidable or subject to avoidance under any section of the
Bankruptcy Code.
(v) Reports Accurate. No report (if prepared by the Seller, or to the
extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Buyer in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Buyer at such
time) as of the date so furnished, and no such document contains or will
contain any material misstatement of fact or omits or shall omit to state a
material fact or any fact necessary to make the statements contained therein
not misleading.
(w) Exchange Act Compliance. No proceeds of the sale of any Purchased
Assets will be used by the Seller to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934,
as amended.
(x) Accuracy of Representations and Warranties. Each representation
or warranty by the Seller contained herein or in any certificate or other
document furnished by the Seller pursuant hereto or in connection herewith is
true and correct in all material respects.
The representations and warranties set forth in this Section 4.1
shall survive the sale, transfer and assignment of the Purchased Assets to the
Buyer. Upon discovery by the Seller or the Buyer of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice thereof to the other and to the Deal Agent
immediately upon obtaining knowledge of such breach.
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Section 4.2 Seller's Representations and Warranties
Regarding the Agreement and the Contracts.
The Seller hereby represents and warrants to the Buyer, as of the
Closing Date and each Subsequent Purchase Date that:
(a) Binding Obligation; Valid Transfer and Security Interest.
(i) This Agreement and each of the Sale Papers constitutes a
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as such enforceability may be
limited by Insolvency Laws and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity) or by an implied covenant of good faith and fair dealing.
(ii) This Agreement constitutes a valid transfer to the
Buyer of all right, title and interest of the Seller in, to and under the
Purchased Assets, and such transfer will be free and clear of any Lien of any
Person claiming through or under the Seller or its Affiliates, except for
Permitted Liens. Upon the filing of the financing statements described in
Section 4.1(r) and, in the case of Subsequent Contracts on the applicable
Subsequent Purchase Date, the Buyer shall have a first priority perfected
security interest in such property, subject only to Permitted Liens.
(b) Eligibility of Contracts. As of the Cut Off Date, (i) the
Contract List and the computer file or microfiche or written list delivered in
connection therewith is an accurate and complete listing in all material
respects of all the Contracts transferred hereunder as of the Cut Off Date and
the information contained therein with respect to the identity of such
Contracts and the amounts owing thereunder is true and correct in all material
respects as of the Cut Off Date, (ii) each such Contract is an Eligible
Contract, (iii) each such Contract and the Seller's interest in the related
Equipment and Applicable Security, as appropriate, has been transferred to the
Buyer free and clear of any Lien of any Person (other than Permitted Liens)
and in compliance, in all material respects, with all Requirements of Law
applicable to the Seller and (iv) with respect to each such Contract, all
material consents, licenses, approvals or authorizations of or registrations
or declarations with any Governmental Authority required to be obtained,
effected or given by the Seller in connection with the transfer of such
Contract and the related Equipment to the Buyer have been duly obtained,
effected or given and are in full force and effect. On each Subsequent
Purchase Date on which Subsequent Contracts are transferred by the Seller to
the Buyer, the Seller shall be deemed to represent and warrant to the Buyer
that (I) each Subsequent Contract transferred on such day is an Eligible
Contract, (II) each such Subsequent Contract and the Seller's interest in the
related Equipment, as appropriate, has been transferred to the Buyer free and
clear of any Lien of any Person (other than Permitted Liens) and in
compliance, in all material respects, with all Requirements of Law applicable
to the Seller or the originator thereof, (III) with respect to each such
Subsequent Contract, all material consents, licenses, approvals or
authorizations of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Seller in
connection with the transfer of such Contract and the related Equipment to the
Buyer have been duly obtained, effected or given and are in full force and
effect and (IV) the representations and warranties set forth in Section 4.2(b)
clauses (i) through (iv), inclusive, are true and correct with respect to each
Contract transferred on such day as if made on such day.
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(c) Notice of Breach. The representations and warranties set forth in
this Section 4.2 shall survive the transfer and assignment of the respective
Contracts and Related Equipment, or interests therein, to the Buyer. Upon
discovery by the Seller or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
written notice thereof to the other and to the Deal Agent under the
Receivables Purchase Agreement immediately upon obtaining knowledge of such
breach.
Section 4.3 Representations and Warranties of the Buyer.
The Buyer hereby represents and warrants to the Seller, as of the
Closing Date and each Subsequent Purchase Date, that:
(a) Organization and Good Standing. The Buyer is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware, and has full corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and each of the Sale Papers.
(b) Due Qualification. The Buyer is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained or will obtain all necessary licenses and
approvals, in each jurisdiction in which failure to so qualify or to obtain
such licenses and approvals would have a material adverse effect on its
ability to perform its obligations hereunder or under the Sale Papers.
(c) Due Authorization. The execution and delivery of this Agreement
and each of the Sale Papers and the consummation of the transactions provided
for herein or therein have been duly authorized by the Buyer by all necessary
corporate action on the part of the Buyer.
(d) No Conflicts. The execution and delivery of this Agreement and
each of the Sale Papers, the performance of the transactions contemplated
hereby or thereby and the fulfillment of the terms hereof and thereof will not
conflict with, result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or both)
a material default under, any material indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Buyer is a party or
by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement and
each of the Sale Papers, the performance of the transactions contemplated
hereby and thereby, and the fulfillment of the terms hereof and thereof
(including, without limitation, the purchase of Purchased Assets by the Buyer
in accordance with the provisions of this Agreement) will not conflict with or
violate, in any material respect, any Requirements of Law applicable to the
Buyer.
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(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Buyer, threatened against the Buyer,
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any of the Sale Papers, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Sale Papers, or
(iii) seeking any determination or ruling that could reasonably be expected to
be adversely determined, and if adversely determined, would materially and
adversely affect the performance by the Buyer of its obligations under this
Agreement or any of the Sale Papers.
ARTICLE V
COVENANTS
Section 5.1 Seller Covenants.
The Seller hereby covenants with respect to each Contract, that:
(a) Compliance with Laws; Preservation of Corporate Existence. The
Seller will comply in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
(b) Contracts Not to be Evidenced by Promissory Notes. Except to the
extent the provisions of Section 6.4 are satisfied, the Seller will take no
action to cause any Contract which is not, as of the Closing Date or the
related Subsequent Purchase Date, as the case may be, evidenced by an
Instrument, to be so evidenced except in connection with the enforcement or
collection of such Contract.
(c) Security Interests. Except for the transfers hereunder, the
Seller will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Contract
transferred hereunder or related Equipment, whether now existing or hereafter
transferred hereunder, or any interest therein, and Seller will not sell,
pledge, assign or suffer to exist any Lien on its interest, if any, hereunder,
other than Liens arising by operation of law in the ordinary course of
business for sums not due and which are released or extinguished within
fifteen (15) days (or such longer period as the Buyer may approve in its sole
discretion) of the Seller becoming aware thereof. The Seller will immediately
notify the Buyer of the existence of any Lien on any Contract transferred
hereunder or related Equipment; and the Seller shall defend the right, title
and interest of the Buyer in, to and under the Contracts transferred hereunder
and the related Equipment, against all claims of third parties; provided,
however, that nothing in this Section 5.1(c) shall prevent or be deemed to
prohibit the Seller from suffering to exist Permitted Liens upon any of the
Contracts transferred hereunder or any related Equipment.
(d) Delivery of Collections. The Seller agrees to pay to the Buyer
promptly (but in no event later than two Business Days after receipt) all
Collections received by the Seller in respect of the Contracts transferred
hereunder.
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(e) Compliance with Law. The Seller hereby agrees to comply in all
material respects with all Requirements of Law applicable to the Seller, the
Contracts and the Equipment.
(f) Activities of the Seller. The Seller shall not engage in any
business or activity of any kind with the Buyer, or enter into any transaction
or indenture, mortgage, instrument, agreement, contract, lease or other
undertaking with the Buyer, which is not directly related to the transactions
contemplated and authorized by this Agreement, the Receivables Purchase
Agreement and the Certificate of Incorporation of the Buyer.
(g) Guarantees. The Seller shall not become or remain liable,
directly or contingently, in connection with any Indebtedness or other
liability of the Buyer, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in the
ordinary course of business), agreement to purchase or repurchase, agreement
to supply or advance funds, or otherwise.
(h) Merger; Sales. The Seller shall not enter into any transaction of
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or
convey, sell, lease or otherwise dispose of all or substantially all of its
property or business, except as provided for in this Agreement.
(i) Location of Seller, Records; Instruments. The Seller (x) shall
not move outside the Commonwealth of Pennsylvania, the location of its chief
executive office, without 30 days' prior written notice to the Buyer and the
Deal Agent and (y) shall not move the location of the Contract Files from the
locations thereof on the Closing Date, without 30 days' prior written notice
to the Buyer and the Deal Agent and (z) will promptly take all actions
required (including, but not limited to, all filings and other acts necessary
or advisable under the UCC, if applicable, of each relevant jurisdiction in
order to continue the first priority perfected security interest of the Buyer
in all Contracts transferred hereunder. The Seller will give the Buyer and the
Deal Agent prompt notice of a change within the Commonwealth of Pennsylvania
of the location of its chief executive office.
(j) Accounting of Purchases. The Seller will not account for or treat
(whether in financial statements or otherwise) the transactions contemplated
hereby in any manner other than the sale of Purchased Assets by the Seller to
the Buyer.
(k) ERISA Matters. The Seller will not (a) engage in any prohibited
transaction for which an exemption is not available or has not previously been
obtained from the United States Department of Labor; (b) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the Code, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (c) fail to make any payments to an
Multiemployer Plan that the Seller may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (d)
terminate any Benefit Plan so as to result in any liability; or (e) permit to
exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability of the Seller under ERISA or
the Code.
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(l) Nature of Business. The Seller will engage in no business with
the Buyer other than the sale and transfer of Purchased Assets hereunder and
the other transactions permitted or contemplated by this Agreement.
(m) Change in the Purchase and Sale Agreement. The Seller will not
amend, modify, waive or terminate any terms or conditions of this Agreement
except as provided herein.
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Retransfer of Ineligible Contracts.
In the event of a breach of any representation or warranty set forth
in Section 4.2 with respect to a Contract transferred hereunder (each such
Contract, an "Ineligible Contract"), no later than 30 days after the earlier
of (i) knowledge of such breach on the part of the Seller and (ii) receipt by
the Seller of written notice thereof given by the Buyer, the Seller shall
accept a retransfer of each such Contract (and any related Equipment or
Applicable Security) selected by the Buyer to which such breach relates at
such time as there is a breach of any such representation or warranty on the
terms and conditions set forth below; provided, however, that no such
retransfer shall be required to be made with respect to such Ineligible
Contract (and such Contract shall cease to be an Ineligible Contract) if, on
or before the expiration of such 30-day period, the representations and
warranties in Section 4.2 with respect to such Contract shall be made true and
correct in all material respects with respect to such Contract as if such
Contract had been transferred to the Buyer on such day. Notwithstanding
anything contained in this Section 6.1 to the contrary, in the event of breach
of any representation and warranty set forth in Section 4.2, with respect to
each Original Contract or Subsequent Contract and the related Equipment having
been conveyed to the Buyer free and clear of any Lien of any Person claiming
through or under the Seller and its Affiliates (other than Permitted Liens)
and in compliance in all material respects, with all Requirements of Law
applicable to the Seller, immediately upon the earlier to occur of the
discovery of such breach by the Seller or receipt by the Seller of written
notice of such breach given by the Buyer, the Seller shall repurchase and the
Buyer shall convey, free and clear of any Lien created pursuant to this
Agreement, all of its right, title and interest in such Ineligible Contract,
and the Buyer shall, in connection with such conveyance and without further
action, be deemed to represent and warrant that it has the corporate authority
and has taken all necessary corporate action to accomplish such conveyance,
but without any other representation or warranty, express or implied. In any
of the foregoing instances, the Seller shall accept a retransfer of each such
Ineligible Contract, and there shall be deducted from the ADCB of the Asset
Pool the Discounted Contract Balance (calculated using the Blended Discount
Rate as of the most recent Determination Date) of each such Ineligible
Contract. On and after the date of such retransfer, each Ineligible Contract
so retransferred shall not be included in the pool of Purchased Assets. In
consideration of such retransfer the Seller shall, on the date of retransfer
of such Ineligible Contract, make a deposit in the Collection Account (for
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allocation pursuant to Section 2.7, 2.8 or 2.9 of the Receivables Purchase
Agreement, as applicable,) in immediately available funds in an amount equal
to the Discounted Contract Balance, plus interest thereon from the most recent
Payment Date to and including the date of repurchase at a rate per annum equal
to the weighted average of the Yield Rates. Upon each retransfer to the Seller
of such Ineligible Contract, the Buyer shall automatically and without further
action be deemed to transfer, assign and set-over to the Seller, free and
clear of any Lien created pursuant to this Agreement, all the right, title and
interest of the Buyer in, to and under such Contract and all monies due or to
become due with respect thereto, the related Equipment and all proceeds of
such Contract and Liquidation Proceeds and Insurance Proceeds relating thereto
and all rights to security for any such Contract, and all proceeds and
products of the foregoing, and the Buyer shall, in connection with such
transfer, assignment and set-over and without further action, be deemed to
represent and warrant that it has the corporate authority and has taken all
necessary corporate action to accomplish such transfer, assignment and
set-over, but without any other representation or warranty, express or
implied.. The Buyer shall, at the sole expense of the Seller, execute such
documents and instruments of transfer as may be prepared by the Seller and
take such other actions as shall reasonably be requested by the Seller to
effect the transfer of such Ineligible Contract pursuant to this Section 6.1.
Section 6.2 Retransfer of Purchased Assets.
In the event of a breach of any of the representations and warranties
set forth in Section 4.2 hereof affecting the Contracts, which breach could
reasonably be expected to have a material adverse affect on the rights of the
Purchasers under the Receivables Purchase Agreement or the Deal Agent as agent
for the Purchasers under the Receivables Purchase Agreement under the
Receivables Purchase Agreement or on the ability of the Buyer to perform its
obligations under the Receivables Purchase Agreement, the Buyer, by notice
then given in writing to the Seller may direct the Seller to accept retransfer
of all of the Contracts purchased from the Seller and the Seller shall be
obligated to accept retransfer of such Contracts on a Payment Date specified
by the Seller (such date, the "Retransfer Date") after such notice on the
terms and conditions set forth below; provided, however, that no such
retransfer shall be required to be made if, on or before expiration of such
applicable period, the representations and warranties contained in Section 4.2
shall then be true and correct in all material respects. The Seller shall
deposit on the Retransfer Date an amount equal to the deposit amount provided
in the next sentence for such Contracts in the Collection Account for
distribution to the Purchasers under the Receivables Purchase Agreement. The
deposit amount for such retransfer will be equal to (x) the sum of (i) the
outstanding Capital at the end of the Business Day preceding the Payment Date
on which the retransfer is scheduled to be made and (ii) an amount equal to
all accrued, and to accrue, but unpaid Yield on such Capital at the applicable
Yield Rate through the latest maturing Fixed Period minus (y) the amount, if
any, available in the Collection Account on such Payment Date. On the
Retransfer Date, provided that such amount has been deposited in full into the
Collection Account, the Contracts transferred hereunder (or security interests
therein) and all monies due or to become due with respect thereto, the related
Equipment (or security interests therein) and all proceeds thereof, all rights
to security for any such Contracts, and all proceeds and products of the
foregoing, shall be transferred to the Seller, and the Buyer shall, at the
sole expense of the Seller, execute and deliver such instruments of transfer,
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in each case without recourse, representation or warranty, as shall be
prepared and reasonably requested by the Seller to vest in the Seller, or its
designee or assignee, all right, title and interest of the Buyer in, to and
under the Contracts transferred hereunder, all monies due or to become due
with respect thereto, the related Equipment and all proceeds thereof and
Insurance Proceeds relating thereto.
Section 6.3 Adjustments.
The Seller hereby agrees that, with respect to each Contract
transferred hereunder which provides for any payment constituting a
Prepayment, which amount is less than an amount equal to the aggregate
remaining Scheduled Payments related to such Contract, the Seller shall
indemnify the Buyer in an amount equal to the amount equal to the aggregate
remaining Scheduled Payments related to such Contract.
Section 6.4 Substitution of Contracts.
On any day prior to the occurrence of the Termination Date, the Buyer
may, in its sole discretion, by written notice to the Seller, request that any
Contract be replaced by one or more other Contracts (each, a "Substitute
Contract"), provided that no such replacement shall occur unless each of the
following conditions is satisfied as of the date of such replacement and
substitution:
(a) the Seller has previously recommended to the Buyer in writing
that the Contract to be replaced should be replaced (each, a "Replaced
Contract");
(b) each Substitute Contract is an Eligible Contract on the date of
such substitution;
(c) after giving effect to any such substitution, the aggregate of
all outstanding Capital does not exceed the lesser of (A) the Purchase Limit
and (B) the Capital Limit;
(d) such Substitute Contracts, at the time of substitution by the
Seller, shall have approximately the same weighted average life as the
remaining Scheduled Payments of Assets in the Asset Pool and shall not
materially exceed the last Scheduled Payment of any Asset in the Asset Pool;
(e) all representations and warranties of the Seller contained in
Section 5.1 and 5.2 shall be true and correct as of the date of substitution
of any such Substitute Contract;
(f) the substitution of any Substitute Contract does not cause a
Payout Event to occur under the Receivables Purchase Agreement; and
(g) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of
the foregoing is true and correct as of such date.
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In connection with any such substitution, the Buyer shall,
automatically and without further action, be deemed to transfer to the Seller,
free and clear of any Lien created pursuant to this Agreement, all of the
right, title and interest of the Buyer in, to and under such Replaced
Contract, and the Buyer shall be deemed to represent and warrant that it has
the corporate authority and has taken all necessary corporate action to
accomplish such transfer, but without any other representation or warranty,
express or implied. Any right of the Buyer to substitute any Contract pursuant
to this Section 6.5 shall be in addition to, and without limitation of, any
other rights or remedies that the Buyer may have to require the Seller to
substitute for, or accept retransfer of, any Contract pursuant to the terms of
this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to the Buyer's Obligations
Regarding Contracts.
The obligations of the Buyer to purchase Purchased Assets from the
Seller on the Closing Date and on any Subsequent Purchase Date shall be
subject to the satisfaction of the following conditions:
(a) all representations and warranties of the Seller contained in
Sections 4.1 and 4.2 shall be true and correct on and as of such day as though
made on and as of such date;
(b) on and as of such day, the Seller shall have performed all
obligations required to be performed by it on or prior to such day pursuant to
the provisions of this Agreement;
(c) no event has occurred and is continuing, or would result from
such purchase which constitutes a Payout Event under the Receivables Purchase
Agreement;
(d) no law or regulation shall prohibit, and no order, judgment or
decree of any federal, state or local court or governmental body, agency or
instrumentality shall prohibit or enjoin, the making of any such purchase by
the Buyer in accordance with the provisions hereof; and
(e) all corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Buyer, and the Buyer shall have
received from the Seller copies of all documents (including, without
limitation, records of corporate proceedings, approvals and opinions) relevant
to the transactions herein contemplated as the Buyer may reasonably have
requested.
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ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Termination.
This Agreement shall commence as of the date of execution and
delivery hereof and shall continue in full force and effect until the
occurrence of the Collection Date pursuant to the Receivables Purchase
Agreement; provided, however, that the termination of this Agreement pursuant
to this Section 8.1 shall not discharge any Person from obligations incurred
prior to any such termination of this Agreement, including, without
limitation, any obligations to repurchase Contracts sold prior to such
termination pursuant to Section 6.1 or 6.2 hereof, or to make the payments
required under Section 6.3 hereof.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Amendment.
This Agreement and any other Sale Papers and the rights and
obligations of the parties hereunder may not be amended, waived or changed
orally, but only by an instrument in writing signed by the Buyer and the
Seller, with the prior written consent of the Deal Agent. The Buyer shall
provide not less than 10 Business Days prior written notice of any such
amendment to the Deal Agent.
Section 9.2 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY
AGREES TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF
NEW YORK. EACH OF THE PARTIES HERETO 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 CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
Section 9.3 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 registered mail, return receipt requested, to:
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(a) in the case of the Buyer, to:
SW Leasing Portfolio IV, Inc.
3000 Mellon Bank Center
1735 Market Street
Philadelphia, Pennsylvania 19103
Attn: President
Facsimile No.: (215) 575-7640
Confirmation No.: (215) 575-0500
(b) in the case of the Seller, to:
Fidelity Leasing, Inc.
Seven East Skippack Pike
Ambler, PA 19002
Attn: David H. English
Facsimile No.: (215) 619-2830
Confirmation No.: (215) 643-6300
(c) in the case of the Deal Agent, to:
First Union Capital Markets Corp.
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attn: Conduit Administrator
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 383-9343
or, as to each party, at such other address as shall be designated by such
party in a written notice to each other party.
Section 9.4 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement or any of the Sale Papers shall for any reason whatsoever be
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 the Sale Papers and shall in no way affect the
validity or enforceability of the other provisions of this Agreement or any of
the Sale Papers.
Section 9.5 Assignment.
(a) Notwithstanding anything to the contrary contained herein, this
Agreement may not be assigned by the Buyer or the Seller except as permitted
by this Section 9.5 or by the Receivables Purchase Agreement. Simultaneously
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with the execution and delivery of this Agreement, the Buyer shall assign all
of its right, title and interest herein (to the extent of the aggregate Asset
Interests) to the Deal Agent as agent for the Purchasers under the Receivables
Purchase Agreement as provided in the Receivables Purchase Agreement, to which
assignment the Seller hereby expressly consents. The Seller agrees to perform
its obligations hereunder for the benefit of the Deal Agent as agent for the
Purchasers under the Receivables Purchase Agreement and the Deal Agent, as
agent for the Purchasers under the Receivables Purchase Agreement under the
Receivables Purchase Agreement shall be a third party beneficiary hereof. The
Deal Agent as agent for the Purchasers under the Receivables Purchase
Agreement may enforce the provisions of this Agreement, exercise the rights of
the Buyer and enforce the obligations of the Seller hereunder as provided in
of the Receivables Purchase Agreement. This Agreement may not be assigned by
the Seller except in connection with a merger or consolidation of the Seller
with or into, or disposition of the Seller's properties and assets to, another
Person, provided, however, that any such merger, consolidation or disposition
shall satisfy the requirements of Section 9.14, upon not less than 10 Business
Days' prior written notice to the Buyer and the Deal Agent.
(b) In connection with any permitted assignment of this Agreement by
the Seller, the Seller shall deliver to the Buyer and the Deal Agent an
Officer's Certificate that such assignment complies with this Section 9.5, and
shall cause such assignee to execute an agreement supplemental hereto, in form
and substance satisfactory to the Seller, pursuant to which such assignee
shall expressly assume and agree to the performance of every covenant and
obligation of the Seller hereunder, to provide for the delivery of an Opinion
of Counsel that such supplemental agreement is legal, valid and binding with
respect to such assignee, and to take such other actions and execute such
other instruments as may reasonably be required to effectuate such assignment.
Section 9.6 Further Assurances.
the Buyer and the Seller agree to do and perform, from time to time,
any and all acts and to execute any and all further instruments required or
reasonably requested by the other party more fully to effect the purposes of
this Agreement and the Sale Papers, including, without limitation, the
execution of any financing statements, continuation statements, termination
statements, releases or equivalent documents relating to the Contracts for
filing under the provisions of the UCC or other laws of any applicable
jurisdiction.
Section 9.7 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the
Buyer or the Seller, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privilege
provided by law.
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Section 9.8 Counterparts.
This Agreement may be executed in two or more counterparts including
telefax transmission thereof (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.
Section 9.9 Binding Effect; Third-Party Beneficiaries.
This Agreement shall inure to the benefit of and the obligations
thereunder shall be binding upon the parties hereto and their respective
successors and permitted assigns. Any permitted assigns shall be third-party
beneficiaries of this Agreement.
Section 9.10 Merger and Integration.
Except as specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to the subject matter
hereof, there are no other agreements between the parties for transactions
relating to or similar to the transactions contemplated by this Agreement, and
all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
Section 9.11 Headings.
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
Section 9.12 Schedules and Exhibits.
The schedules and exhibits attached hereto and referred to herein
shall constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.
Section 9.13 No Proceedings.
The Seller hereby covenants and agrees that, prior to the date which
is one year and one day after the payment in full of the Note, it will not
institute against or join any other Person in instituting against the Buyer
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any State of the United States.
Section 9.14 Merger or Consolidation of, or Assumption
of the Obligations of, the Seller.
The Seller shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as
an entirety to any Person, unless:
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(i) the Person formed by such consolidation or into which
the Seller is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Seller substantially as an
entirety shall be, if the Seller is not the surviving entity,
organized and existing under the laws of the United States of America
or any State or the District of Columbia and shall expressly assume,
by an agreement supplemental hereto, executed and delivered to the
Buyer in form satisfactory to the Buyer, the performance of every
covenant and obligation of the Seller hereunder (to the extent that
any right, covenant or obligation of the Seller, as applicable
hereunder, is inapplicable to the successor entity, such successor
entity shall be subject to such covenant or obligation, or benefit
from such right, as would apply, to the extent practicable, to such
successor entity);
(ii) the Seller shall have delivered to the Buyer and the
Deal Agent an Officer's Certificate that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply with
this Section 9.14 and that all conditions precedent herein provided
for relating to such transaction have been complied with and an
Opinion of Counsel that such supplemental agreement is legal, valid
and binding with respect to the successor entity and that the entity
surviving such consolidation, conveyance or transfer is organized and
existing under the laws of the United States of America or any State
or the District of Columbia. The Deal Agent shall receive prompt
written notice of such merger or consolidation of the Seller; and
(iii) after giving effect thereto, no Event of Termination
under the Receivables Purchase Agreement or an event which with
notice or lapse of time or both would constitute such an Event of
Termination thereunder shall have occurred.
Section 9.15 Costs, Expenses and Taxes.
(a) The Seller agrees to pay on demand all costs and expenses of the
Buyer incurred in connection with the preparation, execution, delivery,
administration (including periodic auditing), amendment or modification of, or
any waiver or consent issued in connection with, this Agreement and the other
documents to be delivered hereunder or in connection herewith, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Buyer with respect thereto and with respect to advising the Buyer as
to its rights and remedies under this Agreement and the other documents to be
delivered hereunder or in connection herewith, and all costs and out-of-pocket
expenses, if any (including reasonable counsel fees and expenses), incurred by
the Buyer in connection with the enforcement of this Agreement and the other
documents to be delivered hereunder or in connection herewith.
(b) The Seller shall pay on demand any and all stamp, sales, excise
and other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement or any
agreement or other document delivered in connection with this Agreement
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(c) The Seller shall pay on demand any and all damages, losses,
claims, liabilities, fees and related costs and expenses, including attorney's
fees and expenses, incurred by or awarded against the Buyer or any of its
Affiliates (each, an "Indemnified Party") arising out of or as a result of the
transactions contemplated under this Agreement and owed by such Indemnified
Party to any other Person; provided, that the Seller shall not be liable to
pay any portion of any such damages, losses, claims or liabilities resulting
from the gross negligence or willful misconduct of an Indemnified Party or the
breach of a Requirement of Law by an Indemnified Party.
Section 9.16 Recourse Against Certain Parties.
(a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of the Seller as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any administrator of the Seller or
any incorporator, officer, employee or director of the Seller or of any such
administrator, as such, by the enforcement of any assessment or by any legal
or equitable proceeding, by virtue of any statute or otherwise; it being
expressly agreed and understood that the agreements of the Seller contained in
this Agreement and all of the other agreements, instruments and documents
entered into by it pursuant hereto or in connection herewith are, in each
case, solely the corporate obligations of the Seller, and that no personal
liability whatsoever shall attach to or be incurred by any administrator of
the Seller or any incorporator, officer, employee or director of the Seller or
of any such administrator, as such, or any other them, under or by reason of
any of the obligations, covenants or agreements of the Seller contained in
this Agreement or in any other such instruments, documents or agreements, or
which are implied therefrom, and that any and all personal liability of every
such administrator of the Seller and each incorporator, officer, employee or
director of the Seller or of any such administrator, or any of them, for
breaches by the Seller of any such obligations, covenants or agreements, which
liability may arise either at common law or at equity, by statute or
constitution, or otherwise, is hereby expressly waived as a condition of and
in consideration for the execution of this Agreement. The provisions of this
Section 9.16(a) shall survive the termination of this Agreement.
(b) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of the Buyer as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any administrator of the Buyer or any
incorporator, officer, employee or director of the Buyer or of any such
administrator, as such, by the enforcement of any assessment or by any legal
or equitable proceeding, by virtue of any statute or otherwise; it being
expressly agreed and understood that the agreements of the Buyer contained in
this Agreement and all of the other agreements, instruments and documents
entered into by it pursuant hereto or in connection herewith are, in each
case, solely the corporate obligations of the Buyer, and that no personal
liability whatsoever shall attach to or be incurred by any administrator of
the Buyer or any incorporator, officer, employee or director of the Buyer or
of any such administrator, as such, or any other them, under or by reason of
any of the obligations, covenants or agreements of the Buyer contained in this
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Agreement or in any other such instruments, documents or agreements, or which
are implied therefrom, and that any and all personal liability of every such
administrator of the Buyer and each incorporator, officer, employee or
director of the Buyer or of any such administrator, or any of them, for
breaches by the Buyer of any such obligations, covenants or agreements, which
liability may arise either at common law or at equity, by statute or
constitution, or otherwise, is hereby expressly waived as a condition of and
in consideration for the execution of this Agreement. The provisions of this
Section 9.16 (b) shall survive the termination of this Agreement.
[Signatures to Follow]
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IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement
to be duly executed by their respective officers as of the day and year first
above written.
SW LEASING PORTFOLIO IV, INC.
By:______________________________________
Name:________________________________
Title:_______________________________
FIDELITY LEASING, INC.
By:______________________________________
Name:________________________________
Title:_______________________________
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EXECUTION COPY
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U.S. $50,000,000
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 18, 1997
Among
SW LEASING PORTFOLIO IV, INC.
as the Seller
-------------
FIDELITY LEASING, INC.
as the Servicer
---------------
the INVESTORS
named herein
------------
VARIABLE FUNDING CAPITAL CORPORATION
as the Purchaser
----------------
FIRST UNION CAPITAL MARKETS CORP.
as the Deal Agent
-----------------
FIRST UNION NATIONAL BANK
as the Liquidity Agent
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and
HARRIS TRUST AND SAVINGS BANK
as the Collateral Custodian and Backup Servicer
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS............................................................................................1
Section 1.1 Certain Defined Terms........................................................................1
Section 1.2 Other Terms.................................................................................23
Section 1.3 Computation of Time Periods.................................................................23
ARTICLE II THE PURCHASE FACILITY................................................................................23
Section 2.1 Purchases of Asset Interests................................................................23
Section 2.2 The Initial Purchase, Subsequent Purchases and Incremental Purchases........................24
Section 2.3 Reduction of the Purchase Limit; Repurchase.................................................25
Section 2.4 Determination of Yield......................................................................25
Section 2.5 [reserved]..................................................................................25
Section 2.6 Dividing or Combining Asset Interests.......................................................25
Section 2.7 Non-Liquidation Settlement Procedures.......................................................26
Section 2.8 Settlement Procedures Following a Termination Date..........................................27
Section 2.9 Settlement Procedures Following a Restricting Event.........................................28
Section 2.10 Collections and Allocations................................................................30
Section 2.11 Payments, Computations, Etc................................................................30
Section 2.12 Optional Repurchase........................................................................31
Section 2.13 Fees.......................................................................................31
Section 2.14 Increased Costs; Capital Adequacy; Illegality..............................................32
Section 2.15 Taxes......................................................................................33
Section 2.16 Assignment of the Purchase Agreement.......................................................35
Section 2.17 Substitution of Contracts..................................................................35
ARTICLE III CONDITIONS OF PURCHASES.............................................................................37
Section 3.1 Conditions Precedent to Initial Purchase....................................................37
Section 3.2 Conditions Precedent to All Purchases and Remittances of Collections........................37
Section 3.3 Delivery of Contract Files..................................................................38
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................................................38
Section 4.1 Representations and Warranties of the Seller................................................38
Section 4.2 Representations and Warranties of Seller Relating to the Agreement and the Contracts........42
Section 4.3 Representations and Warranties of the Seller Relating to the Purchase
Limit and Capital Limit.................................................................................44
ARTICLE V GENERAL COVENANTS OF THE SELLER.......................................................................44
Section 5.1 General Covenants...........................................................................44
Section 5.2 Covenants of Seller.........................................................................44
Section 5.3 Release of Lien on Equipment................................................................48
Section 5.4 Hedging of Contracts........................................................................49
Section 5.5 Retransfer of Ineligible Contracts..........................................................49
Section 5.6 Retransfer of Assets........................................................................50
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ARTICLE VI ADMINISTRATION AND SERVICING OF CONTRACTS............................................................51
Section 6.1 Appointment and Acceptance; Duties..........................................................51
Section 6.2 Collection of Payments......................................................................54
Section 6.3 Servicer Advances...........................................................................55
Section 6.4 Realization Upon Defaulted Contract.........................................................56
Section 6.5 Maintenance of Insurance Policies...........................................................56
Section 6.6 Representations and Warranties of Servicer..................................................57
Section 6.7 Representations and Warranties of Backup Servicer and Collateral Custodian..................58
Section 6.8 Covenants of Servicer.......................................................................60
Section 6.9 Covenants of Backup Servicer and Collateral Custodian.......................................60
Section 6.10 Servicing Compensation.....................................................................61
Section 6.11 Custodial Compensation.....................................................................61
Section 6.12 Payment of Certain Expenses by Servicer....................................................61
Section 6.13 Reports....................................................................................62
Section 6.14 Annual Statement as to Compliance..........................................................62
Section 6.15 Annual Independent Public Accountant's Servicing Reports...................................62
Section 6.16 Adjustments................................................................................63
Section 6.17 Merger or Consolidation of the Servicer....................................................63
Section 6.18 Limitation on Liability of the Servicer and Others.........................................64
Section 6.19 Indemnification of the Seller, the Backup Servicer, the....................................64
Collateral Custodian, the Deal Agent and the Purchasers.................................................64
Section 6.20 The Servicer Not to Resign.................................................................65
Section 6.21 Access to Certain Documentation and Information
Regarding the Contracts.................................................................................65
Section 6.22 Backup Servicer............................................................................66
Section 6.23 Identification of Records..................................................................68
Section 6.24 Servicer Defaults..........................................................................68
Section 6.25 Appointment of Successor Servicer..........................................................70
Section 6.26 Notification...............................................................................71
Section 6.27 Protection of Right, Title and Interest to Assets..........................................71
Section 6.28 Release of Contract Files..................................................................72
ARTICLE VII PAYOUT AND RESTRICTING EVENTS.......................................................................72
Section 7.1 Payout Events...............................................................................72
Section 7.2 Restricting Events..........................................................................72
ARTICLE VIII INDEMNIFICATION....................................................................................74
Section 8.1 Indemnities by the Seller...................................................................74
ARTICLE IX THE DEAL AGENT AND THE LIQUIDITY AGENT...............................................................77
Section 9.1 Authorization and Action....................................................................77
Section 9.2 Delegation of Duties........................................................................77
Section 9.3 Exculpatory Provisions......................................................................78
Section 9.4 Reliance....................................................................................79
Section 9.5 Non-Reliance on Deal Agent, Liquidity Agent and Other Purchasers............................79
Section 9.6 Reimbursement and Indemnification...........................................................80
Section 9.7 Deal Agent and Liquidity Agent in their Individual Capacities...............................80
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Section 9.8 Successor Deal Agent or Liquidity Agent.....................................................80
ARTICLE X ASSIGNMENTS; PARTICIPATIONS...........................................................................81
Section 10.1 Assignments and Participations.............................................................81
ARTICLE XI MISCELLANEOUS........................................................................................84
Section 11.1 Amendments and Waivers.....................................................................84
Section 11.2 Notices, Etc...............................................................................85
Section 11.3 Ratable Payments...........................................................................85
Section 11.4 No Waiver, Rights and Remedies.............................................................86
Section 11.5 Binding Effect.............................................................................86
Section 11.6 Term of this Agreement.....................................................................86
Section 11.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE.......................86
Section 11.8 WAIVER OF JURY TRIAL.......................................................................87
Section 11.9 Costs, Expenses and Taxes..................................................................87
Section 11.10 No Proceedings............................................................................88
Section 11.11 Recourse Against Certain Parties..........................................................88
Section 11.12 Protection of Ownership Interests of the Purchasers; Intent of Parties; Security Interest;
Third Party Beneficiary.................................................................................88
Section 11.13 Confidentiality...........................................................................89
Section 11.14 Execution in Counterparts; Severability; Integration......................................91
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EXHIBITS
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EXHIBIT A Form of Notice of Sale
EXHIBIT B Form of Lock-Box Notices
EXHIBIT C "Limited Purpose" provisions of Seller's Certificate of Incorporation
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Monthly Report
EXHIBIT F Form of Servicer's Certificate
EXHIBIT G Form of Purchase Certificate
EXHIBIT H Form of Hedging Agreement (including Schedule and Confirmation)
SCHEDULES
SCHEDULE I Condition Precedent Documents
SCHEDULE II Lock-Box Banks and Lock-box Accounts
SCHEDULE III Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV Location of Contract Files
SCHEDULE V List of Contracts
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THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is made as of
December 18, 1997, among:
(1) SW LEASING PORTFOLIO IV, INC., a Pennsylvania corporation, as
seller (the "Seller");
(2) FIDELITY LEASING, INC., a Pennsylvania corporation ("Fidelity"),
as servicer (the "Servicer");
(3) the financial institutions listed on the signature pages of this
Agreement under the heading "Investors" and their respective successors and
assigns (the "Investors");
(4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation
("VFCC");
(5) FIRST UNION CAPITAL MARKETS CORP. ("FCMC"), as deal agent (the
"Deal Agent") and as documentation agent (the "Documentation Agent");
(6) FIRST UNION NATIONAL BANK ("First Union"), as liquidity agent
(the "Liquidity Agent"); and
(7) HARRIS TRUST AND SAVINGS BANK, as collateral custodian (the
"Collateral Custodian") and backup servicer (the "Backup Servicer").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
(a) Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1. 1.
(b) As used in this Agreement and its exhibits, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).
ADCB: On any date of determination, the sum of the Discounted Contract Balance
of each Eligible Contract (excluding all Defaulted Contracts, Casualty Loss
Contracts, Early Termination Contracts and Contracts subject to a Warranty
Event) included in the Asset Pool as of the date of such determination.
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Addition Date: With respect to any Additional Contracts, the date on which
such Additional Contracts become Pool Assets.
Additional Contracts: All Contracts that become Pool Assets after the Closing
Date.
Additional Cut Off Date: Each date on and after which Collections on an
Additional Contract are to be transferred to the Asset Pool.
Adjusted Eurodollar Rate: On any day, an interest rate per annum equal to the
quotient, expressed as a percentage and rounded upwards (if necessary), to the
nearest 1/100 of 1%, obtained by dividing (i) the LIBOR Rate on such day by (ii)
decimal equivalent of 100% minus the Eurodollar Reserve Percentage on such day.
Administration Agreement: That certain Administration Agreement executed
between VFCC and First Union Capital Markets Corp., as the same may be
amended, supplemented, or otherwise modified from time to time.
Adverse Claim: A lien, security interest, charge, encumbrance or other right
or claim of any Person.
Affected Party: As defined in Section 2.14(a).
Affiliate: With respect to a Person means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
Agent's Account: A special account (account number 01 41 96 47) in the name of
the Deal Agent or, so long as VFCC is the sole Purchaser hereunder, in the
name of VFCC maintained at Bankers Trust Company.
Aggregate Unpaids: At any time, an amount, equal to the sum of all Yield
(accrued and to accrue), Capital and all other amounts owed hereunder, under
any Hedging Agreement (including, without limitation, payments in respect of
the termination of any such Hedging Agreement) or under any fee letter
delivered by the Originator to the Deal Agent and the Purchasers at such time
(whether due or accrued).
Agreement: This Receivables Purchase Agreement, dated as of December 18, 1997,
as amended, modified, supplemented or restated from time to time.
Alternative Rate: An interest rate per annum equal to the Adjusted Eurodollar
Rate or the Base Rate, as the Deal Agent shall select in accordance with the
terms of the Agreement; provided, however, that the "Alternative Rate" shall
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be the Base Rate if the relevant Purchaser shall have notified the Deal Agent
that a Eurodollar Disruption Event has occurred.
Asset: All right, title and interest of the transferring party in, to and
under any and all of the following:
(i) the Existing Contracts and Additional Contracts, and all
monies due or to become due in payment of such Contracts on and after
the related Cut Off Date, including but not limited to any Prepayment
Amounts, any payments in respect of a casualty or early termination,
and any Recoveries received with respect thereto, but excluding any
Scheduled Payments due prior to the related Cut Off Date and any
Excluded Amounts;
(ii) the Equipment related to such Contracts including all
proceeds from any sale or other disposition of such Equipment;
(iii) the Contract Files,
(iv) all payments made or to be made in the future with
respect to such Contracts or the obligor thereunder and under any
guarantee or similar credit enhancement with respect to such
Contracts;
(v) all Insurance Proceeds with respect to each such
Contract; and
(vi) all income and proceeds of the foregoing.
Asset Interest: At any time, an undivided variable percentage ownership
interest in all Assets. The undivided percentage interest of an Asset Interest
shall equal
C + C x R
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AC
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ADCB
where:
C = equals the Capital in respect of such Asset Interest.
AC = equals the aggregate Capital on such date.
R = equals the Overcollateralization on such date.
Asset Pool: At any time, all then outstanding Assets.
Assignment and Acceptance: An assignment and acceptance entered into by an
Investor and an Eligible Assignee, and accepted by the Deal Agent, in
substantially the form of Exhibit D hereto.
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Backup Servicer: Harris Trust and Savings Bank and its permitted successors
and assigns.
Backup Servicer and Collateral Custodian Fee Letter: The letter dated as of
the Closing Date, among Fidelity, the Deal Agent, the Backup Servicer and
Collateral Custodian setting forth among other things the Backup Servicer Fee
and the Collateral Custodial Fee.
Backup Servicer Fee Rate: The rate per annum set forth in the Backup Servicer
and Collateral Custodian Fee Letter, dated as of the Closing Date.
Backup Servicing Fee: As defined in Section 6.22.
Bankruptcy Code: The Federal Bankruptcy Code, as amended from time to time
(Title 11 of the United States Code).
Base Rate: On any date, a fluctuating rate of interest per annum equal to the
higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1.0%.
Benefit Plan: Any employee benefit plan as defined in Section 3(3) of ERISA in
respect of which the Seller or any ERISA Affiliate of the Seller is, or at any
time during the immediately preceding six years was, an "employer" as defined
in Section 3(5) of ERISA.
Blended Discount Rate: For any Determination Date, a rate per annum equal to
the weighted average (calculated based on the applicable Outstanding Balances)
of (i) the Blended Discount Rate as of the immediately preceding Determination
Date and (ii) the Sale Discount Rate, if any, for any Contract transferred to
the Asset Pool on the most recent Purchase Date, if any, occurring on or after
the immediately preceding Determination Date; provided, however, that the
Blended Discount Rate for the first Determination Date following the Closing
Date shall be the Sale Discount Rate applicable to the Original Contracts.
Business Day: Any day of the year other than a Saturday or a Sunday on which
(a) banks are not required or authorized to be closed in New York City,
Philadelphia, Pennsylvania, Charlotte, North Carolina and Chicago, Illinois,
and (b) if the term "Business Day" is used in connection with the Adjusted
Eurodollar Rate, dealings in United States dollar deposits are carried on in
the London interbank market.
Capital: For each Asset Interest, the amount paid to the Seller for such Asset
Interest at the time of its purchase by the Purchaser pursuant to this
Agreement, reduced from time to time by Collections distributed on account of
such Capital pursuant to Sections 2.7, 2.8 or 2.9; provided, however, that
such Capital shall not be reduced by any distribution or any portion of
Collections if at any time such distribution is rescinded or must be returned
for any reason.
Capital Limit: At any time, the product of (i) the ADCB and (ii) the lesser of
(a) 88% and (b) 100% - (three and a half (3 1/2) multiplied by the Net Loss to
Liquidation Ratio).
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Casualty Loss: With respect to any item of Equipment, the loss, theft, damage
beyond repair or governmental condemnation or seizure of such item of
Equipment.
Casualty Loss Contract: Any Contract that is subject to a Casualty Loss.
Closing Date: December 18, 1997.
Code: The Internal Revenue Code of 1986, as amended.
Collateral Custodian: Harris Trust and Savings Bank and its permitted
successors and assigns.
Collection Account: As defined in Section 6.2(f).
Collection Date: The date following the Termination Date on which the
aggregate outstanding Capital has been reduced to zero, the Purchasers have
received all Yield and other amounts due to the Purchasers in connection with
this Agreement and the Deal Agent has received all amounts due to it in
connection with this Agreement.
Collections: (a) All cash collections and other cash proceeds of any Asset,
including, without limitation, Scheduled Payments, Prepayments, Insurance
Proceeds and Recoveries, all as related to amounts attributable to the
Contracts in the Asset Pool or the related Equipment, but excluding any
Excluded Amounts, (b) Residual Proceeds and (c) any other funds received by
the Seller or the Servicer with respect to any Contract or related Equipment.
Commercial Paper Notes: On any day, any short-term promissory notes issued by
VFCC with respect to financing its purchase of an Asset Interest hereunder.
Commitment: For each Investor, the commitment of such Investor to make
purchases from the Seller in an amount not to exceed the amount set forth
opposite such Investor's name on the signature pages of this Agreement, as
such amount may be modified in accordance with the terms hereof.
Commitment Fee: As defined in Section 2.13(a) hereof.
Commitment Fee Rate: The rate per annum set forth in the Program Fee Agreement.
Commitment Termination Date: December 17, 1998 or such later date to which the
Commitment Termination Date may be extended (if extended) in the sole
discretion of VFCC and each Investor in accordance with the terms of Section
2.1(b).
Contract: Any lease of Equipment by the Originator or by a third party, in
each case as lessor, to an Obligor.
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Contract Files: With respect to each Contract, the fully executed original
counterpart (for UCC purposes) of the Contract, the original certificate of
title or other title document with respect to the related Equipment (if
applicable), and otherwise such documents, if any, that the Collateral
Custodian holds, evidencing ownership of such Equipment (if applicable) and
all other documents originally delivered to the Seller or held by the
Collateral Custodian with respect to any Contract.
Contract List: The contract list provided by the Seller to the Deal Agent and
the Collateral Custodian, in the form of Schedule V hereto.
CP Disruption Event: The inability of a Purchaser, at any time, whether as a
result of a prohibition, a contractual restriction or any other event or
circumstance whatsoever, to raise funds through the issuance of its commercial
paper notes (whether or not constituting commercial paper notes issued to fund
Purchases hereunder) in the United States commercial paper market.
CP Rate: For any Fixed Period, the per annum rate equivalent to the weighted
average of the per annum rates paid or payable by VFCC from time to time as
interest on or otherwise (by means of interest rate hedges or otherwise) in
respect of the promissory notes issued by VFCC that are allocated, in whole or
in part, by the Deal Agent (on behalf of VFCC) to fund or maintain the Asset
Interest during such period, as determined by the Deal Agent (on behalf of
VFCC) and reported to the Seller and the Servicer, which rates shall reflect
and give effect to the commissions of placement agents and dealers in respect
of such promissory notes, to the extent such commissions are allocated, in
whole or in part, to such promissory notes by the Deal Agent (on behalf of
VFCC); provided, however, that if any component of such rate is a discount
rate, in calculating the "CP Rate", the Deal Agent shall for such component
use the rate resulting from converting such discount rate to an interest
bearing equivalent rate per annum.
Credit and Collection Policy: The written credit and collection policies of
the Originator and Servicer in effect on the date hereof, as amended or
supplemented from time to time in accordance with Section 4.1(j).
Custodial Fee: As defined in Section 6.11.
Cut Off Date: With respect to each Existing Contract, the date on and after
which Collections on such Existing Contract are to be transferred to the Asset
Pool, and with respect to each Additional Contract, the related Additional Cut
Off Date.
Default Ratio: As of any Determination Date, the percentage equivalent of a
fraction, the numerator of which is equal to twice the sum of the Discounted
Contract Balance of Contracts that became Defaulted Contracts (net of
Recoveries related thereto) during the immediately preceding six calendar
months and the denominator of which is the average of the ADCB as of each of
the current Determination Date and each of the immediately preceding five
Determination Dates.
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Defaulted Contract: (i) A Contract in the Asset Pool as to which the Servicer
has determined or should have determined in accordance with its Credit and
Collection Policy that such Contract is not collectible or is subject to
repossession, or (ii) a Contract in the Asset Pool as to which all or a
portion of any one or more Scheduled Payments is more than 120 days past due
in an aggregate amount equal to the higher of (A) ten dollars or more or (B)
ten percent or more of any Scheduled Payment.
Delinquency Ratio: As of any Determination Date, the percentage equivalent of
a fraction, the numerator of which is the average of the Discounted Contract
Balance of Delinquent Contracts as of such Determination Date and each of the
immediately preceding two Determination Dates and the denominator of which is
the average of the ADCB as of such Determination Date and each of the
immediately preceding two Determination Dates.
Delinquent Contract: A Contract in the Asset Pool as to which all or a portion
of any one or more Scheduled Payments is 60 days or more past due.
Determination Date: The last Business Day of each calendar month.
Discounted Contract Balance: With respect to any Contract, (i) as of the
related Cut Off Date, the present value of all remaining Scheduled Payments
becoming due under such Contract after the applicable Cut Off Date discounted
monthly at the Sale Discount Rate and (ii) as of any other date of
determination, the present value of all remaining Scheduled Payments becoming
due under such Contract after such Determination Date discounted monthly at
the applicable Blended Discount Rate.
The "Discounted Contract Balance" for each Contract shall be
calculated assuming:
(a) all payments due in any Monthly Period as due on the
last day of the Monthly Period;
(b) payments are discounted on a monthly basis using a 30
day month and a 360 day year; and
(c) all security deposits and drawings under letters of
credit, if any, issued in support of a Contract are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
Early Termination Contracts: Any Contract that the Servicer has allowed the
related Obligor to terminate prior to the date on which the final Scheduled
Payment is due thereunder.
Eligible Assignee: (a) A Person whose short-term rating is at least A-1 from
S&P and P-1 from Moody's, or whose obligations under this Agreement are
guaranteed by a Person whose short-term rating is at least A-1 from S&P and
P-1 from Moody's, or (b) such other Person satisfactory to VFCC, the Deal
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Agent and each of the rating agencies rating the Commercial Paper and
approved, in writing, by the Seller; provided, however, that no such approval
shall be required in the event any Investor is required by any rating agency
rating VFCC's commercial paper notes or by any regulatory agency to make an
assignment.
Eligible Contract: On any Determination Date, each Contract with respect to
which each of the following is true:
(a) the information with respect to the Contract and the Equipment
subject to the Contract is true and correct in all material respects;
(b) immediately prior to the transfer hereunder of the Contract and
any related Equipment (or security interest therein), the Contract was owned
by the Seller free and clear of any Adverse Claim;
(c) no Scheduled Payment related to the Contract is (i) more than 60
days delinquent, (ii) a payment as to which the Servicer has failed to make a
Servicer Advance, (iii) a payment as to which the related Equipment has been
repossessed or (iv) a payment as to which the related Equipment has been
charged-off in accordance with the credit and collection policies of the
Servicer;
(d) the Contract is not a Defaulted Contract;
(e) no provision of the Contract has been waived, altered or modified
in any respect except as allowed under the Credit and Collection Policy of the
Servicer;
(f) the Contract is a valid and binding payment obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by applicable Insolvency Laws and the availability of equitable
remedies);
(g) the Contract is not and will not be subject to rights of
rescission, setoff, counterclaim or defense and no such rights have been
asserted or threatened with respect to the Contract;
(h) the Contract, at the time it is sold to VFCC does not violate the
laws of the United States or any state in any manner which would create
liability for any Purchaser or which would materially and adversely affect the
enforceability or collectibility of such Contract;
(i) (i) the Contract and any related Equipment have not been sold,
transferred, assigned or pledged by the Seller to any other Person and, with
respect to a Contract that is a "true lease," any Equipment related to such
true lease is owned by the Seller free and clear of any Liens of any third
parties (except for any Permitted Liens) and (ii) such Contract is secured by
a fully perfected Lien of the first priority on the related Equipment but only
to the extent that the Contract has (i) a $1.00 purchase option exercisable at
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the expiration of its term and the Equipment has a residual value in excess of
$10,000,00 at such time; (ii) a fixed price purchase option exercisable at the
expiration of its term and the Equipment has a residual value in excess of
$10,000.00 at such time; or (iii) a fair market value purchase price option
exercisable at the expiration of its term and the residual value of the
Equipment exceeds $50,000.00 at such time;
(j) the Contract constitutes chattel paper, an account, an instrument
or a general intangible as defined under the UCC and if the Contract
constitutes "chattel paper" for purposes of the UCC, there is not more than
one "secured party's original" counterpart of the Contract;
(k) all filings necessary to evidence the conveyance or transfer to
the Deal Agent of the Contract and all right, title and interest in the
related Equipment have been made in all appropriate Jurisdictions;
(l) the Obligor is not the subject of bankruptcy or other insolvency
proceedings;
(m) the Obligor's billing address is in the United States and the
Contract is a U.S. dollar-denominated obligation;
(n) the Contract does not require the prior written consent of an
Obligor or contain any other restriction on the transfer or assignment of the
Contract (other than a consent or waiver of such restriction that has been
obtained prior to the Closing Date, with respect to an Existing Contract, or
the Addition Date, with respect to an Additional Contract);
(o) the obligations of the related Obligor under the Contract are
irrevocable, unconditional and non-cancelable (without the right to set off
for any reason and net of any maintenance or cost per copy charges);
(p) the Contract has a remaining term to maturity of not greater than
60 months, provided, however, that up to 10% (by ADCB) may have a remaining
term to maturity of not greater than 72 months;
(q) no adverse selection procedure was used in selecting the Contract
for the Asset Pool;
(r) the Obligor under the Contract is required to maintain casualty
insurance or to self-insure with respect to the related Equipment in
accordance with the Servicer's normal requirements;
(s) the Contract is not a "consumer lease" as defined In Section
2A-103(l)(e) of the UCC;
(t) the Contract is not subject to any guarantee by the Servicer nor
has the Seller or the Originator established any specific credit reserve with
respect to the related Obligor;
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(u) the Contract provides that (i) the Originator, the Seller or the
Servicer may accelerate all remaining Scheduled Payments if the Obligor is in
default under any of its obligations under such Contract and (ii) the Obligor
thereof may not elect to utilize its security deposit to offset any remaining
Scheduled Payment;
(v) the Obligor under the Contract is required to maintain the
Equipment in good working order and bear all costs of operating the Equipment
(including the payment of Taxes);
(w) no provision of such Contract provides for a Prepayment Amount
less than the amount calculated in accordance with the definition of
Prepayment Amount;
(x) the Contract has not been terminated as a result of a Casualty
Loss to the related Equipment or for any other reason;
(y) the Discounted Contract Balance of such Contract, when aggregated
with the Discounted Contract Balance of each other Contract having the same
Obligor, does not exceed the Portfolio Concentration Criteria;
(z) the Discounted Contract Balance of such Contract does not include
the amount of any security deposit held by the Servicer or the Seller;
(aa) such Contract provides that in the event of a Casualty Loss, the
Obligor is required to pay an amount not less than the present value of all
remaining Scheduled Payments discounted at the applicable Sale Discount Rate
plus any past due amounts as of the date of determination;
(bb) the Obligor thereunder has represented to the Originator that
such Obligor has accepted the related Equipment and has had a reasonable
opportunity to inspect and test such Equipment and the Originator has not been
notified of any defects therein; and
(cc) all payments in respect of a Contract will be made free and
clear of, and without deduction or withholding for or on account of, any
Taxes, unless such withholding or deduction is required by law.
Equipment: The tangible assets financed or leased by an Obligor pursuant to a
Contract and/or, unless the context otherwise requires, a security interest in
such assets, such tangible assets to consist of small ticket equipment,
including without limitation small manufacturing, automotive repair, printing,
information and document processing and storage, telecommunications and office
equipment.
ERISA: The U.S. Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
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ERISA Affiliate: (a) Any corporation which is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Code) as
the Seller; (b) A trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Code) with the Seller or
(c) A member of the same affiliated service group (within the meaning of
Section 414(m) of the Code) as the Seller, any corporation described in clause
(a) above or any trade or business described in clause (b) above.
Eurocurrency Liabilities: As defined in Regulation D of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
Eurodollar Disruption Event: The occurrence of any of the following: (a) a
determination by a Purchaser that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London
interbank market to make, fund or maintain any Purchase, (b) the failure of
one or more of the Reference Banks to furnish timely information for purposes
of determining the Adjusted Eurodollar Rate, (c) a determination by a
Purchaser that the rate at which deposits of United States dollars are being
offered to such Purchaser in the London interbank market does not accurately
reflect the cost to such Purchaser of making, funding or maintaining any
Purchase or (d) the inability of a Purchaser to obtain United States dollars
in the London interbank market to make, fund or maintain any Purchase.
Eurodollar Reserve Percentage: Of any Reference Bank for any period, for any
Capital means the percentage applicable during such period (or, if more than
one such percentage shall be so applicable, the daily average of such
percentages for those days in such period during which any such percentage
shall be so applicable) under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for such
Reference Bank with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities having a term of one, two or three months,
as applicable based upon the related LIBOR Rate.
Excess Funds: On any Payment Date, any amount payable to the Seller pursuant
to Sections 2.7(a)(x), 2.8(b)(x) or 2.9(b)(x), as the case may be.
Excluded Amounts: (a) Any collections on deposit in the Collection Account or
otherwise received by the Servicer on or with respect to the Asset Pool or
related Equipment, which collections are attributable to any Taxes, fees or
other charges imposed by any Governmental Authority, (b) any collections
representing reimbursements of insurance premiums or payments for services
that were not financed by the Originator, (c) any collections with respect to
Contracts retransferred or substituted for with respect to a Warranty Event,
or otherwise replaced by a Substitute Contract and (d) any late fees,
insufficient funds charges, inspection charges, collection fees, delinquency
fees, repossession fees or UCC fees, extension fees, documentation fees,
maintenance fees and insurance fees.
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Existing Contracts: The Contracts purchased by the Seller under the Purchase
Agreement and owned by the Seller on the Closing Date.
Facility Financing Statement: As defined in Schedule I.
Fee Letter: The letter, dated as of the Closing Date, among the Seller, the
Servicer, and the Deal Agent setting forth, among other things, the Servicer
Fee.
Federal Funds Rate: For any period, a fluctuating interest rate per annum
equal for each day during such period to the weighted average of the federal
funds rates as quoted by First Union and confirmed in Federal Reserve Board
Statistical Release H.15(519) or any successor or substitute publication
selected by First Union (or, if such day is not a Business Day, for the next
preceding Business Day), or, if, for any reason, such rate is not available on
any day, the rate determined, in the sole opinion of First Union, to be the
rate at which federal funds are being offered for sale in the national federal
funds market at 9:00 A.M. Charlotte, North Carolina time.
First Union: First Union National Bank, in its individual capacity, and its
successors or assigns.
Fixed Period: For any Payment Date the period beginning on, and including the
13th day of the immediately preceding calendar month (or, with respect to the
first Fixed Period, the Closing Date) and ending on, but excluding the 13th
day of the current calendar month.
GAAP: Generally accepted accounting principles as in effect from time to time
the United States.
Governmental Authority: With respect to any Person, any nation or government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
such Person.
H.15: As defined in Section 5.4.
Hedge Counterparty: An entity (i) (A) whose commercial paper or short-term
deposit rating is at least P-1 from Moody's and at least A-1 from S & P and
(B) who shall agree that, in the event that its commercial paper or short-term
deposit rating is reduced below A-1 by S&P or P-1 by Moody's, it shall secure
its obligations in a manner as the Deal Agent may reasonably request or assign
its obligations to a Person meeting the requirements of clauses (i)(A) and
(ii) hereof, and (ii) which shall be rated at least A and A2 by S&P and
Moody's, respectively and (iii) which has entered into a Hedging Agreement.
Hedged Amount: As defined in Section 5.4.
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Hedged Costs: With respect to any Payment Date, the amount of hedging costs,
including, without limitation, payments to the Hedge Counterparty, as payable
out of funds in the Collection Account on such Payment Date as provided by
Section 2.7.
Hedged Level: As defined in Section 5.4.
Hedging Agreement: With respect to this Agreement, each hedging agreement
entered into by the Seller and a Hedge Counterparty.
Increased Costs: Any amounts required to be paid by the Seller to an Affected
Party pursuant to Section 2.12.
Incremental Purchase: Any Purchase that increases the aggregate outstanding
Capital hereunder.
Indebtedness: With respect to any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
or services (other than current liabilities incurred in the ordinary course of
business and payable in accordance with customary trade practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all
obligations of such Person under capital leases, (c) all obligations of such
Person in respect of acceptances issued or created for the account of such
Person and (d) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof.
Indemnified Amounts: As defined in Section 8. 1
Indemnified Persons: As defined in Section 6.19.
Ineligible Contract: As defined in Section 5.5.
Insolvency Event: With respect to a specified Person, (a) the filing of a
decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an
involuntary case under any applicable Insolvency Law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part
of its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable Insolvency Law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for
any substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such Person
generally to pay its debts as such debts become due, or the taking of action
by such Person in furtherance of any of the foregoing.
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Insolvency Laws: The Bankruptcy Code of the United States of America and all
other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of
payments, or similar debtor relief laws from time to time in effect affecting
the rights of creditors generally.
Instrument: Any "instrument" (as defined in Article 9 of the UCC), other than
an instrument which constitutes part of chattel paper.
Insurance Policy: With respect to any Contract, an insurance policy covering
physical damage to or loss of the related Equipment.
Insurance Proceeds: Depending on the context, any amounts payable or any
payments made, to the Servicer under any Insurance Policy.
Investment: With respect to any Person, any direct or indirect loan, advance
or investment by such Person in any other Person, whether by means of share
purchase, capital contribution, loan or otherwise, excluding the acquisition
of Assets pursuant to the Purchase Agreement and excluding commission, travel
and similar advances to officers, employees and directors made in the ordinary
course of business.
Issuer: VFCC and any other Purchaser whose principal business consists of
issuing commercial paper or other securities to fund its acquisition and
maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar assets.
LIBOR Rate: For any period of one, two or three months chosen by the Deal
Agent (the "LIBOR Period"), an interest rate per annum equal the rate
appearing on the Telerate Page 3750 as of 11:00 a.m. (London time) on the
Business Day which is the second Business Day immediately preceding the first
day of such LIBOR Period for a term equal to such LIBOR Period or, if no such
rate appears on such day, the average (rounded upward to the nearest
one-sixteenth (1/16) of one percent) per annum rate of interest determined by
First Union at its principal office in Charlotte, North Carolina (each such
determination, absent manifest error, to be conclusive and binding) as of two
Business Days prior to the first day of the applicable LIBOR Period, to be the
rate at which deposits in immediately available funds in U.S. dollars are
being, have been, or would be offered or quoted by First Union to major banks
in the interbank market for Eurodollar deposits at or about 11:00 A.M.
(Charlotte, North Carolina time) on such day, for a term comparable to such
LIBOR Period and in an amount approximately equal to the Capital allocated to
such LIBOR Period by the Deal Agent.
Lien: With respect to any Asset, (a) any mortgage, lien, pledge, charge
security interest or encumbrance of any kind in respect of such Asset or (b)
the interest of a vendor or lessor under any conditional sale agreement,
financing lease or other title retention agreement relating to such Asset.
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Liquidation Expenses: With respect to any Contract, the aggregate amount of
all out-of-pocket expenses reasonably incurred by the Servicer (including
amounts paid to any subservicer) and any reasonably allocated costs of
internal counsel, in each case in accordance with the Servicer's customary
procedures in connection with the repossession, refurbishing and disposition
of any related Equipment upon or after the expiration or earlier termination
of such Contract and other out-of-pocket costs related to the liquidation of
any such Equipment, including the attempted collection of any amount owing
pursuant to such Contract if it is a Defaulted Contract.
Liquidity Bank: Each liquidity bank that is a party to the Liquidity Purchase
Agreement dated as of December 18, 1997, among the Purchaser, First Union, as
liquidity agent, and each other liquidity bank a party thereto.
Lock-Box: A post office box to which Collections are remitted for retrieval by
a Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box Account.
Lock-Box Account: An account maintained for the purpose of receiving
Collections at a bank or other financial institution which has executed a
Lock-Box Notice for the purpose of receiving Collections.
Lock-Box Bank: Any of the banks or other financial institutions holding one or
more Lock-Box Accounts.
Lock-Box Notice: A notice, in substantially the form of Exhibit B, among the
Seller, the Originator (if applicable) and a Lock-Box Bank.
Monthly Period: As to any Determination Date, the calendar month ended on such
Determination Date.
Monthly Report: As defined in Section 6.13(a).
Moody's: Moody's Investors Service, Inc., and any successor thereto.
Multiemployer Plan: A "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately
preceding five years contributed to by the Seller or any ERISA Affiliate on
behalf of its employees.
Net Loss to Liquidation Ratio: At any time, the product of the Default Ratio
and the weighted average life (in years, rounded upwards to the nearest tenth
of a year) of the Asset Pool.
Notice of Sale: A notice, substantially in the form of Exhibit A hereto,
delivered pursuant to Section 2.2.
Obligor: A Person obligated to make payments pursuant to a Contract including
any guarantor thereof.
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Officer's Certificate: A certificate signed by any officer of the Seller or
the Servicer and delivered to the Collateral Custodian, as the case may be.
Opinion of Counsel: A written opinion of counsel, who may be counsel for
Seller or the Servicer and who shall be reasonably acceptable to the Deal
Agent.
Original Contract: Each Contract identified by account number and Outstanding
Balance as of the related Cut Off Date in the Contract List.
Originator: Fidelity Leasing, Inc. or any wholly owned subsidiary thereof.
Originator Assets: Any Asset that was transferred to the Seller by the
Originator.
Outstanding Balance: Of any Asset at any time, the then outstanding principal
balance thereof.
Overcollateralization: On any day, the difference between the (i) the ADCB on
such day and (ii) the aggregate Capital on such day.
Payment Date: The 20th day of each calendar month or, if such day is not a
Business Day, the next succeeding Business Day.
Payout Event: As defined in Section 7. 1.
Permitted Investments: Any one or more of the following types of investments:
(a) marketable obligations of the United States of America, the full
and timely payment of which are backed by the full faith and credit of the
United States of America and which have a maturity of not more than 270 days
from the date of acquisition;
(b marketable obligations, the full and timely payment of which are
directly and fully guaranteed by the full faith and credit of the United
States of America and which have a maturity of not more than 270 days from the
date of acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not more than
270 days from the date of acquisition) denominated in dollars and issued by
any bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated A-1 by S&P and P-1
by Moody's;
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
entered into with any bank of the type described in clause (c) above;
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(e) commercial paper rated at least A-1 by S&P and P-1 by Moody's;
and,
(f) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America or
any state thereof (or domestic branches of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however that at the time such investment,
or the commitment to make such investment, is entered into, the short-term
debt rating of such depository institution or trust company shall be at least
A-1 by S&P and P-1 by Moody's.
Permitted Liens: (a) shall mean, with respect to Contracts in the Asset Pool:
(i) Liens for state, municipal or other local taxes if such
taxes shall not at the time be due and payable, (ii) Liens in favor
of the Seller created pursuant to a Purchase Agreement and
transferred to the Asset Pool hereunder and (iii) Liens in favor of
the Deal Agent as agent for the Purchasers created pursuant to this
Agreement; and
(b) with respect to the related Equipment:
(i) materialmen's, warehousemen's and mechanics' liens and
other Liens arising by operation of law in the ordinary course of
business for sums not due, (ii) Liens for state, municipal or other
local taxes if such taxes shall not at the time be due and payable,
(iii) Liens in favor of the Seller created pursuant to a Purchase
Agreement and transferred to the Asset Pool hereunder and (iv) Liens
in favor of the Deal Agent as agent for the Purchasers created
pursuant to this Agreement.
Person: An individual, partnership, corporation (including a business trust),
limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.
Pool Assets: On any day any Asset in the Asset Pool.
Portfolio Concentration Criteria: The following concentration limitations at
all times measured on the basis of percentage of ADCB:
(a) the sum of the Discounted Contract Balances of Contracts relating
to any one individual Obligor is limited to the greater of 1.5% of the ADCB,
(b the sum of the Discounted Contract Balance of the 25 obligors with
the largest aggregate Discounted Contract Balances is limited to 15% of the
ADCB;
(c) the sum of the Discounted Contract Balances of Obligors located
in any one state is limited to 10% of the ADCB;
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(d) the sum of the Discounted Contract Balances of Contracts whose
Obligors are municipalities or other government related organizations is
limited to 1% of the ADCB; and
(e) the sum of the Discounted Contract Balances of which the payment
terms are non-monthly is limited to 10% of the ADCB.
Prepaid Contract: Any Contract that has terminated or been prepaid in full
prior to its scheduled expiration date (including because of a Casualty Loss),
other than a Defaulted Contract.
Prepayment Amount: As specified in Section 6.2(b).
Prepayments: Any and all (i) partial and full prepayments on a Contract
(including, with respect to any Contract and any Monthly Period, any Scheduled
Payment or portion thereof which is due in a subsequent Monthly Period which
the Servicer has received, and expressly permitted the related Obligor to
make, in advance of its scheduled due date, and which will be applied to such
Scheduled Payment on such due date), (ii) cash proceeds or rents realized from
the sale, lease, re-lease or re-financing of Equipment under a Prepaid
Contract, net of Liquidation Expenses, and (iii) Recoveries.
Prime Rate: The rate announced by First Union from time to time as its prime
rate in the United States, such rate to change as and when such designated
rate changes. The Prime Rate is not intended to be the lowest rate of interest
charged by First Union in connection with extensions of credit to debtors.
Program Fee: As defined in Section 2.13(b).
Program Fee Agreement: The letter agreement, the Closing Date, among the
Seller, the Servicer and the Deal Agent, setting forth, among other things,
the Commitment Fee, the Program Fee and the Servicing Fee.
Program Fee Rate: The rate per annum set forth in the Program Fee Agreement.
Purchase: A purchase by a Purchaser of an undivided interest in the Assets
from the Seller pursuant to Article II, including without limitation, the
remittance by the Servicer to the Seller of Collections of Pool Assets
pursuant to Section 2.7(b).
Purchase Agreement: The Purchase and Sale Agreement dated as of the date
hereof, between the Originator and the Seller, as amended, modified,
supplemented or restated from time to time.
Purchase Certificate: Each certificate, in the Form of Exhibit G, delivered on
the date of the Initial Purchase and on the date of each Incremental Purchase.
Purchase Date: The Closing Date, and as to any Incremental Purchase, any
Business Day that is (i) at least one (1) calendar week following the
immediately preceding Purchase Date and (ii) two (2) Business Days immediately
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following the receipt by the Deal Agent of a written request by the Seller to
sell an Asset Interest, such notice to be in the form of Exhibit A hereto and
to conform to requirements of Section 3.2 hereof.
Purchase Limit: At any time, $50,000,000, on or after the Termination Date,
the "Purchase Limit" shall mean the aggregate outstanding Capital.
Purchasers: Collectively, VFCC and the Investors and any other Person that
agrees, pursuant to the pertinent Assignment and Acceptance, to purchase an
Asset Interest pursuant to this Agreement.
Qualified Institution: As defined in Section 6.2.
Rating Agency: Each of Standard & Poor's, Moody's and any other rating agency
that has been requested to issue a rating with respect to the commercial paper
notes issued by the Issuer.
Records: All Contracts and other documents, books, records and other
information (including without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and rights)
maintained with respect to Assets and the related Obligors which the Seller
has itself generated, in which the Seller has acquired an interest pursuant to
the Purchase Agreement or in which the Seller has otherwise obtained all
interest.
Recoveries: With respect to a Defaulted Contract, proceeds from the sale,
lease, re-lease or refinancing of the Equipment, proceeds of any related
Insurance Policy and any other recoveries with respect to such Defaulted
Contract and the related Equipment and related property, and other amounts
representing late fees and penalties net of Liquidation Expenses and amounts,
if any, so received that are required to be refunded to the Obligor on such
Contract.
Reference Bank: Any bank which furnishes information for purposes of
determining the Adjusted Eurodollar Rate.
Register: As defined in Section 10. 1(c).
Reinvestment Termination Date: The Business Day that the Seller designates as
the Reinvestment Termination Date by notice to the Deal Agent at least ten
Business Days prior to such Business Day or, if any of the conditions
precedent in Section 3.2 are not satisfied, the Business Day that the Deal
Agent designates as the Reinvestment Termination Date by notice to the Seller
at least one Business Day prior to such Business Day.
Replaced Contract: As defined in Section 2.17(a).
Reporting Date: The 16th day of the month or the first Business Day
thereafter.
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Required Investors: At a particular time, Investors with Commitments in excess
of 66 2/3 % of the Purchase Limit.
Required Reports: Collectively, the Monthly Report, the Servicer's Certificate
and the quarterly financial statement of the Servicer required to be delivered
to the Deal Agent pursuant to Section 6.13(c) hereof.
Requirements of Law: For any Person shall mean the certificate of
incorporation or articles of association and by-laws or other organizational
or governing documents of such Person, and any law, treaty, rule or
regulation, or order or determination of an arbitrator or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether Federal, state or local (including, without
limitation, usury laws, the Federal Truth in Lending Act, and Regulation Z and
Regulation B of the Board of Governors of the Federal Reserve System).
Residual Proceeds: With respect to any Contract or any item of Equipment, the
net proceeds for the sale, re-lease or other disposition of the equipment upon
the expiration, or early termination, of the term of such Contract.
Responsible Officer: As to any Person (other than the Collateral Custodian and
Backup Servicer), any officer of such Person with direct responsibility for
the administration of this Agreement and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject, and with
respect to the Collateral Custodian and Backup Servicer it shall mean any
officer within the office at the address set forth under its name on the
signature pages hereof including any Vice President, Managing Director,
Assistant Vice President, Secretary, Assistant Secretary or Assistant
Treasurer or any other officer of the Collateral Custodian and Backup Servicer
customarily performing functions similar to those performed by any of the
above designated officers and, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge
and familiarity with the particular subject.
Restricting Event: As defined in Section 7.2.
Retransfer Date: As defined in Section 5.6.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.
Sale Discount Rate: For any Contract to be transferred to the Asset Pool by
the Seller, a rate per annum, calculated on the Business Day immediately
preceding such transfer, equal to the sum of (i) the fixed interest rate
associated with the Hedge Agreement related to such purchase, (ii) the Program
Fee Rate, (iii) .05% and (iv) the Servicing Fee Rate.
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Scheduled Payments: On any Determination Date with respect to any Contract,
(a) each monthly, quarterly, annual or seasonal rent or financing (whether
principal or principal and interest) payment scheduled to be made by the
Obligor thereof after such Determination Date under the terms of such
Contract, reduced by a number of such scheduled payments equal to a number
(rounding upwards to the next highest integer if such number is not an
integer) obtained by dividing (i) the dollar amount of any security deposit
related to such Contract by (ii) the amount of a single scheduled payment
under such Contract, (b) any payment due from the Obligor of such Contract at
the expiration or other termination of such Contract and (c) any payments in
connection with a Warranty Event.
Seller: SW Leasing Portfolio IV, Inc., or any permitted successor thereto.
Seller Note: As defined in the Purchase Agreement.
Servicer: Fidelity Leasing, Inc. and its permitted successors and assigns.
Servicer Advance: An advance of Scheduled Payments made by the Servicer
pursuant to Section 6.3.
Servicer Default: As specified in Section 6.24.
Servicer's Certificate: As defined in Section 6.13(b).
Servicing Fee: As specified in Section 2.13(c).
Servicing Fee Rate: The rate per annum set forth in the Fee Letter.
Solvent: As to any Person at any time, having a state of affairs such that all
of the following conditions are met: (a) the fair value of the property of
such Person is greater than the amount of such Person's liabilities (including
disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(31) of the
Bankruptcy Code; (b) the present fair salable value of the property of such
Person in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured; (c) such Person is able to realize
upon its property and pay its debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the normal course
of business; (d) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature; and (e) such Person is not engaged in business
or a transaction, and is not about to engage in a business or a transaction,
for which such Person's property would constitute unreasonably small capital.
Structuring Fee: The structuring fee agreed to between the Seller and the Deal
Agent in the Program Fee Agreement.
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Substitute Contract: On any day, an Eligible Contract which meets each of the
conditions for substitution set forth in Schedule IV hereto.
Successor Servicer: As defined in Section 6.25(a).
Swap Rate: As defined in Section 5.4.
Taxes: Any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and
additions thereto) that are imposed by any government or other taxing
authority.
Termination Date: The earliest of (a) the date of termination of the Purchase
Limit pursuant to Section 2.3, (b) the date of the occurrence of a Payout
Event pursuant to Section 7. 1, (c) the Reinvestment Termination Date and (d)
Commitment Termination Date.
Termination Notice: As defined in Section 6.24.
Transaction: As defined in Section 3.2.
Transaction Documents: This Agreement, the Purchase Agreement, the Liquidity
Purchase Agreement, dated as of the date hereof between VFCC and First Union,
and the Custodial Agreement, dated as of the date hereof between the Seller,
the Servicer, the Deal Agent and the Collateral Custodian, and any additional
document the execution of which is necessary or incidental to carrying out the
terms of the foregoing documents.
UCC: The Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.
United States: The United States of America.
Unreimbursed Servicer Advances: At any time, the amount of all previous
Servicer Advances (or portions thereof) as to which the Servicer has not been
reimbursed as of such time pursuant to Section 2.7 and which the Servicer has
determined in its sole discretion will not be recoverable from Collections
with respect to the related Contract.
Warranty Event: As to any Pool Asset, the occurrence and continuance of a
material breach of any representation or warranty relating to such Contract.
Yield: For each Asset Interest for any Fixed Period, the product of:
YR x C x ED
---
360
where:
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C = the Capital of such Asset Interest.
YR = the weighted average of the Yield Rates applicable during such
Fixed Period.
ED = the actual number of days elapsed during such Fixed Period.
provided, however that (i) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted
by applicable law and (ii) Yield shall not be considered paid by any
distribution if at any time such distribution is rescinded or must otherwise
be returned for any reason.
Yield Rate: For any Asset Interest for any Fixed Period:
(a) to the extent the relevant Purchaser funded the applicable Asset
Interest through the issuance of commercial paper, a rate equal to the CP
Rate, or
(b) to the extent the relevant Purchaser did not fund the applicable
Asset Interest through the issuance of commercial paper, a rate equal to the
Alternative Rate or such other rate as the Deal Agent and the Seller shall
agree to in writing.
Section 1.2 Other Terms.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in
the State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
Section 1.3 Computation of Time Periods.
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 mean "to
but excluding."
ARTICLE II
THE PURCHASE FACILITY
Section 2.1 Purchases of Asset Interests.
(a) On the terms and conditions hereinafter set forth, the Seller may
on any Purchase Date, at its option, sell and assign Asset Interests to the
Purchasers. The Deal Agent may act on behalf of and for the benefit of the
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Purchasers in this regard. VFCC may, in its sole discretion, purchase, or if
VFCC shall decline to purchase, the Liquidity Agent shall purchase on behalf
of the Investors, Asset Interests from time to time during the period from the
date hereof to but not including the Termination Date. Under no circumstances
shall any Purchaser make the initial Purchase or any Incremental Purchase if,
after giving effect to such Purchase or Incremental Purchase, the aggregate
Capital outstanding hereunder would exceed the lesser of (i) the Purchase
Limit or (ii) the Capital Limit.
(b) The Seller may, within 60 days, but no later than 45 days, prior
to the then existing Commitment Termination Date, by written notice to the
Deal Agent, make written request for VFCC and the Investors to extend the
Commitment Termination Date for an additional period of 364 days. The Deal
Agent will give prompt notice to VFCC and each of the Investors of its receipt
of such request for extension of the Commitment Termination Date. VFCC and
each Investor shall make a determination, in their sole discretion and after a
full credit review, not less than 15 days prior to the then applicable
Commitment Termination Date as to whether or not it will agree to extend the
Commitment Termination Date; provided, however, that the failure of VFCC or
any Investor to make a timely response to the Seller's request for extension
of the Commitment Termination Date shall be deemed to constitute a refusal by
VFCC or the Investor, as the case may be, to extend the Commitment Termination
Date. The Commitment Termination Date shall only be extended upon the consent
of both (i) VFCC and (ii) 100% of the Investors.
Section 2.2 The Initial Purchase, Subsequent Purchases and
Incremental Purchases.
(a) Subject to the conditions described in Section 2.1, the initial
Purchase and each Incremental Purchase shall be made in accordance with the
procedures described in Section 2.2(b). After the Collection Date has
occurred, each of the Purchasers and the Deal Agent, in accordance with their
respective interests, shall assign and transfer to the Seller their respective
remaining interest in Asset Interests to the Seller free and clear of any
Adverse Claim resulting solely from an act or omission by a Purchaser or the
Deal Agent, but without any other representation or warranty, express or
implied.
(b) The initial Purchase and each Incremental Purchase shall be made
pursuant to the terms of a Purchase Certificate in the form of Exhibit G
hereto, after receipt by the Purchaser of a Notice of Sale delivered by the
Seller to the Deal Agent (with a copy to the Collateral Custodian) at least
two Business Days prior to such proposed Purchase Date and each such notice
shall specify (i) the aggregate amount of such initial Purchase or Incremental
Purchase which amount must satisfy the applicable minimum requirement set
forth in the following sentence and (ii) the date of such Purchase or
Incremental Purchase. The Seller shall deliver no more than two such notices
in any calendar month, and each amount specified in any such notice must
satisfy the following minimum requirements, as applicable, as a condition to
the related Purchase: (i) the initial Purchase shall be in an amount equal to
$10,000,000 or an integral multiple of $10,000 in excess thereof; (ii) each
Incremental Purchase hereunder shall be in an amount equal to $5,000,000 or an
integral multiple of $10,000 in excess thereof; provided, however, that if
such Incremental Purchase is to be made hereunder at a time when there are no
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outstanding Commercial Paper Notes issued in respect of a Purchase of
$5,000,000 or an integral multiple of $10,000 in excess thereof, then such
Incremental Purchase shall be in an amount equal to $10,000,000 or an integral
multiple of $10,000 in excess thereof. Following receipt of such notice, the
Deal Agent will consult with VFCC in order to assist VFCC in determining
whether or not to make the purchase. If VFCC declines to make a proposed
purchase, the initial Purchase or Incremental Purchase will be made by the
Investors. On the date of such Purchase or Incremental Purchase, as the case
may be, VFCC or each Investor shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Seller in same day
funds, at such bank or other location reasonably designated by Seller in its
Notice of Sale given pursuant to this Section 2.2(b), an amount equal to (i)
the Capital of the Asset Interest related to such initial Purchase or
Incremental Purchase, as the case may be, in the case of a purchase by VFCC or
(ii) such Investor's pro rata share of the Capital related to such Asset
Interest, in the case of a purchase by the Investors.
Section 2.3 Reduction of the Purchase Limit; Repurchase.
(a) The Seller may, upon at least five Business Days' notice to the
Deal Agent, terminate in whole or reduce in part the portion of the Purchase
Limit that exceeds the sum of the aggregate Capital and Yield accrued and to
accrue thereon, and the Commitments of the Investors shall be reduced
proportionately; provided, however, that each partial reduction of the
Purchase Limit shall be in an aggregate amount equal to $1,000,000 or an
integral multiple thereof. Each notice of reduction or termination pursuant to
this Section 2.3(a) shall be irrevocable.
(b) Pursuant to the provisions of Section 2.7(b), Section 2.8(c) and
Section 2.9(c), the Seller may, at any time prior to the occurrence of the
Termination Date, reduce the aggregate outstanding Capital by remitting to the
Deal Agent, for application by the Deal Agent to reduce the Capital of each
(i) cash and (ii) instructions to apply such cash to the reduction of Capital.
Section 2.4 Determination of Yield.
The Deal Agent shall determine the Yield (including unpaid Yield, if
any, due and payable on a prior Payment Date) to be paid on each Payment Date
for the Fixed Period and shall advise the Servicer thereof on the first
Business Day after the Fixed Period.
Section 2.5 [reserved].
Section 2.6 Dividing or Combining Asset Interests.
The Deal Agent may, with the consent of a Purchaser, take any of the
following actions at the end of such Fixed Period with respect to any Asset
Interest: (i) divide the Asset Interest owned by a Purchaser into two or more
portions of Asset Interests having aggregate Capital equal to the Capital of
such divided Asset Interest, (ii) combine one portion of an Asset Interest of
a Purchaser with another portion of an Asset Interest of such Purchaser with a
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Fixed Period ending on the same day, creating a new portion of an Asset
Interest having Capital equal to the Capital of the two portions of Asset
Interest combined or (iii) combine the Asset Interest of a Purchaser with the
Asset Interest to be purchased on such day by such Purchaser, creating a new
Asset Interest having Capital equal to the Capital of the two Asset Interests
combined; provided, that an Asset Interest of VFCC may not be combined with an
Asset Interest of the Investors.
Section 2.7 Non-Liquidation Settlement Procedures.
The provisions of this Section 2.7 shall apply during the term of
this Agreement prior to the occurrence of the Payout Event.
(a) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds,
and (ii) a Servicer Advance if made or required pursuant to Section 6.3, the
following amounts in the following order of priority:
(i) FIRST, to any Hedging Counterparty, an amount equal to
any accrued and unpaid amounts under any Hedge Agreement, for the
payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in amount equal to any accrued
and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
(vii) SEVENTH, to the Deal Agent for the ratable payment to
each Purchaser, in an amount equal to any accrued and unpaid Program
Fee and Yield for such Payment Date;
(viii) EIGHTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in
respect thereof;
(ix) NINTH, to the extent that funds are available, any
remaining amounts may be reinvested in Eligible Contracts; provided,
however, that if the aggregate Capital exceeds the lesser of (i) the
Capital Limit; or (ii) the Purchase Limit an amount equal to such
excess shall be paid to the Deal Agent to pay down Capital
outstanding;
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(x) TENTH, to the extent funds are available to satisfy any
unpaid Indemnified Amounts, amounts required to be paid by the Seller
pursuant to the indemnification provisions of Section 8.1 and any
other amounts due hereunder; and
(xi) ELEVENTH, any remaining amount shall be distributed to
the Seller for application to the payment, in the following order of
priority, of interest accrued and unpaid on, and the reduction to
zero of the principal amount of, the Seller Note.
(b) Notwithstanding anything to the contrary contained in this
Section 2.7 or any other provision in this Agreement, if on any Business Day
prior to the Payout Event the aggregate outstanding amount of Capital shall
exceed the lesser of (i) the Purchase Limit or (ii) the Capital Limit, then
the Seller shall remit to the Deal Agent, prior to any reinvestment of funds
as set forth in item NINTH of Section 2.7(a) and in any event no later than
the close of business of the Deal Agent on the next succeeding Business Day, a
payment (to be applied by the Deal Agent to outstanding Capital allocated to
Monthly Periods selected by the Deal Agent, in its reasonable discretion) in
such amount as may be necessary to reduce outstanding Capital to an amount
less than or equal to the lesser of (i) the Purchase Limit or (ii) the Capital
Limit.
Section 2.8 Settlement Procedures Following a
Termination Date.
The provisions of this Section 2.8 shall apply during the term of
this Agreement after the occurrence of a Payout Event provided that no
Restricting Event has occurred.
(a) [reserved].
(b) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent available funds and
(ii) a Servicer Advance if made or required pursuant to Section 6.3, the
following amounts in the following order of priority:
(i) FIRST, to any Hedging Counterparty, an amount equal to
any accrued and unpaid amounts under any Hedging Agreement, for the
payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
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(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
(vii) SEVENTH, to the Deal Agent, in an amount equal to any
accrued and unpaid Program Fee and Yield for such Payment Date;
(viii) EIGHTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in
respect thereof;
(ix) NINTH, to the Deal Agent for payment to the Purchasers
in an amount necessary to reduce the aggregate Capital to an amount
equal to the product of (i) the Asset Interest and (ii) the ADCB as
of the current Determination Date;
(x) TENTH, to the extent funds are available to satisfy any
unpaid Indemnified Amounts required to be paid by the Seller pursuant
to the indemnification provisions of Section 8.1, and any other
amounts due hereunder; and
(xi) ELEVENTH, any remaining amount shall be distributed to
the Seller for application to the payment, in the following order of
priority, of interest accrued and unpaid on, and the reduction to
zero of the principal amount of, the Seller Note, provided, however,
that if the Overcollateralization is less than or equal to the
product of (i) 0.05 and (ii) the Purchase Limit as of the day
immediately preceding the occurrence of a Termination Date, the
amount which would have been distributed to the Seller will be
distributed to the Purchaser in reduction, to zero, of the aggregate
Capital.
(c) If at any time on or after the occurrence of a Payout Event, the
Deal Agent or the Seller determines that as of the close of business on the
day immediately preceding the Termination Date the outstanding amount of
Capital exceeded the lesser of (i) the Purchase Limit, or (ii) the Capital
Limit, then the Seller shall immediately remit to the Deal Agent, for the
benefit of the Purchaser, a payment (to be applied by the Deal Agent to
outstanding Capital allocated to Monthly Periods selected by the Deal Agent,
in its reasonable discretion) in such amount as may be necessary to reduce the
amount of Capital to the lesser of (i) the Purchase Limit, or (ii) the Capital
Limit as of the close of business on the date immediately preceding the Payout
Event.
Section 2.9 Settlement Procedures Following a
Restricting Event.
The provisions of this Section 2.9 shall apply during the term of
this Agreement after the occurrence of a Restricting Event.
(a) [reserved].
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(b) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds and
(ii) a Servicer Advance if made or required pursuant to Section 6.3, the
following amounts in the following order of priority:
(i) FIRST, to any Hedging Counterparty, an amount equal to
any accrued and unpaid amounts under any Hedge Agreement, for the
payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
(vii) SEVENTH, to the Deal Agent, for the ratable payment to
each Purchaser in an amount equal to any accrued and unpaid Program
Fee and Yield for such Payment Date;
(viii) EIGHTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in
respect thereof;
(ix) NINTH, to the extent that funds are available, to the
Deal Agent for the Purchasers in reduction of aggregate Capital;
(x) TENTH, to the extent funds are available to satisfy any
unpaid Indemnified Amounts, amounts required to be paid by the Seller
pursuant to the indemnification provisions of Section 8.1, and other
amounts due hereunder; and
(xi) ELEVENTH, upon the reduction of the Capital to zero and
the payment in full of the Aggregate Unpaids, any remaining amount
shall be distributed to the Seller for application to the payment, in
the following order of priority, of interest accrued and unpaid on,
and the reduction to zero of the principal amount of, the Seller
Note.
(c) If at any time on or after the Restricting Event, the Deal Agent
or the Seller determines that as of the close of business on the day
immediately preceding Termination Date the outstanding amount of Capital
exceeded the lesser of (i) the Purchase Limit, or (ii) the Capital Limit, then
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the Seller shall immediately remit to the Deal Agent, for the benefit of the
Purchaser, a payment (to be applied by the Deal Agent to outstanding Capital
allocated to Monthly Periods selected by the Deal Agent, in its reasonable
discretion) in such amount as may be necessary to reduce the amount of Capital
to the lesser of (i) the Purchase Limit, or (ii) the Capital Limit as of the
close of business on the date immediately preceding the Restricting Event.
Section 2.10 Collections and Allocations.
(a) Collections. The Servicer shall transfer, or cause to be
transferred, all Collections on deposit in the form of available funds in the
Lock Box Account to the Collection Account by the close of business on the
Business Day such Collections are received in the Lock Box Account. The
Servicer shall promptly (but in no event later than two Business Days after
the receipt thereof) deposit all Collections received directly by it in the
Collection Account. The Servicer shall make such deposits or payments on the
date indicated therein by electronic funds transfer through the Automated
Clearing House system, or by wire transfer, in immediately available funds.
(b) Initial Deposits. On the Closing Date and on each Addition Date
thereafter, the Servicer will deposit (in immediately available funds) into
the Collection Account all Collections received after the applicable Cut Off
Date and through and including the Closing Date or Addition Date, as the case
may be, in respect of Contracts being transferred to the Asset Pool on such
date.
(c) Excluded Amounts. The Servicer may withdraw from the Collection
Account any Collections constituting Excluded Amounts if the Servicer has,
prior to such withdrawal, delivered to the Deal Agent a report setting forth
the calculation of such Excluded Amounts in a format reasonably satisfactory
to the Deal Agent.
Section 2.11 Payments, Computations, Etc.
(a) Unless otherwise expressly provided herein, all amounts to be
paid or deposited by the Seller or the Servicer hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 A.M.
(Charlotte, North Carolina time) on the day when due in lawful money of the
United States in immediately available funds to the Agent's Account. The
Seller shall, to the extent permitted by law, pay to the Purchaser interest on
all amounts not paid or deposited when due hereunder at 1% per annum above the
Base Rate, payable on demand; provided, however, that such interest rate shall
not at any time exceed the maximum rate permitted by applicable law. Such
interest shall be retained by the Deal Agent except to the extent that such
failure to make a timely payment or deposit has continued beyond the date for
distribution by the Deal Agent of such overdue amount to the Purchasers, in
which case such interest accruing after such date shall be for the account of,
and distributed by the Deal Agent to the Purchasers. All computations of
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interest and all computations of Yield and other fees hereunder shall be made
on the basis of a year of 360 days for the actual number of days (including
the first but excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of Yield, interest or any fee payable hereunder, as the
case may be.
(c) If any Purchase or Incremental Purchase requested by the Seller
and approved by a Purchaser and the Deal Agent pursuant to Section 2.2, is
not, for any reason whatsoever related to a default or nonperformance by the
Seller, made or effectuated, as the case may be, on the date specified
therefor, the Seller shall indemnify the Purchaser against any reasonable
loss, cost or expense incurred by the Purchaser, including, without
limitation, any loss (including loss of anticipated profits, net of
anticipated profits in the reemployment of such funds in the manner determined
by the Purchaser), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Purchaser to fund or
maintain such Purchase or Incremental Purchase, as the case may be, during
such Monthly Period.
Section 2.12 Optional Repurchase.
At any time following the Termination Date when the ADCB is less than
ten percent of the ADCB as of the Termination Date, the Servicer may notify
the Deal Agent in writing of its intent to purchase all remaining Assets in
the Asset Pool. On the Payment Date next succeeding any such notice, the
Servicer shall purchase all such Assets for a price equal to the sum of (i)
the Aggregate Unpaids, (ii) all Yield accrued and to accrue, as reasonably
determined by the Deal Agent, and (iii) all accrued and unpaid Commitment
Fees, Program Fees, Backup Servicing Fees, Custodial Fees, Increased Costs,
Taxes, hedging costs, breakage fees and any other amounts payable by the
Seller hereunder or under or with respect to any Hedging Agreement.
Section 2.13 Fees.
(a) Fidelity, in its individual capacity, shall pay to the Deal Agent
from its own funds on each Payment Date, monthly in arrears, a fee (the
"Commitment Fee"), as set forth in the Program Fee Agreement.
(b) Fidelity, in its individual capacity, shall pay to the Deal Agent
from the Collection Account on each Payment Date, monthly in arrears, a fee
(the "Program Fee") agreed to between Fidelity and the Deal Agent in the fee
letter agreement between such parties dated the date hereof (the "Program Fee
Agreement").
(c) The Servicer shall be entitled to receive a fee (the "Servicing
Fee"), monthly in arrears in accordance with Section 2.7(a), 2.8(b) or 2.9(b),
as applicable, which fee shall be equal to the product of (i) the Servicing
Fee Rate agreed to between the Servicer and the Deal Agent in the Program Fee
Agreement and (ii) ADCB for the immediately preceding Determination Date.
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(d) The Backup Servicer shall be entitled to receive the Backup
Servicing Fee in accordance with Section 2.7(a), 2.8(b) or 2.9(b) as
applicable.
(e) The Collateral Custodian shall be entitled to receive the
Custodial Fee in accordance with Section 2.7(a), 2.8(b) or 2.9(b), as
applicable.
(f) The Seller shall pay to the Deal Agent, on the Closing Date, the
Structuring Fee in immediately available funds.
Section 2.14 Increased Costs; Capital Adequacy;
Illegality.
(a) If either (i) the introduction of or any change (including,
without limitation, any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation or (ii) the
compliance by a Purchaser or any Affiliate thereof (each of which, an
"Affected Party") with any guideline or request from any central bank or other
governmental agency or authority (whether or not having the force of law), (A)
shall subject an Affected Party to any Tax (except for Taxes on the overall
net income of such Affected Party), duty or other charge with respect to an
Asset Interest, or any right to make Purchases hereunder, or on any payment
made hereunder or (B) shall impose, modify or deem applicable any reserve
requirement (including, without limitation, any reserve requirement imposed by
the Board of Governors of the Federal Reserve System, but excluding any
reserve requirement, if any, included in the determination of Yield), special
deposit or similar requirement against assets of, deposits with or for the
amount of, or credit extended by, any Affected Party or (C) shall impose any
other condition affecting an Asset Interest or a Purchaser's rights hereunder,
the result of which is to increase the cost to any Affected Party or to reduce
the amount of any sum received or receivable by an Affected Party under this
Agreement, then within ten days after demand by such Affected Party (which
demand shall be accompanied by a statement setting forth the basis for such
demand), the Seller shall pay directly to such Affected Party such additional
amount or amounts as will compensate such Affected Party for such additional
or increased cost incurred or such reduction suffered.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or request
or (ii) compliance by any Affected Party with any law, guideline, rule,
regulation, directive or request from any central bank or other governmental
authority or agency (whether or not having the force of law), including,
without limitation, compliance by an Affected Party with any request or
directive regarding capital adequacy, has or would have the effect of reducing
the rate of return on the capital of any Affected Party as a consequence of
its obligations hereunder or arising in connection herewith to a level below
that which any such Affected Party could have achieved but for such
introduction, change or compliance (taking into consideration the policies of
such Affected Party with respect to capital adequacy) by an amount deemed by
such Affected Party to be material, then from time to time, within ten days
after demand by such Affected Party (which demand shall be accompanied by a
statement setting forth the basis for such demand), the Seller shall pay
directly to such Affected Party such additional amount or amounts as will
compensate such Affected Party for such reduction.
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(c) If as a result of any event or circumstance similar to those
described in clauses (a) or (b) of this section, any Affected Party is
required to compensate a bank or other financial institution providing
liquidity support, credit enhancement or other similar support to such
Affected Party in connection with this Agreement or the funding or maintenance
of Purchases hereunder, then within ten days after demand by such Affected
Party, the Seller shall pay to such Affected Party such additional amount or
amounts as may be necessary to reimburse such Affected Party for any amounts
paid by it.
(d) In determining any amount provided for in this section, the
Affected Party may use any reasonable averaging and attribution methods. Any
Affected Party making a claim under this section shall submit to the Seller a
certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error.
(e) If a Purchaser shall notify the Deal Agent that a Eurodollar
Disruption Event as described in clause (a) of the definition of "Eurodollar
Disruption Event" has occurred, the Deal Agent shall in turn so notify the
Seller, whereupon all Capital in respect of which Yield accrues at the
Adjusted Eurodollar Rate shall immediately be converted into Capital in
respect of which Yield accrues at the Base Rate.
Section 2.15 Taxes.
(a) All payments made by an Obligor in respect of a Contract and all
payments made by the Seller or the Servicer under this Agreement will be made
free and clear of and without deduction or withholding for or on account of
any Taxes, unless such withholding or deduction is required by law. In such
event, the Obligor, Seller, or Servicer (as the case may be) shall pay to the
appropriate taxing authority any such Taxes required to be deducted or
withheld and the amount payable to each Purchaser or the Deal Agent (as the
case may be) will be increased (such increase, the "Additional Amount") such
that every net payment made under this Agreement after deduction or
withholding for or on account of any Taxes (including, without limitation, any
Taxes on such increase) is not less than the amount that would have been paid
had no such deduction or withholding been deducted or withheld. The foregoing
obligation to pay Additional Amounts, however, will not apply with respect to
net income or franchise taxes imposed on a Purchaser or the Deal Agent,
respectively, with respect to payments required to be made by the Seller or
Servicer under this Agreement, by a taxing jurisdiction in which such
Purchaser or Deal Agent is organized, conducts business or is paying taxes as
of the Closing Date (as the case may be). If a Purchaser or the Deal Agent
pays any Taxes in respect of which the Seller is obligated to pay Additional
Amounts under this Section 2.14(a), the Seller shall promptly reimburse such
Purchaser or Deal Agent in full.
(b) The Seller will indemnify each Purchaser and the Deal Agent for
the full amount of Taxes in respect of which the Seller is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
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jurisdiction on such Additional Amounts) paid by such Purchaser or the Deal
Agent (as the case may be) and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto; provided, however,
that such Purchaser or the Deal Agent, as appropriate, making a demand for
indemnity payment shall provide the Seller, at its address set forth under its
name on the signature pages hereof, with a certificate from the relevant
taxing authority or from a responsible officer of such Purchaser or the Deal
Agent stating or otherwise evidencing that response such Purchaser or the Deal
Agent has made payment of such Taxes and will provide a copy of or extract
from documentation, if available, furnished by such taxing authority
evidencing assertion or payment of such Taxes. This indemnification shall be
made within ten days from the date the Purchaser or the Deal Agent (as the
case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller of any
Taxes, the Seller will furnish to the Deal Agent, at its address set forth
under its name on the signature pages hereof, appropriate evidence of payment
thereof.
(d) If a Purchaser is not created or organized under the laws of the
United States or a political subdivision thereof, such Purchaser shall, to the
extent that it may then do so under applicable laws and regulations, deliver
to the Seller with a copy to the Deal Agent (i) within 15 days after the date
hereof, or, if later, the date on which such Purchaser becomes a Purchaser
hereof two (or such other number as may from time to time be prescribed by
applicable laws or regulations) duly completed copies of IRS Form 4224 or Form
1001 (or any successor forms or other certificates or statements which may be
required from time to time by the relevant United States taxing authorities or
applicable laws or regulations), as appropriate, to permit the Seller to make
payments hereunder for the account of such Purchaser, as the case may be,
without deduction or withholding of United States federal income or similar
Taxes and (ii) upon the obsolescence of or after the occurrence of any event
requiring a change in, any form or certificate previously delivered pursuant
to this Section 2.14(d), copies (in such numbers as may from time to time be
prescribed by applicable laws or regulations) of such additional, amended or
successor forms, certificates or statements as may be required under
applicable laws or regulations to permit the Seller to make payments hereunder
for the account of such Purchaser, without deduction or withholding of United
States federal income or similar Taxes.
(e) For any period with respect to which a Purchaser or the Deal
Agent has failed to provide the Seller with the appropriate form, certificate
or statement described in clause (d) of this section (other than if such
failure is due to a change in law occurring after the date of this Agreement),
the Deal Agent or such Purchaser, as the case may be, shall not be entitled to
indemnification under clauses (a) or (b) of this section with respect to any
Taxes.
(f) Within 30 days of the written request of the Seller therefor, the
Deal Agent and the Purchaser, as appropriate, shall execute and deliver to the
Seller such certificates, forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Seller in applying for refunds of Taxes remitted hereunder; provided, however,
that the Deal Agent and the Purchaser shall not be required to deliver such
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certificates forms or other documents if in their respective sole discretion
it is determined that the deliverance of such certificate, form or other
document would have a material adverse affect on the Deal Agent or Purchaser
and provided further, however, that the Seller shall reimburse the Deal Agent
or Purchaser for any reasonable expenses incurred in the delivery of such
certificate, form or other document.
(g) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the
Purchasers in connection with this Agreement or the funding or maintenance of
Purchases hereunder, the Purchasers are required to compensate a bank or other
financial institution in respect of Taxes under circumstances similar to those
described in this section then within ten days after demand by the Purchasers,
the Seller shall pay to the Purchasers such additional amount or amounts as
may be necessary to reimburse the Purchasers for any amounts paid by them.
(h) Without prejudice to the survival of any other agreement of the
Seller hereunder, the agreements and obligations of the Seller contained in
this section shall survive the termination of this Agreement.
Section 2.16 Assignment of the Purchase Agreement.
The Seller hereby represents, warrants and confirms to the Deal Agent
that the Seller has assigned to the Deal Agent, for the ratable benefit of the
Purchasers hereunder, all of the Seller's right and title to and interest in
the Purchase Agreement. The Seller confirms that following a Payout Event the
Deal Agent shall have the sole right to enforce the Seller's rights and
remedies under the Purchase Agreement for the benefit of the Purchasers, but
without any obligation on the part of the Deal Agent, the Purchasers or any of
their respective Affiliates, to perform any of the obligations of the Seller
under the Purchase Agreement. The Seller further confirms and agrees that such
assignment to the Deal Agent shall terminate upon the Collection Date;
provided, however, that the rights of the Deal Agent and the Purchasers
pursuant to such assignment with respect to rights and remedies in connection
with any indemnities and any breach of any representation, warranty or
covenants made by the Originator pursuant to the Purchase Agreement, which
rights and remedies survive the Termination of the Purchase Agreement, shall
be continuing and shall survive any termination of such assignment.
Section 2.17 Substitution of Contracts.
On any day prior to the occurrence of a Restricting Event, the Seller
may, and upon the request of the Deal Agent shall, subject to the conditions
set forth in this Section 2.16, replace any Contract subject to a Warranty
Event or in respect of which the Obligor thereunder has requested the
rewriting and/or restructuring of such Contract with one or more other
Contracts (each, a "Substitute Contract"), provided that no such replacement
shall occur unless each of the following conditions is satisfied as of the
date of such replacement and substitution:
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(a) the Seller has previously recommended to the Deal Agent (with a
copy to the Collateral Custodian) in writing that the Contract to be replaced
should be replaced (each a "Replaced Contract");
(b) each Substitute Contract is an Eligible Contract on the date of
substitution;
(c) after giving effect to any such substitution, the aggregate of
all outstanding Capital does not exceed the lesser of the (i) Purchase Limit
and (ii) the Capital Limit;
(d) the aggregate Discounted Contract Balance (at the applicable Sale
Discount Rate) of such Substitute Contracts shall be equal to or greater than
the aggregate Discounted Contract Balances (at the applicable Sale Discount
Rate as of the date of the inclusion of such Contract in the Asset Pool) of
Contracts being replaced;
(e) such Substitute Contracts, at the time of substitution by the
Seller, shall have approximately the same weighted average life as the
replaced Contracts;
(f) all representations and warranties of the Seller contained in
Sections 4.1 and 4.2 shall be true and correct as of the date of substitution
of any such Substitute Contract;
(g) the substitution of any Substitute Contract does not cause a
Payout Event to occur; and
(h) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of
the foregoing is true and correct as of such date.
In addition, the Seller shall deliver to the Collateral Custodian the
related Contract File as required by Section 3.3. In connection with any such
substitution, the Deal Agent as agent for the Purchasers shall, automatically
and without further action, be deemed to transfer to the Seller, free and
clear of any Lien created pursuant to this Agreement, all of the right, title
and interest of the Deal Agent as Agent for the Purchasers in, to and under
such Replaced Contract, and the Deal Agent as agent for the Purchasers shall
be deemed to represent and warrant that it has the corporate authority and has
taken all necessary corporate action to accomplish such transfer, but without
any other representation and warranty, express or implied. Any right of the
Deal Agent as agent for the Purchasers to substitute any Contract in the Asset
Pool pursuant to this Section 2.16 shall be in addition to, and without
limitation of, any other rights and remedies that the Deal Agent as agent for
the Purchasers or any Purchaser may have to require the Seller or the
Servicer, as applicable, to substitute for, or accept retransfer of, any
Contract pursuant to the terms of this Agreement.
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ARTICLE III
CONDITIONS OF PURCHASES
Section 3.1 Conditions Precedent to Initial Purchase.
The initial Purchase hereunder is subject to the condition precedent
that the Deal Agent shall have received on or before the date of such purchase
the items listed in Schedule I, each (unless otherwise indicated) dated such
date, in form and substance satisfactory to the Deal Agent and the Purchasers.
Section 3.2 Conditions Precedent to All Purchases and
Remittances of Collections.
Each Purchase (including the Initial Purchase) from the Seller by a
Purchaser, the right of the Servicer to remit Collections to the Seller
pursuant to Section 2.7(b) and each Incremental Purchase (each, a
"Transaction") shall be subject to the further conditions precedent that (a)
with respect to any Purchase (including the Initial Purchase) or Incremental
Purchase, the Servicer shall have delivered to the Deal Agent, on or prior to
the date of such Purchase or Incremental Purchase in form and substance
satisfactory to the Deal Agent, (i) a Purchase Notice (Exhibit A), (ii) a
Purchase Certificate (Exhibit G), and (iii) a Certificate of Assignment
(Exhibit A to the Purchase and Sale Agreement) including Schedule I, thereto
dated within 10 days prior to the date of such Purchase (other than the
Initial Purchase, in which case such items shall be dated within 5 days prior
to the date of such Initial Purchase) or Incremental Purchase and containing
such additional information as may be reasonably requested by the Deal Agent;
(b) on the date of such Transaction the following statements shall be true and
the Seller shall be deemed to have certified that:
(i) The representations and warranties contained in Sections
4.1 and 4.2 are true and correct on and as of such day as though made
on and as of such date,
(ii) No event has occurred and is continuing, or would
result from such Transaction which constitutes a Payout Event,
(iii) On and as of such day, after giving effect to such
Transaction, the outstanding Capital does not exceed the lesser of
(x) the Purchase Limit, or (y) the Capital Limit,
(iv) On and as of such day, the Seller and the Servicer each
has performed all of the agreements contained in this Agreement to be
performed by such person at or prior to such day, and
(v) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or
governmental body, agency or instrumentality shall prohibit or
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enjoin, the making of such Purchase, remittance of Collections or
Incremental Purchase by the Purchaser in accordance with the
provisions hereof; and
(c) on the date of such Transaction, the Deal Agent shall have
received such other approvals, opinions or documents as the Deal Agent may
reasonably require.
Section 3.3 Delivery of Contract Files.
As a condition subsequent to each Purchase or substitution of
Substitute Contracts made hereunder, the Seller shall deliver to the
Collateral Custodian, within 10 calendar days after such Purchase or
substitution, the related Contract Files.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the
Seller.
The Seller represents and warrants as follows:
(a) Organization and Good Standing. The Seller is a corporation duly
organized and validly existing in good standing under the laws of the
Commonwealth of Pennsylvania, and has full corporate power, authority and
legal right to own or lease its properties and conduct its business as such
properties are presently owned or leased and such business is presently
conducted, and to execute, deliver and perform its obligations under this
Agreement and the Purchase Agreement.
(b) Due Qualification. The Seller is duly qualified to do business
and is in good standing as a corporation, and has obtained or will obtain all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have a material adverse
effect on its ability to perform its obligations hereunder.
(c) Due Authorization. The execution and delivery of this Agreement
and the Purchase Agreement and the consummation of the transactions provided
for herein and therein have been duly authorized by the Seller by all
necessary corporate action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement and the
Purchase Agreement, the performance by the Seller of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof will not conflict with or result in any breach of any of the material
terms and provisions of, and will not constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a party or
by which it or any of its property is bound.
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(e) No Violation. The execution and delivery of this Agreement and
the Purchase Agreement, the performance of the transactions contemplated
hereby and thereby and the fulfillment of the terms hereof and thereof will
not conflict with or violate, in any material respect, any Requirements of Law
applicable to the Seller.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Seller, threatened against the
Seller, before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement or the Purchase Agreement, (ii) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or the Purchase
Agreement or (iii) seeking any determination or ruling that could reasonably
be expected to be adversely determined, and if adversely determined, would
materially and adversely affect the performance by the Seller of its
obligations under this Agreement or the Purchase Agreement.
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority
required in connection with the execution and delivery by the Seller of this
Agreement and the Purchase Agreement, the performance by the Seller of the
transactions contemplated by this Agreement and the Purchase Agreement, and
the fulfillment of the terms hereof and thereof by the Seller, have been
obtained unless the failure to obtain such shall not materially and adversely
affect the Seller's performance of its obligations thereunder.
(h) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by Seller.
(i) Solvency. The transactions under this Agreement and/or the
Purchase Agreement do not and will not render the Seller not Solvent.
(j) Selection Procedures; Credit and Collection Policy. No procedures
believed by the Seller to be materially adverse to the interests of VFCC or
the Purchasers were utilized by the Seller in identifying and/or selecting the
Contracts in the Asset Pool. In addition, each Contract shall have been
underwritten in accordance with and satisfy the standards of any Credit and
Collection Policy which has been established by the Seller or the Originator
and is then in effect. Such Credit and Collection Policy or procedure may be
amended from time to time in the Seller's or the Originator's normal course of
business provided that the Seller shall not materially change such credit and
collection policy or procedure without the prior written consent of the Deal
Agent.
(k) Taxes. The Seller has filed or caused to be filed all Tax returns
which, to its knowledge, are required to be filed. The Seller has paid or made
adequate provisions for the payment of all Taxes and all assessments made
against it or any of its property (other than any amount of Tax the validity
of which is currently being contested in good faith by appropriate proceedings
and with respect to which reserves in accordance with generally accepted
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accounting principles have been provided on the books of the Seller), and no
Tax lien has been filed and, to the Seller's knowledge, no claim is being
asserted, with respect to any such Tax, fee or other charge.
(l) Agreements Enforceable. This Agreement and the Purchase Agreement
constitute the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with their respective terms, except as such
enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(m) Exchange Act Compliance. No proceeds of any Purchase or
Incremental Purchase will be used by the Seller to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange
Act of 1934, as amended.
(n) No Liens. Each Asset, together with the Contract related thereto,
shall, at all times, be owned by the Seller free and clear of any Adverse
Claim except as provided herein, and upon each Purchase, remittance of
Collections or Incremental Purchase, the relevant Purchaser shall acquire
(subject to recordation where necessary) a valid and perfected first priority
undivided ownership interest in each Asset then existing or thereafter arising
and Collections with respect thereto, free and clear of any Adverse Claim
except as provided hereunder. No effective financing statement or other
instrument similar in effect covering any Asset or Collections with respect
thereto shall at any time be on file in any recording office except such as
may be filed in favor of the Deal Agent relating to this Agreement.
(o) Reports Accurate. No Monthly Report (if prepared by the Seller,
or to the extent that information contained therein is supplied by the
Seller), information, exhibit, financial statement, document, book, record or
report furnished or to be furnished by the Seller to the Deal Agent or a
Purchaser in connection with this Agreement is or will be inaccurate in any
material respect as of the date it is or shall be dated or (except as
otherwise disclosed to the Deal Agent or such Purchaser, as the case may be,
at such time) as of the date so furnished, and no such document contains or
will contain any material misstatement of fact or omits or shall omit to state
a material fact or any fact necessary to make the statements contained therein
not misleading.
(p) Location of Offices. The principal place of business and chief
executive office of the Seller and the office where the Seller keeps all the
Records are located at the address of the Seller referred to in Section 11.2
hereof (or at such other locations as to which the notice and other
requirements specified in Section 5.2(m) shall have been satisfied).
(q) Lock-Boxes. The names and addresses of all the Lock-Box Banks,
together, with the account numbers of the Lock-Box Accounts of the Seller at
such Lock-Box Banks and the names, addresses and account numbers of all
accounts to which Collections of the Assets outstanding before the initial
Purchase hereunder have been sent, are specified in Schedule II (which shall
be deemed to be amended in respect of terminating or adding any Lock-Box
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Account or Lock-Box Bank upon satisfaction of the notice and other
requirements specified in respect thereof).
(r) Tradenames. Except as described in Schedule III, the Seller has
no trade names, fictitious names, assumed names or "doing business as" names
or other names under which it has done or is doing business.
(s) Purchase Agreement. The Purchase Agreement is the only agreement
pursuant to which the Seller purchases Assets.
(t) Value Given. The Seller shall have given reasonably equivalent
value to the Originator in consideration for the transfer to the Seller of the
Assets under the Purchase Agreement, no such transfer shall have been made for
or on account of an antecedent debt owed by the Originator to the Seller, and
no such transfer is or may be voidable or subject to avoidance under any
section of the Bankruptcy Code; no event or circumstance has occurred that
would constitute a Payout Event pursuant to Section 7. 1.
(u) Special Purpose Entity. The Certificate of Incorporation of the
Seller includes substantially the provisions set forth on Exhibit C hereto,
and the Originator has confirmed in writing to the Seller that, so long as the
Seller is not "insolvent" within the meaning of the Bankruptcy Code, the
Originator will not cause the Seller to file a voluntary petition under the
Bankruptcy Code or any other bankruptcy or insolvency laws. Each of the Seller
and the Originator is aware that in light of the circumstances described in
the preceding sentence and other relevant facts, the filing of a voluntary
petition under the Bankruptcy Code for the purpose of making the assets of the
Seller available to satisfy claims of the creditors of the Originator would
not result in making such assets available to satisfy such creditors under the
Bankruptcy Code.
(v) Accounting. The Seller accounts for the transfers to it from the
Originator of interests in Assets and Collections under the Purchase Agreement
as sales of such Assets and transfers of Asset Interests as sales of such
Asset Interests in its books, records and financial statements, in each case
consistent with GAAP and with the requirements set forth herein.
(w) Separate Entity. The Seller is operated as an entity with assets
and liabilities distinct from those of the Originator and any Affiliates
thereof (other than the Seller), and the Seller hereby acknowledges that the
Deal Agent and the Purchasers are entering into the transactions contemplated
by this Agreement in reliance upon the Seller's identity as a separate legal
entity from the Originator and from each such other Affiliate of the
Originator.
(x) Security Interest. The Seller has granted a security interest (as
defined in the UCC) to the Deal Agent, as agent for the Purchasers, in the
Assets and Collections, which is enforceable in accordance with applicable law
upon execution and delivery of this Agreement. Upon the filing of UCC-1
financing statements naming the Deal Agent as secured party and the Seller as
debtor, the Deal Agent, as agent for the Purchasers, shall have a first
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priority perfected security interest in the Assets and Collections (except for
any Permitted Liens). All filings (including, without limitation, such UCC
filings) as are necessary in any Jurisdiction to perfect the interest of the
Deal Agent as agent for the Purchasers, in the Assets and Collections have
been (or prior to the applicable Purchase will be) made.
(y) Investments. The Seller does not own or hold directly or
indirectly, any capital stock or equity security of, or any equity interest
in, any Person.
(z) Business. Since its incorporation, the Seller has conducted no
business other than the purchase and receipt of Contracts and related assets
from the Originator under the Purchase Agreement, the sale of Contracts under
this Agreement and such other activities as are incidental to the foregoing.
(aa) Investment Company Act. The Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(bb) Accuracy of Representations and Warranties. Each representation
or warranty by the Seller contained herein or in any certificate or other
document furnished by the Seller pursuant hereto or in connection herewith is
true and correct in all material respects.
The representations and warranties set forth in this section shall
survive the transfer of the Assets to the Deal Agent as agent for the
Purchasers. Upon discovery by the Seller, the Servicer, any Purchaser, the
Liquidity Agent or the Deal Agent of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
Section 4.2 Representations and Warranties of Seller Relating to the
Agreement and the Contracts.
The Seller hereby represents and warrants to the Deal Agent, each
Purchaser, the Liquidity Agent and each Investor that, as of the Closing Date
and as of each Addition Date:
(a) Binding, Obligation, Valid Transfer and Security Interest.
(i) This Agreement and the Purchase Agreement each
constitute legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with its terms, except
as such enforceability may be limited by Insolvency Laws and except
as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(ii) This Agreement constitutes either (A) a valid transfer
to the Deal Agent as agent for the Purchasers of all right, title and
interest of the Seller in, to and under all Assets in the Asset Pool
to the extent of the Asset Interest, and such transfer will be free
and clear of any Lien of any Person claiming through or under the
Seller or its Affiliates, except for Permitted Liens, or (B) a grant
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of a security interest in all Assets in the Asset Pool to the Deal
Agent as agent for the Purchasers. Upon the filing of the financing
statements described in Section 6.8(c) and, in the case of Additional
Contracts on the applicable Addition Date, the Deal Agent as agent
for the Purchasers shall have a first priority perfected security
interest in all Assets in the Asset Pool, subject only to Permitted
Liens. Neither the Seller nor any Person claiming through or under
Seller shall have any claim to or interest in the Collection Account
and, if this Agreement constitutes the grant of a security interest
in such property, except for the interest of Seller in such property
as a debtor for purposes of the UCC.
(b) Eligibility of Contracts. As of the Closing Date, (i) Schedule I
to this Agreement and the information contained in the Purchase Certificate
delivered pursuant to Section 2.2(b) is an accurate and complete listing in
all material respects of all the Existing Contracts in the Asset Pool as of
the Closing Date and the information contained therein with respect to the
identity of such Contracts and the amounts owing thereunder is true and
correct in all material respects as of the related Cut Off Date, (ii) each
such Contract is an Eligible Contract, (iii) each such Contract and the
related Equipment is free and clear of any Lien of any Person (other than
Permitted Liens) and in compliance with all Requirements of Law applicable to
the Seller and (iv) with respect to each such Contract, all consents,
licenses, approvals or authorizations of or registrations or declarations with
any Governmental Authority required to be obtained, effected or given by the
Seller in connection with the transfer of an interest in such Contract and the
related Equipment to the Deal Agent as agent for the Purchasers have been duly
obtained, effected or given and are in full force and effect. On each Addition
Date on which Additional Contracts are added by the Seller to the Asset Pool,
the Seller shall be deemed to represent and warrant that (i) such Additional
Contract referenced on the related Purchase Certificate delivered pursuant to
Section 2.2(b) hereof is an Eligible Contract, (ii) each such Additional
Contract and the related Equipment is free and clear of any Lien of any Person
(other than Permitted Liens) and in compliance with all Requirements of Law
applicable to Seller and/or the Originator, (iii) with respect to each such
Additional Contract, all consents, licenses, approvals, authorizations,
registrations or declarations with any Governmental Authority required to be
obtained, effected or given by the Seller in connection with the addition of
such Contract and the related Equipment to the Asset Pool have been duly
obtained, effected or given and are in full force and effect and (iv) the
representations and warranties set forth in Section 4.2(a) are true and
correct with respect to each Contract transferred on such day as if made on
such day.
(c) Notice of Breach. The representations and warranties set forth in
this Section 4.2 shall survive the transfer of an interest in the respective
Contracts and related Equipment, or interests therein, to the Deal Agent as
agent for the Purchasers. Upon discovery by the Seller, the Servicer, any
Purchaser, the Deal Agent, the Liquidity Agent of any Investor of a breach of
any of the foregoing representations and warranties, the party discovering
such breach shall give prompt written notice to the others.
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Section 4. 3 Representations and Warranties of the
Seller Relating to the Purchase Limit and
Capital Limit.
The Seller is hereby deemed to represent and warrant that on each day
prior to the Termination Date, the amount of Capital outstanding on such day
shall not exceed the lesser of (x) the Purchase Limit or (y) the Capital
Limit.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
Section 5.1 General Covenants.
Until the date on which all Aggregate Unpaids have been indefeasibly
paid in full, the Seller hereby covenants that:
(a) Compliance with Laws, Preservation of Corporate Existence. The
Seller will comply in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
Section 5.2 Covenants of Seller.
The Seller hereby covenants that:
(a) Contracts Not to be Evidenced by Instruments. The Seller will
take no action to cause any Contract which is not, as of the Closing Date or
the related Addition Date, as the case may be, evidenced by an Instrument, to
be so evidenced except in connection with the enforcement or collection of
such Contract.
(b) Security Interests. The Seller will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to
exist any Lien on any Contract in the Asset Pool or related Equipment, whether
now existing or hereafter transferred hereunder, or any interest therein, and
the Seller will not sell, pledge, assign or suffer to exist any Lien on its
interest, if any, hereunder. The Seller will promptly notify the Deal Agent of
the existence of any Lien on any Contract in the Asset Pool or related
Equipment and the Seller shall defend the right, title and interest of the
Deal Agent as agent for the Purchasers in, to and under the Contracts in the
Asset Pool and the related Equipment, against all claims of third parties,
provided, however, that nothing in this section 5.2(b) shall prevent or be
deemed to prohibit the Seller from suffering to exist Permitted Liens upon any
of the Contracts in the Asset Pool or any related Equipment.
(c) Delivery of Collections. The Seller agrees to pay to the Servicer
promptly (but in no event later than two Business Days after receipt) all
Collections received by Seller in respect of the Contracts in the Asset Pool.
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(d) Compliance with the Law. Seller hereby agrees to comply in all
material respects with all Requirements of Law applicable to Seller, the
Contracts and the Equipment.
(e) Activities of Seller. The Seller shall not engage in any business
or activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, which is not
incidental to the transactions contemplated and authorized by this Agreement
or the Purchase Agreements.
(f) Indebtedness; Investments. The Seller shall not create, incur,
assume or suffer to exist any Indebtedness or other liability whatsoever,
except (i) obligations incurred under this Agreement, or (ii) liabilities
incident to the maintenance of its corporate existence in good standing.
(g) Guarantees. The Seller shall not become or remain liable,
directly or indirectly, in connection with any Indebtedness or other liability
of any other Person, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in the
ordinary course of business), agreement to purchase or repurchase, agreement
to supply or advance funds, or otherwise.
(h) Investments. The Seller shall not make or suffer to exist any
loans or advances to, or extend any credit to, or make any investments (by way
of transfer of property, contributions to capital, purchase of stock or
securities or evidences of indebtedness, acquisition of the business or
assets, or otherwise) in, any Person except for purchases of Contracts
pursuant to the Purchase Agreements, or for investments in Permitted
Investments in accordance with the terms of this Agreement.
(i) Merger; Sales. The Seller shall not enter into any transaction of
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or
convey, sell, lease or otherwise dispose of all or substantially all of its
property or business, except as provided for in this Agreement.
(j) Distributions. The Seller shall not declare or pay, directly or
indirectly, any dividend or make any other distribution (whether in cash or
other property) with respect to the profits, assets or capital of the Seller
or any Person's interest therein, or purchase, redeem or otherwise acquire for
value any of its capital stock now or hereafter outstanding, except that so
long as no Payout Event has occurred and is continuing and no Payout Event
would occur as a result thereof or after giving effect thereto and the Seller
would continue to be Solvent as a result thereof and after giving effect
thereto, the Seller may declare and pay cash or stock dividends on its capital
stock.
(k) Agreements. The Seller shall not become a party to, or permit any
of its properties to be bound by, any indenture, mortgage, instrument,
contract, agreement, lease or other undertaking, except this Agreement and the
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Purchase Agreements, or amend or modify the provisions of its Certificate of
Incorporation without the consent of the Deal Agent or issue any power of
attorney except to the Deal Agent or the Servicer.
(l) Separate Corporate Existence. The Seller shall:
(i) Maintain its own deposit account or accounts, separate
from those of any Affiliate, with commercial banking institutions.
The funds of the Seller will not be diverted to any other Person or
for other than corporate uses of the Seller.
(ii) Ensure that, to the extent that it shares the same
officers or other employees as any of its stockholders or Affiliates,
the salaries of and the expenses related to providing benefits to
such officers and other employees shall be fairly allocated among
such entities, and each such entity shall bear its fair share of the
salary and benefit costs associated with all such common officers and
employees.
(iii) Ensure that, to the extent that it jointly contracts
with any of its stockholders or Affiliates to do business with
vendors or service providers or to share overhead expenses, the costs
incurred in so doing shall be allocated fairly among such entities,
and each such entity shall bear its fair share of such costs. To the
extent that the Seller contracts or does business with vendors or
service providers when the goods and services provided are partially
for the benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose benefit
the goods and services are provided, and each such entity shall bear
its fair share of such costs. All material transactions between
Seller and any of its Affiliates shall be only on an arm's length
basis.
(iv) Maintain a principal executive and administrative
office through which its business is conducted separate from those of
its Affiliates. To the extent that Seller and any of its stockholders
or Affiliates have offices in the same location, there shall be a
fair and appropriate allocation of overhead costs among them, and
each such entity shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with its
Certificate of Incorporation and observe all necessary, appropriate
and customary corporate formalities, including, but not limited to,
holding all regular and special stockholders, and directors' meetings
appropriate to authorize all corporate action, keeping separate and
accurate minutes of its meetings, passing all resolutions or consents
necessary to authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including, but not
limited to, payroll and intercompany transaction accounts.
(vi) Take or refrain from taking, as applicable, each of the
activities specified in the "non-substantive consolidation" opinion
of Morgan, Lewis & Bockius LLP delivered on the Closing Date, upon
which the conclusions expressed therein are based.
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(m) Location of Seller, Records; Instruments. The Seller (x) shall
not move outside the Commonwealth of Pennsylvania, the location of its chief
executive office, without 30 days' prior written notice to the Deal Agent and
(y) shall not move, or consent to the Collateral Custodian or Servicer moving,
the Contract Files from the possession of the Collateral Custodian thereof on
the Closing Date, without 30 days' prior written notice to the Deal Agent and
(z) will promptly take all actions required of each relevant jurisdiction in
order to continue the first priority perfected security interest of the Deal
Agent as agent for the Purchasers in all Assets in the Asset Pool. The Seller
will give the Deal Agent prompt notice of a change within the Commonwealth of
Pennsylvania of the location of its chief executive office.
(n) Accounting of Purchases. Other than for federal, state and local
income tax purposes, the Seller will not account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby in any
manner other than as the sale, or absolute assignment, of Assets by the Seller
to a Purchaser. The Seller will not account for or treat (whether in financial
statements or otherwise) the transaction contemplated by the Purchase
Agreement in any manner other than as the sale, or absolute assignment, of the
Originator Assets by the Originator to the Seller, as the case may be.
(o) ERISA Matters. The Seller will not (a) engage or permit any ERISA
Affiliate to engage in any prohibited transaction for which an exemption is
not available or has not previously been obtained from the United States
Department of Labor; (b) permit to exist any accumulated funding deficiency,
as defined in Section 302(a) of ERISA and Section 412(a) of the Code, or
funding deficiency with respect to any Benefit Plan other than a Multiemployer
Plan; (c) fail to make any payments to a Multiemployer Plan that the Seller or
any ERISA Affiliate may be required to make under the agreement relating to
such Multiemployer Plan or any law pertaining thereto; (d) terminate any
Benefit Plan so as to result in any liability; or (e) permit to exist any
occurrence of any reportable event described in Title IV of ERISA.
(p) Originator Assets. With respect to each Asset acquired by the
Seller, the Seller will (i) acquire such Asset pursuant to and in accordance
with the terms of the Purchase Agreement, (ii) take all action necessary to
perfect, protect and more fully evidence the Seller's ownership of such Asset,
including, without limitation, (A) filing and maintaining, effective financing
statements (Form UCC-1) against the Originator in all necessary or appropriate
filing offices, and filing continuation statements, amendments or assignments
with respect thereto in such filing offices and (B) executing or causing to be
executed such other instruments or notices as may be necessary or appropriate
and (iii) take all additional action that the Deal Agent may reasonably
request to perfect, protect and more fully evidence the respective interests
of the parties to this Agreement in the Assets and interest therein
represented by the Asset Interest.
(q) Transactions with Affiliates. The Seller will not enter into, or
be a party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by this Agreement and the Purchase
Agreement, and (ii) other transactions (including, without limitation, the
lease of office space or computer equipment or software by the Seller to or
from an Affiliate) (A) in the ordinary course of business, (B) pursuant to the
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reasonable requirements of the Seller's business, (C) upon fair and reasonable
terms that are no less favorable to the Seller than could be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of the
Seller, and (D) not inconsistent with the factual assumptions set forth in the
opinion letters issued by Morgan, Lewis & Bockius LLP and delivered to the
Deal Agent as a condition to the initial Purchase as such assumptions may be
modified in any subsequent opinion letters delivered to the Deal Agent
hereunder pursuant to Section 3.2(c) or otherwise. It is understood that any
compensation arrangement for officers shall be permitted under clause (ii)(A)
through (C) above if such arrangement has been expressly approved by the board
of directors of the Seller.
(r) Investments. The Seller will not make any Investments other than
Permitted Investments.
(s) Change in the Purchase Agreement. The Seller will not amend,
modify, waive or terminate any terms or conditions of the Purchase Agreement,
without the consent of Deal Agent.
(t) Amendment to Certificate of Incorporation. The Seller will not
amend, modify or otherwise make any change to its Certificate of Incorporation
which would delete or otherwise nullify or circumvent the provisions set forth
on Exhibit C hereto.
(u) Credit and Collection Policy. The Seller shall not cause or
permit any changes to be made to the Credit and Collection Policy in any
manner that would materially and adversely affect the collectibility of the
Contracts sold hereunder without the prior written consent of the Deal Agent,
which consent shall not be unreasonably withheld.
Section 5.3 Release of Lien on Equipment.
At the same time as (i) any Contract in the Asset Pool expires by its
terms and all amounts in respect thereof have been paid by the related Obligor
and deposited in the Collection Account or (ii) any Contract becomes a Prepaid
Contract and all amounts in respect thereof have been paid by the related
Obligor and deposited in the Collection Account, the Deal Agent as agent for
the Purchasers will, to the extent requested by the Servicer, release its
interest in such Contract; provided, however, that such release will not
constitute a release of their respective interests in the Equipment or the
proceeds of such Contract or Equipment. In connection with any sale of such
Equipment on or after the occurrence of (i) or (ii) above, the Deal Agent as
agent for the Purchasers will after the deposit by the Servicer of the
proceeds of such sale into the Collection Account, at the sole expense of the
Servicer, execute and deliver to the Servicer any assignments, bills of sale,
termination statements and any other releases and instruments as the Servicer
may reasonably request in order to effect the release and transfer of such
Equipment; provided that the Deal Agent as agent for the Purchasers will make
no representation or warranty, express or implied, with respect to any such
Equipment in connection with such sale or transfer and assignment. Nothing in
this section shall diminish the Servicer's obligations pursuant to Section
6.1(c) with respect to the proceeds of any such sale.
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Section 5.4 Hedging of Contracts.
On or prior to the Purchase Date, the Seller shall have entered into
the Hedging Agreement with the Hedge Counterparty. On each Purchase Date the
Seller shall assign to the Deal Agent on behalf of VFCC all of the Seller's
rights under the Hedging Agreements relating to the Contracts conveyed on such
Purchase Date. Each Hedging Agreement shall (i) have a scheduled Termination
Date that coincides with the last Scheduled Payment due to occur for the
Contracts conveyed on such Purchase Date; (ii) provide for a notional amount
from time to time equal to one hundred percent (100%) of the aggregate Capital
on such Purchase Date, after giving effect to any increase in the aggregate
Capital to be made on such Purchase Date, (the "Hedged Level"), of the
aggregate amount (discounted to the present value at the "Swap Rate" defined
below) of all remaining Scheduled Payments on the Contracts on such Purchase
Date (the "Hedged Amount"); (iii) provide that the Hedge Counterparty's
payment obligations shall be calculated by reference to the Hedged Amount and
a per annum rate determined by reference to USD-CP-H. 15, as defined in the
1991 ISDA Definitions published by the International Swap Dealers Association,
Inc. and as determined in accordance with the procedures in effect on the date
of this Agreement (the "H.15"), for a period of 30 days, as determined on the
immediately preceding Payment Date; (iv) provide that the Seller's payment
obligations shall be calculated by reference to the Hedged Amount and a per
annum fixed rate agreed to between the Seller and the Hedge Counterparty (the
"Swap Rate"); (v) provide for net payments to be paid on each Payment Date and
any early termination date thereunder (A) on behalf of the Seller, solely out
of funds in the Collection Account and (B) by the Hedge Counterparty for
deposit into the Collection Account, for distribution in accordance with the
Agreement, (vi) provide for early termination at the option of the Required
Investors upon the disposition of the related Contracts and (vii) include
other provisions requested by the Required Investors and be in a form
acceptable to the Required Investors, which form shall be substantially the
same as set forth in Exhibit H hereto. In the event the H.15 is no longer
available, then the rate described in clause (iii) above shall be determined
by reference to such other publication or method of calculation as shall be
reasonably agreed between the Seller and the Purchaser in order to effect an
economically equivalent business deal between such parties. The Servicer will
provide the Deal Agent with written notice confirming the amounts, if any, to
be paid by or to the Hedge Counterparty on each Payment Date and any early
termination date.
Section 5.5 Retransfer of Ineligible Contracts.
In the event of a breach of any representation or warranty set forth
in Section 4.2 with respect to a Contract in the Asset Pool (each such
Contract, an "Ineligible Contract"), no later than the earlier of (i)
knowledge by the Seller of such Contract becoming an Ineligible Contract and
(ii) receipt by the Seller from the Deal Agent or Servicer of written notice
thereof, the Seller shall either (a) accept the retransfer of each such
Ineligible Contract and any related Equipment selected by the Servicer as to
which such breach related, and the Deal Agent as agent for the Purchasers
shall convey to the Seller, without recourse, representation or warranty, all
of its right, title and interest in such Ineligible Contract; or (b) subject
to the satisfaction of the conditions in Section 2.16, substitute for such
Ineligible Contract a Substitute Contract. In any of the foregoing instances,
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the Seller shall accept the retransfer of each such Ineligible Contract, and
the ADCB shall be reduced by the Discounted Contract Balance (calculated using
the applicable Blended Discount Rate as of the most recent Determination Date)
of each such Ineligible Contract and, if applicable, increased by the
Discounted Contract Balance of each such Substitute Contract. On and after the
date of retransfer, the Ineligible Contract so retransferred shall not be
included in the Asset Pool and, as applicable, the Substitute Contract shall
be included in the Asset Pool. In consideration of such retransfer, without
substitution, the Seller shall, on the date of retransfer of such Ineligible
Contract, make a deposit to the Collection Account (for allocation pursuant to
Section 2.7 , 2.8 or 2.9, as applicable) in immediately available funds in an
amount equal to the Discounted Contract Balance of such Ineligible Contract
(calculated using the applicable Blended Discount Rate as of the most recent
Determination Date). Upon each retransfer to the Seller of such Ineligible
Contract, the Deal Agent, as agent for the Purchasers, shall automatically and
without further action be deemed to transfer, assign and set-over to the
Seller, without recourse, representation or warranty, all the right, title and
interest of the Deal Agent, as agent for the Purchasers, in, to and under such
Ineligible Contract and all monies due or to become due with respect thereto,
the related Equipment and all proceeds of such Ineligible Contract and
Recoveries and Insurance Proceeds relating thereto and all rights to security
for any such Ineligible Contract, and all proceeds and products of the
foregoing. The Deal Agent, as agent for the Purchasers, shall, at the sole
expense of the Servicer execute such documents and instruments of transfer as
may be prepared by the Servicer on behalf of the Seller and take other such
actions as shall reasonably be requested by the Seller to effect the transfer
of such Ineligible Contract pursuant to this subsection.
Section 5.6 Retransfer of Assets.
In the event of a breach of any representation or warranty set forth
in Section 4.2 hereof which breach could reasonably be expected to have a
material adverse affect on the rights of the Purchasers or the Deal Agent, as
agent of the Purchasers, or on the ability of the Seller to perform its
obligations hereunder, by notice then given in writing to the Seller, the Deal
Agent may direct the Seller to accept the retransfer of all of the Assets and
the Seller shall be obligated to accept retransfer of such Assets on a Payment
Date specified by the Seller (such date, the "Retransfer Date"). The Seller
shall deposit on the Retransfer Date an amount equal to the deposit amount
provided below for such Assets in the Collection Account for distribution to
the Purchasers. The deposit amount (the "Retransfer Amount") for such
retransfer will be equal to the (A) sum of (i) the aggregate outstanding
Capital at the end of the Business Day preceding the Payment Date on which the
retransfer is scheduled to be made, (ii) an amount equal to all amounts
accrued and to accrue with respect to unpaid Program Fees, Commitment Fees and
Yield in respect of such Capital at the applicable Yield Rate through the
maturity date of latest maturing Commercial Paper Notes and (iii) any and all
costs associated with the termination, in whole or in part, of any Hedging
Agreement minus (B) the amount, if any, available in the Collection Account on
such Payment Date. On the Retransfer Date, provided that full Retransfer
Amount has been deposited into the Collection Account, the Assets shall be
transferred to the Seller; and the Deal Agent as agent for the Purchasers
shall, at the sole expense of the Servicer, execute and deliver such
instruments of transfer, in each case without recourse, representation or
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warranty, as shall be prepared and reasonably requested by the Servicer on
behalf of the Seller to vest in the Seller, or its designee or assignee, all
right, title and interest of the Deal Agent as agent for the Purchasers in, to
and under the Assets. If the Deal Agent gives a notice directing the Seller to
accept such a retransfer as provided above, the obligation of Seller to accept
a retransfer pursuant to this Section 5.6 shall constitute the sole remedy
respecting a breach of the representations and warranties contained in Section
4.2 available to the Purchasers and the Deal Agent on behalf of the
Purchasers.
ARTICLE VI
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 6.1 Appointment and Acceptance; Duties.
(a) Appointment of Initial Servicer and Collateral Custodian.
Fidelity Leasing, Inc. is hereby appointed as Servicer pursuant to this
Agreement. Fidelity Leasing, Inc. accepts the appointment and agrees to act as
the Servicer pursuant to this Agreement. Harris Trust and Savings Bank is
hereby appointed as Collateral Custodian pursuant to this Agreement. Harris
Trust and Savings Bank accepts the appointment and agrees to act as the
Collateral Custodian pursuant to this Agreement.
(b) General Duties. The Servicer will manage, service, administer,
collect and enforce the Assets in the Asset Pool on behalf of the Purchasers
(the "Servicing Duties") and will have full power and authority to do any and
all things in connection with the performance of the Servicing Duties which it
deems necessary or desirable provided, however, nothing it does may contravene
the provisions of this Agreement. The Servicer will perform the Servicing
Duties with reasonable care, using that degree of skill and attention that a
prudent person engaging in such activities would exercise, but in any event
shall not act with less care than the Servicer exercises with respect to all
comparable contracts that it services for itself or others. The Servicing
Duties will include, without limitation, collection and posting of all
payments, responding to inquiries of Obligors regarding the Assets in the
Asset Pool, investigating delinquencies and making Servicer Advances,
remitting payments to the Deal Agent in a timely manner, furnishing monthly,
quarterly and annual statements with respect to collections and payments in
accordance with the provisions of this Agreement, and using its best efforts
to maintain the perfected first priority security interest of the Deal Agent
as agent for the Purchasers in the Assets. The Servicer will follow customary
standards, policies, and procedures and will have full power and authority,
acting alone, to do any and all things in connection with the performance of
the Servicing Duties that it deems necessary or desirable. If the Servicer
commences a legal proceeding to enforce a Defaulted Contract or commences or
participates in a legal proceeding (including a bankruptcy proceeding)
relating to or involving an Asset in the Asset Pool, the Deal Agent as agent
for the Purchasers will be deemed to have automatically assigned the related
Contract to the Servicer for purposes of commencing or participating in any
such proceeding as a party or claimant, and the Servicer is authorized and
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empowered by the Purchasers, pursuant to this Section 6.1(b), to execute and
deliver, on behalf of itself and the Deal Agent as agent for the Purchasers,
any and all instruments of satisfaction or cancellation, or partial or full
release or discharge, and all other notices, demands, claims, complaints,
responses, affidavits or other documents or instruments in connection with any
such proceedings. If in any enforcement suit or legal proceeding it is held
that the Servicer may not enforce a Contract on the ground that it is not a
real party in interest or a holder entitled to enforce the Contract, then the
Deal Agent will, at the Servicer's expense and direction, take steps on behalf
of the Deal Agent as agent for the Purchasers to enforce the Contract,
including bringing suit in the name of the Deal Agent as agent for the
Purchasers.
(c) Disposition Upon Termination of Contract. Upon the termination of
a Contract included in the Asset Pool as a result of a default by the Obligor
thereunder the Servicer will use commercially reasonable efforts to dispose of
any related Equipment. Without limiting the generality of the foregoing, the
Servicer may dispose of any such Equipment by purchasing such Equipment or by
selling such Equipment to any of its Affiliates for a purchase price equal to
the fair market value thereof, any such sale to be evidenced by a certificate
of a Responsible Officer of the Servicer delivered to the Deal Agent setting
forth the Contract, the Equipment, the sale price of the Equipment and
certifying that such sale price is the fair market value of such Equipment.
(d) Further Assurances. The Deal Agent will, at the sole expense of
the Servicer, furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
(e) Custodial Duties. The Collateral Custodian shall take and retain
custody of the Contract Files delivered by the Seller pursuant to Section 3.3
hereof in accordance with the terms and conditions of this Agreement, all for
the benefit of the Purchasers and subject to the Lien thereon in favor of the
Deal Agent as agent for the Purchasers. Within five Business Days of its
receipt of any Contract File, the Collateral Custodian shall review the
related Contract to verify that such Contract has been executed and has no
missing or mutilated pages and to confirm (in reliance on the related contract
number and Lessee name) that such Contract is referenced on the related list
of Contracts. In order to facilitate the foregoing review by the Collateral
Custodian, in connection with each delivery of Contract Files hereunder to the
Collateral Custodian, the Servicer shall provide to the Collateral Custodian
an electronic file (in EXCEL or a comparable format) that contains the related
list of Contracts or which otherwise contains the Contract number and the name
of the Lessee with respect to each related Contract. If, at the conclusion of
such review, the Collateral Custodian shall determine that such Contract is
not executed or in proper form on its face, or that it is not referenced on
such list of Contracts, the Collateral Custodian shall promptly notify the
Seller and the Deal Agent of such determination by providing a written report
to such Persons setting forth, with particularity, the lack of execution of
such Contract, that such Contract has missing or mutilated pages, or the fact
that such Contract was not referenced on the related list of Contracts. In
addition, unless instructed otherwise in writing by the Seller or the Deal
Agent within 10 days of the Collateral Custodian's delivery of such report,
the Collateral Custodian shall return any Contract not referenced on such list
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of Contracts to the Seller. Other than the foregoing, the Collateral Custodian
shall not have any responsibility for reviewing any Contract File.
In taking and retaining custody of the Contract Files, the Collateral
Custodian shall be deemed to be acting as the agent of the Deal Agent as agent
for the Purchasers, provided, however, that the Collateral Custodian makes no
representations as to the existence, perfection or priority of any Lien on the
Contract Files or the instruments therein, and provided, further, that the
Collateral Custodian's duties as agent shall be limited to those expressly
contemplated herein. All Contract Files shall be kept in fireproof vaults or
cabinets at the locations specified on Schedule IV attached hereto, or at such
other office as shall be specified to the Deal Agent by the Collateral
Custodian in a written notice delivered at least 45 days prior to such change.
All Contract Files shall be placed together in a separate file cabinet with an
appropriate identifying label and maintained in such a manner so as to permit
retrieval and access. All Contract Files shall be clearly segregated from any
other documents or instruments maintained by the Collateral Custodian. The
Collateral Custodian shall clearly indicate that such Contract Files are the
sole property of the Seller and that the Seller has granted an interest
therein to the Deal Agent on behalf of the Purchasers. In performing its
duties, the Collateral Custodian shall use the same degree of care and
attention as it employs with respect to similar Contracts which it holds as
Collateral Custodian.
(f) Concerning the Collateral Custodian.
(i) The Collateral Custodian may conclusively rely on and
shall be fully protected in acting upon any certificate, instrument,
opinion, notice, letter, telegram or other document delivered to it
and which in good faith it reasonably believes to be genuine and
which has been signed by the proper party or parties. The Collateral
Custodian may rely conclusively on and shall be fully protected by in
acting upon (A) the written instructions of any designated officer of
the Deal Agent or (B) the verbal instructions of the Deal Agent.
(ii) The Collateral Custodian may consult counsel
satisfactory to it and the advice or opinion of such counsel shall be
full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and
in accordance with the advice or opinion of such counsel.
(iii) The Collateral Custodian shall not be liable for any
error of judgment, or for any act done or step taken or omitted by
it, in good faith, or for any mistakes of fact or law, or for
anything which it may do or refrain from doing in connection herewith
except in the case of its willful misconduct or grossly negligent
performance or omission.
(iv) The Collateral Custodian makes no warranty or
representation and shall have no responsibility (except as expressly
set forth in this Agreement) as to the content, enforceability,
completeness, validity, sufficiency, value, genuineness, ownership or
transferability of the Contracts, and will not be required to and
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will not make any representations as to the validity or value (except
as expressly set forth in this Agreement) of any of the Contracts.
The Collateral Custodian shall not be obligated to take any legal
action hereunder which might in its judgment involve any expense or
liability unless it has been furnished with an indemnity reasonably
satisfactory to it.
(v) The Collateral Custodian shall have no duties or
responsibilities except such duties and responsibilities as are
specifically set forth in this Agreement and no covenants or
obligations shall be implied in this Agreement against the Collateral
Custodian.
(vi) The Collateral Custodian shall not be required to
expend or risk its own funds in the performance of its duties
hereunder.
(vii) It is expressly agreed and acknowledged that the
Collateral Custodian is not guaranteeing performance of or assuming
any liability for the obligations of the other parties hereto or any
parties to the Contracts.
Section 6.2 Collection of Payments.
(a) Collection Efforts, Modification of Contracts. The Servicer will
make reasonable efforts to collect all payments called for under the terms and
provisions of the Contracts in the Asset Pool as and when the same become due,
and will follow those collection procedures which it follows with respect to
all comparable Contracts that it services for itself or others. The Servicer
may not waive, modify or otherwise vary any provision of a Contract. The
Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing any Contract in the
Asset Pool.
(b) Prepaid Contract. The Servicer may not permit a Contract in the
Asset Pool to become a Prepaid Contract (which shall not include a Contract
that becomes a Prepaid Contract due to a Casualty Loss), unless (x) the
Servicer provides an Additional Contract or (y) such prepayment will not
result in the Collection Account receiving an amount (the "Prepayment Amount")
less than the sum of (A) the Discounted Contract Balance on the date of such
prepayment calculated using the applicable Blended Discount Rate in effect on
the date of such payment and (B) any outstanding Servicer Advances thereon.
After a Payout Event has occurred, the Servicer may not permit a Contract in
the Asset Pool to become a Prepaid Contract (which shall not include a
Contract that becomes a Prepaid Contract due to a Casualty Loss), unless the
Servicer collects an amount equal to the sum of the Discounted Contract
Balance plus accrued and unpaid interest and any outstanding Servicer Advances
thereon plus any swap breakage costs associated with the prepayment.
(c) Acceleration. The Servicer shall accelerate the maturity of all
or any Scheduled Payments under any Contract in the Asset Pool under which a
default under the terms thereof has occurred and is continuing (after the
lapse of any applicable grace period) promptly after such Contract becomes a
Defaulted Contract.
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(d) Taxes and other Amounts. To the extent provided for in any
Contract in the Asset Pool, the Servicer will use its best efforts to collect
all payments with respect to amounts due for taxes, assessments and insurance
premiums relating to such Contracts or the Equipment and remit such amounts to
the appropriate Governmental Authority or insurer on or prior to the date such
payments are due.
(e) Payments to Lock-Box Account. On or before the Closing Date with
respect to the Existing Contracts and on or before the relevant Addition Date,
with respect to Additional Contracts, the Servicer shall have instructed all
Obligors to make all payments in respect of the Contracts in the Asset Pool to
a Lock-Box or directly to a Lock-Box Account.
(f) Establishment of the Collection Account. The Servicer shall cause
to be established, on or before the Closing Date, and maintained in the name
of the Deal Agent as agent for the Purchasers, with an office or branch of a
depository institution or trust company 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) a segregated corporate trust
account (the "Collection Account"); provided, however, that at all times such
depository institution or trust company shall be a depository institution
organized under the laws of the United States of America or any one of the
States thereof or the District of Columbia (or any domestic branch of a
foreign bank), (i) (A) which has either (1) a long-term unsecured debt rating
of A- or better by S&P and A-3 or better by Moody's or (2) a short-term
unsecured debt rating or certificate of deposit rating of A-1 or better by S&P
or P-1 or better by Moody's, (B) the parent corporation of which has either
(1) a long-term unsecured debt rating of A- or better by S&P and A-3 or better
by Moody's or (2) a short-term unsecured debt rating or certificate of deposit
rating of A-1 or better by S&P and P-1 or better by Moody's or (C) is
otherwise acceptable to the Deal Agent and (ii) whose deposits are insured by
the Federal Deposit Insurance Corporation (any such depository institution or
trust company, a "Qualified Institution").
Section 6.3 Servicer Advances.
For each Monthly Period, if the Servicer determines that any
Scheduled Payment (or portion thereof) which was due and payable pursuant to a
Contract in the Asset Pool during such Monthly Period was not received prior
to the end of such Monthly Period, the Servicer may make an advance in an
amount up to the amount of such delinquent Scheduled Payment (or portion
thereof); in addition, if on any day there are not sufficient funds on deposit
in the Collection Account to pay accrued Yield of any Asset Interest the
Monthly Period of which ends on such day, the Servicer shall make an advance
in the amount necessary to pay such Yield (in either case, any such advance, a
"Servicer Advance"). Notwithstanding the preceding sentence, (i) the Servicer
shall be required to make a Servicer Advance with respect to any Contract if,
and only if, the Servicer determines (such determination to be conclusive and
binding) in good faith that such Servicer Advance will ultimately be
recoverable from future collections on, or the liquidation of, the Asset Pool
and payments under any Hedging Agreement, (ii) the Servicer's obligation to
make a Servicer Advance for any Contract shall cease on the day such Contract
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becomes a Defaulted Contract or is charged-off pursuant to the Servicer's
Credit and Collection Policies and (iii) any successor Servicer, including the
Backup Servicer, will not be obligated to make any Servicer Advances. The
Servicer will deposit any Servicer Advances into the Collection Account on or
prior to 11:00 a.m. (Charlotte, North Carolina time) on the related Payment
Date, in immediately available funds.
Section 6.4 Realization Upon Defaulted Contract.
The Servicer will use reasonable efforts to repossess or otherwise
comparably convert the ownership of any Equipment relating to a Defaulted
Contract and will act as sales and processing agent for Equipment which it
repossesses. The Servicer will follow such other practices and procedures as
it deems necessary or advisable and as are customary and usual in its
servicing of contracts and other actions by the Servicer in order to realize
upon such Equipment, which practices and procedures may include reasonable
efforts to enforce all obligations of Obligors and repossessing and selling
such Equipment at public or private sale in circumstances other than those
described in the preceding sentence. Without limiting the generality of the
foregoing, the Servicer may sell any such Equipment to the Servicer or its
Affiliates for a purchase price equal to the then fair market value thereof,
any such sale to be evidenced by a certificate of a Responsible Officer of the
Servicer delivered to the Deal Agent setting forth the Contract, the
Equipment, the sale price of the Equipment and certifying that such sale price
is the fair market value of such Equipment. In any case in which any such
Equipment has suffered damage, the Servicer will not expend funds in
connection with any repair or toward the repossession of such Equipment unless
it reasonably determines that such repair and/or repossession will increase
the Recoveries by an amount greater than the amount of such expenses. The
Servicer will remit to the Collection Account the Recoveries received in
connection with the sale or disposition of Equipment relating to a Defaulted
Contract.
Section 6.5 Maintenance of Insurance Policies.
The Servicer will use its best efforts to ensure that each Obligor
maintains an Insurance Policy with respect to the related Equipment in an
amount at least equal to the sum of the Discounted Contract Balance of the
related Contract and shall ensure that each such Insurance Policy names the
Deal Agent, as agent for the Purchasers, as loss payee and as an insured
thereunder; provided that the Servicer, in accordance with its Credit and
Collection Policy, may allow Obligors to self-insure. Additionally, the
Servicer will require that each Obligor maintain property damage liability
insurance during the term of each Contract in amounts and against risks
customarily insured against by the Obligor on equipment owned by it. If an
Obligor fails to maintain property damage insurance, the Servicer may purchase
and maintain such insurance on behalf of, and at the expense of, the Obligor.
In connection with its activities as Servicer, the Servicer agrees to present,
on behalf of the Deal Agent as agent for the Purchasers, claims to the insurer
under each Insurance Policy and any such liability policy, and to settle,
adjust and compromise such claims, in each case, consistent with the terms of
each Contract. The Servicer's Insurance Policies with respect to the related
Equipment will insure against liability for personal injury and property
damage relating to such Equipment, will name the Deal Agent as agent for the
Purchasers as loss payee and as an insured thereunder and will contain a
breach of warranty clause.
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Section 6.6 Representations and Warranties of Servicer.
The Servicer represents and warrants to the Deal Agent, as agent for
the Purchasers, the Purchasers, the Collateral Custodian and Backup Servicer
that, as of the Closing Date and on each Addition Date, insofar as any of the
following affects the Servicer's ability to perform its obligations pursuant
to this Agreement in any material respect:
(a) Organization and Good Standing. The Servicer is a corporation
duly organized, validly existing and in good standing under the laws of
Pennsylvania with all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted and to enter
into and perform its obligations pursuant to this Agreement.
(b) Due Qualification. The Servicer is qualified to do business as a
corporation, is in good standing, and has obtained all licenses and approvals
as required under the laws of all jurisdictions in which the ownership or
lease of its property and or the conduct of its business (other than the
performance of its obligations hereunder) requires such qualification,
standing, license or approval, except to the extent that the failure to so
qualify, maintain such standing or be so licensed or approved would not have
an adverse effect on the interests of the Seller or of the Purchasers. The
Servicer is qualified to do business as a corporation, is in good standing,
and has obtained all licenses and approvals as required under the laws of all
states in which the performance of its obligations pursuant to this Agreement
requires such qualification, standing, license or approval and where the
failure to qualify or obtain such license or approval would have material
adverse effect on its ability to perform hereunder.
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms.
The Servicer has duly authorized the execution, delivery and performance of
this Agreement by all requisite corporate action. The execution, delivery and
performance of this Agreement does not contravene the Servicer's Certificate
of Incorporation or by-laws.
(d) No Violation. The consummation of the transactions contemplated
by, and the fulfillment of the terms of, this Agreement by the Servicer (with
or without notice or lapse of time) will not (i) conflict with, result in any
breach of any of the terms or provisions of, or constitute a default under,
the articles of incorporation or by-laws of the Servicer, or any term of any
agreement, indenture, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which it or any of its property is bound, (ii)
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument, or (iii) violate any law, regulation, order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority applicable to the Servicer or any of its properties.
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(e) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Servicer or any of its
properties is required to be obtained by or with respect to the Servicer in
order for the Servicer to enter into this Agreement or perform its obligations
hereunder.
(f) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except as such enforceability may be limited by (i)
applicable Insolvency Laws and (ii) general principles of equity (whether
considered in a suit at law or in equity).
(g) No Proceeding. There are no proceedings or investigations pending
or threatened against the Servicer, before any Governmental Authority (i)
asserting the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
(iii) seeking any determination or ruling that might (in the reasonable
judgment of the Servicer) materially and adversely affect the performance by
the Servicer of its obligations under, or the validity or enforceability of,
this Agreement.
(h) Reports Accurate. No Servicer Certificate, information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished by the Servicer to the Deal Agent or a Purchaser in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Deal Agent or
such Purchaser, as the case may be, at such time) as of the date so furnished,
and no such document contains or will contain any material misstatement of
fact or omits or shall omit to state a material fact or any fact necessary to
make the statements contained therein not misleading.
Section 6.7 Representations and Warranties of Backup Servicer
and Collateral Custodian.
Each of the Backup Servicer and the Collateral Custodian represents
and warrants to the Deal Agent, as agent for the Purchasers, and the
Purchasers that, as of the Closing Date and on each Addition Date, insofar as
any of the following affects the Backup Servicer's or the Collateral
Custodian's, as the case may be, ability to perform its obligations pursuant
to this Agreement in any material respect:
(a) Organization and Good Standing. Harris Trust and Savings Bank is
an Illinois banking corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois with all requisite corporate
power and authority to own its properties and to conduct its business as
presently conducted and to enter into and perform its obligations pursuant to
this Agreement.
(b) Power and Authority. Each of the Backup Servicer and the
Collateral Custodian has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms. Each of the Backup Servicer
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and the Collateral Custodian has duly authorized the execution, delivery and
performance of this Agreement by all requisite corporate action.
(c) No Violation. The consummation of the transactions contemplated
by, and the fulfillment of the terms of, this Agreement by the Backup Servicer
and the Collateral Custodian will not (i) conflict with, result in any breach
of any of the terms or provisions of, or constitute a default under, the
articles of incorporation or bylaws of the Backup Servicer or the Collateral
Custodian, or any term of any material agreement, indenture, mortgage, deed of
trust or other instrument to which the Backup Servicer or the Collateral
Custodian is a party or by which it or any of its property is bound, (ii)
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument, or (iii) violate any law, regulation, order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority applicable to Harris Trust and Savings Bank or any of its properties
that might (in the reasonable judgment of the Backup Servicer or the
Collateral Custodian, as the case may be) materially and adversely affect the
performance by the Backup Servicer or the Collateral Custodian of its
obligations under, or the validity or enforceability of, this Agreement.
(d) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit (collectively, the
"Consents") of or with any Governmental Authority having jurisdiction over the
Backup Servicer or the Collateral Custodian or any of its respective
properties is required to be obtained by or with respect to the Backup
Servicer or the Collateral Custodian in order for the Backup Servicer or the
Collateral Custodian, as the case may be, to enter into this Agreement or
perform its obligations hereunder (except with respect to performance only,
such Consents as the Backup Servicer or the Collateral Custodian, as the case
may be, may need to obtain prior to the commencement of its performance of its
duties hereunder in the certain jurisdictions outside of Illinois, provided
that in lieu of obtaining for itself the requisite Consents, the Backup
Servicer or the Collateral Custodian, as the case may be, may and shall be
permitted to delegate the performance of its duties to parties having the
requisite Consents in such jurisdictions; provided, however, in the case of
such delegation of performance the Backup Servicer or the Collateral
Custodian, as the case may be, shall not be relieved of their responsibility
under this Agreement with respect to such duties).
(e) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of Harris Trust and Savings Bank, enforceable against the
Backup Servicer and the Collateral Custodian in accordance with its terms,
except as such enforceability may be limited by (i) applicable Insolvency Laws
and (ii) general principles of equity (whether considered in a suit at law or
in equity).
(f) No Proceeding. There are no proceedings or investigations pending
or, to the best of its knowledge, threatened, against the Backup Servicer or
the Collateral Custodian, before any Governmental Authority (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Backup
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Servicer or the Collateral Custodian, as the case may be) materially and
adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.
Section 6.8 Covenants of Servicer.
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply with all laws and
regulations of any Governmental Authority applicable to the Servicer or the
Contracts in the Asset Pool and related Equipment and Contract Files or any
part thereof.
(b) Obligations with Respect to Contracts; Modifications. The
Servicer will duly fulfill and comply with all obligations on the part of the
Seller to be fulfilled or complied with under or in connection with each
Contract in the Asset Pool and will do nothing to impair the rights of the
Deal Agent as agent for the Purchasers or of the Purchasers in, to and under
the Assets. The Servicer will perform such obligations under the Contracts in
the Asset Pool and will not change or modify the Contracts.
(c) Preservation of Security Interest. The Servicer will execute and
file such financing and continuation statements and any other documents which
may be required by any law or regulation of any Governmental Authority to
preserve and protect fully the interest of the Deal Agent as agent for the
Purchasers in, to and under the Assets.
(d) No Bankruptcy Petition. Prior to the date that is one year and
one day after the payment in full of all amounts owing in respect of all
outstanding commercial paper issued by VFCC, the Servicer will not institute
against the Seller or VFCC, or join any other Person in instituting against
the Seller or VFCC, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceedings under the laws of the
United States or any state of the United States. This Section 6.9(d) will
survive the termination of this Agreement.
Section 6.9 Covenants of Backup Servicer and Collateral
Custodian.
Each of the Backup Servicer and the Collateral Custodian hereby
covenants that:
(a) Contract Files. The Collateral Custodian will not dispose of any
documents constituting the Contract Files in any manner which is inconsistent
with the performance of its obligations as the Collateral Custodian pursuant
to this Agreement and will not dispose of any Contract except as contemplated
by this Agreement.
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(b) Compliance with Law. Each of the Backup Servicer and the
Collateral Custodian will comply with all laws and regulations of any
Governmental Authority applicable to the Backup Servicer and the Collateral
Custodian.
(c) No Bankruptcy Petition. Prior to the date that is one year and
one day after the payment in full of all amounts owing in respect of all
outstanding commercial paper issued by VFCC, neither the Backup Servicer nor
the Collateral Custodian will institute against the Seller or VFCC, or join
any other Person in instituting against the Seller or VFCC, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States.
This Section 6.9(d) will survive the termination of this Agreement.
(d) Location of Contract Files. The Contract Files shall remain at
all times in the possession of the Collateral Custodian at the address set
forth herein unless notice of a different address is given in accordance with
the terms hereof.
(e) No Changes in Backup Servicer and Collateral Custodian Fee. The
Backup Servicer and Collateral Custodian will not make any changes to the fees
set forth in the Backup Servicer and Collateral Custodian Fee Letter without
the prior written approval of the Deal Agent.
Section 6.10 Servicing Compensation.
As compensation for its servicing activities hereunder and
reimbursement for its expenses, the Servicer shall be entitled to receive a
servicing fee (the "Servicing Fee") in respect of each Monthly Period (or
portion thereof) equal to one-twelfth of the product of (A) the Servicing Fee
Rate and (B) the ADCB as on the most recent Determination Date, such Servicing
Fee to be payable monthly in arrears on each Payment Date to the extent of
funds available therefor pursuant to the provisions of Section 2.7, 2.8 or
2.9, as applicable.
Section 6.11 Custodial Compensation.
As compensation for its custodial activities hereunder and
reimbursement for its expenses, the Collateral Custodian shall be entitled to
receive a custodial fee (the "Custodial Fee") as provided in the Backup
Servicer and Collateral Custodian Fee Letter.
Section 6.12 Payment of Certain Expenses by Servicer.
The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of independent accountants, Taxes imposed on the Servicer,
expenses incurred in connection with payments and reports pursuant to this
Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Seller, but excluding Liquidation Expenses
incurred as a result of activities contemplated by Section 6.4. The Servicer
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will be required to pay all reasonable fees and expenses owing to any bank or
trust company in connection with the maintenance of the Collection Account and
the Lock-Box Account. The Servicer shall be required to pay such expenses for
its own account and shall not be entitled to any payment therefor other than
the Servicing Fee.
Section 6.13 Reports.
(a) Monthly Report. With respect to each Determination Date and the
related Monthly Period, the Servicer will provide to the Seller, the Deal
Agent and the Backup Servicer, on the related Reporting Date, a monthly
statement (a "Monthly Report"), signed by a Responsible Officer of the
Servicer and substantially in the form of Exhibit E.
(b) Servicer's Certificate. Together with each Monthly Report, the
Servicer shall submit to the Purchaser a certificate (a "Servicer's
Certificate"), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit F.
(c) Financial Statements. The Servicer will submit to the Purchaser
and the Backup Servicer, within 45 days of the end of each of its fiscal
quarters, commencing February 15, 1998 unaudited financial statements
(including an analysis of delinquencies and losses for each fiscal quarter) as
of the end of each such fiscal quarter. The Servicer will submit to the
Purchaser, within 90 days of the end of each of its fiscal years, commencing
December 31, 1997 audited financial statements (including an analysis of
delinquencies and losses for each fiscal year describing the causes thereof
and sufficient to determine whether a Payout Event has occurred or is
reasonably likely to occur and otherwise reasonably satisfactory to the Deal
Agent) as of the end of each such fiscal year.
Section 6.14 Annual Statement as to Compliance.
The Servicer will provide to the Deal Agent and the Backup Servicer,
on or prior to December 31 of each year, commencing December 31, 1997, an
annual report signed by a Responsible Officer of the Servicer certifying that
(a) a review of the activities of the Servicer, and the Servicer's performance
pursuant to this Agreement, for the period ending on the last day of the
immediately preceding fiscal year has been made under such Person's
supervision and (b) the Servicer has performed or has caused to be performed
in all material respects all of its obligations under this Agreement
throughout such year and no Servicer Default has occurred and is continuing
(or if a Servicer Default has so occurred and is continuing, specifying each
such event, the nature and status thereof and the steps necessary to remedy
such event, and, if a Servicer Default occurred during such year and no notice
thereof has been given to the Deal Agent, specifying such Servicer Default and
the steps taken to remedy such event).
Section 6.15 Annual Independent Public Accountant's
Servicing Reports.
The Servicer will cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish to the Deal Agent and the Backup Servicer, on or prior to September 30
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of each year, commencing September 30, 1998, (i) a report relating to the
previous fiscal year to the effect that (A) such firm has reviewed certain
documents and records relating to the servicing of the Contracts in the Asset
Pool, and (B) based on such examination, such firm is of the opinion that the
Monthly Reports for such year were prepared in compliance with this Agreement,
except for such exceptions as it believes to be immaterial and such other
exceptions as will be set forth in such firm's report and (ii) a report
covering the preceding fiscal year to the effect that such accountants have
applied certain agreed-upon procedures to certain documents and records
relating to the servicing of Contracts under this Agreement, compared the
information contained in the Servicer's Certificates delivered during the
period covered by such report with such documents and records and that no
matters came to the attention of such accountants that caused them to believe
that such servicing was not conducted in compliance with this Article VI of
this Agreement, except for such exceptions as such accountants shall believe
to be immaterial and such other exceptions as shall be set forth in such
statement. In the event such firm requires the Backup Servicer to agree to the
procedures performed by such firm, the Servicer shall direct the Backup
Servicer in writing to so agree; it being understood and agreed that the
Backup Servicer will deliver such letter of agreement in conclusive reliance
upon the direction of the Servicer, and the Backup Servicer makes no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
Section 6.16 Adjustments.
If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Contract in the Asset Pool and such Collection
was received by the Servicer in the form of a check which is not honored for
any reason or (ii) the Servicer makes a mistake with respect to the amount of
any Collection and deposits an amount that is less than or more than the
actual amount of such Collection, the Servicer shall appropriately adjust the
amount subsequently deposited into the Collection Account to reflect such
dishonored check or mistake. Any Scheduled Payment in respect of which a
dishonored check is received shall be deemed not to have been paid.
Section 6.17 Merger or Consolidation of the Servicer.
The Servicer shall not consolidate with or merge into any other
Person or convey or transfer its properties and assets substantially as an
entirety to any Person, unless the Servicer is the surviving entity and
unless:
(i) the Servicer has delivered to the Deal Agent and the
Backup Servicer an Officer's Certificate and an Opinion of Counsel
each stating that any consolidation, merger, conveyance or transfer
and such supplemental agreement comply with this Section 6.17 and
that all conditions precedent herein provided for relating to such
transaction have been complied with and, in the case of the Opinion
of Counsel, that such supplemental agreement is legal, valid and
binding with respect to the Servicer and such other matters as the
Deal Agent may reasonably request;
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(ii) the Servicer shall have delivered notice of such
consolidation, merger, conveyance or transfer to the Deal Agent; and
(iii) after giving effect thereto, no Payout Event or event
which with notice or lapse of time would constitute a Payout Event
shall have occurred.
Section 6.18 Limitation on Liability of the Servicer
and Others.
Except as provided herein, neither the Servicer nor any of the
directors or officers or employees or agents of the Servicer shall be under
any liability to the Deal Agent, the Purchasers or any other Person for any
action taken or for refraining from the taking of any action pursuant to this
Agreement whether arising from express or implied duties under this Agreement;
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability which would otherwise be imposed by reason
of its willful misfeasance, bad faith or gross negligence in the performance
of duties or by reason of its willful misconduct hereunder.
Section 6.19 Indemnification of the Seller, the Backup
Servicer, the Collateral Custodian, the
Deal Agent and the Purchasers.
The Servicer shall indemnify and hold harmless the Seller, the Backup
Servicer, the Collateral Custodian, the Deal Agent, the Liquidity Agent and
each Purchaser and their respective officers, directors, employees and agents
(collectively, the "Indemnified Persons") from and against any loss,
liability, expense, damage or injury suffered or sustained by any Indemnified
Person by reason of any acts, omissions or alleged acts or omissions of the
Servicer, including, but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim, but
excluding allocations of overhead expenses of any such Indemnified Party or
other non-monetary damages of any such Indemnified Party. Notwithstanding the
foregoing, the Servicer shall not indemnify an Indemnified Person if such
loss, liability, expense, damage or injury results or arises (i) as a result
of fraud, gross negligence or breach of fiduciary duty by such Indemnified
Person; and (ii) under any Tax law, including without limitation any federal,
state or local income or franchise taxes or any other Tax imposed on or
measured by income (or any interest or penalties with respect thereto or
arising from a failure to comply therewith) required to be paid by the Seller,
the Backup Servicer, the Collateral Custodian, the Deal Agent, the Liquidity
Agent or the Purchasers in connection herewith to any taxing authority. The
provisions of this indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof. If the Servicer has made any
indemnity payment pursuant to this Section 8.1 and such payment fully
indemnified the recipient thereof and the recipient thereafter collects any
payments from others in respect of such Indemnified Amounts, the recipient
shall repay to the Servicer an amount equal to the amount it has collected
from others in respect of such indemnified amounts.
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If for any reason the indemnification provided above in this Section
6.19 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by such Indemnified Person on the one hand and
Servicer on the other hand but also the relative fault of such Indemnified
Person as well as any other relevant equitable considerations.
The parties hereto agree that the provisions of this Section 6.19
shall not be interpreted to provide recourse to the Seller against loss by
reason of the bankruptcy or insolvency (or other credit condition) of, or
default by, related Obligor on, any Pool Asset.
Any indemnification pursuant to this Section shall not be payable
from the Assets.
The obligations of the Servicer under this Section 6.19 shall survive
the resignation or removal of the Deal Agent, the Liquidity Agent, the Backup
Servicer or the Collateral Custodian and the termination of this Agreement.
Section 6.20 The Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon the Servicer's determination that (i) the
performance of its duties hereunder is or becomes impermissible under
applicable law and (ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced as to clause (i) above by an Opinion of Counsel to
such effect delivered to the Deal Agent and the Backup Servicer. No such
resignation shall become effective until a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance
with Section 6.25.
Section 6.21 Access to Certain Documentation and
Information Regarding the Contracts.
The Collateral Custodian shall provide to the Deal Agent access to
the Contract Files and all other documentation regarding the Contracts in the
Asset Pool and the related Equipment in such cases where the Deal Agent is
required in connection with the enforcement of the rights or interests of the
Purchasers, or by applicable statutes or regulations to review such
documentation, such access being afforded without charge but only (i) upon two
business days prior written request, (ii) during normal business hours and
(iii) subject to the Servicer's and Collateral Custodian's normal security and
confidentiality procedures. Prior to the Closing Date and periodically
thereafter at the discretion of the Deal Agent, the Deal Agent may review the
Servicer's collection and administration of the Contracts in order to assess
compliance by the Servicer with the Servicer's written policies and
procedures, as well as with this Agreement and may conduct an audit of the
Contracts and Contract Files in conjunction with such a review. Such review
shall be reasonable in scope and shall be completed in a reasonable period of
time.
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Section 6.22 Backup Servicer.
(a) On or before the date on which the initial Purchase occurs, until
the receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Deal Agent and the Purchaser, the following duties
and obligations:
(i) On or before the Closing Date, the Backup Servicer shall
accept from the Servicer delivery of the information required to be
set forth in the Monthly Reports in hard copy and on computer tape;
provided, however, the computer tape is in an MS-DOS, PC readable
ASCII format or format to be agreed upon by the Backup Servicer and
the Servicer on or prior to closing.
(ii) Not later than 12:00 noon New York time two Business
Days prior to each Reporting Date, the Backup Servicer shall accept
delivery of tape from the Servicer, which shall include but not be
limited to the following information: the name, number and name of
the related Lessee for each Contract, the collection status, the
contract status, the principal balance and the ADCB (the "Tape").
The Servicer shall provide, or cause the Subservicer to provide, the
Tape on each Reporting Date as described above.
(b) On or before the date on which the initial Purchase occurs, and
until the receipt by the Servicer of a Termination Notice, the Backup Servicer
shall perform, on behalf of the Purchaser and the Deal Agent, the following
duties and obligations:
(i) Prior to the related Payment Date, the Backup Servicer
shall review the Monthly Report to ensure that it is complete on its
face and that the following items in such Monthly Report have been
accurately calculated, if applicable, and reported: (A) the ADCB, (B)
the Backup Servicing Fee, (C) the Average ADCB, (D) the accounts that
are 30-60 days past due, (E) the accounts that are 61-90 days past
due, (E) the accounts that are 90+ days past due, (F) the accounts
that are Defaulted Contracts, (G) the Delinquency Ratio and (H) the
Default Ratio. The Backup Servicer shall notify the Deal Agent and
the Servicer of any disagreements with the Monthly Report based on
such review not later than the Business Day preceding such Payment
Date to such Persons.
(ii) If the Servicer disagrees with the report provided
under paragraph (i) above by the Backup Servicer or if the Servicer
or any subservicer has not reconciled such discrepancy, the Backup
Servicer agrees to confer with the Servicer to resolve such
disagreement on or prior to the next succeeding Determination Date
and shall settle such discrepancy with the Servicer if possible, and
notify the Deal Agent of the resolution thereof. The Servicer hereby
agrees to cooperate at its own expense, with the Backup Servicer in
reconciling any discrepancies herein. If within 20 days after the
delivery of the report provided under paragraph (i) above by the
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Backup Servicer, such discrepancy is not resolved, the Backup
Servicer shall promptly notify the Deal Agent of the continued
existence of such discrepancy. Following receipt of such notice by
the Deal Agent, the Servicer shall deliver to the Deal Agent, the
Purchasers, and the Backup Servicer no later than the related Payment
Date a certificate describing the nature and amount of such
discrepancies and the actions the Servicer proposes to take with
respect thereto.
With respect to the foregoing, the Backup Servicer, in the
performance of its duties and obligations hereunder, is entitled to rely
conclusively, and shall be fully protected in so relying, on the contents of
each Tape, including, but not limited to, the completeness and accuracy
thereof, provided by the Servicer.
(c) After the receipt of an effective Termination Notice by the
Servicer in accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this Agreement, whether with respect
to the Contracts or otherwise shall pass to and be vested in the Backup
Servicer, subject to and in accordance with the provisions of Section 6.25, as
long as the Backup Servicer is not prohibited by an applicable provision of
law from fulfilling the same, as evidenced by an Opinion of Counsel.
(d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on
the part of any of the parties to this Agreement.
(e) As compensation for its back-up servicing obligations hereunder,
the Backup Servicer shall be entitled to receive the Backup Servicing Fee in
respect of each Monthly Period (or portion thereof) until the first to occur
of the date on which the Backup Servicer becomes a Successor Servicer, resigns
or is removed as Backup Servicer or termination of this Agreement.
(f) The Backup Servicer may resign at any time by not less than 120
days notice to the Deal Agent, the Liquidity Agent, the Servicer, the Seller
and the Originator. In addition, the Backup Servicer may be removed without
cause by the Deal Agent by notice then given in writing to the Servicer, the
Seller and the Backup Servicer. In the event of any such resignation or
removal, the Backup Servicer may be replaced by (i) the Servicer, acting with
the consent of the Deal Agent or (ii) if no such replacement is appointed
within 30 days following such removal or resignation, by the Deal Agent.
(g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being
expressly understood by all parties hereto that there are no implied duties or
obligations of the Backup Servicer hereunder. Without limiting the generality
of the foregoing, the Backup Servicer, except as expressly set forth herein,
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shall have no obligation to supervise, verify, monitor or administer the
performance of the Servicer. The Backup Servicer may act through its agents,
attorneys and custodians in performing any of its duties and obligations under
this Agreement, it being understood by the parties hereto that the Backup
Servicer will be responsible for any misconduct or negligence on the part of
such agents, attorneys or custodians acting on the routine and ordinary
day-to-day operations for and on behalf of the Backup Servicer. Neither the
Backup Servicer nor any of its officers, directors, employees or agents shall
be liable, directly or indirectly, for any damages or expenses arising out of
the services performed under this Agreement other than damages or expenses
which result from the gross negligence or willful misconduct of it or them or
the failure to perform materially in accordance with this Agreement.
(h) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer
contained in any computer tape, certificate or other data or document
delivered to the Backup Servicer hereunder or on which the Backup Servicer
must rely in order to perform its obligations hereunder, and the Seller,
Purchaser, Deal Agent, Liquidity Agent, Collateral Custodian and Backup
Servicer, shall look only to the Servicer to perform such obligations. The
Backup Servicer, and the Collateral Custodian shall have no responsibility and
shall not be in default hereunder or incur any liability for any failure,
error, malfunction or any delay in carrying out any of their respective duties
under this Agreement if such failure or delay results from the Backup Servicer
acting in accordance with information prepared or supplied by a Person other
than the Backup Servicer or the failure of any such other Person to prepare or
provide such information. The Backup Servicer shall have no responsibility,
shall not be in default and shall incur no liability for (i) any act or
failure to act of any third party, including the Servicer (ii) any inaccuracy
or omission in a notice or communication received by the Backup Servicer from
any third party, (iii) the invalidity or unenforceability of any Asset or
Contract under applicable law, (iv) the breach or inaccuracy of any
representation or warranty made with respect to any Asset, Contract or any
item of Equipment, or (v) the acts or omissions of any successor Backup
Servicer.
Section 6.23 Identification of Records.
The Servicer shall clearly and unambiguously identify each Contract
in the Asset Pool and the related Equipment in its computer or other records
to reflect that such Contracts and Equipment have been transferred to and are
owned by the Seller and that an interest therein has been transferred by the
Seller pursuant to this Agreement.
Section 6.24 Servicer Defaults.
If any one of the following events (a "Servicer Default") shall occur
and be continuing:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Deal Agent as required by
this Agreement including, without limitation, while Fidelity is Servicer, any
payment required to be made under the Backup Servicer and Collateral Custodian
Fee Letter, or to deliver any required Monthly Report or other Required
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Reports hereunder on or before the date occurring two Business Days after the
date such payment, transfer, deposit, instruction of notice or report is
required to be made or given, as the case may be, under the terms of this
Agreement;
(b) any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or the Purchase Agreement which has a
material adverse effect on the Purchasers, which continues unremedied for a
period of 30 days after the first to occur of (i) the date on which written
notice of such failure requiring the same to be remedied shall have been given
to the Servicer by the Deal Agent and (ii) the date on which the Servicer
becomes aware thereof;
(c) any representation, warranty or certification made by the
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, which has a material
adverse effect on the Purchasers and which continues to be unremedied for a
period of 30 days after the first to occur of (i) the date on which written
notice of such incorrectness requiring the same to be remedied shall have been
given to the Servicer by the Deal Agent and (ii) the date on which the
Servicer becomes aware thereof;
(d) an Insolvency Event shall occur with respect to the Servicer;
(e) any material delegation of the Servicer's duties which is not
permitted by Section 7.1;
(f) any financial or Asset information reasonably requested by the
Deal Agent or the Purchaser as provided herein is not reasonably provided as
requested;
(g) the rendering against the Servicer of a final judgment, decree or
order for the payment of money in excess of U.S. $1,000,000 and the
continuance of such judgment, decree or order unsatisfied and in effect for
any period of 61 consecutive days without a stay of execution;
(h) the failure of the Servicer to make any payment due with respect
to aggregate recourse debt or other obligations with an aggregate principal
amount exceeding U.S. $1,000,000 or the occurrence of any event or condition
which would permit acceleration of such recourse debt or other obligations if
such event or condition has not been waived;
(i) any change in the management of the Servicer relating to the
positions of President, CEO, Chairman of the Board and Executive Vice
President; or
(j) any change in the control of the Servicer which takes the form of
either a merger or consolidation in which the Servicer is not the surviving
entity.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Default shall not have been remedied, the Deal Agent, by written notice to the
Servicer (with a copy to the Backup Servicer) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer as Servicer under
this Agreement.
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Section 6.25 Appointment of Successor Servicer.
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 6.24, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Deal Agent in writing or, if no such date
is specified in such Termination Notice or otherwise specified by the Deal
Agent, until a date mutually agreed upon by the Servicer and the Deal Agent.
The Deal Agent may at the time described in the immediately preceding sentence
in its sole discretion, appoint the Backup Servicer as the Servicer hereunder,
and the Backup Servicer shall on such date assume all obligations of the
Servicer hereunder, and all authority and power of the Servicer under this
Agreement shall pass to and be vested in the Backup Servicer; provided,
however, that the Successor Servicer shall not (i) be responsible or liable
for any past actions or omissions of the outgoing Servicer or (ii) be
obligated to make Servicer Advances. In the event that the Deal Agent does not
so appoint the Backup Servicer, there is no Backup Servicer or the Backup
Servicer is unwilling or unable to assume such obligations on such date, the
Deal Agent shall as promptly as possible appoint a successor servicer (the
Backup Servicer or any such other successor, the "Successor Servicer"), and
such Successor Servicer shall accept its appointment by a written assumption
in a form acceptable to the Deal Agent. If the Deal Agent within 60 days of
receipt of a Termination Notice is unable to obtain any bids from Eligible
Servicers and the Servicer delivers an Officer's Certificate to the effect
that it cannot in good faith cure the Servicer Default which gave rise to a
transfer of servicing, then the Deal Agent shall offer the Seller the right to
accept retransfer of all the Assets and the Seller may accept re-transfer of
all the Assets, provided, however, that if the long-term unsecured debt
obligations of the Seller are not rated at the time of such purchase at least
investment grade by each rating agency providing a rating in respect of such
long-term unsecured debt obligations, no such re-transfer shall occur unless
the Seller shall deliver an Opinion of Counsel reasonably acceptable to the
Deal Agent that such re-transfer would not constitute a fraudulent conveyance
of the Seller. The amount to be paid and deposited in respect of such
re-transfer shall be equal to the sum of the Capital outstanding plus all
Yield that has accrued thereon and that will accrue thereon. In the event that
a Successor Servicer has not been appointed and has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Deal
Agent shall petition a court of competent Jurisdiction to appoint any
established financial institution having a net worth of not less than U.S.
$50,000,000 and whose regular business includes the servicing of Contracts as
the Successor Servicer hereunder.
(b) Upon its appointment, the Backup Servicer (subject to Section
6.25(a)) or the Successor Servicer, as applicable, shall be the successor in
all respects to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall
be deemed to refer to the Backup Servicer or the Successor Servicer, as
applicable.
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(c) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of this
Agreement and shall pass to and be vested in the Seller and, without
limitation, the Seller is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The Servicer agrees to cooperate with the Seller in
effecting the termination of the responsibilities and rights of the Servicer
to conduct servicing on the Contracts in the Asset Pool.
(d) Upon the Backup Servicer receiving notice that it is required to
serve as the Servicer hereunder pursuant to the foregoing provisions of this
Section 6.25, the Backup Servicer will promptly begin the transition to its
role as Servicer.
(e) The Backup Servicer shall be entitled to receive its reasonable
costs incurred in transitioning to Servicer.
Section 6.26 Notification.
Upon the Servicer becoming aware of the occurrence of any Servicer
Default, the Servicer shall promptly give written notice thereof to the Deal
Agent and the Backup Servicer.
Section 6.27 Protection of Right, Title and Interest
to Assets.
(a) The Servicer shall cause this Agreement, all amendments hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the right, title and interest of the Deal Agent
as agent for the Purchaser and of the Purchasers to the Assets to be promptly
recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the Deal
Agent as agent for the Purchasers hereunder to all property comprising the
Assets. The Servicer shall deliver to the Deal Agent file-stamped copies of,
or filing receipts for, any document recorded, registered or filed as provided
above, as soon as available following such recording, registration or filing.
The Seller shall cooperate fully with the Servicer in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this subsection 6.27(a).
(b) The Servicer will give the Deal Agent at least 30 days' prior
written notice of any relocation of any office from which it services
Contracts in the Asset Pool or keeps the Contract Files or of its principal
executive office and whether, as a result of such relocation, the applicable
provisions of the UCC or any other applicable law governing the perfection of
interests in property would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to continue the perfection of the security interest of the Deal
Agent as agent for the Purchasers in the Contracts in the Asset Pool and the
proceeds thereof. The Servicer will at all times maintain each office from
which it services Contracts in the Asset Pool within the United States of
America.
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Section 6.28 Release of Contract Files.
The Seller may, with the prior written consent of the Deal Agent
(such consent not to be unreasonably withheld), require that the Collateral
Custodian release each Contract File (a) delivered to the Collateral Custodian
in error, (b) for which a Substitute Contract has been substituted in
accordance with Section 2.16, (c) as to which the lien on the related
Equipment has been so released pursuant to Section 5.3, (d) which has been
retransferred to the Seller pursuant to Section 5.5 or 5.6, or (e) which is
required to be redelivered to the Seller in connection with the termination of
this Agreement, in each case by submitting to the Collateral Custodian and the
Deal Agent a written request in the form of Exhibit H hereto (signed by both
the Seller and the Deal Agent) specifying the Contracts to be so released and
reciting that the conditions to such release have been met (and specifying the
section or sections of this Agreement being relied upon for such release). The
Collateral Custodian shall upon its receipt of each such request for release
executed by the Seller and the Deal Agent promptly, but in any event within 5
Business Days, release the Contract Files so requested to the Seller.
ARTICLE VII
PAYOUT AND RESTRICTING EVENTS
Section 7.1 Payout Events.
If any of the following events ("Payout Events") shall occur:
(a) as of any Reporting Date, the Delinquency Ratio for the preceding
Determination Date exceeds 3.0%;
(b) as of any Reporting Date, the Default Ratio for the preceding
Determination Date exceeds 2.75%;
(c) the passage of 60 days following receipt by the Purchaser of a
written notification of the Seller's intent to terminate the revolving period;
(d) a Restricting Event has occurred.
Section 7.2 Restricting Events.
If any of the following events ("Restricting Events") shall occur:
(a) as of any Reporting Date, the Delinquency Ratio for the preceding
Determination Date exceeds 4.0%;
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(b) as of any Reporting Date, the Default Ratio for the preceding
Determination Date exceeds 3.25%;
(c) the Termination Date shall have occurred;
(d) the level of Capital exceeds the Capital Limit and the Seller
does not, within one Business Day, contribute Eligible Contracts and/or cash
collateral sufficient to cause the Capital to comply with the Capital Limit;
(e) the Seller is not in compliance with the Portfolio Concentration
Criteria, and such noncompliance is not cured within 5 Business Days;
(f) a Servicer Default occurs and is continuing;
(g) (i) failure on the part of the Seller to make any payment or
deposit required by the terms of this Agreement on the day such
payment or deposit is required to be made or
(ii) failure on the part of the Seller to observe or perform
any of its covenants or agreements set forth in this Agreement, which
failure has a material adverse effect on the interests of the Deal
Agent, any Purchaser, the Liquidity Agent or any Investor and which
continues unremedied for a period of 30 days or more after written
notice to Seller; provided, that only a five Business Day cure period
shall apply in the case of a failure by the Seller to observe its
covenants not to grant a security interest or otherwise intentionally
create a Lien on the Contracts;
(h) any representation or warranty made by the Seller in this
Agreement or any information required to be given by the Seller to the Deal
Agent to identify Contracts pursuant to this Agreement, shall prove to have
been incorrect in any material respect when made or delivered and which
continues to be incorrect in any material respect for a period of 30 days
after written notice or actual knowledge thereof;
(i) the occurrence of an Insolvency Event relating to the Originator,
the Seller or the Servicer;
(j) the Seller shall become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the "40 Act") or
the arrangements contemplated by this Agreement shall require registration as
an `investment company" within the meaning of the 40 Act;
(k) a regulatory, tax or accounting body has ordered that the
activities of the Seller or any Affiliate of the Seller, contemplated hereby
be terminated or, as a result of any other event or circumstance, the
activities of the Seller contemplated hereby may reasonably be expected to
cause the Seller or any of its respective Affiliates to suffer materially
adverse regulatory, accounting or tax consequences; or
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(l) on any day, less than 100% of the Capital is subject to Hedging
Agreements.
then, and in any such event, the Termination Date shall be deemed to have
occurred automatically upon the occurrence of such event. Upon any such
occurrence, the Deal Agent and the Purchasers shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnities by the Seller.
Without limiting any other rights which the Deal Agent, the Backup
Servicer, the Collateral Custodian, the Liquidity Agent, the Purchasers or any
of their respective Affiliates may have hereunder or under applicable law, the
Seller hereby agrees to indemnify the Deal Agent, the Backup Servicer, the
Collateral Custodian, the Liquidity Agent, the Purchasers, and each of their
respective Affiliates and officers, directors, employees and agents thereof
from and against any and all damages, losses, claims, liabilities and related
costs and expenses, including reasonable attorneys' fees and disbursements
(all of the foregoing being collectively referred to as "Indemnified Amounts")
awarded against or incurred by, but excluding allocations of overhead expenses
of any such Indemnified Party or other non-monetary damages of any such
Indemnified Party any of them arising out of or as a result of this Agreement
or the ownership of the Asset Interest or in respect of any Asset or any
Contract, excluding, however, (a) Indemnified Amounts to the extent resulting
from negligence or willful misconduct on the part of the Deal Agent, the
Backup Servicer, the Collateral Custodian, the Liquidity Agent, such Purchaser
or such Affiliate and (b) recourse (except with respect to payment and
performance of obligations provided for in this Agreement) for Defaulted
Contracts. If the Seller has made any indemnity payment pursuant to this
Section 8.1 and such payment fully indemnified the recipient thereof and the
recipient thereafter collects any payments from others in respect of such
Indemnified Amounts then, the recipient shall repay to the Seller an amount
equal to the amount it has collected from others in respect of such
indemnified amounts. Without limiting the foregoing, the Seller shall
indemnify the Deal Agent, the Backup Servicer, the Collateral Custodian, the
Liquidity Agent, the Purchasers and each of their respective Affiliates and
officers, directors, employees and agents thereof for Indemnified Amounts
relating to or resulting from:
(i) any Purchased Asset treated as or represented by the
Seller to be an Eligible Contract which is not at the applicable time
an Eligible Contract;
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(ii) reliance on any representation or warranty made or
deemed made by the Seller, the Servicer (if the Originator or one of
its Affiliates) or any of their respective officers under or in
connection with this Agreement, which shall have been false or
incorrect in any material respect when made or deemed made or
delivered;
(iii) the failure by the Seller or the Servicer (if the
Originator or one of its Affiliates) to comply with any term,
provision or covenant contained in this Agreement or any agreement
executed in connection with this Agreement, or with any applicable
law, rule or regulation with respect to any Asset, the related
Contract, or the nonconformity of any Asset, the related Contract
with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the relevant
Purchaser or to transfer to such Purchaser, an undivided ownership
interest in the Assets, together with all Collections, free and clear
of any Adverse Claim whether existing at the time of any Purchase or
at any time thereafter;
(v) the failure to maintain, as of the close of business on
each Business Day prior to the Termination Date, an amount of Capital
outstanding which is less than or equal to the lesser of (x) the
Purchase Limit on such Business Day, or (y) the Capital Limit on such
Business Day;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Assets which are, or are purported to be, Pool Assets, whether at
the time of any Purchase or at any subsequent time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Asset which is, or is purported to be, a Purchased Asset
(including, without limitation, a defense based on such Asset or the
related Contract not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the merchandise or
services related to such Asset or the furnishing or failure to
furnish such merchandise or services;
(viii) any failure of the Seller or the Servicer (if the
Originator or one of its Affiliates) to perform its duties or
obligations in accordance with the provisions of this Agreement or
any failure by the Originator, the Seller or any Affiliate thereof to
perform its respective duties under the Contracts;
(ix) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Asset or Contract;
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(x) the failure by Seller to pay when due any Taxes for
which the Seller is liable, including without limitation, sales,
excise or personal property taxes payable in connection with the Pool
Assets;
(xi) any repayment by the Deal Agent, the Liquidity Agent or
a Purchaser of any amount previously distributed in reduction of
Capital or payment of Yield or any other amount due hereunder, in
each case which amount the Deal Agent, the Liquidity Agent or a
Purchaser believes in good faith is required to be repaid;
(xii) the commingling of Collections of Pool Assets at any
time with other funds;
(xiii) any investigation, litigation or proceeding related
to this Agreement or the use of proceeds of Purchases or
reinvestments or the ownership of the Asset Interest or in respect of
any Asset or Contract;
(xiv) any failure by the Seller to give reasonably
equivalent value to the Originator in consideration for the transfer
by the Originator to the Seller of any Assets or any attempt by any
Person to void or otherwise avoid any such transfer under any
statutory provision or common law or equitable action, including,
without limitation, any provision of the Bankruptcy Code; or
(xv) the failure of the Seller, the Originator or any of
their respective agents or representatives to remit to the Servicer
or the Deal Agent, Collections of Pool Assets remitted to the Seller
or any such agent or representative.
Any amounts subject to the indemnification provisions of this Section 8.1
shall be paid by the Seller solely pursuant to the provisions of Sections 2.7,
2.8 and 2.9 hereof as the case may be to the Deal Agent within two Business
Days following the Deal Agent's demand therefor.
If for any reason the indemnification provided above in this Section
8.1 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by such Indemnified Person on the one hand and the
Seller on the other hand but also the relative fault of such Indemnified
Person as well as any other relevant equitable considerations.
The parties hereto agree that the provisions of Section 8.1 shall not
be interpreted to provide recourse to the Seller against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by,
related Obligor on, any Pool Asset.
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ARTICLE IX
THE DEAL AGENT AND THE LIQUIDITY AGENT
Section 9.1 Authorization and Action.
(a) Each Purchaser hereby designates and appoints the Deal Agent as
Deal Agent hereunder, and authorizes the Deal Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Deal
Agent by the terms of this Agreement together with such powers as are
reasonably incidental thereto. The Deal Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Deal
Agent shall be read into this Agreement or otherwise exist for the Deal Agent.
In performing its functions and duties hereunder, the Deal Agent shall act
solely as agent for the Purchasers and does not assume nor shall be deemed to
have assumed any obligation or relationship of trust or agency with or for the
Seller or any of its successors or assigns. The Deal Agent shall not be
required to take any action which exposes the Deal Agent to personal liability
or which is contrary to this Agreement or applicable law. The appointment and
authority of the Deal Agent hereunder shall terminate at the indefeasible
payment in full of the Aggregate Unpaids.
(b) Each Investor hereby designates and appoints FUNB as Liquidity
Agent hereunder, and authorizes the Liquidity Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the
Liquidity Agent by the terms of this Agreement together with such powers as
are reasonably incidental thereto. The Liquidity Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Liquidity Agent shall be read into this Agreement or otherwise exist for the
Liquidity Agent. In performing its functions and duties hereunder, the
Liquidity Agent shall act solely as agent for the Investors and does not
assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for the Seller or any of its successors or assigns.
The Liquidity Agent shall not be required to take any action which exposes the
Liquidity Agent to personal liability or which is contrary to this Agreement
or applicable law. The appointment and authority of the Liquidity Agent
hereunder shall terminate at the indefeasible payment in full of the Aggregate
Unpaids.
Section 9.2 Delegation of Duties.
(a) The Deal Agent may execute any of its duties under this Agreement
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Deal Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
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(b) The Liquidity Agent may execute any of its duties under this
Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Liquidity Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
Section 9.3 Exculpatory Provisions.
(a) Neither the Deal Agent nor any of its directors, officers, agents
or employees shall be (i) liable for any action lawfully taken or omitted to
be taken by it or them under or in connection with this Agreement (except for
its, their or such Person's own gross negligence or willful misconduct or, in
the case of the Deal Agent, the breach of its obligations expressly set forth
in this Agreement), or (ii) responsible in any manner to any of the Purchasers
for any recitals, statements, representations or warranties made by the Seller
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document
furnished in connection herewith, or for any failure of the Seller to perform
its obligations hereunder, or for the satisfaction of any condition specified
in Article III. The Deal Agent shall not be under any obligation to any
Purchaser to ascertain or to inquire as to the observance or performance of
any of the agreements or covenants contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Seller. The
Deal Agent shall not be deemed to have knowledge of any Payout Event unless
the Deal Agent has received notice from the Seller or a Purchaser.
(b) Neither the Liquidity Agent nor any of its directors, officers,
agents or employees shall be (i) liable for any action lawfully taken or
omitted to be taken by it or them under or in connection with this Agreement
(except for its, their or such Person's own gross negligence or willful
misconduct or, in the case of the Liquidity Agent, the breach of its
obligations expressly set forth in this Agreement), or (ii) responsible in any
manner to the Deal Agent or any of the Purchasers for any recitals,
statements, representations or warranties made by the Seller contained in this
Agreement or in any certificate, report, statement or other document referred
to or provided for in, or received under or in connection with, this Agreement
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other document furnished in connection
herewith, or for any failure of the Seller to perform its obligations
hereunder, or for the satisfaction of any condition specified in Article III.
The Liquidity Agent shall not be under any obligation to the Deal Agent or any
Purchaser to ascertain or to inquire as to the observance or performance of
any of the agreements or covenants contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Seller. The
Liquidity Agent shall not be deemed to have knowledge of any Payout Event
unless the Liquidity Agent has received notice from the Seller, the Deal Agent
or a Purchaser.
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Section 9.4 Reliance.
(a) The Deal Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, upon any document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Seller), independent
accountants and other experts selected by the Deal Agent. The Deal Agent shall
in all cases be fully justified in failing or refusing to take any action
under this Agreement or any other document furnished in connection herewith
unless it shall first receive such advice or concurrence of VFCC or the
Required Investors or all of the Purchasers, as applicable, as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Purchasers, provided that unless and until the Deal Agent shall have received
such advice, the Deal Agent may take or refrain from taking any action, as the
Deal Agent shall deem advisable and in the best interests of the Purchasers.
The Deal Agent shall in all cases be fully protected in acting, or in
refraining from acting, in accordance with a request of VFCC or the Required
Investors or all of the Purchasers, as applicable, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Purchasers.
(b) The Liquidity Agent shall in all cases be entitled to rely, and
shall be fully protected in relying, upon any document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to the Seller), independent
accountants and other experts selected by the Liquidity Agent. The Liquidity
Agent shall in all cases be fully justified in failing or refusing to take any
action under this Agreement or any other document furnished in connection
herewith unless it shall first receive such advice or concurrence of Required
Investors as it deems appropriate or it shall first be indemnified to its
satisfaction by the Investors, provided that unless and until the Liquidity
Agent shall have received such advice, the Liquidity Agent may take or refrain
from taking any action, as the Liquidity Agent shall deem advisable and in the
best interests of the Investors. The Liquidity Agent shall in all cases be
fully protected in acting, or in refraining from acting, in accordance with a
request of the Required Investors and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Investors.
Section 9.5 Non-Reliance on Deal Agent, Liquidity
Agent and Other Purchasers.
Each Purchaser expressly acknowledges that neither the Deal Agent,
the Liquidity Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Deal Agent or the
Liquidity Agent hereafter taken, including, without limitation, any review of
the affairs of the Seller, shall be deemed to constitute any representation or
warranty by the Deal Agent or the Liquidity Agent. Each Purchaser represents
and warrants to the Deal Agent and to the Liquidity Agent that it has and
will, independently and without reliance upon the Deal Agent, the Liquidity
Agent or any other Purchaser and based on such documents and information as it
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has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, prospects, financial and other conditions and
creditworthiness of the Seller and made its own decision to enter into this
Agreement.
Section 9.6 Reimbursement and Indemnification.
The Investors agree to reimburse and indemnify VFCC, the Deal Agent,
the Liquidity Agent and each of their respective officers, directors,
employees, representatives and agents ratably according to their pro rata
shares, to the extent not paid or reimbursed by the Seller (i) for any amounts
for which VFCC, the Liquidity Agent, acting in its capacity as Liquidity
Agent, or the Deal Agent, acting in its capacity as Deal Agent, is entitled to
reimbursement by the Seller hereunder and (ii) for any other expenses incurred
by VFCC, the Liquidity Agent, acting in its capacity as Liquidity Agent, or
the Deal Agent, in its capacity as Deal Agent and acting on behalf of the
Purchasers, in connection with the administration and enforcement of this
Agreement.
Section 9.7 Deal Agent and Liquidity Agent in their
Individual Capacities.
The Deal Agent, the Liquidity Agent and each of their respective
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Seller or any Affiliate of the Seller as though the
Deal Agent or the Liquidity Agent, as the case may be, were not the Deal Agent
or the Liquidity Agent, as the case may be, hereunder. With respect to the
acquisition of Asset Interests pursuant to this Agreement, the Deal Agent, the
Liquidity Agent and each of their respective Affiliates shall have the same
rights and powers under this Agreement as any Purchaser and may exercise the
same as though it were not the Deal Agent or the Liquidity Agent, as the case
may be, and the terms "Investor," "Purchaser," "Investors" and "Purchasers"
shall include the Deal Agent or the Liquidity Agent, as the case may be, in
its individual capacity.
Section 9.8 Successor Deal Agent or Liquidity Agent.
(a) The Deal Agent may, upon 5 days' notice to the Seller and the
Purchasers, and the Deal Agent will, upon the direction of all of the
Purchasers (other than the Deal Agent, in its individual capacity) resign as
Deal Agent. If the Deal Agent shall resign, then the Required Investors during
such 5-day period shall appoint from among the Purchasers a successor agent.
If for any reason no successor Deal Agent is appointed by the Required
Investors during such 5-day period, then effective upon the expiration of such
5-day period, the Purchasers shall perform all of the duties of the Deal Agent
hereunder and the Seller shall make all payments in respect of the Aggregate
Unpaids or under any fee letter delivered by the Originator to the Deal Agent
and the Purchasers directly to the applicable Purchaser and for all purposes
shall deal directly with the Purchasers. After any retiring Deal Agent's
resignation hereunder as Deal Agent, the provisions of this Article VIII and
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Deal Agent under this Agreement.
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(b) The Liquidity Agent may, upon 5 days' notice to the Seller, the
Deal Agent and the Investors, and the Liquidity Agent will, upon the direction
of all of the Investors (other than the Liquidity Agent, in its individual
capacity) resign as Liquidity Agent. If the Liquidity Agent shall resign, then
the Required Investors during such 5-day period shall appoint from among the
Investors a successor Liquidity Agent. If for any reason no successor
Liquidity Agent is appointed by the Required Investors during such 5-day
period, then effective upon the expiration of such 5-day period, the Investors
shall perform all of the duties of the Liquidity Agent hereunder and all
payments in respect of the Aggregate Unpaids. After any retiring Liquidity
Agent's resignation hereunder as Liquidity Agent, the provisions of this
Article VIII and Article IX shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Liquidity Agent under this
Agreement.
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1 Assignments and Participations.
(a) Each Investor may upon at least 30 days' notice to VFCC, the Deal
Agent, the Liquidity Agent and S&P and Moody's, assign to one or more banks or
other entities all or a portion of its rights and obligations under this
Agreement; provided, however, that (i) each such assignment shall be of a
constant, and not a varying percentage of all of the assigning Investor's
rights and obligations under this Agreement, (ii) the amount of the Commitment
of the assigning Investor being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to
such assignment) shall in no event be less than the lesser of (A) $15,000,000
or an integral multiple of $1,000,000 in excess of that amount and (B) the
full amount of the assigning Investor's Commitment, (iii) each such assignment
shall be to an Eligible Assignee, (iv) the parties to each such assignment
shall execute and deliver to the Deal Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance, together with a processing and
recordation fee of $3,500 or such lesser amount as shall be approved by the
Deal Agent, (v) the parties to each such assignment shall have agreed to
reimburse the Deal Agent, the Liquidity Agent and VFCC for all fees, costs and
expenses (including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for each of the Deal Agent, the Liquidity Agent and VFCC)
incurred by the Deal Agent, the Liquidity Agent and VFCC, respectively, in
connection with such assignment and (vi) there shall be no increased costs,
expenses or taxes incurred by the Deal Agent, the Liquidity Agent or VFCC upon
such assignment or participation, and provided further that upon the effective
date of such assignment the provisions of Section 3.03(f) of the
Administration Agreement shall be satisfied. Upon such execution, delivery and
acceptance by the Deal Agent and the Liquidity Agent and the recording by the
Deal Agent, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be the date of acceptance thereof by
the Deal Agent and the Liquidity Agent, unless a later date is specified
therein, (i) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
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to such Assignment and Acceptance, have the rights and obligations of an
Investor hereunder and (ii) the Investor assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Investor's
rights and obligations under this Agreement, such Investor shall cease to be a
party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Investor assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Investor makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Investor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of VFCC or the performance or observance by VFCC of any of
its obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of such financial statements and
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Deal
Agent or the Liquidity Agent, such assigning Investor or any other Investor
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assigning Investor and such assignee
confirm that such assignee is an Eligible Assignee; (vi) such assignee
appoints and authorizes each of the Deal Agent and the Liquidity Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to such agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed
by it as an Investor.
(c) The Deal Agent shall maintain at its address referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Investors and
the Commitment of, and the Capital of, each Asset interest owned by each
investor from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and VFCC,
the Seller and the Investors may treat each Person whose name is recorded in
the Register as an Investor hereunder for all purposes of this Agreement. The
Register shall be available for inspection by VFCC, the Liquidity Agent or any
Investor at any reasonable time and from time to time upon reasonable prior
notice.
(d) Subject to the provisions of Section 10.1(a), upon its receipt of
an Assignment and Acceptance executed by an assigning Investor and an
assignee, the Deal Agent and the Liquidity Agent shall each, if such
Assignment and Acceptance has been completed and is in substantially the form
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of Exhibit D hereto, accept such Assignment and Acceptance, and the Deal Agent
shall then (i) record the information contained therein in the Register and
(ii) give prompt notice thereof to VFCC.
(e) Each Investor may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and each Asset Interest owned by it); provided, however, that (i)
such Investor's obligations under this Agreement (including, without
limitation, its Commitment hereunder) shall remain unchanged, (ii) such
Investor shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Deal Agent and the other
Investors shall continue to deal solely and directly with such Investor in
connection with such Investor's rights and obligations under this Agreement,
and provided further that the Deal Agent shall have confirmed that upon the
effective date of such participation the provisions of Section 3.03(f) of the
Administration Agreement shall be satisfied. Notwithstanding anything herein
to the contrary, each participant shall have the rights of an Investor
(including any right to receive payment) under Sections 2.12 and 2.13;
provided, however, that no participant shall be entitled to receive payment
under either such Section in excess of the amount that would have been payable
under such Section by the Seller to the Investor granting its participation
had such participation not been granted, and no Investor granting a
participation shall be entitled to receive payment under either such Section
in an amount which exceeds the sum of (i) the amount to which such Investor is
entitled under such Section with respect to any portion of any Asset Interest
owned by such Investor which is not subject to any participation plus (ii) the
aggregate amount to which its participants are entitled under such Sections
with respect to the amounts of their respective participations. With respect
to any participation described in this Section 10.1, the participant's rights
as set forth in the agreement between such participant and the applicable
Investor to agree to or to restrict such Investor's ability to agree to any
modification, waiver or release of any of the terms of this Agreement or to
exercise or refrain from exercising any powers or rights which such Investor
may have under or in respect of this Agreement shall be limited to the right
to consent to any of the matters set forth in Section 11.1 of this Agreement.
(f) Each Investor may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.1, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Seller or VFCC furnished to such
Investor by or on behalf of the Seller or VFCC.
(g) In the event (i) an Investor ceases to qualify as an Eligible
Assignee, or (ii) an Investor makes demand for compensation pursuant to
Section 2.12 or Section 2.13, VFCC may, and, upon the direction of the Seller
and prior to the occurrence of a Restricting Event, shall, in any such case,
notwithstanding any provision to the contrary herein, replace such Investor
with an Eligible Assignee by giving three Business Days' prior written notice
to such Investor. In the event of the replacement of an Investor, such
Investor agrees (i) to assign all of its rights and obligations hereunder to
an Eligible Assignee selected by VFCC upon payment to such Investor of the
amount of such Investor's Asset Interests together with any accrued and unpaid
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Yield thereon, all accrued and unpaid commitment fees owing to such Investor
and all other amounts owing to such Investor hereunder and (ii) to execute and
deliver an Assignment and Acceptance and such other documents evidencing such
assignment as shall be necessary or reasonably requested by VFCC or the Deal
Agent. In the event that any Investor ceases to qualify as an Eligible
Assignee, such affected Investor agrees (1) to give the Deal Agent, the Seller
and VFCC prompt written notice thereof and (2) subject to the following
proviso, to reimburse the Deal Agent, the Liquidity Agent, the Seller, VFCC
and the relevant assignee for all fees, costs and expenses (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for each
of the Deal Agent, the Liquidity Agent, the Seller and VFCC and such assignee)
incurred by the Deal Agent, the Liquidity Agent, the Seller, VFCC and such
assignee, respectively, in connection with any assignment made pursuant to
this Section 10.1(g) by such affected Investor; provided, however, that such
affected Investor's liability for such costs, fees and expenses shall be
limited to the amount of any up-front fees paid to such affected Investor at
the time that it became a party to this Agreement.
(h) Nothing herein shall prohibit any Investor from pledging or
assigning as collateral any of its rights under this Agreement to any Federal
Reserve Bank in accordance with applicable law and any such pledge or
collateral assignment may be made without compliance with Section 10.1(a) or
Section 10.1(b).
(i) In the event any Investor causes increased costs, expenses or
taxes to be incurred by the Deal Agent, Liquidity Agreement or VFCC in
connection with the assignment or participation of such Investor's rights and
obligations under this Agreement to an Eligible Assignee then such Investor
agrees that it will make reasonable efforts to assign such increased costs,
expenses or taxes to such Eligible Assignee in accordance with the provisions
of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments and Waivers.
(a) Except as provided in this Section 11.1, no amendment, waiver or
other modification of any provision of this Agreement shall be effective
without the written agreement of the Seller, the Deal Agent and the Required
Investors; provided, however, that no such amendment, waiver or modification
affecting the rights or obligations of any Hedge Counterparty, the Backup
Servicer or the Collateral Custodian shall be effective as against the Backup
Servicer and/or the Collateral Custodian, as the case may be, without the
written agreement of such Persons. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
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(b) No amendment, waiver or other modification of this Agreement
shall:
(i) without the consent of each affected Purchaser, (A)
extend the Commitment Termination Date or the date of any payment or
deposit of Collections by the Seller or the Servicer, (B) reduce the
rate or extend the time of payment of Yield (or any component
thereof), (C) reduce any fee payable to the Deal Agent for the
benefit of the Purchasers, (D) except pursuant to Article X hereof,
change the amount of the Capital of any Purchaser, an Investor's pro
rata share or an Investor's Commitment, (E) amend, modify or waive
any provision of the definition of Required Investors or this Section
11.1(b), (F) consent to or permit the assignment or transfer by the
Seller of any of its rights and obligations under this Agreement or
(G) amend or modify any defined term (or any defined term used
directly or indirectly in such defined term) used in clauses (A)
through (E) above in a manner which would circumvent the intention of
the restrictions set forth in such clauses; or
(ii) without the written consent of the Deal Agent, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Agent.
(c) Notwithstanding the foregoing provisions of this Section 11.1,
without the consent of the Investors, the Deal Agent may, with the consent of
the Seller amend this Agreement solely to add additional Persons as Investors
hereunder. Any modification or waiver shall apply to each of the Purchasers
equally and shall be binding upon the Seller, the Purchasers and the Deal
Agent.
Section 11.2 Notices, Etc.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telex communication
and communication by facsimile copy) and mailed, telexed, transmitted or
delivered, as to each party hereto, at its address set forth under its name on
the signature pages hereof or specified in such party's Assignment and
Acceptance or at such other address as shall be designated by such party in a
written notice to the other parties hereto. All such notices and
communications shall be effective, upon receipt, or in the case of (a) notice
by mail, five days after being deposited in the United States mail, first
class postage prepaid, (b) notice by telex, when telexed against receipt of
answer back, or (c) notice by facsimile copy, when verbal communication of
receipt is obtained, except that notices and communications pursuant to
Article 11 shall not be effective until received with respect to any notice
sent by mail or telex.
Section 11.3 Ratable Payments.
If any Purchaser, whether by setoff or otherwise, has payment made to
it with respect to any portion of the Aggregate Unpaids owing to such
Purchaser (other than payments received pursuant to Section 8.1 in a greater
proportion than that received by any other Purchaser), such Purchaser agrees,
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promptly upon demand, to purchase for cash without recourse or warranty a
portion of the Aggregate Unpaids held by the other Purchasers so that after
such purchase each Purchaser will hold its ratable proportion of the Aggregate
Unpaids; provided, however, that if all or any portion of such excess amount
is thereafter recovered from such Purchaser, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
Section 11.4 No Waiver, Rights and Remedies.
No failure on the part of the Deal Agent, the Collateral Custodian,
the Backup Servicer or a Purchaser to exercise, and no delay in exercising,
any right or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right. The rights and
remedies herein provided are cumulative and not exclusive of any rights and
remedies provided by law.
Section 11.5 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Seller, the Deal Agent, the Backup Servicer, the Collateral Custodian, the
Purchasers and their respective successors and permitted assigns.
Section 11.6 Term of this Agreement.
This Agreement, including, without limitation, the Seller's
obligation to observe its covenants set forth in Article V, and the Servicer's
obligation to observe its covenants set forth in Article VI, shall remain in
full force and effect until the Collection Date; provided, however, that the
rights and remedies with respect to any breach of any representation and
warranty made or deemed made by the Seller pursuant to Articles III and IV and
the indemnification and payment provisions of Article VIII and Article IX and
the provisions of Section 11.9 and Section 11.10 shall be continuing and shall
survive any termination of this Agreement.
Section 11.7 GOVERNING LAW; 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 PURCHASERS, THE SELLER,
THE LIQUIDITY AGENT AND THE DEAL AGENT HEREBY AGREES TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH
OF THE PARTIES HERETO 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 CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
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Section 11.8 WAIVER OF JURY TRIAL.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PURCHASERS,
THE SELLER AND THE DEAL AGENT 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 11.9 Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification granted to the Deal
Agent, the Liquidity Agent, the Backup Servicer, the Collateral Custodian, the
Purchasers and its or their Affiliates and officers, directors, employees and
agents thereof under Article VIII hereof, the Seller agrees to pay on demand
all costs and expenses of the Deal Agent, the Liquidity Agent, the Backup
Servicer, the Collateral Custodian and the Purchasers incurred in connection
with the preparation, execution, delivery, administration (including periodic
auditing), amendment or modification of, or any waiver or consent issued in
connection with, this Agreement and the other documents to be delivered
hereunder or in connection herewith, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Deal Agent, the
Liquidity Agent, the Backup Servicer, the Collateral Custodian and the
Purchasers with respect thereto and with respect to advising the Deal Agent,
the Liquidity Agent, the Backup Servicer, the Collateral Custodian and the
Purchasers as to their respective rights and remedies under this Agreement and
the other documents to be delivered hereunder or in connection herewith, and
all costs and expenses, if any (including reasonable counsel fees and
expenses), incurred by the Deal Agent, the Liquidity Agent, the Backup
Servicer, the Collateral Custodian or the Purchasers in connection with the
enforcement of this Agreement and the other documents to be delivered
hereunder or in connection herewith.
(b) The Seller shall pay on demand any and all stamp, sales, excise
and other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement, the
other documents to be delivered hereunder or any agreement or other document
providing liquidity support, credit enhancement or other similar support to
the Purchaser in connection with this Agreement or the funding or maintenance
of Purchases hereunder.
(c) The Seller shall pay on demand all other costs, expenses and
Taxes (excluding income taxes) incurred by any Issuer or any shareholder of
such Issuer ("Other Costs"), including, without limitation, all costs and
expenses incurred by the Deal Agent in connection with periodic audits of the
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Seller's or the Servicer's books and records and the cost of rating such
Issuer's commercial paper with respect to financing its purchase of Asset
Interests hereunder by independent financial rating agencies.
Section 11.10 No Proceedings.
Each of the Seller, the Deal Agent, the Liquidity Agent, the
Servicer, the Backup Servicer, the Collateral Custodian and the Purchasers
hereby agrees that it will not institute against, or join any other Person in
instituting against VFCC any proceedings of the type referred to in Section
6.8(d) and 6.9(c) so long as any commercial paper issued by VFCC shall be
outstanding and there shall not have elapsed one year and one day since the
last day on which any such commercial paper shall have been outstanding.
Section 11.11 Recourse Against Certain Parties.
No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Purchaser as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any administrator of such Purchaser
or any incorporator, affiliate, stockholder, officer, employee or director of
such Purchaser or of any such administrator, as such, by the enforcement of
any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise; it being expressly agreed and understood that the
agreements of such Purchaser contained in this Agreement and all of the other
agreements, instruments and documents entered into by it pursuant hereto or in
connection herewith are, in each case, solely the corporate obligations of
such Purchaser, and that no personal liability whatsoever shall attach to or
be incurred by any administrator of such Purchaser or any incorporator,
stockholder, affiliate, officer, employee or director of such Purchaser or of
any such administrator, as such, or any other of them, under or by reason of
any of the obligations, covenants or agreements of such Purchaser contained in
this Agreement or in any other such instruments, documents or agreements, or
which are implied therefrom, and that any and all personal liability of every
such administrator of such Purchaser and each incorporator, stockholder,
affiliate, officer, employee or director of such Purchaser or of any such
administrator, or any of them, for breaches by such Purchaser of any such
obligations, covenants or agreements, which liability may arise either at
common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement. The provisions of this Section 11.11 shall survive the
termination of this Agreement.
Section 11.12 Protection of Ownership Interests of the
Purchasers; Intent of Parties; Security
Interest; Third Party Beneficiary.
(a) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may reasonably be necessary or desirable, or that the Deal Agent
may reasonably request, to perfect, protect or more fully evidence the Asset
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Interests and the undivided ownership interest in the Assets in the Asset Pool
represented by such Asset Interests, or to enable the Deal Agent or the
Purchasers to exercise and enforce their rights and remedies hereunder.
(b) If the Seller or the Servicer fails to perform any of its
obligations hereunder after five Business Days' notice from the Deal Agent,
the Deal Agent or any Purchaser may (but shall not be required to) perform, or
cause performance of, such obligation; and the Deal Agent's or such
Purchaser's costs and expenses incurred in connection therewith shall be
payable by the Seller (if the Servicer that fails to so perform is the Seller
or an Affiliate thereof) as provided in Article VIII, as applicable. The
Seller irrevocably authorizes the Deal Agent and appoints the Deal Agent as
its attorney-in-fact to act on behalf of the Seller (i) to execute on behalf
of the Seller as debtor and to file financing statements necessary or
desirable in the Deal Agent's sole discretion to perfect and to maintain the
perfection and priority of the interest of the Purchasers in the Assets and
(ii) to file a carbon, photographic or other reproduction of this Agreement or
any financing statement with respect to the Assets as a financing statement in
such offices as the Deal Agent in its sole discretion deems necessary or
desirable to perfect and to maintain the perfection and priority of the
interests of the Purchasers in the Assets. This appointment is coupled with an
interest and is irrevocable.
(c) The parties hereto intend that the conveyance of Asset Interests
by the Seller to the Purchasers shall be treated as sales for all purposes.
If, despite such intention, a determination is made that such transactions
shall not be treated as sales, then the parties hereto intend that this
Agreement constitutes a security agreement and the transactions effected
hereby constitute secured loans by the Purchasers to the Seller under
applicable law. For such purpose, the Seller hereby transfers, conveys,
assigns and grants to the Deal Agent, for the benefit of the Purchasers and
the Hedge Counterparties, a continuing security interest in all Assets, all
Collections and the proceeds of the foregoing to secure the repayment of all
Capital, all payments at any time due or accrued in respect of the Yield on
any Asset Interest and all other payments at any time due (whether accrued or
due) by the Seller hereunder (including without limit any amount owing under
Article VIII hereof), under any Hedging Agreement (including, without
limitation, payments in respect of the termination of any such Hedging
Agreement) or under any fee letter to the Deal Agent and each Purchaser.
(d) Each of the parties hereto agree that the Hedge Counterparties
shall be third party beneficiaries hereunder with respect to the rights
specifically granted to such Hedge Counterparties, including, without
limitation, the priorities set forth in Section 2.7, 2.8 and 2.9.
Section 11.13 Confidentiality
(a) Each of the Deal Agent, the Purchasers, the Liquidity Agent, the
Servicer, the Collateral Custodian, the Backup Servicer and the Seller shall
maintain and shall cause each of its employees and officers to maintain the
confidentiality of the Agreement and all information with respect to the other
parties, including all information regarding the business of the Seller and
the Servicer hereto and their respective businesses obtained by it or them in
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connection with the structuring, negotiating and execution of the transactions
contemplated herein, except that each such party and its officers and
employees may (i) disclose such information to its external accountants,
attorneys, investors, potential investors and the agents of such Persons
("Excepted Persons"), provided, however, that each Excepted Person shall, as a
condition to any such disclosure, agree for the benefit of the Deal Agent, the
Seller and the Investors that such information shall be used solely in
connection with such Excepted Person's evaluation of, or relationship with,
the Seller and its affiliates, (ii) disclose the existence of the Agreement,
but not the financial terms thereof and (iii) disclose such information as is
required by an applicable law or an order of an judicial or administrative
proceeding. It is understood that the financial terms that may not be
disclosed except in compliance with this Section 11.13(a) include, without
limitation, all fees and other pricing terms, and all Payout Events,
Restricting Events, Servicer Defaults, and priority of payment provisions
(b) Anything herein to the contrary notwithstanding, the Seller
hereby consents to the disclosure of any nonpublic information with respect to
it (i) to the Deal Agent, the Liquidity Agent, the Collateral Custodian, the
Backup Servicer or the Purchasers by each other, (ii) by the Deal Agent or the
Purchasers to any prospective or actual assignee or participant of any of them
or (iii) by the Deal Agent, the Liquidity Agent or a Purchaser to any Rating
Agency, Commercial Paper dealer or provider of a surety, guaranty or credit or
liquidity enhancement to a Purchaser and to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing, provided
each such Person is informed of the confidential nature of such information.
In addition, the Purchasers, the Liquidity Agent and the Deal Agent may
disclose any such nonpublic information as required pursuant to any law, rule,
regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).
(c) Notwithstanding anything herein to the contrary, the foregoing
shall not be construed to prohibit (i) disclosure of any and all information
that is or becomes publicly known, (ii) disclosure of any and all information
(A) if required to do so by any applicable statute, law, rule or regulation,
(B) to any government agency or regulatory body having or claiming authority
to regulate or oversee any respects of the Collateral Custodian's or Backup
Servicer's business or that of their affiliates, (C) pursuant to any subpoena,
civil investigative demand or similar demand or request of any court,
regulatory authority, arbitrator or arbitration to which the Collateral
Custodian or Backup Servicer or an affiliate or an officer, director, employer
or shareholder thereof is a party, (D) in any preliminary or final offering
circular, registration statement or contract or other document pertaining to
the transactions contemplated herein approved in advance by the Seller or
Servicer or (E) to any affiliate, independent or internal auditor, agent,
employee or attorney of the Collateral Custodian or Backup Servicer having a
need to know the same, provided that the Collateral Custodian or Backup
Servicer advises such recipient of the confidential nature of the information
being disclosed, or (iii) any other disclosure authorized by the Seller or
Servicer.
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Section 11.14 Execution in Counterparts; Severability;
Integration.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement. In case any provision in
or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or obligation in any
other jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Originator to the Deal Agent and
the Purchasers.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE SELLER: SW LEASING PORTFOLIO IV, INC.
By______________________________
Title:
THE SERVICER: FIDELITY LEASING, INC.
By______________________________
Title:
THE INVESTORS: FIRST UNION NATIONAL BANK
By______________________________
Title:
Commitment: $50,000,000
First Union National Bank
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Mr. Bill A. Shirley
Facsimile No.: (704) 374-3254
Confirmation No: (704) 374-4001
VFCC: VARIABLE FUNDING CAPITAL
CORPORATION
By First Union Capital Markets Corp., as
attorney-in-fact
By______________________________
Title:
Variable Funding Capital Corporation
c/o First Union Capital Markets Corp.
One First Union Center, TW-6
Attention: Mr. Darrell Baber
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 383-9343
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With a copy to:
Lord Securities Corp.
Attention:
Facsimile No.: (____) __________
Confirmation No.: (____) __________
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS
CORP.
By
Title:________________________
First Union Capital Markets Corp.
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Mr. Darrell Baber
Facsimile No.: (704) 383-6036
Telephone No.: (704) 383-9343
THE LIQUIDITY AGENT: FIRST UNION NATIONAL BANK
By______________________________
Title:
First Union National Bank
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Mr. Bill A. Shirley
Facsimile No.: (704) 374-3254
Telephone No.: (704) 374-4001
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THE COLLATERAL CUSTODIAN: HARRIS TRUST AND SAVINGS BANK
By______________________________
Title:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administrator
Facsimile: (312) 461-3525
Telephone: (312) 461-2532
THE BACKUP SERVICER: HARRIS TRUST AND SAVINGS BANK
By___________________________
Title:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administrator
Facsimile: (312) 461-3525
Telephone: (312) 461-2532
94
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FIDELITY LEASING, INC.: FIDELITY LEASING, INC.
By______________________________
Title:
95
<PAGE>
================================================================================
FIDELITY LEASING SPC I, INC.
as Buyer
and
FIDELITY LEASING, INC.,
as Seller
================================================================================
PURCHASE AND SALE AGREEMENT
Dated as of June 24, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I GENERAL................................................................................................1
Section 1.1 Certain Defined Terms........................................................................1
Section 1.2 Other Definitional Provisions................................................................2
ARTICLE II SALE AND CONVEYANCE...................................................................................2
Section 2.1 Sale.........................................................................................2
Section 2.2 Subsequent Contracts.........................................................................5
ARTICLE III PURCHASE PRICE AND PAYMENT; MONTHLY REPORT...........................................................6
Section 3.1 Purchase Price...............................................................................6
Section 3.2 Payment of Purchase Price....................................................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................................6
Section 4.1 Seller's Representations and Warranties......................................................6
Section 4.2 Seller's Representations and Warranties Regarding the Agreement and the Contracts...........10
Section 4.3 Representations and Warranties of the Buyer.................................................11
ARTICLE V COVENANTS.............................................................................................12
Section 5.1 Seller Covenants............................................................................12
ARTICLE VI REPURCHASE OBLIGATION................................................................................14
Section 6.1 Retransfer of Ineligible Contracts..........................................................14
Section 6.2 Retransfer of Purchased Assets..............................................................15
Section 6.3 Adjustments.................................................................................16
Section 6.4 Substitution of Contracts...................................................................16
ARTICLE VII CONDITIONS PRECEDENT................................................................................17
Section 7.1 Conditions to the Buyer's Obligations Regarding Contracts...................................17
ARTICLE VIII TERM AND TERMINATION...............................................................................18
Section 8.1 Termination.................................................................................18
ARTICLE IX MISCELLANEOUS PROVISIONS.............................................................................18
Section 9.1 Amendment...................................................................................18
Section 9.2 Governing Law...............................................................................18
Section 9.3 Notices.....................................................................................19
Section 9.4 Severability of Provisions..................................................................20
Section 9.5 Assignment..................................................................................20
Section 9.6 Further Assurances..........................................................................20
Section 9.7 No Waiver; Cumulative Remedies..............................................................21
Section 9.8 Counterparts................................................................................21
Section 9.9 Binding Effect; Third-Party Beneficiaries...................................................21
Section 9.10 Merger and Integration.....................................................................21
Section 9.11 Headings...................................................................................21
Section 9.12 Schedules and Exhibits.....................................................................21
Section 9.13 No Proceedings.............................................................................21
Section 9.14 Merger or Consolidation of, or Assumption of the Obligations of, the Seller................22
Section 9.15 Costs, Expenses and Taxes..................................................................22
Section 9.16 Recourse Against Certain Parties...........................................................23
Schedule I List of Contracts
Schedule II Tradenames, Fictitious Names and "Doing Business As" Names
Exhibit A Form of Assignment
-i-
</TABLE>
<PAGE>
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of June 24, 1998 by and between
FIDELITY LEASING, INC., a Pennsylvania corporation (the "Seller"), and FIDELITY
LEASING SPC I, INC., a Delaware corporation (the "Buyer").
W I T N E S S E T H :
WHEREAS, the Buyer desires to purchase from the Seller and the Seller
desires to sell to the Buyer certain contracts originated or purchased by the
Seller in its normal course of business, together with, among other things the
related rights of payment thereunder and the interest of the Seller in the
related equipment and other interests securing the payments to be made under
such contracts.
NOW, THEREFORE, it is hereby agreed by and between the Buyer and the
Seller as follows:
ARTICLE I
GENERAL
Section 1.1 Certain Defined Terms.
Certain capitalized terms used throughout this Agreement are defined
above or in this Section 1.1. In addition, capitalized terms used but not
defined herein have the meanings given to such terms in the Receivables Purchase
Agreement.
Agreement: Shall mean this Purchase and Sale Agreement, as the same shall be
amended, supplemented, restated or replaced from time to time.
Excess Amount: Shall have the meaning specified in Section 3.2 hereof
Purchase: Any purchase made hereunder pursuant to Section 2.1.
Purchase Date: Any day on which any Purchased Asset is acquired by the Buyer
pursuant to the terms of this Agreement.
Purchase Price: Shall have the meaning specified in Section 3.1 hereof.
Purchased Assets: The interests and property purchased pursuant to Sections
2.1(a) and (b).
Purchased Contracts: The Contracts listed on Schedule I hereto.
<PAGE>
Receivables Purchase Agreement: The Receivables Purchase Agreement dated as of
June __, 1998 by and among the Buyer, as seller thereunder, Fidelity Leasing,
Inc., as servicer, the investors named therein, Variable Funding Capital
Corporation, as a purchaser, Harris Trust and Savings Bank, as collateral
custodian and backup servicer, First Union Capital Markets, a division of Wheat
First Securities, Inc., as deal agent and First Union National Bank, as
liquidity agent, as the same may be amended, supplemented, restated or replaced
from time to time.
Required Lease Cancellation Payment: Shall have the meaning set forth in Section
6.3(b) hereof.
Sale Papers: Shall have the meaning set forth in Section 4.1(a) hereof.
Servicer: Initially, Fidelity Leasing, Inc., in its capacity as the Servicer
under the Receivables Purchase Agreement, and its permitted successors and
assigns, and thereafter any Person appointed as successor as provided therein to
service the Assets thereunder.
Subsequent Contract List: The list of Contracts to be sold by the Seller to the
Buyer on a Subsequent Purchase Date.
Subsequent Contracts: On any Subsequent Purchase Date, the Contracts sold by the
Seller to the Buyer on such date as listed on the Subsequent Contact List.
Subsequent Purchase Date: Each Purchase Date other than the Closing Date.
Substitution Date: Any date on which the Seller transfers a Substitute Contract
to the Buyer.
Section 1.2 Other Definitional Provisions.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or any Sale Paper shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
Section, Subsection, Schedule and Exhibit references contained in this Agreement
are references to Sections, Subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified. In the event that any term or provision
contained herein shall conflict with or be inconsistent with any term or
provision contained in the Receivables Purchase Agreement, the terms and
provisions contained herein shall govern with respect to this Agreement.
ARTICLE II
SALE AND CONVEYANCE
Section 2.1 Sale.
(a) On the Closing Date, the Seller hereby sells, transfers, assigns,
sets over and otherwise conveys to the Buyer as of the Closing Date, and the
Buyer hereby purchases from the Seller, without recourse, all right, title and
interest of the Seller in, to and under the following property, whether now
existing or hereafter created or acquired:
2
<PAGE>
(i) the Contracts that are owned by the Seller on the
Closing Date and that are listed on the Contract List, together with
all Collections and all monies due or to become due in payment of such
Contracts after the related Cut Off Date, and any payments in respect
of a Casualty Loss or Early Termination, but excluding any Scheduled
Payments due on or prior to the related Cut Off Date and any Excluded
Amounts;
(ii) the Equipment related to such Contracts,
including all proceeds from any sale or other disposition of such
Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future
specifically with respect to such Contracts or the Obligor thereunder
under any guarantee or similar credit enhancement with respect to such
Contracts;
(v) all Insurance Proceeds with respect to each such
Contract; and
(vii) all income and proceeds of the foregoing.
(b) On each Subsequent Purchase Date, the Seller will sell, transfer,
assign and set over and otherwise convey to the Buyer and the Buyer will
purchase from the Seller, without recourse, all right, title and interest of the
Seller in, to and under the following property, whether now existing or
hereafter created or acquired:
(i) the Subsequent Contracts identified on the
Subsequent Contract List delivered by the Seller to the Buyer two
Business Days before the applicable Subsequent Purchase Date, together
with all Collections and all monies due or to become due in payment of
such Contracts after the related Cut Off Date, and any payments in
respect of a casualty or early termination, but excluding any Scheduled
Payments due on or prior to the related Cut Off Date and any Excluded
Amounts;
(ii) the Equipment related to such Contracts,
including all proceeds from any sale or other disposition of such
Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future
specifically with respect to such Contracts or the Obligor thereunder
under any guarantee or similar credit enhancement with respect to such
Contracts;
(v) all Insurance Proceeds with respect to each such
Contract; and
(vii) all income and proceeds of the foregoing.
3
<PAGE>
The foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Buyer of any obligation of the Seller or any other Person in connection with the
Contracts or under any agreement or instrument relating thereto including,
without limitation, any obligation to any Obligors.
(c) In connection with the sale of the Purchased Assets, the Seller
agrees (i) to record and file, at its own expense, any financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Purchased Assets, meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect, and maintain the perfection of, the sale of the Purchased Assets
from the Seller to the Buyer on and after the Closing Date, (ii) that such
financing statements shall name the Seller, as seller, and the Buyer, as
purchaser, of the Purchased Assets and (iii) to deliver a file-stamped copy of
such financing statements or other evidence of such filings (excluding
continuation statements, which shall be delivered as filed) to the Buyer on or
prior to the initial Purchase Date, in the case of the Original Contracts and
(if any additional filing is necessary) on or prior to the related Subsequent
Purchase Date, in the case of Subsequent Contracts.
(d) In connection with the sale of the Purchased Assets, the Seller
further agrees that it will, at its own expense, indicate clearly and
unambiguously in its computer files, on or prior to the Closing Date in the case
of the Original Contracts and on or prior to the related Subsequent Purchase
Date in the case of each Subsequent Contract, that such Contracts have been sold
to the Buyer pursuant to this Agreement. The Seller further agrees to deliver to
the Buyer (i) on the Closing Date, a computer file or microfiche list containing
a true and complete list of all Original Contracts, identified by account number
and Outstanding Balance as of the Cut Off Date and (ii) on any Subsequent
Purchase Date with respect to Subsequent Contracts, a computer file or
microfiche list containing a true and complete list of all Subsequent Contracts
transferred on such date identified by account number and Outstanding Balance as
of the related Additional Cut Off Date. Such file or list shall be marked as
Schedule I to this Agreement, shall be delivered to the Buyer as confidential
and proprietary, and is hereby incorporated into and made a part of this
Agreement.
(e) It is the intention of the parties hereto that the conveyance of
the Contracts and the other Purchased Assets by the Seller to the Buyer as
provided in this Section 2.1 be, and be construed as, an absolute sale, without
recourse, of the Contracts and the other Purchased Assets by the Seller to the
Buyer. Furthermore, it is not intended that such conveyance be deemed a pledge
of the Contracts and the other Purchased Assets by the Seller to the Buyer to
secure a debt or other obligation of the Seller. If, however, notwithstanding
the intention of the parties, the conveyance provided for in this Section 2.1 is
determined to be a transfer for security, then this Agreement shall also be
deemed to be a "security agreement" within the meaning of Article 9 of the UCC
and the Seller hereby grants to the Buyer a "security interest" within the
meaning of Article 9 of the UCC in all of the Seller's right, title and interest
in and to the Contracts and the other Purchased Assets, now existing and
hereafter created, to secure a loan in an amount equal to the aggregate Purchase
Price and each of the Seller's other payment obligations under this Agreement.
4
<PAGE>
Section 2.2 Subsequent Contracts.
(a) The Seller shall on or prior to any Subsequent Purchase Date with
respect to any Contracts execute and deliver to the Buyer a written assignment
from Seller to the Buyer substantially the form of Exhibit A hereto. From and
after such Subsequent Purchase Date, such Subsequent Contracts shall be deemed
to be Contracts hereunder.
(b) Covenants of the Seller In Connection With Additions. On or before
any Subsequent Purchase Date with respect to any Contracts acquired by the Buyer
as described in subsection 2.1(b), the Seller shall:
(i) clearly indicate in its files that such Contracts have
been sold to the Buyer and deliver to the Buyer a computer file or microfiche
list which the Seller shall represent to contain a true and complete list of
such Subsequent Contracts, identified by account number as of the related Cut
Off Date, which computer file or microfiche list shall be as of such date
incorporated into and made apart of this Agreement;
(ii) provide the Buyer with an Officer's Certificate
certifying as follows: (A) each such Contract was, as of the related Subsequent
Purchase Date, an Eligible Contract, (B) no selection procedures believed by the
Seller to be materially adverse to the interest of the Buyer were utilized in
selecting such Contracts from the available Eligible Contracts in the Seller's
portfolio, (C) such Contracts and all proceeds thereof will be conveyed to the
Buyer free and clear of any Lien of any Person claiming through or under the
Seller or any of its Affiliates, except for Liens permitted hereunder and (D) as
of the related Subsequent Purchase Date, (x) no Insolvency Event with respect to
the Seller has occurred, (y) the Buyer is not insolvent and (z) the sale of such
Contracts to the Buyer has not been made in contemplation of the occurrence of
any Insolvency Event with respect to the Seller, and (E) as of the related
Subsequent Purchase Date, no Restricting Event with respect to the Seller has
occurred;
(iii) record and file financing statements with respect to
such Contracts meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect the sale of such Contracts
by the Seller to the Buyer.
5
<PAGE>
ARTICLE III
PURCHASE PRICE AND PAYMENT; MONTHLY REPORT
Section 3.1 Purchase Price.
The purchase price for each Contract sold to the Buyer by the Seller
under this Agreement (the "Purchase Price") shall be a dollar amount equal to
the Discounted Contract Balance determined as of the related Cut Off Date.
Section 3.2 Payment of Purchase Price.
(a) The Purchase Price for each Contract existing on the Closing Date
shall be paid or provided for on the Closing Date (i) by payment of
$18,278,606.43 in immediately available funds and (ii) the remainder shall be
deemed paid through a contribution to capital of the Buyer by the Seller in an
amount equal to such remainder.
(b) The Purchase Price for any portion of the Contracts sold by the
Seller on any date after the Closing Date shall be paid either (i) in cash or
(ii) if the Buyer does not have sufficient cash to pay the full amount of the
Purchase Price, by means of a capital contribution by the Seller to the Buyer.
(c) Unless otherwise specified herein, all payments of the Purchase
price of any Contract sold hereunder shall be made not later than 3:00 p.m. (New
York City time) on the date specified therefor in lawful money of the United
States of America in same day funds by depositing such amounts in the bank
account designated in writing by the Seller to the Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Seller's Representations and Warranties.
The Seller hereby represents and warrants to the Buyer, as of the
initial Purchase Date and each Subsequent Purchase Date, that:
(a) Organization and Good Standing. The Seller is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its formation and has full corporate power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and as such business is presently conducted and to execute,
deliver and perform its obligations under this Agreement and each other document
or instrument to be delivered by the Seller hereunder (collectively, the "Sale
Papers").
6
<PAGE>
(b) Due Qualification. The Seller is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would have a material adverse effect on its ability to perform its
obligations hereunder or under the Sale Papers.
(c) Due Authorization. The execution and delivery of this Agreement and
each of the Sale Papers, and the consummation of the transactions provided for
herein and therein have been duly authorized by the Seller by all necessary
corporate action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof, will not conflict
with, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material default
under, any material indenture, contract, agreement, mortgage, deed of trust, or
other instrument to which the Seller is a party or by which it or any of its
property is bound.
(e) No Violation. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof (including, without
limitation, the sale of Purchased Assets by the Seller or remittance of
Collections in accordance with the provisions of this Agreement), will not
conflict with or violate, in any material respect, any Requirements of Law
applicable to the Seller.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Seller, threatened against the Seller before
any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
any of the Sale Papers, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Sale Papers, or (iii)
seeking any determination or ruling that could reasonably be expected to be
adversely determined, and if adversely determined, would materially and
adversely affect the performance by the Seller of its obligations under this
Agreement or any of the Sale Papers.
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
in connection with the execution and delivery of this Agreement and the Sale
Papers, the performance of the transactions contemplated by this Agreement and
the Sale Papers and the fulfillment of or terms hereof and thereof, have been
obtained.
(h) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by the Seller.
(i) Solvency. The transactions contemplated under this Agreement and
the Sale Papers do not and will not render the Seller insolvent.
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(j) Selection Procedures. No selection procedures believed by the
Seller to be materially adverse to the interests of the Buyer were utilized by
the Seller in selecting the Contracts to be sold, assigned, transferred,
set-over and otherwise conveyed hereunder.
(k) Use of Proceeds. No proceeds of the sale of any Contract hereunder
received by the Seller will be used by the Seller to purchase or carry any
margin security.
(l) Not an Investment Company. The Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or is exempt from all provisions of such Act.
(m) Other Names. The legal name of the Seller is as set forth in this
Agreement and within the preceding five years the Seller has not used, and the
Seller currently does not use, any tradenames, fictitious names, assumed names
or "doing business as" names other than those set forth on Schedule II hereto.
(n) Taxes. The Seller has filed or caused to be filed all tax returns
which, to its knowledge, are required to be filed and has paid all taxes shown
to be due and payable on such returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any amount of tax
due the validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in accordance with
generally accepted accounting principles have been provided on the books of the
Seller); no tax lien has been filed and, to the Seller's knowledge, no claim is
being asserted, with respect to any such tax, fee or other charge.
(o) Place of Business. The principal executive offices of the Seller
are in Ambler, Pennsylvania and the offices where the Seller keeps its records
concerning the Contracts are in Ambler, Pennsylvania.
(p) No Liens. Each Purchased Asset, together with the Contract related
thereto, shall, at all times, be owned by the Seller free and clear of any Lien
except as provided herein, and upon the sale, transfer or assignment hereunder,
the Buyer shall acquire a valid and perfected first priority undivided ownership
interest in each Purchased Asset then existing or thereafter arising and in the
Collections with respect thereto, free and clear of any Lien except as provided
herein. No effective financing statement or other instrument similar in effect
covering any Purchased Asset or the Collections with respect thereto shall at
any time be on file in any recording office except such as may be filed in favor
of the Buyer relating to this Agreement.
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(q) Special Purpose Entity. The Seller agrees that, for a period of one
year and one day after the Aggregate Unpaids have been paid in full, the Seller
will not cause the Buyer to file a voluntary petition or institute, cause to be
instituted or join in any involuntary petition or proceeding under the
Bankruptcy Code or any other bankruptcy or insolvency laws. Each of the Buyer
and the Seller is aware that in light of the circumstances described in the
preceding sentence and other relevant facts, the filing of a voluntary petition
under the Bankruptcy Code for the purpose of making the assets of the Buyer
available to satisfy claims of the creditors of the Seller would not result in
making such assets available to satisfy such creditors under the Bankruptcy
Code.
(r) Security Interest. The Seller has granted a security interest (as
defined in the UCC) to the Buyer in the Purchased Assets and Collections, which
is enforceable in accordance with the UCC upon execution and delivery of this
Agreement. Upon the filing of UCC-1 financing statements naming the Buyer as
secured party and the Seller as debtor, the Buyer shall have a first priority
perfected security interest in the Purchased Assets and Collections. All filings
(including, without limitation, such UCC filings) as are necessary in any
jurisdiction to perfect the interest of the Buyer in the Purchased Assets and
Collections have been (or prior to the applicable purchase hereunder will be)
made; provided, however, that filings as to related Equipment have been (or
prior to the applicable purchase hereunder will be) made solely in the Filing
Locations and such Equipment filings have been (or prior to the applicable
purchase hereunder will be) made by filing in each such Filing Location one
financing statement listing all Equipment, without the necessity of making
individual filings for each item of Equipment.
(s) Accounting. The Seller will account for the transfers by it to the
Buyer of interests in Purchased Assets and Collections under this Agreement as
sales of such Purchased Assets in its books, records and financial statements,
in each case consistent with GAAP, as applicable, and with the requirements set
forth herein.
(t) Separate Entity. The Buyer is operated as an entity with assets and
liabilities distinct from those of the Seller and any Affiliates thereof, and
the Seller hereby acknowledges that the Deal Agent and the Purchasers under the
Receivables Purchase Agreement are entering into the transactions contemplated
by the Receivables Purchase Agreement in reliance upon the Buyer's identity as a
separate legal entity from the Seller and from each such Affiliate of the
Seller.
(u) Value Given. The cash payments received by the Seller in respect of
the Purchase Price of each Contract sold hereunder constitutes reasonably
equivalent value in consideration for the transfer to the Buyer of such Contract
under this Agreement, such transfer was not made for or on account of an
antecedent debt owed by the Seller to the Buyer, and such transfer was not and
is not voidable or subject to avoidance under any section of the Bankruptcy
Code.
(v) Reports Accurate. No report (if prepared by the Seller, or to the
extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Buyer in connection with this
Agreement is or will be inaccurate in any material respect as of the date it is
or shall be dated or (except as otherwise disclosed to the Buyer at such time)
as of the date so furnished, and no such document contains or will contain any
material misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.
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(w) Exchange Act Compliance. No proceeds of the sale of any Purchased
Assets will be used by the Seller to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.
(x) Accuracy of Representations and Warranties. Each representation or
warranty by the Seller contained herein or in any certificate or other document
furnished by the Seller pursuant hereto or in connection herewith is true and
correct in all material respects.
The representations and warranties set forth in this Section 4.1 shall
survive the sale, transfer and assignment of the Purchased Assets to the Buyer.
Upon discovery by the Seller or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice thereof to the other and to the Deal Agent immediately
upon obtaining knowledge of such breach.
Section 4.2 Seller's Representations and Warranties Regarding the
Agreement and the Contracts.
The Seller hereby represents and warrants to the Buyer, as of the
initial Purchase Date and each Subsequent Purchase Date that:
(a) Binding Obligation; Valid Transfer and Security Interest.
(i) This Agreement and each of the Sale Papers constitutes a
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as such enforceability may be
limited by Insolvency Laws and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity)
or by an implied covenant of good faith and fair dealing.
(ii) This Agreement constitutes a valid transfer to the Buyer
of all right, title and interest of the Seller in, to and under the Purchased
Assets, and such transfer will be free and clear of any Lien of any Person
claiming through or under the Seller or its Affiliates, except for Permitted
Liens. Upon the filing of the financing statements described in Section 4.1(r)
and, in the case of Subsequent Contracts on the applicable Subsequent Purchase
Date, the Buyer shall have a first priority perfected security interest in such
property, subject only to Permitted Liens.
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(b) Eligibility of Contracts. As of the Cut Off Date, (i) the Contract
List and the computer file or microfiche or written list delivered in connection
therewith is an accurate and complete listing in all material respects of all
the Contracts transferred hereunder as of the Cut Off Date and the information
contained therein with respect to the identity of such Contracts and the amounts
owing thereunder is true and correct in all material respects as of the Cut Off
Date, (ii) each such Contract is an Eligible Contract, (iii) each such Contract
and the Seller's interest in the related Equipment and Applicable Security, as
appropriate, has been transferred to the Buyer free and clear of any Lien of any
Person (other than Permitted Liens) and in compliance, in all material respects,
with all Requirements of Law applicable to the Seller and (iv) with respect to
each such Contract, all material consents, licenses, approvals or authorizations
of or registrations or declarations with any Governmental Authority required to
be obtained, effected or given by the Seller in connection with the transfer of
such Contract and the related Equipment to the Buyer have been duly obtained,
effected or given and are in full force and effect. On each Subsequent Purchase
Date on which Subsequent Contracts are transferred by the Seller to the Buyer,
the Seller shall be deemed to represent and warrant to the Buyer that (I) each
Subsequent Contract transferred on such day is an Eligible Contract, (II) each
such Subsequent Contract and the Seller's interest in the related Equipment, as
appropriate, has been transferred to the Buyer free and clear of any Lien of any
Person (other than Permitted Liens) and in compliance, in all material respects,
with all Requirements of Law applicable to the Seller or the originator thereof,
(III) with respect to each such Subsequent Contract, all material consents,
licenses, approvals or authorizations of or registrations or declarations with
any Governmental Authority required to be obtained, effected or given by the
Seller in connection with the transfer of such Contract and the related
Equipment to the Buyer have been duly obtained, effected or given and are in
full force and effect and (IV) the representations and warranties set forth in
Section 4.2(b) clauses (i) through (iv), inclusive, are true and correct with
respect to each Contract transferred on such day as if made on such day.
(c) Notice of Breach. The representations and warranties set forth in
this Section 4.2 shall survive the transfer and assignment of the respective
Contracts and Related Equipment, or interests therein, to the Buyer. Upon
discovery by the Seller or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
written notice thereof to the other and to the Deal Agent under the Receivables
Purchase Agreement immediately upon obtaining knowledge of such breach.
Section 4.3 Representations and Warranties of the Buyer.
The Buyer hereby represents and warrants to the Seller, as of the
Closing Date and each Subsequent Purchase Date, that:
(a) Organization and Good Standing. The Buyer is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware, and has full corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and each of the Sale Papers.
(b) Due Qualification. The Buyer is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained or will obtain all necessary licenses and
approvals, in each jurisdiction in which failure to so qualify or to obtain such
licenses and approvals would have a material adverse effect on its ability to
perform its obligations hereunder or under the Sale Papers.
(c) Due Authorization. The execution and delivery of this Agreement and
each of the Sale Papers and the consummation of the transactions provided for
herein or therein have been duly authorized by the Buyer by all necessary
corporate action on the part of the Buyer.
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(d) No Conflicts. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby or
thereby and the fulfillment of the terms hereof and thereof will not conflict
with, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material default
under, any material indenture, contract, agreement, mortgage, deed of trust, or
other instrument to which the Buyer is a party or by which it or any of its
property is bound.
(e) No Violation. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof (including, without
limitation, the purchase of Purchased Assets by the Buyer in accordance with the
provisions of this Agreement) will not conflict with or violate, in any material
respect, any Requirements of Law applicable to the Buyer.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Buyer, threatened against the Buyer, before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or any of the
Sale Papers, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any of the Sale Papers, or (iii) seeking any
determination or ruling that could reasonably be expected to be adversely
determined, and if adversely determined, would materially and adversely affect
the performance by the Buyer of its obligations under this Agreement or any of
the Sale Papers.
ARTICLE V
COVENANTS
Section 5.1 Seller Covenants.
The Seller hereby covenants with respect to each Contract, that:
(a) Compliance with Laws; Preservation of Corporate Existence. The
Seller will comply in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
(b) Contracts Not to be Evidenced by Promissory Notes. Except to the
extent the provisions of Section 6.4 are satisfied, the Seller will take no
action to cause any Contract which is not, as of the Closing Date or the related
Subsequent Purchase Date, as the case may be, evidenced by an Instrument, to be
so evidenced except in connection with the enforcement or collection of such
Contract.
(c) Security Interests. Except for the transfers hereunder, the Seller
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on any Contract transferred hereunder
or related Equipment, whether now existing or hereafter transferred hereunder,
or any interest therein, and Seller will not sell, pledge, assign or suffer to
exist any Lien on its interest, if any, hereunder, other than Liens arising by
operation of law in the ordinary course of business for sums not due and which
are released or extinguished within fifteen (15) days (or such longer period as
the Buyer may approve in its sole discretion) of the Seller becoming aware
thereof. The Seller will immediately notify the Buyer of the existence of any
Lien on any Contract transferred hereunder or related Equipment; and the Seller
shall defend the right, title and interest of the Buyer in, to and under the
Contracts transferred hereunder and the related Equipment, against all claims of
third parties; provided, however, that nothing in this Section 5.1(c) shall
prevent or be deemed to prohibit the Seller from suffering to exist Permitted
Liens upon any of the Contracts transferred hereunder or any related Equipment.
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(d) Delivery of Collections. The Seller agrees to pay to the Buyer
promptly (but in no event later than two Business Days after receipt) all
Collections received by the Seller in respect of the Contracts transferred
hereunder.
(e) Compliance with Law. The Seller hereby agrees to comply in all
material respects with all Requirements of Law applicable to the Seller, the
Contracts and the Equipment.
(f) Activities of the Seller. The Seller shall not engage in any
business or activity of any kind with the Buyer, or enter into any transaction
or indenture, mortgage, instrument, agreement, contract, lease or other
undertaking with the Buyer, which is not directly related to the transactions
contemplated and authorized by this Agreement, the Receivables Purchase
Agreement and the Certificate of Incorporation of the Buyer.
(g) Guarantees. The Seller shall not become or remain liable, directly
or contingently, in connection with any Indebtedness or other liability of the
Buyer, whether by guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance funds, or
otherwise.
(h) Merger; Sales. The Seller shall not enter into any transaction of
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or convey,
sell, lease or otherwise dispose of all or substantially all of its property or
business, except as provided for in this Agreement.
(i) Location of Seller, Records; Instruments. The Seller (x) shall not
move outside the Commonwealth of Pennsylvania, the location of its chief
executive office, without 30 days' prior written notice to the Buyer and the
Deal Agent and (y) shall not move the location of the Contract Files from the
locations thereof on the Closing Date, without 30 days' prior written notice to
the Buyer and the Deal Agent and (z) will promptly take all actions required
(including, but not limited to, all filings and other acts necessary or
advisable under the UCC, if applicable, of each relevant jurisdiction in order
to continue the first priority perfected security interest of the Buyer in all
Contracts transferred hereunder. The Seller will give the Buyer and the Deal
Agent prompt notice of a change within the Commonwealth of Pennsylvania of the
location of its chief executive office.
(j) Accounting of Purchases. The Seller will not account for or treat
(whether in financial statements or otherwise) the transactions contemplated
hereby in any manner other than the sale of Purchased Assets by the Seller to
the Buyer.
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(k) ERISA Matters. The Seller will not (a) engage in any prohibited
transaction for which an exemption is not available or has not previously been
obtained from the United States Department of Labor; (b) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the Code, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (c) fail to make any payments to an
Multiemployer Plan that the Seller may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (d) terminate
any Benefit Plan so as to result in any liability; or (e) permit to exist any
occurrence of any reportable event described in Title IV of ERISA which
represents a material risk of a liability of the Seller under ERISA or the Code.
(l) Nature of Business. The Seller will engage in no business with the
Buyer other than the sale and transfer of Purchased Assets hereunder and the
other transactions permitted or contemplated by this Agreement.
(m) Change in the Purchase and Sale Agreement. The Seller will not
amend, modify, waive or terminate any terms or conditions of this Agreement
except as provided herein.
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Retransfer of Ineligible Contracts.
In the event of a breach of any representation or warranty set forth in
Section 4.2 with respect to a Contract transferred hereunder (each such
Contract, an "Ineligible Contract"), no later than 30 days after the earlier of
(i) knowledge of such breach on the part of the Seller and (ii) receipt by the
Seller of written notice thereof given by the Buyer, the Seller shall accept a
retransfer of each such Contract (and any related Equipment or Applicable
Security) selected by the Buyer to which such breach relates at such time as
there is a breach of any such representation or warranty on the terms and
conditions set forth below; provided, however, that no such retransfer shall be
required to be made with respect to such Ineligible Contract (and such Contract
shall cease to be an Ineligible Contract) if, on or before the expiration of
such 30-day period, the representations and warranties in Section 4.2 with
respect to such Contract shall be made true and correct in all material respects
with respect to such Contract as if such Contract had been transferred to the
Buyer on such day. Notwithstanding anything contained in this Section 6.1 to the
contrary, in the event of breach of any representation and warranty set forth in
Section 4.2, with respect to each Original Contract or Subsequent Contract and
the related Equipment having been conveyed to the Buyer free and clear of any
Lien of any Person claiming through or under the Seller and its Affiliates
(other than Permitted Liens) and in compliance in all material respects, with
all Requirements of Law applicable to the Seller, immediately upon the earlier
to occur of the discovery of such breach by the Seller or receipt by the Seller
of written notice of such breach given by the Buyer, the Seller shall repurchase
and the Buyer shall convey, free and clear of any Lien created pursuant to this
Agreement, all of its right, title and interest in such Ineligible Contract, and
the Buyer shall, in connection with such conveyance and without further action,
be deemed to represent and warrant that it has the corporate authority and has
taken all necessary corporate action to accomplish such conveyance, but without
any other representation or warranty, express or implied. In any of the
foregoing instances, the Seller shall accept a retransfer of each such
Ineligible Contract, and there shall be deducted from the ADCB of the Asset Pool
the Discounted Contract Balance (calculated using the Blended Discount Rate as
of the most recent Determination Date) of each such Ineligible Contract. On and
after the date of such retransfer, each Ineligible Contract so retransferred
shall not be included in the pool of Purchased Assets. In consideration of such
retransfer the Seller shall, on the date of retransfer of such Ineligible
Contract, make a deposit in the Collection Account (for allocation pursuant to
Section 2.7, 2.8 or 2.9 of the Receivables Purchase Agreement, as applicable,)
in immediately available funds in an amount equal to the Discounted Contract
Balance, plus interest thereon from the most recent Payment Date to and
including the date of repurchase at a rate per annum equal to the weighted
average of the Yield Rates. Upon each retransfer to the Seller of such
Ineligible Contract, the Buyer shall automatically and without further action be
deemed to transfer, assign and set-over to the Seller, free and clear of any
Lien created pursuant to this Agreement, all the right, title and interest of
the Buyer in, to and under such Contract and all monies due or to become due
with respect thereto, the related Equipment and all proceeds of such Contract
and Liquidation Proceeds and Insurance Proceeds relating thereto and all rights
to security for any such Contract, and all proceeds and products of the
foregoing, and the Buyer shall, in connection with such transfer, assignment and
set-over and without further action, be deemed to represent and warrant that it
has the corporate authority and has taken all necessary corporate action to
accomplish such transfer, assignment and set-over, but without any other
representation or warranty, express or implied.. The Buyer shall, at the sole
expense of the Seller, execute such documents and instruments of transfer as may
be prepared by the Seller and take such other actions as shall reasonably be
requested by the Seller to effect the transfer of such Ineligible Contract
pursuant to this Section 6.1.
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Section 6.2 Retransfer of Purchased Assets.
In the event of a breach of any of the representations and warranties
set forth in Section 4.2 hereof affecting the Contracts, which breach could
reasonably be expected to have a material adverse affect on the rights of the
Purchasers under the Receivables Purchase Agreement or the Deal Agent as agent
for the Purchasers under the Receivables Purchase Agreement under the
Receivables Purchase Agreement or on the ability of the Buyer to perform its
obligations under the Receivables Purchase Agreement, the Buyer, by notice then
given in writing to the Seller may direct the Seller to accept retransfer of all
of the Contracts purchased from the Seller and the Seller shall be obligated to
accept retransfer of such Contracts on a Payment Date specified by the Seller
(such date, the "Retransfer Date") after such notice on the terms and conditions
set forth below; provided, however, that no such retransfer shall be required to
be made if, on or before expiration of such applicable period, the
representations and warranties contained in Section 4.2 shall then be true and
correct in all material respects. The Seller shall deposit on the Retransfer
Date an amount equal to the deposit amount provided in the next sentence for
such Contracts in the Collection Account for distribution to the Purchasers
under the Receivables Purchase Agreement. The deposit amount for such retransfer
will be equal to (x) the sum of (i) the outstanding Capital at the end of the
Business Day preceding the Payment Date on which the retransfer is scheduled to
be made and (ii) an amount equal to all accrued, and to accrue, but unpaid Yield
on such Capital at the applicable Yield Rate through the latest maturing Fixed
Period minus (y) the amount, if any, available in the Collection Account on such
Payment Date. On the Retransfer Date, provided that such amount has been
deposited in full into the Collection Account, the Contracts transferred
hereunder (or security interests therein) and all monies due or to become due
with respect thereto, the related Equipment (or security interests therein) and
all proceeds thereof, all rights to security for any such Contracts, and all
proceeds and products of the foregoing, shall be transferred to the Seller, and
the Buyer shall, at the sole expense of the Seller, execute and deliver such
instruments of transfer, in each case without recourse, representation or
warranty, as shall be prepared and reasonably requested by the Seller to vest in
the Seller, or its designee or assignee, all right, title and interest of the
Buyer in, to and under the Contracts transferred hereunder, all monies due or to
become due with respect thereto, the related Equipment and all proceeds thereof
and Insurance Proceeds relating thereto.
Section 6.3 Adjustments.
The Seller hereby agrees that, with respect to each Contract
transferred hereunder which provides for any payment constituting a Prepayment,
which amount is less than an amount equal to the aggregate remaining Scheduled
Payments related to such Contract, the Seller shall indemnify the Buyer in an
amount equal to the amount equal to the aggregate remaining Scheduled Payments
related to such Contract.
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Section 6.4 Substitution of Contracts.
On any day prior to the occurrence of the Termination Date, the Buyer
may, in its sole discretion, by written notice to the Seller, request that any
Contract be replaced by one or more other Contracts (each, a "Substitute
Contract"), provided that no such replacement shall occur unless each of the
following conditions is satisfied as of the date of such replacement and
substitution:
(a) the Seller has previously recommended to the Buyer in writing that
the Contract to be replaced should be replaced (each, a "Replaced Contract");
(b) each Substitute Contract is an Eligible Contract on the date of
such substitution;
(c) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of (A) the Purchase Limit and (B)
the Capital Limit;
(d) such Substitute Contracts, at the time of substitution by the
Seller, shall have approximately the same weighted average life as the remaining
Scheduled Payments of Assets in the Asset Pool and shall not materially exceed
the last Scheduled Payment of any Asset in the Asset Pool;
(e) all representations and warranties of the Seller contained in
Section 5.1 and 5.2 shall be true and correct as of the date of substitution of
any such Substitute Contract;
(f) the substitution of any Substitute Contract does not cause a Payout
Event to occur under the Receivables Purchase Agreement; and
(g) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date.
In connection with any such substitution, the Buyer shall,
automatically and without further action, be deemed to transfer to the Seller,
free and clear of any Lien created pursuant to this Agreement, all of the right,
title and interest of the Buyer in, to and under such Replaced Contract, and the
Buyer shall be deemed to represent and warrant that it has the corporate
authority and has taken all necessary corporate action to accomplish such
transfer, but without any other representation or warranty, express or implied.
Any right of the Buyer to substitute any Contract pursuant to this Section 6.5
shall be in addition to, and without limitation of, any other rights or remedies
that the Buyer may have to require the Seller to substitute for, or accept
retransfer of, any Contract pursuant to the terms of this Agreement.
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ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to the Buyer's Obligations Regarding Contracts.
The obligations of the Buyer to purchase Purchased Assets from the
Seller on the Closing Date and on any Subsequent Purchase Date shall be subject
to the satisfaction of the following conditions:
(a) all representations and warranties of the Seller contained in
Sections 4.1 and 4.2 shall be true and correct on and as of such day as though
made on and as of such date;
(b) on and as of such day, the Seller shall have performed all
obligations required to be performed by it on or prior to such day pursuant to
the provisions of this Agreement;
(c) no event has occurred and is continuing, or would result from such
purchase which constitutes a Payout Event under the Receivables Purchase
Agreement;
(d) no law or regulation shall prohibit, and no order, judgment or
decree of any federal, state or local court or governmental body, agency or
instrumentality shall prohibit or enjoin, the making of any such purchase by the
Buyer in accordance with the provisions hereof; and
(e) all corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Buyer, and the Buyer shall have
received from the Seller copies of all documents (including, without limitation,
records of corporate proceedings, approvals and opinions) relevant to the
transactions herein contemplated as the Buyer may reasonably have requested.
17
<PAGE>
ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Termination.
This Agreement shall commence as of the date of execution and delivery
hereof and shall continue in full force and effect until the occurrence of the
Collection Date pursuant to the Receivables Purchase Agreement; provided,
however, that the termination of this Agreement pursuant to this Section 8.1
shall not discharge any Person from obligations incurred prior to any such
termination of this Agreement, including, without limitation, any obligations to
repurchase Contracts sold prior to such termination pursuant to Section 6.1 or
6.2 hereof, or to make the payments required under Section 6.3 hereof.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Amendment.
This Agreement and any other Sale Papers and the rights and obligations
of the parties hereunder may not be amended, waived or changed orally, but only
by an instrument in writing signed by the Buyer and the Seller, with the prior
written consent of the Deal Agent. The Buyer shall provide not less than 10
Business Days prior written notice of any such amendment to the Deal Agent.
Section 9.2 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY AGREES TO
THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH
OF THE PARTIES HERETO 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 CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
18
<PAGE>
Section 9.3 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 registered mail, return receipt requested, to:
(a) in the case of the Buyer, to:
Fidelity Leasing SPC I, Inc.
Seven East Skippack Pike
Ambler, PA 19002
Attn: David H. English
Facsimile No.: (215) 614-2830
Confirmation No.: (215) 643-6300
(b) in the case of the Seller, to:
Fidelity Leasing, Inc.
Seven East Skippack Pike
Ambler, PA 19002
Attn: David H. English
Facsimile No.: (215) 619-2830
Confirmation No.: (215) 643-6300
(c) in the case of the Deal Agent, to:
First Union Capital Markets, a division
of Wheat First Securities, Inc.
1345 Chestnut Street
FC 1-8-12-1
Philadelphia, PA 19107
Attn: Dan Miller
Facsimile No.: (215) 973-1887
Confirmation No.: (215) 973-4093
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
19
<PAGE>
Section 9.4 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement or any of the Sale Papers shall for any reason whatsoever be 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 the Sale Papers and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or any of the Sale
Papers.
Section 9.5 Assignment.
(a) Notwithstanding anything to the contrary contained herein, this
Agreement may not be assigned by the Buyer or the Seller except as permitted by
this Section 9.5 or by the Receivables Purchase Agreement. Simultaneously with
the execution and delivery of this Agreement, the Buyer shall assign all of its
right, title and interest herein (to the extent of the aggregate Asset
Interests) to the Deal Agent as agent for the Purchasers under the Receivables
Purchase Agreement as provided in the Receivables Purchase Agreement, to which
assignment the Seller hereby expressly consents. The Seller agrees to perform
its obligations hereunder for the benefit of the Deal Agent as agent for the
Purchasers under the Receivables Purchase Agreement and the Deal Agent, as agent
for the Purchasers under the Receivables Purchase Agreement under the
Receivables Purchase Agreement shall be a third party beneficiary hereof. The
Deal Agent as agent for the Purchasers under the Receivables Purchase Agreement
may enforce the provisions of this Agreement, exercise the rights of the Buyer
and enforce the obligations of the Seller hereunder as provided in of the
Receivables Purchase Agreement. This Agreement may not be assigned by the Seller
except in connection with a merger or consolidation of the Seller with or into,
or disposition of the Seller's properties and assets to, another Person,
provided, however, that any such merger, consolidation or disposition shall
satisfy the requirements of Section 9.14, upon not less than 10 Business Days'
prior written notice to the Buyer and the Deal Agent.
(b) In connection with any permitted assignment of this Agreement by
the Seller, the Seller shall deliver to the Buyer and the Deal Agent an
Officer's Certificate that such assignment complies with this Section 9.5, and
shall cause such assignee to execute an agreement supplemental hereto, in form
and substance satisfactory to the Seller, pursuant to which such assignee shall
expressly assume and agree to the performance of every covenant and obligation
of the Seller hereunder, to provide for the delivery of an Opinion of Counsel
that such supplemental agreement is legal, valid and binding with respect to
such assignee, and to take such other actions and execute such other instruments
as may reasonably be required to effectuate such assignment.
Section 9.6 Further Assurances.
the Buyer and the Seller agree to do and perform, from time to time,
any and all acts and to execute any and all further instruments required or
reasonably requested by the other party more fully to effect the purposes of
this Agreement and the Sale Papers, including, without limitation, the execution
of any financing statements, continuation statements, termination statements,
releases or equivalent documents relating to the Contracts for filing under the
provisions of the UCC or other laws of any applicable jurisdiction.
20
<PAGE>
Section 9.7 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the
Buyer or the Seller, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privilege provided by law.
Section 9.8 Counterparts.
This Agreement may be executed in two or more counterparts including
telefax transmission thereof (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.
Section 9.9 Binding Effect; Third-Party Beneficiaries.
This Agreement shall inure to the benefit of and the obligations
thereunder shall be binding upon the parties hereto and their respective
successors and permitted assigns. Any permitted assigns shall be third-party
beneficiaries of this Agreement.
Section 9.10 Merger and Integration.
Except as specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to the subject matter
hereof, there are no other agreements between the parties for transactions
relating to or similar to the transactions contemplated by this Agreement, and
all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
Section 9.11 Headings.
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
Section 9.12 Schedules and Exhibits.
The schedules and exhibits attached hereto and referred to herein shall
constitute a part of this Agreement and are incorporated into this Agreement for
all purposes.
Section 9.13 No Proceedings.
The Seller hereby covenants and agrees that, prior to the date which is
one year and one day after the payment in full of the Note, it will not
institute against or join any other Person in instituting against the Buyer any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any State of
the United States.
21
<PAGE>
Section 9.14 Merger or Consolidation of, or Assumption of the
Obligations of, the Seller.
The Seller shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the Person formed by such consolidation or into which the
Seller is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Seller substantially as an entirety
shall be, if the Seller is not the surviving entity, organized and
existing under the laws of the United States of America or any State or
the District of Columbia and shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Buyer in form
satisfactory to the Buyer, the performance of every covenant and
obligation of the Seller hereunder (to the extent that any right,
covenant or obligation of the Seller, as applicable hereunder, is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity);
(ii) the Seller shall have delivered to the Buyer and the Deal
Agent an Officer's Certificate that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply with this
Section 9.14 and that all conditions precedent herein provided for
relating to such transaction have been complied with and an Opinion of
Counsel that such supplemental agreement is legal, valid and binding
with respect to the successor entity and that the entity surviving such
consolidation, conveyance or transfer is organized and existing under
the laws of the United States of America or any State or the District
of Columbia. The Deal Agent shall receive prompt written notice of such
merger or consolidation of the Seller; and
(iii) after giving effect thereto, no Event of Termination
under the Receivables Purchase Agreement or an event which with notice
or lapse of time or both would constitute such an Event of Termination
thereunder shall have occurred.
Section 9.15 Costs, Expenses and Taxes.
(a) The Seller agrees to pay on demand all costs and expenses of the
Buyer incurred in connection with the preparation, execution, delivery,
administration (including periodic auditing), amendment or modification of, or
any waiver or consent issued in connection with, this Agreement and the other
documents to be delivered hereunder or in connection herewith, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Buyer with respect thereto and with respect to advising the Buyer as to
its rights and remedies under this Agreement and the other documents to be
delivered hereunder or in connection herewith, and all costs and out-of-pocket
expenses, if any (including reasonable counsel fees and expenses), incurred by
the Buyer in connection with the enforcement of this Agreement and the other
documents to be delivered hereunder or in connection herewith.
22
<PAGE>
(b) The Seller shall pay on demand any and all stamp, sales, excise and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Agreement or any agreement or
other document delivered in connection with this Agreement
(c) The Seller shall pay on demand any and all damages, losses, claims,
liabilities, fees and related costs and expenses, including attorney's fees and
expenses, incurred by or awarded against the Buyer or any of its Affiliates
(each, an "Indemnified Party") arising out of or as a result of the transactions
contemplated under this Agreement and owed by such Indemnified Party to any
other Person; provided, that the Seller shall not be liable to pay any portion
of any such damages, losses, claims or liabilities resulting from the gross
negligence or willful misconduct of an Indemnified Party or the breach of a
Requirement of Law by an Indemnified Party.
Section 9.16 Recourse Against Certain Parties.
(a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of the Seller as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any administrator of the Seller or any
incorporator, officer, employee or director of the Seller or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of the Seller contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
the corporate obligations of the Seller, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of the Seller or
any incorporator, officer, employee or director of the Seller or of any such
administrator, as such, or any other them, under or by reason of any of the
obligations, covenants or agreements of the Seller contained in this Agreement
or in any other such instruments, documents or agreements, or which are implied
therefrom, and that any and all personal liability of every such administrator
of the Seller and each incorporator, officer, employee or director of the Seller
or of any such administrator, or any of them, for breaches by the Seller of any
such obligations, covenants or agreements, which liability may arise either at
common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement. The provisions of this Section 9.16(a) shall survive the
termination of this Agreement.
23
<PAGE>
(b) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of the Buyer as contained in this Agreement or any other agreement,
instrument or document entered into by it pursuant hereto or in connection
herewith shall be had against any administrator of the Buyer or any
incorporator, officer, employee or director of the Buyer or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of the Buyer contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
the corporate obligations of the Buyer, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of the Buyer or
any incorporator, officer, employee or director of the Buyer or of any such
administrator, as such, or any other them, under or by reason of any of the
obligations, covenants or agreements of the Buyer contained in this Agreement or
in any other such instruments, documents or agreements, or which are implied
therefrom, and that any and all personal liability of every such administrator
of the Buyer and each incorporator, officer, employee or director of the Buyer
or of any such administrator, or any of them, for breaches by the Buyer of any
such obligations, covenants or agreements, which liability may arise either at
common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement. The provisions of this Section 9.16 (b) shall survive the
termination of this Agreement.
[Signatures to Follow]
24
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement
to be duly executed by their respective officers as of the day and year first
above written.
FIDELITY LEASING SPC I, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
FIDELITY LEASING, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
25
<PAGE>
SCHEDULE I
LIST OF CONTRACTS
Attached.
<PAGE>
SCHEDULE II
TRADENAMES, FICTITIOUS NAMES AND "DOING BUSINESS AS" NAMES
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT
Attached.
<PAGE>
EXECUTION COPY
================================================================================
U.S. $100,000,000
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 24, 1998
Among
FIDELITY LEASING SPC I, INC.
as the Seller
-------------
FIDELITY LEASING, INC.
as the Servicer
---------------
the INVESTORS
named herein
------------
VARIABLE FUNDING CAPITAL CORPORATION
as a Purchaser
--------------
FIRST UNION CAPITAL MARKETS, a division of
WHEAT FIRST SECURITIES, INC.
as the Deal Agent
-----------------
FIRST UNION NATIONAL BANK
as the Liquidity Agent
----------------------
and
Harris Trust and Savings Bank
as the Collateral Custodian and Backup Servicer
-----------------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS............................................................................................1
SECTION 1.1 CERTAIN DEFINED TERMS...............................................................................1
SECTION 1.2 OTHER TERMS.........................................................................................24
SECTION 1.3 COMPUTATION OF TIME PERIODS.........................................................................24
ARTICLE II THE PURCHASE FACILITY.................................................................................24
SECTION 2.1 PURCHASES OF ASSET INTERESTS........................................................................24
SECTION 2.2 THE INITIAL PURCHASE, SUBSEQUENT PURCHASES AND INCREMENTAL PURCHASES................................25
SECTION 2.3 REDUCTION OF THE PURCHASE LIMIT; REPURCHASE.........................................................25
SECTION 2.4 DETERMINATION OF YIELD..............................................................................26
SECTION 2.5 [RESERVED]..........................................................................................26
SECTION 2.6 DIVIDING OR COMBINING ASSET INTERESTS...............................................................26
SECTION 2.7 NON-LIQUIDATION SETTLEMENT PROCEDURES...............................................................26
SECTION 2.8 SETTLEMENT PROCEDURES FOLLOWING A TERMINATION DATE..................................................28
SECTION 2.9 SETTLEMENT PROCEDURES FOLLOWING A RESTRICTING EVENT.................................................29
SECTION 2.10 COLLECTIONS AND ALLOCATIONS.........................................................................31
SECTION 2.11 PAYMENTS, COMPUTATIONS, ETC.........................................................................31
SECTION 2.12 OPTIONAL REPURCHASE.................................................................................32
SECTION 2.13 FEES................................................................................................32
SECTION 2.14 INCREASED COSTS; CAPITAL ADEQUACY; ILLEGALITY.......................................................33
SECTION 2.15 TAXES...............................................................................................34
SECTION 2.16 ASSIGNMENT OF THE PURCHASE AGREEMENT................................................................36
SECTION 2.17 SUBSTITUTION OF CONTRACTS...........................................................................36
ARTICLE III CONDITIONS OF PURCHASES..............................................................................37
SECTION 3.1 CONDITIONS PRECEDENT TO INITIAL PURCHASE............................................................37
SECTION 3.2 CONDITIONS PRECEDENT TO ALL PURCHASES AND REMITTANCES OF COLLECTIONS................................38
SECTION 3.3 DELIVERY OF CONTRACT FILES..........................................................................38
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................................39
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER........................................................39
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO THE AGREEMENT AND THE CONTRACTS................43
SECTION 4.3 REPRESENTATIONS AND WARRANTIES OF THE SELLER RELATING TO THE PURCHASE LIMIT AND CAPITAL LIMIT.......44
ARTICLE V GENERAL COVENANTS OF THE SELLER........................................................................44
SECTION 5.1 GENERAL COVENANTS...................................................................................44
SECTION 5.2 COVENANTS OF SELLER.................................................................................45
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 5.3 RELEASE OF LIEN ON EQUIPMENT........................................................................49
SECTION 5.4 HEDGING OF CONTRACTS................................................................................49
SECTION 5.5 RETRANSFER OF INELIGIBLE CONTRACTS..................................................................50
SECTION 5.6 RETRANSFER OF ASSETS................................................................................51
SECTION 5.7 YEAR 2000 COMPATIBILITY.............................................................................51
ARTICLE VI ADMINISTRATION AND SERVICING OF CONTRACTS.............................................................52
SECTION 6.1 APPOINTMENT AND ACCEPTANCE; DUTIES..................................................................52
SECTION 6.2 COLLECTION OF PAYMENTS..............................................................................55
SECTION 6.3 SERVICER ADVANCES...................................................................................56
SECTION 6.4 REALIZATION UPON DEFAULTED CONTRACT.................................................................57
SECTION 6.5 MAINTENANCE OF INSURANCE POLICIES...................................................................57
SECTION 6.6 REPRESENTATIONS AND WARRANTIES OF SERVICER..........................................................58
SECTION 6.7 REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER AND COLLATERAL CUSTODIAN..........................59
SECTION 6.8 COVENANTS OF SERVICER...............................................................................61
SECTION 6.9 COVENANTS OF BACKUP SERVICER AND COLLATERAL CUSTODIAN...............................................61
SECTION 6.10 SERVICING COMPENSATION..............................................................................62
SECTION 6.11 CUSTODIAL COMPENSATION..............................................................................62
SECTION 6.12 PAYMENT OF CERTAIN EXPENSES BY SERVICER.............................................................62
SECTION 6.13 REPORTS.............................................................................................63
SECTION 6.14 ANNUAL STATEMENT AS TO COMPLIANCE...................................................................63
SECTION 6.15 ANNUAL INDEPENDENT PUBLIC ACCOUNTANT'S SERVICING REPORTS............................................64
SECTION 6.16 ADJUSTMENTS.........................................................................................64
SECTION 6.17 MERGER OR CONSOLIDATION OF THE SERVICER.............................................................64
SECTION 6.18 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS..................................................65
SECTION 6.19 INDEMNIFICATION OF THE SELLER, THE BACKUP SERVICER, THE.............................................65
COLLATERAL CUSTODIAN, THE DEAL AGENT AND THE SECURED PARTIES........................................65
SECTION 6.20 THE SERVICER NOT TO RESIGN..........................................................................66
SECTION 6.21 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION.....................................................66
REGARDING THE CONTRACTS.............................................................................66
SECTION 6.22 BACKUP SERVICER.....................................................................................67
SECTION 6.23 IDENTIFICATION OF RECORDS...........................................................................69
SECTION 6.24 SERVICER DEFAULTS...................................................................................69
SECTION 6.25 APPOINTMENT OF SUCCESSOR SERVICER...................................................................71
SECTION 6.26 NOTIFICATION........................................................................................72
SECTION 6.27 PROTECTION OF RIGHT, TITLE AND INTEREST TO ASSETS...................................................72
SECTION 6.28 RELEASE OF CONTRACT FILES...........................................................................73
ARTICLE VII PAYOUT AND RESTRICTING EVENTS........................................................................73
SECTION 7.1 PAYOUT EVENTS.......................................................................................73
SECTION 7.2 RESTRICTING EVENTS..................................................................................73
ARTICLE VIII INDEMNIFICATION.....................................................................................75
SECTION 8.1 INDEMNITIES BY THE SELLER...........................................................................75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IX THE DEAL AGENT AND THE LIQUIDITY AGENT................................................................78
SECTION 9.1 AUTHORIZATION AND ACTION...........................................................................78
SECTION 9.2 DELEGATION OF DUTIES...............................................................................78
SECTION 9.3 EXCULPATORY PROVISIONS.............................................................................79
SECTION 9.4 RELIANCE...........................................................................................79
SECTION 9.5 NON-RELIANCE ON DEAL AGENT, LIQUIDITY AGENT AND OTHER PURCHASERS...................................80
SECTION 9.6 REIMBURSEMENT AND INDEMNIFICATION..................................................................81
SECTION 9.7 DEAL AGENT AND LIQUIDITY AGENT IN THEIR INDIVIDUAL CAPACITIES......................................81
SECTION 9.8 SUCCESSOR DEAL AGENT OR LIQUIDITY AGENT............................................................81
ARTICLE X ASSIGNMENTS; PARTICIPATIONS............................................................................82
SECTION 10.1 ASSIGNMENTS AND PARTICIPATIONS.....................................................................82
ARTICLE XI MISCELLANEOUS.........................................................................................85
SECTION 11.1 AMENDMENTS AND WAIVERS.............................................................................85
SECTION 11.2 NOTICES, ETC.......................................................................................86
SECTION 11.3 RATABLE PAYMENTS...................................................................................86
SECTION 11.4 NO WAIVER, RIGHTS AND REMEDIES.....................................................................87
SECTION 11.5 BINDING EFFECT; BENEFIT OF AGREEMENT...............................................................87
SECTION 11.6 TERM OF THIS AGREEMENT.............................................................................87
SECTION 11.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE...............................87
SECTION 11.8 WAIVER OF JURY TRIAL...............................................................................87
SECTION 11.9 COSTS, EXPENSES AND TAXES..........................................................................88
SECTION 11.10 NO PROCEEDINGS.....................................................................................89
SECTION 11.11 RECOURSE AGAINST CERTAIN PARTIES...................................................................89
SECTION 11.12 PROTECTION OF OWNERSHIP INTERESTS OF THE PURCHASERS; INTENT OF PARTIES; SECURITY INTEREST..........89
SECTION 11.13 CONFIDENTIALITY....................................................................................90
SECTION 11.14 EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION...............................................91
</TABLE>
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT A Form of Notice of Sale
EXHIBIT B Form of Lock-Box Notices
EXHIBIT C "Limited Purpose" provisions of Seller's Certificate of Incorporation
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Monthly Report
EXHIBIT F Form of Servicer's Certificate
EXHIBIT G Form of Purchase Certificate
EXHIBIT H Form of Hedging Agreement (including Schedule and Confirmation)
</TABLE>
SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
SCHEDULE I Condition Precedent Documents
SCHEDULE II Lock-Box Banks and Lock-box Accounts
SCHEDULE III Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV Location of Contract Files
SCHEDULE V List of Contracts
</TABLE>
<PAGE>
THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is made as of
June 24, 1998, among:
(1) FIDELITY LEASING SPC I, INC., a Delaware corporation, as seller
(the "Seller");
(2) FIDELITY LEASING, INC., a Pennsylvania corporation ("Fidelity"), as
servicer (the "Servicer");
(3) the financial institutions listed on the signature pages of this
Agreement under the heading "Investors" and their respective successors and
assigns (the "Investors");
(4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation
("VFCC");
(5) FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST SECURITIES,
INC. ("FCM"), as deal agent (the "Deal Agent") and as documentation agent (the
"Documentation Agent");
(6) FIRST UNION NATIONAL BANK ("First Union"), as liquidity agent (the
"Liquidity Agent"); and
(7) Harris Trust and Savings Bank, as collateral custodian (the
"Collateral Custodian") and backup servicer (the "Backup Servicer").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
(a) Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1. 1.
(b) As used in this Agreement and its exhibits, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).
ADCB: On any date of determination, the sum of the Discounted Contract Balance
of each Eligible Contract (excluding all Defaulted Contracts, Casualty Loss
Contracts, Early Termination Contracts and Contracts subject to a Warranty
Event) included in the Asset Pool as of the date of such determination.
<PAGE>
Addition Date: With respect to any Additional Contracts, the date on which such
Additional Contracts become Pool Assets.
Additional Contracts: All Contracts that become Pool Assets after the Closing
Date.
Additional Cut Off Date: Each date on and after which Collections on an
Additional Contract are to be transferred to the Asset Pool.
Adjusted Eurodollar Rate: On any day, an interest rate per annum equal to the
quotient, expressed as a percentage and rounded upwards (if necessary), to the
nearest 1/100 of 1%, obtained by dividing (i) the LIBOR Rate on such day by (ii)
the decimal equivalent of 100% minus the Eurodollar Reserve Percentage on such
day.
Adjusted Eurodollar Rate Advances: Any Advance with respect to which Yield
accrues at a rate based upon the Adjusted Eurodollar Rate.
Administration Agreement: That certain Administration Agreement executed between
VFCC and FCM, as the same may be amended, supplemented, or otherwise modified
from time to time.
Adverse Claim: A lien, security interest, charge, encumbrance or other right or
claim of any Person.
Affected Party: As defined in Section 2.14(a).
Affiliate: With respect to a Person means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" or "controlled" have meanings correlative
to the foregoing.
Agent's Account: A special account (account number 01 41 96 47) in the name of
the Deal Agent or, so long as VFCC is the sole Purchaser hereunder, in the name
of VFCC maintained at Bankers Trust Company.
Aggregate Unpaids: At any time, an amount, equal to the sum of all Yield
(accrued and to accrue), Capital and all other amounts owed hereunder, under any
Hedging Agreement (including, without limitation, payments in respect of the
termination of any such Hedging Agreement) or under any fee letter delivered by
the Originator to the Deal Agent and the Purchasers at such time (whether due or
accrued).
Agreement: This Receivables Purchase Agreement, dated as of June 24, 1998, as
amended, modified, supplemented or restated from time to time.
<PAGE>
Alternative Rate: An interest rate per annum equal to the Adjusted Eurodollar
Rate or the Base Rate, as the Deal Agent shall select in accordance with the
terms of the Agreement; provided, however, that the "Alternative Rate" shall be
the Base Rate if the relevant Purchaser shall have notified the Deal Agent that
a Eurodollar Disruption Event has occurred.
Asset: All right, title and interest of the transferring party in, to and under
any and all of the following:
(i) the Existing Contracts and Additional Contracts, and all
monies due or to become due in payment of such Contracts on and after
the related Cut Off Date, including but not limited to any Prepayment
Amounts, any payments in respect of a casualty or early termination,
and any Recoveries received with respect thereto, but excluding any
Scheduled Payments due prior to the related Cut Off Date and any
Excluded Amounts;
(ii) the Equipment related to such Contracts including all
proceeds from any sale or other disposition of such Equipment;
(iii) the Contract Files,
(iv) all payments made or to be made in the future with
respect to such Contracts or the obligor thereunder and under any
guarantee or similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such
Contract; and
(vi) all income and proceeds of the foregoing.
Asset Interest: At any time, an undivided variable percentage ownership interest
in all Assets. The undivided percentage interest of an Asset Interest shall
equal
C + C x R
-----
AC
---------------------
ADCB
where:
C = equals the Capital in respect of such Asset Interest.
AC = equals the aggregate Capital on such date.
R = equals the Overcollateralization on such date.
Asset Pool: At any time, all then outstanding Assets.
<PAGE>
Assignment and Acceptance: An assignment and acceptance entered into by an
Investor and an Eligible Assignee, and accepted by the Deal Agent, in
substantially the form of Exhibit D hereto.
Backup Servicer: Harris Trust and Savings Bank and its permitted successors and
assigns.
Backup Servicer and Collateral Custodian Fee Letter: The letter dated as of the
Closing Date, among Fidelity, the Deal Agent, the Backup Servicer and Collateral
Custodian setting forth among other things the Backup Servicer Fee and the
Collateral Custodial Fee.
Backup Servicer Fee Rate: The rate per annum set forth in the Backup Servicer
and Collateral Custodian Fee Letter, dated as of the Closing Date.
Backup Servicing Fee: As defined in Section 6.22.
Bankruptcy Code: The Federal Bankruptcy Code, as amended from time to time
(Title 11 of the United States Code).
Base Rate: On any date, a fluctuating rate of interest per annum equal to the
higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1.0%.
Base Rate Advance: Any Advance with respect to which Yield accrues at a rate
based upon the Base Rate.
Benefit Plan: Any employee benefit plan as defined in Section 3(3) of ERISA in
respect of which the Seller or any ERISA Affiliate of the Seller is, or at any
time during the immediately preceding six years was, an "employer" as defined in
Section 3(5) of ERISA.
Blended Discount Rate: For any Determination Date, a rate per annum equal to the
weighted average (calculated based on the applicable Outstanding Balances) of
(i) the Blended Discount Rate as of the immediately preceding Determination Date
and (ii) the Sale Discount Rate, if any, for any Contract transferred to the
Asset Pool on the most recent Purchase Date, if any, occurring on or after the
immediately preceding Determination Date; provided, however, that the Blended
Discount Rate for the first Determination Date following the Closing Date shall
be the Sale Discount Rate applicable to the Original Contracts.
Breakage Costs: Any amount or amounts as shall compensate a Purchaser for any
loss, cost or expense incurred by such Purchaser (as reasonably determined by
such Purchaser) as a result of a prepayment by the Seller of Capital or Yield
pursuant to the terms hereof.
Business Day: Any day of the year other than a Saturday or a Sunday on which (a)
banks are not required or authorized to be closed in New York City,
Philadelphia, Pennsylvania, Charlotte, North Carolina and Chicago, Illinois, and
(b) if the term "Business Day" is used in connection with the Adjusted
Eurodollar Rate, dealings in United States dollar deposits are carried on in the
London interbank market.
<PAGE>
Capital: For each Asset Interest, the amount paid to the Seller for such Asset
Interest at the time of its purchase by the Purchaser pursuant to this
Agreement, reduced from time to time by Collections distributed on account of
such Capital pursuant to Sections 2.7, 2.8 or 2.9; provided, however, that such
Capital shall not be reduced by any distribution or any portion of Collections
if at any time such distribution is rescinded or must be returned for any
reason.
Capital Limit: At any time, the product of (i) the ADCB and (ii) the lesser of
(a) 90% and (b) 100% - (two and a half (2 1/2) multiplied by the Net Loss to
Liquidation Ratio).
Casualty Loss: With respect to any item of Equipment, the loss, theft, damage
beyond repair or governmental condemnation or seizure of such item of Equipment.
Casualty Loss Contract: Any Contract that is subject to a Casualty Loss.
Closing Date: June 24, 1998.
Code: The Internal Revenue Code of 1986, as amended.
Collateral Custodian: Harris Trust and Savings Bank and its permitted successors
and assigns.
Collection Account: As defined in Section 6.2(f).
Collection Date: The date following the Termination Date on which the aggregate
outstanding Capital has been reduced to zero, the Purchasers have received all
Yield and other amounts due to the Purchasers in connection with this Agreement
each Hedge Transaction has been terminated and each Hedge Counterparty has
received all amounts owing to it under its respective Hedging Agreement and the
Deal Agent has received all amounts due to it in connection with this Agreement.
Collections: (a) All cash collections and other cash proceeds of any Asset,
including, without limitation, Scheduled Payments, Prepayments, Insurance
Proceeds and Recoveries, all as related to amounts attributable to the Contracts
in the Asset Pool or the related Equipment, but excluding any Excluded Amounts,
(b) any other funds received by the Seller or the Servicer with respect to any
Contract or related Equipment, and (c) all payments received pursuant to any
Hedging Agreement or Hedge Transaction.
Commercial Paper Notes: On any day, any short-term promissory notes issued by
VFCC with respect to financing its purchase of an Asset Interest hereunder.
Commitment: For each Investor, the commitment of such Investor to make purchases
from the Seller in an amount not to exceed the amount set forth opposite such
Investor's name on the signature pages of this Agreement, as such amount may be
modified in accordance with the terms hereof.
Commitment Fee: As defined in Section 2.13(a) hereof.
<PAGE>
Commitment Fee Rate: The rate per annum set forth in the Fee Letter.
Commitment Termination Date: June 23, 1999 or such later date to which the
Commitment Termination Date may be extended (if extended) in the sole discretion
of VFCC and each Investor in accordance with the terms of Section 2.1(b).
Contract: Any lease of Equipment by the Originator or by a third party, in each
case as lessor, to an Obligor.
Contract Files: With respect to each Contract, the fully executed original
counterpart (for UCC purposes) of the Contract, the original certificate of
title or other title document with respect to the related Equipment (if
applicable), and otherwise such documents, if any, that the Collateral Custodian
holds, evidencing ownership of such Equipment (if applicable) and all other
documents originally delivered to the Seller or held by the Collateral Custodian
with respect to any Contract.
Contract List: The contract list provided by the Seller to the Deal Agent and
the Collateral Custodian, in the form of Schedule V hereto.
CP Disruption Event: The inability of a Purchaser, at any time, whether as a
result of a prohibition, a contractual restriction or any other event or
circumstance whatsoever, to raise funds through the issuance of its commercial
paper notes (whether or not constituting commercial paper notes issued to fund
Purchases hereunder) in the United States commercial paper market.
CP Rate: For any Fixed Period, the per annum rate equivalent to the weighted
average of the per annum rates paid or payable by VFCC from time to time as
interest on or otherwise (by means of interest rate hedges or otherwise) in
respect of the promissory notes issued by VFCC that are allocated, in whole or
in part, by the Deal Agent (on behalf of VFCC) to fund or maintain the Asset
Interest during such period, as determined by the Deal Agent (on behalf of VFCC)
and reported to the Seller and the Servicer, which rates shall reflect and give
effect to the commissions of placement agents and dealers in respect of such
promissory notes, to the extent such commissions are allocated, in whole or in
part, to such promissory notes by the Deal Agent (on behalf of VFCC); provided,
however, that if any component of such rate is a discount rate, in calculating
the "CP Rate", the Deal Agent shall for such component use the rate resulting
from converting such discount rate to an interest bearing equivalent rate per
annum.
CP Rate Advances: Any Advance with respect to which Yield accrues at a rate
based upon the CP Rate.
Credit and Collection Policy: The written credit and collection policies of the
Originator and Servicer in effect on the date hereof, as amended or supplemented
from time to time in accordance with Section 4.1(j).
<PAGE>
Custodial Fee: As defined in Section 6.11.
Cut Off Date: With respect to each Existing Contract, the date on and after
which Collections on such Existing Contract are to be transferred to the Asset
Pool, and with respect to each Additional Contract, the related Additional Cut
Off Date.
Default Ratio: As of any Determination Date, the percentage equivalent of a
fraction, the numerator of which is equal to twice the sum of the Discounted
Contract Balance of Contracts that became Defaulted Contracts (net of Recoveries
related thereto) during the immediately preceding six calendar months and the
denominator of which is the average of the ADCB as of each of the current
Determination Date and each of the immediately preceding five Determination
Dates.
Defaulted Contract: (i) A Contract in the Asset Pool as to which the Servicer
has determined or should have determined in accordance with its Credit and
Collection Policy that such Contract is not collectible or is subject to
repossession, or (ii) a Contract in the Asset Pool as to which all or a portion
of any one or more Scheduled Payments is more than 120 days past due in an
aggregate amount equal to the higher of (A) ten dollars or more or (B) ten
percent or more of any Scheduled Payment.
Delinquency Ratio: As of any Determination Date, the percentage equivalent of a
fraction, the numerator of which is the average of the Discounted Contract
Balance of Delinquent Contracts as of such Determination Date and each of the
immediately preceding two Determination Dates and the denominator of which is
the average of the ADCB as of such Determination Date and each of the
immediately preceding two Determination Dates.
Delinquent Contract: A Contract in the Asset Pool as to which all or a portion
of any one or more Scheduled Payments is 60 days or more past due.
Derivatives: Any exchange-traded or over-the-counter (i) forward, future,
option, swap, cap, collar, floor, foreign exchange contract, any combination
thereof, whether for physical delivery or cash settlement, relating to any
interest rate, interest rate index, currency, currency exchange rate, currency
exchange rate index, debt instrument, debt price, debt index, depositary
instrument, depositary price, depositary index, equity instrument, equity price,
equity index, commodity, commodity price or commodity index, (ii) any similar
transaction, contract, instrument, undertaking or security, or (iii) any
transaction, contract, instrument, undertaking or security containing any of the
foregoing.
Determination Date: The last Business Day of each calendar month.
Discounted Contract Balance: With respect to any Contract, (i) as of the related
Cut Off Date, the present value of all remaining Scheduled Payments becoming due
under such Contract after the applicable Cut Off Date discounted monthly at the
Sale Discount Rate and (ii) as of any other date of determination, the present
value of all remaining Scheduled Payments becoming due
<PAGE>
under such Contract after such Determination Date discounted monthly at the
applicable Blended Discount Rate.
The "Discounted Contract Balance" for each Contract shall be calculated
assuming:
(a) all payments due in any Monthly Period as due on the last
day of the Monthly Period;
(b) payments are discounted on a monthly basis using a 30 day
month and a 360 day year; and
(c) all security deposits and drawings under letters of
credit, if any, issued in support of a Contract are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
Early Termination Contracts: Any Contract that the Servicer has allowed the
related Obligor to terminate prior to the date on which the final Scheduled
Payment is due thereunder.
Eligible Assignee: (a) A Person whose short-term rating is at least A-1 from S&P
and P-1 from Moody's, or whose obligations under this Agreement are guaranteed
by a Person whose short-term rating is at least A-1 from S&P and P-1 from
Moody's, or (b) such other Person satisfactory to VFCC, the Deal Agent and each
of the rating agencies rating the Commercial Paper and approved, in writing, by
the Seller; provided, however, that no such approval shall be required in the
event any Investor is required by any rating agency rating VFCC's commercial
paper notes or by any regulatory agency to make an assignment.
Eligible Contract: On any Determination Date, each Contract with respect to
which each of the following is true:
(a) the information with respect to the Contract and the Equipment
subject to the Contract is true and correct in all material respects;
(b) immediately prior to the transfer hereunder of the Contract and any
related Equipment (or security interest therein), the Contract was owned by the
Seller free and clear of any Adverse Claim;
(c) no Scheduled Payment related to the Contract is (i) more than 60
days delinquent, (ii) a payment as to which the Servicer has failed to make a
Servicer Advance, (iii) a payment as to which the related Equipment has been
repossessed or (iv) a payment as to which the related Equipment has been
charged-off in accordance with the credit and collection policies of the
Servicer;
(d) the Contract is not a Defaulted Contract;
<PAGE>
(e) no provision of the Contract has been waived, altered or modified
in any respect except as allowed under the Credit and Collection Policy of the
Servicer;
(f) the Contract is a valid and binding payment obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by applicable Insolvency Laws and the availability of equitable
remedies);
(g) the Contract is not and will not be subject to rights of
rescission, setoff, counterclaim or defense and no such rights have been
asserted or threatened with respect to the Contract;
(h) the Contract, at the time it is sold to VFCC does not violate the
laws of the United States or any state in any manner which would create
liability for any Purchaser or which would materially and adversely affect the
enforceability or collectibility of such Contract;
(i) (i) the Contract and any related Equipment have not been sold,
transferred, assigned or pledged by the Seller to any other Person and, with
respect to a Contract that is a "true lease," any Equipment related to such true
lease is owned by the Seller free and clear of any Liens of any third parties
(except for any Permitted Liens) and (ii) such Contract is secured by a fully
perfected Lien of the first priority on the related Equipment but only to the
extent that the Contract has (i) a $1.00 purchase option exercisable at the
expiration of its term and the Equipment has a residual value in excess of
$10,000,00 at such time; (ii) a fixed price purchase option exercisable at the
expiration of its term and the Equipment has a residual value in excess of
$10,000.00 at such time; or (iii) a fair market value purchase price option
exercisable at the expiration of its term and the residual value of the
Equipment exceeds $50,000.00 at such time;
(j) the Contract constitutes chattel paper, an account, an instrument
or a general intangible as defined under the UCC and if the Contract constitutes
"chattel paper" for purposes of the UCC, there is not more than one "secured
party's original" counterpart of the Contract;
(k) all filings necessary to evidence the conveyance or transfer to the
Deal Agent of the Contract and all right, title and interest in the related
Equipment have been made in all appropriate Jurisdictions;
(l) the Obligor is not the subject of bankruptcy or other insolvency
proceedings;
(m) the Obligor's billing address is in the United States and the
Contract is a U.S. dollar-denominated obligation;
(n) the Contract does not require the prior written consent of an
Obligor or contain any other restriction on the transfer or assignment of the
Contract (other than a consent or waiver of such restriction that has been
obtained prior to the Closing Date, with respect to an Existing Contract, or the
Addition Date, with respect to an Additional Contract);
<PAGE>
(o) the obligations of the related Obligor under the Contract are
irrevocable, unconditional and non-cancelable (without the right to set off for
any reason and net of any maintenance or cost per copy charges);
(p) the Contract has a remaining term to maturity of not greater than
60 months, provided, however, that up to 10% (by ADCB) may have a remaining term
to maturity of not greater than 72 months;
(q) no adverse selection procedure was used in selecting the Contract
for the Asset Pool;
(r) the Obligor under the Contract is required to maintain casualty
insurance or to self-insure with respect to the related Equipment in accordance
with the Servicer's normal requirements;
(s) the Contract is not a "consumer lease" as defined In Section
2A-103(l)(e) of the UCC;
(t) the Contract is not subject to any guarantee by the Servicer nor
has the Seller or the Originator established any specific credit reserve with
respect to the related Obligor;
(u) the Contract provides that (i) the Originator, the Seller or the
Servicer may accelerate all remaining Scheduled Payments if the Obligor is in
default under any of its obligations under such Contract and (ii) the Obligor
thereof may not elect to utilize its security deposit to offset any remaining
Scheduled Payment;
(v) the Obligor under the Contract is required to maintain the
Equipment in good working order and bear all costs of operating the Equipment
(including the payment of Taxes);
(w) no provision of such Contract provides for a Prepayment Amount less
than the amount calculated in accordance with the definition of Prepayment
Amount;
(x) the Contract has not been terminated as a result of a Casualty Loss
to the related Equipment or for any other reason;
(y) the Discounted Contract Balance of such Contract, when aggregated
with the Discounted Contract Balance of each other Contract having the same
Obligor, does not exceed the Portfolio Concentration Criteria;
(z) the Discounted Contract Balance of such Contract does not include
the amount of any security deposit held by the Servicer or the Seller;
(aa) such Contract provides that in the event of a Casualty Loss, the
Obligor is required to pay an amount not less than the present value of all
remaining Scheduled Payments
<PAGE>
discounted at the applicable Sale Discount Rate plus any past due amounts as of
the date of determination;
(bb) the Obligor thereunder has represented to the Originator that such
Obligor has accepted the related Equipment and has had a reasonable opportunity
to inspect and test such Equipment and the Originator has not been notified of
any defects therein; and
(cc) all payments in respect of a Contract will be made free and clear
of, and without deduction or withholding for or on account of, any Taxes, unless
such withholding or deduction is required by law.
Equipment: The tangible assets financed or leased by an Obligor pursuant to a
Contract and/or, unless the context otherwise requires, a security interest in
such assets, such tangible assets to consist of small ticket equipment,
including without limitation small manufacturing, automotive repair, printing,
information and document processing and storage, telecommunications and office
equipment.
ERISA: The U.S. Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
ERISA Affiliate: (a) Any corporation which is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Code) as the
Seller; (b) A trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Code) with the Seller or
(c) A member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as the Seller, any corporation described in clause (a) above
or any trade or business described in clause (b) above.
Eurocurrency Liabilities: As defined in Regulation D of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
Eurodollar Disruption Event: The occurrence of any of the following: (a) a
determination by a Purchaser that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase, (b) the failure of one or more of
the Reference Banks to furnish timely information for purposes of determining
the Adjusted Eurodollar Rate, (c) a determination by a Purchaser that the rate
at which deposits of United States dollars are being offered to such Purchaser
in the London interbank market does not accurately reflect the cost to such
Purchaser of making, funding or maintaining any Purchase or (d) the inability of
a Purchaser to obtain United States dollars in the London interbank market to
make, fund or maintain any Purchase.
Eurodollar Reserve Percentage: Of any Reference Bank for any period, for any
Capital means the percentage applicable during such period (or, if more than one
such percentage shall be so applicable, the daily average of such percentages
for those days in such period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board
<PAGE>
of Governors of the Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such Reference Bank with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term of one, two or three months, as applicable based upon
the related LIBOR Rate.
Excluded Amounts: (a) Any collections on deposit in the Collection Account or
otherwise received by the Servicer on or with respect to the Asset Pool or
related Equipment, which collections are attributable to any Taxes, fees or
other charges imposed by any Governmental Authority, (b) any collections
representing reimbursements of insurance premiums or payments for services that
were not financed by the Originator, (c) any collections with respect to
Contracts retransferred or substituted for with respect to a Warranty Event, or
otherwise replaced by a Substitute Contract, (d) any late fees, insufficient
funds charges, inspection charges, collection fees, delinquency fees,
repossession fees or UCC fees, extension fees, documentation fees, maintenance
fees and insurance fees, and (e) Residual Proceeds.
Existing Contracts: The Contracts purchased by the Seller under the Purchase
Agreement and owned by the Seller on the Closing Date.
Facility Financing Statement: As defined in Schedule I.
Federal Funds Rate: For any period, a fluctuating interest rate per annum equal
for each day during such period to the weighted average of the federal funds
rates as quoted by First Union and confirmed in Federal Reserve Board
Statistical Release H.15(519) or any successor or substitute publication
selected by First Union (or, if such day is not a Business Day, for the next
preceding Business Day), or, if, for any reason, such rate is not available on
any day, the rate determined, in the sole opinion of First Union, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 A.M. Charlotte, North Carolina time.
Fee Letter: The letter agreement, the Closing Date, among the Seller, the
Servicer and the Deal Agent, setting forth, among other things, the Commitment
Fee, the Program Fee and the Structuring Fee.
First Union: First Union National Bank, in its individual capacity, and its
successors or assigns.
Fixed Period: For any Payment Date the period beginning on, and including the
13th day of the immediately preceding calendar month (or, with respect to the
first Fixed Period, the Closing Date) and ending on, but excluding the 13th day
of the current calendar month.
GAAP: Generally accepted accounting principles as in effect from time to time
the United States.
Governmental Authority: With respect to any Person, any nation or government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial,
<PAGE>
regulatory or administrative functions of or pertaining to government and any
court or arbitrator having jurisdiction over such Person.
H.15: Federal Reserve Statistical Release H.15.
Hedge Breakage Costs: For any Hedge Transaction, any amount payable by the
Seller for the early termination of that Hedge Transaction or any portion
thereof.
Hedge Counterparty: Any entity which (a) on the date of entering into any Hedge
Transaction (i) is an interest rate swap dealer that is either a Purchaser or an
Affiliate of a Purchaser, or has been approved in writing by the Deal Agent
(which approval shall not be unreasonably withheld), and (ii) has a long-term
unsecured debt rating of not less than "A" by S&P and not less than "A-2" by
Moody's ("Long-term Rating Requirement") and a short-term unsecured debt rating
of not less than "A-1" by S&P and not less than "P-1" by Moody's ("Short-term
Rating Requirement"), and (b) in a Hedging Agreement (i) consents to the
assignment of the Seller's rights under the Hedging Agreement to the Deal Agent
pursuant to Section 5.4(b) and (ii) agrees that in the event that Moody's or S&P
reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, or reduces its short-term unsecured debt rating below the
Short-term Rating Requirement, it shall transfer its rights and obligations
under each Hedging Transaction to another entity that meets the requirements of
clause (a) and (b) hereof and has entered into a Hedging Agreement with the
Seller on or prior to the date of such transfer.
Hedge Notional Amount: For any Purchase, the aggregate notional amount in effect
on any day under all Hedge Transactions entered into pursuant to Section 5.4(a)
for that Purchase.
Hedge Rate: For any Contract to which a Purchase relates, the "Fixed Rate" of
the Hedge Transaction to be used in computing the Sale Discount Rate of that
Contract.
Hedge Transaction: Each interest rate swap transaction between the Borrower and
a Hedge Counterparty which is entered into pursuant to Section 5.4(a) and is
governed by a Hedging Agreement.
Hedging Agreement: Each agreement between the Seller and a Hedge Counterparty
which governs one or more Hedge Transactions entered into pursuant to Section
5.4(a), which agreement shall consist of a "Master Agreement" in a form
published by the International Swaps and Derivatives Association, Inc., together
with a "Schedule" thereto substantially in the form of Exhibit H hereto or such
other form as the Deal Agent shall approve in writing, and each "Confirmation"
thereunder confirming the specific terms of each such Hedge Transaction.
Increased Costs: Any amounts required to be paid by the Seller to an Affected
Party pursuant to Section 2.12.
Incremental Purchase: Any Purchase that increases the aggregate outstanding
Capital hereunder.
<PAGE>
Indebtedness: With respect to any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current liabilities incurred in the ordinary course of
business and payable in accordance with customary trade practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under capital leases, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (d) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (e) all indebtedness, obligations or liabilities of that Person in respect
of Derivatives.
Indemnified Amounts: As defined in Section 8. 1
Indemnified Persons: As defined in Section 6.19.
Ineligible Contract: As defined in Section 5.5.
Insolvency Event: With respect to a specified Person, (a) the filing of a decree
or order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case under
any applicable Insolvency Law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
law, or the consent by such Person to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
Insolvency Laws: The Bankruptcy Code of the United States of America and all
other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally.
Instrument: Any "instrument" (as defined in Article 9 of the UCC), other than an
instrument which constitutes part of chattel paper.
Insurance Policy: With respect to any Contract, an insurance policy covering
physical damage to or loss of the related Equipment.
Insurance Proceeds: Depending on the context, any amounts payable or any
payments made, to the Servicer under any Insurance Policy.
<PAGE>
Investment: With respect to any Person, any direct or indirect loan, advance or
investment by such Person in any other Person, whether by means of share
purchase, capital contribution, loan or otherwise, excluding the acquisition of
Assets pursuant to the Purchase Agreement and excluding commission, travel and
similar advances to officers, employees and directors made in the ordinary
course of business.
Issuer: VFCC and any other Purchaser whose principal business consists of
issuing commercial paper or other securities to fund its acquisition and
maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar assets.
LIBOR Rate: For any period of one, two or three months chosen by the Deal Agent
(the "LIBOR Period"), an interest rate per annum equal the rate appearing on the
Telerate Page 3750 as of 11:00 a.m. (London time) on the Business Day which is
the second Business Day immediately preceding the first day of such LIBOR Period
for a term equal to such LIBOR Period or, if no such rate appears on such day,
the average (rounded upward to the nearest one-sixteenth (1/16) of one percent)
per annum rate of interest determined by First Union at its principal office in
Charlotte, North Carolina (each such determination, absent manifest error, to be
conclusive and binding) as of two Business Days prior to the first day of the
applicable LIBOR Period, to be the rate at which deposits in immediately
available funds in U.S. dollars are being, have been, or would be offered or
quoted by First Union to major banks in the interbank market for Eurodollar
deposits at or about 11:00 A.M. (Charlotte, North Carolina time) on such day,
for a term comparable to such LIBOR Period and in an amount approximately equal
to the Capital allocated to such LIBOR Period by the Deal Agent.
Lien: With respect to any Asset, (a) any mortgage, lien, pledge, charge security
interest or encumbrance of any kind in respect of such Asset or (b) the interest
of a vendor or lessor under any conditional sale agreement, financing lease or
other title retention agreement relating to such Asset.
Liquidation Expenses: With respect to any Contract, the aggregate amount of all
out-of-pocket expenses reasonably incurred by the Servicer (including amounts
paid to any subservicer) and any reasonably allocated costs of internal counsel,
in each case in accordance with the Servicer's customary procedures in
connection with the repossession, refurbishing and disposition of any related
Equipment upon or after the expiration or earlier termination of such Contract
and other out-of-pocket costs related to the liquidation of any such Equipment,
including the attempted collection of any amount owing pursuant to such Contract
if it is a Defaulted Contract.
Liquidity Bank: Each liquidity bank that is a party to the Liquidity Purchase
Agreement dated as of June 24, 1998, among the Purchaser, First Union, as
liquidity agent, and each other liquidity bank a party thereto.
Lock-Box: A post office box to which Collections are remitted for retrieval by a
Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box Account.
<PAGE>
Lock-Box Account: An account maintained for the purpose of receiving Collections
at a bank or other financial institution which has executed a Lock-Box Notice
for the purpose of receiving Collections.
Lock-Box Bank: Any of the banks or other financial institutions holding one or
more Lock-Box Accounts.
Lock-Box Notice: A notice, in substantially the form of Exhibit B, among the
Seller, the Originator (if applicable) and a Lock-Box Bank.
Monthly Period: As to any Determination Date, the calendar month ended on such
Determination Date.
Monthly Report: As defined in Section 6.13(a).
Moody's: Moody's Investors Service, Inc., and any successor thereto.
Multiemployer Plan: A "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately
preceding five years contributed to by the Seller or any ERISA Affiliate on
behalf of its employees.
Net Loss to Liquidation Ratio: At any time, the product of the Default Ratio and
the weighted average life (in years, rounded upwards to the nearest tenth of a
year) of the Asset Pool.
Notice of Sale: A notice, substantially in the form of Exhibit A hereto,
delivered pursuant to Section 2.2.
Obligor: A Person obligated to make payments pursuant to a Contract including
any guarantor thereof.
Officer's Certificate: A certificate signed by any officer of the Seller or the
Servicer and delivered to the Collateral Custodian, as the case may be.
Opinion of Counsel: A written opinion of counsel, who may be counsel for Seller
or the Servicer and who shall be reasonably acceptable to the Deal Agent.
Original Contract: Each Contract identified by account number and Outstanding
Balance as of the related Cut Off Date in the Contract List.
Originator: Fidelity Leasing, Inc. or any wholly owned subsidiary thereof.
Originator Assets: Any Asset that was transferred to the Seller by the
Originator.
Outstanding Balance: Of any Asset at any time, the then outstanding principal
balance thereof.
<PAGE>
Overcollateralization: On any day, the difference between the (i) the ADCB on
such day and (ii) the aggregate Capital on such day.
Payment Date: The 20th day of each calendar month or, if such day is not a
Business Day, the next succeeding Business Day.
Payout Event: As defined in Section 7. 1.
Permitted Investments: Any one or more of the following types of investments:
(a) marketable obligations of the United States of America, the full
and timely payment of which are backed by the full faith and credit of the
United States of America and which have a maturity of not more than 270 days
from the date of acquisition;
(b) marketable obligations, the full and timely payment of which are
directly and fully guaranteed by the full faith and credit of the United States
of America and which have a maturity of not more than 270 days from the date of
acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not more than
270 days from the date of acquisition) denominated in dollars and issued by any
bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated A-1 by S&P and P-1
by Moody's;
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
entered into with any bank of the type described in clause (c) above;
(e) commercial paper rated at least A-1 by S&P and P-1 by Moody's; and,
(f) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America or
any state thereof (or domestic branches of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however that at the time such investment, or
the commitment to make such investment, is entered into, the short-term debt
rating of such depository institution or trust company shall be at least A-1 by
S&P and P-1 by Moody's.
Permitted Liens: (a) shall mean, with respect to Contracts in the Asset Pool:
(i) Liens for state, municipal or other local taxes if such
taxes shall not at the time be due and payable, (ii) Liens in favor of
the Seller created pursuant to a Purchase Agreement and transferred to
the Asset Pool hereunder and (iii) Liens in favor of the Deal Agent as
agent for the Purchasers created pursuant to this Agreement; and
<PAGE>
(b) with respect to the related Equipment:
(i) materialmen's, warehousemen's and mechanics' liens and
other Liens arising by operation of law in the ordinary course of
business for sums not due, (ii) Liens for state, municipal or other
local taxes if such taxes shall not at the time be due and payable,
(iii) Liens in favor of the Seller created pursuant to a Purchase
Agreement and transferred to the Asset Pool hereunder and (iv) Liens in
favor of the Deal Agent as agent for the Purchasers created pursuant to
this Agreement.
Person: An individual, partnership, corporation (including a business trust),
limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.
Pool Assets: On any day any Asset in the Asset Pool.
Portfolio Concentration Criteria: The following concentration limitations at all
times measured on the basis of percentage of ADCB:
(a) the sum of the Discounted Contract Balances of Contracts relating
to any one individual Obligor is limited to the greater of 1.5% of the ADCB,
(b) the sum of the Discounted Contract Balance of the 25 obligors with
the largest aggregate Discounted Contract Balances is limited to 15% of the
ADCB;
(c) the sum of the Discounted Contract Balances of Obligors located in
the state of Texas is limited to 20% of the ADCB;
(d) the sum of the Discounted Contract Balances of Obligors located in
the States of New York, Florida and California is limited to 15% of the ADCB;
(e) the sum of the Discounted Contract Balances of Obligors located in
any other one State (other than Texas, New York, Florida and California) is
limited to 10% of the ADCB;
(f) the sum of the Discounted Contract Balances of Contracts whose
Obligors are municipalities or other government related organizations is limited
to 1% of the ADCB; and
(g) the sum of the Discounted Contract Balances of which the payment
terms are non-monthly is limited to 10% of the ADCB.
Prepaid Contract: Any Contract that has terminated or been prepaid in full prior
to its scheduled expiration date (including because of a Casualty Loss), other
than a Defaulted Contract.
Prepayment Amount: As specified in Section 6.2(b).
<PAGE>
Prepayments: Any and all (i) partial and full prepayments on a Contract
(including, with respect to any Contract and any Monthly Period, any Scheduled
Payment or portion thereof which is due in a subsequent Monthly Period which the
Servicer has received, and expressly permitted the related Obligor to make, in
advance of its scheduled due date, and which will be applied to such Scheduled
Payment on such due date), (ii) cash proceeds or rents realized from the sale,
lease, re-lease or re-financing of Equipment under a Prepaid Contract, net of
Liquidation Expenses, and (iii) Recoveries.
Prime Rate: The rate announced by First Union from time to time as its prime
rate in the United States, such rate to change as and when such designated rate
changes. The Prime Rate is not intended to be the lowest rate of interest
charged by First Union in connection with extensions of credit to debtors.
Program Fee: As defined in Section 2.13(b).
Program Fee Rate: The rate per annum set forth in the Program Fee Agreement.
Purchase: A purchase by a Purchaser of an undivided interest in the Assets from
the Seller pursuant to Article II, including without limitation, the remittance
by the Servicer to the Seller of Collections of Pool Assets pursuant to Section
2.7(b).
Purchase Agreement: The Purchase and Sale Agreement dated as of the date hereof,
between the Originator and the Seller, as amended, modified, supplemented or
restated from time to time.
Purchase Certificate: Each certificate, in the Form of Exhibit G, delivered on
the date of the Initial Purchase and on the date of each Incremental Purchase.
Purchase Date: The Closing Date, and as to any Incremental Purchase, any
Business Day that is (i) at least one (1) calendar week following the
immediately preceding Purchase Date and (ii) two (2) Business Days immediately
following the receipt by the Deal Agent of a written request by the Seller to
sell an Asset Interest, such notice to be in the form of Exhibit A hereto and to
conform to requirements of Section 3.2 hereof.
Purchase Limit: At any time, $100,000,000, on or after the Termination Date, the
"Purchase Limit" shall mean the aggregate outstanding Capital.
Purchasers: Collectively, VFCC and the Investors and any other Person that
agrees, pursuant to the pertinent Assignment and Acceptance, to purchase an
Asset Interest pursuant to this Agreement.
Qualified Institution: As defined in Section 6.2.
Rating Agency: Each of Standard & Poor's, Moody's and any other rating agency
that has been requested to issue a rating with respect to the commercial paper
notes issued by the Issuer.
<PAGE>
Records: All Contracts and other documents, books, records and other information
(including without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) maintained with
respect to Assets and the related Obligors which the Seller has itself
generated, in which the Seller has acquired an interest pursuant to the Purchase
Agreement or in which the Seller has otherwise obtained all interest.
Recoveries: With respect to a Defaulted Contract, proceeds from the sale, lease,
re-lease or refinancing of the Equipment, proceeds of any related Insurance
Policy and any other recoveries with respect to such Defaulted Contract and the
related Equipment and related property, and other amounts representing late fees
and penalties net of Liquidation Expenses and amounts, if any, so received that
are required to be refunded to the Obligor on such Contract.
Reference Bank: Any bank which furnishes information for purposes of determining
the Adjusted Eurodollar Rate.
Register: As defined in Section 10. 1(c).
Reinvestment Termination Date: The Business Day that the Seller designates as
the Reinvestment Termination Date by notice to the Deal Agent at least ten
Business Days prior to such Business Day or, if any of the conditions precedent
in Section 3.2 are not satisfied, the Business Day that the Deal Agent
designates as the Reinvestment Termination Date by notice to the Seller at least
one Business Day prior to such Business Day.
Replaced Contract: As defined in Section 2.17(a).
Reporting Date: The 16th day of the month or the first Business Day thereafter.
Required Investors: At a particular time, Investors with Commitments in excess
of 66 2/3 % of the Purchase Limit.
Required Reports: Collectively, the Monthly Report, the Servicer's Certificate
and the quarterly financial statement of the Servicer required to be delivered
to the Deal Agent pursuant to Section 6.13(c) hereof.
Requirements of Law: For any Person shall mean the certificate of incorporation
or articles of association and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or order or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
Residual Proceeds: With respect to any Contract or any item of Equipment, the
net proceeds for the sale, re-lease or other disposition of the equipment upon
the expiration, or early termination, of the term of such Contract.
<PAGE>
Responsible Officer: As to any Person (other than the Collateral Custodian and
Backup Servicer), any officer of such Person with direct responsibility for the
administration of this Agreement and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject, and with respect to
the Collateral Custodian and Backup Servicer it shall mean any officer within
the office at the address set forth under its name on the signature pages hereof
including any Vice President, Managing Director, Assistant Vice President,
Secretary, Assistant Secretary or Assistant Treasurer or any other officer of
the Collateral Custodian and Backup Servicer customarily performing functions
similar to those performed by any of the above designated officers and, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge and familiarity with the particular
subject.
Restricting Event: As defined in Section 7.2.
Retransfer Date: As defined in Section 5.6.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.
Sale Discount Rate: For any Contract to be transferred to the Asset Pool by the
Seller, a rate per annum, calculated on the Business Day immediately preceding
such transfer, equal to the sum of (i) the Hedge Rate for that Contract, (ii)
the Program Fee Rate, (iii) .05% and (iv) the Servicing Fee Rate.
Scheduled Payments: On any Determination Date with respect to any Contract, (a)
each monthly, quarterly, annual or seasonal rent or financing (whether principal
or principal and interest) payment scheduled to be made by the Obligor thereof
after such Determination Date under the terms of such Contract, reduced by a
number of such scheduled payments equal to a number (rounding upwards to the
next highest integer if such number is not an integer) obtained by dividing (i)
the dollar amount of any security deposit related to such Contract by (ii) the
amount of a single scheduled payment under such Contract, (b) any payment due
from the Obligor of such Contract at the expiration or other termination of such
Contract and (c) any payments in connection with a Warranty Event.
Secured Party: (i) Each Purchaser and (ii) each Hedge Counterparty that is
either a Purchaser or an Affiliate of a Purchaser if that Affiliate is a Hedge
Counterparty executes a counterpart of this Agreement agreeing to be bound by
the terms of this Agreement applicable to a Secured Party.
Seller: Fidelity Leasing SPC I, Inc., or any permitted successor thereto.
Servicer: Fidelity Leasing, Inc. and its permitted successors and assigns.
Servicer Advance: An advance of Scheduled Payments made by the Servicer pursuant
to Section 6.3.
<PAGE>
Servicer Default: As specified in Section 6.24.
Servicer's Certificate: As defined in Section 6.13(b).
Servicing Fee: As specified in Section 2.13(c).
Servicing Fee Letter: The letter, dated as of the Closing Date, among the
Seller, the Servicer, and the Deal Agent setting forth, among other things, the
Servicer Fee.
Servicing Fee Rate: The rate per annum set forth in the Servicing Fee Letter.
Solvent: As to any Person at any time, having a state of affairs such that all
of the following conditions are met: (a) the fair value of the property of such
Person is greater than the amount of such Person's liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy
Code; (b) the present fair salable value of the property of such Person in an
orderly liquidation of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute unreasonably small capital.
Structuring Fee: The structuring fee agreed to between the Seller and the Deal
Agent in the Program Fee Agreement.
Substitute Contract: On any day, an Eligible Contract which meets each of the
conditions for substitution set forth in Schedule IV hereto.
Successor Servicer: As defined in Section 6.25(a).
Taxes: Any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any government or other taxing authority.
Termination Date: The earliest of (a) the date of termination of the Purchase
Limit pursuant to Section 2.3, (b) the date of the occurrence of a Payout Event
pursuant to Section 7. 1, (c) the Reinvestment Termination Date and (d)
Commitment Termination Date.
Termination Notice: As defined in Section 6.24.
Transaction: As defined in Section 3.2.
<PAGE>
Transaction Documents: This Agreement, the Purchase Agreement, the Liquidity
Purchase Agreement, dated as of the date hereof between VFCC and First Union,
and the Custodial Agreement, dated as of the date hereof between the Seller, the
Servicer, the Deal Agent and the Collateral Custodian, and any additional
document the execution of which is necessary or incidental to carrying out the
terms of the foregoing documents.
UCC: The Uniform Commercial Code as from time to time in effect in the specified
jurisdiction.
United States: The United States of America.
Unreimbursed Servicer Advances: At any time, the amount of all previous Servicer
Advances (or portions thereof) as to which the Servicer has not been reimbursed
as of such time pursuant to Section 2.7 and which the Servicer has determined in
its sole discretion will not be recoverable from Collections with respect to the
related Contract.
Warranty Event: As to any Pool Asset, the occurrence and continuance of a
material breach of any representation or warranty relating to such Contract.
Yield: For each Asset Interest for any Fixed Period, the product of:
YR x C x ED
--
360
where:
C = the Capital of such Asset Interest.
YR = the weighted average of the Yield Rates applicable during such
Fixed Period.
ED = the actual number of days elapsed during such Fixed Period.
provided, however that (i) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (ii) Yield shall not be considered paid by any distribution
if at any time such distribution is rescinded or must otherwise be returned for
any reason.
Yield Rate: For any Fixed Period,
(a) to the extent the relevant Purchaser funded the applicable Asset
Interest through the issuance of commercial paper, a rate equal to the CP Rate,
or
(b) to the extent the relevant Purchaser did not fund the applicable
Asset Interest through the issuance of commercial paper, a rate equal to the
Alternative Rate plus 1.25% or if
<PAGE>
the Alternative Rate is not available for any reason (as determined in the Deal
Agent's sole discretion) and the tranche period applicable to such Asset
Interest is less than one month, the Base Rate.
Section 1.2 Other Terms.
All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.
Section 1.3 Computation of Time Periods.
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 mean "to but
excluding."
ARTICLE II
THE PURCHASE FACILITY
Section 2.1 Purchases of Asset Interests.
(a) On the terms and conditions hereinafter set forth, the Seller may
on any Purchase Date, at its option, sell and assign Asset Interests to the
Purchasers. The Deal Agent may act on behalf of and for the benefit of the
Purchasers in this regard. VFCC may, in its sole discretion, purchase, or if
VFCC shall decline to purchase, the Liquidity Agent shall purchase on behalf of
the Investors, Asset Interests from time to time during the period from the date
hereof to but not including the Termination Date. Under no circumstances shall
any Purchaser make the initial Purchase or any Incremental Purchase if, after
giving effect to such Purchase or Incremental Purchase, the aggregate Capital
outstanding hereunder would exceed the lesser of (i) the Purchase Limit or (ii)
the Capital Limit. Each Asset Interest purchased by any Purchaser hereunder is
subject to the interests of the Hedge Counterparties under Sections 2.7(a)(i),
2.8(b)(i) and 2.9(b)(i) of this Agreement.
(b) The Seller may, within 60 days, but no later than 45 days, prior to
the then existing Commitment Termination Date, by written notice to the Deal
Agent, make written request for VFCC and the Investors to extend the Commitment
Termination Date for an additional period of 364 days. The Deal Agent will give
prompt notice to VFCC and each of the Investors of its receipt of such request
for extension of the Commitment Termination Date. VFCC and each Investor shall
make a determination, in their sole discretion and after a full credit review,
not less than 15 days prior to the then applicable Commitment Termination Date
as to whether or not it will agree to extend the Commitment Termination Date;
provided, however, that the failure of VFCC or any Investor to make a timely
response to the Seller's request for extension of the Commitment Termination
Date shall be deemed to constitute a refusal by VFCC
<PAGE>
or the Investor, as the case may be, to extend the Commitment Termination Date.
The Commitment Termination Date shall only be extended upon the consent of both
(i) VFCC and (ii) 100% of the Investors.
Section 2.2 The Initial Purchase, Subsequent Purchases and
Incremental Purchases.
(a) Subject to the conditions described in Section 2.1, the initial
Purchase and each Incremental Purchase shall be made in accordance with the
procedures described in Section 2.2(b). After the Collection Date has occurred,
each of the Purchasers and the Deal Agent, in accordance with their respective
interests, shall assign and transfer to the Seller their respective remaining
interest in Asset Interests to the Seller free and clear of any Adverse Claim
resulting solely from an act or omission by a Purchaser or the Deal Agent, but
without any other representation or warranty, express or implied.
(b) The initial Purchase and each Incremental Purchase shall be made
pursuant to the terms of a Purchase Certificate in the form of Exhibit G hereto,
after receipt by the Purchaser of a Notice of Sale delivered by the Seller to
the Deal Agent (with a copy to the Collateral Custodian) at least two Business
Days prior to such proposed Purchase Date and each such notice shall specify (i)
the aggregate amount of such initial Purchase or Incremental Purchase which
amount must satisfy the applicable minimum requirement set forth in the
following sentence and (ii) the date of such Purchase or Incremental Purchase.
The Seller may deliver notices as frequently as bi-weekly (or more frequently
subject to the prior written consent of the Deal Agent), and each amount
specified in any such notice must satisfy the following minimum requirements, as
applicable, as a condition to the related Purchase the initial Purchase and each
Incremental Purchase hereunder shall be in an amount equal to $3,000,000 or an
integral multiple of $10,000 in excess thereof. Following receipt of such
notice, the Deal Agent will consult with VFCC in order to assist VFCC in
determining whether or not to make the Purchase. If VFCC declines to make a
proposed Purchase, the initial Purchase or Incremental Purchase will be made by
the Investors. On the date of such Purchase or Incremental Purchase, as the case
may be, VFCC or each Investor shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Seller in same day
funds, at such bank or other location reasonably designated by Seller in its
Notice of Sale given pursuant to this Section 2.2(b), an amount equal to (i) the
Capital of the Asset Interest related to such initial Purchase or Incremental
Purchase, as the case may be, in the case of a purchase by VFCC or (ii) such
Investor's pro rata share of the Capital related to such Asset Interest, in the
case of a Purchase by the Investors.
Section 2.3 Reduction of the Purchase Limit; Repurchase.
(a) The Seller may, upon at least five Business Days' notice to the
Deal Agent, terminate in whole or reduce in part the portion of the Purchase
Limit that exceeds the sum of the aggregate Capital and Yield accrued and to
accrue thereon, and the Commitments of the Investors shall be reduced
proportionately; provided, however, that each partial reduction of the Purchase
Limit shall be in an aggregate amount equal to $1,000,000 or an integral
multiple
<PAGE>
thereof. Each notice of reduction or termination pursuant to this Section 2.3(a)
shall be irrevocable.
(b) The Seller may, upon 30 days (and not more than 90 days) notice to
each Purchaser and the Deal Agent prior to the date of such reduction, reduce
each Purchaser's Asset Interest by remitting to each Purchaser (i) cash and (ii)
instructions to apply such cash to the reduction of Capital and accrued Yield
through the date of such payment, provided that no such reduction shall be given
effect unless the Seller has complied with the terms of any Hedging Agreement
requiring that one or more Hedge Transactions be terminated in whole or in part
as the result of any such reduction of the Purchaser's Asset Interest, and
Seller has paid all Hedge Breaking Costs owing to the relevant Hedge
Counterparty for any such termination. If the Seller does not notify each
Purchaser and the Deal Agent of any such Capital reduction at least 30 days
prior to such Capital reduction, the Seller shall pay all costs related to the
reduction of outstanding Capital, including Breakage Costs, Hedge Breakage Costs
and all costs associated with the outstanding Commercial Paper Notes related to
such Capital reduction. The Seller understands (i) that Commercial Paper Notes
issued in connection with such Assets Interests may not be prepaid, (ii) that
the amount of cash proceeds received by each Purchaser may not match the amount
of maturing Commercial Paper Notes on the desired repayment date and (iii) that
each Purchaser shall use its reasonable best efforts to minimize any such
Breakage Costs.
Section 2.4 Determination of Yield.
The Deal Agent shall determine the Yield (including unpaid Yield, if
any, due and payable on a prior Payment Date) to be paid on each Payment Date
for the Fixed Period and shall advise the Servicer thereof on the first Business
Day after the Fixed Period.
Section 2.5 [reserved].
Section 2.6 Dividing or Combining Asset Interests.
The Deal Agent may, with the consent of a Purchaser, take any of the
following actions at the end of such Fixed Period with respect to any Asset
Interest: (i) divide the Asset Interest owned by such Purchaser into two or more
portions of Asset Interests having aggregate Capital equal to the Capital of
such divided Asset Interest, (ii) combine one portion of an Asset Interest of
such Purchaser with another portion of an Asset Interest of such Purchaser with
a Fixed Period ending on the same day, creating a new portion of an Asset
Interest having Capital equal to the Capital of the two portions of Asset
Interest combined or (iii) combine the Asset Interest of such Purchaser with the
Asset Interest to be purchased on such day by such Purchaser, creating a new
Asset Interest having Capital equal to the Capital of the two Asset Interests
combined; provided, that an Asset Interest of VFCC may not be combined with an
Asset Interest of the Investors.
Section 2.7 Non-Liquidation Settlement Procedures.
The provisions of this Section 2.7 shall apply during the term of this
Agreement prior to the occurrence of the Payout Event.
<PAGE>
(a) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds, and
(ii) a Servicer Advance if made or required pursuant to Section 6.3, the
following amounts in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in amount equal to any accrued
and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
(vii) SEVENTH, to the extent not paid for by Fidelity, to the
Deal Agent for the ratable payment to each Purchaser in an amount equal
to any accrued and unpaid Commitment Fees;
(viii) EIGHTH, to the extent not paid for by Fidelity, to the
Deal Agent for the ratable payment to each Purchaser, in an amount
equal to any accrued and unpaid Program Fees and Yield for such Payment
Date;
(ix) NINTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in respect
thereof;
(x) TENTH, to the extent that funds are available, any
remaining amounts may be reinvested in Eligible Contracts; provided,
however, that if the aggregate Capital exceeds the lesser of (i) the
Capital Limit; or (ii) the Purchase Limit an amount equal to such
excess shall be paid to the Deal Agent to pay down Capital outstanding;
(xi) ELEVENTH, to the extent funds are available to satisfy
any unpaid Indemnified Amounts, amounts required to be paid by the
Seller pursuant to the indemnification provisions of Section 8.1 and
any other amounts due hereunder; and
(xii) TWELFTH, any remaining amount shall be distributed to
the Seller.
<PAGE>
(b) Notwithstanding anything to the contrary contained in this Section
2.7 or any other provision in this Agreement, if on any Business Day prior to
the Payout Event the aggregate outstanding amount of Capital shall exceed the
lesser of (i) the Purchase Limit or (ii) the Capital Limit, then the Seller
shall remit to the Deal Agent, prior to any reinvestment of funds as set forth
in item TENTH of Section 2.7(a) and in any event no later than the close of
business of the Deal Agent on the next succeeding Business Day, a payment (to be
applied by the Deal Agent to outstanding Capital allocated to Monthly Periods
selected by the Deal Agent, in its reasonable discretion) in such amount as may
be necessary to reduce outstanding Capital to an amount less than or equal to
the lesser of (i) the Purchase Limit or (ii) the Capital Limit.
Section 2.8 Settlement Procedures Following a Termination Date.
The provisions of this Section 2.8 shall apply during the term of this
Agreement after the occurrence of a Payout Event provided that no Restricting
Event has occurred.
(a) [reserved].
(b) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent available funds and (ii)
a Servicer Advance if made or required pursuant to Section 6.3, the following
amounts in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
(vii) SEVENTH, to the extent not paid for by Fidelity, to the
Deal Agent for the ratable payment to each Purchaser in an amount equal
to any accrued and unpaid Commitment Fees;
<PAGE>
(viii) EIGHTH, to the extent not paid for by Fidelity, to the
Deal Agent, in an amount equal to any accrued and unpaid Program Fees
and Yield for such Payment Date;
(ix) NINTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in respect
thereof;
(x) TENTH, to the Deal Agent for payment to the Purchasers in
an amount necessary to reduce the aggregate Capital to an amount equal
to the product of (i) the Asset Interest and (ii) the ADCB as of the
current Determination Date;
(xi) ELEVENTH, to the extent funds are available to satisfy
any unpaid Indemnified Amounts required to be paid by the Seller
pursuant to the indemnification provisions of Section 8.1, and any
other amounts due hereunder; and
(xii) TWELFTH, any remaining amount shall be distributed to
the Seller, provided, however, that if the Overcollateralization is
less than or equal to the product of (i) 0.05 and (ii) the Purchase
Limit as of the day immediately preceding the occurrence of a
Termination Date, the amount which would have been distributed to the
Seller will be distributed to the Purchaser in reduction, to zero, of
the aggregate Capital.
(c) If at any time on or after the occurrence of a Payout Event, the
Deal Agent or the Seller determines that as of the close of business on the day
immediately preceding the Termination Date the outstanding amount of Capital
exceeded the lesser of (i) the Purchase Limit, or (ii) the Capital Limit, then
the Seller shall immediately remit to the Deal Agent, for the benefit of the
Purchasers, a payment (to be applied by the Deal Agent to outstanding Capital
allocated to Monthly Periods selected by the Deal Agent, in its reasonable
discretion) in such amount as may be necessary to reduce the amount of Capital
to the lesser of (i) the Purchase Limit, or (ii) the Capital Limit as of the
close of business on the date immediately preceding the Payout Event.
Section 2.9 Settlement Procedures Following a Restricting Event.
The provisions of this Section 2.9 shall apply during the term of this
Agreement after the occurrence of a Restricting Event.
(a) [reserved].
(b) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds and
(ii) a Servicer Advance if made or required pursuant to Section 6.3, the
following amounts in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
<PAGE>
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
(vii) SEVENTH, to the extent not paid for by Fidelity, to the
Deal Agent for the ratable payment to each Purchaser in an amount equal
to any accrued and unpaid Commitment Fees;
(viii) EIGHTH, to the extent not paid for by Fidelity, to the
Deal Agent, for the ratable payment to each Purchaser in an amount
equal to any accrued and unpaid Program Fees and Yield for such Payment
Date;
(ix) NINTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Purchasers in respect
thereof;
(x) TENTH, to the extent that funds are available, to the Deal
Agent for the Purchasers in reduction of aggregate Capital;
(xi) ELEVENTH, to the extent funds are available to satisfy
any unpaid Indemnified Amounts, amounts required to be paid by the
Seller pursuant to the indemnification provisions of Section 8.1, and
other amounts due hereunder; and
(xii) TWELFTH, upon the reduction of the Capital to zero and
the payment in full of the Aggregate Unpaids, any remaining amount
shall be distributed to the Seller.
(c) If at any time on or after the Restricting Event, the Deal Agent or
the Seller determines that as of the close of business on the day immediately
preceding Termination Date the outstanding amount of Capital exceeded the lesser
of (i) the Purchase Limit, or (ii) the Capital Limit, then the Seller shall
immediately remit to the Deal Agent, for the benefit of the Purchasers, a
payment (to be applied by the Deal Agent to outstanding Capital allocated to
Monthly Periods selected by the Deal Agent, in its reasonable discretion) in
such amount as may be necessary to reduce the amount of Capital to the lesser of
(i) the Purchase Limit, or (ii) the Capital Limit as of the close of business on
the date immediately preceding the Restricting Event.
<PAGE>
Section 2.10 Collections and Allocations.
(a) Collections. The Servicer shall transfer, or cause to be
transferred, all Collections on deposit in the form of available funds in the
Lock Box Account to the Collection Account by the close of business on the
Business Day such Collections are received in the Lock Box Account. The Servicer
shall promptly (but in no event later than two Business Days after the receipt
thereof) deposit all Collections received directly by it in the Collection
Account. The Servicer shall make such deposits or payments on the date indicated
therein by electronic funds transfer through the Automated Clearing House
system, or by wire transfer, in immediately available funds.
(b) Initial Deposits. On the Closing Date and on each Addition Date
thereafter, the Servicer will deposit (in immediately available funds) into the
Collection Account all Collections received after the applicable Cut Off Date
and through and including the Closing Date or Addition Date, as the case may be,
in respect of Contracts being transferred to the Asset Pool on such date.
(c) Excluded Amounts. The Servicer may withdraw from the Collection
Account any Collections constituting Excluded Amounts if the Servicer has, prior
to such withdrawal, delivered to the Deal Agent a report setting forth the
calculation of such Excluded Amounts in a format reasonably satisfactory to the
Deal Agent.
Section 2.11 Payments, Computations, Etc.
(a) Unless otherwise expressly provided herein, all amounts to be paid
or deposited by the Seller or the Servicer hereunder shall be paid or deposited
in accordance with the terms hereof no later than 11:00 A.M. (Charlotte, North
Carolina time) on the day when due in lawful money of the United States in
immediately available funds to the Agent's Account. The Seller shall, to the
extent permitted by law, pay to the Secured Parties interest on all amounts not
paid or deposited when due hereunder at 1% per annum above the Base Rate,
payable on demand; provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. Such interest shall be
retained by the Deal Agent except to the extent that such failure to make a
timely payment or deposit has continued beyond the date for distribution by the
Deal Agent of such overdue amount to the Secured Parties, in which case such
interest accruing after such date shall be for the account of, and distributed
by the Deal Agent to the Secured Parties. All computations of interest and all
computations of Yield and other fees hereunder shall be made on the basis of a
year of 360 days for the actual number of days (including the first but
excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of Yield, interest or any fee payable hereunder, as the
case may be.
<PAGE>
(c) If any Purchase or Incremental Purchase requested by the Seller and
approved by a Purchaser and the Deal Agent pursuant to Section 2.2, is not, for
any reason whatsoever related to a default or nonperformance by the Seller, made
or effectuated, as the case may be, on the date specified therefor, the Seller
shall indemnify such Purchaser against any reasonable loss, cost or expense
incurred by such Purchaser, including, without limitation, any loss (including
loss of anticipated profits, net of anticipated profits in the reemployment of
such funds in the manner determined by such Purchaser), cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Purchaser to fund or maintain such Purchase or Incremental Purchase, as
the case may be, during such Monthly Period.
Section 2.12 Optional Repurchase.
At any time following the Termination Date when the ADCB is less than
ten percent of the ADCB as of the Termination Date, the Servicer may notify the
Deal Agent in writing of its intent to purchase all remaining Assets in the
Asset Pool, provided that all Hedge Transactions have been terminated. On the
Payment Date next succeeding any such notice, the Servicer shall purchase all
such Assets for a price equal to the sum of (i) the Aggregate Unpaids, (ii) all
Yield accrued and to accrue, as reasonably determined by the Deal Agent, and
(iii) all accrued and unpaid Commitment Fees, Program Fees, Backup Servicing
Fees, Custodial Fees, Increased Costs, Taxes, Hedge Breaking Costs, Breakage
Costs and any other amounts payable by the Seller hereunder or under or with
respect to any Hedging Agreement, and the proceeds of such purchase will be
deposited into the Collection Account and paid in accordance with Section
2.8(b).
Section 2.13 Fees.
(a) Fidelity, in its individual capacity, shall pay to the Deal Agent
from its own funds on each Payment Date, monthly in arrears, a fee (the
"Commitment Fee"), as set forth in the Fee Letter.
(b) Fidelity, in its individual capacity, shall pay to the Deal Agent
from the Collection Account on each Payment Date, monthly in arrears, a fee (the
"Program Fee") agreed to between Fidelity and the Deal Agent in the Fee Letter.
(c) The Servicer shall be entitled to receive a fee (the "Servicing
Fee"), monthly in arrears in accordance with Section 2.7(a), 2.8(b) or 2.9(b),
as applicable, which fee shall be equal to the product of (i) the Servicing Fee
Rate agreed to between the Servicer and the Deal Agent in the Servicing Fee
Letter and (ii) ADCB for the immediately preceding Determination Date.
(d) The Backup Servicer shall be entitled to receive the Backup
Servicing Fee in accordance with Section 2.7(a), 2.8(b) or 2.9(b) as applicable.
(e) The Collateral Custodian shall be entitled to receive the Custodial
Fee in accordance with Section 2.7(a), 2.8(b) or 2.9(b), as applicable.
<PAGE>
(f) The Seller shall pay to the Deal Agent, on the Closing Date, the
Structuring Fee in immediately available funds.
Section 2.14 Increased Costs; Capital Adequacy; Illegality.
(a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by a
Purchaser or any Affiliate thereof (each of which, an "Affected Party") with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), (A) shall subject an
Affected Party to any Tax (except for Taxes on the overall net income of such
Affected Party), duty or other charge with respect to an Asset Interest, or any
right to make Purchases hereunder, or on any payment made hereunder or (B) shall
impose, modify or deem applicable any reserve requirement (including, without
limitation, any reserve requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve requirement, if any, included
in the determination of Yield), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Affected Party or (C) shall impose any other condition affecting an Asset
Interest or a Purchaser's rights hereunder, the result of which is to increase
the cost to any Affected Party or to reduce the amount of any sum received or
receivable by an Affected Party under this Agreement, then within ten days after
demand by such Affected Party (which demand shall be accompanied by a statement
setting forth the basis for such demand), the Seller shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such additional or increased cost incurred or such reduction
suffered.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or request or
(ii) compliance by any Affected Party with any law, guideline, rule, regulation,
directive or request from any central bank or other governmental authority or
agency (whether or not having the force of law), including, without limitation,
compliance by an Affected Party with any request or directive regarding capital
adequacy, has or would have the effect of reducing the rate of return on the
capital of any Affected Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which any such Affected
Party could have achieved but for such introduction, change or compliance
(taking into consideration the policies of such Affected Party with respect to
capital adequacy) by an amount deemed by such Affected Party to be material,
then from time to time, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis for
such demand), the Seller shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
reduction.
(c) If as a result of any event or circumstance similar to those
described in clauses (a) or (b) of this section, any Affected Party is required
to compensate a bank or other financial institution providing liquidity support,
credit enhancement or other similar support to such Affected Party in connection
with this Agreement or the funding or maintenance of Purchases hereunder, then
within ten days after demand by such Affected Party, the Seller shall pay to
such
<PAGE>
Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any amounts paid by it.
(d) In determining any amount provided for in this section, the
Affected Party may use any reasonable averaging and attribution methods. Any
Affected Party making a claim under this section shall submit to the Seller a
certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error.
(e) If a Purchaser shall notify the Deal Agent that a Eurodollar
Disruption Event as described in clause (a) of the definition of "Eurodollar
Disruption Event" has occurred, the Deal Agent shall in turn so notify the
Seller, whereupon all Capital in respect of which Yield accrues at the Adjusted
Eurodollar Rate shall immediately be converted into Capital in respect of which
Yield accrues at the Base Rate.
Section 2.15 Taxes.
(a) All payments made by an Obligor in respect of a Contract and all
payments made by the Seller or the Servicer under this Agreement will be made
free and clear of and without deduction or withholding for or on account of any
Taxes, unless such withholding or deduction is required by law. In such event,
the Obligor, Seller, or Servicer (as the case may be) shall pay to the
appropriate taxing authority any such Taxes required to be deducted or withheld
and the amount payable to each Purchaser or the Deal Agent (as the case may be)
will be increased (such increase, the "Additional Amount") such that every net
payment made under this Agreement after deduction or withholding for or on
account of any Taxes (including, without limitation, any Taxes on such increase)
is not less than the amount that would have been paid had no such deduction or
withholding been deducted or withheld. The foregoing obligation to pay
Additional Amounts, however, will not apply with respect to net income or
franchise taxes imposed on a Purchaser or the Deal Agent, respectively, with
respect to payments required to be made by the Seller or Servicer under this
Agreement, by a taxing jurisdiction in which such Purchaser or Deal Agent is
organized, conducts business or is paying taxes as of the Closing Date (as the
case may be). If a Purchaser or the Deal Agent pays any Taxes in respect of
which the Seller is obligated to pay Additional Amounts under this Section
2.14(a), the Seller shall promptly reimburse such Purchaser or Deal Agent in
full.
(b) The Seller will indemnify each Purchaser and the Deal Agent for the
full amount of Taxes in respect of which the Seller is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
jurisdiction on such Additional Amounts) paid by such Purchaser or the Deal
Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; provided, however, that
such Purchaser or the Deal Agent, as appropriate, making a demand for indemnity
payment shall provide the Seller, at its address set forth under its name on the
signature pages hereof, with a certificate from the relevant taxing authority or
from a responsible officer of such Purchaser or the Deal Agent stating or
otherwise evidencing that response such Purchaser or the Deal Agent has made
payment of such Taxes and will provide a copy of or extract from documentation,
if available, furnished by such taxing authority evidencing assertion or payment
of such Taxes.
<PAGE>
This indemnification shall be made within ten days from the date the Purchaser
or the Deal Agent (as the case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller of any
Taxes, the Seller will furnish to the Deal Agent, at its address set forth under
its name on the signature pages hereof, appropriate evidence of payment thereof.
(d) If a Purchaser is not created or organized under the laws of the
United States or a political subdivision thereof, such Purchaser shall, to the
extent that it may then do so under applicable laws and regulations, deliver to
the Seller with a copy to the Deal Agent (i) within 15 days after the date
hereof, or, if later, the date on which such Purchaser becomes a Purchaser
hereof two (or such other number as may from time to time be prescribed by
applicable laws or regulations) duly completed copies of IRS Form 4224 or Form
1001 (or any successor forms or other certificates or statements which may be
required from time to time by the relevant United States taxing authorities or
applicable laws or regulations), as appropriate, to permit the Seller to make
payments hereunder for the account of such Purchaser, as the case may be,
without deduction or withholding of United States federal income or similar
Taxes and (ii) upon the obsolescence of or after the occurrence of any event
requiring a change in, any form or certificate previously delivered pursuant to
this Section 2.14(d), copies (in such numbers as may from time to time be
prescribed by applicable laws or regulations) of such additional, amended or
successor forms, certificates or statements as may be required under applicable
laws or regulations to permit the Seller to make payments hereunder for the
account of such Purchaser, without deduction or withholding of United States
federal income or similar Taxes.
(e) For any period with respect to which a Purchaser or the Deal Agent
has failed to provide the Seller with the appropriate form, certificate or
statement described in clause (d) of this section (other than if such failure is
due to a change in law occurring after the date of this Agreement), the Deal
Agent or such Purchaser, as the case may be, shall not be entitled to
indemnification under clauses (a) or (b) of this section with respect to any
Taxes.
(f) Within 30 days of the written request of the Seller therefor, the
Deal Agent and the Purchasers, as appropriate, shall execute and deliver to the
Seller such certificates, forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Seller in applying for refunds of Taxes remitted hereunder; provided, however,
that the Deal Agent and the Purchasers shall not be required to deliver such
certificates forms or other documents if in their respective sole discretion it
is determined that the deliverance of such certificate, form or other document
would have a material adverse affect on the Deal Agent or any Purchaser and
provided further, however, that the Seller shall reimburse the Deal Agent or any
such Purchaser for any reasonable expenses incurred in the delivery of such
certificate, form or other document.
(g) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the Purchasers
in connection with this Agreement or the funding or maintenance of Purchases
hereunder, the Purchasers are required to compensate a bank or other financial
institution in respect of Taxes under circumstances similar
<PAGE>
to those described in this section then within ten days after demand by the
Purchasers, the Seller shall pay to the Purchasers such additional amount or
amounts as may be necessary to reimburse the Purchasers for any amounts paid by
them.
(h) Without prejudice to the survival of any other agreement of the
Seller hereunder, the agreements and obligations of the Seller contained in this
section shall survive the termination of this Agreement.
Section 2.16 Assignment of the Purchase Agreement.
The Seller hereby represents, warrants and confirms to the Deal Agent
that the Seller has assigned to the Deal Agent, for the ratable benefit of the
Secured Parties hereunder, all of the Seller's right and title to and interest
in the Purchase Agreement. The Seller confirms that following a Payout Event the
Deal Agent shall have the sole right to enforce the Seller's rights and remedies
under the Purchase Agreement for the benefit of the Secured Parties, but without
any obligation on the part of the Deal Agent, the Purchasers or any of their
respective Affiliates, to perform any of the obligations of the Seller under the
Purchase Agreement. The Seller further confirms and agrees that such assignment
to the Deal Agent shall terminate upon the Collection Date; provided, however,
that the rights of the Deal Agent and the Secured Parties pursuant to such
assignment with respect to rights and remedies in connection with any
indemnities and any breach of any representation, warranty or covenants made by
the Originator pursuant to the Purchase Agreement, which rights and remedies
survive the termination of the Purchase Agreement, shall be continuing and shall
survive any termination of such assignment.
Section 2.17 Substitution of Contracts.
On any day prior to the occurrence of a Restricting Event, the Seller
may, and upon the request of the Deal Agent shall, subject to the conditions set
forth in this Section 2.16, replace any Contract subject to a Warranty Event or
in respect of which the Obligor thereunder has requested the rewriting and/or
restructuring of such Contract with one or more other Contracts (each, a
"Substitute Contract"), provided that no such replacement shall occur unless
each of the following conditions is satisfied as of the date of such replacement
and substitution:
(a) the Seller has previously recommended to the Deal Agent (with a
copy to the Collateral Custodian) in writing that the Contract to be replaced
should be replaced (each a "Replaced Contract");
(b) each Substitute Contract is an Eligible Contract on the date of
substitution;
(c) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of the (i) Purchase Limit and
(ii) the Capital Limit;
(d) the aggregate Discounted Contract Balance (at the applicable Sale
Discount Rate) of such Substitute Contracts shall be equal to or greater than
the aggregate Discounted Contract
<PAGE>
Balances (at the applicable Sale Discount Rate as of the date of the inclusion
of such Contract in the Asset Pool) of Contracts being replaced;
(e) such Substitute Contracts, at the time of substitution by the
Seller, shall have approximately the same weighted average life as the replaced
Contracts;
(f) all representations and warranties of the Seller contained in
Sections 4.1 and 4.2 shall be true and correct as of the date of substitution of
any such Substitute Contract;
(g) the substitution of any Substitute Contract does not cause a Payout
Event to occur; and
(h) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date.
In addition, the Seller shall deliver to the Collateral Custodian the
related Contract File as required by Section 3.3. In connection with any such
substitution, the Deal Agent as agent for the Secured Parties shall,
automatically and without further action, be deemed to transfer to the Seller,
free and clear of any Lien created pursuant to this Agreement, all of the right,
title and interest of the Deal Agent as agent for the Secured Parties in, to and
under such Replaced Contract, and the Deal Agent as agent for the Secured
Parties shall be deemed to represent and warrant that it has the corporate
authority and has taken all necessary corporate action to accomplish such
transfer, but without any other representation and warranty, express or implied.
Any right of the Deal Agent as agent for the Secured Parties to substitute any
Contract in the Asset Pool pursuant to this Section 2.16 shall be in addition
to, and without limitation of, any other rights and remedies that the Deal Agent
as agent for the Secured Parties or any Secured Party may have to require the
Seller or the Servicer, as applicable, to substitute for, or accept retransfer
of, any Contract pursuant to the terms of this Agreement.
ARTICLE III
CONDITIONS OF PURCHASES
Section 3.1 Conditions Precedent to Initial Purchase.
The initial Purchase hereunder is subject to the condition precedent
that the Deal Agent shall have received on or before the date of such purchase
the items listed in Schedule I, each (unless otherwise indicated) dated such
date, in form and substance satisfactory to the Deal Agent and the Purchasers.
<PAGE>
Section 3.2 Conditions Precedent to All Purchases and Remittances
of Collections.
Each Purchase (including the Initial Purchase) from the Seller by a
Purchaser, the right of the Servicer to remit Collections to the Seller pursuant
to Section 2.7(b) and each Incremental Purchase (each, a "Transaction") shall be
subject to the further conditions precedent that (a) with respect to any
Purchase (including the Initial Purchase) or Incremental Purchase, the Servicer
shall have delivered to the Deal Agent, on or prior to the date of such Purchase
or Incremental Purchase in form and substance satisfactory to the Deal Agent,
(i) a Purchase Notice (Exhibit A), (ii) a Purchase Certificate (Exhibit G), and
(iii) a Certificate of Assignment (Exhibit A to the Purchase and Sale Agreement)
including Schedule I, thereto dated within 10 days prior to the date of such
Purchase (other than the Initial Purchase, in which case such items shall be
dated within 5 days prior to the date of such Initial Purchase) or Incremental
Purchase and containing such additional information as may be reasonably
requested by the Deal Agent; (b) on the date of such Transaction the following
statements shall be true and the Seller shall be deemed to have certified that:
(i) The representations and warranties contained in Sections
4.1 and 4.2 are true and correct on and as of such day as though made
on and as of such date,
(ii) No event has occurred and is continuing, or would result
from such Transaction which constitutes a Payout Event,
(iii) On and as of such day, after giving effect to such
Transaction, the outstanding Capital does not exceed the lesser of (x)
the Purchase Limit, or (y) the Capital Limit,
(iv) On and as of such day, the Seller and the Servicer each
has performed all of the agreements contained in this Agreement to be
performed by such person at or prior to such day, and
(v) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
such Purchase, remittance of Collections or Incremental Purchase by the
Purchaser in accordance with the provisions hereof; and
(c) on the date of such Transaction, the Deal Agent shall have received
such other approvals, opinions or documents as the Deal Agent may reasonably
require.
Section 3.3 Delivery of Contract Files.
As a condition subsequent to each Purchase or substitution of
Substitute Contracts made hereunder, the Seller shall deliver to the Collateral
Custodian, within 10 calendar days after such Purchase or substitution, the
related Contract Files.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Seller.
The Seller represents and warrants as follows:
(a) Organization and Good Standing. The Seller is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware, and has full corporate power, authority and legal right to own or
lease its properties and conduct its business as such properties are presently
owned or leased and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Purchase
Agreement.
(b) Due Qualification. The Seller is duly qualified to do business and
is in good standing as a corporation, and has obtained or will obtain all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have a material adverse
effect on its ability to perform its obligations hereunder.
(c) Due Authorization. The execution and delivery of this Agreement and
the Purchase Agreement and the consummation of the transactions provided for
herein and therein have been duly authorized by the Seller by all necessary
corporate action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement and the
Purchase Agreement, the performance by the Seller of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof will not conflict with or result in any breach of any of the material
terms and provisions of, and will not constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a party or
by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement and the
Purchase Agreement, the performance of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof will not conflict
with or violate, in any material respect, any Requirements of Law applicable to
the Seller.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Seller, threatened against the Seller, before
any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
the Purchase Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or the Purchase Agreement or (iii)
seeking any determination or ruling that could reasonably be expected to be
adversely determined, and if adversely determined, would materially and
adversely affect the performance by the Seller of its obligations under this
Agreement or the Purchase Agreement.
<PAGE>
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
in connection with the execution and delivery by the Seller of this Agreement
and the Purchase Agreement, the performance by the Seller of the transactions
contemplated by this Agreement and the Purchase Agreement, and the fulfillment
of the terms hereof and thereof by the Seller, have been obtained unless the
failure to obtain such shall not materially and adversely affect the Seller's
performance of its obligations thereunder.
(h) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by Seller.
(i) Solvency. The transactions under this Agreement and/or the Purchase
Agreement do not and will not render the Seller not Solvent.
(j) Selection Procedures; Credit and Collection Policy. No procedures
believed by the Seller to be materially adverse to the interests of VFCC or the
Purchasers were utilized by the Seller in identifying and/or selecting the
Contracts in the Asset Pool. In addition, each Contract shall have been
underwritten in accordance with and satisfy the standards of any Credit and
Collection Policy which has been established by the Seller or the Originator and
is then in effect. Such Credit and Collection Policy or procedure may be amended
from time to time in the Seller's or the Originator's normal course of business
provided that the Seller shall not materially change such credit and collection
policy or procedure without the prior written consent of the Deal Agent.
(k) Taxes. The Seller has filed or caused to be filed all Tax returns
which, to its knowledge, are required to be filed. The Seller has paid or made
adequate provisions for the payment of all Taxes and all assessments made
against it or any of its property (other than any amount of Tax the validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which reserves in accordance with generally accepted accounting
principles have been provided on the books of the Seller), and no Tax lien has
been filed and, to the Seller's knowledge, no claim is being asserted, with
respect to any such Tax, fee or other charge.
(l) Agreements Enforceable. This Agreement and the Purchase Agreement
constitute the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with their respective terms, except as such
enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(m) Exchange Act Compliance. No proceeds of any Purchase or Incremental
Purchase will be used by the Seller to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.
<PAGE>
(n) No Liens. Each Asset, together with the Contract related thereto,
shall, at all times, be owned by the Seller free and clear of any Adverse Claim
except as provided herein, and upon each Purchase, remittance of Collections or
Incremental Purchase, the relevant Secured Party shall acquire (subject to
recordation where necessary) a valid and perfected first priority undivided
ownership interest in each Asset then existing or thereafter arising and
Collections with respect thereto, free and clear of any Adverse Claim except as
provided hereunder. No effective financing statement or other instrument similar
in effect covering any Asset or Collections with respect thereto shall at any
time be on file in any recording office except such as may be filed in favor of
the Deal Agent relating to this Agreement.
(o) Reports Accurate. No Monthly Report (if prepared by the Seller, or
to the extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Deal Agent or a Purchaser in
connection with this Agreement is or will be inaccurate in any material respect
as of the date it is or shall be dated or (except as otherwise disclosed to the
Deal Agent or such Purchaser, as the case may be, at such time) as of the date
so furnished, and no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(p) Location of Offices. The principal place of business and chief
executive office of the Seller and the office where the Seller keeps all the
Records are located at the address of the Seller referred to in Section 11.2
hereof (or at such other locations as to which the notice and other requirements
specified in Section 5.2(m) shall have been satisfied).
(q) Lock-Boxes. The names and addresses of all the Lock-Box Banks,
together, with the account numbers of the Lock-Box Accounts of the Seller at
such Lock-Box Banks and the names, addresses and account numbers of all accounts
to which Collections of the Assets outstanding before the initial Purchase
hereunder have been sent, are specified in Schedule II (which shall be deemed to
be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof).
(r) Tradenames. Except as described in Schedule III, the Seller has no
trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(s) Purchase Agreement. The Purchase Agreement is the only agreement
pursuant to which the Seller purchases Assets.
(t) Value Given. The Seller shall have given reasonably equivalent
value to the Originator in consideration for the transfer to the Seller of the
Assets under the Purchase Agreement, no such transfer shall have been made for
or on account of an antecedent debt owed by the Originator to the Seller, and no
such transfer is or may be voidable or subject to avoidance
<PAGE>
under any section of the Bankruptcy Code; no event or circumstance has occurred
that would constitute a Payout Event pursuant to Section 7. 1.
(u) Special Purpose Entity. The Certificate of Incorporation of the
Seller includes substantially the provisions set forth on Exhibit C hereto, and
the Originator has confirmed in writing to the Seller that, so long as the
Seller is not "insolvent" within the meaning of the Bankruptcy Code, the
Originator will not cause the Seller to file a voluntary petition under the
Bankruptcy Code or any other bankruptcy or insolvency laws. Each of the Seller
and the Originator is aware that in light of the circumstances described in the
preceding sentence and other relevant facts, the filing of a voluntary petition
under the Bankruptcy Code for the purpose of making the assets of the Seller
available to satisfy claims of the creditors of the Originator would not result
in making such assets available to satisfy such creditors under the Bankruptcy
Code.
(v) Accounting. The Seller accounts for the transfers to it from the
Originator of interests in Assets and Collections under the Purchase Agreement
as sales of such Assets and transfers of Asset Interests as sales of such Asset
Interests in its books, records and financial statements, in each case
consistent with GAAP and with the requirements set forth herein.
(w) Separate Entity. The Seller is operated as an entity with assets
and liabilities distinct from those of the Originator and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the Deal Agent
and the Secured Parties are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal entity from
the Originator and from each such other Affiliate of the Originator.
(x) Security Interest. The Seller has granted a security interest (as
defined in the UCC) to the Deal Agent, as agent for the Secured Parties, in the
Assets and Collections, which is enforceable in accordance with applicable law
upon execution and delivery of this Agreement. Upon the filing of UCC-1
financing statements naming the Deal Agent as secured party and the Seller as
debtor, the Deal Agent, as agent for the Secured Parties, shall have a first
priority perfected security interest in the Assets and Collections (except for
any Permitted Liens). All filings (including, without limitation, such UCC
filings) as are necessary in any Jurisdiction to perfect the interest of the
Deal Agent as agent for the Secured Parties, in the Assets and Collections have
been (or prior to the applicable Purchase will be) made.
(y) Investments. The Seller does not own or hold directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person.
(z) Business. Since its incorporation, the Seller has conducted no
business other than the purchase and receipt of Contracts and related assets
from the Originator under the Purchase Agreement, the sale of Contracts under
this Agreement and such other activities as are incidental to the foregoing.
(aa) Investment Company Act. The Seller is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
<PAGE>
(bb) Accuracy of Representations and Warranties. Each representation or
warranty by the Seller contained herein or in any certificate or other document
furnished by the Seller pursuant hereto or in connection herewith is true and
correct in all material respects.
The representations and warranties set forth in this section shall
survive the transfer of the Assets to the Deal Agent as agent for the Secured
Parties. Upon discovery by the Seller, the Servicer, any Secured Party, the
Liquidity Agent or the Deal Agent of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
Section 4.2 Representations and Warranties of Seller Relating to the
Agreement and the Contracts.
The Seller hereby represents and warrants to the Deal Agent, each
Secured Party, the Liquidity Agent and each Investor that, as of the Closing
Date and as of each Addition Date:
(a) Binding, Obligation, Valid Transfer and Security Interest.
(i) This Agreement and the Purchase Agreement each constitute
legal, valid and binding obligations of the Seller, enforceable against
the Seller in accordance with its terms, except as such enforceability
may be limited by Insolvency Laws and except as such enforceability may
be limited by general principles of equity (whether considered in a
suit at law or in equity).
(ii) This Agreement constitutes either (A) a valid transfer to
the Deal Agent as agent for the Secured Parties of all right, title and
interest of the Seller in, to and under all Assets in the Asset Pool to
the extent of the Asset Interest, and such transfer will be free and
clear of any Lien of any Person claiming through or under the Seller or
its Affiliates, except for Permitted Liens, or (B) a grant of a
security interest in all Assets in the Asset Pool to the Deal Agent as
agent for the Secured Parties. Upon the filing of the financing
statements described in Section 6.8(c) and, in the case of Additional
Contracts on the applicable Addition Date, the Deal Agent as agent for
the Secured Parties shall have a first priority perfected security
interest in all Assets in the Asset Pool, subject only to Permitted
Liens. Neither the Seller nor any Person claiming through or under
Seller shall have any claim to or interest in the Collection Account
and, if this Agreement constitutes the grant of a security interest in
such property, except for the interest of Seller in such property as a
debtor for purposes of the UCC.
(b) Eligibility of Contracts. As of the Closing Date, (i) Schedule I to
this Agreement and the information contained in the Purchase Certificate
delivered pursuant to Section 2.2(b) is an accurate and complete listing in all
material respects of all the Existing Contracts in the Asset Pool as of the
Closing Date and the information contained therein with respect to the identity
of such Contracts and the amounts owing thereunder is true and correct in all
material respects as of the related Cut Off Date, (ii) each such Contract is an
Eligible Contract, (iii) each such Contract
<PAGE>
and the related Equipment is free and clear of any Lien of any Person (other
than Permitted Liens) and in compliance with all Requirements of Law applicable
to the Seller and (iv) with respect to each such Contract, all consents,
licenses, approvals or authorizations of or registrations or declarations with
any Governmental Authority required to be obtained, effected or given by the
Seller in connection with the transfer of an interest in such Contract and the
related Equipment to the Deal Agent as agent for the Secured Parties have been
duly obtained, effected or given and are in full force and effect. On each
Addition Date on which Additional Contracts are added by the Seller to the Asset
Pool, the Seller shall be deemed to represent and warrant that (i) such
Additional Contract referenced on the related Purchase Certificate delivered
pursuant to Section 2.2(b) hereof is an Eligible Contract, (ii) each such
Additional Contract and the related Equipment is free and clear of any Lien of
any Person (other than Permitted Liens) and in compliance with all Requirements
of Law applicable to Seller and/or the Originator, (iii) with respect to each
such Additional Contract, all consents, licenses, approvals, authorizations,
registrations or declarations with any Governmental Authority required to be
obtained, effected or given by the Seller in connection with the addition of
such Contract and the related Equipment to the Asset Pool have been duly
obtained, effected or given and are in full force and effect and (iv) the
representations and warranties set forth in Section 4.2(a) are true and correct
with respect to each Contract transferred on such day as if made on such day.
(c) Notice of Breach. The representations and warranties set forth in
this Section 4.2 shall survive the transfer of an interest in the respective
Contracts and related Equipment, or interests therein, to the Deal Agent as
agent for the Secured Parties. Upon discovery by the Seller, the Servicer, any
Secured Party, the Deal Agent, the Liquidity Agent of any Investor of a breach
of any of the foregoing representations and warranties, the party discovering
such breach shall give prompt written notice to the others.
Section 4. 3 Representations and Warranties of the Seller Relating
to the Purchase Limit and Capital Limit.
The Seller is hereby deemed to represent and warrant that on each day
prior to the Termination Date, the amount of Capital outstanding on such day
shall not exceed the lesser of (x) the Purchase Limit or (y) the Capital Limit.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
Section 5.1 General Covenants.
Until the date on which all Aggregate Unpaids have been indefeasibly
paid in full, the Seller hereby covenants that:
(a) Compliance with Laws, Preservation of Corporate Existence. The
Seller will comply in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
<PAGE>
Section 5.2 Covenants of Seller.
The Seller hereby covenants that:
(a) Contracts Not to be Evidenced by Instruments. The Seller will take
no action to cause any Contract which is not, as of the Closing Date or the
related Addition Date, as the case may be, evidenced by an Instrument, to be so
evidenced except in connection with the enforcement or collection of such
Contract.
(b) Security Interests. The Seller will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any Lien on any Contract in the Asset Pool or related Equipment, whether now
existing or hereafter transferred hereunder, or any interest therein, and the
Seller will not sell, pledge, assign or suffer to exist any Lien on its
interest, if any, hereunder. The Seller will promptly notify the Deal Agent of
the existence of any Lien on any Contract in the Asset Pool or related Equipment
and the Seller shall defend the right, title and interest of the Deal Agent as
agent for the Secured Parties in, to and under the Contracts in the Asset Pool
and the related Equipment, against all claims of third parties, provided,
however, that nothing in this section 5.2(b) shall prevent or be deemed to
prohibit the Seller from suffering to exist Permitted Liens upon any of the
Contracts in the Asset Pool or any related Equipment.
(c) Delivery of Collections. The Seller agrees to pay to the Servicer
promptly (but in no event later than two Business Days after receipt) all
Collections received by Seller in respect of the Contracts in the Asset Pool.
(d) Compliance with the Law. Seller hereby agrees to comply in all
material respects with all Requirements of Law applicable to Seller, the
Contracts and the Equipment.
(e) Activities of Seller. The Seller shall not engage in any business
or activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, which is not
incidental to the transactions contemplated and authorized by this Agreement or
the Purchase Agreements.
(f) Indebtedness. The Seller shall not create, incur, assume or suffer
to exist any Indebtedness or other liability whatsoever, except (i) obligations
incurred under this Agreement or under any Hedging Agreement required by Section
5.4(a), or (ii) liabilities incident to the maintenance of its corporate
existence in good standing.
(g) Guarantees. The Seller shall not become or remain liable, directly
or indirectly, in connection with any Indebtedness or other liability of any
other Person, whether by guarantee, endorsement (other than endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business), agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise.
<PAGE>
(h) Investments. The Seller shall not make or suffer to exist any loans
or advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except for purchases of Contracts pursuant to the
Purchase Agreements, or for investments in Permitted Investments in accordance
with the terms of this Agreement.
(i) Merger; Sales. The Seller shall not enter into any transaction of
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or convey,
sell, lease or otherwise dispose of all or substantially all of its property or
business, except as provided for in this Agreement.
(j) Distributions. The Seller shall not declare or pay, directly or
indirectly, any dividend or make any other distribution (whether in cash or
other property) with respect to the profits, assets or capital of the Seller or
any Person's interest therein, or purchase, redeem or otherwise acquire for
value any of its capital stock now or hereafter outstanding, except that so long
as no Payout Event has occurred and is continuing and no Payout Event would
occur as a result thereof or after giving effect thereto and the Seller would
continue to be Solvent as a result thereof and after giving effect thereto, the
Seller may declare and pay cash or stock dividends on its capital stock.
(k) Agreements. The Seller shall not become a party to, or permit any
of its properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except the Transaction Documents, or
amend or modify the provisions of its Certificate of Incorporation without the
consent of the Deal Agent or issue any power of attorney except to the Deal
Agent or the Servicer.
(l) Separate Corporate Existence. The Seller shall:
(i) Maintain its own deposit account or accounts, separate
from those of any Affiliate, with commercial banking institutions. The
funds of the Seller will not be diverted to any other Person or for
other than corporate uses of the Seller.
(ii) Ensure that, to the extent that it shares the same
officers or other employees as any of its stockholders or Affiliates,
the salaries of and the expenses related to providing benefits to such
officers and other employees shall be fairly allocated among such
entities, and each such entity shall bear its fair share of the salary
and benefit costs associated with all such common officers and
employees.
(iii) Ensure that, to the extent that it jointly contracts
with any of its stockholders or Affiliates to do business with vendors
or service providers or to share overhead expenses, the costs incurred
in so doing shall be allocated fairly among such entities, and each
such entity shall bear its fair share of such costs. To the extent that
the Seller contracts or does business with vendors or service providers
when the goods and services provided are partially for the benefit of
any other Person, the costs incurred in so
<PAGE>
doing shall be fairly allocated to or among such entities for whose
benefit the goods and services are provided, and each such entity shall
bear its fair share of such costs. All material transactions between
Seller and any of its Affiliates shall be only on an arm's length
basis.
(iv) Maintain a principal executive and administrative office
through which its business is conducted separate from those of its
Affiliates. To the extent that Seller and any of its stockholders or
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such
entity shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with its
Certificate of Incorporation and observe all necessary, appropriate and
customary corporate formalities, including, but not limited to, holding
all regular and special stockholders, and directors' meetings
appropriate to authorize all corporate action, keeping separate and
accurate minutes of its meetings, passing all resolutions or consents
necessary to authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including, but not
limited to, payroll and intercompany transaction accounts.
(vi) Take or refrain from taking, as applicable, each of the
activities specified in the "non-substantive consolidation" opinion of
Morgan, Lewis & Bockius LLP delivered on the Closing Date, upon which
the conclusions expressed therein are based.
(m) Location of Seller, Records; Instruments. The Seller (x) shall not
move outside the Commonwealth of Pennsylvania, the location of its chief
executive office, without 30 days' prior written notice to the Deal Agent and
(y) shall not move, or consent to the Collateral Custodian or Servicer moving,
the Contract Files from the possession of the Collateral Custodian thereof on
the Closing Date, without 30 days' prior written notice to the Deal Agent and
(z) will promptly take all actions required of each relevant jurisdiction in
order to continue the first priority perfected security interest of the Deal
Agent as agent for the Secured Parties in all Assets in the Asset Pool. The
Seller will give the Deal Agent prompt notice of a change within the
Commonwealth of Pennsylvania of the location of its chief executive office.
(n) Accounting of Purchases. Other than for federal, state and local
income tax purposes, the Seller will not account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby in any
manner other than as the sale, or absolute assignment, of Assets by the Seller
to a Purchaser. The Seller will not account for or treat (whether in financial
statements or otherwise) the transaction contemplated by the Purchase Agreement
in any manner other than as the sale, or absolute assignment, of the Originator
Assets by the Originator to the Seller, as the case may be.
(o) ERISA Matters. The Seller will not (a) engage or permit any ERISA
Affiliate to engage in any prohibited transaction for which an exemption is not
available or has not previously been obtained from the United States Department
of Labor; (b) permit to exist any accumulated funding deficiency, as defined in
Section 302(a) of ERISA and Section 412(a) of
<PAGE>
the Code, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (c) fail to make any payments to a Multiemployer Plan that
the Seller or any ERISA Affiliate may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (d) terminate
any Benefit Plan so as to result in any liability; or (e) permit to exist any
occurrence of any reportable event described in Title IV of ERISA.
(p) Originator Assets. With respect to each Asset acquired by the
Seller, the Seller will (i) acquire such Asset pursuant to and in accordance
with the terms of the Purchase Agreement, (ii) take all action necessary to
perfect, protect and more fully evidence the Seller's ownership of such Asset,
including, without limitation, (A) filing and maintaining, effective financing
statements (Form UCC-1) against the Originator in all necessary or appropriate
filing offices, and filing continuation statements, amendments or assignments
with respect thereto in such filing offices and (B) executing or causing to be
executed such other instruments or notices as may be necessary or appropriate
and (iii) take all additional action that the Deal Agent may reasonably request
to perfect, protect and more fully evidence the respective interests of the
parties to this Agreement in the Assets and interest therein represented by the
Asset Interest.
(q) Transactions with Affiliates. The Seller will not enter into, or be
a party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by the Transaction Documents, and (ii)
other transactions (including, without limitation, the lease of office space or
computer equipment or software by the Seller to or from an Affiliate) (A) in the
ordinary course of business, (B) pursuant to the reasonable requirements of the
Seller's business, (C) upon fair and reasonable terms that are no less favorable
to the Seller than could be obtained in a comparable arm's-length transaction
with a Person not an Affiliate of the Seller, and (D) not inconsistent with the
factual assumptions set forth in the opinion letters issued by Morgan, Lewis &
Bockius LLP and delivered to the Deal Agent as a condition to the initial
Purchase as such assumptions may be modified in any subsequent opinion letters
delivered to the Deal Agent hereunder pursuant to Section 3.2(c) or otherwise.
It is understood that any compensation arrangement for officers shall be
permitted under clause (ii)(A) through (C) above if such arrangement has been
expressly approved by the board of directors of the Seller.
(r) Change in the Purchase Agreement. The Seller will not amend,
modify, waive or terminate any terms or conditions of the Purchase Agreement,
without the consent of Deal Agent.
(s) Amendment to Certificate of Incorporation. Notwithstanding anything
to the contrary contained herein, the Seller will not amend, modify or otherwise
make any change to its Certificate of Incorporation which would delete or
otherwise nullify or circumvent the provisions set forth on Exhibit C hereto.
(t) Credit and Collection Policy. The Seller shall not cause or permit
any changes to be made to the Credit and Collection Policy in any manner that
would materially and adversely affect the collectibility of the Contracts sold
hereunder without the prior written consent of the Deal Agent, which consent
shall not be unreasonably withheld.
<PAGE>
Section 5.3 Release of Lien on Equipment.
At the same time as (i) any Contract in the Asset Pool expires by its
terms and all amounts in respect thereof have been paid by the related Obligor
and deposited in the Collection Account or (ii) any Contract becomes a Prepaid
Contract and all amounts in respect thereof have been paid by the related
Obligor and deposited in the Collection Account, the Deal Agent as agent for the
Purchasers will, to the extent requested by the Servicer, release its interest
in such Contract; provided, however, that such release will not constitute a
release of their respective interests in the Equipment or the proceeds of such
Contract or Equipment. In connection with any sale of such Equipment on or after
the occurrence of (i) or (ii) above, the Deal Agent as agent for the Purchasers
will after the deposit by the Servicer of the proceeds of such sale into the
Collection Account, at the sole expense of the Servicer, execute and deliver to
the Servicer any assignments, bills of sale, termination statements and any
other releases and instruments as the Servicer may reasonably request in order
to effect the release and transfer of such Equipment; provided that the Deal
Agent as agent for the Purchasers will make no representation or warranty,
express or implied, with respect to any such Equipment in connection with such
sale or transfer and assignment. Nothing in this section shall diminish the
Servicer's obligations pursuant to Section 6.1(c) with respect to the proceeds
of any such sale.
Section 5.4 Hedging of Contracts.
(a) On or prior to each Purchase Date of any Purchase, the Seller shall
enter into one or more Hedge Transactions for that Purchase, provided that each
such Hedge Transaction shall:
(i) be entered into with a Hedge Counterparty and governed by
a Hedging Agreement;
(ii) have a schedule of monthly payment periods the first of
which commences on the Purchase Date of that Purchase and the last of
which ends on the last Scheduled Payment due to occur under the
Contracts to which that Purchase relates;
(iii) have an amortizing notional amount such that the Hedge
Notional Amount in effect during any monthly payment period shall be
equal to one hundred percent (100%) of the present value of all
remaining Scheduled Payments becoming due after the first day of that
monthly payment period under all Contracts to which that Purchase
relates, determined as of the Purchase Date of that Purchase by
discounting on a monthly basis each such Scheduled Payment from the end
of the monthly payment period in which that Scheduled Payment is due to
occur to the Purchase Date at the Sale Discount Rate; and
(iv) provide for two series of monthly payments to be netted
against each other, one such series being payments to be made by the
Seller to a Hedge Counterparty (solely on a net basis) by reference to
a fixed rate to be used in computing the Sale Discount Rate for that
Purchase, and the other such series being payments to be made by the
Hedge Counterparty to the Deal Agent (solely on a net basis) by
reference to the
<PAGE>
money market yield of the rate set forth in Federal Reserve Statistical
Release H.15 (519) under the caption "Commercial Paper-Nonfinancial"
for a 30-day maturity as in effect on the first day of each monthly
payment period, the net amount of which shall be paid into the
Collection Account (if payable by the Hedge Counterparty) or from the
Collection Account to the extent funds are available under Section
2.7(a), 2.8(b) and 2.9(b) of this Agreement (if payable by the Seller);
(b) As additional security hereunder, Seller hereby assigns to the Deal
Agent, as agent for the Secured Parties, all right, title and interest of Seller
in each Hedging Agreement, each Hedge Transaction, and all present and future
amounts payable by a Hedge Counterparty to Seller under or in connection with
the respective Hedging Agreement and Hedge Transaction(s) with that Hedge
Counterparty ("Hedge Collateral"), and grants a security interest to the Deal
Agent, as agent for the Secured Parties, in the Hedge Collateral. Seller
acknowledges that, as a result of that assignment, Seller may not, without the
prior written consent of the Deal Agent, exercise any rights under any Hedging
Agreement or Hedge Transaction, except for Seller's right under any Hedging
Agreement to enter into Hedge Transactions in order to meet the Seller's
obligations under Section 4.5(a) hereof. Nothing herein shall have the effect of
releasing the Seller from any of its obligations under any Hedging Agreement or
any Hedge Transaction, nor be construed as requiring the consent of the Deal
Agent or any Secured Party for the performance by Seller of any such
obligations.
Section 5.5 Retransfer of Ineligible Contracts.
In the event of a breach of any representation or warranty set forth in
Section 4.2 with respect to a Contract in the Asset Pool (each such Contract, an
"Ineligible Contract"), no later than the earlier of (i) knowledge by the Seller
of such Contract becoming an Ineligible Contract and (ii) receipt by the Seller
from the Deal Agent or Servicer of written notice thereof, the Seller shall
either (a) accept the retransfer of each such Ineligible Contract and any
related Equipment selected by the Servicer as to which such breach related, and
the Deal Agent as agent for the Secured Parties shall convey to the Seller,
without recourse, representation or warranty, all of its right, title and
interest in such Ineligible Contract; or (b) subject to the satisfaction of the
conditions in Section 2.16, substitute for such Ineligible Contract a Substitute
Contract. In any of the foregoing instances, the Seller shall accept the
retransfer of each such Ineligible Contract, and the ADCB shall be reduced by
the Discounted Contract Balance (calculated using the applicable Blended
Discount Rate as of the most recent Determination Date) of each such Ineligible
Contract and, if applicable, increased by the Discounted Contract Balance of
each such Substitute Contract. On and after the date of retransfer, the
Ineligible Contract so retransferred shall not be included in the Asset Pool
and, as applicable, the Substitute Contract shall be included in the Asset Pool.
In consideration of such retransfer, without substitution, the Seller shall, on
the date of retransfer of such Ineligible Contract, make a deposit to the
Collection Account (for allocation pursuant to Section 2.7 , 2.8 or 2.9, as
applicable) in immediately available funds in an amount equal to the Discounted
Contract Balance of such Ineligible Contract (calculated using the applicable
Blended Discount Rate as of the most recent Determination Date). Upon each
retransfer to the Seller of such Ineligible Contract, the Deal Agent, as agent
for the Secured Parties, shall automatically and without further action be
deemed
<PAGE>
to transfer, assign and set-over to the Seller, without recourse, representation
or warranty, all the right, title and interest of the Deal Agent, as agent for
the Secured Parties in, to and under such Ineligible Contract and all monies due
or to become due with respect thereto, the related Equipment and all proceeds of
such Ineligible Contract and Recoveries and Insurance Proceeds relating thereto
and all rights to security for any such Ineligible Contract, and all proceeds
and products of the foregoing. The Deal Agent, as agent for the Secured Parties,
shall, at the sole expense of the Servicer execute such documents and
instruments of transfer as may be prepared by the Servicer on behalf of the
Seller and take other such actions as shall reasonably be requested by the
Seller to effect the transfer of such Ineligible Contract pursuant to this
subsection.
Section 5.6 Retransfer of Assets.
In the event of a breach of any representation or warranty set forth in
Section 4.2 hereof which breach could reasonably be expected to have a material
adverse affect on the rights of the Secured Parties or the Deal Agent, as agent
of the Secured Parties, or on the ability of the Seller to perform its
obligations hereunder, by notice then given in writing to the Seller, the Deal
Agent may direct the Seller to accept the retransfer of all of the Assets, in
which case the Seller shall be obligated to accept retransfer of such Assets on
a Payment Date specified by the Seller (such date, the "Retransfer Date") and to
terminate all Hedge Transactions prior to the Retransfer Date. The Seller shall
deposit on the Retransfer Date an amount equal to the deposit amount provided
below for such Assets in the Collection Account for distribution to the Secured
Parties in accordance with Section 2.7(a), 2.8(b) or 2.9(b), as applicable. The
deposit amount (the "Retransfer Amount") for such retransfer will be equal to
the (A) sum of (i) the Aggregate Unpaids, (ii) all Yield accrued and to accrue,
as reasonably determined by the Deal Agent, and (iii) all Hedge Breakage Costs
and any other amounts payable by Seller under or with respect to any Hedging
Agreement minus (B) the amount, if any, available in the Collection Account on
such Payment Date. On the Retransfer Date, provided that full Retransfer Amount
has been deposited into the Collection Account, the Assets shall be transferred
to the Seller; and the Deal Agent as agent for the Secured Parties shall, at the
sole expense of the Servicer, execute and deliver such instruments of transfer,
in each case without recourse, representation or warranty, as shall be prepared
and reasonably requested by the Servicer on behalf of the Seller to vest in the
Seller, or its designee or assignee, all right, title and interest of the Deal
Agent as agent for the Secured Parties in, to and under the Assets. If the Deal
Agent gives a notice directing the Seller to accept such a retransfer as
provided above, the obligation of Seller to accept a retransfer pursuant to this
Section 5.6 shall constitute the sole remedy respecting a breach of the
representations and warranties contained in Section 4.2 available to the Secured
Parties and the Deal Agent on behalf of the Secured Parties.
Section 5.7 Year 2000 Compatibility.
The Seller shall take all action necessary to assure that, prior to
January 1, 2000, the Seller's computer system is able to operate and effectively
process data including dates on and after January 1, 2000. At the request of the
Deal Agent or the Backup Servicer, the Seller shall
<PAGE>
provide assurance acceptable to the Deal Agent or the Backup Servicer of the
Seller's Year 2000 Compatibility.
ARTICLE VI
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 6.1 Appointment and Acceptance; Duties.
(a) Appointment of Initial Servicer and Collateral Custodian. Fidelity
Leasing, Inc. is hereby appointed as Servicer pursuant to this Agreement.
Fidelity Leasing, Inc. accepts the appointment and agrees to act as the Servicer
pursuant to this Agreement. Harris Trust and Savings Bank is hereby appointed as
Collateral Custodian pursuant to this Agreement. Harris Trust and Savings Bank
accepts the appointment and agrees to act as the Collateral Custodian pursuant
to this Agreement.
(b) General Duties. The Servicer will manage, service, administer,
collect and enforce the Assets in the Asset Pool on behalf of the Purchasers
(the "Servicing Duties") and will have full power and authority to do any and
all things in connection with the performance of the Servicing Duties which it
deems necessary or desirable provided, however, nothing it does may contravene
the provisions of this Agreement. The Servicer will perform the Servicing Duties
with reasonable care, using that degree of skill and attention that a prudent
person engaging in such activities would exercise, but in any event shall not
act with less care than the Servicer exercises with respect to all comparable
contracts that it services for itself or others. The Servicing Duties will
include, without limitation, collection and posting of all payments, responding
to inquiries of Obligors regarding the Assets in the Asset Pool, investigating
delinquencies and making Servicer Advances, remitting payments to the Deal Agent
in a timely manner, furnishing monthly, quarterly and annual statements with
respect to collections and payments in accordance with the provisions of this
Agreement, and using its best efforts to maintain the perfected first priority
security interest of the Deal Agent as agent for the Secured Parties in the
Assets. The Servicer will follow customary standards, policies, and procedures
and will have full power and authority, acting alone, to do any and all things
in connection with the performance of the Servicing Duties that it deems
necessary or desirable. If the Servicer commences a legal proceeding to enforce
a Defaulted Contract or commences or participates in a legal proceeding
(including a bankruptcy proceeding) relating to or involving an Asset in the
Asset Pool, the Deal Agent as agent for the Secured Parties will be deemed to
have automatically assigned the related Contract to the Servicer for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Secured Parties, pursuant to
this Section 6.1(b), to execute and deliver, on behalf of itself and the Deal
Agent as agent for the Secured Parties, any and all instruments of satisfaction
or cancellation, or partial or full release or discharge, and all other notices,
demands, claims, complaints, responses, affidavits or other documents or
instruments in connection with any such proceedings. If in any enforcement suit
or legal proceeding it is held that the Servicer may not enforce a Contract on
the ground that it is not a real party in interest or a holder entitled to
<PAGE>
enforce the Contract, then the Deal Agent will, at the Servicer's expense and
direction, take steps on behalf of the Deal Agent as agent for the Secured
Parties to enforce the Contract, including bringing suit in the name of the Deal
Agent as agent for the Secured Parties.
(c) Disposition Upon Termination of Contract. Upon the termination of a
Contract included in the Asset Pool as a result of a default by the Obligor
thereunder the Servicer will use commercially reasonable efforts to dispose of
any related Equipment. Without limiting the generality of the foregoing, the
Servicer may dispose of any such Equipment by purchasing such Equipment or by
selling such Equipment to any of its Affiliates for a purchase price equal to
the fair market value thereof, any such sale to be evidenced by a certificate of
a Responsible Officer of the Servicer delivered to the Deal Agent setting forth
the Contract, the Equipment, the sale price of the Equipment and certifying that
such sale price is the fair market value of such Equipment.
(d) Further Assurances. The Deal Agent will, at the sole expense of the
Servicer, furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
(e) Custodial Duties. The Collateral Custodian shall take and retain
custody of the Contract Files delivered by the Seller pursuant to Section 3.3
hereof in accordance with the terms and conditions of this Agreement, all for
the benefit of the Secured Parties and subject to the Lien thereon in favor of
the Deal Agent as agent for the Secured Parties. Within five Business Days of
its receipt of any Contract File, the Collateral Custodian shall review the
related Contract to verify that such Contract has been executed and has no
missing or mutilated pages and to confirm (in reliance on the related contract
number and Lessee name) that such Contract is referenced on the related list of
Contracts. In order to facilitate the foregoing review by the Collateral
Custodian, in connection with each delivery of Contract Files hereunder to the
Collateral Custodian, the Servicer shall provide to the Collateral Custodian an
electronic file (in EXCEL or a comparable format) that contains the related list
of Contracts or which otherwise contains the Contract number and the name of the
Lessee with respect to each related Contract. If, at the conclusion of such
review, the Collateral Custodian shall determine that such Contract is not
executed or in proper form on its face, or that it is not referenced on such
list of Contracts, the Collateral Custodian shall promptly notify the Seller and
the Deal Agent of such determination by providing a written report to such
Persons setting forth, with particularity, the lack of execution of such
Contract, that such Contract has missing or mutilated pages, or the fact that
such Contract was not referenced on the related list of Contracts. In addition,
unless instructed otherwise in writing by the Seller or the Deal Agent within 10
days of the Collateral Custodian's delivery of such report, the Collateral
Custodian shall return any Contract not referenced on such list of Contracts to
the Seller. Other than the foregoing, the Collateral Custodian shall not have
any responsibility for reviewing any Contract File.
In taking and retaining custody of the Contract Files, the Collateral
Custodian shall be deemed to be acting as the agent of the Deal Agent as agent
for the Secured Parties, provided, however, that the Collateral Custodian makes
no representations as to the existence, perfection or
<PAGE>
priority of any Lien on the Contract Files or the instruments therein, and
provided, further, that the Collateral Custodian's duties as agent shall be
limited to those expressly contemplated herein. All Contract Files shall be kept
in fireproof vaults or cabinets at the locations specified on Schedule IV
attached hereto, or at such other office as shall be specified to the Deal Agent
by the Collateral Custodian in a written notice delivered at least 45 days prior
to such change. All Contract Files shall be placed together in a separate file
cabinet with an appropriate identifying label and maintained in such a manner so
as to permit retrieval and access. All Contract Files shall be clearly
segregated from any other documents or instruments maintained by the Collateral
Custodian. The Collateral Custodian shall clearly indicate that such Contract
Files are the sole property of the Seller and that the Seller has granted an
interest therein to the Deal Agent on behalf of the Secured Parties. In
performing its duties, the Collateral Custodian shall use the same degree of
care and attention as it employs with respect to similar Contracts which it
holds as Collateral Custodian.
(f) Concerning the Collateral Custodian.
(i) The Collateral Custodian may conclusively rely on and
shall be fully protected in acting upon any certificate, instrument,
opinion, notice, letter, telegram or other document delivered to it and
which in good faith it reasonably believes to be genuine and which has
been signed by the proper party or parties. The Collateral Custodian
may rely conclusively on and shall be fully protected by in acting upon
(A) the written instructions of any designated officer of the Deal
Agent or (B) the verbal instructions of the Deal Agent.
(ii) The Collateral Custodian may consult counsel satisfactory
to it and the advice or opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(iii) The Collateral Custodian shall not be liable for any
error of judgment, or for any act done or step taken or omitted by it,
in good faith, or for any mistakes of fact or law, or for anything
which it may do or refrain from doing in connection herewith except in
the case of its willful misconduct or grossly negligent performance or
omission.
(iv) The Collateral Custodian makes no warranty or
representation and shall have no responsibility (except as expressly
set forth in this Agreement) as to the content, enforceability,
completeness, validity, sufficiency, value, genuineness, ownership or
transferability of the Contracts, and will not be required to and will
not make any representations as to the validity or value (except as
expressly set forth in this Agreement) of any of the Contracts. The
Collateral Custodian shall not be obligated to take any legal action
hereunder which might in its judgment involve any expense or liability
unless it has been furnished with an indemnity reasonably satisfactory
to it.
(v) The Collateral Custodian shall have no duties or
responsibilities except such duties and responsibilities as are
specifically set forth in this Agreement and no
<PAGE>
covenants or obligations shall be implied in this Agreement against the
Collateral Custodian.
(vi) The Collateral Custodian shall not be required to expend
or risk its own funds in the performance of its duties hereunder.
(vii) It is expressly agreed and acknowledged that the
Collateral Custodian is not guaranteeing performance of or assuming any
liability for the obligations of the other parties hereto or any
parties to the Contracts.
Section 6.2 Collection of Payments.
(a) Collection Efforts, Modification of Contracts. The Servicer will
make reasonable efforts to collect all payments called for under the terms and
provisions of the Contracts in the Asset Pool as and when the same become due,
and will follow those collection procedures which it follows with respect to all
comparable Contracts that it services for itself or others. The Servicer may not
waive, modify or otherwise vary any provision of a Contract. The Servicer may in
its discretion waive any late payment charge or any other fees that may be
collected in the ordinary course of servicing any Contract in the Asset Pool.
(b) Prepaid Contract. The Servicer may not permit a Contract in the
Asset Pool to become a Prepaid Contract (which shall not include a Contract that
becomes a Prepaid Contract due to a Casualty Loss), unless (x) the Servicer
provides an Additional Contract or (y) such prepayment will not result in the
Collection Account receiving an amount (the "Prepayment Amount") less than the
sum of (A) the Discounted Contract Balance on the date of such prepayment
calculated using the applicable Blended Discount Rate in effect on the date of
such payment, (B) any outstanding Servicer Advances thereon (and to the extent
not included therein any accrued and unpaid interest) and (C) all Hedge Breakage
Costs owing to the relevant Hedge Counterparty for any termination of one or
more Hedge Transactions, in whole or in part, as required by the terms of any
Hedging Agreement as the result of any such Contract becoming a Prepaid
Contract. After a Payout Event has occurred, the Servicer may not permit a
Contract in the Asset Pool to become a Prepaid Contract (which shall not include
a Contract that becomes a Prepaid Contract due to a Casualty Loss), unless the
Servicer collects an amount equal to the sum of (A) the Discounted Contract
Balance on the date of such prepayment calculated using the applicable Blended
Discount Rate in effect on the date of payment, (B) any outstanding Servicer
Advances thereon (and to the extent not included therein any accrued and unpaid
interest) and (C) all Hedge Breakage Costs owing to the relevant Hedge
Counterparty for any termination of one or more Hedge Transactions, in whole or
in part, as required by the terms of any Hedging Agreement as the result of any
such Contract becoming a Prepaid Contract.
(c) Acceleration. The Servicer shall accelerate the maturity of all or
any Scheduled Payments under any Contract in the Asset Pool under which a
default under the terms thereof has occurred and is continuing (after the lapse
of any applicable grace period) promptly after such Contract becomes a Defaulted
Contract.
<PAGE>
(d) Taxes and other Amounts. To the extent provided for in any Contract
in the Asset Pool, the Servicer will use its best efforts to collect all
payments with respect to amounts due for taxes, assessments and insurance
premiums relating to such Contracts or the Equipment and remit such amounts to
the appropriate Governmental Authority or insurer on or prior to the date such
payments are due.
(e) Payments to Lock-Box Account. On or before the Closing Date with
respect to the Existing Contracts and on or before the relevant Addition Date,
with respect to Additional Contracts, the Servicer shall have instructed all
Obligors to make all payments in respect of the Contracts in the Asset Pool to a
Lock-Box or directly to a Lock-Box Account.
(f) Establishment of the Collection Account. The Servicer shall cause
to be established, on or before the Closing Date, and maintained in the name of
the Deal Agent as agent for the Secured Parties, with an office or branch of a
depository institution or trust company 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) a segregated corporate trust account
(the "Collection Account"); provided, however, that at all times such depository
institution or trust company shall be a depository institution organized under
the laws of the United States of America or any one of the States thereof or the
District of Columbia (or any domestic branch of a foreign bank), (i) (A) which
has either (1) a long-term unsecured debt rating of A- or better by S&P and A-3
or better by Moody's or (2) a short-term unsecured debt rating or certificate of
deposit rating of A-1 or better by S&P or P-1 or better by Moody's, (B) the
parent corporation of which has either (1) a long-term unsecured debt rating of
A- or better by S&P and A-3 or better by Moody's or (2) a short-term unsecured
debt rating or certificate of deposit rating of A-1 or better by S&P and P-1 or
better by Moody's or (C) is otherwise acceptable to the Deal Agent and (ii)
whose deposits are insured by the Federal Deposit Insurance Corporation (any
such depository institution or trust company, a "Qualified Institution").
Section 6.3 Servicer Advances.
For each Monthly Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) which was due and payable pursuant to a Contract in
the Asset Pool during such Monthly Period was not received prior to the end of
such Monthly Period, the Servicer may make an advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof); in addition,
if on any day there are not sufficient funds on deposit in the Collection
Account to pay accrued Yield of any Asset Interest the Monthly Period of which
ends on such day, the Servicer shall make an advance in the amount necessary to
pay such Yield (in either case, any such advance, a "Servicer Advance").
Notwithstanding the preceding sentence, (i) the Servicer shall be required to
make a Servicer Advance with respect to any Contract if, and only if, the
Servicer determines (such determination to be conclusive and binding) in good
faith that such Servicer Advance will ultimately be recoverable from future
collections on, or the liquidation of, the Asset Pool and payments by one or
more Hedge Counterparties under one or more Hedging Agreements, (ii) the
Servicer's obligation to make a Servicer Advance for any Contract shall cease on
the day such Contract becomes a Defaulted Contract or is charged-off
<PAGE>
pursuant to the Servicer's Credit and Collection Policies and (iii) any
successor Servicer, including the Backup Servicer, will not be obligated to make
any Servicer Advances. The Servicer will deposit any Servicer Advances into the
Collection Account on or prior to 11:00 a.m. (Charlotte, North Carolina time) on
the related Payment Date, in immediately available funds.
Section 6.4 Realization Upon Defaulted Contract.
The Servicer will use reasonable efforts to repossess or otherwise
comparably convert the ownership of any Equipment relating to a Defaulted
Contract and will act as sales and processing agent for Equipment which it
repossesses. The Servicer will follow such other practices and procedures as it
deems necessary or advisable and as are customary and usual in its servicing of
contracts and other actions by the Servicer in order to realize upon such
Equipment, which practices and procedures may include reasonable efforts to
enforce all obligations of Obligors and repossessing and selling such Equipment
at public or private sale in circumstances other than those described in the
preceding sentence. Without limiting the generality of the foregoing, the
Servicer may sell any such Equipment to the Servicer or its Affiliates for a
purchase price equal to the then fair market value thereof, any such sale to be
evidenced by a certificate of a Responsible Officer of the Servicer delivered to
the Deal Agent setting forth the Contract, the Equipment, the sale price of the
Equipment and certifying that such sale price is the fair market value of such
Equipment. In any case in which any such Equipment has suffered damage, the
Servicer will not expend funds in connection with any repair or toward the
repossession of such Equipment unless it reasonably determines that such repair
and/or repossession will increase the Recoveries by an amount greater than the
amount of such expenses. The Servicer will remit to the Collection Account the
Recoveries received in connection with the sale or disposition of Equipment
relating to a Defaulted Contract.
Section 6.5 Maintenance of Insurance Policies.
The Servicer will use its best efforts to ensure that each Obligor
maintains an Insurance Policy with respect to the related Equipment in an amount
at least equal to the sum of the Discounted Contract Balance of the related
Contract and shall ensure that each such Insurance Policy names the Deal Agent,
as agent for the Secured Parties, as loss payee and as an insured thereunder;
provided that the Servicer, in accordance with its Credit and Collection Policy,
may allow Obligors to self-insure. Additionally, the Servicer will require that
each Obligor maintain property damage liability insurance during the term of
each Contract in amounts and against risks customarily insured against by the
Obligor on equipment owned by it. If an Obligor fails to maintain property
damage insurance, the Servicer may purchase and maintain such insurance on
behalf of, and at the expense of, the Obligor. In connection with its activities
as Servicer, the Servicer agrees to present, on behalf of the Deal Agent as
agent for the Secured Parties, claims to the insurer under each Insurance Policy
and any such liability policy, and to settle, adjust and compromise such claims,
in each case, consistent with the terms of each Contract. The Servicer's
Insurance Policies with respect to the related Equipment will insure against
liability for personal injury and property damage relating to such Equipment,
will name the Deal Agent as
<PAGE>
agent for the Secured Parties as loss payee and as an insured thereunder and
will contain a breach of warranty clause.
Section 6.6 Representations and Warranties of Servicer.
The Servicer represents and warrants to the Deal Agent, as agent for
the Secured Parties, the Secured Parties, the Collateral Custodian and Backup
Servicer that, as of the Closing Date and on each Addition Date, insofar as any
of the following affects the Servicer's ability to perform its obligations
pursuant to this Agreement in any material respect:
(a) Organization and Good Standing. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of Pennsylvania
with all requisite corporate power and authority to own its properties and to
conduct its business as presently conducted and to enter into and perform its
obligations pursuant to this Agreement.
(b) Due Qualification. The Servicer is qualified to do business as a
corporation, is in good standing, and has obtained all licenses and approvals as
required under the laws of all jurisdictions in which the ownership or lease of
its property and or the conduct of its business (other than the performance of
its obligations hereunder) requires such qualification, standing, license or
approval, except to the extent that the failure to so qualify, maintain such
standing or be so licensed or approved would not have an adverse effect on the
interests of the Seller or of the Secured Parties. The Servicer is qualified to
do business as a corporation, is in good standing, and has obtained all licenses
and approvals as required under the laws of all states in which the performance
of its obligations pursuant to this Agreement requires such qualification,
standing, license or approval and where the failure to qualify or obtain such
license or approval would have material adverse effect on its ability to perform
hereunder.
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms. The
Servicer has duly authorized the execution, delivery and performance of this
Agreement by all requisite corporate action. The execution, delivery and
performance of this Agreement does not contravene the Servicer's Certificate of
Incorporation or by-laws.
(d) No Violation. The consummation of the transactions contemplated by,
and the fulfillment of the terms of, this Agreement by the Servicer (with or
without notice or lapse of time) will not (i) conflict with, result in any
breach of any of the terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws of the Servicer, or any term of any
agreement, indenture, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which it or any of its property is bound, (ii) result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (iii) violate any law, regulation, order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority
applicable to the Servicer or any of its properties.
<PAGE>
(e) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Servicer or any of its
properties is required to be obtained by or with respect to the Servicer in
order for the Servicer to enter into this Agreement or perform its obligations
hereunder.
(f) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except as such enforceability may be limited by (i)
applicable Insolvency Laws and (ii) general principles of equity (whether
considered in a suit at law or in equity).
(g) No Proceeding. There are no proceedings or investigations pending
or threatened against the Servicer, before any Governmental Authority (i)
asserting the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or (iii)
seeking any determination or ruling that might (in the reasonable judgment of
the Servicer) materially and adversely affect the performance by the Servicer of
its obligations under, or the validity or enforceability of, this Agreement.
(h) Reports Accurate. No Servicer Certificate, information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished by the Servicer to the Deal Agent or a Purchaser in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Deal Agent or
such Purchaser, as the case may be, at such time) as of the date so furnished,
and no such document contains or will contain any material misstatement of fact
or omits or shall omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.
Section 6.7 Representations and Warranties of Backup Servicer and
Collateral Custodian.
Each of the Backup Servicer and the Collateral Custodian represents and
warrants to the Deal Agent, as agent for the Secured Parties, and the Secured
Parties that, as of the Closing Date and on each Addition Date, insofar as any
of the following affects the Backup Servicer's or the Collateral Custodian's, as
the case may be, ability to perform its obligations pursuant to this Agreement
in any material respect:
(a) Organization and Good Standing. Harris Trust and Savings Bank is an
Illinois banking corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois with all requisite corporate
power and authority to own its properties and to conduct its business as
presently conducted and to enter into and perform its obligations pursuant to
this Agreement.
(b) Power and Authority. Each of the Backup Servicer and the Collateral
Custodian has the corporate power and authority to execute and deliver this
Agreement and to carry out its terms. Each of the Backup Servicer and the
Collateral Custodian has duly authorized the execution, delivery and performance
of this Agreement by all requisite corporate action.
<PAGE>
(c) No Violation. The consummation of the transactions contemplated by,
and the fulfillment of the terms of, this Agreement by the Backup Servicer and
the Collateral Custodian will not (i) conflict with, result in any breach of any
of the terms or provisions of, or constitute a default under, the charter or
bylaws of the Backup Servicer or the Collateral Custodian, or any term of any
material agreement, indenture, mortgage, deed of trust or other instrument to
which the Backup Servicer or the Collateral Custodian is a party or by which it
or any of its property is bound, (ii) result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or (iii) violate any
law, regulation, order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority applicable to Harris Trust and Savings Bank
or any of its properties that might (in the reasonable judgment of the Backup
Servicer or the Collateral Custodian, as the case may be) materially and
adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.
(d) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit (collectively, the
"Consents") of or with any Governmental Authority having jurisdiction over the
Backup Servicer or the Collateral Custodian or any of its respective properties
is required to be obtained by or with respect to the Backup Servicer or the
Collateral Custodian in order for the Backup Servicer or the Collateral
Custodian, as the case may be, to enter into this Agreement or perform its
obligations hereunder (except with respect to performance only, such Consents as
the Backup Servicer or the Collateral Custodian, as the case may be, may need to
obtain prior to the commencement of its performance of its duties hereunder in
the certain jurisdictions outside of Illinois, provided that in lieu of
obtaining for itself the requisite Consents, the Backup Servicer or the
Collateral Custodian, as the case may be, may and shall be permitted to delegate
the performance of its duties to parties having the requisite Consents in such
jurisdictions; provided, however, in the case of such delegation of performance
the Backup Servicer or the Collateral Custodian, as the case may be, shall not
be relieved of their responsibility under this Agreement with respect to such
duties).
(e) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of Harris Trust and Savings Bank, enforceable against the
Backup Servicer and the Collateral Custodian in accordance with its terms,
except as such enforceability may be limited by (i) applicable Insolvency Laws
and (ii) general principles of equity (whether considered in a suit at law or in
equity).
(f) No Proceeding. There are no proceedings or investigations pending
or, to the best of its knowledge, threatened, against the Backup Servicer or the
Collateral Custodian, before any Governmental Authority (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Backup
Servicer or the Collateral Custodian, as the case may be) materially and
adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.
<PAGE>
Section 6.8 Covenants of Servicer.
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply with all laws and
regulations of any Governmental Authority applicable to the Servicer or the
Contracts in the Asset Pool and related Equipment and Contract Files or any part
thereof.
(b) Obligations with Respect to Contracts; Modifications. The Servicer
will duly fulfill and comply with all obligations on the part of the Seller to
be fulfilled or complied with under or in connection with each Contract in the
Asset Pool and will do nothing to impair the rights of the Deal Agent as agent
for the Secured Parties or of the Secured Parties in, to and under the Assets.
The Servicer will perform such obligations under the Contracts in the Asset Pool
and will not change or modify the Contracts.
(c) Preservation of Security Interest. The Servicer will execute and
file such financing and continuation statements and any other documents which
may be required by any law or regulation of any Governmental Authority to
preserve and protect fully the interest of the Deal Agent as agent for the
Secured Parties in, to and under the Assets.
(d) No Bankruptcy Petition. Prior to the date that is one year and one
day after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, the Servicer will not institute against the
Seller or VFCC, or join any other Person in instituting against the Seller or
VFCC, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States or
any state of the United States. This Section 6.9(d) will survive the termination
of this Agreement.
(e) Year 2000 Compatibility. The Servicer shall take all action
necessary to assure that, prior to January 1, 2000, the Servicer's computer
system is able to operate and effectively process data including dates on and
after January 1, 2000. At the request of the Deal Agent or the Backup Servicer,
the Servicer shall provide assurance acceptable to the Deal Agent or the Backup
Servicer of the Servicer's Year 2000 Compatibility.
Section 6.9 Covenants of Backup Servicer and Collateral Custodian.
Each of the Backup Servicer and the Collateral Custodian hereby
covenants that:
(a) Contract Files. The Collateral Custodian will not dispose of any
documents constituting the Contract Files in any manner which is inconsistent
with the performance of its obligations as the Collateral Custodian pursuant to
this Agreement and will not dispose of any Contract except as contemplated by
this Agreement.
(b) Compliance with Law. Each of the Backup Servicer and the Collateral
Custodian will comply with all laws and regulations of any Governmental
Authority applicable to the Backup Servicer and the Collateral Custodian.
<PAGE>
(c) No Bankruptcy Petition. Prior to the date that is one year and one
day after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, neither the Backup Servicer nor the Collateral
Custodian will institute against the Seller or VFCC, or join any other Person in
instituting against the Seller or VFCC, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States.
This Section 6.9(d) will survive the termination of this Agreement.
(d) Location of Contract Files. The Contract Files shall remain at all
times in the possession of the Collateral Custodian at the address set forth
herein unless notice of a different address is given in accordance with the
terms hereof.
(e) No Changes in Backup Servicer and Collateral Custodian Fee. The
Backup Servicer and Collateral Custodian will not make any changes to the fees
set forth in the Backup Servicer and Collateral Custodian Fee Letter without the
prior written approval of the Deal Agent.
(f) Year 2000 Compatibility. The Backup Servicer and Collateral
Custodian shall take all action necessary to assure that, prior to January 1,
2000, the Backup Servicer and Collateral Custodian's computer system is able to
operate and effectively process data including dates on and after January 1,
2000. At the request of the Deal Agent, the Backup Servicer and Collateral
Custodian shall provide assurance acceptable to the Deal Agent of the Backup
Servicer and Collateral Custodian's Year 2000 Compatibility.
Section 6.10 Servicing Compensation.
As compensation for its servicing activities hereunder and
reimbursement for its expenses, the Servicer shall be entitled to receive a
servicing fee (the "Servicing Fee") in respect of each Monthly Period (or
portion thereof) equal to one-twelfth of the product of (A) the Servicing Fee
Rate and (B) the ADCB as on the most recent Determination Date, such Servicing
Fee to be payable monthly in arrears on each Payment Date to the extent of funds
available therefor pursuant to the provisions of Section 2.7, 2.8 or 2.9, as
applicable.
Section 6.11 Custodial Compensation.
As compensation for its custodial activities hereunder and
reimbursement for its expenses, the Collateral Custodian shall be entitled to
receive a custodial fee (the "Custodial Fee") as provided in the Backup Servicer
and Collateral Custodian Fee Letter.
Section 6.12 Payment of Certain Expenses by Servicer.
The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of independent accountants, Taxes imposed on the Servicer,
expenses incurred in connection with payments and reports
<PAGE>
pursuant to this Agreement, and all other fees and expenses not expressly stated
under this Agreement for the account of the Seller, but excluding Liquidation
Expenses incurred as a result of activities contemplated by Section 6.4. The
Servicer will be required to pay all reasonable fees and expenses owing to any
bank or trust company in connection with the maintenance of the Collection
Account and the Lock-Box Account. The Servicer shall be required to pay such
expenses for its own account and shall not be entitled to any payment therefor
other than the Servicing Fee.
Section 6.13 Reports.
(a) Monthly Report. With respect to each Determination Date and the
related Monthly Period, the Servicer will provide to the Seller, the Deal Agent
and the Backup Servicer, on the related Reporting Date, a monthly statement (a
"Monthly Report"), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit E.
(b) Servicer's Certificate. Together with each Monthly Report, the
Servicer shall submit to the Purchaser a certificate (a "Servicer's
Certificate"), signed by a Responsible Officer of the Servicer and substantially
in the form of Exhibit F.
(c) Financial Statements. The Servicer will submit to the Purchaser and
the Backup Servicer, within 45 days of the end of each of its fiscal quarters,
commencing February 15, 1998 unaudited financial statements (including an
analysis of delinquencies and losses for each fiscal quarter) as of the end of
each such fiscal quarter. The Servicer will submit to the Purchaser, within 90
days of the end of each of its fiscal years, commencing December 31, 1997
audited financial statements (including an analysis of delinquencies and losses
for each fiscal year describing the causes thereof and sufficient to determine
whether a Payout Event has occurred or is reasonably likely to occur and
otherwise reasonably satisfactory to the Deal Agent) as of the end of each such
fiscal year.
Section 6.14 Annual Statement as to Compliance.
The Servicer will provide to the Deal Agent and the Backup Servicer, on
or prior to December 31 of each year, commencing December 31, 1997, an annual
report signed by a Responsible Officer of the Servicer certifying that (a) a
review of the activities of the Servicer, and the Servicer's performance
pursuant to this Agreement, for the period ending on the last day of the
immediately preceding fiscal year has been made under such Person's supervision
and (b) the Servicer has performed or has caused to be performed in all material
respects all of its obligations under this Agreement throughout such year and no
Servicer Default has occurred and is continuing (or if a Servicer Default has so
occurred and is continuing, specifying each such event, the nature and status
thereof and the steps necessary to remedy such event, and, if a Servicer Default
occurred during such year and no notice thereof has been given to the Deal
Agent, specifying such Servicer Default and the steps taken to remedy such
event).
<PAGE>
Section 6.15 Annual Independent Public Accountant's Servicing
Reports.
The Servicer will cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish to the Deal Agent and the Backup Servicer, on or prior to September 30
of each year, commencing September 30, 1998, (i) a report relating to the
previous fiscal year to the effect that (A) such firm has reviewed certain
documents and records relating to the servicing of the Contracts in the Asset
Pool, and (B) based on such examination, such firm is of the opinion that the
Monthly Reports for such year were prepared in compliance with this Agreement,
except for such exceptions as it believes to be immaterial and such other
exceptions as will be set forth in such firm's report and (ii) a report covering
the preceding fiscal year to the effect that such accountants have applied
certain agreed-upon procedures to certain documents and records relating to the
servicing of Contracts under this Agreement, compared the information contained
in the Servicer's Certificates delivered during the period covered by such
report with such documents and records and that no matters came to the attention
of such accountants that caused them to believe that such servicing was not
conducted in compliance with this Article VI of this Agreement, except for such
exceptions as such accountants shall believe to be immaterial and such other
exceptions as shall be set forth in such statement. In the event such firm
requires the Backup Servicer to agree to the procedures performed by such firm,
the Servicer shall direct the Backup Servicer in writing to so agree; it being
understood and agreed that the Backup Servicer will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Backup Servicer makes no independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
Section 6.16 Adjustments.
If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Contract in the Asset Pool and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Scheduled Payment in respect of which a dishonored check
is received shall be deemed not to have been paid.
Section 6.17 Merger or Consolidation of the Servicer.
The Servicer shall not consolidate with or merge into any other Person
or convey or transfer its properties and assets substantially as an entirety to
any Person, unless the Servicer is the surviving entity and unless:
(i) the Servicer has delivered to the Deal Agent and the
Backup Servicer an Officer's Certificate and an Opinion of Counsel each
stating that any consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 6.17 and that all
conditions precedent herein provided for relating to such
<PAGE>
transaction have been complied with and, in the case of the Opinion of
Counsel, that such supplemental agreement is legal, valid and binding
with respect to the Servicer and such other matters as the Deal Agent
may reasonably request;
(ii) the Servicer shall have delivered notice of such
consolidation, merger, conveyance or transfer to the Deal Agent; and
(iii) after giving effect thereto, no Payout Event or event
which with notice or lapse of time would constitute a Payout Event
shall have occurred.
Section 6.18 Limitation on Liability of the Servicer and Others.
Except as provided herein, neither the Servicer nor any of the
directors or officers or employees or agents of the Servicer shall be under any
liability to the Deal Agent, the Secured Parties or any other Person for any
action taken or for refraining from the taking of any action pursuant to this
Agreement whether arising from express or implied duties under this Agreement;
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability which would otherwise be imposed by reason of
its willful misfeasance, bad faith or gross negligence in the performance of
duties or by reason of its willful misconduct hereunder.
Section 6.19 Indemnification of the Seller, the Backup Servicer,
the Collateral Custodian, the Deal Agent and the
Secured Parties.
The Servicer shall indemnify and hold harmless the Seller, the Backup
Servicer, the Collateral Custodian, the Deal Agent, the Liquidity Agent and each
Secured Party and their respective officers, directors, employees and agents
(collectively, the "Indemnified Persons") from and against any loss, liability,
expense, damage or injury suffered or sustained by any Indemnified Person by
reason of any acts, omissions or alleged acts or omissions of the Servicer,
including, but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, but excluding
allocations of overhead expenses of any such Indemnified Party or other
non-monetary damages of any such Indemnified Party. Notwithstanding the
foregoing, the Servicer shall not indemnify an Indemnified Person if such loss,
liability, expense, damage or injury results or arises (i) as a result of fraud,
gross negligence or breach of fiduciary duty by such Indemnified Person; and
(ii) under any federal, state or local income or franchise taxes or any other
Tax imposed on or measured by income (or any interest or penalties with respect
thereto or arising from a failure to comply therewith) required to be paid by
the Seller, the Backup Servicer, the Collateral Custodian, the Deal Agent, the
Liquidity Agent or the Secured Parties in connection herewith to any taxing
authority. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof. If the
Servicer has made any indemnity payment pursuant to this Section 8.1 and such
payment fully indemnified the recipient thereof and the recipient thereafter
collects any payments from others in respect of such Indemnified Amounts, the
recipient shall repay to the Servicer an amount equal to the amount it has
collected from others in respect of such indemnified amounts.
<PAGE>
If for any reason the indemnification provided above in this Section
6.19 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and Servicer on the
other hand but also the relative fault of such Indemnified Person as well as any
other relevant equitable considerations.
The parties hereto agree that the provisions of this Section 6.19 shall
not be interpreted to provide recourse to the Seller against loss by reason of
the bankruptcy or insolvency (or other credit condition) of, or default by,
related Obligor on, any Pool Asset.
Any indemnification pursuant to this Section shall not be payable from
the Assets.
The obligations of the Servicer under this Section 6.19 shall survive
the resignation or removal of the Deal Agent, the Liquidity Agent, the Backup
Servicer or the Collateral Custodian and the termination of this Agreement.
Section 6.20 The Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon the Servicer's determination that (i) the performance
of its duties hereunder is or becomes impermissible under applicable law and
(ii) there is no reasonable action which the Servicer could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Servicer shall be evidenced as
to clause (i) above by an Opinion of Counsel to such effect delivered to the
Deal Agent and the Backup Servicer. No such resignation shall become effective
until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 6.25.
Section 6.21 Access to Certain Documentation and Information
Regarding the Contracts.
The Collateral Custodian shall provide to the Deal Agent access to the
Contract Files and all other documentation regarding the Contracts in the Asset
Pool and the related Equipment in such cases where the Deal Agent is required in
connection with the enforcement of the rights or interests of the Secured
Parties, or by applicable statutes or regulations to review such documentation,
such access being afforded without charge but only (i) upon two business days
prior written request, (ii) during normal business hours and (iii) subject to
the Servicer's and Collateral Custodian's normal security and confidentiality
procedures. Prior to the Closing Date and periodically thereafter at the
discretion of the Deal Agent, the Deal Agent may review the Servicer's
collection and administration of the Contracts in order to assess compliance by
the Servicer with the Servicer's written policies and procedures, as well as
with this Agreement and may conduct an audit of the Contracts and Contract Files
in conjunction with such a review. Such review shall be reasonable in scope and
shall be completed in a reasonable period of time.
<PAGE>
Section 6.22 Backup Servicer.
(a) On or before the date on which the initial Purchase occurs, until
the receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Deal Agent and the Secured Parties, the following
duties and obligations:
(i) On or before the Closing Date, the Backup Servicer shall
accept from the Servicer delivery of the information required to be set
forth in the Monthly Reports in hard copy and on computer tape;
provided, however, the computer tape is in an MS-DOS, PC readable ASCII
format or format to be agreed upon by the Backup Servicer and the
Servicer on or prior to closing.
(ii) Not later than 12:00 noon New York time two Business Days
prior to each Reporting Date, the Backup Servicer shall accept delivery
of tape from the Servicer, which shall include but not be limited to
the following information: the name, number and name of the related
Lessee for each Contract, the collection status, the contract status,
the principal balance and the ADCB (the "Tape").
The Servicer shall provide, or cause the Subservicer to provide, the
Tape on each Reporting Date as described above.
(b) On or before the date on which the initial Purchase occurs, and
until the receipt by the Servicer of a Termination Notice, the Backup Servicer
shall perform, on behalf of the Secured Parties and the Deal Agent, the
following duties and obligations:
(i) Prior to the related Payment Date, the Backup Servicer
shall review the Monthly Report to ensure that it is complete on its
face and that the following items in such Monthly Report have been
accurately calculated, if applicable, and reported: (A) the ADCB, (B)
the Backup Servicing Fee, (C) the Average ADCB, (D) the accounts that
are 30-60 days past due, (E) the accounts that are 61-90 days past due,
(E) the accounts that are 90+ days past due, (F) the accounts that are
Defaulted Contracts, (G) the Delinquency Ratio and (H) the Default
Ratio. The Backup Servicer shall notify the Deal Agent and the Servicer
of any disagreements with the Monthly Report based on such review not
later than the Business Day preceding such Payment Date to such
Persons.
(ii) If the Servicer disagrees with the report provided under
paragraph (i) above by the Backup Servicer or if the Servicer or any
subservicer has not reconciled such discrepancy, the Backup Servicer
agrees to confer with the Servicer to resolve such disagreement on or
prior to the next succeeding Determination Date and shall settle such
discrepancy with the Servicer if possible, and notify the Deal Agent of
the resolution thereof. The Servicer hereby agrees to cooperate at its
own expense, with the Backup Servicer in reconciling any discrepancies
herein. If within 20 days after the delivery of the report provided
under paragraph (i) above by the Backup Servicer, such discrepancy is
not resolved, the Backup Servicer shall promptly notify the Deal Agent
of the continued existence of such discrepancy. Following receipt of
such notice by the Deal
<PAGE>
Agent, the Servicer shall deliver to the Deal Agent, the Secured
Parties, and the Backup Servicer no later than the related Payment Date
a certificate describing the nature and amount of such discrepancies
and the actions the Servicer proposes to take with respect thereto.
With respect to the foregoing, the Backup Servicer, in the performance
of its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.
(c) After the receipt of an effective Termination Notice by the
Servicer in accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this Agreement, whether with respect to
the Contracts or otherwise shall pass to and be vested in the Backup Servicer,
subject to and in accordance with the provisions of Section 6.25, as long as the
Backup Servicer is not prohibited by an applicable provision of law from
fulfilling the same, as evidenced by an Opinion of Counsel.
(d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on the
part of any of the parties to this Agreement.
(e) As compensation for its back-up servicing obligations hereunder,
the Backup Servicer shall be entitled to receive the Backup Servicing Fee in
respect of each Monthly Period (or portion thereof) until the first to occur of
the date on which the Backup Servicer becomes a Successor Servicer, resigns or
is removed as Backup Servicer or termination of this Agreement.
(f) The Backup Servicer may resign at any time by not less than 120
days notice to the Deal Agent, the Liquidity Agent, the Servicer, the Seller and
the Originator. In addition, the Backup Servicer may be removed without cause by
the Deal Agent by notice then given in writing to the Servicer, the Seller and
the Backup Servicer. In the event of any such resignation or removal, the Backup
Servicer may be replaced by (i) the Servicer, acting with the consent of the
Deal Agent or (ii) if no such replacement is appointed within 30 days following
such removal or resignation, by the Deal Agent.
(g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or obligations
of the Backup Servicer hereunder. Without limiting the generality of the
foregoing, the Backup Servicer, except as expressly set forth herein, shall have
no obligation to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer may act through its agents, attorneys and
custodians in performing any of its duties and obligations under this Agreement,
it being understood by the
<PAGE>
parties hereto that the Backup Servicer will be responsible for any misconduct
or negligence on the part of such agents, attorneys or custodians acting on the
routine and ordinary day-to-day operations for and on behalf of the Backup
Servicer. Neither the Backup Servicer nor any of its officers, directors,
employees or agents shall be liable, directly or indirectly, for any damages or
expenses arising out of the services performed under this Agreement other than
damages or expenses which result from the gross negligence or willful misconduct
of it or them or the failure to perform materially in accordance with this
Agreement.
(h) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer contained
in any computer tape, certificate or other data or document delivered to the
Backup Servicer hereunder or on which the Backup Servicer must rely in order to
perform its obligations hereunder, and the Seller, Secured Parties, Deal Agent,
Liquidity Agent, Collateral Custodian and Backup Servicer, shall look only to
the Servicer to perform such obligations. The Backup Servicer, and the
Collateral Custodian shall have no responsibility and shall not be in default
hereunder or incur any liability for any failure, error, malfunction or any
delay in carrying out any of their respective duties under this Agreement if
such failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer or
the failure of any such other Person to prepare or provide such information. The
Backup Servicer shall have no responsibility, shall not be in default and shall
incur no liability for (i) any act or failure to act of any third party,
including the Servicer (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party, (iii) the
invalidity or unenforceability of any Asset or Contract under applicable law,
(iv) the breach or inaccuracy of any representation or warranty made with
respect to any Asset, Contract or any item of Equipment, or (v) the acts or
omissions of any successor Backup Servicer.
Section 6.23 Identification of Records.
The Servicer shall clearly and unambiguously identify each Contract in
the Asset Pool and the related Equipment in its computer or other records to
reflect that such Contracts and Equipment have been transferred to and are owned
by the Seller and that an interest therein has been transferred by the Seller
pursuant to this Agreement.
Section 6.24 Servicer Defaults.
If any one of the following events (a "Servicer Default") shall occur
and be continuing:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Deal Agent as required by this
Agreement including, without limitation, while Fidelity is Servicer, any payment
required to be made under the Backup Servicer and Collateral Custodian Fee
Letter, or to deliver any required Monthly Report or other Required Reports
hereunder on or before the date occurring two Business Days after the date such
payment, transfer, deposit, instruction of notice or report is required to be
made or given, as the case may be, under the terms of this Agreement;
<PAGE>
(b) any failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer set
forth in this Agreement or the Purchase Agreement which has a material adverse
effect on the Secured Parties, which continues unremedied for a period of 30
days after the first to occur of (i) the date on which written notice of such
failure requiring the same to be remedied shall have been given to the Servicer
by the Deal Agent and (ii) the date on which the Servicer becomes aware thereof;
(c) any representation, warranty or certification made by the Servicer
in this Agreement or in any certificate delivered pursuant to this Agreement
shall prove to have been incorrect when made, which has a material adverse
effect on the Secured Parties and which continues to be unremedied for a period
of 30 days after the first to occur of (i) the date on which written notice of
such incorrectness requiring the same to be remedied shall have been given to
the Servicer by the Deal Agent and (ii) the date on which the Servicer becomes
aware thereof;
(d) an Insolvency Event shall occur with respect to the Servicer;
(e) any material delegation of the Servicer's duties which is not
permitted by Section 7.1;
(f) any financial or Asset information reasonably requested by the Deal
Agent or the Purchaser as provided herein is not reasonably provided as
requested;
(g) the rendering against the Servicer of a final judgment, decree or
order for the payment of money in excess of U.S. $1,000,000 and the continuance
of such judgment, decree or order unsatisfied and in effect for any period of 61
consecutive days without a stay of execution;
(h) the failure of the Servicer to make any payment due with respect to
aggregate recourse debt or other obligations with an aggregate principal amount
exceeding U.S. $1,000,000 or the occurrence of any event or condition which
would permit acceleration of such recourse debt or other obligations if such
event or condition has not been waived;
(i) any change in the management of the Servicer relating to the
positions of President, CEO, Chairman of the Board and Executive Vice President;
or
(j) any change in the control of the Servicer which takes the form of
either a merger or consolidation in which the Servicer is not the surviving
entity.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Default shall not have been remedied, the Deal Agent, by written notice to the
Servicer (with a copy to the Backup Servicer) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer as Servicer under
this Agreement.
<PAGE>
Section 6.25 Appointment of Successor Servicer.
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 6.24, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Deal Agent in writing or, if no such date
is specified in such Termination Notice or otherwise specified by the Deal
Agent, until a date mutually agreed upon by the Servicer and the Deal Agent. The
Deal Agent may at the time described in the immediately preceding sentence in
its sole discretion, appoint the Backup Servicer as the Servicer hereunder, and
the Backup Servicer shall on such date assume all obligations of the Servicer
hereunder, and all authority and power of the Servicer under this Agreement
shall pass to and be vested in the Backup Servicer; provided, however, that the
Successor Servicer shall not (i) be responsible or liable for any past actions
or omissions of the outgoing Servicer or (ii) be obligated to make Servicer
Advances. In the event that the Deal Agent does not so appoint the Backup
Servicer, there is no Backup Servicer or the Backup Servicer is unwilling or
unable to assume such obligations on such date, the Deal Agent shall as promptly
as possible appoint a successor servicer (the Backup Servicer or any such other
successor, the "Successor Servicer"), and such Successor Servicer shall accept
its appointment by a written assumption in a form acceptable to the Deal Agent.
If the Deal Agent within 60 days of receipt of a Termination Notice is unable to
obtain any bids from Eligible Servicers and the Servicer delivers an Officer's
Certificate to the effect that it cannot in good faith cure the Servicer Default
which gave rise to a transfer of servicing, then the Deal Agent shall offer the
Seller the right to accept retransfer of all the Assets and the Seller may
accept re-transfer of all the Assets, provided, however, that if the long-term
unsecured debt obligations of the Seller are not rated at the time of such
purchase at least investment grade by each rating agency providing a rating in
respect of such long-term unsecured debt obligations, no such re-transfer shall
occur unless the Seller shall deliver an Opinion of Counsel reasonably
acceptable to the Deal Agent that such re-transfer would not constitute a
fraudulent conveyance of the Seller. The amount to be paid and deposited in
respect of such re-transfer shall be equal to the sum of the Capital outstanding
plus all Yield that has accrued thereon and that will accrue thereon. In the
event that a Successor Servicer has not been appointed and has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Deal
Agent shall petition a court of competent Jurisdiction to appoint any
established financial institution having a net worth of not less than U.S.
$50,000,000 and whose regular business includes the servicing of Contracts as
the Successor Servicer hereunder.
(b) Upon its appointment, the Backup Servicer (subject to Section
6.25(a)) or the Successor Servicer, as applicable, shall be the successor in all
respects to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Backup Servicer or the Successor Servicer, as applicable.
(c) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of this
Agreement and shall pass to and be vested in the Seller and, without limitation,
the Seller is hereby authorized and empowered to
<PAGE>
execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights. The Servicer agrees to cooperate with the Seller
in effecting the termination of the responsibilities and rights of the Servicer
to conduct servicing on the Contracts in the Asset Pool.
(d) Upon the Backup Servicer receiving notice that it is required to
serve as the Servicer hereunder pursuant to the foregoing provisions of this
Section 6.25, the Backup Servicer will promptly begin the transition to its role
as Servicer.
(e) The Backup Servicer shall be entitled to receive its reasonable
costs incurred in transitioning to Servicer.
Section 6.26 Notification.
Upon the Servicer becoming aware of the occurrence of any Servicer
Default, the Servicer shall promptly give written notice thereof to the Deal
Agent and the Backup Servicer.
Section 6.27 Protection of Right, Title and Interest to Assets.
(a) The Servicer shall cause this Agreement, all amendments hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the right, title and interest of the Deal Agent as
agent for the Secured Parties and of the Secured Parties to the Assets to be
promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the Deal
Agent as agent for the Secured Parties hereunder to all property comprising the
Assets. The Servicer shall deliver to the Deal Agent file-stamped copies of, or
filing receipts for, any document recorded, registered or filed as provided
above, as soon as available following such recording, registration or filing.
The Seller shall cooperate fully with the Servicer in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this subsection 6.27(a).
(b) The Servicer will give the Deal Agent at least 30 days' prior
written notice of any relocation of any office from which it services Contracts
in the Asset Pool or keeps the Contract Files or of its principal executive
office and whether, as a result of such relocation, the applicable provisions of
the UCC or any other applicable law governing the perfection of interests in
property would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
file such financing statements or amendments as may be necessary to continue the
perfection of the security interest of the Deal Agent as agent for the Secured
Parties in the Contracts in the Asset Pool and the proceeds thereof. The
Servicer will at all times maintain each office from which it services Contracts
in the Asset Pool within the United States of America.
<PAGE>
Section 6.28 Release of Contract Files.
The Seller may, with the prior written consent of the Deal Agent (such
consent not to be unreasonably withheld), require that the Collateral Custodian
release each Contract File (a) delivered to the Collateral Custodian in error,
(b) for which a Substitute Contract has been substituted in accordance with
Section 2.16, (c) as to which the lien on the related Equipment has been so
released pursuant to Section 5.3, (d) which has been retransferred to the Seller
pursuant to Section 5.5 or 5.6, or (e) which is required to be redelivered to
the Seller in connection with the termination of this Agreement, in each case by
submitting to the Collateral Custodian and the Deal Agent a written request in
the form of Exhibit H hereto (signed by both the Seller and the Deal Agent)
specifying the Contracts to be so released and reciting that the conditions to
such release have been met (and specifying the section or sections of this
Agreement being relied upon for such release). The Collateral Custodian shall
upon its receipt of each such request for release executed by the Seller and the
Deal Agent promptly, but in any event within 5 Business Days, release the
Contract Files so requested to the Seller.
ARTICLE VII
PAYOUT AND RESTRICTING EVENTS
Section 7.1 Payout Events.
If any of the following events ("Payout Events") shall occur:
(a) as of any Reporting Date, the Delinquency Ratio for the preceding
Determination Date exceeds 3.0%;
(b) as of any Reporting Date, the Default Ratio for the preceding
Determination Date exceeds 2.75%;
(c) the passage of 60 days following receipt by the Purchaser of a
written notification of the Seller's intent to terminate the revolving period;
(d) a Restricting Event has occurred.
Section 7.2 Restricting Events.
If any of the following events ("Restricting Events") shall occur:
(a) as of any Reporting Date, the Delinquency Ratio for the preceding
Determination Date exceeds 4.0%;
(b) as of any Reporting Date, the Default Ratio for the preceding
Determination Date exceeds 3.25%;
<PAGE>
(c) the Termination Date shall have occurred;
(d) the level of Capital exceeds the Capital Limit and the Seller does
not, within one Business Day, contribute Eligible Contracts and/or cash
collateral sufficient to cause the Capital to comply with the Capital Limit;
(e) the Seller is not in compliance with the Portfolio Concentration
Criteria, and such noncompliance is not cured within 5 Business Days;
(f) a Servicer Default occurs and is continuing;
(g)(i) failure on the part of the Seller to make any payment or
deposit required by the terms of this Agreement on the day such payment
or deposit is required to be made or
(ii) failure on the part of the Seller to observe or perform
any of its covenants or agreements set forth in this Agreement, which
failure has a material adverse effect on the interests of the Deal
Agent, any Secured Party, the Liquidity Agent or any Investor and which
continues unremedied for a period of 30 days or more after written
notice to Seller; provided, that only a five Business Day cure period
shall apply in the case of a failure by the Seller to observe its
covenants not to grant a security interest or otherwise intentionally
create a Lien on the Contracts;
(h) any representation or warranty made by the Seller in this Agreement
or any information required to be given by the Seller to the Deal Agent to
identify Contracts pursuant to this Agreement, shall prove to have been
incorrect in any material respect when made or delivered and which continues to
be incorrect in any material respect for a period of 30 days after written
notice or actual knowledge thereof;
(i) the occurrence of an Insolvency Event relating to the Originator,
the Seller or the Servicer;
(j) the Seller shall become an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "40 Act") or the
arrangements contemplated by this Agreement shall require registration as an
"investment company" within the meaning of the 40 Act;
(k) a regulatory, tax or accounting body has ordered that the
activities of the Seller or any Affiliate of the Seller, contemplated hereby be
terminated or, as a result of any other event or circumstance, the activities of
the Seller contemplated hereby may reasonably be expected to cause the Seller or
any of its respective Affiliates to suffer materially adverse regulatory,
accounting or tax consequences; or
(l) on any day, the aggregate Hedge Notional Amount in effect for that
day under all Hedge Transactions is less than 100% of the Capital outstanding on
that day.
<PAGE>
then, and in any such event, the Termination Date shall be deemed to have
occurred automatically upon the occurrence of such event. Upon any such
occurrence, the Deal Agent and the Purchasers shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnities by the Seller.
Without limiting any other rights which the Deal Agent, the Backup
Servicer, the Collateral Custodian, the Liquidity Agent, the Secured Parties or
any of their respective Affiliates may have hereunder or under applicable law,
the Seller hereby agrees to indemnify the Deal Agent, the Backup Servicer, the
Collateral Custodian, the Liquidity Agent, the Secured Parties, and each of
their respective Affiliates and officers, directors, employees and agents
thereof from and against any and all damages, losses, claims, liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by, but excluding allocations
of overhead expenses of any such Indemnified Party or other non-monetary damages
of any such Indemnified Party any of them arising out of or as a result of this
Agreement or the ownership of the Asset Interest or in respect of any Asset or
any Contract, excluding, however, (a) Indemnified Amounts to the extent
resulting from negligence or willful misconduct on the part of the Deal Agent,
the Backup Servicer, the Collateral Custodian, the Liquidity Agent, such Secured
Parties or such Affiliate and (b) recourse (except with respect to payment and
performance of obligations provided for in this Agreement) for Defaulted
Contracts. If the Seller has made any indemnity payment pursuant to this Section
8.1 and such payment fully indemnified the recipient thereof and the recipient
thereafter collects any payments from others in respect of such Indemnified
Amounts then, the recipient shall repay to the Seller an amount equal to the
amount it has collected from others in respect of such indemnified amounts.
Without limiting the foregoing, the Seller shall indemnify the Deal Agent, the
Backup Servicer, the Collateral Custodian, the Liquidity Agent, the Secured
Parties and each of their respective Affiliates and officers, directors,
employees and agents thereof for Indemnified Amounts relating to or resulting
from:
(i) any Purchased Asset treated as or represented by the
Seller to be an Eligible Contract which is not at the applicable time
an Eligible Contract;
(ii) reliance on any representation or warranty made or deemed
made by the Seller, the Servicer (if the Originator or one of its
Affiliates) or any of their respective officers under or in connection
with this Agreement, which shall have been false or incorrect in any
material respect when made or deemed made or delivered;
<PAGE>
(iii) the failure by the Seller or the Servicer (if the
Originator or one of its Affiliates) to comply with any term, provision
or covenant contained in this Agreement or any agreement executed in
connection with this Agreement, or with any applicable law, rule or
regulation with respect to any Asset, the related Contract, or the
nonconformity of any Asset, the related Contract with any such
applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the relevant
Purchaser or to transfer to such Purchaser, an undivided ownership
interest in the Assets, together with all Collections, free and clear
of any Adverse Claim whether existing at the time of any Purchase or at
any time thereafter;
(v) the failure to maintain, as of the close of business on
each Business Day prior to the Termination Date, an amount of Capital
outstanding which is less than or equal to the lesser of (x) the
Purchase Limit on such Business Day, or (y) the Capital Limit on such
Business Day;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Assets which are, or are purported to be, Pool Assets, whether at
the time of any Purchase or at any subsequent time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Asset which is, or is purported to be, a Purchased Asset
(including, without limitation, a defense based on such Asset or the
related Contract not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the merchandise or services
related to such Asset or the furnishing or failure to furnish such
merchandise or services;
(viii) any failure of the Seller or the Servicer (if the
Originator or one of its Affiliates) to perform its duties or
obligations in accordance with the provisions of this Agreement or any
failure by the Originator, the Seller or any Affiliate thereof to
perform its respective duties under the Contracts;
(ix) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Asset or Contract;
(x) the failure by Seller to pay when due any Taxes for which
the Seller is liable, including without limitation, sales, excise or
personal property taxes payable in connection with the Pool Assets;
<PAGE>
(xi) any repayment by the Deal Agent, the Liquidity Agent or a
Secured Party of any amount previously distributed in reduction of
Capital or payment of Yield or any other amount due hereunder or under
any Hedging Agreement, in each case which amount the Deal Agent, the
Liquidity Agent or a Secured Party believes in good faith is required
to be repaid;
(xii) the commingling of Collections of Pool Assets at any
time with other funds;
(xiii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases or reinvestments or
the ownership of the Asset Interest or in respect of any Asset or
Contract;
(xiv) any failure by the Seller to give reasonably equivalent
value to the Originator in consideration for the transfer by the
Originator to the Seller of any Assets or any attempt by any Person to
void or otherwise avoid any such transfer under any statutory provision
or common law or equitable action, including, without limitation, any
provision of the Bankruptcy Code; or
(xv) the failure of the Seller, the Originator or any of their
respective agents or representatives to remit to the Servicer or the
Deal Agent, Collections of Pool Assets remitted to the Seller or any
such agent or representative.
Any amounts subject to the indemnification provisions of this Section 8.1 shall
be paid by the Seller solely pursuant to the provisions of Sections 2.7, 2.8 and
2.9 hereof as the case may be to the Deal Agent within two Business Days
following the Deal Agent's demand therefor.
If for any reason the indemnification provided above in this Section
8.1 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and the Seller on
the other hand but also the relative fault of such Indemnified Person as well as
any other relevant equitable considerations.
The parties hereto agree that the provisions of Section 8.1 shall not
be interpreted to provide recourse to the Seller against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by, related
Obligor on, any Pool Asset.
<PAGE>
ARTICLE IX
THE DEAL AGENT AND THE LIQUIDITY AGENT
Section 9.1 Authorization and Action.
(a) Each Secured Party hereby designates and appoints the Deal Agent as
Deal Agent hereunder, and authorizes the Deal Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Deal
Agent by the terms of this Agreement together with such powers as are reasonably
incidental thereto. The Deal Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Deal
Agent shall be read into this Agreement or otherwise exist for the Deal Agent.
In performing its functions and duties hereunder, the Deal Agent shall act
solely as agent for the Secured Parties and does not assume nor shall be deemed
to have assumed any obligation or relationship of trust or agency with or for
the Seller or any of its successors or assigns. The Deal Agent shall not be
required to take any action which exposes the Deal Agent to personal liability
or which is contrary to this Agreement or applicable law. The appointment and
authority of the Deal Agent hereunder shall terminate at the indefeasible
payment in full of the Aggregate Unpaids.
(b) Each Investor hereby designates and appoints FUNB as Liquidity
Agent hereunder, and authorizes the Liquidity Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the
Liquidity Agent by the terms of this Agreement together with such powers as are
reasonably incidental thereto. The Liquidity Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Liquidity Agent shall be read into this Agreement or otherwise exist for the
Liquidity Agent. In performing its functions and duties hereunder, the Liquidity
Agent shall act solely as agent for the Investors and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. The Liquidity Agent shall
not be required to take any action which exposes the Liquidity Agent to personal
liability or which is contrary to this Agreement or applicable law. The
appointment and authority of the Liquidity Agent hereunder shall terminate at
the indefeasible payment in full of the Aggregate Unpaids.
Section 9.2 Delegation of Duties.
(a) The Deal Agent may execute any of its duties under this Agreement
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Deal Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
(b) The Liquidity Agent may execute any of its duties under this
Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all
<PAGE>
matters pertaining to such duties. The Liquidity Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
Section 9.3 Exculpatory Provisions.
(a) Neither the Deal Agent nor any of its directors, officers, agents
or employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Deal Agent, the breach of its obligations expressly set forth in
this Agreement), or (ii) responsible in any manner to any of the Secured Parties
for any recitals, statements, representations or warranties made by the Seller
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document furnished
in connection herewith, or for any failure of the Seller to perform its
obligations hereunder, or for the satisfaction of any condition specified in
Article III. The Deal Agent shall not be under any obligation to any Secured
Party to ascertain or to inquire as to the observance or performance of any of
the agreements or covenants contained in, or conditions of, this Agreement, or
to inspect the properties, books or records of the Seller. The Deal Agent shall
not be deemed to have knowledge of any Payout Event unless the Deal Agent has
received notice from the Seller or a Secured Party.
(b) Neither the Liquidity Agent nor any of its directors, officers,
agents or employees shall be (i) liable for any action lawfully taken or omitted
to be taken by it or them under or in connection with this Agreement (except for
its, their or such Person's own gross negligence or willful misconduct or, in
the case of the Liquidity Agent, the breach of its obligations expressly set
forth in this Agreement), or (ii) responsible in any manner to the Deal Agent or
any of the Secured Parties for any recitals, statements, representations or
warranties made by the Seller contained in this Agreement or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other document furnished in connection herewith, or for any failure of the
Seller to perform its obligations hereunder, or for the satisfaction of any
condition specified in Article III. The Liquidity Agent shall not be under any
obligation to the Deal Agent or any Secured Party to ascertain or to inquire as
to the observance or performance of any of the agreements or covenants contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Seller. The Liquidity Agent shall not be deemed to have knowledge
of any Payout Event unless the Liquidity Agent has received notice from the
Seller, the Deal Agent or a Secured Party.
Section 9.4 Reliance.
(a) The Deal Agent shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of
<PAGE>
legal counsel (including, without limitation, counsel to the Seller),
independent accountants and other experts selected by the Deal Agent. The Deal
Agent shall in all cases be fully justified in failing or refusing to take any
action under this Agreement or any other document furnished in connection
herewith unless it shall first receive such advice or concurrence of VFCC or the
Required Investors or all of the Secured Parties, as applicable, as it deems
appropriate or it shall first be indemnified to its satisfaction by the Secured
Parties, provided that unless and until the Deal Agent shall have received such
advice, the Deal Agent may take or refrain from taking any action, as the Deal
Agent shall deem advisable and in the best interests of the Secured Parties. The
Deal Agent shall in all cases be fully protected in acting, or in refraining
from acting, in accordance with a request of VFCC or the Required Investors or
all of the Secured Parties, as applicable, and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Secured
Parties.
(b) The Liquidity Agent shall in all cases be entitled to rely, and
shall be fully protected in relying, upon any document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Seller), independent accountants
and other experts selected by the Liquidity Agent. The Liquidity Agent shall in
all cases be fully justified in failing or refusing to take any action under
this Agreement or any other document furnished in connection herewith unless it
shall first receive such advice or concurrence of Required Investors as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Investors, provided that unless and until the Liquidity Agent shall have
received such advice, the Liquidity Agent may take or refrain from taking any
action, as the Liquidity Agent shall deem advisable and in the best interests of
the Investors. The Liquidity Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the
Required Investors and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Investors.
Section 9.5 Non-Reliance on Deal Agent, Liquidity Agent and Other
Purchasers.
Each Secured Party expressly acknowledges that neither the Deal Agent,
the Liquidity Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by the Deal Agent or the Liquidity Agent
hereafter taken, including, without limitation, any review of the affairs of the
Seller, shall be deemed to constitute any representation or warranty by the Deal
Agent or the Liquidity Agent. Each Secured Party represents and warrants to the
Deal Agent and to the Liquidity Agent that it has and will, independently and
without reliance upon the Deal Agent, the Liquidity Agent or any other Secured
Party and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of the
Seller and made its own decision to enter into this Agreement or Hedging
Agreement, as the case may be.
<PAGE>
Section 9.6 Reimbursement and Indemnification.
The Investors agree to reimburse and indemnify VFCC, the Deal Agent,
the Liquidity Agent and each of their respective officers, directors, employees,
representatives and agents ratably according to their pro rata shares, to the
extent not paid or reimbursed by the Seller (i) for any amounts for which VFCC,
the Liquidity Agent, acting in its capacity as Liquidity Agent, or the Deal
Agent, acting in its capacity as Deal Agent, is entitled to reimbursement by the
Seller hereunder and (ii) for any other expenses incurred by VFCC, the Liquidity
Agent, acting in its capacity as Liquidity Agent, or the Deal Agent, in its
capacity as Deal Agent and acting on behalf of the Secured Parties, in
connection with the administration and enforcement of this Agreement.
Section 9.7 Deal Agent and Liquidity Agent in their Individual
Capacities.
The Deal Agent, the Liquidity Agent and each of their respective
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Seller or any Affiliate of the Seller as though the
Deal Agent or the Liquidity Agent, as the case may be, were not the Deal Agent
or the Liquidity Agent, as the case may be, hereunder. With respect to the
acquisition of Asset Interests pursuant to this Agreement, the Deal Agent, the
Liquidity Agent and each of their respective Affiliates shall have the same
rights and powers under this Agreement as any Purchaser and may exercise the
same as though it were not the Deal Agent or the Liquidity Agent, as the case
may be, and the terms "Investor," "Purchaser," "Investors" and "Purchasers"
shall include the Deal Agent or the Liquidity Agent, as the case may be, in its
individual capacity.
Section 9.8 Successor Deal Agent or Liquidity Agent.
(a) The Deal Agent may, upon 5 days' notice to the Seller and the
Secured Parties, and the Deal Agent will, upon the direction of all of the
Secured Parties (other than the Deal Agent, in its individual capacity) resign
as Deal Agent. If the Deal Agent shall resign, then the Required Investors
during such 5-day period shall appoint from among the Secured Parties a
successor agent. If for any reason no successor Deal Agent is appointed by the
Required Investors during such 5-day period, then effective upon the expiration
of such 5-day period, the Second Parties shall perform all of the duties of the
Deal Agent hereunder and the Seller shall make all payments in respect of the
Aggregate Unpaids or under any fee letter delivered by the Originator to the
Deal Agent and the Secured Parties directly to the applicable Secured Party and
for all purposes shall deal directly with the Secured Party. After any retiring
Deal Agent's resignation hereunder as Deal Agent, the provisions of this Article
VIII and Article IX shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Deal Agent under this Agreement.
(b) The Liquidity Agent may, upon 5 days' notice to the Seller, the
Deal Agent and the Investors, and the Liquidity Agent will, upon the direction
of all of the Investors (other than the Liquidity Agent, in its individual
capacity) resign as Liquidity Agent. If the Liquidity Agent shall resign, then
the Required Investors during such 5-day period shall appoint from among the
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Investors a successor Liquidity Agent. If for any reason no successor Liquidity
Agent is appointed by the Required Investors during such 5-day period, then
effective upon the expiration of such 5-day period, the Investors shall perform
all of the duties of the Liquidity Agent hereunder and all payments in respect
of the Aggregate Unpaids. After any retiring Liquidity Agent's resignation
hereunder as Liquidity Agent, the provisions of this Article VIII and Article IX
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Liquidity Agent under this Agreement.
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1 Assignments and Participations.
(a) Each Investor may upon at least 30 days' notice to VFCC, the Deal
Agent, the Liquidity Agent and S&P and Moody's, assign to one or more banks or
other entities all or a portion of its rights and obligations under this
Agreement; provided, however, that (i) each such assignment shall be of a
constant, and not a varying percentage of all of the assigning Investor's rights
and obligations under this Agreement, (ii) the amount of the Commitment of the
assigning Investor being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than the lesser of (A) $15,000,000 or an integral
multiple of $1,000,000 in excess of that amount and (B) the full amount of the
assigning Investor's Commitment, (iii) each such assignment shall be to an
Eligible Assignee, (iv) the parties to each such assignment shall execute and
deliver to the Deal Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500 or such lesser amount as shall be approved by the Deal Agent, (v) the
parties to each such assignment shall have agreed to reimburse the Deal Agent,
the Liquidity Agent and VFCC for all fees, costs and expenses (including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for each of the Deal Agent, the Liquidity Agent and VFCC) incurred by the Deal
Agent, the Liquidity Agent and VFCC, respectively, in connection with such
assignment and (vi) there shall be no increased costs, expenses or taxes
incurred by the Deal Agent, the Liquidity Agent or VFCC upon such assignment or
participation, and provided further that upon the effective date of such
assignment the provisions of Section 3.03(f) of the Administration Agreement
shall be satisfied. Upon such execution, delivery and acceptance by the Deal
Agent and the Liquidity Agent and the recording by the Deal Agent, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be the date of acceptance thereof by the Deal Agent and the
Liquidity Agent, unless a later date is specified therein, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of an Investor hereunder and (ii)
the Investor assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an
<PAGE>
Assignment and Acceptance covering all or the remaining portion of an assigning
Investor's rights and obligations under this Agreement, such Investor shall
cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Investor assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Investor makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of VFCC or the performance or observance by VFCC of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Deal Agent or the
Liquidity Agent, such assigning Investor or any other Investor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assigning Investor and such assignee confirm that such
assignee is an Eligible Assignee; (vi) such assignee appoints and authorizes
each of the Deal Agent and the Liquidity Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
such agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as an Investor.
(c) The Deal Agent shall maintain at its address referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Investors and the
Commitment of, and the Capital of, each Asset interest owned by each investor
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and VFCC, the
Seller and the Investors may treat each Person whose name is recorded in the
Register as an Investor hereunder for all purposes of this Agreement. The
Register shall be available for inspection by VFCC, the Liquidity Agent or any
Investor at any reasonable time and from time to time upon reasonable prior
notice.
(d) Subject to the provisions of Section 10.1(a), upon its receipt of
an Assignment and Acceptance executed by an assigning Investor and an assignee,
the Deal Agent and the Liquidity Agent shall each, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit D
hereto, accept such Assignment and Acceptance, and the Deal Agent shall then (i)
record the information contained therein in the Register and (ii) give prompt
notice thereof to VFCC.
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(e) Each Investor may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
each Asset Interest owned by it); provided, however, that (i) such Investor's
obligations under this Agreement (including, without limitation, its Commitment
hereunder) shall remain unchanged, (ii) such Investor shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Deal Agent and the other Investors shall continue to deal solely
and directly with such Investor in connection with such Investor's rights and
obligations under this Agreement, and provided further that the Deal Agent shall
have confirmed that upon the effective date of such participation the provisions
of Section 3.03(f) of the Administration Agreement shall be satisfied.
Notwithstanding anything herein to the contrary, each participant shall have the
rights of an Investor (including any right to receive payment) under Sections
2.12 and 2.13; provided, however, that no participant shall be entitled to
receive payment under either such Section in excess of the amount that would
have been payable under such Section by the Seller to the Investor granting its
participation had such participation not been granted, and no Investor granting
a participation shall be entitled to receive payment under either such Section
in an amount which exceeds the sum of (i) the amount to which such Investor is
entitled under such Section with respect to any portion of any Asset Interest
owned by such Investor which is not subject to any participation plus (ii) the
aggregate amount to which its participants are entitled under such Sections with
respect to the amounts of their respective participations. With respect to any
participation described in this Section 10.1, the participant's rights as set
forth in the agreement between such participant and the applicable Investor to
agree to or to restrict such Investor's ability to agree to any modification,
waiver or release of any of the terms of this Agreement or to exercise or
refrain from exercising any powers or rights which such Investor may have under
or in respect of this Agreement shall be limited to the right to consent to any
of the matters set forth in Section 11.1 of this Agreement.
(f) Each Investor may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.1, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Seller or VFCC furnished to such
Investor by or on behalf of the Seller or VFCC.
(g) In the event (i) an Investor ceases to qualify as an Eligible
Assignee, or (ii) an Investor makes demand for compensation pursuant to Section
2.12 or Section 2.13, VFCC may, and, upon the direction of the Seller and prior
to the occurrence of a Restricting Event, shall, in any such case,
notwithstanding any provision to the contrary herein, replace such Investor with
an Eligible Assignee by giving three Business Days' prior written notice to such
Investor. In the event of the replacement of an Investor, such Investor agrees
(i) to assign all of its rights and obligations hereunder to an Eligible
Assignee selected by VFCC upon payment to such Investor of the amount of such
Investor's Asset Interests together with any accrued and unpaid Yield thereon,
all accrued and unpaid commitment fees owing to such Investor and all other
amounts owing to such Investor hereunder and (ii) to execute and deliver an
Assignment and Acceptance and such other documents evidencing such assignment as
shall be necessary or reasonably requested by VFCC or the Deal Agent. In the
event that any Investor ceases to qualify as an Eligible Assignee, such affected
Investor agrees (1) to give the Deal Agent, the Seller and VFCC
<PAGE>
prompt written notice thereof and (2) subject to the following proviso, to
reimburse the Deal Agent, the Liquidity Agent, the Seller, VFCC and the relevant
assignee for all fees, costs and expenses (including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for each of the Deal
Agent, the Liquidity Agent, the Seller and VFCC and such assignee) incurred by
the Deal Agent, the Liquidity Agent, the Seller, VFCC and such assignee,
respectively, in connection with any assignment made pursuant to this Section
10.1(g) by such affected Investor; provided, however, that such affected
Investor's liability for such costs, fees and expenses shall be limited to the
amount of any up-front fees paid to such affected Investor at the time that it
became a party to this Agreement.
(h) Nothing herein shall prohibit any Investor from pledging or
assigning as collateral any of its rights under this Agreement to any Federal
Reserve Bank in accordance with applicable law and any such pledge or collateral
assignment may be made without compliance with Section 10.1(a) or Section
10.1(b).
(i) In the event any Investor causes increased costs, expenses or taxes
to be incurred by the Deal Agent, Liquidity Agreement or VFCC in connection with
the assignment or participation of such Investor's rights and obligations under
this Agreement to an Eligible Assignee then such Investor agrees that it will
make reasonable efforts to assign such increased costs, expenses or taxes to
such Eligible Assignee in accordance with the provisions of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments and Waivers.
(a) Except as provided in this Section 11.1, no amendment, waiver or
other modification of any provision of this Agreement shall be effective without
the written agreement of the Seller, the Deal Agent and the Required Investors;
provided, however, that no such amendment, waiver or modification affecting the
rights or obligations of any Hedge Counterparty, the Backup Servicer or the
Collateral Custodian shall be effective as against that Hedge Counterparty, the
Backup Servicer and/or the Collateral Custodian, as the case may be, without the
written agreement of such Persons. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
(b) No amendment, waiver or other modification of this Agreement shall:
(i) without the consent of each affected Purchaser, (A) extend
the Commitment Termination Date or the date of any payment or deposit
of Collections by the Seller or the Servicer, (B) reduce the rate or
extend the time of payment of Yield (or any component thereof), (C)
reduce any fee payable to the Deal Agent for the benefit of the
Purchasers, (D) except pursuant to Article X hereof, change the amount
of the Capital of any Purchaser, an Investor's pro rata share or an
Investor's Commitment, (E) amend,
<PAGE>
modify or waive any provision of the definition of Required Investors
or this Section 11.1(b), (F) consent to or permit the assignment or
transfer by the Seller of any of its rights and obligations under this
Agreement or (G) amend or modify any defined term (or any defined term
used directly or indirectly in such defined term) used in clauses (A)
through (E) above in a manner which would circumvent the intention of
the restrictions set forth in such clauses; or
(ii) without the written consent of the Deal Agent, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Agent.
(c) Notwithstanding the foregoing provisions of this Section 11.1,
without the consent of the Investors, the Deal Agent may, with the consent of
the Seller amend this Agreement solely to add additional Persons as Investors
hereunder. Any modification or waiver shall apply to each of the Purchasers
equally and shall be binding upon the Seller, the Purchasers and the Deal Agent.
Section 11.2 Notices, Etc.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or specified in such party's Assignment and Acceptance or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall be
effective, upon receipt, or in the case of (a) notice by mail, five days after
being deposited in the United States mail, first class postage prepaid, (b)
notice by telex, when telexed against receipt of answer back, or (c) notice by
facsimile copy, when verbal communication of receipt is obtained, except that
notices and communications pursuant to Article 11 shall not be effective until
received with respect to any notice sent by mail or telex.
Section 11.3 Ratable Payments.
If any Secured Party, whether by setoff or otherwise, has payment made
to it with respect to any portion of the Aggregate Unpaids owing to such Secured
Party (other than payments received pursuant to Section 8.1 in a greater
proportion than that received by any other Secured Party), such Secured Party
agrees, promptly upon demand, to purchase for cash without recourse or warranty
a portion of the Aggregate Unpaids held by the other Secured Parties so that
after such purchase each Secured Party will hold its ratable proportion of the
Aggregate Unpaids; provided, however, that if all or any portion of such excess
amount is thereafter recovered from such Secured Party, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
<PAGE>
Section 11.4 No Waiver, Rights and Remedies.
No failure on the part of the Deal Agent, the Collateral Custodian, the
Backup Servicer or a Secured Party to exercise, and no delay in exercising, any
right or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right. The rights and
remedies herein provided are cumulative and not exclusive of any rights and
remedies provided by law.
Section 11.5 Binding Effect; Benefit of Agreement.
This Agreement shall be binding upon and inure to the benefit of the
Seller, the Deal Agent, the Backup Servicer, the Collateral Custodian, the
Secured Parties and their respective successors and permitted assigns and, in
addition, the provisions of 2.7(a)(i), 2.8(b)(i) and 2.9(b)(i) shall inure to
the benefit of each Hedge Counterparty, whether or not that Hedge Counterparty
is a Secured Party.
Section 11.6 Term of this Agreement.
This Agreement, including, without limitation, the Seller's obligation
to observe its covenants set forth in Article V, and the Servicer's obligation
to observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by the Seller pursuant to Articles III and IV and the
indemnification and payment provisions of Article VIII and Article IX and the
provisions of Section 11.9 and Section 11.10 shall be continuing and shall
survive any termination of this Agreement.
Section 11.7 Governing Law; 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 SECURED PARTIES, THE SELLER, THE
LIQUIDITY AGENT AND THE DEAL AGENT HEREBY AGREES TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF
THE PARTIES HERETO AND EACH SECURED PARTY 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 CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
Section 11.8 Waiver of Jury Trial.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE SECURED PARTIES,
THE SELLER AND THE DEAL AGENT WAIVES ANY RIGHT TO HAVE A
<PAGE>
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 11.9 Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification granted to the Deal
Agent, the Liquidity Agent, the Backup Servicer, the Collateral Custodian, the
Secured Parties and its or their Affiliates and officers, directors, employees
and agents thereof under Article VIII hereof, the Seller agrees to pay on demand
all costs and expenses of the Deal Agent, the Liquidity Agent, the Backup
Servicer, the Collateral Custodian and the Secured Parties incurred in
connection with the preparation, execution, delivery, administration (including
periodic auditing), amendment or modification of, or any waiver or consent
issued in connection with, this Agreement and the other documents to be
delivered hereunder or in connection herewith (excluding any Hedging Agreement),
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Deal Agent, the Liquidity Agent, the Backup Servicer, the
Collateral Custodian and the Secured Parties with respect thereto and with
respect to advising the Deal Agent, the Liquidity Agent, the Backup Servicer,
the Collateral Custodian and the Secured Parties as to their respective rights
and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith (excluding any Hedging Agreement), and all
costs and expenses, if any (including reasonable counsel fees and expenses),
incurred by the Deal Agent, the Liquidity Agent, the Backup Servicer, the
Collateral Custodian or the Secured Parties in connection with the enforcement
of this Agreement and the other documents to be delivered hereunder or in
connection herewith (including any Hedging Agreement).
(b) The Seller shall pay on demand any and all stamp, sales, excise and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Agreement, the other documents
to be delivered hereunder or any agreement or other document providing liquidity
support, credit enhancement or other similar support to the Purchaser in
connection with this Agreement or the funding or maintenance of Purchases
hereunder.
(c) The Seller shall pay on demand all other costs, expenses and Taxes
(excluding income taxes) incurred by any Issuer or any shareholder of such
Issuer ("Other Costs"), including, without limitation, all costs and expenses
incurred by the Deal Agent in connection with periodic audits of the Seller's or
the Servicer's books and records and the cost of rating such Issuer's commercial
paper with respect to financing its purchase of Asset Interests hereunder by
independent financial rating agencies.
<PAGE>
Section 11.10 No Proceedings.
Each of the Seller, the Deal Agent, the Liquidity Agent, the Servicer,
the Backup Servicer, the Collateral Custodian and the Secured Parties hereby
agrees that it will not institute against, or join any other Person in
instituting against VFCC any proceedings of the type referred to in Section
6.8(d) and 6.9(c) so long as any commercial paper issued by VFCC shall be
outstanding and there shall not have elapsed one year and one day since the last
day on which any such commercial paper shall have been outstanding.
Section 11.11 Recourse Against Certain Parties.
No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Secured Party as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any administrator of such Secured Party
or any incorporator, affiliate, stockholder, officer, employee or director of
such Secured Party or of any such administrator, as such, by the enforcement of
any assessment or by any legal or equitable proceeding, by virtue of any statute
or otherwise; it being expressly agreed and understood that the agreements of
such Secured Party contained in this Agreement and all of the other agreements,
instruments and documents entered into by it pursuant hereto or in connection
herewith are, in each case, solely the corporate obligations of such Secured
Party, and that no personal liability whatsoever shall attach to or be incurred
by any administrator of such Secured Party or any incorporator, stockholder,
affiliate, officer, employee or director of such Secured Party or of any such
administrator, as such, or any other of them, under or by reason of any of the
obligations, covenants or agreements of such Secured Party contained in this
Agreement or in any other such instruments, documents or agreements, or which
are implied therefrom, and that any and all personal liability of every such
administrator of such Secured Party and each incorporator, stockholder,
affiliate, officer, employee or director of such Secured Party or of any such
administrator, or any of them, for breaches by such Secured Party of any such
obligations, covenants or agreements, which liability may arise either at common
law or at equity, by statute or constitution, or otherwise, is hereby expressly
waived as a condition of and in consideration for the execution of this
Agreement. The provisions of this Section 11.11 shall survive the termination of
this Agreement.
Section 11.12 Protection of Ownership Interests of the Purchasers;
Intent of Parties; Security Interest.
(a) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may reasonably be necessary or desirable, or that the Deal Agent
may reasonably request, to perfect, protect or more fully evidence the Asset
Interests and the undivided ownership interest in the Assets in the Asset Pool
represented by such Asset Interests, or to enable the Deal Agent or the Secured
Parties to exercise and enforce their rights and remedies hereunder.
<PAGE>
(b) If the Seller or the Servicer fails to perform any of its
obligations hereunder after five Business Days' notice from the Deal Agent, the
Deal Agent or any Secured Party may (but shall not be required to) perform, or
cause performance of, such obligation; and the Deal Agent's or such Secured
Party's costs and expenses incurred in connection therewith shall be payable by
the Seller (if the Servicer that fails to so perform is the Seller or an
Affiliate thereof) as provided in Article VIII, as applicable. The Seller
irrevocably authorizes the Deal Agent and appoints the Deal Agent as its
attorney-in-fact to act on behalf of the Seller (i) to execute on behalf of the
Seller as debtor and to file financing statements necessary or desirable in the
Deal Agent's sole discretion to perfect and to maintain the perfection and
priority of the interest of the Secured Parties in the Assets and (ii) to file a
carbon, photographic or other reproduction of this Agreement or any financing
statement with respect to the Assets as a financing statement in such offices as
the Deal Agent in its sole discretion deems necessary or desirable to perfect
and to maintain the perfection and priority of the interests of the Secured
Parties in the Assets. This appointment is coupled with an interest and is
irrevocable.
(c) The parties hereto intend that the conveyance of Asset Interests by
the Seller to the Purchasers shall be treated as sales for all purposes. If,
despite such intention, a determination is made that such transactions shall not
be treated as sales, then the parties hereto intend that this Agreement
constitutes a security agreement and the transactions effected hereby constitute
secured loans by the Purchasers to the Seller under applicable law. For such
purpose, the Seller hereby transfers, conveys, assigns and grants to the Deal
Agent, for the benefit of the Secured Parties, a continuing security interest in
all Assets, all Collections, all Hedging Agreements and the proceeds of the
foregoing to secure the repayment of all Capital, all payments at any time due
or accrued in respect of the Yield on any Asset Interest and all other payments
at any time due (whether accrued or due) by the Seller hereunder (including
without limit any amount owing under Article VIII hereof), under any Hedging
Agreement (including, without limitation, payments in respect of the termination
of any such Hedging Agreement) or under any fee letter to the Deal Agent and
each Purchaser.
Section 11.13 Confidentiality
(a) Each of the Deal Agent, the Secured Parties, the Liquidity Agent,
the Servicer, the Collateral Custodian, the Backup Servicer and the Seller shall
maintain and shall cause each of its employees and officers to maintain the
confidentiality of the Agreement and all information with respect to the other
parties, including all information regarding the business of the Seller and the
Servicer hereto and their respective businesses obtained by it or them in
connection with the structuring, negotiating and execution of the transactions
contemplated herein, except that each such party and its officers and employees
may (i) disclose such information to its external accountants, attorneys,
investors, potential investors and the agents of such Persons ("Excepted
Persons"), provided, however, that each Excepted Person shall, as a condition to
any such disclosure, agree for the benefit of the Deal Agent, the Secured
Parties, the Liquidity Agent, the Servicer, the Collateral Custodian, the Backup
Services and the Seller that such information shall be used solely in connection
with such Excepted Person's evaluation of, or relationship with, the Seller and
its affiliates, (ii) disclose the existence of the Agreement, but not the
financial terms thereof, (iii) disclose such information as is required by an
applicable law or an order of an
<PAGE>
judicial or administrative proceeding and (iv) disclose the Agreement and such
information in any suit, action, proceeding or investigation (whether in law or
in equity or pursuant to arbitration) involving any of the Transaction Documents
or any Hedging Agreement for the purpose of defending itself, reducing its
liability, or protecting or exercising any of its claims, rights, remedies, or
interests under or in connection with any of the Transaction Documents or any
Hedging Agreement. It is understood that the financial terms that may not be
disclosed except in compliance with this Section 11.13(a) include, without
limitation, all fees and other pricing terms, and all Payout Events, Restricting
Events, Servicer Defaults, and priority of payment provisions
(b) Anything herein to the contrary notwithstanding, the Seller and the
Servicer each hereby consents to the disclosure of any nonpublic information
with respect to it (i) to the Deal Agent, the Liquidity Agent, the Collateral
Custodian, the Backup Servicer or the Secured Parties by each other, (ii) by the
Deal Agent or the Purchasers to any prospective or actual assignee or
participant of any of them or (iii) by the Deal Agent, the Liquidity Agent or a
Purchaser to any Rating Agency, Commercial Paper dealer or provider of a surety,
guaranty or credit or liquidity enhancement to a Purchaser and to any officers,
directors, employees, outside accountants and attorneys of any of the foregoing,
provided each such Person is informed of the confidential nature of such
information. In addition, the Secured Parties, the Liquidity Agent and the Deal
Agent may disclose any such nonpublic information as required pursuant to any
law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law).
(c) Notwithstanding anything herein to the contrary, the foregoing
shall not be construed to prohibit (i) disclosure of any and all information
that is or becomes publicly known, (ii) disclosure of any and all information
(A) if required to do so by any applicable statute, law, rule or regulation, (B)
to any government agency or regulatory body having or claiming authority to
regulate or oversee any respects of the Collateral Custodian's or Backup
Servicer's business or that of their affiliates, (C) pursuant to any subpoena,
civil investigative demand or similar demand or request of any court, regulatory
authority, arbitrator or arbitration to which the Collateral Custodian or Backup
Servicer or an affiliate or an officer, director, employer or shareholder
thereof is a party, (D) in any preliminary or final offering circular,
registration statement or contract or other document pertaining to the
transactions contemplated herein approved in advance by the Seller or Servicer
or (E) to any affiliate, independent or internal auditor, agent, employee or
attorney of the Collateral Custodian or Backup Servicer having a need to know
the same, provided that the Collateral Custodian or Backup Servicer advises such
recipient of the confidential nature of the information being disclosed, or
(iii) any other disclosure authorized by the Seller or Servicer.
Section 11.14 Execution in Counterparts; Severability; Integration.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
<PAGE>
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
This Agreement contains the final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement among the parties hereto with respect to
the subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Originator to the Deal Agent and the
Purchasers.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: FIDELITY LEASING SPC I, INC.
By_________________________________________
Title:
THE SERVICER: FIDELITY LEASING, INC.
By_________________________________________
Title:
THE INVESTORS: FIRST UNION NATIONAL BANK
By_________________________________________
Title:
Commitment: $100,000,000
First Union National Bank
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Mr. Terry Begley
Facsimile No.: (704) 374-3254
Confirmation No: (704) 374-4001
<PAGE>
VFCC: VARIABLE FUNDING CAPITAL CORPORATION
By First Union Capital Markets, a division
of Wheat First Securities, Inc. as
attorney-in-fact
By_________________________________________
Title:
Variable Funding Capital Corporation
c/o First Union Capital Markets, a division of
Wheat First Securities, Inc.
One First Union Center, TW-6
Attention: Conduit Administration
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 383-9343
With a copy to:
Lord Securities Corp.
Attention:
Facsimile No.: (____) __________
Confirmation No.: (____) __________
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS, a division
of WHEAT FIRST SECURITIES, INC.
By_________________________________________
Title:
First Union Capital Markets, a division of
Wheat First Securities, Inc.
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile No.: (704) 383-6036
Telephone No.: (704) 383-9343
<PAGE>
THE LIQUIDITY AGENT: FIRST UNION NATIONAL BANK
By_________________________________________
Title:
First Union National Bank
One First Union Center, TW-6
Charlotte, North Carolina 28288
Attention: Mr. Terry Begley
Facsimile No.: (704) 374-3254
Telephone No.: (704) 374-4001
THE COLLATERAL CUSTODIAN: HARRIS TRUST AND SAVINGS BANK,
as Collateral Custodian
By_________________________________________
Title:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administrator
Facsimile: (312) 461-3525
Telephone: (312) 461-2532
THE BACKUP SERVICER: HARRIS TRUST AND SAVINGS BANK,
as Backup Servicer
By_________________________________________
Title:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administrator
Facsimile: (312) 461-3525
Telephone: (312) 461-2532
<PAGE>
FIDELITY LEASING, INC.: FIDELITY LEASING, INC.
By_________________________________________
Title:
<PAGE>
AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
among
FIDELITY LEASING, INC.,
JLA CREDIT CORPORATION
and
FIDELITY LEASING SPC II, INC.
February 5, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
GENERAL
Section 1.1 Certain Defined Terms. 1
Section 1.2 Other Definitional Provisions. 2
ARTICLE II
SALE AND CONVEYANCE
Section 2.1 Sale. 3
Section 2.2 Subsequent Contracts. 5
ARTICLE III
PURCHASE PRICE AND PAYMENT; MONTHLY REPORT
Section 3.1 Purchase Price. 6
Section 3.2 Payment of Purchase Price. 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Seller Representations and Warranties. 6
Section 4.2 Seller Representations and Warranties Regarding the
Agreement and the Contracts. 10
Section 4.3 Representations and Warranties of the Buyer. 11
ARTICLE V
COVENANTS
Section 5.1 Seller Covenants. 12
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Retransfer of Ineligible Contracts. 14
Section 6.2 Retransfer of Purchased Assets. 15
Section 6.3 Adjustments. 16
Section 6.4 Substitution of Contracts 16
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to the Buyer's Obligations Regarding Contracts. 17
ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Termination. 18
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Amendment. 18
Section 9.2 Governing Law. 18
Section 9.3 Notices. 19
Section 9.4 Severability of Provisions. 20
Section 9.5 Assignment. 20
Section 9.6 Further Assurances. 20
Section 9.7 No Waiver; Cumulative Remedies. 21
Section 9.8 Counterparts. 21
Section 9.9 Binding Effect; Third-Party Beneficiaries. 21
Section 9.10 Merger and Integration. 21
Section 9.11 Headings. 21
Section 9.12 Schedules and Exhibits. 21
Section 9.13 No Proceedings. 21
Section 9.14 Merger or Consolidation of, or Assumption of the
Obligations of, the Sellers. 22
Section 9.15 Costs, Expenses and Taxes 22
Section 9.16 Recourse Against Certain Parties. 23
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment
Schedule I Purchased Contracts
Schedule II Trade Names
<PAGE>
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
------------------------------------------------
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT, dated as of February
5, 1999 by and among FIDELITY LEASING, INC., a Pennsylvania corporation ("FLI"),
JLA CREDIT CORPORATION, a Delaware corporation ("JLA" and together with FLI, the
"Sellers") and FIDELITY LEASING SPC II, INC., a Delaware corporation (the
"Buyer").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, FLI and the Buyer are parties to a Purchase and Sale
Agreement, dated as of December 28, 1998 (the "Original Agreement") pursuant to
which the Buyer has purchased and accepted from FLI and FLI has sold or
contributed to the Buyer certain contracts originated or purchased by FLI in its
normal course of business, together with, among other things, the related rights
of payment thereunder and the interest of FLI in the related equipment and other
interests securing the payments to be made under such contracts;
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement as set forth in this Agreement in order to add JLA as a "Seller"
hereunder.
NOW, THEREFORE, it is hereby agreed by and between the Buyer and the
Sellers as follows:
I. ARTICLE
GENERAL
Section 1.1 Certain Defined Terms.
----------------------
Certain capitalized terms used throughout this Agreement are defined
above or in this Section 1.1. In addition, capitalized terms used but not
defined herein have the meanings given to such terms in the Receivables Purchase
Agreement.
Agreement: This Amended and Restated Purchase and Sale Agreement, as the same
shall be amended, supplemented, restated or replaced from time to time.
Excess Amount: Shall have the meaning specified in Section 3.2.
Original Agreement: Shall have the meaning specified in the first recital.
Purchase: Any purchase made hereunder pursuant to Section 2.1.
<PAGE>
Purchase Date: Any day on which any Purchased Asset is acquired by the Buyer
pursuant to the terms of this Agreement.
Purchase Price: Shall have the meaning specified in Section 3.1.
Purchased Assets: The interests and property described in Sections
2.1(a)(i)-(vi) and (b)(i)-(vi).
Purchased Contracts: The Contracts listed on Schedule I hereto.
Receivables Purchase Agreement: The Receivables Purchase Agreement dated as of
December 29, 1998 by and among the Buyer, as seller, Fidelity Leasing, Inc., as
servicer, Market Street Funding Corporation, as purchaser, Harris Trust and
Savings Bank, as collateral custodian and backup servicer, and PNC Bank,
National Association, as administrator, as the same may be amended,
supplemented, restated or replaced from time to time.
Required Lease Cancellation Payment: Shall have the meaning set forth in Section
6.3(b).
Sale Papers: Shall have the meaning set forth in Section 4.1(a).
Servicer: Initially, Fidelity Leasing, Inc., in its capacity as the Servicer
under the Receivables Purchase Agreement, and its permitted successors and
assigns, and thereafter any Person appointed as successor as provided therein to
service the Assets thereunder.
Subsequent Contract List: The list of Contracts to be sold by a Seller to the
Buyer on a Subsequent Purchase Date.
Subsequent Contracts: On any Subsequent Purchase Date, the Contracts sold by a
Seller to the Buyer on such date as listed on the Subsequent Contact List.
Subsequent Purchase Date: Each Purchase Date other than the Closing Date.
Substitution Date: Any date on which either Seller transfers a Substitute
Contract to the Buyer.
Section 1.2 Other Definitional Provisions.
------------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement have the meanings as so defined herein when used in any other
Transaction Document, certificate, report or other document made or delivered
pursuant hereto.
(b) Each term defined in the singular form in Section 1.1 or elsewhere
in this Agreement shall mean the plural thereof when the plural form of such
term is used in any Transaction Document, certificate, report or other document
made or delivered pursuant hereto, and each term defined in the plural form in
Section 1.1 shall mean the singular thereof when the singular form of such term
is used herein or therein.
<PAGE>
(c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Agreement shall refer to this agreement as a whole and not to any
particular provision of this Agreement, and article, section, subsection,
schedule and exhibit references herein are references to articles, sections,
subsections, schedules and exhibits to this Agreement unless otherwise
specified.
(d) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Receivables Purchase Agreement, the terms and provisions contained herein shall
govern with respect to this Agreement.
ARTICLE II
SALE AND CONVEYANCE
Section 2.1 Sale.
-----
(a) On the Closing Date, each Seller hereby sells, transfers, assigns,
sets over and otherwise conveys to the Buyer as of the Closing Date, and the
Buyer hereby purchases from the Seller, without recourse, all right, title and
interest of the Seller in, to and under the following property, whether now
existing or hereafter created or acquired (to the extent not previously sold to
the Buyer pursuant to the Original Agreement):
(i) the Contracts that are owned by such Seller on the Closing
Date and that are listed on the Contract List, together with all Collections and
all monies due or to become due in payment of such Contracts after the related
Cut Off Date, and any payments in respect of a Casualty Loss or Early
Termination, but excluding any Scheduled Payments due on or prior to the related
Cut Off Date and any Excluded Amounts;
(ii) the Equipment related to such Contracts, including all
proceeds from any sale or other disposition of such Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future specifically
with respect to such Contracts or the Obligor thereunder under any guarantee or
similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
and
<PAGE>
(vi) all income and proceeds of the foregoing.
(b) On each Subsequent Purchase Date, either or both Sellers will sell,
transfer, assign and set over and otherwise convey to the Buyer and the Buyer
will purchase from the applicable Seller(s), without recourse, all right, title
and interest of such Seller(s) or the in, to and under the following property,
whether now existing or hereafter created or acquired:
(i) the Subsequent Contracts identified on the Subsequent
Contract List delivered by such Seller(s) to the Buyer two Business Days before
the applicable Subsequent Purchase Date, together with all Collections and all
monies due or to become due in payment of such Contracts after the related Cut
Off Date, and any payments in respect of a casualty or early termination, but
excluding any Scheduled Payments due on or prior to the related Cut Off Date and
any Excluded Amounts;
(ii) the Equipment related to such Contracts, including all
proceeds from any sale or other disposition of such Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future specifically
with respect to such Contracts or the Obligor thereunder under any guarantee or
similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
and
(vi) all income and proceeds of the foregoing.
The foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Buyer of any obligation of the Sellers or any other Person in connection with
the Contracts or under any agreement or instrument relating thereto including,
without limitation, any obligation to any Obligors.
(c) In connection with the sale of the Purchased Assets, each Seller
agrees (i) to record and file, at its own expense, any financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Purchased Assets, meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect, and maintain the perfection of, the sale of the Purchased Assets
from such Seller to the Buyer on and after the Closing Date, (ii) that such
financing statements shall name such Seller, as seller, and the Buyer, as
purchaser, of the Purchased Assets and (iii) to deliver a file-stamped copy of
such financing statements or other evidence of such filings (excluding
continuation statements, which shall be delivered as filed) to the Buyer on or
prior to the initial Purchase Date, in the case of the Original Contracts and
(if any additional filing is necessary) on or prior to the related Subsequent
Purchase Date, in the case of Subsequent Contracts.
<PAGE>
(d) In connection with the sale of the Purchased Assets, each Seller
further agrees that it will, at its own expense, indicate clearly and
unambiguously in its computer files, on or prior to the Closing Date in the case
of the Original Contracts and on or prior to the related Subsequent Purchase
Date in the case of each Subsequent Contract, that such Contracts have been sold
to the Buyer pursuant to this Agreement. Each Seller further agrees to deliver
to the Buyer (i) on the Closing Date, a computer file or microfiche list
containing a true and complete list of all Original Contracts, identified by
account number and Outstanding Balance as of the Cut Off Date and (ii) on any
Subsequent Purchase Date with respect to Subsequent Contracts, a computer file
or microfiche list containing a true and complete list of all Subsequent
Contracts transferred on such date identified by account number and Outstanding
Balance as of the related Additional Cut Off Date. Such file or list shall be
marked as Schedule I, shall be delivered to the Buyer as confidential and
proprietary, and is hereby incorporated into and made a part of this Agreement.
(e) It is the intention of the parties hereto that the conveyance of
the Contracts and the other Purchased Assets by the Sellers to the Buyer as
provided in this Section 2.1 be, and be construed as, an absolute sale, without
recourse, of the Contracts and the other Purchased Assets by the Seller to the
Buyer. Furthermore, it is not intended that such conveyance be deemed a pledge
of the Contracts and the other Purchased Assets by the applicable Seller to the
Buyer to secure a debt or other obligation of such Seller. If, however,
notwithstanding the intention of the parties, the conveyance provided for in
this Section 2.1 is determined to be a transfer for security, then this
Agreement shall also be deemed to be a "security agreement" within the meaning
of Article 9 of the UCC and each Seller hereby grants to the Buyer a "security
interest" within the meaning of Article 9 of the UCC in all of such Seller's
right, title and interest in and to the Contracts and the other Purchased
Assets, now existing and hereafter created, to secure a loan in an amount equal
to the aggregate Purchase Price and each of such Seller's other payment
obligations under this Agreement.
Section 2.2 Subsequent Contracts.
---------------------
(a) Each Seller shall on or prior to any Subsequent Purchase Date with
respect to any Contracts to be sold by such Seller on such Subsequent Purchase
Date execute and deliver to the Buyer a written assignment from such Seller to
the Buyer substantially in the form of Exhibit A. From and after such Subsequent
Purchase Date, such Subsequent Contracts shall be deemed to be Contracts
hereunder.
(b) Covenants of the Sellers In Connection With Additions. On or before
any Subsequent Purchase Date with respect to any Contracts acquired by the Buyer
as described in subsection 2.1(b), each applicable Seller shall:
<PAGE>
(i) clearly indicate in its files that such Contracts have been
sold to the Buyer and deliver to the Buyer a computer file or microfiche list
which such Seller shall represent to contain a true and complete list of such
Subsequent Contracts, identified by account number as of the related Cut Off
Date, which computer file or microfiche list shall be as of such date
incorporated into and made a part of this Agreement;
(ii) provide the Buyer with an Officer's Certificate certifying as
follows: (A) each such Contract was, as of the related Subsequent Purchase Date,
an Eligible Contract, (B) no selection procedures believed by such Seller to be
materially adverse to the interest of the Buyer were utilized in selecting such
Contracts from the available Eligible Contracts in the Seller's portfolio, (C)
such Contracts and all proceeds thereof will be conveyed to the Buyer free and
clear of any Lien of any Person claiming through or under such Seller or any of
its Affiliates, except for Liens permitted hereunder, (D) as of the related
Subsequent Purchase Date, (x) no Insolvency Event with respect to such Seller
has occurred, (y) neither such Seller nor the Buyer is insolvent and (z) the
sale of such Contracts to the Buyer has not been made in contemplation of the
occurrence of any Insolvency Event with respect to such Seller, (E) as of the
related Subsequent Purchase Date, no Restricting Event with respect to such
Seller has occurred and (F) each of the conditions precedent set forth in
Section 7.1 have been satisfied with respect to such Contracts; and
(iii) record and file financing statements with respect to such
Contracts meeting the requirements of applicable state law in such manner and in
such jurisdictions as are necessary to perfect the sale of such Contracts by
such Seller to the Buyer.
ARTICLE III
PURCHASE PRICE AND PAYMENT; MONTHLY REPORT
Section 3.1 Purchase Price.
---------------
The purchase price for each Contract sold to the Buyer by a Seller
under this Agreement (the "Purchase Price") shall be a dollar amount equal to
the Discounted Contract Balance determined as of the related Cut Off Date.
Section 3.2 Payment of Purchase Price.
--------------------------
(a) The Purchase Price for each Contract existing on the Closing Date
shall be paid or provided for on the Closing Date (i) by payment in immediately
available funds to the applicable Seller to the extent available and (ii) the
remainder shall be deemed paid through a contribution to capital of the Buyer by
the applicable Seller in an amount equal to such remainder.
<PAGE>
(b) The Purchase Price for any portion of the Contracts sold by a
Seller on any date after the Closing Date shall be paid either (i) in cash or
(ii) if the Buyer does not have sufficient cash to pay the full amount of the
Purchase Price, by means of a capital contribution by the applicable Seller to
the Buyer.
(c) Unless otherwise specified herein, all payments of the Purchase
Price of any Contract sold hereunder shall be made not later than 3:00 p.m. (New
York City time) on the date specified therefor in lawful money of the United
States of America in same day funds by depositing such amounts in the bank
account designated in writing by the applicable Seller to the Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Seller Representations and Warranties.
--------------------------------------
Each Seller hereby represents and Warrants to the Buyer, as of the
initial Purchase Date and each Subsequent Purchase Date, that:
(a) Organization and Good Standing. Such Seller is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its formation and has full corporate power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and as such business is presently conducted and to execute,
deliver and perform its obligations under this Agreement and each other document
or instrument to be delivered by it hereunder (collectively, the "Sale Papers").
(b) Due Qualification. Such Seller is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would have a material adverse effect on its ability to perform its
obligations hereunder or under the Sale Papers.
(c) Due Authorization. The execution and delivery of this Agreement and
each of the Sale Papers, and the consummation of the transactions provided for
herein and therein have been duly authorized by such Seller by all necessary
corporate action on its part.
(d) No Conflict. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof, will not conflict
with, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material default
under, any material indenture, contract, agreement, mortgage, deed of trust, or
other instrument to which such Seller is a party or by which it or any of its
property is bound.
<PAGE>
(e) No Violation. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof (including, without
limitation, the sale of Purchased Assets by such Seller or remittance of
Collections in accordance with the provisions of this Agreement), will not
conflict with or violate, in any material respect, any Requirements of Law
applicable to such Seller.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best its knowledge, threatened against such Seller before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or any of the
Sale Papers, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any of the Sale Papers or (iii) seeking any
determination or ruling that could reasonably be expected to be adversely
determined, and if adversely determined, would materially and adversely affect
the performance by such Seller of its obligations under this Agreement or any of
the Sale Papers.
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
in connection with the execution and delivery of this Agreement and the Sale
Papers, the performance of the transactions contemplated by this Agreement and
the Sale Papers and the fulfillment of or terms hereof and thereof, have been
obtained.
(h) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by such Seller.
(i) Solvency. The transactions contemplated under this Agreement and
the Sale Papers do not and will not render such Seller insolvent.
(j) Selection Procedures. No selection procedures believed by such
Seller to be materially adverse to the interests of the Buyer were utilized by
such Seller in selecting the Contracts to be sold, assigned, transferred,
set-over and otherwise conveyed hereunder.
(k) Use of Proceeds. No proceeds of the sale of any Contract hereunder
received by such Seller will be used by it to purchase or carry any margin
security.
(l) Not an Investment Company. Such Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or is exempt from all provisions of such Act.
<PAGE>
(m) Other Names. Such Seller's legal name is as set forth in this
Agreement and within the preceding five years such Seller has not used, and such
Seller currently does not use, any trade names, fictitious names, assumed names
or "doing business as" names other than those set forth on Schedule II.
(n) Taxes. Such Seller has filed or caused to be filed all tax returns
which, to its knowledge, are required to be filed and has paid all taxes shown
to be due and payable on such returns or on any assessments made against such
Seller or any of its property and all other taxes, fees or other charges imposed
on it or any of its property by any Governmental Authority (other than any
amount of tax due the validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with generally accepted accounting principles have been provided on
its books); no tax lien has been filed and, to such Seller's knowledge, no claim
is being asserted, with respect to any such tax, fee or other charge.
(o) Place of Business. Such Seller's principal executive offices are at
1255 Wrights Lane in West Chester, Pennsylvania and the offices where it keeps
its records concerning the Contracts are at 1255 Wrights Lane in West Chester,
Pennsylvania.
(p) No Liens. Each Purchased Asset, together with the Contract related
thereto, shall, at all times, be owned by such Seller free and clear of any Lien
except as provided herein, and upon the sale, transfer or assignment hereunder,
the Buyer shall acquire a valid and perfected first priority undivided ownership
interest in each Purchased Asset then existing or thereafter arising and in the
Collections with respect thereto, free and clear of any Lien except as provided
herein. No effective financing statement or other instrument similar in effect
covering any Purchased Asset or the Collections with respect thereto shall at
any time be on file in any recording office except such as may be filed in favor
of the Buyer relating to this Agreement.
(q) Special Purpose Entity. Such Seller agrees that, for a period of
one year and one day after the Aggregate Unpaids have been paid in full, it will
not cause the Buyer to file a voluntary petition or institute, cause to be
instituted or join in any involuntary petition or proceeding under the
Bankruptcy Code or any other bankruptcy or insolvency laws. Such Seller is aware
that in light of the circumstances described in the preceding sentence and other
relevant facts, the filing of a voluntary petition under the Bankruptcy Code for
the purpose of making the assets of the Buyer available to satisfy claims of its
creditors would not result in making such assets available to satisfy such
creditors under the Bankruptcy Code.
(r) Security Interest. Such Seller has granted a security interest (as
defined in the UCC) to the Buyer in the Purchased Assets and Collections, which
is enforceable in accordance with the UCC upon execution and delivery of this
Agreement. Upon the filing UCC-1 financing statements naming the Buyer as
secured party and such Seller as debtor, the Buyer shall have a first priority
<PAGE>
perfected security interest in the Purchased Assets and Collections. All filings
(including, without limitation, such UCC filings) as are necessary in any
jurisdiction to perfect the interest of the Buyer in the Purchased Assets and
Collections have been (or prior to the applicable purchase hereunder will be)
made; provided, however, that filings as to related Equipment have been (or
prior to the applicable purchase hereunder will be) made solely in the Filing
Locations and such Equipment filings have been (or prior to the applicable
purchase hereunder will be) made by filing in each such Filing Location one
financing statement listing all Equipment, without the necessity of making
individual filings for each item of Equipment.
(s) Accounting. Such Seller will account for the transfers by such
Seller to the Buyer of interests in Purchased Assets and Collections under this
Agreement as sales of such Purchased Assets in its books, records and financial
statements, in each case consistent with GAAP, as applicable, and with the
requirements set forth herein.
(t) Separate Entity. The Buyer is operated as an entity with assets and
liabilities distinct from those of such Seller and any Affiliates thereof, and
such Seller hereby acknowledges that the Administrator and MSFC under the
Receivables Purchase Agreement are entering into the transactions contemplated
by the Receivables Purchase Agreement in reliance upon the Buyer's identity as a
separate legal entity from such Seller and from each such Affiliate of such
Seller.
(u) Value Given. The cash payments received by such Seller in respect
of the Purchase Price of each Contract sold hereunder constitutes reasonably
equivalent value in consideration for the transfer to the Buyer of such Contract
under this Agreement, such transfer was not made for or on account of an
antecedent debt owed by such Seller to the Buyer, and such transfer was not and
is not voidable or subject to avoidance under any section of the Bankruptcy
Code.
(v) Reports Accurate. No report (if prepared by such Seller, or to the
extent that information contained therein is supplied by such Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by such Seller to the Buyer in connection with this
Agreement is or will be inaccurate in any material respect as of the date it is
or shall be dated or (except as otherwise disclosed to the Buyer at such time)
as of the date so furnished, and no such document contains or will contain any
material misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.
(w) Exchange Act Compliance. No proceeds of the sale of any Purchased
Assets will be used by such Seller to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.
(x) Accuracy of Representations and Warranties. Each representation or
warranty by such Seller contained herein or in any certificate or other document
furnished by it pursuant hereto or in connection herewith is true and correct in
all material respects.
<PAGE>
The representations and warranties set forth in this Section 4.1 shall
survive the sale, transfer and assignment of the Purchased Assets to the Buyer.
Upon discovery by a Seller or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice thereof to the other and to the Administrator immediately
upon obtaining knowledge of such breach.
Section 4.2 Seller Representations and Warranties Regarding the
---------------------------------------------------
Agreement and the Contracts.
----------------------------
Each Seller hereby represents and warrants to the Buyer, as of the
initial Purchase Date and each Subsequent Purchase Date that:
(a) Binding Obligation, Valid Transfer and Security Interest.
---------------------------------------------------------
(i) This Agreement and each of the Sale Papers constitutes a legal,
valid and binding obligation of such Seller, enforceable against such Seller in
accordance with its terms, except as such enforceability may be limited by
Insolvency Laws and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity) or by an
implied covenant of good faith and fair dealing.
(ii) This Agreement constitutes a valid transfer to the Buyer of
all right, title and interest of such Seller in, to and under the Purchased
Assets, and such transfer will be free and clear of any Lien of any Person
claiming through or under such Seller or its Affiliates, except for Permitted
Liens. Upon the filing of the financing statements described in Section 4.1(r)
and, in the case of Subsequent Contracts on the applicable Subsequent Purchase
Date, the Buyer shall have a first priority perfected security interest in such
property, subject only to Permitted Liens.
(b) Eligibility of Contracts. As of the Cut Off Date, (i) the Contract
List and the computer file or microfiche or written list delivered in connection
therewith is an accurate and complete listing in all material respects of all
the Contracts transferred hereunder as of the Cut Off Date and the information
contained therein with respect to the identity of such Contracts and the amounts
owing thereunder is true and correct in all material respects as of the Cut Off
Date, (ii) each such Contract is an Eligible Contract, (iii) each such Contract
and such Seller's interest in the related Equipment and Applicable Security, as
appropriate, has been transferred to the Buyer free and clear of any Lien of any
Person (other than Permitted Liens) and in compliance, in all material respects,
with all Requirements of Law applicable to such Seller and (iv) with respect to
each such Contract, all material consents, licenses, approvals or authorizations
of or registrations or declarations with any Governmental Authority required to
be obtained, effected or given by such Seller in connection with the transfer of
such Contract and the related Equipment to the Buyer have been duly obtained,
<PAGE>
effected or given and are in full force and effect. On each Subsequent Purchase
Date on which Subsequent Contracts are transferred by such Seller to the Buyer,
such Seller shall be deemed to represent and warrant to the Buyer that (I) each
Subsequent Contract transferred on such day is an Eligible Contract, (II) each
such Subsequent Contract and such Seller's interest in the related Equipment, as
appropriate, has been transferred to the Buyer free and clear of any Lien of any
Person (other than Permitted Liens) and in compliance, in all material respects,
with all Requirements of Law applicable to such Seller or the originator
thereof, (III) with respect to each such Subsequent Contract, all material
consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained, effected
or given by such Seller in connection with the transfer of such Contract and the
related Equipment to the Buyer have been duly obtained, effected or given and
are in full force and effect and (IV) the representations and warranties set
forth in Section 4.2(b) clauses (i) through (iv), inclusive, are true and
correct with respect to each Contract transferred on such day as if made on such
day.
(c) Notice of Breach. The representations and warranties set forth in
this Section 4.2 shall survive the transfer and assignment of the respective
Contracts and Related Equipment, or interests therein, to the Buyer. Upon
discovery by a Seller or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
written notice thereof to the other and to the Administrator under the
Receivables Purchase Agreement immediately upon obtaining knowledge of such
breach.
Section 4.3 Representations and Warranties of the Buyer.
--------------------------------------------
The Buyer hereby represents and warrants to each Seller, as of the
Closing Date and each Subsequent Purchase Date, that:
(a) Organization and Good Standing. The Buyer is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware, and has full corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and each of the Sale Papers.
(b) Due Qualification. The Buyer is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained or will obtain all necessary licenses and
approvals, in each jurisdiction in which failure to so qualify or to obtain such
licenses and approvals would have a material adverse effect on its ability to
perform its obligations hereunder or under the Sale Papers.
<PAGE>
(c) Due Authorization. The execution and delivery of this Agreement and
each of the Sale Papers and the consummation of the transactions provided for
herein or therein have been duly authorized by the Buyer by all necessary
corporate action on the part of the Buyer.
(d) No Conflicts. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby or
thereby and the fulfillment of the terms hereof and thereof will not conflict
with, result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material default
under, any material indenture, contract, agreement, mortgage, deed of trust, or
other instrument to which the Buyer is a party or by which it or any of its
property is bound.
(e) No Violation. The execution and delivery of this Agreement and each
of the Sale Papers, the performance of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof (including, without
limitation, the purchase of Purchased Assets by the Buyer in accordance with the
provisions of this Agreement) will not conflict with or violate, in any material
respect, any Requirements of Law applicable to the Buyer.
(f) No Proceeding. There are no proceedings or investigations pending
or, to the best knowledge of the Buyer, threatened against the Buyer, before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or any of the
Sale Papers, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any of the Sale Papers, or (iii) seeking any
determination or ruling that could reasonably be expected to be adversely
determined, and if adversely determined, would materially and adversely affect
the performance by the Buyer of its obligations under this Agreement or any of
the Sale Papers.
ARTICLE V
COVENANTS
Section 5.1 Seller Covenants.
-----------------
Each Seller hereby covenants with respect to each Contract, that:
(a) Compliance with Laws; Preservation of Corporate Existence. Such
Seller will comply in all material respects with all applicable laws, rules,
regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
(b) Contracts Not to be Evidenced by Promissory Notes. Except to the
extent the provisions of Section 6.4 are satisfied, such Seller will take no
action to cause any Contract which is not, as of the Closing Date or the related
Subsequent Purchase Date, as the case may be, evidenced by an Instrument, to be
so evidenced except in connection with the enforcement or collection of such
Contract.
<PAGE>
(c) Security Interests. Except for the transfers hereunder, such Seller
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on any Contract transferred hereunder
or related Equipment, whether now existing or hereafter transferred hereunder,
or any interest therein, and such Seller will not sell, pledge, assign or suffer
to exist any Lien on its interest, if any, hereunder, other than Liens arising
by operation of law in the ordinary course of business for sums not due and
which are released or extinguished within fifteen (15) days (or such longer
period as the Buyer may approve in its sole discretion) of such Seller becoming
aware thereof. Such Seller will immediately notify the Buyer of the existence of
any Lien on any Contract transferred hereunder or related Equipment; and such
Seller shall defend the right, title and interest of the Buyer in, to and under
the Contracts transferred hereunder and the related Equipment, against all
claims of third parties; provided, however, that nothing in this Section 5.1(c)
shall prevent or be deemed to prohibit such Seller from suffering to exist
Permitted Liens upon any of the Contracts transferred hereunder or any related
Equipment.
(d) Delivery of Collections. Such Seller agrees to pay to the Buyer
promptly (but in no event later than two Business Days after receipt) all
Collections received by such Seller in respect of the Contracts transferred
hereunder.
(e) Compliance with Law. Such Seller hereby agrees to comply in all
material respects with all Requirements of Law applicable to such Seller, the
Contracts and the Equipment.
(f) Activities of the Seller. Such Seller shall not engage in any
business or activity of any kind with the Buyer, or enter into any transaction
or indenture, mortgage, instrument, agreement, contract, lease or other
undertaking with the Buyer, which is not directly related to the transactions
contemplated and authorized by this Agreement, the Receivables Purchase
Agreement and the Certificate of Incorporation of the Buyer.
(g) Guarantees. Such Seller shall not become or remain liable, directly
or contingently, in connection with any Indebtedness or other liability of the
Buyer, whether by guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance funds, or
otherwise.
(h) Merger; Sales. Such Seller shall not enter into any transaction of
merger or consolidation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or acquire or be acquired by any Person, or convey,
sell, lease or otherwise dispose of all or substantially all of its property or
business, except as provided for in this Agreement.
<PAGE>
(i) Location of Seller; Records; Instruments. Such Seller (x) shall not
move the location of its chief executive office, without 30 days' prior written
notice to the Buyer and the Administrator and (y) shall not move the location of
the Contract Files from the locations thereof on the Closing Date, without 30
days' prior written notice to the Buyer and the Administrator and (z) will
promptly take all actions required (including, but not limited to, all filings
and other acts necessary or advisable under the UCC, if applicable, of each
relevant jurisdiction in order to continue the first priority perfected security
interest of the Buyer in all Contracts transferred hereunder.
(j) Accounting of Purchases. Such Seller will not account for or treat
(whether in financial statements or otherwise) the transactions contemplated
hereby in any manner other than the sale of Purchased Assets by such Seller to
the Buyer.
(k) ERISA Matters. Such Seller will not (a) engage in any prohibited
transaction for which an exemption is not available or has not previously been
obtained from the United States Department of Labor; (b) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the Code, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (c) fail to make any payments to a
Multiemployer Plan that such Seller may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (d) terminate
any Benefit Plan so as to result in any liability; or (e) permit to exist any
occurrence of any reportable event described in Title IV of ERISA which
represents a material risk of a liability of such Seller under ERISA or the
Code.
(l) Nature of Business. Such Seller will engage in no business with the
Buyer other than the sale and transfer of Purchased Assets hereunder and the
other transactions permitted or contemplated by this Agreement.
(m) Change in the Purchase and Sale Agreement. Such Seller will not
amend, modify, waive or terminate any terms or conditions of this Agreement
except as provided herein.
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Retransfer of Ineligible Contracts.
-----------------------------------
In the event of a breach of any representation or warranty set forth in
Section 4.2 with respect to a Contract transferred hereunder (each such
Contract, an "Ineligible Contract"), no later than 30 days after the earlier of
(i) knowledge of such breach on the part of the applicable Seller and (ii)
receipt by such Seller of written notice thereof given by the Buyer, such Seller
shall accept a retransfer of each such Contract (and any related Equipment or
<PAGE>
Applicable Security) selected by the Buyer to which such breach relates at such
time as there is a breach of any such representation or warranty on the terms
and conditions set forth below; provided, however, that no such retransfer shall
be required to be made with respect to such Ineligible Contract (and such
Contract shall cease to be an Ineligible Contract) if, on or before the
expiration of such 30-day period, the representations and warranties in Section
4.2 with respect to such Contract shall be made true and correct in all material
respects with respect to such Contract as if such Contract had been transferred
to the Buyer on such day. Notwithstanding anything contained in this Section 6.1
to the contrary, in the event of breach of any representation and warranty set
forth in Section 4.2, with respect to each Original Contract or Subsequent
Contract and the related Equipment having been conveyed to the Buyer free and
clear of any Lien of any Person claiming through or under such Seller and its
Affiliates (other than Permitted Liens) and in compliance in all material
respects, with all Requirements of Law applicable to such Seller, immediately
upon the earlier to occur of the discovery of such breach by such Seller or
receipt by such Seller of written notice of such breach given by the Buyer, such
Seller shall repurchase and the Buyer shall convey, free and clear of any Lien
created pursuant to this Agreement, all of its right, title and interest in such
Ineligible Contract, and the Buyer shall, in connection with such conveyance and
without further action, be deemed to represent and warrant that it has the
corporate authority and has taken all necessary corporate action to accomplish
such conveyance, but without any other representation or warranty, express or
implied. In any of the foregoing instances, the applicable Seller shall accept a
retransfer of each such Ineligible Contract, and there shall be deducted from
the ADCB of the Asset Pool the Discounted Contract Balance (calculated using the
Blended Discount Rate as of the most recent Determination Date) of each such
Ineligible Contract. On and after the date of such retransfer, each Ineligible
Contract so retransferred shall not be included in the pool of Purchased Assets.
In consideration of such retransfer the applicable Seller shall, on the date of
retransfer of such Ineligible Contract, make a deposit in the Collection Account
(for allocation pursuant to Section 2.7 or 2.9 of the Receivables Purchase
Agreement, as applicable,) in immediately available funds in an amount equal to
the Discounted Contract Balance, plus interest thereon from the most recent
Settlement Date to and including the date of repurchase at a rate per annum
equal to the weighted average of the Yield Rates. Upon each retransfer to the
applicable Seller of such Ineligible Contract, the Buyer shall automatically and
without further action be deemed to transfer, assign and set-over to such
Seller, free and clear of any Lien created pursuant to this Agreement, all the
right, title and interest of the Buyer in, to and under such Contract and all
monies due or to become due with respect thereto, the related Equipment and all
proceeds of such Contract and Liquidation Proceeds, Residual Proceeds and
Insurance Proceeds relating thereto and all rights to security for any such
Contract, and all proceeds and products of the foregoing, and the Buyer shall,
in connection with such transfer, assignment and set-over and without further
action, be deemed to represent and warrant that it has the corporate authority
and has taken all necessary corporate action to accomplish such transfer,
assignment and set-over, but without any other representation or warranty,
express or implied. The Buyer shall, at the sole expense of the applicable
Seller, execute such documents and instruments of transfer as may be prepared by
such Seller and take such other actions as shall reasonably be requested by such
Seller to effect the transfer of such Ineligible Contract pursuant to this
Section 6.1.
<PAGE>
Section 6.2 Retransfer of Purchased Assets.
-------------------------------
In the event of a breach of any of the representations and warranties
set forth in Section 4.2 hereof affecting the Contracts, which breach could
reasonably be expected to have a material adverse affect on the rights of MSFC
or the Administrator under the Receivables Purchase Agreement or on the ability
of the Buyer to perform its obligations under the Receivables Purchase
Agreement, the Buyer, by notice then given in writing to the applicable Seller
may direct such Seller to accept retransfer of all of the Contracts purchased
from such Seller and such Seller shall be obligated to accept retransfer of such
Contracts on a Settlement Date specified by such Seller (such date, the
"Retransfer Date") after such notice on the terms and conditions set forth
below; provided, however, that no such retransfer shall be required to be made
if, on or before expiration of such applicable period, the representations and
warranties contained in Section 4.2 shall then be true and correct in all
material respects. The applicable Seller shall deposit on the Retransfer Date an
amount equal to the deposit amount provided in the next sentence for such
Contracts in the Collection Account for distribution in accordance with the
Receivables Purchase Agreement. The deposit amount for such retransfer will be
equal to (x) the sum of (i) the outstanding Capital at the end of the Business
Day preceding the Settlement Date on which the retransfer is scheduled to be
made and (ii) an amount equal to all accrued, and to accrue, but unpaid Yield on
such Capital at the applicable Yield Rate through the latest maturing Fixed
Period minus (y) the amount, if any, available in the Collection Account on such
Settlement Date. On the Retransfer Date, provided that such amount has been
deposited in full into the Collection Account, the Contracts transferred
hereunder (or security interests therein) and all monies due or to become due
with respect thereto, the related Equipment (or security interests therein) and
all proceeds thereof, all rights to security for any such Contracts, and all
proceeds and products of the foregoing, shall be transferred to the applicable
Seller, and the Buyer shall, at the sole expense of such Seller, execute and
deliver such instruments of transfer, in each case without recourse,
representation or warranty, as shall be prepared and reasonably requested by
such Seller to vest in such Seller, or its designee or assignee, all right,
title and interest of the Buyer in, to and under the Contracts transferred
hereunder, all monies due or to become due with respect thereto, the related
Equipment and all proceeds thereof and insurance Proceeds relating thereto.
Section 6.3 Adjustments.
------------
Each Seller hereby agrees that, with respect to each Contract
transferred hereunder which provides for any payment constituting a Prepayment,
which amount is less than an amount equal to the aggregate remaining Scheduled
Payments related to such Contract, such Seller shall indemnify the Buyer in an
amount equal to the amount equal to the aggregate remaining Scheduled Payments
related to such Contract.
<PAGE>
Section 6.4 Substitution of Contracts.
--------------------------
On any day prior to the occurrence of the Termination Date, the Buyer
may, in its sole discretion, by written notice to the applicable Seller, request
that any Contract be replaced by one or more other Contracts (each, a
"Substitute Contract"); provided, however, that no such replacement shall occur
unless each of the following conditions is satisfied as of the date of such
replacement and substitution:
(a) such Seller has previously notified the Buyer in writing that the
Contract to be replaced should be replaced (each, a "Replaced Contract");
(b) each Substitute Contract is an Eligible Contract on the date of
such substitution;
(c) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of (i) the Purchase Limit or (ii)
the Capital Limit;
(d) the aggregate Discounted Contract Balance (at the applicable Sale
Discount Rate) of such Substitute Contracts shall be equal to or greater than
the aggregate Discounted Contract Balances (at the applicable Sale Discount Rate
as of the date of the inclusion of such Contract in the Asset Pool) of Contracts
being replaced;
(e) such Substitute Contracts, at the time of substitution by such
Seller, shall have approximately the same weighted average life as the remaining
Scheduled Payments of Assets in the Asset Pool and shall not materially exceed
the last Scheduled Payment of any Asset in the Asset Pool;
(f) all representations and warranties of such Seller contained in
Section 4.1 and 4.2 shall be true and correct as of the date of substitution of
any such Substitute Contract;
(g) the substitution of any Substitute Contract does not cause a
Termination Event or Unmatured Termination Event to occur under the Receivables
Purchase Agreement; and
(h) such Seller shall deliver to the Administrator on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date.
In connection with any such substitution, the Buyer shall,
automatically and without further action, be deemed to transfer to the
applicable Seller, free and clear of any Lien created pursuant to this
Agreement, all of the right, title and interest of the Buyer in, to and under
such Replaced Contract, and the Buyer shall be deemed to represent and warrant
that it has the corporate authority and has taken all necessary corporate action
to accomplish such transfer, but without any other representation or warranty,
express or implied. Any right of the Buyer to substitute any Contract pursuant
to this Section 6.5 shall be in addition to, and without limitation of, any
other rights or remedies that the Buyer may have to require such Seller to
substitute for, or accept retransfer of, any Contract pursuant to the terms of
this Agreement.
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to the Buyer's Obligations Regarding Contracts.
----------------------------------------------------------
The obligations of the Buyer to purchase Purchased Assets from a Seller
on the Closing Date and on any Subsequent Purchase Date shall be subject to the
satisfaction of the following conditions:
(a) all representations and warranties of such Seller contained in
Sections 4.1 and 4.2 shall be true and correct on and as of such day as though
made on and as of such date;
(b) on and as of such day, such Seller shall have performed all
obligations required to be performed by it on or prior to such day pursuant to
the provisions of this Agreement;
(c) no event has occurred and is continuing, or would result from such
purchase which constitutes a Termination Event or Unmatured Termination Event
under the Receivables Purchase Agreement;
(d) no law or regulation shall prohibit, and no order, judgment or
decree of any federal, state or local court or governmental body, agency or
instrumentality shall prohibit or enjoin, the making of any such purchase by the
Buyer in accordance with the provisions hereof; and
(e) all corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Buyer, and the Buyer shall have
received from such Seller copies of all documents (including, without
limitation, records of corporate proceedings, approvals and opinions) relevant
to the transactions herein contemplated as the Buyer may reasonably have
requested.
Section 7.2 Conditions to Effectiveness of Amendment and Restatement
---------------------------------------------------------
of Original Agreement.
----------------------
The effectiveness of this Agreement amending and restating the Original
Agreement shall be subject to the receipt by the Administrator of each of the
following items:
<PAGE>
(a) certificates of the Secretary or Assistant Secretary of each of the
Sellers, each dated the date of this Agreement, certifying (i) the names and
true signatures of the incumbent officers of such Person authorized to sign this
Agreement and the other documents to be delivered by it hereunder, (ii) that the
copy of the certificate of incorporation of such Person attached thereto is a
complete and correct copy and that such certificate of incorporation has not
been amended, modified or supplemented and is in full force and effect, (iii)
that the copy of the bylaws of such Person attached thereto is a complete and
correct copy and that such by-laws have not been amended, modified or
supplemented and are in full force and effect, and (iv) the resolutions of such
Person's board of directors approving and authorizing the execution, delivery
and performance by such Person of this Agreement and the documents related
thereto (including, in the case of FLI, the Performance Guaranty);
(b) a good standing certificate for JLA issued by the Secretary of
State of Delaware;
(c) acknowledgment copies of proper financing statements, dated a date
reasonably near to the date hereof, describing the Assets and naming JLA as
debtor, the Buyer as secured party and the Administrator as assignee, or other,
similar instruments or documents, as may be necessary or, in the opinion of the
Administrator, desirable under the UCC of all appropriate jurisdictions or any
comparable law to perfect the Administrator's interests in all Assets;
(d) acknowledgment copies of proper financing statements, if any,
necessary to release all security interests and other rights of any Person in
the Assets previously granted by JLA;
(e) certified copies of requests for information or copies (or a
similar search report certified by a party acceptable to the Administrator),
dated a date reasonably near to the date hereof, listing all effective financing
statements which name JLA (under its present name and any previous name) as
debtor and which are filed in the jurisdictions in which the financing
statements referred to in clause above were filed, together with copies of such
financing statements (none of which, other than the financing statements
referred to above, shall cover any Assets or Contracts);
(f) opinions of special counsel to JLA relating to the effect that:
(1) JLA is a corporation organized, existing and in good
standing under the laws of its jurisdiction of organization,
with corporate power and authority to own its properties and
conduct its business as currently conducted; and JLA is
qualified to do business as a foreign corporation in good
standing in each jurisdiction in which it owns or leases
substantial properties or in which the conduct of its business
requires such qualification;
<PAGE>
(2) JLA has or had at all relevant times full power, authority
and legal right to exercise, deliver and perform its
obligations under the Transaction Documents; and has or had at
all relevant times full power, authority and legal right to
acquire, own and transfer the Assets and the other property
transferred by it to the Buyer pursuant to this Agreement;
(3) Each of the Transaction Documents to which JLA is a party
has been duly authorized, executed and delivered by JLA and is
a valid and binding agreement, enforceable against JLA in
accordance with its respective terms, except to the extent
that enforcement thereof may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights
generally, (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or
in equity) and (C) the qualification that certain remedial
provisions of the Agreement may be unenforceable in whole or
in part, but the inclusion of such provisions does not affect
the validity of the Agreement, and the Agreement, together
with applicable law, contains adequate remedial provisions for
the practical realization of the benefits of the security
created thereby;
(4) The grant of the security interest in the Assets by JLA to
the Buyer pursuant to this Agreement, the compliance by JLA
with all of the provisions of, and the consummation of the
transactions contemplated in, the Transaction Documents will
not (A) conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which JLA is
a party or by which JLA is bound or to which any of the
property or assets of JLA is subject, (B) result in any
violation of the provisions of any order known to such counsel
of any court or governmental agency or body having
jurisdiction over JLA or any of its properties or (C) result
in any violation of the provisions of the charter or the
by-laws of JLA or any statute or any rule or regulation of any
governmental agency or body having jurisdiction over JLA or
any of its properties;
(5) No authorization, approval, consent or order of, or filing
with, any court or governmental authority or agency is
required by JLA in connection with the consummation of the
transactions contemplated in the Transaction Documents, except
such as have been obtained;
(6) To the best of such counsel's knowledge and information,
there are no legal or governmental proceedings pending or
threatened (A) asserting the invalidity of any Transaction
Document, (B) seeking to prevent the consummation by JLA of
any of the transactions contemplated by any Transaction
Document or (C) which might materially and adversely affect
the performance by JLA of its obligations under any
Transaction Document;
<PAGE>
(7) The provisions of the Purchase Agreement are effective to
create a valid security interest in the Assets in favor of the
Buyer and such security interest is perfected and prior to all
other creditors of and purchasers from JLA; and
(8) Such other matters as the Administrator may reasonably
request, including without limitation, the "true sale" of the
Assets from JLA to the Buyer and the "non-consolidation" of
the Buyer with JLA;
(g) an executed copy of the Performance Guaranty, in form and substance
satisfactory to the Administrator;
(h) an opinion of Morgan, Lewis & Bockius, special counsel to FLI,
relating to the due authorization, execution and enforceability of the
Performance Guaranty;.
(i) an executed copy of the first amendment to the Receivables Purchase
Agreement, in form and substance satisfactory to the Administrator, together
with all opinions and documents required to be delivered in connection
therewith;
(j) written confirmation from both Moody's and S&P that the
effectiveness of this Agreement and the first amendment to the Receivables
Purchase Agreement will not cause either such rating agency to reduce its rating
of the Commercial Paper Notes below A-1, in the case of S&P and P-1, in the case
of Moody's;
(k) such other approvals, opinions or documents as the Administrator
may reasonably require.
ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Termination.
------------
This Agreement shall commence as of the date of execution and delivery
hereof and shall continue in full force and effect until the occurrence of the
Collection Date pursuant to the Receivables Purchase Agreement; provided,
however, that the termination of this Agreement pursuant to this Section 8.1
shall not discharge any Person from obligations incurred prior to any such
termination of this Agreement, including, without limitation, any obligations to
repurchase Contracts sold prior to such termination pursuant to Section 6.1 or
6.2, or to make the payments required under Section 6.3.
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 7.1 Amendment.
----------
This Agreement and any other Sale Papers and the rights and obligations
of the parties hereunder may not be amended, waived or changed orally, but only
by an instrument in writing signed by the Buyer and each Seller, with the prior
written consent of the Administrator. The Buyer shall provide not less than 10
Business Days prior written notice of any such amendment to the Administrator.
Section 7.2 Governing Law.
--------------
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY AGREES TO
THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH
OF THE PARTIES HERETO 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 CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
Section 7.3 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 registered mail, return receipt requested, to:
(a) in the case of the Buyer, to:
Fidelity Leasing SPC II, Inc.
1255 Wrights Lane
West Chester, PA 19380
Attention: David H. English
Telephone: (610) 719-4500
Facsimile: (610) 719-4515
<PAGE>
(b) in the case of the FLI, to:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, PA 19380
Attention: David H. English
Telephone: (610) 719-4500
Facsimile: (610) 719-4515
(c) in the case of the JLA, to:
JLA Credit Corporation
c/o
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, PA 19380
Attention: David H. English
Telephone: (610) 719-4500
Facsimile: (610) 719-4515
(d) in the case of the Administrator, to:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
Attention: John T. Smathers
Facsimile No.: (412) 762-9184
Confirmation No.: (412) 762-6440
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
Section 9.4 Severability of Provisions.
---------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement or any of the Sale Papers shall for any reason whatsoever be 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 the Sale Papers and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or any of the Sale
Papers.
Section 9.5 Assignment.
-----------
(a) Notwithstanding anything to the contrary contained herein, this
Agreement may not be assigned by the Buyer or either Seller except as permitted
by this Section 9.5 or by the Receivables Purchase Agreement. Simultaneously
with the execution and delivery of this Agreement, the Buyer shall assign all of
its right, title and interest herein (to the extent of the aggregate Asset
<PAGE>
Interests) to the Administrator under the Receivables Purchase Agreement as
provided in the Receivables Purchase Agreement, to which assignment each Seller
hereby expressly consents. Each Seller agrees to perform its obligations
hereunder for the benefit of the Administrator under the Receivables Purchase
Agreement and the Administrator and MSFC shall be a third party beneficiary
hereof. The Administrator or MSFC may enforce the provisions of this Agreement,
exercise the rights of the Buyer and enforce the obligations of each Seller
hereunder as provided in of the Receivables Purchase Agreement. This Agreement
may not be assigned by either Seller except in connection with a merger or
consolidation of such Seller with or into, or disposition of such Seller's
properties and assets to, another Person; provided, however, that any such
merger, consolidation or disposition shall satisfy the requirements of Section
9.14, upon not less than 10 Business Days' prior written notice to the Buyer and
the Administrator.
(b) In connection with any permitted assignment of this Agreement by a
Seller, such Seller shall deliver to the Buyer and the Administrator an
Officer's Certificate that such assignment complies with this Section 9.5, and
shall cause such assignee to execute an agreement supplemental hereto, in form
and substance satisfactory to such Seller, pursuant to which such assignee shall
expressly assume and agree to the performance of every covenant and obligation
of such Seller hereunder, to provide for the delivery of an Opinion of Counsel
that such supplemental agreement is legal, valid and binding with respect to
such assignee, and to take such other actions and execute such other instruments
as may reasonably be required to effectuate such assignment.
Section 9.6 Further Assurances.
-------------------
The Buyer and each Seller agree to do and perform, from time to time,
any and all acts and to execute any and all further instruments required or
reasonably requested by the other party more fully to effect the purposes of
this Agreement and the Sale Papers, including, without limitation, the execution
of any financing statements, continuation statements, termination statements,
releases or equivalent documents relating to the Contracts for filing under the
provisions of the UCC or other laws of any applicable jurisdiction.
Section 9.7 No Waiver; Cumulative Remedies.
-------------------------------
No failure to exercise and no delay in exercising, on the part of the
Buyer or either Seller, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privilege provided by law.
<PAGE>
Section 9.8 Counterparts.
-------------
This Agreement may be executed in two or more counterparts including
telefax transmission thereof (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.
Section 9.9 Binding Effect; Third-Party Beneficiaries.
------------------------------------------
This Agreement shall inure to the benefit of and the obligations
thereunder shall be binding upon the parties hereto and their respective
successors and permitted assigns. Any permitted assigns shall be third-party
beneficiaries of this Agreement.
Section 9.10 Merger and Integration.
-----------------------
Except as specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to the subject matter
hereof, there are no other agreements between the parties for transactions
relating to or similar to the transactions contemplated by this Agreement, and
all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
Section 9.11 Headings.
---------
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
Section 9.12 Schedules and Exhibits.
-----------------------
The schedules and exhibits attached hereto and referred to herein shall
constitute a part of this Agreement and are incorporated into this Agreement for
all purposes.
Section 9.13 No Proceedings.
---------------
Each Seller hereby covenants and agrees that, prior to the date which
is one year and one day after the payment in full of all Aggregate Unpaids and
all other amounts payable under the Receivables Purchase Agreement, it will not
institute against or join any other Person in instituting against the Buyer any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any State of
the United States.
Section 9.14 Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, a Seller.
-------------------------
Neither Seller shall consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
<PAGE>
(i) the Person formed by such consolidation or into which such
Seller is merged or the Person which acquires by conveyance or transfer the
properties and assets of such Seller substantially as an entirety shall be, if
such Seller is not the surviving entity, organized and existing under the laws
of the United States of America or any State or the District of Columbia and
shall expressly assume, by an agreement supplemental hereto, executed and
delivered to the Buyer in form satisfactory to the Buyer, the performance of
every covenant and obligation of such Seller hereunder (to the extent that any
right, covenant or obligation of such Seller, as applicable hereunder, is
inapplicable to the successor entity, such successor entity shall be subject to
such covenant or obligation, or benefit from such right, as would apply, to the
extent practicable, to such successor entity);
(ii) such Seller shall have delivered to the Buyer and the
Administrator an Officer's Certificate that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply with this Section
9.14 and that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel that such
supplemental agreement is legal, valid and binding with respect to the successor
entity and that the entity surviving such consolidation, conveyance or transfer
is organized and existing under the laws of the United States of America or any
State or the District of Columbia. The Administrator shall receive prompt
written notice of such merger or consolidation of such Seller; and
(iii) after giving effect thereto, no Termination Event or Unmatured
Termination Event shall have occurred.
Section 9.14 Costs, Expenses and Taxes.
--------------------------
(a) The Sellers, jointly and severally, agree to pay on demand all
costs and expenses of the Buyer incurred in connection with the preparation,
execution, delivery, administration (including periodic auditing), amendment or
modification of, or any waiver or consent issued in connection with, this
Agreement and the other documents to be delivered hereunder or in connection
herewith, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Buyer with respect thereto and with respect to
advising the Buyer as to its rights and remedies under this Agreement and the
other documents to be delivered hereunder or in connection herewith, and all
costs and out-of-pocket expenses, if any (including reasonable counsel fees and
expenses), incurred by the Buyer in connection with the enforcement of this
Agreement and the other documents to be delivered hereunder or in connection
herewith.
(b) The Sellers, jointly and severally, agree to pay on demand any
and all stamp, sales, excise and other taxes and fees payable or determined to
be payable in connection with the execution, delivery, filing and recording of
this Agreement or any agreement or other document delivered in connection with
this Agreement.
<PAGE>
(c) The Sellers, jointly and severally, agree to pay on demand any
and all damages, losses, claims, liabilities, fees and related costs and
expenses, including attorney's fees and expenses, incurred by or awarded against
the Buyer or any of its Affiliates (each, an "Indemnified Party") arising out of
or as a result of the transactions contemplated under this Agreement and owed by
such Indemnified Party to any other Person; provided, however, that no Seller
shall be liable to pay any portion of any such damages, losses, claims or
liabilities resulting from the gross negligence or willful misconduct of an
Indemnified Party or the breach of a Requirement of Law by an Indemnified Party.
Section 9.16 Recourse Against Certain Parties.
---------------------------------
(a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Seller as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any administrator of such Seller or any
incorporator, officer, employee or director of such Seller or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of each Seller contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
the corporate obligations of such Seller, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of such Seller or
any incorporator, officer, employee or director of such Seller or of any such
administrator, as such, or any other them, under or by reason of any of the
obligations, covenants or agreements of such Seller contained in this Agreement
or in any other such instruments, documents or agreements, or which are implied
therefrom, and that any and all personal liability of every such administrator
of such Seller and each incorporator, officer, employee or director of such
Seller or of any such administrator, or any of them, for breaches by such Seller
of any such obligations, covenants or agreements, which liability may arise
either at common law or at equity, by statute or constitution, or otherwise, is
hereby expressly waived as a condition of and in consideration for the execution
of this Agreement. The provisions of this Section 9.16(a) shall survive the
termination of this Agreement.
(b) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of the Buyer as contained in this Agreement or any other agreement,
instrument or document entered into by it pursuant hereto or in connection
herewith shall be had against any administrator of the Buyer or any
incorporator, officer, employee or director of the Buyer or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of the Buyer contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
<PAGE>
the corporate obligations of the Buyer, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of the Buyer or
any incorporator, officer, employee or director of the Buyer or of any such
administrator, as such, or any of them, under or by reason of any of the
obligations, covenants or agreements of the Buyer contained in this Agreement or
in any other such instruments, documents or agreements, or which are implied
therefrom, and that any and all personal liability of every such administrator
of the Buyer and each incorporator, officer, employee or director of the Buyer
or of any such administrator, or any of them, for breaches by the Buyer of any
such obligations, covenants or agreements, which liability may arise either at
common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement. The provisions of this Section 9.16(b) shall survive the
termination of this Agreement.
Section 9.17 Amendment and Restatement.
--------------------------
This Agreement amends and restates in full the Original Agreement.
Nothing in this Agreement shall be construed to abrogate any of the obligations
of the parties hereto pursuant to the Original Agreement. Without limiting the
foregoing, all accrued amounts owing under the Original Agreement but not due
and payable as of the date hereof shall be due and payable on the next date for
payment of such amounts as provided for in this Agreement or the Original
Agreement.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Sellers have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
FIDELITY LEASING SPC II, INC.
By:
Name:
Title:
FIDELITY LEASING, INC.
By:
Name:
Title:
JLA CREDIT CORPORATION
By:
Name:
Title:
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
among
FIDELITY LEASING SPC II, INC.,
FIDELITY LEASING, INC.,
MARKET STREET FUNDING CORPORATION,
PNC BANK, NATIONAL ASSOCIATION,
and
HARRIS TRUST AND SAVINGS BANK
December 29, 1998
(conformed as amended on February 5, 1999 and March 8, 1999)
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. 1
Section 1.2 Other Terms. 24
Section 1.3 Computation of Time Periods. 24
Section 1.4 Other Definitional Provisions. 24
ARTICLE II
THE PURCHASE FACILITY
Section 2.1 Purchases of Asset Interests. 25
Section 2.2 The Initial Purchase, Subsequent Purchases
and Incremental Purchases. 25
Section 2.3 Reduction of the Purchase Limit; Repurchase. 26
Section 2.4 Determination of Yield. 26
Section 2.5 [reserved]. 26
Section 2.6 Dividing or Combining Asset Interests. 26
Section 2.7 Non-Liquidation Settlement Procedures. 27
Section 2.8 [reserved]. 28
Section 2.9 Settlement Procedures Following a
Termination Event or an Unmatured Event. 28
Section 2.10 Collections and Allocations. 29
Section 2.11 Payments, Computations, Etc. 30
Section 2.12 Optional Repurchase. 30
Section 2.13 Fees. 31
Section 2.14 Increased Costs, Capital Adequacy; Illegality. 31
Section 2.15 Taxes. 33
Section 2.16 Assignment of the Purchase Agreement. 35
Section 2.17 Substitution of Contracts. 35
ARTICLE III
CONDITIONS OF PURCHASES
Section 3.1 Conditions Precedent to Initial Purchase. 36
Section 3.2 Conditions Precedent to All Purchases and Remittances
of Collections. 36
Section 3.3 Delivery of Contract Files. 37
<PAGE>
Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Seller. 37
Section 4.2 Representations and Warranties of Seller
Relating to the Agreement and the Contracts. 41
Section 4.3 Representations and Warranties of the Seller
Relating to the Purchase Limit and Capital Limit. 43
ARTICLE V
GENERAL COVENANTS OF THE SELLER
Section 5.1 General Covenants. 43
Section 5.2 Covenants of Seller. 43
Section 5.3 Release of Lien on Equipment. 47
Section 5.4 Hedging of Contracts. 48
Section 5.5 Retransfer ofIneligible Contracts. 49
Section 5.6 Retransfer of Assets. 50
Section 5.7 Year 2000 Compatibility. 50
ARTICLE VI
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 6.1 Appointment and Acceptance; Duties. 50
Section 6.2 Collection of Payments. 53
Section 6.3 Servicer Advances. 55
Section 6.4 Realization Upon Defaulted Contract. 55
Section 6.5 Maintenance of Insurance Policies. 56
Section 6.6 Representations and Warranties of Servicer. 56
Section 6.7 Representations and Warranties of Backup
Servicer and Collateral Custodian. 58
Section 6.8 Covenants of Servicer. 59
Section 6.9 Covenants of Backup Servicer and
Collateral Custodian. 60
Section 6.10 Servicing Compensation. 61
Section 6.11 Custodial Compensation. 61
Section 6.12 Payment of Certain Expenses by Servicer. 61
Section 6.13 Reports. 61
Section 6.14 Annual Statement as to Compliance. 62
Section 6.15 Annual Independent Public Accountant's
Servicing Reports. 62
Section 6.16 Adjustments. 63
Section 6.17 Merger or Consolidation of the Servicer. 63
Section 6.18 Limitation on Liability of the Servicer and
Others. 63
<PAGE>
Page
----
Section 6.19 Indemnification of the Seller, the Backup
Servicer, the Collateral Custodian, the
Administrator and the MSFC. 64
Section 6.20 The Servicer Not to Resign. 66
Section 6.21 Access to Certain Documentation and
Information Regarding the Contracts. 66
Section 6.22 Backup Servicer. 67
Section 6.23 Identification of Records. 69
Section 6.24 Servicer Defaults. 69
Section 6.25 Appointment of Successor Servicer. 71
Section 6.26 Notification. 72
Section 6.27 Protection of Right, Title and Interest
to Assets. 72
Section 6.28 Release of Contract Files. 73
ARTICLE VII
TERMINATION EVENTS
Section 7.1 [reserved]. 73
Section 7.2 Termination Events. 73
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnities by the Seller. 75
ARTICLE IX
THE ADMINISTRATOR
Section 9.1 Authorization and Action. 78
Section 9.2 Delegation of Duties. 78
Section 9.3 Exculpatory Provisions. 78
Section 9.4 Reliance. 79
Section 9.5 Non-Reliance on Administrator. 79
Section 9.6 Administrator in its Individual Capacities. 79
<PAGE>
Page
----
ARTICLE X
ASSIGNMENTS
Section 10.1 Restrictions on Assignments 80
Section 10.2 Documentation 80
Section 10.3 Rights of Assignee 80
Section 10.4 Notice of Assignment 81
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments and Waivers 81
Section 11.2 Notices, Etc. 81
Section 11.3 [reserved]. 81
Section 11.4 No Waiver, Rights and Remedies. 81
Section 11.5 Binding Effect, Benefit of Agreement. 82
Section 11.6 Term of this Agreement. 82
Section 11.7 Governing Law, Consent to Jurisdiction;
Waiver of Objection to Venue. 82
Section 11.8 Waiver of July Trial. 82
Section 11.9 Costs, Expenses and Taxes. 83
Section 11.10 No Proceedings. 83
Section 11.11 Recourse Against Certain Parties. 84
Section 11.12 Protection of Ownership Interests; Intent of
Parties; Security Interest. 84
Section 11.13 Confidentiality. 85
Section 11.14 Execution in Counterparts, Severability,
Integration. 86
<PAGE>
SCHEDULES AND EXHIBITS
Schedule I Condition Precedent Documents
Schedule II Lockbox Banks and Lockbox Accounts
Schedule III Tradenames, Fictitious Names and "Doing
Business As" Names
Schedule IV Location of Contract Files
Schedule V List of Contracts
Exhibit A Form of Purchase Notice
Exhibit B Form of Lock-box Notice
Exhibit C "Limited Purpose" Provisions
Exhibit D Address for Notices
Exhibit E Form of Monthly Report
Exhibit F Form of Servicer's Certificate
Exhibit G Form of Purchase Certificate
Exhibit H Form of Hedge Agreement
<PAGE>
THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is made as of
December 29, 1998, among:
(1) FIDELITY LEASING SPC II, INC., a Delaware corporation, as seller
(the "Seller");
(2) FIDELITY LEASING, INC., a Pennsylvania corporation ("Fidelity"), as
servicer (the "Servicer");
(3) MARKET STREET FUNDING CORPORATION, a Delaware corporation (together
with its successors and permitted assigns, "MSFC");
(4) PNC BANK, NATIONAL ASSOCIATION ("PNC"), as administrator for and on
behalf of MSFC (the "Administrator"); and
(5) HARRIS TRUST AND SAVINGS BANK, as collateral custodian (the
"Collateral Custodian") and backup servicer (the "Backup Servicer").
IT IS AGREED as follows:
I. ARTICLE
DEFINITIONS
Section 1.1 Certain Defined Terms.
(a) Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1.1.
(b) As used in this Agreement and its exhibits, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).
ADCB: On any date of determination, the sum of the Discounted Contract Balance
of each Eligible Contract (excluding all Defaulted Contracts, Casualty Loss
Contracts, Early Termination Contracts and Contracts subject to a Warranty
Event) included in the Asset Pool as of the date of such determination.
Addition Date: With respect to any Additional Contracts, the date on which such
Additional Contracts become Pool Assets.
Additional Contracts: All Contracts that become Pool Assets after the Closing
Date.
Additional Cut Off Date: Each date on and after which Collections on an
Additional Contract are to be transferred to the Asset Pool.
<PAGE>
Additional Servicer Compensation: Any late fees, insufficient funds charges,
inspection charges, collection fees, delinquency fees, repossession fees or UCC
fees, extension fees, documentation fees, maintenance fees and insurance fees.
Adverse Claim: A lien, security interest, charge, encumbrance or other right or
claim of any Person.
Affected Party: Each of MSFC, the Liquidity Banks, any permitted assignee of
MSFC or Liquidity Bank, the Credit Banks, any assignee of any of the MSFC's
obligations to any Credit Bank in respect of any Credit Advances, PNC, as holder
of a participation interest, and any subsequent holder of such participation
interest, in the rights and obligations of any Liquidity Bank and any Credit
Bank under the Liquidity Agreement and the Credit Agreement and in respect of
any Credit Advances, the Administrator, and any holding company of PNC.
Affiliate: With respect to a Person means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" or "controlled" have meanings correlative
to the foregoing.
Agent's Account: A special account (account number 1002422076) in the name of
MSFC maintained at PNC.
Aggregate Unpaids: At any time, an amount, equal to the sum of all Yield
(accrued and to accrue), all Capital and all other amounts owed (whether due or
accrued or to accrue) under any Transaction Document, including, without
limitation, all payments in respect of Hedge Breakage Costs, Breakage Costs,
Increased Costs, Taxes and Indemnified Amounts.
Agreement: This Receivables Purchase Agreement, dated as of December 29, 1998,
as amended, modified, supplemented or restated from time to time.
Alternate Reference Rate: On any date, a fluctuating rate of interest per annum
equal to the higher of:
(a) the rate of interest most recently announced by PNC at its
principal office in Pittsburgh, Pennsylvania as its reference rate (it
being understood that at any one time there shall exist only one such
reference rate so announced), which rate is not necessarily intended to
be the lowest rate of interest determined by PNC in connection with
extensions of credit; or
<PAGE>
(b) the Federal Funds Rate (as defined below) most recently
determined by PNC plus 0.50% per annum.
--- -----
Asset: All right, title and interest of the transferring party in, to and under
any and all of the following:
(i) the Existing Contracts and Additional Contracts, and all monies due or to
become due in payment of such Contracts on and after the related Cut Off Date,
including, but not limited to, any Prepayment Amounts, Residual Proceeds, any
payments in respect of a casualty or early termination, and any Recoveries
received with respect thereto, but excluding any Scheduled Payments due prior to
the related Cut Off Date and any Excluded Amounts;
(ii) the Equipment related to such Contracts including all proceeds from any
sale or other disposition of such Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future with respect to such
Contracts or the obligor thereunder and under any guarantee or similar credit
enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract; and
(vi) all income and proceeds of the foregoing.
Asset Interest: At any time, an undivided variable percentage ownership interest
in all Assets. The undivided percentage interest of an Asset Interest shall
equal
C + C x R
-----
AC
- -------------------------------------------
ADCB
where:
C = equals the Capital in respect of such Asset Interest.
AC = equals the aggregate Capital on such date.
R = equals the Overcollateralization on such date.
<PAGE>
Asset Pool: At any time, all then outstanding Assets.
Backup Servicer: Harris Trust and Savings Bank and its permitted successors and
assigns.
Backup Servicer and Collateral Custodian Fee Letter: The letter dated as of the
Closing Date, among Fidelity, the Administrator, the Backup Servicer and
Collateral Custodian setting forth among other things the Backup Servicer Fee
and the Collateral Custodial Fee.
Backup Servicing Fee: As defined in Section 6.22(e).
Bank Rate: For any Settlement Period, an interest rate per annum equal to either
(a) the sum of (i) 1.00% per annum, and (ii) the Eurodollar Rate (Reserve
Adjusted) for such Settlement Period; provided, however, that if (x) it shall
become unlawful for Administrator, any Liquidity Bank or any Credit Bank to
obtain funds in the London interbank eurodollar market in order to make, fund or
maintain any Loan hereunder, or if such funds shall not be reasonably available
to the Administrator or any Liquidity Bank, or (y) there shall not be time prior
to the commencement of an applicable Settlement Period to determine a Eurodollar
Rate in accordance with its terms or the "Bank Rate" shall apply other than at
the first day of the Settlement Period, then the "Bank Rate" shall be equal to
the weighted average of the Alternate Reference Rates in effect for each day
during the remainder of such Settlement Period or (b) if requested by Seller,
the weighted average of the Alternate Reference Rates in effect during such
Settlement Period.
Bankruptcy Code: The Federal Bankruptcy Code, as amended from time to time
(Title 11 of the United States Code).
Benefit Plan: Any employee benefit plan as defined in Section 3(3) of ERISA in
respect of which the Seller or any ERISA Affiliate of the Seller is, or at any
time during the immediately preceding six years was, an "employer" as defined in
Section 3(5) of ERISA.
Blended Discount Rate: For any Determination Date, a rate per annum equal to the
weighted average (calculated based on the applicable Outstanding Balances) of
(i) the Blended Discount Rate as of the immediately preceding Determination Date
and (ii) the Sale Discount Rate for any Contract transferred to the Asset Pool
on the most recent Purchase Date, if any, occurring on or after the immediately
preceding Determination Date; provided, however, that the Blended Discount Rate
for the first Determination Date following the Closing Date shall be the Sale
Discount Rate applicable to the Original Contracts.
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Breakage Costs: Any amount or amounts as shall compensate an Affected Party for
any loss, cost or expense incurred by such Affected Party (as reasonably
determined by such Affected Party) as a result of a prepayment by the Seller of
Capital or Yield pursuant to the terms hereof.
Business Day: Any day of the year other than a Saturday or a Sunday on which (a)
banks are not required or authorized to be closed in Illinois, New York or
Pennsylvania and (b) if the term "Business Day" is used in connection with the
Eurodollar Rate, dealings in United States dollar deposits are carried on in the
London interbank market.
Capital: For each Asset Interest, the amount paid to the Seller for such Asset
Interest at the time of its purchase by MSFC pursuant to this Agreement, reduced
from time to time by Collections distributed on account of such Capital pursuant
to Sections 2.7 or 2.9; provided, however, that such Capital shall not be
reduced by any distribution or any portion of Collections if at any time such
distribution is rescinded or must be returned for any reason.
Capital Limit: At any time, the product of (i) the difference of (a) the ADCB
minus (b) the aggregate amount of Servicer Advances outstanding and (ii) the
lesser of (a) 90% and (b) the difference of (I) 100% minus (II) the product of
two and a half (2 1/2) multiplied by the Net Loss to Liquidation Ratio.
Casualty Loss: With respect to any item of Equipment, the loss, theft, damage
beyond repair or governmental condemnation or seizure of such item of Equipment.
Casualty Loss Contract: Any Contract that is subject to a Casualty Loss.
Change in Control: Fidelity shall fail to own, directly or indirectly, free and
clear of all Adverse Claims, 100% of the shares of the outstanding voting stock
of the Seller on a fully diluted basis.
Closing Date: December 30, 1998.
Code: The Internal Revenue Code of 1986, as amended.
Collateral Custodian: Harris Trust and Savings Bank and its permitted successors
and assigns.
Collection Account: As defined in Section 6.2(f).
Collection Date: The date following the Termination Date on which the aggregate
outstanding Capital has been reduced to zero, MSFC has received all Yield and
other amounts due thereto in connection with this Agreement, each Hedge
Transaction has
<PAGE>
been terminated and each Hedge Counterparty has received all amounts owing to it
under its respective Hedging Agreement, the Administrator has received all
amounts due to it in connection with this Agreement and any other Aggregate
Unpaids have been reduced to zero.
Collections: (a) All cash collections and other cash proceeds of any Asset,
including, without limitation, Scheduled Payments, Prepayments, Insurance
Proceeds, Residual Proceeds and Recoveries, all as related to amounts
attributable to the Contracts in the Asset Pool or the related Equipment, but
excluding any Excluded Amounts, (b) any other funds received by the Seller or
the Servicer with respect to any Contract or related Equipment, and (c) all
payments received pursuant to any Hedging Agreement or Hedge Transaction.
Commercial Paper Notes: Short-term promissory notes issued by MSFC with respect
to financing its purchase of an Asset Interest hereunder or purchasing or
funding other financial assets or loans.
Commercial Paper Rate: For any Settlement Period for the related Asset Interest,
a rate per annum equal to the sum of (i) the rate or, if more than one rate, the
weighted average of the rates, determined by converting to an interest-bearing
equivalent rate per annum the discount rate (or rates) at which Commercial Paper
Notes outstanding during such Settlement Period have been or may be sold by any
placement agent or commercial paper dealer selected by the Administrator, plus
(ii) the commissions and charges charged by such placement agent or commercial
paper dealer with respect to such Commercial Paper Notes expressed as a
percentage of the face amount thereof and converted to an interest-bearing
equivalent rate per annum.
Commitment Fee: As defined in Section 2.13(a).
Commitment Termination Date: December 29, 1999.
Contract: Any lease of Equipment by the Originator or by a third party, in each
case as lessor, to an Obligor.
Contract Files: With respect to each Contract, the fully executed original
counterpart (for UCC purposes) of the Contract, the original certificate of
title or other title document with respect to the related Equipment (if
applicable), and otherwise such documents, if any, that the Collateral Custodian
holds, evidencing ownership of such Equipment (if applicable) and all other
documents originally delivered to the Seller or held by the Collateral Custodian
with respect to any Contract.
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Contract List: The contract list provided by the Seller to the Administrator and
the Collateral Custodian, in the form of Schedule V.
CP Disruption Event: The inability of MSFC at any time, whether as a result of a
prohibition, a contractual restriction or any other event or circumstance
whatsoever, to raise funds through the issuance of its commercial paper notes
(whether or not constituting commercial paper notes issued to fund Purchases
hereunder) in the United States commercial paper market.
Credit Advance: A drawing under a letter of credit issued pursuant to the Credit
Agreement for the account of MSFC, a loan to MSFC under the Credit Agreement or
any other advance or disbursement of funds to MSFC or for MSFC's account
pursuant to the Credit Agreement or any such letter of credit, in each case to
the extent such drawing, loan, advance or disbursement has not been repaid or
reimbursed to the Credit Banks in accordance with the Credit Agreement.
Credit Agreement: Any program-wide agreement entered into by any Credit Bank
providing for the issuance of one or more letters of credit for the account of
MSFC, the issuance of one or more surety bonds for which MSFC is obligated to
reimburse the applicable Credit Bank for any drawings hereunder, the sale by
MSFC to any Credit Bank of receivables or other financial assets purchased by
MSFC (or portions thereof) and/or the making of loans and/or other extensions of
credit to MSFC in connection with its commercial paper program, together with
any cash collateral agreement, letter of credit, surety bond or other agreement
or instrument executed and delivered in connection therewith (but excluding the
Liquidity Agreement, or similar agreement, or any voluntary advance agreement).
Credit and Collection Policy: The written credit and collection policies of the
Originator and Servicer in effect on the date hereof, as amended or supplemented
from time to time in accordance with Section 4.1(j).
Credit Bank: PNC and any other or additional bank or other Person (other than
the Seller or other customer of MSFC or any liquidity provider as such) now or
hereafter extending credit or a purchase commitment to or for the account of
MSFC or issuing a letter of credit, surety bond or other instrument, in each
case to support any obligations arising under or in connection with MSFC's
commercial paper program.
Custodial Agreement: The Custodial Agreement dated as of the date hereof between
the Seller, the Collateral Custodian and the Administrator, as amended,
supplemented or otherwise modified from time to time.
Custodial Fee: As defined in Section 6.11.
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Cut Off Date: With respect to each Existing Contract, the date on and after
which Collections on such Existing Contract are to be transferred to the Asset
Pool, and with respect to each Additional Contract, the related Additional Cut
Off Date.
Default Ratio: As of any Determination Date, the percentage equivalent of a
fraction, the numerator of which is equal to twice the sum of the Discounted
Contract Balance of Contracts that became Defaulted Contracts (net of Recoveries
related thereto) during the immediately preceding six calendar months and the
denominator of which is the average of the ADCB as of each of the current
Determination Date and each of the immediately preceding five Determination
Dates.
Defaulted Contract: (i) A Contract in the Asset Pool as to which the Servicer
has determined or should have determined in accordance with its Credit and
Collection Policy that such Contract is not collectible or is subject to
repossession or (ii) a Contract in the Asset Pool as to which all or a portion
of any one or more Scheduled Payments is more than 120 days past due in an
aggregate amount equal to the higher of (A) ten dollars or more or (B) ten
percent or more of any Scheduled Payment.
Delinquency Ratio: As of any Determination Date, the percentage equivalent of a
fraction, the numerator of which is the average of the Discounted Contract
Balance of Delinquent Contracts as of such Determination Date and each of the
immediately preceding two Determination Dates and the denominator of which is
the average of the ADCB as of such Determination Date and each of the
immediately preceding two Determination Dates.
Delinquent Contract: A Contract in the Asset Pool as to which all or a portion
of any one or more Scheduled Payments is 60 days or more past due.
Derivatives: Any exchange-traded or over-the-counter (i) forward, future,
option, swap, cap, collar, floor, foreign exchange contract, any combination
thereof, whether for physical delivery or cash settlement, relating to any
interest rate, interest rate index, currency, currency exchange rate, currency
exchange rate index, debt instrument, debt price, debt index, depositary
instrument, depositary price, depositary index, equity instrument, equity price,
equity index, commodity, commodity price or commodity index, (ii) any similar
transaction, contract, instrument, undertaking or security or (iii) any
transaction, contract, instrument, undertaking or security containing any of the
foregoing.
Determination Date: The last day of each calendar month.
Discounted Contract Balance: With respect to any Contract, (i) as of the related
Cut Off Date, the present value of all remaining Scheduled Payments becoming due
under such Contract after the applicable Cut Off Date discounted monthly at the
Sale Discount Rate and (ii) as of any other date of determination, the present
value of all remaining
<PAGE>
Scheduled Payments becoming due under such Contract after such Determination
Date discounted monthly at the applicable Blended Discount Rate.
The "Discounted Contract Balance" for each Contract shall be calculated
assuming:
(a) all payments due in any Monthly Period as due on the last
day of the Monthly Period;
(b) payments are discounted on a monthly basis using a 30 day
month and a 360 day year; and
(c) all security deposits and drawings under letters of
credit, if any, issued in support of a Contract are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
Early Termination Contracts: Any Contract that the Servicer has allowed the
related Obligor to terminate prior to the date on which the final Scheduled
Payment is due thereunder.
Eligible Contract: On any Determination Date, each Contract with respect to
which each of the following is true:
(a) the information with respect to the Contract and the Equipment
subject to the Contract is true and correct in all material respects;
(b) immediately prior to the transfer hereunder of the Contract and any
related Equipment (or security interest therein), the Contract was owned by the
Seller free and clear of any Adverse Claim;
(c) no Scheduled Payment related to the Contract is (i) more than 60
days delinquent, (ii) a payment as to which the Servicer has failed to make a
Servicer Advance, (iii) a payment as to which the related Equipment has been
repossessed or (iv) a payment as to which the related Equipment has been
charged-off in accordance with the credit and collection policies of the
Servicer;
(d) the Contract is not a Defaulted Contract;
(e) no provision of the Contract has been waived, altered or modified
in any respect except as allowed under the Credit and Collection Policy and such
Contract satisfies all applicable requirements of the Credit and Collection
Policy;
<PAGE>
(f) the Contract is a valid and binding payment obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by applicable Insolvency Laws and the availability of equitable
remedies);
(g) the Contract was originated by the Originator in the ordinary
course of business and is not and will not be subject to rights of rescission,
setoff, counterclaim or defense and no such rights have been asserted or
threatened with respect to the Contract;
(h) the Contract does not violate the laws of the United States or any
state in any manner which would create liability for the Administrator or MSFC
or which would materially and adversely affect the enforceability or
collectibility of such Contract;
(i) (i) the Contract and any related Equipment have not been sold,
transferred, assigned or pledged by the Seller to any other Person and, with
respect to a Contract that is a "true lease," any Equipment related to such true
lease is owned by the Seller free and clear of any Liens of any third parties
(except for any Permitted Liens) and (ii) such Contract is secured by a fully
perfected Lien of the first priority on the related Equipment but only to the
extent that the Contract has (i) a $1.00 purchase option exercisable at the
expiration of its term and the Equipment has a residual value in excess of
$10,000.00 at such time; (ii) a fixed price purchase option exercisable at the
expiration of its term and the Equipment has a residual value in excess of
$10,000.00 at such time; or (iii) a fair market value purchase price option
exercisable at the expiration of its term and the residual value of the
Equipment exceeds $50,000.00 at such time;
(j) the Contract constitutes chattel paper, an account, an instrument
or a general intangible as defined under the UCC and if the Contract constitutes
"chattel paper" for purposes of the UCC, there is not more than one "secured
party's original" counterpart of the Contract;
(k) all filings necessary to evidence the conveyance or transfer to the
Administrator of the Contract and all right, title and interest in the related
Equipment have been made in all appropriate Jurisdictions;
(l) the Obligor is not a Governmental Authority, an Affiliate of any
party hereto or the subject of bankruptcy or other insolvency proceedings;
provided, however, that up to 1% (by ADCB) may have an Obligor that is a
municipality, school district or similar governmental organization;
(m) the Obligor's billing address is in the United States and the
Contract is a U.S. dollar-denominated obligation;
(n) the Contract does not require the prior written consent of an
Obligor or contain any other restriction on the transfer or assignment of the
Contract (other than a consent or waiver of such restriction that has been
obtained prior to the Closing Date, with respect to an Existing Contract, or the
Addition Date, with respect to an Additional Contract);
<PAGE>
(o) the obligations of the related Obligor under the Contract are
irrevocable, unconditional and non-cancelable (without the right to set off for
any reason and net of any maintenance or cost per copy charges);
(p) the Contract has a remaining term to maturity of not greater than
60 months, provided, however, that up to 10% (by ADCB) may have a remaining term
to maturity of greater than 60 but not greater than 96 months, and provided,
further, that, without duplication, no more than 5% (by ADCB) may have a
remaining term to maturity of greater than 85 months and not greater than 96
months;
(q) no adverse selection procedure was used in selecting the Contract
for the Asset Pool;
(r) the Obligor under the Contract is required to maintain casualty
insurance or to self-insure with respect to the related Equipment in accordance
with the Servicer's normal requirements;
(s) the Contract is not a "consumer lease" as defined in Section
2A-103(l)(e) of the UCC;
(t) the Contract is not subject to any guarantee by the Servicer nor
has the Seller or the Originator established any specific credit reserve with
respect to the related Obligor;
(u) the Contract provides that (i) the Originator, the Seller or the
Servicer may accelerate all remaining Scheduled Payments if the Obligor is in
default under any of its obligations under such Contract and (ii) the Obligor
thereof may not elect to utilize its security deposit to offset any remaining
Scheduled Payment;
(v) the Obligor under the Contract is required to maintain the
Equipment in good working order and bear all costs of operating the Equipment
(including the payment of Taxes);
(w) no provision of such Contract provides for a Prepayment Amount less
than the amount calculated in accordance with the definition of Prepayment
Amount;
(x) the Contract has not been terminated as a result of a Casualty Loss
to the related Equipment or for any other reason;
<PAGE>
(y) the Discounted Contract Balance of such Contract, when aggregated
with the Discounted Contract Balance of each other Contract having the same
Obligor, does not exceed the Portfolio Concentration Criteria;
(z) the Discounted Contract Balance of such Contract does not include
the amount of any security deposit held by the Servicer or the Seller;
(aa) such Contract provides that in the event of a Casualty Loss, the
Obligor is required to pay an amount not less than the present value of all
remaining Scheduled Payments discounted at the applicable Sale Discount Rate
plus any past due amounts as of the date of determination;
(bb) the Obligor thereunder has represented to the Originator that such
Obligor has accepted the related Equipment and has had a reasonable opportunity
to inspect and test such Equipment and the Originator has not been notified of
any defects therein; and
(cc) all payments in respect of a Contract will be made free and clear
of, and without deduction or withholding for or on account of, any Taxes, unless
such withholding or deduction is required by law.
Equipment: The tangible assets financed or leased by an Obligor pursuant to a
Contract and/or, unless the context otherwise requires, a security interest in
such assets, such tangible assets to consist of small ticket equipment,
including without limitation small manufacturing, automotive repair, printing,
information and document processing and storage, telecommunications and office
equipment.
ERISA: The U.S. Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
ERISA Affiliate: (a) Any corporation which is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Code) as the
Seller; (b) A trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Code) with the Seller or
(c) A member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as the Seller, any corporation described in clause (a) above
or any trade or business described in clause (b) above.
Eurocurrency Liabilities: As defined in Regulation D of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
Eurodollar Disruption Event: The occurrence of any of the following: (a) a
determination by a Liquidity Bank that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase, (b) the failure of the
Administrator to obtain timely information for purposes of
<PAGE>
determining the Eurodollar Rate, (c) a determination by a Liquidity Bank that
the rate at which deposits of United States dollars are being offered to such
Liquidity Bank in the London interbank market does not accurately reflect the
cost to such Liquidity Bank of making, funding or maintaining any Purchase or
(d) the inability of a Liquidity Bank to obtain United States dollars in the
London interbank market to make, fund or maintain any Purchase.
Eurodollar Rate: For any Settlement Period, the interest rate per annum
determined by the Administrator by dividing (the resulting quotient rounded
upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of
interest determined by the Administrator in accordance with its usual procedures
(which determination shall be conclusive absent manifest error) to be the
average of the London interbank market offered rates for U.S. dollars quoted by
the BBA as set forth on Dow Jones Markets Service (formerly known as Telerate)
(or appropriate successor or its successor ceases to provide display page 3750
(or such other display page on the Dow Jones Markets Service system as may
replace display page 3750) at or about 11:00 a.m. (London time) on the Business
Day which is two (2) Business Days prior to the first day of such Settlement
Period for an amount comparable to the Capital to be funded at the Bank Rate and
based upon the Eurodollar Rate during such Settlement Period by (ii) a number
equal to 1.00 minus the Euro-Rate Reserve Percentage. The Eurodollar Rate may
also be expressed by the following formula:
Average of London interbank offered rates quoted by BBA
as shown on Dow Jones Markets Service display page 3750
or appropriate successor
Eurodollar Rate =__________
1.00 - Euro-Rate Reserve Percentage
where "Euro-Rate Reserve Percentage" means, the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including without limitation, supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding liabilities (currently
referred to as "Eurocurrency Liabilities"). The Eurodollar Rate shall be
adjusted with respect to any Capital funded at the Bank Rate and based upon the
Eurodollar Rate that is outstanding on the effective date of any change in the
Euro-Rate Reserve Percentage as of such effective date. The Administrator shall
give prompt notice to the Seller of the Eurodollar Rate as determined or
adjusted in accordance herewith (which determination shall be conclusive absent
manifest error).
Excluded Amounts: (a) Any collections on deposit in the Collection Account or
otherwise received by the Servicer on or with respect to the Asset Pool or
related
<PAGE>
Equipment, which collections are attributable to any Taxes, fees or other
charges imposed by any Governmental Authority, (b) any collections representing
reimbursements of insurance premiums or payments for services that were not
financed by the Originator, and (c) any collections with respect to Contracts
retransferred or substituted for with respect to a Warranty Event, or otherwise
replaced by a Substitute Contract.
Existing Contracts: The Contracts purchased by the Seller under the Purchase
Agreement and owned by the Seller on the Closing Date.
Facility Financing Statement: As defined in Schedule I.
Federal Funds Rate: For any period, a fluctuating interest rate per annum equal
(for each day during such period) to
(i) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(ii) if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by PNC from three federal funds brokers of
recognized standing selected by it.
Fee Letter: The letter agreement, the Closing Date, among the Seller, the
Servicer and the Administrator, setting forth, among other things, the
Commitment Fee, the Program Fee and the Structuring Fee.
GAAP: Generally accepted accounting principles as in effect from time to time
the United States.
Governmental Authority: With respect to any Person, any nation or government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
such Person.
H.15: Federal Reserve Statistical Release H.15.
Hedge Agreement: Each agreement between the Seller and a Hedge Counterparty
which governs one or more Hedge Transactions entered into pursuant to Section
5.4(a), which agreement shall consist of a "Master Agreement" in a form
published by the International Swaps and Derivatives Association, Inc., together
with a "Schedule" thereto substantially in the form of Exhibit H or such other
form as the Administrator shall approve in writing, and each "Confirmation"
thereunder confirming the specific terms of each such Hedge Transaction.
<PAGE>
Hedge Breakage Costs: For any Hedge Transaction, any amount payable under the
Hedge Agreement by the Seller for the early termination of that Hedge
Transaction or any portion thereof.
Hedge Counterparty: Any entity which (a) on the date of entering into any Hedge
Transaction (i) is an interest rate swap dealer that has been approved in
writing by the Administrator (which approval shall not be unreasonably withheld)
and (ii) has a long-term unsecured debt rating of not less than "A-" by S&P and
not less than "A3" by Moody's ("Long-term Rating Requirement") and a short-term
unsecured debt rating of not less than "A-l" by S&P and not less than "P-1" by
Moody's ("Short-term Rating Requirement") and (b) in a Hedging Agreement (i)
consents to the assignment of the Seller's rights under the Hedging Agreement to
the Administrator pursuant to Section 5.4(b) and (ii) agrees that in the event
that Moody's or S&P reduces its long-term unsecured debt rating below the
Long-term Rating Requirement or reduces its short-term unsecured debt rating
below the Short-term Rating Requirement, it shall transfer its rights and
obligations under each Hedging Transaction to another entity that meets the
requirements of clause (a) and (b) hereof and has entered into a Hedging
Agreement with the Seller on or prior to the date of such transfer.
Hedge Notional Amount: For any Purchase, the aggregate notional amount in effect
on any day under all Hedge Transactions entered into pursuant to Section 5.4(a)
for that Purchase.
Hedge Rate: For any Contract to which a Purchase relates, the "Fixed Rate" of
the Hedge Transaction to be used in computing the Sale Discount Rate of that
Contract.
Hedge Transaction: Each interest rate swap transaction between the Borrower and
a Hedge Counterparty which is entered into pursuant to Section 5.4(a) and is
governed by a Hedging Agreement.
Increased Costs: Any amounts required to be paid by the Seller to an Affected
Party pursuant to Section 2.14.
Incremental Purchase: Any Purchase that increases the aggregate outstanding
Capital hereunder.
Indebtedness: With respect to any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current liabilities incurred in the ordinary course of
business and payable in accordance with customary trade practices) or which is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under capital leases, (c) all
<PAGE>
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (d) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof and (e) all indebtedness, obligations or
liabilities of that Person in respect of Derivatives.
Indemnified Amounts: As defined in Section 6.19.
Indemnified Persons: As defined in Section 6.19.
Ineligible Contract: As defined in Section 5.5.
Insolvency Event: With respect to a specified Person, (a) the filing of a decree
or order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its Property in an involuntary case under
any applicable Insolvency Law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
law, or the consent by such Person to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
Insolvency Laws: The Bankruptcy Code of the United States of America and all
other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally.
Instrument: Any "instrument" (as defined in Article 9 of the UCC), other than an
instrument which constitutes part of chattel paper.
Insurance Policy: With respect to any Contract, an insurance policy covering
physical damage to or loss of the related Equipment.
Insurance Proceeds: Depending on the context, any amounts payable or any
payments made, to the Servicer under any Insurance Policy.
<PAGE>
Interest Collections: With respect to Settlement Period, the aggregate amount of
Scheduled Payments received during such Settlement Period multiplied in each
case by the applicable Hedge Rate.
Investment: With respect to any Person, any direct or indirect loan, advance or
investment by such Person in any other Person, whether by means of share
purchase, capital contribution, loan or otherwise, excluding the acquisition of
Assets pursuant to the Purchase Agreement and excluding commission, travel and
similar advances to officers, employees and directors made in the ordinary
course of business.
Lien: With respect to any Asset, (a) any mortgage, lien, pledge, charge security
interest or encumbrance of any kind in respect of such Asset or (b) the interest
of a vendor or lessor under any conditional sale agreement, financing lease or
other title retention agreement relating to such Asset.
Liquidation Expenses: With respect to any Contract, the aggregate amount of all
out-of-pocket expenses reasonably incurred by the Servicer (including amounts
paid to any subservicer) and any reasonably allocated costs of internal counsel,
in each case in accordance with the Servicer's customary procedures in
connection with the repossession, refurbishing and disposition of any related
Equipment upon or after the expiration or earlier termination of such Contract
and other out-of-pocket costs related to the liquidation of any such Equipment,
including the attempted collection of any amount owing pursuant to such Contract
if it is a Defaulted Contract.
Liquidity Agreement: (a) The Liquidity Asset Purchase Agreement, dated as of
December 29, 1998, among MSFC, as borrower, PNC Bank, National Association, as
liquidity agent for the Liquidity Bank, and, PNC, as administrator for MSFC and
the Liquidity Banks, and (b) any other agreement hereafter entered into by MSFC
providing for the sale by MSFC of Asset Interests (or portions thereof), or the
making of Asset Interests or other extensions of credit to MSFC secured by
security interests in specified Asset Interests (or portions thereof), to
support all or part of MSFC's payment obligations under the Commercial Paper
Notes or to provide an alternate means of funding MSFC's investments in accounts
receivable or other financial assets, and under which the amount available from
such sale or such extension of credit is limited to an amount calculated by
reference to the value or eligible unpaid balance of such accounts receivable or
other financial assets or any portion thereof, in each case as amended,
supplemented or otherwise modified from time to time.
Liquidity Bank: PNC Bank, National Association and the various financial
institutions as are, or may become, parties to the Liquidity Agreement, as
purchasers thereunder, and any other or additional bank or other financial
institution hereafter purchasing Asset Interests (or portions thereof),
extending credit to or for the account of MSFC or having a commitment to do
either of the foregoing under the Liquidity Agreement.
<PAGE>
Lock-Box: A post office box to which Collections are remitted for retrieval by a
Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box Account.
Lock-Box Account: An account maintained for the purpose of receiving Collections
at a bank or other financial institution which has executed a Lock-Box Notice
for the purpose of receiving Collections.
Lock-Box Bank: Any of the banks or other financial institutions holding one or
more Lock-Box Accounts.
Lock-Box Notice: A notice, in substantially the form of Exhibit B, among the
Seller, the Originator (if applicable) and a Lock-Box Bank.
Monthly Period: As to any Determination Date, the calendar month ended on such
Determination Date.
Monthly Report: As defined in Section 6.13(a).
Moody's: Moody's Investors Service, Inc., and any successor thereto.
Multiemployer Plan: A "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately
preceding five years contributed to by the Seller or any ERISA Affiliate on
behalf of its employees.
Net Loss to Liquidation Ratio: At any time, the product of the Default Ratio and
the weighted average life (in years, rounded upwards to the nearest tenth of a
year) of the Asset Pool.
Notice of Sale: A notice, substantially in the form of Exhibit A, delivered
pursuant to Section 2.2.
Obligor: A Person obligated to make payments pursuant to a Contract including
any guarantor thereof.
Officer's Certificate: A certificate signed by any officer of the Seller or the
Servicer and delivered to the Collateral Custodian, as the case may be.
Opinion of Counsel: A written opinion of counsel, who may be counsel for Seller
or the Servicer and who shall be reasonably acceptable to the Administrator.
Original Contract: Each Contract identified by account number and Outstanding
Balance as of the related Cut Off Date in the Contract List.
<PAGE>
Originator: Fidelity Leasing, Inc. or any wholly owned subsidiary thereof.
Originator Assets: Any Asset that was transferred to the Seller by the
Originator.
Outstanding Balance: Of any Asset at any time, the then outstanding principal
balance thereof.
Overcollateralization: On any day, the difference between the (i) the ADCB on
such day and (ii) the aggregate Capital on such day.
Performance Guaranty: The Peformance Guaranty, dated as of February 1, 1999,
made by Fidelity Leasing, Inc. in favor of the Administrator for the benefit of
MSFC, as amended, modified, supplemented or restated from time to time.
Permitted Investments: Any one or more of the following types of investments:
(a) marketable obligations of the United States of America, the full
and timely payment of which are backed by the full faith and credit of the
United States of America and which have a maturity of not more than 270 days
from the date of acquisition;
(b) marketable obligations, the full and timely payment of which are
directly and fully guaranteed by the full faith and credit of the United States
of America and which have a maturity of not more than 270 days from the date of
acquisition;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations (in each case having a maturity of not more than
270 days from the date of acquisition) denominated in dollars and issued by any
bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated A-1 by S&P and P-1
by Moody's;
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
entered into with any bank of the type described in clause (c) above;
(e) commercial paper rated at least A-1 by S&P and P-1 by Moody's;
(f) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America or
any state thereof (or domestic branches of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however that at the time such investment, or
the commitment to make such investment, is entered into, the short-term debt
rating of such depository institution or trust company shall be at least A-1 by
S&P and P-1 by Moody's; and
<PAGE>
(g) money market funds rated not lower than the highest rating category
from Moody's and "AAAm or "AAAm-g" from S&P.
Permitted Liens: (a) shall mean with respect to Contracts in the Asset Pool:
(i) Liens for state, municipal or other local taxes if such
taxes shall not at the time be due and payable, (ii) Liens in favor of
the Seller created pursuant to a Purchase Agreement and transferred to
the Asset Pool hereunder and (iii) Liens in favor of the Administrator
created pursuant to this Agreement; and
(b) with respect to the related Equipment:
(i) materialmen's, warehousemen's and mechanics' liens and
other Liens arising by operation of law in the ordinary course of
business for sums not due, (ii) Liens for state, municipal or other
local taxes if such taxes shall not at the time be due and payable,
(iii) Liens in favor of the Seller created pursuant to a Purchase
Agreement and transferred to the Asset Pool hereunder and (iv) Liens in
favor of the Administrator created pursuant to this Agreement.
Person: An individual, partnership, corporation (including a business trust),
limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.
PNC: PNC Bank, National Association, in its individual capacity, and its
successors or assigns.
Pool Assets: On any day any Asset in the Asset Pool.
Portfolio Concentration Criteria: The following concentration limitations at all
times measured on the basis of percentage of ADCB:
(a) the sum of the Discounted Contract Balances of Contracts relating
to any one individual Obligor is limited to 2.0%;
(b) the sum of the Discounted Contract Balance of the 6 Obligors with
the largest aggregate Discounted Contract Balances is limited to 10% of the
ADCB;
(c) the sum of the Discounted Contract Balances of Obligors located in
the State of California is limited to 25% of the ADCB;
<PAGE>
(d) the sum of the Discounted Contract Balances of Obligors located in
the State of Texas is limited to 20% of the ADCB;
(e) the sum of the Discounted Contract Balances of Obligors located in
the States of New York and Florida is limited to 15% of the ADCB;
(f) the sum of the Discounted Contract Balances of Obligors located in
any other one State (other than Texas, New York, Florida and California) is
limited to 10% of the ADCB; and
(g) the sum of the Discounted Contract Balances of which the payment
terms are non-monthly is limited to 10% of the ADCB.
Prepaid Contract: Any Contract that has terminated or been prepaid in full prior
to its scheduled expiration date (including because of a Casualty Loss), other
than a Defaulted Contract.
Prepayment Amount: As specified in Section 6.2(b).
Prepayments: Any and all (i) partial and full prepayments on a Contract
(including, with respect to any Contract and any Monthly Period, any Scheduled
Payment or portion thereof which is due in a subsequent Monthly Period which the
Servicer has received, and expressly permitted the related Obligor to make, in
advance of its scheduled due date, and which will be applied to such Scheduled
Payment on such due date), (ii) cash proceeds or rents realized from the sale,
lease, re-lease or re-financing of Equipment under a Prepaid Contract, net of
Liquidation Expenses and (iii) Recoveries.
Program Fee: As defined in Section 2.13(b).
Program Fee Rate: The rate per annum set forth in the Fee Letter.
Purchase: A purchase by MSFC of an undivided interest in the Assets from the
Seller pursuant to Article II, including without limitation, the remittance by
the Servicer to the Seller of Collections of Pool Assets pursuant to Section
2.7(b).
Purchase Agreement: The Purchase and Sale Agreement dated as of the date hereof,
between the Originator and the Seller, as amended, modified, supplemented or
restated from time to time.
Purchase Certificate: Each certificate, in the form of Exhibit G, delivered on
the date of the initial Purchase and on the date of each Incremental Purchase.
Purchase Date: The Closing Date, and as to any Incremental Purchase, any
Business Day that is two (2) Business Days immediately following the receipt by
the Administrator of a written request by the Seller to sell an Asset Interest,
such notice to be in the form of Exhibit A and to conform to requirements of
Section 3.2.
<PAGE>
Purchase Limit: At any time, $100,000,000; provided, however, that on or after
the Termination Date, the "Purchase Limit" shall not exceed the aggregate
outstanding Capital.
Qualified Institution: As defined in Section 6.2.
Rating Agency: Each of Standard & Poor's, Moody's and any other rating agency
that has been requested to issue a rating with respect to the commercial paper
notes issued by MSFC.
Records: All Contracts and other documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) maintained with
respect to Assets and the related Obligors which the Seller has itself
generated, in which the Seller has acquired an interest pursuant to the Purchase
Agreement or in which the Seller has otherwise obtained all interest.
Recoveries: With respect to a Defaulted Contract, proceeds from the sale, lease,
re-lease or refinancing of the Equipment, proceeds of any related Insurance
Policy and any other recoveries with respect to such Defaulted Contract and the
related Equipment and related property, and other amounts representing late fees
and penalties net of Liquidation Expenses and amounts, if any, so received that
are required to be refunded to the Obligor on such Contract.
Reinvestment Termination Date: The Business Day that the Seller designates as
the Reinvestment Termination Date by notice to the Administrator at least ten
Business Days prior to such Business Day or, if any of the conditions precedent
in Section 3.2 are not satisfied, the Business Day that the Administrator
designates as the Reinvestment Termination Date by notice to the Seller at least
one Business Day prior to such Business Day.
Replaced Contract: As defined in Section 2.17(a).
Reporting Date: The 16th day of the month or the first Business Day thereafter.
Required Reports: Collectively, the Monthly Report, the Servicer's Certificate
and the quarterly financial statement of the Servicer required to be delivered
to the Administrator pursuant to Section 6.13(c).
<PAGE>
Requirements of Law: For any Person shall mean the certificate of incorporation
or articles of association and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or order or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
Residual Proceeds: With respect to any Contract or any item of Equipment, the
net proceeds for the sale, re-lease or other disposition of the Equipment upon
the expiration, or early termination, of the term of such Contract.
Responsible Officer: As to any Person (other than the Collateral Custodian and
Backup Servicer), any officer of such Person with direct responsibility for the
administration of this Agreement and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject, and with respect to
the Collateral Custodian and Backup Servicer it shall mean any officer within
the office at the address set forth under its name on the signature pages hereof
or in Exhibit D including any Vice President, Managing Director, Assistant Vice
President, Secretary, Assistant Secretary or Assistant Treasurer or any other
officer of the Collateral Custodian and Backup Servicer customarily performing
functions similar to those performed by any of the above designated officers
and, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge and familiarity with the
particular subject.
Retransfer Date: As defined in Section 5.6.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.
Sale Discount Rate: For any Contract to be transferred to the Asset Pool by the
Seller, a rate per annum, calculated on the Business Day immediately preceding
such transfer, equal to the sum of (i) the Hedge Rate for that Contract, (ii)
the Program Fee Rate, (iii) .15% and (iv) the Servicing Fee Rate.
Scheduled Payments: On any Determination Date with respect to any Contract, (a)
each monthly, quarterly, annual or seasonal rent or financing (whether principal
or principal and interest) payment scheduled to be made by the Obligor thereof
after such Determination Date under the terms of such Contract, reduced by a
number of such scheduled payments equal to a number (rounding upwards to the
next highest integer if such number is not an integer) obtained by dividing (i)
the dollar amount of any security deposit related to such Contract by (ii) the
amount of a single scheduled payment under such Contract, (b) any payment due
from the Obligor of such Contract at the expiration or other termination of such
Contract and (c) any payments in connection with a Warranty Event.
<PAGE>
Seller: Fidelity Leasing SPC II, Inc., or any permitted successor thereto.
Servicer: Fidelity Leasing, Inc. and its permitted successors and assigns.
Servicer Advance: An advance of Scheduled Payments made by the Servicer pursuant
to Section 6.3.
Servicer Default: As specified in Section 6.24.
Servicer's Certificate: As defined in Section 6.13(b).
Servicing Fee: As specified in Section 2.13(c).
Servicing Fee Rate: 0.50%.
Settlement Date: The 20th day of each month (beginning in the month immediately
following the month in which the initial Purchase is made hereunder) or, if such
day is not a Business Day, the Business Day immediately thereafter.
Settlement Period: With respect to any Asset Interest:
(a) the period from and including the date of the initial
funding of such Asset Interest to but excluding the next subsequent
Settlement Date in which such funding occurred; and
(b) thereafter, each period from and including the last day of
the immediately preceding Settlement Period for such Asset Interest to
but excluding the next subsequent Settlement Date;
provided, however, that if any Settlement Period for any Asset Interest that
commences before the Termination Date would otherwise end on a date occurring
after such Termination Date, such Settlement Period shall end on such
Termination Date and the duration of each such Settlement Period that commences
on or after the Termination Date, if any, shall be of such duration as shall be
selected by the Administrator.
Solvent: As to any Person at any time, having a state of affairs such that all
of the following conditions are met: (a) the fair value of the property of such
Person is greater than the amount of such Person's liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy
Code; (b) the present fair salable value of the property of such Person in an
orderly liquidation of such Person is not less than the
<PAGE>
amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured; (c) such Person is able to realize
upon its property and pay its debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the normal course of
business; (d) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute unreasonably small capital.
Structuring Fee: The structuring fee agreed to between the Seller and the
Administrator in the Fee Letter.
Substitute Contract: On any day, an Eligible Contract which meets each of the
conditions for substitution set forth in Schedule IV hereto.
Successor Servicer: As defined in Section 6.25(a).
Tangible Net Worth: With respect to any Person, the net worth of such Person
calculated in accordance with generally accepted accounting principals after
subtracting therefrom the aggregate amount of such Person's intangible assets
(including, without limitation, trademarks, goodwill, deferred closing costs,
loans to shareholders and Affiliates and "start-up" costs except Fidelity may
include up to $300,000 worth of intangible assets representing certain
organization costs and deferred taxes paid for by Fidelity prior to September
30, 1996) and adding thereto subordinate debt.
Taxes: Any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any government or other taxing authority.
Termination Date: The earliest of (a) the date of termination of the Purchase
Limit pursuant to Section 2.3, (b) the date of the occurrence of a Termination
Event pursuant to Section 7.2, (c) the Reinvestment Termination Date and (d) the
Commitment Termination Date.
Termination Event: As defined in Section 7.2.
Termination Notice: As defined in Section 6.24.
Transaction: As defined in Section 3.2.
Transaction Documents: This Agreement, the Purchase Agreement, the Performance
Guaranty, each Hedging Agreement, the Liquidity Agreement, the Fee Letter, the
Backup Servicer and Collateral Custodian Fee Letter, and the Custodial
Agreement, each assignment and any additional letters, documents or other
agreements executed in connection with the foregoing documents.
<PAGE>
UCC: The Uniform Commercial Code as from time to time in effect in the specified
jurisdiction.
United States: The United States of America.
Unmatured Termination Event: Any event which but for the giving of notice, or
passage of time, would constitute a Termination Event.
Unreimbursed Servicer Advances: At any time, the amount of all previous Servicer
Advances (or portions thereof) as to which the Servicer has not been reimbursed
as of such time pursuant to Section 2.7 or 2.9 and which the Servicer has
determined in its sole discretion will not be recoverable from Collections with
respect to the related Contract.
Warranty Event: As to any Pool Asset, the occurrence and continuance of a
material breach of any representation or warranty relating to such Contract.
Yield: For each Asset Interest for any Settlement Period, the product of:
YR x C x ED
--
360
where:
C = the Capital of such Asset Interest.
YR = the weighted average of the Yield Rates applicable during such
Settlement Period.
ED = the actual number of days elapsed during such Settlement Period.
provided, however that (i) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (ii) Yield shall not be considered paid by any distribution
if at any time such distribution is rescinded or must otherwise be returned for
any reason.
Yield Rate: For any Settlement Period,
(a) to the extent MSFC funded the applicable Asset Interest through the
issuance of Commercial Paper Notes, a rate equal to the Commercial Paper Rate,
or
<PAGE>
(b) to the extent MSFC did not fund the applicable Asset Interest
through the issuance of Commercial Paper Notes, a rate equal to the Bank Rate or
if the Bank Rate is not available for any reason (as determined in the
Administrator's sole discretion) and the tranche period applicable to such Asset
Interest is less than one month, the Alternate Reference Rate;
provided, however, that following the occurrence and during the continuance of a
Termination Event (other than a Termination Event arising solely under Section
7.2(c)) the "Yield Rate" shall be a rate equal to the Alternate Reference Rate
plus 2%.
Section 1.2 Other Terms.
All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.
Section 1.3 Computation of Time Periods.
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 mean "to but
excluding."
Section 1.4 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this Agreement have
the meanings as so defined herein when used in any other Transaction Document,
certificate, report or other document made or delivered pursuant hereto.
(b) Each term defined in the singular form in Section 1.1 or elsewhere in this
Agreement shall mean the plural thereof when the plural form of such term is
used in any Transaction Document, certificate, report or other document made or
delivered pursuant hereto, and each term defined in the plural form in Section
1.1 shall mean the singular thereof when the singular form of such term is used
herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when used in
this Agreement shall refer to this agreement as a whole and not to any
particular provision of this Agreement, and article, section, subsection,
schedule and exhibit references herein are references to articles, sections,
subsections, schedules and exhibits to this Agreement unless otherwise
specified.
<PAGE>
ARTICLE II
THE PURCHASE FACILITY
Section 2.1 Purchases of Asset Interests.
On the terms and conditions hereinafter set forth, the Seller may on
any Purchase Date prior to the Termination Date, at its option, sell and assign
Asset Interests to MSFC. Under no circumstances shall MSFC make the initial
Purchase or any Incremental Purchase if, after giving effect to such initial
Purchase or Incremental Purchase, the aggregate Capital outstanding hereunder
would exceed the lesser of (i) the Purchase Limit or (ii) the Capital Limit.
Each Asset Interest purchased by MSFC hereunder is subject to the interests of
the Hedge Counterparties under Sections 2.7(a) and 2.9(b).
Section 2.2 The Initial Purchase, Subsequent Purchases and Incremental
Purchases.
(a) Subject to the conditions described in Section 2.1, the initial Purchase and
each Incremental Purchase shall be made in accordance with the procedures
described in Section 2.2(b). The initial Purchase shall be in an amount not less
than $4,000,000. After the Collection Date has occurred, MSFC shall assign and
transfer to the Seller its remaining interest in Asset Interests to the Seller
free and clear of any Adverse Claim resulting solely from an act or omission by
MSFC or the Administrator, but without any other representation or warranty,
express or implied.
(b) The initial Purchase and each Incremental Purchase shall be made pursuant to
the terms of a Purchase Certificate in the form of Exhibit G, after receipt by
MSFC of a Notice of Sale delivered by the Seller to the Administrator (with a
copy to the Collateral Custodian) at least two Business Days prior to such
proposed Purchase Date. Each such Notice of shall specify (i) the aggregate
amount of such initial Purchase or Incremental Purchase which shall be at least
$1,000,000 and in integral multiple of $1,000 in excess thereof and (ii) the
date of such initial Purchase or Incremental Purchase. On the date of such
initial Purchase or Incremental Purchase, MSFC shall, upon satisfaction of the
applicable conditions set forth in Article III, make available to the Seller in
same day funds, at such bank or other location reasonably designated by Seller
in the Notice of Sale, an amount equal to the Capital of the Asset Interest
related to such initial Purchase or Incremental Purchase.
Section 2.3 Reduction of the Purchase Limit; Repurchase.
(a) The Seller may, upon at least five Business Days' notice to the
Administrator, terminate in whole or reduce in part the Purchase Limit to the
extent that the Purchase Limit exceeds the sum of the aggregate Capital and
Yield accrued and to accrue thereon; provided, however, that each partial
reduction of the Purchase Limit shall be in an aggregate amount equal to
$1,000,000 or an integral multiple thereof. Each notice of reduction or
termination pursuant to this Section 2.3(a) shall be irrevocable.
<PAGE>
(b) The Seller may reduce the Capital of any Asset Interest, upon 30 days notice
to MSFC and the Administrator prior to the date of such reduction, by remitting
to the Agent's Account (i) cash and (ii) instructions to apply such cash to the
reduction of such Capital and Yield to accrue (until such cash can be used to
pay Commercial Paper Notes) with respect to such Asset Interest, provided that
no such reduction shall be given effect unless the Seller has complied with the
terms of any Hedging Agreement requiring that one or more Hedge Transactions be
terminated in whole or in part as the result of any such reduction of such Asset
Interest, and Seller has paid all Hedge Breaking Costs owing to the relevant
Hedge Counterparty for any such termination and all Breakage Costs. The Seller
shall pay all costs related to the reduction of outstanding Capital, including
Breakage Costs, Hedge Breakage Costs and all costs associated with the
outstanding Commercial Paper Notes related to such Capital reduction; provided,
however, that MSFC and the Administrator shall use their reasonable best efforts
to minimize any Breakage Costs.
Section 2.4 Determination of Yield.
The Administrator shall determine the Yield (including unpaid Yield, if
any, due and payable on a prior Settlement Date) to be paid on each Settlement
Date for the related Settlement Period and shall advise the Servicer thereof on
the last day of such Settlement Period.
Section 2.5 Voluntary Repurchases.
The Seller may, upon at least 30 days' notice to the Administrator,
repurchase all or any of the Asset Interests in full by remitting to the Agent's
Account (i) cash and (ii) instructions to apply such cash to the Capital and
Yield accrued and to accrue (until such cash can be used to pay Commercial Paper
Notes) with respect to the Asset Interests to be repurchased, provided that no
such repurchase shall be effective unless the Seller has complied with the terms
of any Hedging Agreement requiring that one or more Hedge Transactions be
terminated in whole or in part as the result of any such repurchase of such
Asset Interest, and Seller has paid all Hedge Breakage Costs owing to the
relevant Hedge Counterparty for any such termination and all Breakage Costs. The
Seller shall pay all costs related to such repurchases, including Breakage
Costs, Hedge Breakage Costs and all costs associated with the outstanding
Commercial Paper Notes related to the Asset Interests repurchased; provided,
however, that MSFC and the Administrator shall use their reasonable best efforts
to minimize any Breakage Costs.
<PAGE>
Section 2.6 Dividing or Combining Asset Interests.
The Administrator may take any of the following actions at the end of a
Settlement Period with respect to any Asset Interest: (i) divide such Asset
Interest into two or more Asset Interests having aggregate Capital equal to the
Capital of such divided Asset Interest, (ii) combine such Asset Interests with
another Asset Interest with a Settlement Period ending on the same day, creating
a new Asset Interest having Capital equal to the Capital of the two Asset
Interests combined or (iii) combine such Asset Interest with the Asset Interest
to be purchased on such day, creating a new Asset Interest having Capital equal
to the Capital of the two Asset Interests combined.
Section 2.7 Non-Liquidation Settlement Procedures.
The provisions of this Section 2.7 shall apply during the term of this
Agreement unless a Termination Event or an Unmatured Termination Event has
occurred and is continuing.
(a) On each Settlement Date, the Servicer shall pay to the following Persons,
from (i) the Collection Account, to the extent of available funds, and (ii) a
Servicer Advance if made or required pursuant to Section 6.3, the following
amounts in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty (based on the amount payable
thereto under this clause FIRST), any amounts owing to that Hedge Counterparty
under its respective Hedging Agreement in respect of any Hedge Transaction(s),
excluding Hedge Breakage Costs, for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any accrued and unpaid
Servicing Fee, for the payment thereof;
(iii) THIRD, to the Administrator, in an amount equal to any accrued and unpaid
Yield for all Asset Interests, for payment to MSFC in respect thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any Unreimbursed Servicer
Advances, for the payment thereof;
(v) FIFTH, pro rata to each Hedge Counterparty (based on the amount payable
thereto under this clause FIFTH), in an amount equal to any unpaid Hedge
Breakage Costs, for payment thereof;
<PAGE>
(vi) SIXTH, pro rata to the Persons entitled thereto (based on the amount
payable thereto under this clause SIXTH), in an amount equal to any unpaid
Breakage Costs, Increased Costs and/or Taxes, for the payment thereof;
(vii) SEVENTH, pro rata to the Persons entitled thereto (based on the amount
payable thereto under this clause SEVENTH), in an amount equal to any unpaid
Indemnified Amounts and other amounts due hereunder, for the payment thereof;
(viii) EIGHTH, to the Seller, any Residual Proceeds; and
(ix) NINTH, any remaining amounts may be reinvested in Eligible Contracts,
subject to satisfaction of the conditions precedent set forth in Section 3.2, or
distributed to the Seller.
(b) Notwithstanding anything to the contrary contained in this Section 2.7 or
any other provision in this Agreement, if on any Business Day prior to the
Termination Date the aggregate outstanding amount of Capital of all Asset
Interests shall exceed the lesser of (i) the Purchase Limit or (ii) the Capital
Limit, then the Seller shall remit to the Administrator, no later than the close
of business of the Administrator on the next succeeding Business Day, a payment
(to be applied by the Administrator to outstanding Asset Interests as selected
by the Administrator, in its reasonable discretion) in such amount as may be
necessary to reduce outstanding Capital to an amount less than or equal to the
lesser of (i) the Purchase Limit or (ii) the Capital Limit plus pay any Breakage
Costs with respect thereto, and no amounts shall be distributed pursuant to
clauses FOURTH, FIFTH, SIXTH, SEVENTH, EIGHTH or NINTH above to the extent that
a Termination Event or Unmatured Termination Event would exist after giving
effect to such distribution.
Section 2.8 [reserved].
Section 2.9 Settlement Procedures Following a Termination Event or an
Unmatured Termination Event.Section Settlement Procedures Following a
Termination Event or an Unmatured Termination Event.
The provisions of this Section 2.9 shall apply during the term of this
Agreement after the occurrence and during the continuance of a Termination Event
or an Unmatured Termination Event.
(a) [reserved].
(b) On each Settlement Date, the Servicer shall pay to the following Persons,
from (i) the Collection Account, to the extent of available funds and (ii) a
Servicer Advance if made or required pursuant to Section 6.3, the following
amounts in the following order of priority:
<PAGE>
(i) FIRST, to the Servicer, in an amount equal to any accrued and unpaid
Servicing Fee, for the payment thereof;
(ii) SECOND, to the extent not paid for by Fidelity, to the Backup Servicer, in
an amount equal to any accrued and unpaid Backup Servicing Fee, for the payment
thereof;
(iii) THIRD, to the extent not paid for by Fidelity, to the Collateral
Custodian, in an amount equal to any accrued and unpaid Custodial Fee, for the
payment thereof;
(iv) FOURTH, pro rata to each Hedge Counterparty and the Administrator (based on
the amount payable thereto under this clause FOURTH), in an amount equal to (i)
in the case of each Hedge Counterparty the amount then due thereto under its
respective Hedging Agreement in respect of any Hedge Transaction(s), excluding
Hedge Breakage Costs, for the payment thereof, and (ii) in the case of the
Administrator, any accrued and unpaid Yield for all Asset Interests, for payment
to MSFC in respect thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the Administrator, in an
amount equal to the accrued and unpaid Program Fees and Commitment Fees, for
payment to the Persons entitled thereto in respect thereof;
(vi) SIXTH, pro rata to the Servicer and the Administrator (based on the amount
payable thereto under this clause SIXTH), in an amount equal to (i) in the case
of the Servicer, any Unreimbursed Servicer Advances, for the payment thereof,
and (ii) in the case of the Administrator, the aggregate outstanding Capital,
for payment to MSFC in respect thereof;
(vii) SEVENTH, pro rata to the Persons entitled thereto (based on the amount
payable thereto under this clause SEVENTH), in an amount equal to any unpaid
Breakage Costs, Hedge Breakage Costs, Increased Costs, Taxes, Indemnified
Amounts and other amounts due hereunder, for the payment thereof; and
(viii) EIGHTH, upon the reduction of the Capital to zero and the payment in full
of the Aggregate Unpaids, any remaining amount shall be distributed to the
Seller.
(c) If at any time on or after the Termination Date, the Administrator or the
Seller determines that as of the close of business on the day immediately
preceding Termination Date the aggregate outstanding amount of Capital for all
Asset Interests exceeded the lesser of (i) the Purchase Limit or (ii) the
Capital Limit, then the Seller shall immediately remit to the Administrator a
payment (to be applied by
<PAGE>
the Administrator to outstanding Asset Interests as selected by the
Administrator, in its reasonable discretion) in such amount as may be necessary
to reduce the amount of Capital to the lesser of (i) the Purchase Limit or (ii)
the Capital Limit as of the close of business on the date immediately preceding
the Termination Date plus any Breakage Costs.
Section 2.10 Collections and Allocations.
(a) Collections. The Servicer shall transfer, or cause to be transferred, all
Collections on deposit in the form of available funds in the Lock Box Account to
the Collection Account by the close of business on the Business Day such
Collections are received in the Lock Box Account. The Servicer shall promptly
(but in no event later than two Business Days after the receipt thereof) deposit
all Collections received directly by it in the Collection Account. The Servicer
shall make such deposits or payments on the date indicated therein by electronic
funds transfer through the Automated Clearing House system, or by wire transfer,
in immediately available funds.
(b) Initial Deposits. On the Closing Date and on each Addition Date thereafter,
the Servicer will deposit (in immediately available funds) into the Collection
Account all Collections received after the applicable Cut Off Date and through
and including the Closing Date or Addition Date, as the case may be, in respect
of Contracts being transferred to the Asset Pool on such date.
(c) Excluded Amounts. The Servicer may withdraw from the Collection Account any
Collections constituting Excluded Amounts for distribution to the Originator if
the Servicer has, prior to such withdrawal, delivered to the Administrator a
report setting forth the calculation of such Excluded Amounts in a format
reasonably satisfactory to the Administrator.
Section 2.11 Payments, Computations, Etc.
(a) Unless otherwise expressly provided herein, all amounts to be paid or
deposited by the Seller or the Servicer hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 A.M. (New York City time)
on the day when due in lawful money of the United States in immediately
available funds to the Agent's Account (other than amounts payable to any Hedge
Counterparty which shall be paid directly thereto). The Seller shall, to the
extent permitted by law, pay interest on all amounts not paid or deposited when
due hereunder at 2.0% per annum above the Alternate Reference Rate, payable on
demand; provided, however, that such interest rate shall not at any time exceed
the maximum rate permitted by applicable law. All computations of interest and
all computations of Yield and other fees hereunder shall be made on the basis of
a year of 360 days for the actual number of days (including the first but
excluding the last day) elapsed.
<PAGE>
(b) Whenever any payment hereunder shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of Yield, interest or any fee payable hereunder, as the case may be.
(c) If any Purchase or Incremental Purchase requested by the Seller, is not, for
any reason whatsoever related to a default or nonperformance by the Seller, made
or effectuated, as the case may be, on the date specified therefor, the Seller
shall indemnify MSFC against any reasonable loss, cost or expense incurred by
MSFC, including, without limitation, any loss (including loss of anticipated
profits, net of anticipated profits in the reemployment of such funds in the
manner determined by MSFC), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by MSFC to fund
or maintain such Purchase or Incremental Purchase, as the case may be, during
such Monthly Period.
Section 2.12 Optional Repurchase.
At any time following the Termination Date when the ADCB is less than
ten percent (10%) of the ADCB as of the Termination Date, the Servicer may
notify the Administrator in writing of its intent to purchase all remaining
Assets in the Asset Pool, provided that all Hedge Transactions have been
terminated. On the Settlement Date next succeeding any such notice, the Servicer
shall purchase all such Assets for a price equal to the sum of (i) the Aggregate
Unpaids, (ii) the Yield for all Asset Interests accrued and to accrue, as
reasonably determined by the Administrator, and (iii) all accrued and unpaid
Commitment Fees, Program Fees, Backup Servicing Fees, Custodial Fees, Increased
Costs, Taxes, Hedge Breaking Costs, Breakage Costs and any other amounts payable
by the Seller hereunder or under or with respect to any Hedging Agreement, and
the proceeds of such purchase will be deposited into the Collection Account and
paid in accordance with Section 2.9(b).
Section 2.13 Fees.
(a) Fidelity, in its individual capacity, shall pay to the Administrator, from
its own funds on each Settlement Date, monthly in arrears, a fee (the
"Commitment Fee"), as set forth in the Fee Letter.
(b) Fidelity, in its individual capacity, shall pay to the Administrator, from
the Collection Account on each Settlement Date, monthly in arrears, a fee (the
"Program Fee") agreed to between Fidelity and the Administrator in the Fee
Letter.
(c) The Servicer shall be entitled to receive a fee (the "Servicing Fee"),
monthly in arrears, in accordance with Section 2.7(a) or 2.9(b), as
<PAGE>
applicable, which fee shall be equal to the sum of (i) the product of (A) the
Servicing Fee Rate, multiplied by (B) the ADCB for the immediately preceding
Determination Date, plus (ii) if a Termination Event or an Unmatured Termination
Event has not occurred which is continuing, the Additional Servicer
Compensation.
(d) Fidelity in its individual capacity, shall pay to the Backup Servicer, from
its own funds on each Settlement Date, monthly in arrears, the Backup Servicing
Fee.
(e) Fidelity, in its individual capacity, shall pay to the Collateral Custodian,
from its own funds on each Settlement Date, monthly in arrears, the Custodial
Fee.
(f) Fidelity, in its individual capacity, shall pay to the Administrator, on the
Closing Date, the Structuring Fee in immediately available funds.
(g) Notwithstanding the foregoing, if any of the fees described in clauses (a),
(b), (d), (e) and (f) are paid pursuant to Section 2.9(b), then Fidelity shall
immediately deposit the amount of such fees so paid into the Collection Account
for subsequent distribution in accordance with Section 2.9(b).
Section 2.14 Increased Costs, Capital Adequacy; Illegality.
(a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by
any Affected Party with any guideline or request from any central bank or other
governmental agency or authority (whether or not having the force of law), (A)
shall subject an Affected Party to any Tax (except for Taxes on the overall net
income of such Affected Party), duty or other charge with respect, directly or
indirectly, to any Asset Interest, to any right or obligations to make or fund
Purchases hereunder or to any payment made under any Transaction Document or (B)
shall impose, modify or deem applicable any reserve requirement (including,
without limitation, any reserve requirement imposed by the Board of Governors of
the Federal Reserve System, but excluding any reserve requirement, if any,
included in the determination of Yield), special deposit or similar requirement
against assets of, deposits with or for the amount of, or credit extended by,
any Affected Party or (C) shall impose any other condition affecting any Asset
Interest or any Affected Party's rights under any Transaction Document, the
result of which is to increase the cost to any Affected Party or to reduce the
amount of any sum received or receivable by an Affected Party under any
Transaction Document (or other credit support agreement), then within ten days
after demand by such Affected Party (which demand shall be accompanied by a
statement setting forth the basis for such demand), the Seller shall pay
directly to such Affected Party such additional amount or amounts as will
compensate such Affected Party for such additional or increased cost incurred or
such reduction suffered.
<PAGE>
(b) If either (i) the introduction of or any change in or in the interpretation
of any law, guideline, rule, regulation, directive or request or (ii) compliance
by any Affected Party with any law, guideline, rule, regulation, directive or
request from any central bank or other governmental authority or agency (whether
or not having the force of law), including, without limitation, compliance by an
Affected Party with any request or directive regarding capital adequacy, has or
would have the effect of reducing the rate of return on the capital of any
Affected Party as a consequence of its obligations hereunder or arising in
connection herewith to a level below that which any such Affected Party could
have achieved but for such introduction, change or compliance (taking into
consideration the policies of such Affected Party with respect to capital
adequacy) by an amount deemed by such Affected Party to be material, then from
time to time, within ten days after demand by such Affected Party (which demand
shall be accompanied by a statement setting forth the basis for such demand),
the Seller shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such reduction.
(c) If as a result of any event or circumstance similar to those described in
clauses (a) or (b) above, any Affected Party is required to compensate a bank or
other financial institution providing liquidity support, credit enhancement or
other similar support to such Affected Party in connection with this Agreement
or the funding or maintenance of Purchases hereunder, then within ten days after
demand by such Affected Party, the Seller shall pay to such Affected Party such
additional amount or amounts as may be necessary to reimburse such Affected
Party for any amounts paid by it.
(d) In determining any amount provided for in this section, the Affected Party
may use any reasonable averaging and attribution methods. Any Affected Party
making a claim under this Section 2.14 shall submit to the Seller a certificate
as to such additional or increased cost or reduction, which certificate shall be
conclusive absent demonstrable error.
(e) If any Liquidity Bank shall notify the Administrator that a Eurodollar
Disruption Event as described in clause (a) of the definition of "Eurodollar
Disruption Event" has occurred, the Administrator shall in turn so notify the
Seller, whereupon all Capital in respect of which Yield accrues at the
Eurodollar Rate shall immediately be converted into Capital in respect of which
Yield accrues at the Alternate Reference Rate.
<PAGE>
(f) Notwithstanding the foregoing, if any amounts required to be paid by the
Seller pursuant to this Section 2.14 are paid pursuant to Section 2.9(b), then
the Seller shall immediately deposit the amount so paid into the Collection
Account for subsequent distribution in accordance with Section 2.9(b).
Section 2.15 Taxes.
(a) All payments made by the Seller or the Servicer under this Agreement will be
made free and clear of and without deduction or withholding for or on account of
any Taxes, unless such withholding or deduction is required by law. In such
event, the Seller or the Servicer, as the case may be, shall pay to the
appropriate taxing authority any such Taxes required to be deducted or withheld
and the amount payable to MSFC or the Administrator, as the case may be, will be
increased (such increase, the "Additional Amount") such that every net payment
made under this Agreement after deduction or withholding for or on account of
any Taxes (including, without limitation, any Taxes on such increase) is not
less than the amount that would have been paid had no such deduction or
withholding been deducted or withheld. The foregoing obligation to pay
Additional Amounts, however, will not apply with respect to net income or
franchise taxes imposed on MSFC or the Administrator, respectively, with respect
to payments required to be made by the Seller or Servicer under this Agreement,
by a taxing jurisdiction in which MSFC or Administrator is organized, conducts
business or is paying taxes as of the Closing Date, as the case may be. If MSFC
or the Administrator pays any Taxes in respect of which the Seller is obligated
to pay Additional Amounts under this Section 2.14(a), the Seller shall promptly
reimburse MSFC or Administrator in full.
(b) The Seller will indemnify MSFC and the Administrator for the full amount of
Taxes in respect of which the Seller is required to pay Additional Amounts
(including, without limitation, any Taxes imposed by any jurisdiction on such
Additional Amounts) paid by MSFC or the Administrator, as the case may be, and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto; provided, however, that MSFC or the Administrator, as
appropriate, making a demand for indemnity payment shall provide the Seller, at
its address set forth under its name on the signature pages hereof or in Exhibit
D, with a certificate from the relevant taxing authority or from a responsible
officer of MSFC or the Administrator stating or otherwise evidencing that
response MSFC or the Administrator has made payment of such Taxes and will
provide a copy of or extract from documentation, if available, furnished by such
taxing authority evidencing assertion or payment of such Taxes. This
indemnification shall be made within ten days from the date MSFC or the
Administrator, as the case may be, makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller of any Taxes, the
Seller will furnish to the Administrator, at its address set forth under its
name on the signature pages hereof or in Exhibit D, appropriate evidence of
payment thereof.
<PAGE>
(d) If an assignee of MSFC is not created or organized under the laws of the
United States or a political subdivision thereof, such assignee shall, to the
extent that it may then do so under applicable laws and regulations, deliver to
the Seller with a copy to the Administrator (i) within 15 days after becoming an
assignee of MSFC, two (or such other number as may from time to time be
prescribed by applicable laws or regulations) duly completed copies of IRS Form
4224 or Form 1001 (or any successor forms or other certificates or statements
which may be required from time to time by the relevant United States taxing
authorities or applicable laws or regulations), as appropriate, to permit the
Seller to make payments hereunder for the account of such assignee, as the case
may be, without deduction or withholding of United States federal income or
similar Taxes and (ii) upon the obsolescence of or after the occurrence of any
event requiring a change in, any form or certificate previously delivered
pursuant to this Section 2.14(d), copies (in such numbers as may from time to
time be prescribed by applicable laws or regulations) of such additional,
amended or successor forms, certificates or statements as may be required under
applicable laws or regulations to permit the Seller to make payments hereunder
for the account of such assignee, without deduction or withholding of United
States federal income or similar Taxes.
(e) For any period with respect to which an assignee of MSFC has failed to
provide the Seller with the appropriate form, certificate or statement described
in clause (d) above (other than if such failure is due to a change in law
occurring after the date of this Agreement), such assignee shall not be entitled
to indemnification under clauses (a) or (b) above with respect to any Taxes.
(f) Within 30 days of the written request of the Seller therefor, the
Administrator or MSFC, as appropriate, shall execute and deliver to the Seller
such certificates, forms or other documents which can be furnished consistent
with the facts and which are reasonably necessary to assist the Seller in
applying for refunds of Taxes remitted hereunder; provided, however, that the
Administrator and MSFC shall not be required to deliver such certificates forms
or other documents if in their respective sole discretion it is determined that
the deliverance of such certificate, form or other document would have a
material adverse affect on the Administrator or MSFC; provided further, however,
that the Seller shall reimburse the Administrator or MSFC for any reasonable
expenses incurred in the delivery of such certificate, form or other document.
(g) If, in connection with an agreement or other document providing liquidity
support, credit enhancement or other similar support to MSFC in connection with
this Agreement or the funding or maintenance of Purchases hereunder, MSFC is
required to compensate a bank or other financial institution in respect of Taxes
under circumstances similar to those described in this section then within ten
days after demand by MSFC, the Seller shall pay to MSFC such additional amount
or amounts as may be necessary to reimburse MSFC for any amounts paid by them.
<PAGE>
(h) Without prejudice to the survival of any other agreement of the Seller
hereunder, the agreements and obligations of the Seller contained in this
Section 2.15 shall survive the termination of this Agreement.
(i) Notwithstanding the foregoing, if any amounts required to be paid by the
Seller pursuant to this Section 2.15 are paid pursuant to Section 2.9(b), then
the Seller shall immediately deposit the amount so paid into the Collection
Account for subsequent distribution in accordance with Section 2.9(b).
Section 2.16 Assignment of the Purchase Agreement.
The Seller hereby represents, warrants and confirms to the
Administrator that the Seller has assigned to the Administrator, for the benefit
of MSFC hereunder, all of the Seller's right and title to and interest in the
Purchase Agreement. The Seller confirms that following a Termination Event the
Administrator shall have the sole right to enforce the Seller's rights and
remedies under the Purchase Agreement, but without any obligation on the part of
the Administrator, MSFC or any of their respective Affiliates, to perform any of
the obligations of the Seller under the Purchase Agreement. The Seller further
confirms and agrees that such assignment to the Administrator shall terminate
upon the Collection Date; provided, however, that the rights of the
Administrator pursuant to such assignment with respect to rights and remedies in
connection with any indemnities and any breach of any representation, warranty
or covenants made by the Originator pursuant to the Purchase Agreement, which
rights and remedies survive the termination of the Purchase Agreement, shall be
continuing and shall survive any termination of such assignment.
Section 2.17 Substitution of Contracts.
On any day prior to the occurrence of a Termination Event, the Seller
may, and upon the request of the Administrator shall, subject to the conditions
set forth in this Section 2.17, replace any Contract subject to a Warranty Event
or in respect of which the Obligor thereunder has requested the rewriting and/or
restructuring of such Contract with one or more other Contracts (each, a
"Substitute Contract"); provided, however, that no such replacement shall occur
unless each of the following conditions is satisfied as of the date of such
replacement and substitution:
(a) the Seller has notified the Administrator (with a copy to the Collateral
Custodian) in writing that the Contract to be replaced should be replaced (each
a "Replaced Contract");
(b) each Substitute Contract is an Eligible Contract on the date of
substitution;
<PAGE>
(c) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of (i) the Purchase Limit or (ii)
the Capital Limit;
(d) the aggregate Discounted Contract Balance (at the applicable Sale Discount
Rate) of such Substitute Contracts shall be equal to or greater than the
aggregate Discounted Contract Balances (at the applicable Sale Discount Rate as
of the date of the inclusion of such Contract in the Asset Pool) of Contracts
being replaced;
(e) such Substitute Contracts, at the time of substitution by the Seller, shall
have approximately the same weighted average life as the replaced Contracts;
(f) all representations and warranties of the Seller contained in Sections 4.1
and 4.2 shall be true and correct as of the date of substitution of any such
Substitute Contract;
(g) the substitution of any Substitute Contract does not cause a Termination
Event or Unmatured Termination Event to occur; and
(h) the Seller and the Servicer shall deliver to the Administrator on the date
of such substitution a certificate of a Responsible Officer certifying that each
of the foregoing is true and correct as of such date.
In addition, the Seller shall deliver to the Collateral Custodian the
related Contract File as required by Section 3.3. In connection with any such
substitution, the Administrator shall, automatically and without further action,
be deemed to transfer to the Seller, free and clear of any Lien created pursuant
to this Agreement, all of the right, title and interest of the Administrator in,
to and under such Replaced Contract, and the Administrator shall be deemed to
represent and warrant that it has the corporate authority and has taken all
necessary corporate action to accomplish such transfer, but without any other
representation and warranty, express or implied. Any right of the Administrator
to substitute any Contract in the Asset Pool pursuant to this Section 2.16 shall
be in addition to, and without limitation of, any other rights and remedies that
the Administrator or MSFC may have to require the Seller or the Servicer, as
applicable, to substitute for, or accept retransfer of, any Contract pursuant to
the terms of this Agreement.
<PAGE>
ARTICLE III
CONDITIONS OF PURCHASES
Section 3.1 Conditions Precedent to Initial Purchase.
The initial Purchase hereunder is subject to the condition precedent
that the Administrator shall have received on or before the date of such
purchase the items listed in Schedule I, each (unless otherwise indicated) dated
such date, in form and substance satisfactory to the Administrator.
Section 3.2 Conditions Precedent to All Purchases and Remittances of
Collections.
Each Purchase (including the initial Purchase) from the Seller by MSFC
the right of the Servicer to remit Collections to the Seller pursuant to Section
2.7(b) and each Incremental Purchase (each, a "Transaction") shall be subject to
the further conditions precedent that (a) with respect to any Purchase
(including the initial Purchase) or Incremental Purchase, the Servicer shall
have delivered to the Administrator, on or prior to the date of such Purchase or
Incremental Purchase in form and substance satisfactory to the Administrator,
(i) a Purchase Notice (Exhibit A), (ii) a Purchase Certificate (Exhibit G), and
(iii) a Certificate of Assignment (Exhibit A to the Purchase and Sale Agreement)
including Schedule I thereto, dated within 10 days prior to the date of such
Purchase (other than the initial Purchase, in which case such items shall be
dated within 5 days prior to the date of such initial Purchase) or Incremental
Purchase and containing such additional information as may be reasonably
requested by the Administrator; (b) on the date of such Transaction the
following statements shall be true and the Seller and the Servicer shall be
deemed to have certified that:
(i) The representations and warranties contained in Sections 4.1 and 4.2 are
true and correct on and as of such day as though made on and as of such date,
(ii) No event has occurred and is continuing, or would result from such
Transaction which constitutes a Termination Event or an Unmatured Termination
Event,
(iii) On and as of such day, after giving effect to such Transaction, the
outstanding Capital does not exceed the lesser of (x) the Purchase Limit or (y)
the Capital Limit,
(iv) On and as of such day, the Seller and the Servicer each has performed all
of the agreements contained in this Agreement to be performed by such person at
or prior to such day, and
(v) No law or regulation shall prohibit, and no order, judgment or decree of any
federal, state or local court or governmental body, agency or instrumentality
shall prohibit or enjoin, the making of such Purchase, remittance of Collections
or Incremental Purchase by MSFC in accordance with the provisions hereof; and
<PAGE>
(c) on the date of such Transaction, the Administrator shall have
received such other approvals, opinions or documents as the Administrator may
reasonably require.
A. Section Delivery of Contract Files.
As a condition subsequent to each Purchase or substitution of
Substitute Contracts made hereunder, the Seller shall deliver to the Collateral
Custodian, within 10 calendar days after such Purchase or substitution, the
related Contract Files.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Seller.
The Seller represents and warrants as follows:
(a) Organization and Good Standing. The Seller is a corporation duly organized
and validly existing in good standing under the laws of the State of Delaware,
and has full corporate power, authority and legal right to own or lease its
properties and conduct its business as such properties are presently owned or
leased and such business is presently conducted, and to execute, deliver and
perform its obligations under the Transaction Documents.
(b) Due Qualification. The Seller is duly qualified to do business and is in
good standing as a corporation, and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which failure to so qualify or
to obtain such licenses and approvals would have a material adverse effect on
its ability to perform its obligations under any Transaction Document.
(c) Due Authorization. The execution and delivery of the Transaction Documents
to which the Seller is a party and the consummation of the transactions provided
for herein and therein have been duly authorized by the Seller by all necessary
corporate action on the part of the Seller.
(d) No Conflict. The execution and delivery of the Transaction Documents, the
performance by the Seller of the transactions contemplated hereby and thereby
and the fulfillment of the terms hereof and thereof will not conflict with or
result in any breach of any of the material terms and provisions of, and will
not constitute (with
<PAGE>
or without notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to which the
Seller is a party or by which it or any of its property is bound.
(e) No Violation. The execution and delivery of the Transaction Documents, the
performance of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof will not conflict with or violate,
in any material respect, any Requirements of Law applicable to the Seller.
(f) No Proceedings. There are no proceedings or investigations pending or, to
the best knowledge of the Seller, threatened against the Seller, before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of any Transaction Document, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
any Transaction Document or (iii) seeking any determination or ruling that could
reasonably be expected to be adversely determined, and if adversely determined,
would materially and adversely affect the performance by the Seller of its
obligations under any Transaction Document.
(g) All Consents Required. All approvals, authorizations, consents, orders or
other actions of any Person or of any Governmental Authority required in
connection with the execution and delivery by the Seller of the Transaction
Documents to which the Seller is a party, the performance by the Seller of the
transactions contemplated by the Transaction Documents, and the fulfillment of
the terms hereof and thereof by the Seller, have been obtained unless the
failure to obtain such shall not materially and adversely affect the Seller's
performance of its obligations thereunder.
(h) Bulk Sales. The execution, delivery and performance of the Transaction
Documents do not require compliance with any "bulk sales" law by Seller.
(i) Solvency. The transactions under the Transaction Documents do not and will
not render the Seller not Solvent.
(j) Selection Procedures; Credit and Collection Policy. No procedures believed
by the Seller to be materially adverse to the interests of MSFC were utilized by
the Seller in identifying and/or selecting the Contracts in the Asset Pool. In
addition, each Contract shall have been underwritten in accordance with and
satisfy the standards of any Credit and Collection Policy which has been
established by the Seller or the Originator and is then in effect. Such Credit
and Collection Policy or procedure may be amended from time to time in the
Seller's or the Originator's normal course of business provided that the Seller
shall not materially change such credit and collection policy or procedure
without the prior written consent of the Administrator.
<PAGE>
(k) Taxes. The Seller has filed or caused to be filed all Tax returns which, to
its knowledge, are required to be filed. The Seller has paid or made adequate
provisions for the payment of all Taxes and all assessments made against it or
any of its property (other than any amount of Tax the validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with generally accepted accounting
principles have been provided on the books of the Seller), and no Tax lien has
been filed and, to the Seller's knowledge, no claim is being asserted, with
respect to any such Tax, fee or other charge.
(l) Agreements Enforceable. The Transaction Documents to which the Seller is a
party each constitute the legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with their respective terms, except
as such enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(m) Exchange Act Compliance. No proceeds of any Purchase or Incremental Purchase
will be used by the Seller to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(n) No Liens. Each Asset, together with the Contract related thereto, shall, at
all times, be owned by the Seller free and clear of any Adverse Claim except as
provided herein, and upon each Purchase, remittance of Collections or
Incremental Purchase, the Administrator shall acquire (subject to recordation
where necessary) a valid and perfected first priority undivided ownership
interest in each Asset then existing or thereafter arising and Collections with
respect thereto, free and clear of any Adverse Claim except as provided
hereunder. No effective financing statement or other instrument similar in
effect covering any Asset or Collections with respect thereto shall at any time
be on file in any recording office except such as may be filed in favor of the
Administrator relating to this Agreement.
(o) Reports Accurate. No Monthly Report (if prepared by the Seller, or to the
extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Administrator or MSFC in
connection with this Agreement is or will be inaccurate in any material respect
as of the date it is or shall be dated or (except as otherwise disclosed to the
Administrator or MSFC, as the case may be, at such time) as of the date so
furnished, and no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(p) Location of Offices. The principal place of business and chief executive
office of the Seller and the office where the Seller keeps all the Records
<PAGE>
are located at the address of the Seller referred to in Section 11.2 (or at such
other locations as to which the notice and other requirements specified in
Section 5.2(m) shall have been satisfied).
(q) Lock-Boxes. The names and addresses of all the Lock-Box Banks, together,
with the account numbers of the Lock-Box Accounts of the Seller at such
Lock-Box-Banks and the names, addresses and account numbers of all accounts to
which Collections of the Assets outstanding before the initial Purchase
hereunder have been sent, are specified in Schedule II (which shall be deemed to
be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof).
(r) Tradenames. Except as described in Schedule III, the Seller has no trade
names, fictitious names, assumed names or "doing business as" names or other
names under which it has done or is doing business.
(s) Purchase Agreement. The Purchase Agreement is the only agreement pursuant to
which the Seller purchases Assets.
(t) Value Given. The Seller shall have given reasonably equivalent value to the
Originator in consideration for the transfer to the Seller of the Assets under
the Purchase Agreement, no such transfer shall have been made for or on account
of an antecedent debt owed by the Originator to the Seller, and no such transfer
is or may be voidable or subject to avoidance under any section of the
Bankruptcy Code; no event or circumstance has occurred that would constitute a
Termination Event.
(u) Special Purpose Entity. The Certificate of Incorporation of the Seller
includes substantially the provisions set forth on Exhibit C, and the Originator
has confirmed in writing to the Seller that the Originator will not cause the
Seller to file a voluntary petition under the Bankruptcy Code or any other
bankruptcy or insolvency laws. Each of the Seller and the Originator is aware
that in light of the circumstances described in the preceding sentence and other
relevant facts, the filing of a voluntary petition under the Bankruptcy Code for
the purpose of making the assets of the Seller available to satisfy claims of
the creditors of the Originator would not result in making such assets available
to satisfy such creditors under the Bankruptcy Code.
(v) Accounting. The Seller accounts for the transfers to it from the Originator
of interests in Assets and Collections under the Purchase Agreement as sales of
such Assets and transfers of Asset Interests as sales of such Asset Interests in
its books, records and financial statements, in each case consistent with GAAP
and with the requirements set forth herein.
(w) Separate Entity. The Seller is operated as an entity with assets and
liabilities distinct from those of the Originator and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the
Administrator and MSFC
<PAGE>
are entering into the transactions contemplated by this Agreement in reliance
upon the Seller's identity as a separate legal entity from the Originator and
from each such other Affiliate of the Originator.
(x) Security Interest. The Seller has granted a security interest (as defined in
the UCC) to the Administrator in the Assets and Collections, which is
enforceable in accordance with applicable law upon execution and delivery of
this Agreement. Upon the filing of UCC-1 financing statements naming the
Administrator as secured party and the Seller as debtor, the Administrator shall
have a first priority perfected security interest in the Assets and Collections
(except for any Permitted Liens). All filings (including, without limitation,
such UCC filings) as are necessary in any jurisdiction to perfect the interest
of the Administrator in the Assets and Collections have been (or prior to the
applicable Purchase will be) made.
(y) Investments. The Seller does not own or hold directly or indirectly, any
capital stock or equity security of, or any equity interest in, any Person.
(z) Business. Since its incorporation, the Seller has conducted no business
other than the purchase and receipt of Contracts and related assets from the
Originator under the Purchase Agreement, the sale of Contracts under this
Agreement and such other activities as are incidental to the foregoing.
(aa) Investment Company Act. The Seller is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(bb) Accuracy of Representations and Warranties. Each representation or warranty
by the Seller contained herein or in any certificate or other document furnished
by the Seller pursuant hereto or in connection herewith is true and correct in
all material respects.
The representations and warranties set forth in this section shall
survive the transfer of the Assets to the Administrator. Upon discovery by the
Seller, the Servicer, MSFC or the Administrator of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the others.
Section 4.2 Representations and Warranties of Seller Relating to the
Agreement and the Contracts.
The Seller hereby represents and warrants to the Administrator and MSFC
that, as of the Closing Date and as of each Addition Date:
<PAGE>
(a) Binding, Obligation, Valid Transfer and Security Interest.
(i) The Transaction Documents to which the Seller is a party each constitute
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except as such enforceability
may be limited by Insolvency Laws and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at law or
in equity).
(ii) This Agreement constitutes either (A) a valid transfer to the Administrator
of all right, title and interest of the Seller in, to and under all Assets in
the Asset Pool to the extent of the Asset Interest, and such transfer will be
free and clear of any Lien of any Person claiming through or under the Seller or
its Affiliates, except for Permitted Liens or (B) a grant of a security interest
in all Assets in the Asset Pool to the Administrator. Upon the filing of the
financing statements described in Section 6.8(c) and, in the case of Additional
Contracts on the applicable Addition Date, the Administrator shall have a first
priority perfected security interest in all Assets in the Asset Pool, subject
only to Permitted Liens. Neither the Seller nor any Person claiming through or
under the Seller or any of its Affiliates shall have any claim to or interest in
the Collection Account and, if this Agreement constitutes the grant of a
security interest in such property, except for the interest of Seller in such
property as a debtor for purposes of the UCC.
(b) Eligibility of Contracts. As of the Closing Date, (i) Schedule I and the
information contained in the Purchase Certificate delivered pursuant to Section
2.2(b) is an accurate and complete listing in all material respects of all the
Existing Contracts in the Asset Pool as of the Closing Date and the information
contained therein with respect to the identity of such Contracts and the amounts
owing thereunder is true and correct in all material respects as of the related
Cut Off Date, (ii) each such Contract is an Eligible Contract, (iii) each such
Contract and the related Equipment is free and clear of any Lien of any Person
(other than Permitted Liens) and in compliance with all Requirements of Law
applicable to the Seller and (iv) with respect to each such Contract, all
consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained, effected
or given by the Seller in connection with the transfer of an interest in such
Contract and the related Equipment to the Administrator have been duly obtained,
effected or given and are in full force and effect. On each Addition Date on
which Additional Contracts are added by the Seller to the Asset Pool, the Seller
shall be deemed to represent and warrant that (i) such Additional Contract
referenced on the related Purchase Certificate delivered pursuant to Section
2.2(b) is an Eligible Contract, (ii) each such Additional Contract and the
related Equipment is free and clear of any Lien of any Person (other than
Permitted Liens) and in compliance with all Requirements of Law applicable to
Seller and/or the Originator, (iii) with respect to each such Additional
Contract, all consents, licenses, approvals, authorizations, registrations or
declarations with any Governmental Authority required to
<PAGE>
be obtained, effected or given by the Seller in connection with the addition of
such Contract and the related Equipment to the Asset Pool have been duly
obtained, effected or given and are in full force and effect and (iv) the
representations and warranties set forth in Section 4.2(a) are true and correct
with respect to each Contract transferred on such day as if made on such day.
(c) Notice of Breach. The representations and warranties set forth in this
Section 4.2 shall survive the transfer of an interest in the respective
Contracts and related Equipment, or interests therein, to the Administrator.
Upon discovery by the Seller, the Servicer, MSFC or the Administrator of a
breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the others.
Section 4.3 Representations and Warranties of the Seller Relating to
the Purchase Limit and Capital Limit.
The Seller is hereby deemed to represent and warrant that on each day
prior to the Termination Date, the amount of Capital outstanding on such day
shall not exceed the lesser of (x) the Purchase Limit or (y) the Capital Limit.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
Section 5.1 General Covenants.
Until the date on which all Aggregate Unpaids have been indefeasibly
paid in full, the Seller hereby covenants that:
(a) Compliance with Laws, Preservation of Corporate Existence. The Seller will
comply in all material respects with all applicable laws, rules, regulations and
orders and preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges.
<PAGE>
Section 5.2 Covenants of Seller.
The Seller hereby covenants that:
(a) Contracts Not to be Evidenced by Instruments. The Seller will take no action
to cause any Contract which is not, as of the Closing Date or the related
Addition Date, as the case may be, evidenced by an Instrument, to be so
evidenced except in connection with the enforcement or collection of such
Contract.
(b) Security Interests. The Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
any Contract in the Asset Pool or related Equipment, whether now existing or
hereafter transferred hereunder, or any interest therein, and the Seller will
not sell, pledge, assign or suffer to exist any Lien on its interest, if any,
hereunder. The Seller will promptly notify the Administrator of the existence of
any Lien on any Contract in the Asset Pool or related Equipment and the Seller
shall defend the right, title and interest of the Administrator in, to and under
the Contracts in the Asset Pool and the related Equipment, against all claims of
third parties; provided, however, that nothing in this Section 5.2(b) shall
prevent or be deemed to prohibit the Seller from suffering to exist Permitted
Liens upon any of the Contracts in the Asset Pool or any related Equipment.
(c) Delivery of Collections. The Seller agrees to pay to the Servicer promptly
(but in no event later than two Business Days after receipt) all Collections
received by Seller in respect of the Contracts in the Asset Pool.
(d) Compliance with the Law. Seller hereby agrees to comply in all material
respects with all Requirements of Law applicable to Seller, the Contracts and
the Equipment.
(e) Activities of Seller. The Seller shall not engage in any business or
activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, which is not
incidental to the transactions contemplated and authorized by Transaction
Documents.
(f) Indebtedness. The Seller shall not create, incur, assume or suffer to exist
any Indebtedness or other liability whatsoever, except (i) obligations incurred
under this Agreement or under any Hedging Agreement required by Section 5.4(a)
or (ii) liabilities incident to the maintenance of its corporate existence in
good standing.
(g) Guarantees. The Seller shall not become or remain liable, directly or
indirectly, in connection with any Indebtedness or other liability of any other
Person, whether by guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance funds, or
otherwise.
<PAGE>
(h) Investments. The Seller shall not make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except for purchases of Contracts pursuant to the
Purchase Agreement, or for investments in Permitted Investments in accordance
with the terms of this Agreement.
(i) Merger; Sales. The Seller shall not enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation or
dissolution), or acquire or be acquired by any Person, or convey, sell, lease or
otherwise dispose of all or substantially all of its property or business,
except as provided for in this Agreement.
(j) Distributions. The Seller shall not declare or pay, directly or indirectly,
any dividend or make any other distribution (whether in cash or other property)
with respect to the profits, assets or capital of the Seller or any Person's
interest therein, or purchase, redeem or otherwise acquire for value any of its
capital stock now or hereafter outstanding, except that so long as no
Termination Event or Unmatured Termination Event has occurred and is continuing
and no Termination Event or Unmatured Termination Event would occur as a result
thereof or after giving effect thereto and the Seller would continue to be
Solvent as a result thereof and after giving effect thereto, the Seller may
declare and pay cash or stock dividends on its capital stock.
(k) Agreements. The Seller shall not become a party to, or permit any of its
properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except the Transaction Documents, or
amend or modify the provisions of its Certificate of Incorporation without the
consent of the Administrator or issue any power of attorney except to the
Administrator or the Servicer.
(l) Separate Corporate Existence. The Seller shall:
(i) Maintain its own deposit account or accounts, separate from those of any
Affiliate, with commercial banking institutions. The funds of the Seller will
not be diverted to any other Person or for other than corporate uses of the
Seller.
(ii) Ensure that, to the extent that it shares the same officers or other
employees as any of its stockholders or Affiliates, the salaries of and the
expenses related to providing benefits to such officers and other employees
shall be fairly allocated among such entities, and each such entity shall bear
its fair share of the salary and benefit costs associated with all such common
officers and employees.
<PAGE>
(iii) Ensure that, to the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service providers or
to share overhead expenses, the costs incurred in so doing shall be allocated
fairly among such entities, and each such entity shall bear its fair share of
such costs. To the extent that the Seller contracts or does business with
vendors or service providers when the goods and services provided are partially
for the benefit of any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit the goods and
services are provided, and each such entity shall bear its fair share of such
costs. All material transactions between Seller and any of its Affiliates shall
be only on an arm's length basis.
(iv) Maintain a principal executive and administrative office through which its
business is conducted separate from those of its Affiliates. To the extent that
Seller and any of its stockholders or Affiliates have offices in the same
location, there shall be a fair and appropriate allocation of overhead costs
among them, and each such entity shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with its Certificate of
Incorporation and observe all necessary, appropriate and customary corporate
formalities, including, but not limited to, holding all regular and special
stockholders, and directors' meetings appropriate to authorize all corporate
action, keeping separate and accurate minutes of its meetings, passing all
resolutions or consents necessary to authorize actions taken or to be taken, and
maintaining accurate and separate books, records and accounts, including, but
not limited to, payroll and intercompany transaction accounts.
(vi) Take or refrain from taking, as applicable, each of the activities
specified as factual assumptions in the "non-substantive consolidation" opinion
of Morgan, Lewis & Bockius LLP delivered on the Closing Date, upon which the
conclusions expressed therein are based.
(m) Location of Seller, Records; Instruments. The Seller (x) shall not move
outside the Commonwealth of Pennsylvania, the location of its chief executive
office, without 30 days' prior written notice to the Administrator and (y) shall
not move, or consent to the Collateral Custodian or Servicer moving, the
Contract Files from the possession of the Collateral Custodian thereof on the
Closing Date, without 30 days' prior written notice to the Administrator and (z)
will promptly take all actions required of each relevant jurisdiction in order
to continue the first priority perfected security interest of the Administrator
in all Assets in the Asset Pool. The Seller will give the Administrator prompt
notice of a change within the Commonwealth of Pennsylvania of the location of
its chief executive office.
<PAGE>
(n) Accounting of Purchases. Other than for federal, state and local income tax
purposes, the Seller will not account for or treat (whether in financial
statements or otherwise) the transactions contemplated hereby in any manner
other than as the sale, or absolute assignment, of Assets by the Seller to MSFC.
The Seller will not account for or treat (whether in financial statements or
otherwise) the transaction contemplated by the Purchase Agreement in any manner
other than as the sale, or absolute assignment, of the Originator Assets by the
Originator to the Seller, as the case may be.
(o) ERISA Matters. The Seller will not (a) engage or permit any ERISA Affiliate
to engage in any prohibited transaction for which an exemption is not available
or has not previously been obtained from the United States Department of Labor;
(b) permit to exist any accumulated funding deficiency, as defined in Section
302(a) of ERISA and Section 412(a) of the Code, or funding deficiency with
respect to any Benefit Plan other than a Multiemployer Plan; (c) fail to make
any payments to a Multiemployer Plan that the Seller or any ERISA Affiliate may
be required to make under the agreement relating to such Multiemployer Plan or
any law pertaining thereto; (d) terminate any Benefit Plan so as to result in
any liability; or (e) permit to exist any occurrence of any reportable event
described in Title IV of ERISA.
(p) Originator Assets. With respect to each Asset acquired by the Seller, the
Seller will (i) acquire such Asset pursuant to and in accordance with the terms
of the Purchase Agreement, (ii) take all action necessary to perfect, protect
and more fully evidence the Seller's ownership of such Asset, including, without
limitation, (A) filing and maintaining, effective financing statements (Form
UCC-1) against the Originator in all necessary or appropriate filing offices,
and filing continuation statements, amendments or assignments with respect
thereto in such filing offices and (B) executing or causing to be executed such
other instruments or notices as may be necessary or appropriate and (iii) take
all additional action that the Administrator may reasonably request to perfect,
protect and more fully evidence the respective interests of the parties to this
Agreement in the Assets and interest therein represented by the Asset Interest.
(q) Transactions with Affiliates. The Seller will not enter into, or be a party
to, any transaction with any of its Affiliates, except (i) the transactions
permitted or contemplated by the Transaction Documents, and (ii) other
transactions (including, without limitation, the lease of office space or
computer equipment or software by the Seller to or from an Affiliate) (A) in the
ordinary course of business, (B) pursuant to the reasonable requirements of the
Seller's business, (C) upon fair and reasonable terms that are no less favorable
to the Seller than could be obtained in a comparable arm's-length transaction
with a Person not an Affiliate of the Seller and (D)
<PAGE>
not inconsistent with the factual assumptions set forth in the opinion letters
issued by Morgan, Lewis & Bockius LLP and delivered to the Administrator as a
condition to the initial Purchase as such assumptions may be modified in any
subsequent opinion letters delivered to the Administrator hereunder pursuant to
Section 3.2(c) or otherwise. It is understood that any compensation arrangement
for officers shall be permitted under clause (ii)(A) through (C) above if such
arrangement has been expressly approved by the board of directors of the Seller.
(r) Change in the Transaction Documents. The Seller will not amend, modify,
waive or terminate any terms or conditions of any Transaction Document, without
the consent of Administrator.
(s) Amendment to Certificate of Incorporation. Notwithstanding anything to the
contrary contained herein, the Seller will not amend, modify or otherwise make
any change to its Certificate of Incorporation which would delete or otherwise
nullify or circumvent the provisions set forth on Exhibit C.
(t) Credit and Collection Policy. The Seller shall not cause or permit any
changes to be made to the Credit and Collection Policy in any manner that would
materially and adversely affect the collectibility of the Contracts sold
hereunder without the prior written consent of the Administrator, which consent
shall not be unreasonably withheld.
Section 5.3 Release of Lien on Equipment.
At the same time as (i) any Contract in the Asset Pool expires by its
terms and all amounts in respect thereof have been paid by the related Obligor
and deposited in the Collection Account or (ii) any Contract becomes a Prepaid
Contract and all amounts in respect thereof have been paid by the related
Obligor and deposited in the Collection Account, the Administrator will, to the
extent requested by the Servicer, release its interest in such Contract;
provided, however, that such release will not constitute a release of their
respective interests in the Equipment or the proceeds of such Contract or
Equipment. In connection with any sale of such Equipment on or after the
occurrence of (i) or (ii) above, the Administrator will after the deposit by the
Servicer of the proceeds of such sale into the Collection Account, at the sole
expense of the Servicer, execute and deliver to the Servicer any assignments,
bills of sale, termination statements and any other releases and instruments as
the Servicer may reasonably request in order to effect the release and transfer
of such Equipment; provided that the Administrator will make no representation
or warranty, express or implied, with respect to any such Equipment in
connection with such sale or transfer and assignment. Nothing in this section
shall diminish the Servicer's obligations pursuant to Section 6.1(c) with
respect to the proceeds of any such sale.
<PAGE>
Section 5.4 Hedging of Contracts.
(a) On or prior to each Purchase Date of any Purchase, the Seller shall enter
into one or more Hedge Transactions for that Purchase, provided that each such
Hedge Transaction shall:
(i) be entered into with a Hedge Counterparty and governed by a Hedging
Agreement;
(ii) have a schedule of monthly payment periods the first of which commences on
the Purchase Date of that Purchase and the last of which ends on the last
Scheduled Payment due to occur under the Contracts to which that Purchase
relates;
(iii) have an amortizing notional amount such that the Hedge Notional Amount in
effect during any monthly payment period shall be equal to one hundred percent
(100%) of the present value of all remaining Scheduled Payments becoming due
after the first day of that monthly payment period under all Contracts to which
that Purchase relates, determined as of the Purchase Date of that Purchase by
discounting on a monthly basis each such Scheduled Payment from the end of the
monthly payment period in which that Scheduled Payment is due to occur to the
Purchase Date at the Sale Discount Rate; and
(iv) provide for two series of monthly payments to be netted against each other,
one such series being payments to be made by the Seller to a Hedge Counterparty
(solely on a net basis) by reference to the Hedge Rate to be used in computing
the Sale Discount Rate for that Purchase, and the other such series being
payments to be made by the Hedge Counterparty to the Administrator (solely on a
net basis) by reference to the money market yield of the rate set forth in
Federal Reserve Statistical Release H.15 (519) under the caption "Commercial
Paper-Nonfinancial" for a 30-day maturity as in effect on the first day of each
monthly payment period, the net amount of which shall be paid into the
Collection Account (if payable by the Hedge Counterparty) or from the Collection
Account to the extent funds are available under Section 2.7(a) and 2.9(b) of
this Agreement (if payable by the Seller);
(b) As additional security hereunder, Seller hereby assigns to the Administrator
all right, title and interest of Seller in each Hedging Agreement, each Hedge
Transaction, and all present and future amounts payable by a Hedge Counterparty
to Seller under or in connection with the respective Hedging Agreement and Hedge
Transaction(s) with that Hedge Counterparty ("Hedge Collateral"), and grants a
security interest to the Administrator in the Hedge Collateral. Seller
acknowledges that, as a result of that assignment, Seller may not, without the
prior written consent of the Administrator, exercise any rights (including,
without limitation, any termination right) under any Hedging Agreement or Hedge
Transaction, except for Seller's right under any
<PAGE>
Hedging Agreement to enter into Hedge Transactions in order to meet the Seller's
obligations under Section 4.5(a). Nothing herein shall have the effect of
releasing the Seller from any of its obligations under any Hedging Agreement or
any Hedge Transaction, nor be construed as requiring the consent of the
Administrator or MSFC for the performance by Seller of any such obligations.
Section 5.5 Retransfer of Ineligible Contracts.
In the event of a breach of any representation or warranty set forth in
Section 4.2 with respect to a Contract in the Asset Pool (each such Contract, an
"Ineligible Contract"), no later than the earlier of (i) knowledge by the Seller
of such Contract becoming an Ineligible Contract and (ii) receipt by the Seller
from the Administrator or the Servicer of written notice thereof, the Seller
shall either (a) accept the retransfer of each such Ineligible Contract and any
related Equipment selected by the Servicer as to which such breach related, and
the Administrator shall convey to the Seller, without recourse, representation
or warranty, all of its right, title and interest in such Ineligible Contract;
or (b) subject to the satisfaction of the conditions in Section 2.16, substitute
for such Ineligible Contract a Substitute Contract. In any of the foregoing
instances, the Seller shall accept the retransfer of each such Ineligible
Contract, and the ADCB shall be reduced by the Discounted Contract Balance
(calculated using the applicable Blended Discount Rate as of the most recent
Determination Date) of each such Ineligible Contract and, if applicable,
increased by the Discounted Contract Balance of each such Substitute Contract.
On and after the date of retransfer, the Ineligible Contract so retransferred
shall not be included in the Asset Pool and, as applicable, the Substitute
Contract shall be included in the Asset Pool. In consideration of such
retransfer, without substitution, the Seller shall, on the date of retransfer of
such Ineligible Contract, make a deposit to the Collection Account (for
allocation pursuant to Section 2.7 or 2.9, as applicable) in immediately
available funds in an amount equal to the Discounted Contract Balance of such
Ineligible Contract (calculated using the applicable Blended Discount Rate as of
the most recent Determination Date). Upon each retransfer to the Seller of such
Ineligible Contract, the Administrator shall automatically and without further
action be deemed to transfer, assign and set-over to the Seller, without
recourse, representation or warranty, all the right, title and interest of the
Administrator in, to and under such Ineligible Contract and all monies due or to
become due "with respect thereto, the related Equipment and all proceeds of such
Ineligible Contract and Recoveries and Insurance Proceeds relating thereto and
all rights to security for any such Ineligible Contract, and all proceeds and
products of the foregoing. The Administrator shall, at the sole expense of the
Servicer execute such documents and instruments of transfer as may be prepared
by the Servicer on behalf of the Seller and take other such actions as shall
reasonably be requested by the Seller to effect the transfer of such Ineligible
Contract pursuant to this subsection.
<PAGE>
Section 5.6 Retransfer of Assets.
In the event of a breach of any representation or warranty set forth in
Section 4.2 which breach could reasonably be expected to have a material adverse
affect on the rights of MSFC or the Administrator or on the ability of the
Seller to perform its obligations hereunder, by notice then given in writing to
the Seller, the Administrator may direct the Seller to accept the retransfer of
all of the Assets, in which case the Seller shall be obligated to accept
retransfer of such Assets on a Settlement Date specified by the Seller (such
date, the "Retransfer Date") and to terminate all Hedge Transactions prior to
the Retransfer Date. The Seller shall deposit on the Retransfer Date an amount
equal to the deposit amount provided below for such Assets in the Collection
Account for distribution in accordance with Section 2.7(a) or 2.9(b), as
applicable. The deposit amount (the "Retransfer Amount") for such retransfer
will be equal to the (A) sum of (i) the Aggregate Unpaids, (ii) all Yield
accrued and to accrue, as reasonably determined by the Administrator, and (iii)
all Hedge Breakage Costs and any other amounts payable by Seller under or with
respect to any Hedging Agreement minus (B) the amount, if any, available in the
Collection Account on such Settlement Date. On the Retransfer Date, provided
that full Retransfer Amount has been deposited into the Collection Account, the
Assets shall be transferred to the Seller; and the Administrator shall, at the
sole expense of the Servicer, execute and deliver such instruments of transfer,
in each case without recourse, representation or warranty, as shall be prepared
and reasonably requested by the Servicer on behalf of the Seller to vest in the
Seller, or its designee or assignee, all right, title and interest of the
Administrator in, to and under the Assets. If the Administrator gives a notice
directing the Seller to accept such a retransfer as provided above, the
obligation of Seller to accept a retransfer pursuant to this Section 5.6 shall
constitute the sole remedy respecting a breach of the representations and
warranties contained in Section 4.2 available to MSFC and the Administrator.
Section 5.7 Year 2000 Compatibility.
The Seller shall take all action necessary to assure that, prior to
January 1, 2000, the Seller's computer system is able to operate and effectively
process data including dates on and after January 1, 2000. At the request of the
Administrator or the Backup Servicer, the Seller shall provide assurance
acceptable to the Administrator or the Backup Servicer of the Seller's year 2000
compatibility.
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ARTICLE VI
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 6.1 Appointment and Acceptance; Duties.
(a) Appointment of Initial Servicer and Collateral Custodian. Fidelity is hereby
appointed as Servicer pursuant to this Agreement. Fidelity accepts the
appointment and agrees to act as the Servicer pursuant to this Agreement.
Fidelity may delegate its duties and obligations as Servicer to any of its
Affiliates on the condition that each such Affiliate (acting as a subservicer)
shall agree to perform the duties and obligations of the Servicer; provided,
however, that notwithstanding such delegation, Fidelity shall remain primarily
liable for the performance of the duties and obligations so delegated and the
Administrator and MSFC shall have the right to look solely to Fidelity for such
performance; provided further, however, that the Administrator may at any time
following the occurrence and during the continuance of a Termination Event
replace any subservicer. Harris Trust and Savings Bank is hereby appointed as
Collateral Custodian pursuant to this Agreement. Harris Trust and Savings Bank
accepts the appointment and agrees to act as the Collateral Custodian pursuant
to this Agreement.
(b) General Duties. The Servicer will manage, service, administer, collect and
enforce the Assets in the Asset Pool on behalf of the Seller, MSFC and the Hedge
Counterparties (the "Servicing Duties") and will have full power and authority
to do any and all things in connection with the performance of the Servicing
Duties which it deems necessary or desirable; provided, however, that nothing it
does may contravene the provisions of this Agreement. The Servicer will perform
the Servicing Duties with reasonable care, using that degree of skill and
attention that a prudent person engaging in such activities would exercise, but
in any event shall not act with less care than the Servicer exercises with
respect to all comparable contracts that it services for itself or others. The
Servicing Duties will include, without limitation, collection and posting of all
payments, responding to inquiries of Obligors regarding the Assets in the Asset
Pool, investigating delinquencies and making Servicer Advances, remitting
payments to the Administrator and other Persons entitled thereto in a timely
manner, furnishing monthly, quarterly and annual statements with respect to
collections and payments in accordance with the provisions of this Agreement,
and maintaining the perfected first priority security interest of the
Administrator in the Assets. The Servicer will follow customary standards,
policies, and procedures and will have full power and authority, acting alone,
to do any and all things in connection with the performance of the Servicing
Duties that it deems necessary or desirable. If the Servicer commences a legal
proceeding to enforce a Defaulted Contract or commences or participates in a
legal proceeding (including a bankruptcy proceeding) relating to or involving an
Asset in the Asset Pool, the Administrator will be deemed to have automatically
assigned the related Contract to the Servicer for purposes of commencing or
participating in any such proceeding as a party or claimant, and the Servicer is
authorized and empowered by the Administrator, pursuant to this Section 6.1(b),
to execute and deliver, on behalf of itself and the Administrator, any and all
instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceedings. If in any enforcement suit or legal proceeding it is held that the
Servicer may not enforce a
<PAGE>
Contract on the ground that it is not a real party in interest or a holder
entitled to enforce the Contract, then the Administrator will, at the Servicer's
expense and direction, take steps on behalf of the Administrator to enforce the
Contract, including bringing suit in the name of the Administrator.
(c) Disposition Upon Termination of Contract. Upon the termination of a Contract
included in the Asset Pool as a result of a default by the Obligor thereunder
the Servicer will use commercially reasonable efforts to dispose of any related
Equipment. Without limiting the generality of the foregoing, the Servicer may
dispose of any such Equipment by purchasing such Equipment or by selling such
Equipment to any of its Affiliates for a purchase price equal to the fair market
value thereof, any such sale to be evidenced by a certificate of a Responsible
Officer of the Servicer delivered to the Administrator setting forth the
Contract, the Equipment, the sale price of the Equipment and certifying that
such sale price is the fair market value of such Equipment.
(d) Further Assurances. The Administrator will, at the sole expense of the
Servicer, furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
(e) Custodial Duties. The Collateral Custodian shall take and retain custody of
the Contract Files delivered by the Seller pursuant to Section 3.3 in accordance
with the terms and conditions of this Agreement, all for the benefit of the
Administrator and MSFC and subject to the Lien thereon in favor of the
Administrator. Within five Business Days of its receipt of any Contract File,
the Collateral Custodian shall review the related Contract to verify that such
Contract has been executed and has no missing or mutilated pages and to confirm
(in reliance on the related contract number and Lessee name) that such Contract
is referenced on the related list of Contracts. In order to facilitate the
foregoing review by the Collateral Custodian, in connection with each delivery
of Contract Files hereunder to the Collateral Custodian, the Servicer shall
provide to the Collateral Custodian an electronic file (in EXCEL or a comparable
format) that contains the related list of Contracts or which otherwise contains
the Contract number and the name of the Lessee with respect to each related
Contract. If, at the conclusion of such review, the Collateral Custodian shall
determine that such Contract is not executed or in proper form on its face, or
that it is not referenced on such list of Contracts, the Collateral Custodian
shall promptly notify the Seller and the Administrator of such determination by
providing a written report to such Persons setting forth, with particularity,
the lack of execution of such Contract, that such Contract has missing or
mutilated pages, or the fact that such Contract was not referenced on the
related list of Contracts. In addition, unless instructed otherwise in writing
by the Seller or the Administrator within 10 days of the Collateral Custodian's
delivery of such report, the Collateral Custodian shall return any Contract not
referenced on such list of Contracts to the Seller. Other than the foregoing,
the Collateral Custodian shall not have any responsibility for reviewing any
Contract File.
<PAGE>
In taking and retaining custody of the Contract Files, the Collateral
Custodian shall be deemed to be acting as the agent of the Administrator;
provided, however, that the Collateral Custodian makes no representations as to
the existence, perfection or priority of any Lien on the Contract Files or the
instruments therein; provided further, however, that the Collateral Custodian's
duties as agent shall be limited to those expressly contemplated herein. All
Contract Files shall be kept in fireproof vaults or cabinets at the locations
specified on Schedule IV, or at such other office as shall be specified to the
Administrator by the Collateral Custodian in a written notice delivered at least
45 days prior to such change. All Contract Files shall be placed together in a
separate file cabinet with an appropriate identifying label and maintained in
such a manner so as to permit retrieval and access. All Contract Files shall be
clearly segregated from any other documents or instruments maintained by the
Collateral Custodian. The Collateral Custodian shall clearly indicate that such
Contract Files are the sole property of the Seller and that the Seller has
granted an interest therein to the Administrator. In performing its duties, the
Collateral Custodian shall use the same degree of care and attention as it
employs with respect to similar Contracts which it holds as Collateral
Custodian.
(f) Concerning the Collateral Custodian.
(i) The Collateral Custodian may conclusively rely on and shall be fully
protected in acting upon any certificate, instrument, opinion, notice, letter,
telegram or other document delivered to it and which in good faith it reasonably
believes to be genuine and which has been signed by the proper party or parties.
The Collateral Custodian may rely conclusively on and shall be fully protected
by in acting upon (A) the written instructions of any designated officer of the
Administrator or (B) the verbal instructions of the Administrator.
(ii) The Collateral Custodian may consult counsel satisfactory to it and the
advice or opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
(iii) The Collateral Custodian shall not be liable for any error of judgment, or
for any act done or step taken or omitted by it, in good faith, or for any
mistakes of fact or law, or for anything which it may do or refrain from doing
in connection herewith except in the case of its willful misconduct or grossly
negligent performance or omission.
(iv) The Collateral Custodian makes no warranty or representation and shall have
no responsibility (except as expressly set forth in this Agreement) as to the
content, enforceability, completeness, validity, sufficiency, value,
genuineness, ownership or transferability of the Contracts, and will not be
required to and will not make any representations as to the validity or value
(except as expressly set forth in this Agreement) of any of the Contracts. The
Collateral Custodian shall not be obligated to take any legal action hereunder
which might in its judgment involve any expense or liability unless it has been
furnished with an indemnity reasonably satisfactory to it.
<PAGE>
(v) The Collateral Custodian shall have no duties or responsibilities except
such duties and responsibilities as are specifically set forth in this Agreement
and no covenants or obligations shall be implied in this Agreement against the
Collateral Custodian.
(vi) The Collateral Custodian shall not be required to expend or risk its own
funds in the performance of its duties hereunder.
(vii) It is expressly agreed and acknowledged that the Collateral Custodian is
not guaranteeing performance of or assuming any liability for the obligations of
the other parties hereto or any parties to the Contracts.
Section 6.2 Collection of Payments.
(a) Collection Efforts, Modification of Contracts. The Servicer will make
reasonable efforts to collect all payments called for under the terms and
provisions of the Contracts in the Asset Pool as and when the same become due,
and will follow those collection procedures which it follows with respect to all
comparable Contracts that it services for itself or others. The Servicer may not
waive, modify or otherwise vary any provision of a Contract. The Servicer may in
its discretion waive any late payment charge or any other fees that may be
collected in the ordinary course of servicing any Contract in the Asset Pool.
(b) Prepaid Contract. The Servicer may not permit a Contract in the Asset Pool
to become a Prepaid Contract (which shall not include a Contract that becomes a
Prepaid Contract due to a Casualty Loss), unless (x) the Servicer provides an
Additional Contract or (y) such prepayment will not result in the Collection
Account receiving an amount (the "Prepayment Amount") less than the sum of (A)
the Discounted Contract Balance on the date of such prepayment calculated using
the applicable Blended Discount Rate in effect on the date of such payment, (B)
any outstanding Servicer Advances thereon (and to the extent not included
therein any accrued and unpaid interest) and (C) all Hedge Breakage Costs owing
to the relevant Hedge Counterparty for any termination of one or more Hedge
Transactions, in whole or in part, as required by the terms of any Hedging
Agreement as the result of any such Contract becoming a Prepaid Contract. After
a Termination Event has occurred, the Servicer may not permit a Contract in the
Asset Pool to become a Prepaid Contract (which shall not include a Contract that
becomes a Prepaid Contract due to a Casualty Loss), unless the Servicer collects
an amount equal to the sum of (A) the Discounted Contract Balance on the date of
such prepayment calculated using the applicable Blended Discount Rate in effect
on
<PAGE>
the date of payment, (B) any outstanding Servicer Advances thereon (and to
the extent not included therein any accrued and unpaid interest) and (C) all
Hedge Breakage Costs owing to the relevant Hedge Counterparty for any
termination of one or more Hedge Transactions, in whole or in part, as required
by the terms of any Hedging Agreement as the result of any such Contract
becoming a Prepaid Contract.
(c) Acceleration. The Servicer shall accelerate the maturity of all or any
Scheduled Payments under any Contract in the Asset Pool under which a default
under the terms thereof has occurred and is continuing (after the lapse of any
applicable grace period) promptly after such Contract becomes a Defaulted
Contract.
(d) Taxes and other Amounts. To the extent provided for in any Contract in the
Asset Pool, the Servicer will use its best efforts to collect all payments with
respect to amounts due for taxes, assessments and insurance premiums relating to
such Contracts or the Equipment and remit such amounts to the appropriate
Governmental Authority or insurer on or prior to the date such payments are due.
(e) Payments to Lock-Box Account. On or before the Closing Date with respect to
the Existing Contracts and on or before the relevant Addition Date, with respect
to Additional Contracts, the Servicer shall have instructed all Obligors to make
all payments in respect of the Contracts in the Asset Pool to a Lock-Box or
directly to a Lock-Box Account.
(f) Establishment of the Collection Account. The Servicer shall cause to be
established, on or before the Closing Date, and maintained in the name of the
Administrator, with an office or branch of a depository institution or trust
company 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) a segregated corporate trust account (the "Collection Account");
provided, however, that at all times such depository institution or trust
company shall be a depository institution organized under the laws of the United
States of America or any one of the States thereof or the District of Columbia
(or any domestic branch of a foreign bank), (i) (A) which has either (1) a
long-term unsecured debt rating of A- or better by S&P and A-3 or better by
Moody's or (2) a short-term unsecured debt rating or certificate of deposit
rating of A-1 or better by S&P or P-1 or better by Moody's, (B) the parent
corporation of which has either (1) a long-term unsecured debt rating of A-or
better by S&P and A-3 or better by Moody's or (2) a short-term unsecured debt
rating or certificate of deposit rating of A-1 or better by S&P and P-1 or
better by Moody's or (C) is otherwise acceptable to the Administrator and (ii)
whose deposits are insured by the Federal Deposit Insurance Corporation (any
such depository institution or trust company, a "Qualified Institution").
<PAGE>
Section 6.3 Servicer Advances.
For each Monthly Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) which was due and payable pursuant to a Contract in
the Asset Pool during such Monthly Period was not received prior to the end of
such Monthly Period, the Servicer may make an advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof); in addition,
if on any day there are not sufficient funds on deposit in the Collection
Account to pay accrued Yield of any Asset Interest the Monthly Period of which
ends on such day, the Servicer shall make an advance in the amount necessary to
pay such Yield (in either case, any such advance, a "Servicer Advance").
Notwithstanding the preceding sentence, (i) the Servicer shall be required to
make a Servicer Advance with respect to any Contract if, and only if, the
Servicer determines (such determination to be conclusive and binding) in good
faith that such Servicer Advance will ultimately be recoverable from future
collections on, or the liquidation of, the Asset Pool and payments by one or
more Hedge Counterparties under one or more Hedging Agreements, (ii) the
Servicer's obligation to make a Servicer Advance for any Contract shall cease on
the day such Contract becomes a Defaulted Contract or is charged-off pursuant to
the Servicer's Credit and Collection Policies and (iii) any successor Servicer,
including the Backup Servicer, will not be obligated to make any Servicer
Advances. The Servicer will deposit any Servicer Advances into the Collection
Account on or prior to 11:00 A.M. (New York City time) on the related Settlement
Date, in immediately available funds.
<PAGE>
Section 6.4 Realization Upon Defaulted Contract.
The Servicer will use reasonable efforts to repossess or otherwise
comparably convert the ownership of any Equipment relating to a Defaulted
Contract and will act as sales and processing agent for Equipment which it
repossesses. The Servicer will follow such other practices and procedures as it
deems necessary or advisable and as are customary and usual in its servicing of
contracts and other actions by the Servicer in order to realize upon such
Equipment, which practices and procedures may include reasonable efforts to
enforce all obligations of Obligors and repossessing and selling such Equipment
at public or private sale in circumstances other than those described in the
preceding sentence. Without limiting the generality of the foregoing, the
Servicer may sell any such Equipment to the Servicer or its Affiliates for a
purchase price equal to the then fair market value thereof, any such sale to be
evidenced by a certificate of a Responsible Officer of the Servicer delivered to
the Administrator setting forth the Contract, the Equipment, the sale price of
the Equipment and certifying that such sale price is the fair market value of
such Equipment. In any case in which any such Equipment has suffered damage, the
Servicer will not expend funds in connection with any repair or toward the
repossession of such Equipment unless it reasonably determines that such repair
and/or repossession will increase the Recoveries by an amount greater than the
amount of such expenses. The Servicer will remit to the Collection Account the
Recoveries received in connection with the sale or disposition of Equipment
relating to a Defaulted Contract.
Section 6.5 Maintenance of Insurance Policies.
The Servicer will use its best efforts to ensure that each Obligor
maintains an Insurance Policy with respect to the related Equipment in an amount
at least equal to the sum of the Discounted Contract Balance of the related
Contract and shall ensure that each such Insurance Policy names the Servicer as
loss payee and as an insured thereunder; provided, however, that the Servicer,
in accordance with its Credit and Collection Policy, may allow Obligors to
self-insure. Additionally, the Servicer will require that each Obligor maintain
property damage liability insurance during the term of each Contract in amounts
and against risks customarily insured against by the Obligor on equipment owned
by it. If an Obligor fails to maintain property damage insurance, the Servicer
may purchase and maintain such insurance on behalf of, and at the expense of,
the Obligor. In connection with its activities as Servicer, the Servicer agrees
to present, on behalf of the Administrator, claims to the insurer under each
Insurance Policy and any such liability policy, and to settle, adjust and
compromise such claims, in each case, consistent with the terms of each
Contract. The Servicer's Insurance Policies with respect to the related
Equipment will insure against liability for personal injury and property damage
relating to such Equipment, will name the Administrator as loss payee and as an
insured thereunder and will contain a breach of warranty clause.
<PAGE>
Section 6.6 Representations and Warranties of Servicer.
The Servicer represents and warrants to the Administrator, MSFC, the
Collateral Custodian and Backup Servicer that, as of the Closing Date and on
each Addition Date, insofar as any of the following affects the Servicer's
ability to perform its obligations pursuant to this Agreement in any material
respect:
(a) Organization and Good Standing. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of Pennsylvania
with all requisite corporate power and authority to own its properties and to
conduct its business as presently conducted and to enter into and perform its
obligations pursuant to the Transaction Documents.
(b) Due Qualification. The Servicer is qualified to do business as a
corporation, is in good standing, and has obtained all licenses and approvals as
required under the laws of all jurisdictions in which the ownership or lease of
its property and or the conduct of its business (other than the performance of
its obligations hereunder) requires such qualification, standing, license or
approval, except to the extent that the failure to so qualify, maintain such
standing or be so licensed or approved would not have an adverse effect on the
interests of the Seller or of the Administrator or MSFC. The Servicer is
qualified to do business as a corporation, is in good standing, and has obtained
all licenses and approvals as required under the laws of all states in which the
performance of its obligations pursuant to the Transaction Documents requires
such qualification, standing, license or approval and where the failure to
qualify or obtain such license or approval would have material adverse effect on
its ability to perform under any Transaction Document.
(c) Power and Authority. The Servicer has the corporate power and authority to
execute and deliver the Transaction Documents to which the Servicer is a party
and to carry out their respective terms. The Servicer has duly authorized the
execution, delivery and performance of the Transaction Documents to which the
Servicer is a party by all requisite corporate action. The execution, delivery
and performance of the Transaction Documents does not contravene the Servicer's
Certificate of Incorporation or by-laws.
(d) No Violation. The consummation of the transactions contemplated by, and the
fulfillment of the terms of, the Transaction Documents by the Servicer (with or
without notice or lapse of time) will not (i) conflict with, result in any
breach of any of the terms or provisions of, or constitute a default under, the
articles of incorporation or by-laws of the Servicer, or any term of any
agreement, indenture,
<PAGE>
mortgage, deed of trust or other instrument to which the Servicer is a party or
by which it or any of its property is bound, (ii) result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, or (iii)
violate any law, regulation, order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority applicable to the Servicer
or any of its properties.
(e) No Consent. No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any Governmental Authority
having jurisdiction over the Servicer or any of its properties is required to be
obtained by or with respect to the Servicer in order for the Servicer to enter
into any Transaction Document or perform its obligations hereunder or
thereunder.
(f) Binding Obligation. The Transaction Documents to which the Servicer is a
party each constitute a legal, valid and binding obligation of the Servicer,
enforceable against the Servicer in accordance with their respective terms,
except as such enforceability may be limited by (i) applicable Insolvency Laws
and (ii) general principles of equity (whether considered in a suit at law or in
equity).
(g) No Proceeding. There are no proceedings or investigations pending or
threatened against the Servicer, before any Governmental Authority (i) asserting
the invalidity of any Transaction Document, (ii) seeking to prevent the
consummation of any of the transactions contemplated by any Transaction Document
or (iii) seeking any determination or ruling that might (in the reasonable
judgment of the Servicer) materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of, any
Transaction Document.
(h) Reports Accurate. No Servicer Certificate, information, exhibit, financial
statement, document, book, record or report furnished or to be furnished by the
Servicer to the Administrator or MSFC in connection with any Transaction
Document is or will be inaccurate in any material respect as of the date it is
or shall be dated or (except as otherwise disclosed to the Administrator or
MSFC, as the case may be, at such time) as of the date so furnished, and no such
document contains or will contain any material misstatement of fact or omits or
shall omit to state a material fact or any fact necessary to make the statements
contained therein not misleading.
Section 6.7 Representations and Warranties of Backup Servicer and
Collateral Custodian.
Each of the Backup Servicer and the Collateral Custodian represents and
warrants to the Administrator and MSFC that, as of the Closing Date and on each
Addition Date, insofar as any of the following affects the Backup Servicer's or
the Collateral Custodian's, as the case may be, ability to perform its
obligations pursuant to this Agreement or, with respect to the Collateral
Custodian, the Custodial Agreement, in any material respect:
<PAGE>
(a) Organization and Good Standing. Harris Trust and Savings Bank is an Illinois
banking corporation duly organized, validly existing and in good standing under
the laws of the State of Illinois with all requisite corporate power and
authority to own its properties and to conduct its business as presently
conducted and to enter into and perform its obligations pursuant to this
Agreement and the Custodial Agreement.
(b) Power and Authority. Each of the Backup Servicer and the Collateral
Custodian has the corporate power and authority to execute and deliver this
Agreement and, with respect to the Collateral Custodian, the Custodial
Agreement, and to carry out their respective terms. Each of the Backup Servicer
and the Collateral Custodian has duly authorized the execution, delivery and
performance of this Agreement and, with respect to the Collateral Custodian, the
Custodial Agreement, by all requisite corporate action.
(c) No Violation. The consummation of the transactions contemplated by, and the
fulfillment of the terms of, this Agreement and, with respect to the Collateral
Custodian, the Custodial Agreement, by the Backup Servicer and the Collateral
Custodian will not (i) conflict with, result in any breach of any of the terms
or provisions of, or constitute a default under, the charter or bylaws of the
Backup Servicer or the Collateral Custodian, or any term of any material
agreement, indenture, mortgage, deed of trust or other instrument to which the
Backup Servicer or the Collateral Custodian is a party or by which it or any of
its property is bound, (ii) result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or (iii) violate any
law, regulation, order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority applicable to Harris Trust and Savings Bank
or any of its properties that might (in the reasonable judgment of the Backup
Servicer or the Collateral Custodian, as the case may be) materially and
adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement or, with respect to the Collateral Custodian, the Custodial Agreement.
(d) No Consent. No consent, approval, authorization, order, registration,
filing, qualification, license or permit (collectively, the "Consents") of or
with any Governmental Authority having jurisdiction over the Backup Servicer or
the Collateral Custodian or any of its respective properties is required to be
obtained by or with respect to the Backup Servicer or the Collateral Custodian
in order for the Backup Servicer or the Collateral Custodian, as the case may
be, to enter into this Agreement or, with respect to the Collateral Custodian,
the Custodial Agreement, or perform its obligations hereunder or thereunder
(except with respect to performance only, such
<PAGE>
Consents as the Backup Servicer or the Collateral Custodian, as the case may be,
may need to obtain prior to the commencement of its performance of its duties
hereunder or thereunder in the certain jurisdictions outside of Illinois;
provided, however, that in lieu of obtaining for itself the requisite Consents,
the Backup Servicer or the Collateral Custodian, as the case may be, may and
shall be permitted to delegate the performance of its duties to parties having
the requisite Consents in such jurisdictions; provided, however, in the case of
such delegation of performance the Backup Servicer or the Collateral Custodian,
as the case may be, shall not be relieved of their responsibility under this
Agreement or, with respect to the Collateral Custodian, the Custodial Agreement,
with respect to such duties).
(e) Binding Obligation. This Agreement and, with respect to the Collateral
Custodian, the Custodial Agreement constitutes a legal, valid and binding
obligation of Harris Trust and Savings Bank, enforceable against the Backup
Servicer and the Collateral Custodian in accordance with their respective terms,
except as such enforceability may be limited by (i) applicable Insolvency Laws
and (ii) general principles of equity (whether considered in a suit at law or in
equity).
(f) No Proceeding. There are no proceedings or investigations pending or, to the
best of its knowledge, threatened, against the Backup Servicer or the Collateral
Custodian, before any Governmental Authority (i) asserting the invalidity of
this Agreement or, with respect to the Collateral Custodian, the Custodial
Agreement, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or, with respect to the Collateral Custodian, the
Custodial Agreement, or (iii) seeking any determination or ruling that might (in
the reasonable judgment of the Backup Servicer or the Collateral Custodian, as
the case may be) materially and adversely affect the performance by the Backup
Servicer or the Collateral Custodian of its obligations under, or the validity
or enforceability of, this Agreement or, with respect to the Collateral
Custodian, the Custodial Agreement.
Section 6.8 Covenants of Servicer.
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply with all laws and regulations
of any Governmental Authority applicable to the Servicer or the Contracts in the
Asset Pool and related Equipment and Contract Files or any part thereof.
(b) Obligations with Respect to Contracts; Modifications. The Servicer will duly
fulfill and comply with all obligations on the part of the Seller to be
fulfilled or complied with under or in connection with each Contract in the
Asset Pool and will do nothing to impair the rights of the Administrator or of
MSFC in, to and under the Assets. The Servicer will perform such obligations
under the Contracts in the Asset Pool and will not change or modify the
Contracts.
<PAGE>
(c) Preservation of Security Interest. The Servicer will execute and file such
financing and continuation statements and any other documents which may be
required by any law or regulation of any Governmental Authority to preserve and
protect fully the interest of the Administrator in, to and under the Assets.
(d) No Bankruptcy Petition. Prior to the date that is one year and one day after
the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by MSFC, the Servicer will not institute against the
Seller or MSFC, or join any other Person in instituting against the Seller or
MSFC, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States or
any state of the United States. This Section 6.9(d) will survive the termination
of this Agreement.
(e) Year 2000 Compatibility. The Servicer shall take all action necessary to
assure that, prior to January 1, 2000, the Servicer's computer system is able to
operate and effectively process data including dates on and after January 1,
2000. At the request of the Administrator or the Backup Servicer, the Servicer
shall provide assurance acceptable to the Administrator or the Backup Servicer
of the Servicer's year 2000 compatibility.
(f) Tangible Net Worth. The Servicer shall maintain a Tangible Net Worth of at
least $8,000,000.
Section 6.9 Covenants of Backup Servicer and Collateral Custodian.
Each of the Backup Servicer and the Collateral Custodian hereby
covenants that:
(a) Contract Files. The Collateral Custodian will not dispose of any documents
constituting the Contract Files in any manner which is inconsistent with the
performance of its obligations as the Collateral Custodian and will not dispose
of any Contract except as contemplated by this Agreement and the Custodial
Agreement.
(b) Compliance with Law. Each of the Backup Servicer and the Collateral
Custodian will comply with all laws and regulations of any Governmental
Authority applicable to the Backup Servicer and the Collateral Custodian.
(c) No Bankruptcy Petition. Prior to the date that is one year and one day after
the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by MSFC, neither the Backup Servicer nor the Collateral
Custodian will institute against the Seller or MSFC, or join any other Person in
instituting against the Seller or MSFC, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States. This
Section 6.9(d) will survive the termination of this Agreement.
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(d) Location of Contract Files. The Contract Files shall remain at all times in
the possession of the Collateral Custodian at the address set forth herein
unless notice of a different address is given in accordance with the terms
hereof.
(e) No Changes in Backup Servicer and Collateral Custodian Fee. The Backup
Servicer and Collateral Custodian will not make any changes to the fees set
forth in the Backup Servicer and Collateral Custodian Fee Letter without the
prior written approval of the Administrator.
(f) Year 2000 Compatibility. The Backup Servicer and Collateral Custodian shall
take all action necessary to assure that, prior to January 1, 2000, the Backup
Servicer and Collateral Custodian's relevant computer system designated for the
administration of the transactions contemplated hereby is able to operate and
effectively process data including dates on and after January 1, 2000. At the
request of the Administrator, the Backup Servicer and Collateral Custodian shall
provide assurance acceptable to the Administrator of the Backup Servicer and
Collateral Custodian's year 2000 compatibility.
Section 6.10 Servicing Compensation.
As compensation for its servicing activities hereunder and
reimbursement for its expenses, the Servicer shall be entitled to receive a
servicing fee (the "Servicing Fee") in respect of each Monthly Period (or
portion thereof) equal to one-twelfth of the product of (A) the Servicing Fee
Rate and (B) the ADCB as on the most recent Determination Date, such Servicing
Fee to be payable monthly in arrears on each Settlement Date to the extent of
funds available therefor pursuant to the provisions of Section 2.7 or 2.9, as
applicable.
Section 6.11 Custodial Compensation.
As compensation for its custodial activities hereunder and
reimbursement for its expenses, the Collateral Custodian shall be entitled to
receive a custodial fee (the "Custodial Fee") as provided in the Backup Servicer
and Collateral Custodian Fee Letter.
Section 6.12 Payment of Certain Expenses by Servicer.
The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of independent accountants, Taxes imposed on the Servicer,
expenses incurred in connection with payments and reports pursuant to this
Agreement, and all other fees and expenses not
<PAGE>
expressly stated under this Agreement for the account of the Seller, but
excluding Liquidation Expenses incurred as a result of activities contemplated
by Section 6.4. The Servicer will be required to pay all reasonable fees and
expenses owing to any bank or trust company in connection with the maintenance
of the Collection Account and the Lock-Box Account. The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Servicing Fee.
Section 6.13 Reports.
(a) Monthly Report. With respect to each Determination Date and the related
Monthly Period, the Servicer will provide to the Seller, the Administrator and
the Backup Servicer, on the related Reporting Date, a monthly statement (a
"Monthly Report"), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit E.
(b) Servicer's Certificate. Together with each Monthly Report, the Servicer
shall submit to the Administrator a certificate (a "Servicer's Certificate"),
signed by a Responsible Officer of the Servicer and substantially in the form of
Exhibit F.
(c) Financial Statements. The Servicer will submit to the Administrator and the
Backup Servicer, within 45 days of the end of each of its fiscal quarters,
commencing with the quarter ended December 31, 1998 unaudited financial
statements (including an analysis of delinquencies and losses for each fiscal
quarter) as of the end of each such fiscal quarter. The Servicer will submit to
the Administrator and Backup Servicer, within 90 days of the end of each of its
fiscal years, commencing with the fiscal year ended September 30, 1998 audited
financial statements (including an analysis of delinquencies and losses for each
fiscal year describing the causes thereof and sufficient to determine whether a
Termination Event has occurred or is reasonably likely to occur and otherwise
reasonably satisfactory to the Administrator) as of the end of each such fiscal
year.
<PAGE>
Section 6.15 Annual Statement as to Compliance.
The Servicer will provide to the Administrator and the Backup Servicer,
on or prior to December 31 of each year, commencing December 31, 1998, an annual
report signed by a Responsible Officer of the Servicer certifying that (a) a
review of the activities of the Servicer, and the Servicer's performance
pursuant to the Transaction Documents, for the period ending on the last day of
the immediately preceding fiscal year has been made under such Person's
supervision and (b) the Servicer has performed or has caused to be performed in
all material respects all of its obligations under the Transaction Documents
throughout such year and no Servicer Default has occurred and is continuing (or
if a Servicer Default has so occurred and is continuing, specifying each such
event, the nature and status thereof and the steps necessary to remedy such
event, and, if a Servicer Default occurred during such year and no notice
thereof has been given to the Administrator, specifying such Servicer Default
and the steps taken to remedy such event).
Section 6.16 Annual Independent Public Accountant's Servicing Reports.
The Servicer will cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish to the Administrator and the Backup Servicer, on or prior to September
30 of each year, commencing September 30, 1999, (i) a report relating to the
previous fiscal year to the effect that (A) such firm has reviewed certain
documents and records relating to the servicing of the Contracts in the Asset
Pool, and (B) based on such examination, such firm is of the opinion that the
Monthly Reports for such year were prepared in compliance with this Agreement,
except for such exceptions as it believes to be immaterial and such other
exceptions as will be set forth in such firm's report and (ii) a report covering
the preceding fiscal year to the effect that such accountants have applied
certain agreed-upon procedures to certain documents and records relating to the
servicing of Contracts under the Transaction Documents, compared the information
contained in the Servicer's Certificates delivered during the period covered by
such report with such documents and records and that no matters came to the
attention of such accountants that caused them to believe that such servicing
was not conducted in compliance with this Article VI of this Agreement, except
for such exceptions as such accountants shall believe to be immaterial and such
other exceptions as shall be set forth in such statement. In the event such firm
requires the Backup Servicer to agree to the procedures performed by such firm,
the Servicer shall direct the Backup Servicer in writing to so agree; it being
understood and agreed that the Backup Servicer will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Backup Servicer makes no independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
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Section 6.16 Adjustments.
If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Contract in the Asset Pool and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Scheduled Payment in respect of which a dishonored check
is received shall be deemed not to have been paid.
Section 6.17 Merger or Consolidation of the Servicer.
The Servicer shall not consolidate with or merge into any other Person
or convey or transfer its properties and assets substantially as an entirety to
any Person, unless the Servicer is the surviving entity and unless:
(i) the Servicer has delivered to the Administrator and the Backup Servicer an
Officer's Certificate and an Opinion of Counsel each stating that any
consolidation, merger, conveyance or transfer and such supplemental agreement
comply with this Section 6.17 and that all conditions precedent herein provided
for relating to such transaction have been complied with and, in the case of the
Opinion of Counsel, that such supplemental agreement is legal, valid and binding
with respect to the Servicer and such other matters as the Administrator may
reasonably request;
(ii) the Servicer shall have delivered notice of such consolidation, merger,
conveyance or transfer to the Administrator; and
(iii) after giving effect thereto, no Termination Event or Unmatured Termination
Event shall have occurred.
Section 6.18 Limitation on Liability of the Servicer and Others.
Except as provided herein, neither the Servicer nor any of the
directors or officers or employees or agents of the Servicer shall be under any
liability to the Administrator, MSFC or any other Person for any action taken or
for refraining from the taking of any action pursuant to any Transaction
Document whether arising from express or implied duties under the Transaction
Documents; provided, however, that this provision shall not protect the Servicer
or any such Person against any liability which would otherwise be imposed by
reason of its willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of its willful misconduct thereunder.
<PAGE>
Section 6.19 Indemnification of the Seller, the Backup Servicer, the
Collateral Custodian, the Administrator and the MSFC.
Without limiting any other rights that the Seller, the Backup Servicer,
the Collateral Custodian, the Administrator or MSFC or any of their respective
Affiliates or directors, officers, employees or agents (collectively, the
"Indemnified Persons") may have under any Transaction Documents or under
applicable law, the Servicer hereby agrees to indemnify and hold harmless each
Indemnified Person, from and against any and all damages, losses, claims,
liabilities, judgements, awards, settlements and related costs and expenses,
including, without limitation, reasonable attorneys' fees and disbursements but
excluding allocations of overhead expenses of any such Indemnified Party or
other non-monetary damages of any such Indemnified Party (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded against or
incurred by such Indemnified Person by reason of any acts, omissions or alleged
acts or omissions of the Servicer or otherwise incurred in connection with the
transactions contemplated by the Transaction Documents. Notwithstanding the
foregoing, the Servicer shall not indemnify an Indemnified Person if such
Indemnified Amount results or arises (i) as a result of fraud, gross negligence
or breach of fiduciary duty by such Indemnified Person; and (ii) under any
federal, state or local income or franchise taxes or any other Tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising
from a failure to comply therewith) required to be paid by the Seller, the
Backup Servicer, the Collateral Custodian, the Administrator or MSFC in
connection herewith to any taxing authority. The provisions of this indemnity
shall run directly to and be enforceable by an injured party subject to the
limitations hereof. If the Servicer has made any indemnity payment pursuant to
this Section 6.19 and such payment fully indemnified the recipient thereof and
the recipient thereafter collects any payments from others in respect of such
Indemnified Amounts, the recipient shall repay to the Servicer an amount equal
to the amount it has collected from others (and does not have to repay to such
others) in respect of such Indemnified Amounts. Without limiting the foregoing,
the Servicer shall indemnify the Indemnified Parties for Indemnified Amounts
relating to or resulting from:
(i) any Purchased Asset treated as, or represented to be, an Eligible Contract
which is not at the applicable time an Eligible Contract;
(ii) reliance on any representation or warranty made or deemed made by the
Servicer or any of its respective officers under or in connection with any
Transaction Document, which shall have been false or incorrect in any material
respect when made or deemed made or delivered;
<PAGE>
(iii) the failure by the Servicer to comply with any term, provision or covenant
contained in any Transaction Document or any agreement executed in connection
with any Transaction Document, or with any applicable law, rule or regulation
with respect to any Asset, the related Contract, or the nonconformity of any
Asset, the related Contract with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Administrator or to transfer
to the Administrator an undivided ownership interest in the Assets, together
with all Collections, free and clear of any Adverse Claim whether existing at
the time of any Purchase or at any time thereafter;
(v) the failure to monitor that, as of the close of business on each Business
Day prior to the Termination Date, the amount of Capital outstanding less than
or equal to the lesser of (x) the Purchase Limit on such Business Day or (y) the
Capital Limit on such Business Day;
(vi) the failure to file, or any delay in filing, financing statements or other
similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Assets which are, or are purported to
be, Pool Assets, whether at the time of any Purchase or at any subsequent time;
(vii) any failure of the Servicer to perform its duties or obligations in
accordance with the provisions of the Transaction Documents;
(viii) the failure to monitor that the Seller has paid when due any Taxes for
which the Seller is liable, including without limitation, sales, excise or
personal property taxes payable in connection with the Pool Assets;
(ix) the commingling of Collections of Pool Assets at any time with other funds;
(x) any failure to monitor that the Seller has given reasonably equivalent value
to the Originator in consideration for the transfer by the Originator to the
Seller of any Assets;
(xi) the failure of the Servicer or any of its respective agents or
representatives to remit Collections of Pool Assets in accordance herewith; or
(xii) any amounts payable under the Hedge Transactions for any Settlement Period
in excess of Interest Collections for such Settlement Period or any failure of
the Hedge Transactions to comply at all times with the requirements of Section
5.4, including, without limitation, having a Hedge Notional Amount that complies
at all times with Section 5.4(iii).
<PAGE>
Any amounts subject to the indemnification provisions of this Section 6.19 shall
be paid by the Servicer to the Indemnified Person within two Business Days
following its demand therefor. Notwithstanding the foregoing, if any such
amounts are paid pursuant to Section 2.9(b), then the Servicer shall immediately
deposit the amount so paid into the Collection Account for subsequent
distribution in accordance with Section 2.9(b).
If for any reason the indemnification provided above in this Section
6.19 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and Servicer on the
other hand but also the relative fault of such Indemnified Person as well as any
other relevant equitable considerations.
The parties hereto agree that the provisions of this Section 6.19 shall
not be interpreted to provide recourse to the Seller against loss by reason of
the bankruptcy or insolvency (or other credit condition) of, or default by,
related Obligor on, any Pool Asset.
Any indemnification pursuant to this Section shall not be payable from
the Assets.
The obligations of the Servicer under this Section 6.19 shall survive
the resignation or removal of the Administrator, the Backup Servicer or the
Collateral Custodian and the termination of this Agreement.
Section 6.20 The Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon the Servicer's determination that (i) the performance
of its duties hereunder is or becomes impermissible under applicable law and
(ii) there is no reasonable action which the Servicer could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Servicer shall be evidenced as
to clause (i) above by an Opinion of Counsel to such effect delivered to the
Administrator and the Backup Servicer. No such resignation shall become
effective until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 6.25.
<PAGE>
Section 6.21 Access to Certain Documentation and Information Regarding
the Contracts.
The Collateral Custodian shall provide to the Administrator access to
the Contract Files and all other documentation regarding the Contracts in the
Asset Pool and the related Equipment in such cases where the Administrator is
required in connection with the enforcement of the rights or interests of the
Administrator or MSFC, or by applicable statutes or regulations to review such
documentation, such access being afforded without charge but only (i) upon two
Business Days prior written request, (ii) during normal business hours and (iii)
subject to the Servicer's and Collateral Custodian's normal security and
confidentiality procedures. Prior to the Closing Date and periodically
thereafter at the discretion of the Administrator, the Administrator may review
the Servicer's collection and administration of the Contracts in order to assess
compliance by the Servicer with the Credit and Collection Policy, as well as
with the Transaction Documents and may conduct an audit of the Contracts and
Contract Files in conjunction with such a review. Such review shall be
reasonable in scope and shall be completed in a reasonable period of time.
Section 6.22 Backup Servicer.
(a) On or before the date on which the initial Purchase occurs, and until the
receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Administrator and MSFC, the following duties and
obligations:
(i) On or before the Closing Date, the Backup Servicer shall accept from the
Servicer delivery of the information required to be set forth in the Monthly
Reports in hard copy and on computer tape; provided, however, the computer tape
is in an MS-DOS, PC readable ASCII format or format to be agreed upon by the
Backup Servicer and the Servicer on or prior to closing.
(ii) Not later than 12:00 noon New York time two Business Days prior to each
Reporting Date, the Backup Servicer shall accept delivery of tape from the
Servicer, which shall include but not be limited to the following information:
the name, number and name of the related Lessee for each Contract, the
collection status, the contract status, the principal balance and the ADCB (the
"Tape").
The Servicer shall provide, or cause the Subservicer to provide, the
Tape on each Reporting Date as described above.
(b) On or before the date on which the initial Purchase occurs, and until the
receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of MSFC and the Administrator, the following duties and
obligations:
<PAGE>
(i) Prior to the related Settlement Date, the Backup Servicer shall review the
Monthly Report to ensure that it is complete on its face and that the following
items in such Monthly Report have been accurately calculated, if applicable, and
reported: (A) the ADCB, (B) the Backup Servicing Fee, (C) the average ADCB, (D)
the Contracts with any Scheduled Payment 30-60 days past due, (E) the Contracts
with any Scheduled Payment 61-90 days past due, (E) the Contracts with any
Scheduled Payment 90+ days past due, (F) the Contracts that are Defaulted
Contracts, (G) the Delinquency Ratio and (H) the Default Ratio. The Backup
Servicer shall notify the Administrator and the Servicer of any disagreements
with the Monthly Report based on such review not later than the Business Day
preceding such Settlement Date to such Persons.
(ii) If the Servicer disagrees with the report provided under paragraph (i)
above by the Backup Servicer or if the Servicer or any subservicer has not
reconciled such discrepancy, the Backup Servicer agrees to confer with the
Servicer to resolve such disagreement on or prior to the next succeeding
Determination Date and shall settle such discrepancy with the Servicer if
possible, and notify the Administrator of the resolution thereof. The Servicer
hereby agrees to cooperate at its own expense, with the Backup Servicer in
reconciling any discrepancies herein. If within 20 days after the delivery of
the report provided under paragraph (i) above by the Backup Servicer, such
discrepancy is not resolved, the Backup Servicer shall promptly notify the
Administrator of the continued existence of such discrepancy. Following receipt
of such notice by the Administrator, the Servicer shall deliver to the
Administrator, MSFC and the Backup Servicer no later than the related Settlement
Date a certificate describing the nature and amount of such discrepancies and
the actions the Servicer proposes to take with respect thereto.
With respect to the foregoing, the Backup Servicer, in the performance
of its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.
(c) After the receipt of an effective Termination Notice by the Servicer in
accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this Agreement, whether with respect to
the Contracts or otherwise shall pass to and be vested in the Backup Servicer,
subject to and in accordance with the provisions of Section 6.25, as long as the
Backup Servicer is not prohibited by an applicable provision of law from
fulfilling the same, as evidenced by an Opinion of Counsel.
(d) Any Person (i) into which the Backup Servicer may be merged or consolidated,
(ii) which may result from any merger or consolidation to which the Backup
Servicer shall be a party, or (iii) which may succeed to the properties and
assets of the Backup Servicer substantially as a whole, which Person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Backup Servicer hereunder, shall be the successor to the
Backup Servicer under this Agreement without further act on the part of any of
the parties to this Agreement.
<PAGE>
(e) As compensation for its Backup servicing obligations hereunder, the Backup
Servicer shall be entitled to receive the backup servicing fee (the "Backup
Servicing Fee") as provided in the Backup Servicer and Collateral Custodian Fee
Letter in respect of each Monthly Period (or portion thereof) until the first to
occur of the date on which the Backup Servicer becomes a Successor Servicer,
resigns or is removed as Backup Servicer or termination of this Agreement.
(f) The Backup Servicer may resign at any time by not less than 120 days notice
to the Administrator, the Servicer, the Seller and the Originator. In addition,
the Backup Servicer may be removed without cause by the Administrator by notice
then given in writing to the Servicer, the Seller and the Backup Servicer. In
the event of any such resignation or removal, the Backup Servicer may be
replaced by (i) the Servicer, acting with the consent of the Administrator or
(ii) if no such replacement is appointed within 30 days following such removal
or resignation, by the Administrator.
(g) The Backup Servicer undertakes to perform only such duties and obligations
as are specifically set forth in this Agreement, it being expressly understood
by all parties hereto that there are no implied duties or obligations of the
Backup Servicer hereunder. Without limiting the generality of the foregoing, the
Backup Servicer, except as expressly set forth in this Agreement, shall have no
obligation to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer may act through its agents, attorneys and
custodians in performing any of its duties and obligations under this Agreement,
it being understood by the parties hereto that the Backup Servicer will be
responsible for any misconduct or negligence on the part of such agents,
attorneys or custodians acting on the routine and ordinary day-to-day operations
for and on behalf of the Backup Servicer. Neither the Backup Servicer nor any of
its officers, directors, employees or agents shall be liable, directly or
indirectly, for any damages or expenses arising out of the services performed
under this Agreement other than damages or expenses which result from the gross
negligence or willful misconduct of it or them or the failure to perform
materially in accordance with this Agreement.
(h) The Backup Servicer shall not be liable for any obligation of the Servicer
contained in any Transaction Document or for any errors of the Servicer
contained in any computer tape, certificate or other data or document delivered
to the Backup Servicer hereunder or on which the Backup Servicer must rely in
order to perform its obligations hereunder or thereunder, and the Seller, MSFC,
the Administrator, the Collateral Custodian and the Backup Servicer, shall look
only to the Servicer to perform such obligations. The Backup Servicer, and the
Collateral Custodian shall have no responsibility and shall not be in default
under any Transaction Document or incur any
<PAGE>
liability for any failure, error, malfunction or any delay in carrying out any
of their respective duties under any Transaction Document if such failure or
delay results from the Backup Servicer acting in accordance with information
prepared or supplied by a Person other than the Backup Servicer or the failure
of any such other Person to prepare or provide such information. The Backup
Servicer shall have no responsibility, shall not be in default and shall incur
no liability for (i) any act or failure to act of any third party, including the
Servicer (ii) any inaccuracy or omission in a notice or communication received
by the Backup Servicer from any third party, (iii) the invalidity or
unenforceability of any Asset or Contract under applicable law, (iv) the breach
or inaccuracy of any representation or warranty made with respect to any Asset,
Contract or any item of Equipment, or (v) the acts or omissions of any successor
Backup Servicer.
Section 6.23 Identification of Records.
The Servicer shall clearly and unambiguously identify each Contract in
the Asset Pool and the related Equipment in its computer or other records to
reflect that such Contracts and Equipment have been transferred to and are owned
by the Seller and that an interest therein has been transferred by the Seller
pursuant to this Agreement.
Section 6.24 Servicer Defaults.
If any one of the following events (a "Servicer Default") shall occur
and be continuing:
(a) any failure by the Servicer to make any payment, transfer or deposit or to
give instructions or notice to the Administrator as required by this Agreement
including, without limitation, while Fidelity is Servicer, any payment required
to be made under the Backup Servicer and Collateral Custodian Fee Letter, or to
deliver any required Monthly Report or other Required Reports hereunder on or
before the date occurring two Business Days after the date such payment,
transfer, deposit, instruction of notice or report is required to be made or
given, as the case may be, under the terms of this Agreement;
(b) any failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
any Transaction Document which has a material adverse effect on the
Administrator or MSFC, which continues unremedied for a period of 30 days after
the first to occur of (i) the date on which written notice of such failure
requiring the same to be remedied shall have been given to the Servicer by the
Administrator and (ii) the date on which the Servicer becomes aware thereof;
(c) any representation, warranty or certification made by the Servicer in any
Transaction Document or in any certificate delivered pursuant to any Transaction
Document shall prove to have been incorrect when made, which has a
<PAGE>
material adverse effect on the Administrator or MSFC and which continues to be
unremedied for a period of 30 days after the first to occur of (i) the date on
which written notice of such incorrectness requiring the same to be remedied
shall have been given to the Servicer by the Administrator and (ii) the date on
which the Servicer becomes aware thereof;
(d) an Insolvency Event shall occur with respect to the Servicer;
(e) any material delegation of the Servicer's duties which is not permitted by
Section 6.1;
(f) any financial or Asset information reasonably requested by the Administrator
or MSFC as provided herein is not reasonably provided as requested;
(g) the rendering against the Servicer of a final judgment, decree or order for
the payment of money in excess of U.S. $1,000,000 and the continuance of such
judgment, decree or order unsatisfied and in effect for any period of more than
60 consecutive days without a stay of execution;
(h) the failure of the Servicer to make any payment due with respect to
aggregate recourse debt or other obligations with an aggregate principal amount
exceeding U.S. $1,000,000 or the occurrence of any event or condition which
would permit acceleration of such recourse debt or other obligations if such
event or condition has not been waived;
(i) any change in the management of the Servicer relating to the positions of
President, CEO, Chairman of the Board and Executive Vice President; or
(j) any change in the control of the Servicer which takes the form of either a
merger or consolidation in which the Servicer is not the surviving entity.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Default shall not have been remedied, the Administrator, by written notice to
the Servicer (with a copy to the Backup Servicer) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer as Servicer under
this Agreement.
Section 6.25 Appointment of Successor Servicer.
(a) On and after the receipt by the Servicer of a Termination Notice pursuant to
Section 6.24, the Servicer shall continue to perform all servicing functions
under the Transaction Documents until the date specified in the Termination
Notice or otherwise specified by the Administrator in writing or, if no such
date is specified in such Termination Notice or otherwise specified by the
Administrator, until a
<PAGE>
date mutually agreed upon by the Servicer and the Administrator. The
Administrator may at the time described in the immediately preceding sentence in
its sole discretion, appoint the Backup Servicer as the servicer, and the Backup
Servicer shall on such date assume all obligations of the servicer, and all
authority and power of the Servicer under this Agreement and the Custodial
Agreement shall pass to and be vested in the Backup Servicer; provided, however,
that the Successor Servicer shall not (i) be responsible or liable for any past
actions or omissions of the outgoing Servicer or (ii) be obligated to make
Servicer Advances. In the event that the Administrator does not so appoint the
Backup Servicer, there is no Backup Servicer or the Backup Servicer is unable to
assume such obligations on such date, the Administrator shall as promptly as
possible appoint a successor servicer (the Backup Servicer or any such other
successor, the "Successor Servicer"), and such Successor Servicer shall accept
its appointment by a written assumption in a form acceptable to the
Administrator. If the Administrator within 60 days of receipt of a Termination
Notice is unable to obtain any bids from Eligible Servicers and the Servicer
delivers an Officer's Certificate to the effect that it cannot in good faith
cure the Servicer Default which gave rise to a transfer of servicing, then the
Administrator shall offer the Seller the right to accept retransfer of all the
Assets and the Seller may accept re-transfer of all the Assets; provided,
however, that if the long-term unsecured debt obligations of the Seller are not
rated at the time of such purchase at least investment grade by each rating
agency providing a rating in respect of such long-term unsecured debt
obligations, no such re-transfer shall occur unless the Seller shall deliver an
Opinion of Counsel reasonably acceptable to the Administrator that such
re-transfer would not constitute a fraudulent conveyance of the Seller. The
amount to be paid and deposited in respect of such re-transfer shall be equal to
the sum of the Capital outstanding plus all Yield that has accrued thereon and
that will accrue thereon. In the event that a Successor Servicer has not been
appointed and has not accepted its appointment at the time when the Servicer
ceases to act as Servicer, the Administrator shall petition a court of competent
jurisdiction to appoint any established financial institution having a net worth
of not less than U.S. $50,000,000 and whose regular business includes, without
limitation, the servicing of Contracts as the Successor Servicer hereunder.
(b) Upon its appointment, the Successor Servicer shall be the successor in all
respects to the Servicer with respect to servicing functions under this
Agreement and the Custodial Agreement and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions thereof, and all references in this Agreement and
the Custodial Agreement, to the Servicer shall be deemed to refer to the
Successor Servicer.
(c) All authority and power granted to the Servicer under the Transaction
Documents shall automatically cease and terminate upon termination of this
Agreement and shall pass to and be vested in the Seller and, without limitation,
the Seller is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and
<PAGE>
accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Servicer agrees to cooperate
with the Seller in effecting the termination of the responsibilities and rights
of the Servicer to conduct servicing on the Contracts in the Asset Pool.
(d) Upon the Backup Servicer receiving notice that it is required to serve as
the Successor Servicer pursuant to the foregoing provisions of this Section
6.25, the Backup Servicer will promptly begin the transition to its role as
Successor Servicer.
(e) The Backup Servicer shall be entitled to receive its reasonable costs
incurred in transitioning to Successor Servicer.
Section 6.26 Notification.
Upon the Servicer becoming aware of the occurrence of any Servicer
Default, the Servicer shall promptly give written notice thereof to the
Administrator and the Backup Servicer.
<PAGE>
Section 6.27 Protection of Right, Title and Interest to Assets.
(a) The Servicer shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the right, title and interest of the Administrator and of
MSFC to the Assets to be promptly recorded, registered and filed, and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the fight, title
and interest of the Administrator hereunder to all property comprising the
Assets. The Servicer shall deliver to the Administrator file-stamped copies of,
or filing receipts for, any document recorded, registered or filed as provided
above, as soon as available following such recording, registration or filing.
The Seller shall cooperate fully with the Servicer in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this subsection 6.27(a).
(b) The Servicer will give the Administrator at least 30 days' prior written
notice of any relocation of any office from which it services Contracts in the
Asset Pool or keeps the Contract Files or of its principal executive office and
whether, as a result of such relocation, the applicable provisions of the UCC or
any other applicable law governing the perfection of interests in property would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall file such
financing statements or amendments as may be necessary to continue the
perfection of the security interest of the Administrator in the Contracts in the
Asset Pool and the proceeds thereof. The Servicer will at all times maintain
each office from which it services Contracts in the Asset Pool within the United
States of America.
<PAGE>
Section 6.28 Release of Contract Files.
The Seller may, with the prior written consent of the Administrator
(such consent not to be unreasonably withheld), require that the Collateral
Custodian release each Contract File (a) delivered to the Collateral Custodian
in error, (b) for which a Substitute Contract has been substituted in accordance
with Section 2.16, (c) as to which the lien on the related Equipment has been so
released pursuant to Section 5.3, (d) which has been retransferred to the Seller
pursuant to Section 5.5 or 5.6, or (e) which is required to be redelivered to
the Seller in connection with the termination of this Agreement, in each case by
submitting to the Collateral Custodian and the Administrator a written request
in the form of Exhibit H (signed by both the Seller and the Administrator)
specifying the Contracts to be so released and reciting that the conditions to
such release have been met (and specifying the section or sections of this
Agreement being relied upon for such release). The Collateral Custodian shall
upon its receipt of each such request for release executed by the Seller and the
Administrator promptly, but in any event within 5 Business Days, release the
Contract Files so requested to the Seller.
ARTICLE VII
TERMINATION EVENTS
Section 7.1 [reserved]. Section [reserved].
Section 7.2 Termination Events.
If any of the following events ("Termination Events") shall occur:
(a) as of any Reporting Date, the Delinquency Ratio for the preceding
Determination Date exceeds 3.0%;
(b) as of any Reporting Date, the Default Ratio for the preceding Determination
Date exceeds 2.75%;
(c) the Termination Date shall have occurred;
(d) the level of Capital exceeds the Capital Limit, and such condition as not
cured within one Business Day;
(e) the Seller is not in compliance with the Portfolio Concentration Criteria,
and such noncompliance is not cured within 5 Business Days;
(f) a Servicer Default occurs and is continuing;
<PAGE>
(g) (i) failure on the part of the Seller to make any payment or deposit
required by the terms of any Transaction Document on the day such payment or
deposit is required to be made, including, without limitation, the payment of
all accrued and unpaid Yield on each Settlement Date;
(ii) failure on the part of the Seller to observe or perform
any of its covenants or agreements set forth in any Transaction
Document, which failure has a material adverse effect on the interests
of the Administrator or MSFC and which continues unremedied for a
period of 30 days or more after written notice or actual knowledge
thereof; provided, however, that only a five Business Day cure period
shall apply in the case of a failure by the Seller to observe its
covenants not to grant a security interest or otherwise intentionally
create a Lien on the Contracts;
(h) any representation or warranty made by the Seller in any Transaction
Document or any information required to be given by the Seller to the
Administrator to identify Contracts pursuant to any Transaction Document, shall
prove to have been incorrect in any material respect when made or delivered and
which continues to be incorrect in any material respect for a period of 30 days
after written notice or actual knowledge thereof;
(i) the occurrence of an Insolvency Event relating to the Originator, the Seller
or the Servicer;
(j) the Seller shall become an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "40 Act") or the arrangements
contemplated by the Transaction Documents shall require registration as an
"investment company" within the meaning of the 40 Act;
(k) a regulatory, tax or accounting body has ordered that the activities of the
Seller or any Affiliate of the Seller, contemplated hereby be terminated or, as
a result of any other event or circumstance, the activities of the Seller
contemplated hereby may reasonably be expected to cause the Seller or any of its
respective Affiliates to suffer materially adverse regulatory, accounting or tax
consequences;
(l) on any day, the aggregate Hedge Notional Amount in effect for that day under
all Hedge Transactions is less than 100% of the Capital outstanding on that day;
(m) the Internal Revenue Service shall file notice of a lien pursuant to Section
6323 of the Internal Revenue Code with regard to any of the assets of the
Seller, the Originator or the Servicer, and such lien shall not have been
released within 30 days, or the Pension Benefit Guaranty Corporation shall file
notice of a lien pursuant to Section 4068 of ERISA with regard to any of the
assets of the Seller, the Originator or the Servicer, and such lien shall not
have been released within 10 days;
<PAGE>
(n) (i) any Transaction Document, or any lien or security interest granted
thereunder, shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of the Seller, the Originator, the Servicer or Fidelity,
(ii) the Seller, the Originator, the Servicer, Fidelity or any other party
shall, directly or indirectly, contest in any manner such effectiveness,
validity, binding nature or enforceability or (iii) any security interest
securing any obligation under any Transaction Document shall, in whole or in
part, cease to be a perfected first priority security interest;
(o) aa Change in Control shall have occurred with respect to the Seller;
(p) iif Fidelity is the Servicer, the Tangible Net Worth of Fidelity is less
than $8,000,000; or
(q) the failure of Fidelity to pay the Commitment Fee, Program Fee, Backup
Servicing Fee or Custodial Fee when due, and such failure is not cured within
one Business Day.
then, and in any such event, the Termination Date shall be deemed to have
occurred automatically upon the occurrence of such event. Upon any such
occurrence, the Administrator and MSFC shall have, in addition to all other
rights and remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
<PAGE>
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnities by the Seller.
Without limiting any other rights which any Indemnified Person may have
under any Transaction Document or under applicable law, the Seller hereby agrees
to indemnify and hold harmless each Indemnified Person from and against any and
all Indemnified Amounts awarded against or incurred by such Indemnified Party
arising out of or as a result of any Transaction Document or the ownership of
the Asset Interest or in respect of any Asset or any Contract, excluding,
however, (a) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of such Indemnified Person and (b) recourse
(except with respect to payment and performance of obligations provided for in
this Agreement) for Defaulted Contracts. If the Seller has made any indemnity
payment pursuant to this Section 8.1 and such payment fully indemnified the
recipient thereof and the recipient thereafter collects any payments from others
in respect of such Indemnified Amounts then, the recipient shall repay to the
Seller an amount equal to the amount it has collected from others (and does not
have to repay to such others) in respect of such Indemnified Amounts. Without
limiting the foregoing, the Seller shall indemnify the Indemnified Parties for
Indemnified Amounts relating to or resulting from:
(i) any Purchased Asset treated as, or represented to be, an Eligible Contract
which is not at the applicable time an Eligible Contract;
(ii) reliance on any representation or warranty made or deemed made by the
Seller, the Servicer (if the Originator or one of its Affiliates) or any of
their respective officers under or in connection with any Transaction Document,
which shall have been false or incorrect in any material respect when made or
deemed made or delivered;
(iii) the failure by the Seller or the Servicer (if the Originator or one of its
Affiliates) to comply with any term, provision or covenant contained in any
Transaction Document or any agreement executed in connection with any
Transaction Document, or with any applicable law, rule or regulation with
respect to any Asset, the related Contract, or the nonconformity of any Asset,
the related Contract with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in the Administrator or to transfer
to the Administrator, an undivided ownership interest in the Assets, together
with all Collections, free and clear of any Adverse Claim whether existing at
the time of any Purchase or at any time thereafter;
<PAGE>
(v) the failure to maintain, as of the close of business on each Business Day
prior to the Termination Date, an amount of Capital outstanding which is less
than or equal to the lesser of (x) the Purchase Limit on such Business Day or
(y) the Capital Limit on such Business Day;
(vi) the failure to file, or any delay in filing, financing statements or other
similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Assets which are, or are purported to
be, Pool Assets, whether at the time of any Purchase or at any subsequent time;
(vii) any dispute, claim, offset or defense (other than the discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Asset which is,
or is purported to be, a Purchased Asset (including, without limitation, a
defense based on such Asset or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance with its
terms), or any other claim resulting from the sale of the merchandise or
services related to such Asset or the furnishing or failure to furnish such
merchandise or services;
(viii) any failure of the Seller or the Servicer (if the Originator or one of
its Affiliates) to perform its duties or obligations in accordance with the
provisions of the Transaction Documents or any failure by the Originator, the
Seller or any Affiliate thereof to perform its respective duties under the
Contracts;
(ix) any products liability claim or personal injury or property damage suit or
other similar or related claim or action of whatever sort arising out of or in
connection with merchandise or services which are the subject of any Asset or
Contract;
(x) the failure by Seller to pay when due any Taxes for which the Seller is
liable, including without limitation, sales, excise or personal property taxes
payable in connection with the Pool Assets;
(xi) any repayment by the Administrator or MSFC of any amount previously
distributed in reduction of Capital or payment of Yield or any other amount due
hereunder or under any Hedging Agreement, in each case which amount the
Administrator or MSFC believes in good faith is required to be repaid;
(xii) the commingling of Collections of Pool Assets at any time with other
funds;
(xiii) any investigation, litigation or proceeding related to any Transaction
Documents or the use of proceeds of Purchases or reinvestments or the ownership
of the Asset Interest or in respect of any Asset or Contract;
<PAGE>
(xiv) any failure by the Seller to give reasonably equivalent value to the
Originator in consideration for the transfer by the Originator to the Seller of
any Assets or any attempt by any Person to void or otherwise avoid any such
transfer under any statutory provision or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code;
(xv) the failure of the Seller, the Originator or any of their respective agents
or representatives to remit to the Servicer or the Administrator, Collections of
Pool Assets remitted to the Seller or any such agent or representative; or
(xvi) any amounts payable under the Hedge Transactions for any Settlement Period
in excess of Interest Collections for such Settlement Period or any failure of
the Hedge Transactions to comply at all times with the requirements of Section
5.4, including, without limitation, having a Hedge Notional Amount that complies
at all times with Section 5.4(iii).
Any amounts subject to the indemnification provisions of this Section 8.1 shall
be paid by the Seller to the Administrator within two Business Days following
the Administrator's demand therefor. Notwithstanding the foregoing, if any such
amounts are paid pursuant to Section 2.9(b), then the Seller shall immediately
deposit the amount so paid into the Collection Account for subsequent
distribution in accordance with Section 2.9(b).
If for any reason the indemnification provided above in this Section
8.1 is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and the Seller on
the other hand but also the relative fault of such Indemnified Person as well as
any other relevant equitable considerations.
The parties hereto agree that the provisions of Section 8.1 shall not
be interpreted to provide recourse to the Seller against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by, related
Obligor on, any Pool Asset.
<PAGE>
ARTICLE IX
THE ADMINISTRATOR
Section 9.1 Authorization and Action.
MSFC hereby designates and appoints the Administrator as Administrator
hereunder, and authorizes the Administrator to take such actions as agent on its
behalf and to exercise such powers as are delegated to the Administrator by the
terms of this Agreement together with such powers as are reasonably incidental
thereto. The Administrator shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with MSFC, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Administrator shall be read into any Transaction
Document or otherwise exist for the Administrator. In performing its functions
and duties under the Transaction Documents, the Administrator shall act solely
as agent for MSFC and does not assume nor shall be deemed to have assumed any
obligation or relationship of trust or agency with or for the Seller or any of
its successors or assigns. The Administrator shall not be required to take any
action which exposes the Administrator to personal liability or which is
contrary to any Transaction Document or applicable law. The appointment and
authority of the Administrator hereunder shall terminate at the indefeasible
payment in full of the Aggregate Unpaids.
Section 9.2 Delegation of Duties.
The Administrator may execute any of its duties under this Agreement by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrator
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
Section 9.3 Exculpatory Provisions.
Neither the Administrator nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with the Transaction Documents
(except for its, their or such Person's own gross negligence or willful
misconduct or, in the case of the Administrator, the breach of its obligations
expressly set forth in this Agreement), or (ii) responsible in any manner to any
Person for any recitals, statements, representations or warranties made by the
Seller or the Servicer contained in any Transaction Document or in any
certificate, report, statement or other document referred to or provided for in,
or received under or in connection with, any Transaction Document for the value,
validity, effectiveness,
<PAGE>
genuineness, enforceability or sufficiency of any Transaction Document or any
other document furnished in connection therewith, or for any failure of the
Seller or the Servicer to perform its obligations under any Transaction
Document, or for the satisfaction of any condition specified in Article III. The
Administrator shall not be under any obligation to any Person to ascertain or to
inquire as to the observance or performance of any of the agreements or
covenants contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Seller or the Servicer. The Administrator
shall not be deemed to have knowledge of any Termination Event unless the
Administrator has received notice from MSFC, the Seller or the Servicer.
Section 9.4 Reliance.
The Administrator shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Seller or the Servicer), independent
accountants and other experts selected by the Administrator. The Administrator
shall in all cases be fully justified in failing or refusing to take any action
under any Transaction Document or any other document furnished in connection
therewith unless it shall first receive such advice or concurrence of MSFC as it
deems appropriate or it shall first be indemnified to its satisfaction by the
MSFC, provided that unless and until the Administrator shall have received such
advice, the Administrator may take or refrain from taking any action, as the
Administrator shall deem advisable and in the best interests of MSFC. The
Administrator shall in all cases be fully protected in acting, or in refraining
from acting, in accordance with a request of MSFC and such request and any
action taken or failure to act pursuant thereto shall be binding upon MSFC.
Section 9.5 Non-Reliance on Administrator.
MSFC expressly acknowledges that neither the Administrator nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the
Administrator hereafter taken, including, without limitation, any review of the
affairs of the Seller, shall be deemed to constitute any representation or
warranty by the Administrator. MSFC represents and warrants to the Administrator
that it has and will, independently and without reliance upon the Administrator
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Seller and
made its own decision to enter into the Transaction Documents to which it is a
party.
<PAGE>
Section 9.6 Administrator in its Individual Capacities.
The Administrator and each of its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with any party hereto
or any Affiliate thereof as though the Administrator were not the Administrator
hereunder. With respect to the acquisition of Asset Interests pursuant to this
Agreement, the Administrator and its Affiliates shall have the same rights and
powers under the Transaction Documents as any assignee of MSFC and may exercise
the same as though it were not the Administrator hereunder.
ARTICLE X
ASSIGNMENTS
Section 10.1 Restrictions on Assignments.
None of MSFC, the Seller, the Servicer or Fidelity may assign its
rights hereunder or any interest herein without the prior written consent of
Administrator, and MSFC may not assign its rights hereunder, any Asset Interest
to any Person without the prior written consent of the Seller; provided,
however, that
(a) MSFC may assign, or grant a security interest in, all or any portion of the
Asset Interests to PNC, any Liquidity Bank, any Credit Bank (or any successor of
any thereof by merger, consolidation or otherwise) or any Affiliate thereof in
connection with a draw under the Liquidity Agreement or a Credit Advance (which
may then assign all or any portion thereof so assigned or any interest therein
to such party or parties as it may choose); and
(b) MSFC may assign any Asset Interest to any other Person proposed by MSFC and
consented to by the Seller (such consent not to be unreasonably withheld). The
Administrator shall promptly provide notice of any such assignment to each
Rating Agency.
Within five Business Days after notice to the Seller of any proposed
assignment by MSFC for which the Seller's consent is required, the Seller agrees
to advise Administrator of its consent or non-consent thereto. If the Seller
does not consent to such assignment MSFC may immediately assign the Asset
Interest (or portion thereof) that was subject to such proposal to PNC, any
Liquidity Bank, any Credit Bank or any Affiliate thereof. Subject to Section
10.2, all of the aforementioned assignments shall be upon such terms and
conditions as MSFC and the assignee may mutually agree.
<PAGE>
Section 10.2 Documentation.
MSFC shall deliver to each assignee an assignment, in such form as MSFC
and the related assignee may agree, duly executed by MSFC, assigning any such
Asset Interest to the assignee, and MSFC shall promptly execute and deliver all
further instruments and documents, and take all further action, that the
assignee may reasonably request, in order to perfect, protect or more fully
evidence the assignee's right, title and interest in and to such Asset Interest,
and to enable the assignee to exercise or enforce any rights hereunder.
Section 10.3 Rights of Assignee.
Upon the foreclosure of any assignment of any Asset Interests made for
security purposes, or upon any other assignment of any Asset Interest from MSFC
pursuant to this Article X, the respective assignee receiving such assignment
shall have all of the rights of MSFC hereunder with respect to such Asset
Interests and all references to MSFC in the Transaction Documents shall be
deemed to apply to such assignee, including, without limitation in Sections 6.19
and 8.1.
Section 10.4 Notice of Assignment.
MSFC shall provide notice to the Seller of any assignment hereunder by
MSFC to any assignee.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments and Waivers.
Except as provided in this Section 11.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the
written agreement of the Seller, the Administrator and MSFC; provided, however,
that no such amendment, waiver or modification affecting the rights or
obligations of any Hedge Counterparty, the Backup Servicer or the Collateral
Custodian shall be effective as against that Hedge Counterparty, the Backup
Servicer and/or the Collateral Custodian, as the case may be, without the
written agreement of such Persons; and provided further, however, that no such
material amendment shall be effective until both Moody's and S&P have notified
the Administrator in writing that such action will not result in a reduction or
withdrawal of the rating of any of the MSFC's commercial paper notes. Any waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. The Administrator shall provide each of Moody's and S&P
with a copy of each amendment to or waiver or consent under this Agreement
promptly following the effective date thereof.
<PAGE>
Section 11.2 Notices, Etc.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or in Exhibit D or at such other address as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, upon receipt, or in the case
of (a) notice by mail, five days after being deposited in the United States
mail, first class postage prepaid, (b) notice by telex, when telexed against
receipt of answer back, or (c) notice by facsimile copy, when verbal
communication of receipt is obtained, except that notices and communications
pursuant to Article 11 shall not be effective until received with respect to any
notice sent by mail or telex.
Section 11.3 [reserved].
Section 11.4 No Waiver, Rights and Remedies.
No failure on the part of the Administrator, the Collateral Custodian,
the Backup Servicer or MSFC to exercise, and no delay in exercising, any right
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies
herein provided are cumulative and not exclusive of any rights and remedies
provided by law.
Section 11.5 Binding Effect, Benefit of Agreement.
This Agreement shall be binding upon and inure to the benefit of the
Seller, the Servicer, Fidelity, the Administrator, the Backup Servicer, the
Collateral Custodian, MSFC and their respective successors and permitted assigns
and, in addition, the provisions of Sections 2.7(a) and 2.9(b) shall inure to
the benefit of each Hedge Counterparty, the provisions of Sections 2.7(a),
2.9(b), 6.19 and 8.1 shall inure to the benefit of each Indemnified Party and
the provisions of Sections 2.7(a), 2.9(b) and 2.14 shall inure to the benefit of
each Affected Party.
<PAGE>
Section 11.6 Term of this Agreement.
This Agreement, including, without limitation, the Seller's obligation
to observe its covenants set forth in Article V, and the Servicer's obligation
to observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by the Seller pursuant to Articles III and IV and the
indemnification and payment provisions of Articles VI, VIII and IX and the
provisions of Section 11.9 and Section 11.10 shall be continuing and shall
survive any termination of this Agreement.
Section 11.7 Governing Law, 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 PARTIES HERETO AND EACH HEDGE
COUNTERPARTY HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL
COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO AND EACH
HEDGE COUNTERPARTY 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 CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
Section 11.8 Waiver of July Trial.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO
AND EACH HEDGE COUNTERPARTY HEREBY 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.
<PAGE>
Section 11.9 Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification granted to the Indemnified
Parties under Article VIII, the Seller agrees to pay on demand all costs and
expenses of the Administrator, the Backup Servicer, the Collateral Custodian and
MSFC incurred in connection with the preparation, execution, delivery,
administration (including periodic auditing), amendment or modification of, or
any waiver or consent issued in connection with, any Transaction Document and
the other documents to be delivered thereunder or in connection therewith,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Administrator, the Backup Servicer, the Collateral Custodian and
MSFC with respect thereto and with respect to advising the Administrator, the
Backup Servicer, the Collateral Custodian and MSFC as to their respective rights
and remedies under the Transaction Documents and the other documents to be
delivered thereunder or in connection therewith, and all costs and expenses, if
any (including, without limitation, reasonable counsel fees and expenses),
incurred by the Administrator, the Backup Servicer, the Collateral Custodian or
MSFC in connection with the enforcement of the Transaction Documents and the
other documents to be delivered thereunder or in connection therewith.
(b) The Seller shall pay on demand any and all stamp, sales, excise and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of the Transaction Documents, the
other documents to be delivered thereunder or any agreement or other document
providing liquidity support, credit enhancement or other similar support to MSFC
in connection with this Agreement or the funding or maintenance of Purchases
hereunder.
(c) The Seller shall pay on demand all other costs, expenses and Taxes
(excluding income taxes) incurred by MSFC or the Administrator or any
shareholder thereof ("Other Costs"), including, without limitation, all costs
and expenses incurred by the Administrator in connection with periodic audits of
the Seller's or the Servicer's books and records and the cost of rating MSFC's
commercial paper with respect to financing its purchase of Asset Interests
hereunder by independent financial rating agencies.
Section 11.10 No Proceedings.
Each of the parties hereto and each Hedge Counterparty hereby agrees
that it will not institute against, or join any other Person in instituting
against MSFC any proceedings of the type referred to in Section 6.8(d) and
6.9(c) so long as any commercial paper issued by MSFC shall be outstanding and
there shall not have elapsed one year and one day since the last day on which
any such commercial paper shall have been outstanding.
<PAGE>
Section 11.11 Recourse Against Certain Parties.
No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of MSFC or the Administrator as contained in any Transaction
Document or any other agreement, instrument or document entered into by it
pursuant thereto or in connection therewith shall be had against any
incorporator, affiliate, administrator, stockholder, officer, employee or
director of MSFC or the Administrator, by the enforcement of any assessment or
by any legal or equitable proceeding, by virtue of any statute or otherwise; it
being expressly agreed and understood that the agreements of MSFC and the
Administrator contained in the Transaction Documents and all of the other
agreements, instruments and documents entered into by it pursuant thereto or in
connection therewith are, in each case, solely the respective corporate
obligations of MSFC and the Administrator, and that no personal liability
whatsoever shall attach to or be incurred by any incorporator, stockholder,
affiliate, administrator, officer, employee or director of any Transaction
Document or any other of them, under or by reason of any of the obligations,
covenants or agreements of MSFC or the Administrator contained in any
Transaction Document or in any other such instruments, documents or agreements,
or which are implied therefrom, and that any and all personal liability of each
incorporator, stockholder, affiliate, administrator, officer, employee or
director of MSFC or the Administrator, or any of them, for breaches by MSFC or
the Administrator of any such obligations, covenants or agreements, which
liability may arise either at common law or at equity, by statute or
constitution, or otherwise, is hereby expressly waived as a condition of and in
consideration for the execution of this Agreement. The provisions of this
Section 11.11 shall survive the termination of this Agreement.
Section 11.12 Protection of Ownership Interests; Intent of Parties;
Security Interest.
(a) The Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may reasonably be necessary or desirable, or that the Administrator may
reasonably request, to perfect, protect or more fully evidence the Asset
Interests and the undivided ownership interest in the Assets in the Asset Pool
represented by such Asset Interests, or to enable the Administrator or MSFC to
exercise and enforce their rights and remedies hereunder.
(b) If the Seller or the Servicer fails to perform any of its obligations
hereunder after five Business Days' notice from the Administrator, the
Administrator or MSFC may (but shall not be required to) perform, or cause
performance of, such obligation; and the Administrator's or MSFC's costs and
expenses incurred in connection therewith shall be payable by the Seller (if the
Servicer that fails to so perform
<PAGE>
is the Seller or an Affiliate thereof) as provided in Article VIII, as
applicable. The Seller irrevocably authorizes the Administrator and appoints the
Administrator as its attorney-in-fact to act on behalf of the Seller (i) to
execute on behalf of the Seller as debtor and to file financing statements
necessary or desirable in the Administrator's sole discretion to perfect and to
maintain the perfection and priority of the interest of the Administrator and
MSFC in the Assets, and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to the
Assets as a financing statement in such offices as the Administrator in its sole
discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the interests of the Administrator and MSFC in the
Assets. This appointment is coupled with an interest and is irrevocable.
(c) The parties hereto intend that the conveyance of Asset Interests by the
Seller to the Administrator and MSFC shall be treated as sales for all purposes.
If, despite such intention, a determination is made that such transactions shall
not be treated as sales, then the parties hereto intend that this Agreement
constitutes a security agreement and the transactions effected hereby constitute
secured loans by MSFC to the Seller under applicable law. For such purpose, the
Seller hereby transfers, conveys, assigns and grants to the Administrator a
continuing security interest in all Assets, all Collections, all Hedging
Agreements and the proceeds of the foregoing to secure the repayment of all
Capital, all payments at any time due or accrued in respect of the Yield on any
Asset Interest and all other payments at any time due (whether accrued or due)
by the Seller hereunder (including without limit any amount owing under Article
VIII hereof), under any Hedging Agreement (including, without limitation,
payments in respect of the termination of any such Hedging Agreement) or under
any Fee Letter.
Section 11.13 Confidentiality.
(a) Each of the Administrator, MSFC, the Servicer, the Collateral Custodian, the
Backup Servicer and the Seller shall maintain and shall cause each of its
employees and officers to maintain the confidentiality of this Agreement and all
information with respect to the other parties, including all information
regarding the business of the Seller and the Servicer hereto and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers and employees may (i) disclose such information
to its external accountants, attorneys, investors, potential investors and the
agents of such Persons ("Excepted Persons"), provided, however, that each
Excepted Person shall, as a condition to any such disclosure, agree for the
benefit of the Administrator, MSFC, the Servicer, the Collateral Custodian, the
Backup Services and the Seller that such information shall be used solely in
connection with such Excepted Person's evaluation of, or relationship with, the
Seller and its affiliates, (ii) disclose the existence of the Agreement, but not
the financial terms thereof, (iii) disclose such information as is required by
an applicable law or an order of an judicial or administrative proceeding and
(iv) disclose the Agreement and such information in any suit, action, proceeding
or investigation (whether in law or in equity or
<PAGE>
pursuant to arbitration) involving any of the Transaction Documents or any
Hedging Agreement for the purpose of defending itself, reducing its liability,
or protecting or exercising any of its claims, rights, remedies, or interests
under or in connection with any of the Transaction Documents or any Hedging
Agreement. It is understood that the financial terms that may not be disclosed
except in compliance with this Section 11.13(a) include, without limitation, all
fees and other pricing terms and all Termination Events, Servicer Defaults, and
priority of payment provisions.
(b) Anything herein to the contrary notwithstanding, the Seller and the Servicer
each hereby consents to the disclosure of any nonpublic information with respect
to it (i) to the Administrator, the Liquidity Banks, the Credit Banks, the
Collateral Custodian, the Backup Servicer or MSFC by each other, (ii) by the
Administrator, MSFC, the Liquidity Banks or the Credit Banks to any prospective
or actual assignee or participant of any of them or (iii) by the Administrator,
MSFC, the Liquidity Banks or the Credit Banks to any Rating Agency, Commercial
Paper Note dealer or provider of a surety, guaranty or credit or liquidity
enhancement to MSFC and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, provided each such Person is
informed of the confidential nature of such information. In addition, any such
nonpublic information may be disclosed as required pursuant to any law, rule,
regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).
(c) Notwithstanding anything herein to the contrary, the foregoing shall not be
construed to prohibit (i) disclosure of any and all information that is or
becomes publicly known, (ii) disclosure of any and all information (A) if
required to do so by any applicable statute, law, rule or regulation, (B) to any
government agency or regulatory body having or claiming authority to regulate or
oversee any respects of the Administrator's, MSFC's, the Liquidity Banks', the
Credit Banks', the Collateral Custodian's or Backup Servicer's business or that
of their affiliates, (C) pursuant to any subpoena, civil investigative demand or
similar demand or request of any court, regulatory authority, arbitrator or
arbitration to which the Administrator, MSFC, the Liquidity Banks, the Credit
Banks, the Collateral Custodian or Backup Servicer or an affiliate or an
officer, director, employer or shareholder thereof is a party, (D) in any
preliminary or final offering circular, registration statement or contract or
other document pertaining to the transactions contemplated herein approved in
advance by the Seller or Servicer or (E) to any affiliate, independent or
internal auditor, agent, employee or attorney of the Administrator, MSFC, the
Liquidity Banks, the Credit Banks, the Collateral Custodian or Backup Servicer
having a need to know the same, provided that the Administrator, MSFC, the
Liquidity Banks, the Credit Banks, the Collateral Custodian or Backup Servicer
advises such recipient of the confidential nature of the information being
disclosed, or (iii) any other disclosure authorized by the Seller or Servicer.
<PAGE>
Section 11.14 Execution in Counterparts, Severability, Integration.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: FIDELITY LEASING SPC II, INC.
By
Title:
THE SERVICER: FIDELITY LEASING, INC.
By
Title:
MSFC: MARKET STREET FUNDING
CORPORATION
By
Title:
Market Street Funding Corporation
c/o AMACAR Group, L.L.C.
6707-D Fairview Road
Charlotte, NC 28210
Attention: Douglas K. Johnson
Facsimile No.: (704) 365-1362
with a copy to:
PNC BANK, NATIONAL
ASSOCIATION
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
Attention: John T. Smathers
Facsimile No.: (412) 762-9184
<PAGE>
THE ADMINISTRATOR: PNC BANK, NATIONAL
ASSOCIATION
By
Title:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
Attention: John T. Smathers
Facsimile No.: (412) 762-9184
THE COLLATERAL CUSTODIAN: HARRIS TRUST AND SAVINGS
BANK,
as Collateral Custodian
By
Title:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Facsimile: (312) 461-3525
Telephone: (312) 461-2532
THE BACKUP SERVICER: HARRIS TRUST AND SAVINGS
BANK,
as Backup Servicer
By
Title:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Facsimile: (312) 461-3525
Telephone: (312) 461-2532
FIDELITY LEASING, INC.: FIDELITY LEASING, INC.
By
Title:
<PAGE>
EXHIBITS AND SCHEDULES
TO
RECEIVABLES PURCHASE AGREEMENT
<PAGE>
SCHEDULE I
CONDITION PRECEDENT DOCUMENTS
As required by Section 3.1 of the Agreement, each of the following items must be
delivered to the Administrator prior to the date of the initial Purchase:
A copy of this Agreement duly executed by the Seller and the Servicer;
A copy of the Purchase and Sale Agreement duly executed by the Fidelity
and the Seller;
A copy of the Hedge Agreement duly executed by the Seller and PNC;
A copy of the Fee Letter duly executed by Fidelity and the Seller;
A copy of the Backup Servicer/Collateral Custodian Fee Letter duly
executed by Fidelity, the Backup Servicer and the Collateral Custodian;
A copy of the Interest Rate/Commitment Fee Settlement Agreement duly
executed by Fidelity;
Certificates of the Secretary or Assistant Secretary of each of the
Seller and of the Servicer, each dated the date of this Agreement,
certifying (i) the names and true signatures of the incumbent officers
of such Person authorized to sign this Agreement and the other
documents to be delivered by it hereunder (on which certificate the
Administrator and MSFC may conclusively rely until such time as the
Administrator shall receive from the Seller or the Servicer, as the
case may be, a revised certificate meeting the requirements of this
paragraph (b), (ii) that the copy of the certificate of incorporation
of such Person attached thereto is a complete and correct copy and that
such certificate of incorporation has not been amended, modified or
supplemented and is in full force and effect, (iii) that the copy of
the bylaws of such Person attached thereto is a complete and correct
copy and that such by-laws have not been amended, modified or
supplemented and are in full force and effect, and (iv) the resolutions
of such Person's board of directors approving and authorizing the
execution, delivery and performance by such Person of this Agreement
and the documents related thereto;
Good standing certificate for the Seller issued by the Secretary of
State of Delaware;
<PAGE>
Good standing certificate for the Servicer issued by the Commonwealth
of Pennsylvania;
Acknowledgment copies of proper financing statements (the "Facility
Financing Statement"), dated a date reasonably near to the date of the
initial Purchase, describing the Assets and naming the Seller as debtor
and the Administrator as secured party, or other, similar instruments
or documents, as may be necessary or, in the opinion of the
Administrator, desirable under the UCC of all appropriate jurisdictions
or any comparable law to perfect the Administrator's interests in all
Assets;
Acknowledgment copies of proper financing statements, if any, necessary
to release all security interests and other rights of any Person in the
Assets previously granted by the Seller;
Certified copies of requests for information or copies (or a similar
search report certified by a party acceptable to the Administrator),
dated a date reasonably near to the date of the initial Purchase,
listing all effective financing statements which name the Seller (under
its present name and any previous name) as debtor and which are filed
in the jurisdictions in which the financing statements referred to in
clause (d) above were filed, together with copies of such financing
statements (none of which, other than the financing statements referred
to in clause (d) above, shall cover any Assets or Contracts);
Opinions of Morgan, Lewis & Bockius, special counsel to Fidelity and
the Seller, relating to the effect that:
(1) The Seller is a corporation organized, existing and in
good standing under the laws of its jurisdiction of
organization, with corporate power and authority to own its
properties and conduct its business as currently conducted;
and the Seller is qualified to do business as a foreign
corporation in good standing in each jurisdiction in which it
owns or leases substantial properties or in which the conduct
of its business requires such qualification;
(2) The Seller has or had at all relevant times full power,
authority and legal right to exercise, deliver and perform its
obligations under the Transaction Documents; and has or had at
all relevant times full power, authority and legal right to
acquire, own and transfer the Assets and the other property
transferred by it to the Administrator pursuant to this
Agreement;
<PAGE>
(3) Each of the Transaction Documents to which the Seller is a
party have been duly authorized, executed and delivered by the
Seller and is a valid and binding agreement, enforceable
against the Seller in accordance with its respective terms,
except to the extent that enforcement thereof may be limited
by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights generally, (B) general principles of equity
(regardless of whether enforceability is considered in a
proceeding at law or in equity) and (C) the qualification that
certain remedial provisions of this Agreement may be
unenforceable in whole or in part, but the inclusion of such
provisions does not affect the validity of this Agreement, and
this Agreement, together with applicable law, contains
adequate remedial provisions for the practical realization of
the benefits of the security created thereby;
(4) The grant of the security interest in the Assets by the
Seller to the Administrator pursuant to this Agreement, the
compliance by the Seller with all of the provisions of, and
the consummation of the transactions contemplated in, the
Transaction Documents will not (A) conflict with or result in
a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such
counsel to which the Seller is a party or by which the Seller
is bound or to which any of the property or assets of the
Seller is subject, (B) result in any violation of the
provisions of any order known to such counsel of any court or
governmental agency or body having jurisdiction over the
Seller or any of its properties or (C) result in any violation
of the provisions of the charter or the by-laws of the Seller
or any statute or any rule or regulation of any governmental
agency or body having jurisdiction over the Seller or any of
its properties;
(5) No authorization, approval, consent or order of, or filing
with, any court or governmental authority or agency is
required by the Seller in connection with the consummation of
the transactions contemplated in the Transaction Documents,
except such as have been obtained;
(6) To the best of such counsel's knowledge and information,
there are no legal or governmental proceedings pending or
threatened (A) asserting the invalidity of any Transaction
Document, (B) seeking to prevent the consummation by the
Seller of any of the transactions contemplated by any
Transaction Document or (C) which might materially and
adversely affect the performance by the Seller of its
obligations under any Transaction Document;
<PAGE>
(7) The provisions of this Agreement are effective to create
a valid security interest in the Assets in favor of the
Administrator on behalf of MSFC and such security interest is
perfected and prior to all other creditors of and purchasers
from the Seller;
(8) The Seller is not required to be registered as an
"investment company" under the Investment Company Act of 1940,
as amended;
(9) Fidelity is a corporation organized, existing and in good
standing under the laws of its jurisdiction of organization,
with corporate power and authority to own its properties and
conduct its business as currently conducted; and Fidelity is
qualified to do business as a foreign corporation in good
standing in each jurisdiction in which it owns or leases
substantial properties or in which the conduct of its business
requires such qualification;
(10) Fidelity has or had at all relevant times full power,
authority and legal right to exercise, deliver and perform its
obligations under the Transaction Documents; and has or had at
all relevant times full power, authority and legal right to
acquire, own and transfer the Assets and the other property
transferred by it to the Seller pursuant to the Purchase
Agreement;
(11) Each of the Transaction Documents to which Fidelity is a
party have been duly authorized, executed and delivered by
Fidelity and is a valid and binding agreement, enforceable
against Fidelity in accordance with its respective terms,
except to the extent that enforcement thereof may be limited
by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights generally, (B) general principles of equity
(regardless of whether enforceability is considered in a
proceeding at law or in equity) and (C) the qualification that
certain remedial provisions of the Agreement may be
unenforceable in whole or in part, but the inclusion of such
provisions does not affect the validity of the Agreement, and
the Agreement, together with applicable law, contains adequate
remedial provisions for the practical realization of the
benefits of the security created thereby;
(12) The grant of the security interest in the Assets by
Fidelity to the Seller pursuant to the Purchase Agreement, the
compliance by Fidelity with all of the provisions of, and the
consummation of the transactions contemplated in, the
Transaction Documents will not (A) conflict with or result in
a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or
<PAGE>
other agreement or instrument known to such counsel to which
Fidelity is a party or by which Fidelity is bound or to which
any of the property or assets of Fidelity is subject, (B)
result in any violation of the provisions of any order known
to such counsel of any court or governmental agency or body
having jurisdiction over Fidelity or any of its properties or
(C) result in any violation of the provisions of the charter
or the by-laws of Fidelity or any statute or any rule or
regulation of any governmental agency or body having
jurisdiction over Fidelity or any of its properties;
(13) No authorization, approval, consent or order of, or
filing with, any court or governmental authority or agency is
required by Fidelity in connection with the consummation of
the transactions contemplated in the Transaction Documents,
except such as have been obtained;
(14) To the best of such counsel's knowledge and information,
there are no legal or governmental proceedings pending or
threatened (A) asserting the invalidity of any Transaction
Document, (B) seeking to prevent the consummation by Fidelity
of any of the transactions contemplated by any Transaction
Document or (C) which might materially and adversely affect
the performance by Fidelity of its obligations under any
Transaction Document;
(15) The provisions of the Purchase Agreement are effective to
create a valid security interest in the Assets in favor of the
Seller and such security interest is perfected and prior to
all other creditors of and purchasers from Fidelity; and
(16) Such other matters as the Administrator may reasonably
request, including without limitation, the "true sale" of the
Assets from Fidelity to the Seller and the "non-consolidation"
of the Seller with Fidelity;
Written confirmation from both Moody's and S&P that the purchase by MSFC of any
Asset Interest hereunder will not cause either such rating agency to reduce its
rating of the Commercial Paper Notes below A-1, in the case of S&P and P-1, in
the case of Moody's; and
Such other agreements, documents, opinions and certificates as the Administrator
shall reasonably request.
<PAGE>
SCHEDULE II
LOCKBOX BANKS AND LOCKBOX ACCOUNTS
First Union National Bank
1339 Chestnut Street, 11th Floor
Philadelphia, PA 19101
Account Number #2014134816280
<PAGE>
SCHEDULE III
TRADENAMES, FICTITIOUS NAMES AND "DOING BUSINESS AS" NAMES
None.
<PAGE>
SCHEDULE IV
LOCATION OF CONTRACT FILES
Harris Trust and Savings Bank
111 West Monroe Street
Level B-2
Chicago, IL 60603
<PAGE>
SCHEDULE V
LIST OF CONTRACTS
<PAGE>
EXHIBIT A
FORM OF PURCHASE NOTICE
I, ____________________________________, ___________________________ of
Fidelity Leasing SPC II Inc., (the "Seller"), hereby certify that, with respect
to that certain Receivables Purchase Agreement (the "Agreement"), dated as of
December 29, 1998, by and among Fidelity Leasing SPC II, Inc., as seller (the
"Seller"), Fidelity Leasing, Inc. in its individual capacity and as servicer
(the "Servicer"), Market Street Funding Corporation ("MSFC"), PNC Bank, National
Association, as the administrator (the "Administrator"), and Harris Trust and
Savings Bank, as collateral custodian (the "Collateral Custodian") and as backup
servicer (the "Backup Servicer"), as amended from time to time.
The Seller hereby requests that a Purchase or Incremental Purchase or
Incremental Purchase be made in accordance of the following terms:
(a) The aggregate amount of such Purchase or Incremental Purchase shall
be __________________________.*
(b) The date of such Purchase or Incremental Purchase or Incremental
Purchase shall be __________________.**
(c) The aggregate outstanding Capital after such Purchase shall be
$______________.
The representations and warranties contained in Sections 5.1 and 5.2 of
the Agreement are true and correct as though made on the date thereof.
No event has occurred and is continuing, or would result from any
Purchase or Incremental Purchase occurring on the date hereof, which constitutes
a Termination Event.
As of the date hereof, the aggregate outstanding Capital (after giving
effect to any Purchase or Incremental Purchase occurring on the date hereof)
does not exceed the lesser of (x) the Purchase Limit or (y) the Capital Limit.
For purposes hereof, Purchase Limit and Capital Limit have been recalculated
based upon amounts and percentages as of the date hereof.
<PAGE>
On and as of such day, the Seller and the Servicer has each performed
in all material respects all of the agreements contained in the Agreement to be
performed by such Person at or prior to such day.
____________________________
* Each Purchase or Incremental Purchase shall be in an amount as defined in
Section 2.2 of the Agreement.
** [At least one Business Day's notice is required by the Seller or if the
Yield to accrue with respect to such Purchase of Incremental Purchase is
computed by reference to the Eurodollar Rate, at least three Business Day's
notice by the Seller.]
<PAGE>
No law, rule or regulation prohibits, and no order, judgment or decree
of any federal, state or local court or governmental body, agency or
instrumentality prohibits or enjoins, the making of any Purchase or Incremental
Purchase occurring on the date hereof.
[remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Purchase Notice to
be duly executed this ____ day of _________________, _____.
FIDELITY LEASING SPC II, INC.
as Seller
By:
<PAGE>
EXHIBIT B
FORM OF LOCK-BOX NOTICE
, 199
[Name and Address of Lock-Box Bank]
Re: [Seller]
Lock-Box No.
Lock-Box Account No.
Ladies and Gentlemen:
[Seller] (the "Assignor") hereby notifies you that in connection with
certain transactions involving the Assignor's accounts receivables, the Assignor
will transfer exclusive ownership and control of its lock-box number ___________
(the "Lock-Box") and the corresponding lock-box account no. ____________
maintained with you (the "Lock-Box Account") to PNC Bank, National Association,
as administrator (the "Agent"). These transfers will become effective upon your
receipt of a notice of effectiveness, substantially in the form attached hereto
as Attachment 1 (the "Notice of Effectiveness"), which shall be delivered via
facsimile transmission to your attention.
In connection with the foregoing, the Assignor and the Agent hereby
instruct you, beginning on the date of receipt of the Notice of Effectiveness:
(i) to collect the monies, checks, instruments and other items of payment mailed
to the Lock-Box, (ii) to deposit into the Lock-Box Account all such monies,
checks, instruments and other items of payment (unless otherwise instructed by
the Agent) and (iii) to transfer all funds deposited and collected in the
Lock-Box Account pursuant to instructions given to you by the Agent from time to
time.
You are hereby further instructed: (i) that unless and until the Agent
notifies you to the contrary, you shall make such transfers from the Lock-Box
Account at such times and in such manner as the Assignor, in its capacity as
servicer for the Agent, shall from time to time instruct to the extent such
instructions are not inconsistent with the instructions set forth herein, and
(ii) to permit the Assignor (in its capacity as servicer for the Agent) and the
Agent to obtain upon request any information relating to the Lock-Box Account,
including, without limitation, any information regarding the balance or activity
of the Lock-Box Account.
<PAGE>
The Assignor also hereby notifies you that, beginning on the date of
receipt by facsimile of the Notice of Effectiveness from the Agent,
notwithstanding anything herein or elsewhere to the contrary, the Agent shall be
irrevocably entitled to exercise any and all rights in respect of or in
connection with the Lock-Box and the Lock-Box Account, including, without
limitation, the right to specify when payments are to be made out of or in
connection with the
Lock-Box and the Lock-Box Account. The Agent acts as agent for persons
having a continuing interest in all of the checks and their proceeds and all
monies and earnings, if any, thereon in the Lock-Box Account, and you shall be
the Agent's agent for the purpose of holding and collecting such property. The
monies, checks, instruments and other items of payment mailed to the Lock-Box
and the funds deposited into the Lock-Box Account will not be subject to
deduction, set-off, banker's lien, or any other right in favor of any person
other than the Agent (except that you may set off (i) all amounts due to you in
respect of your customary fees and expenses for the routine maintenance and
operation of the Lock-Box Account, and (ii) the face amount of any checks
returned unpaid because of uncollected or insufficient funds).
This Agreement may not be terminated at any time by the Assignor or
you, without the prior written consent of the Agent. Neither this Agreement nor
any provision hereof may be changed, amended, modified or waived orally but only
by an instrument in writing signed by the Agent and the Assignor.
You shall not assign or transfer your rights or obligations hereunder
(other than to the Agent) without the prior written consent of the Agent and the
Assignor. Subject to the preceding sentence, this Agreement shall be binding
upon each of the parties hereto and their respective successors and assigns, and
shall inure to the benefit of, and be enforceable by, the Agent, each of the
parties hereto and their respective successors and assigns.
You hereby represent that the person signing this Agreement on your
behalf is duly authorized by you to so sign.
You agree to give the Agent and the Assignor prompt notice if the
Lock-Box or the Lock-Box Account becomes subject to any writ, judgment, warrant
of attachment, execution or similar process.
Any notice, demand or other communication required or permitted to be
given hereunder shall be in writing and may be (a) personally served, (b) sent
by courier service, (c) telecopied or (d) sent by United States mail and shall
be deemed to have been given when (a) delivered in person, (b) delivered by
courier service, (c) upon receipt of the telecopy or (d) three Business Days
after deposit in the United States mail (registered
<PAGE>
or certified, with postage prepaid and properly addressed), provided, however,
that notices to the Agent hereunder shall not be effective until actually
received by the Agent. For the purposes hereof, (i) the addresses of the parties
hereto shall be as set forth below each party's name below, or, as to each
party, at such other address as may be designated by such party in a written
notice to the other party and the Agent, and (ii) the address of the Agent shall
be PNC Bank, National Association, [Address], [Attn.: __________] at such other
address as may be designated by the Agent in a written notice to each of the
parties hereto.
Please agree to the terms of, and acknowledge receipt of, this
Agreement by signing in the space provided below.
Very truly yours,
FIDELITY LEASING, INC.
By:
Name:
Title:
[Address]
[Attention:]
Telecopy #:
ACKNOWLEDGED AND AGREED:
[Name of Lock-Box Bank]
By:
Name:
Title:
Date:
[Address]
[Attention:]
<PAGE>
ATTACHMENT 1
LOCK-BOX ACCOUNT AGREEMENT
VIA FACSIMILE TRANSMISSION
- --------------------------
TO: [Name of Lock-Box Bank]
DATED: [Date]
ATTENTION:
Re: Lock-Box No.
Lock-Box Account No.
Gentlemen:
Pursuant to the Lock-Box Agreement between Fidelity Leasing,
Inc. and you, dated as of _______ (the "Agreement"), we hereby give you notice
that the transfers of the above-referenced Lock-Box and the Lock-Box Account, as
described in the Agreement, are effective as of the date hereof. You are hereby
instructed to comply immediately with the instructions set forth in the
Agreement and, until we notify you to the contrary, to transfer all funds
deposited and collected in the Lock-Box Account to account number ______________
at ____________________________.
PNC BANK, NATIONAL
ASSOCIATION
By
Title:
ACKNOWLEDGED AND AGREED:
[Name of Lock-Box Bank]
By:
Name:
Title:
Date:
[Address]
[Attention:]
Telecopy #:
<PAGE>
EXHIBIT C
"LIMITED PURPOSE" PROVISIONS
Attached.
--------
<PAGE>
EXHIBIT D
Addresses for Notice
--------------------
The Seller:
- ----------
Fidelity Leasing SPC II, Inc.
1255 Wrights Lane
West Chester, PA 19380
Attention: David H. English
Telephone: (610) 719-4500
Facsimile: (610) 719-4515
The Servicer:
- ------------
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, PA 19380
Attention: David H. English
Telephone: (610) 719-4500
Facsimile: (610) 719-4515
<PAGE>
EXHIBIT E
FORM OF MONTHLY REPORT
[see attached]
<PAGE>
EXHIBIT F
FORM OF SERVICER'S CERTIFICATE
This Servicer's Certificate is delivered pursuant to the provisions of Section
6.13 of the Receivables Purchase Agreement dated as of December 29, 1998 among
Fidelity Leasing SPC II, Inc., as Seller, Fidelity Leasing, Inc., as Servicer,
Market Street Funding Corporation, PNC Bank, National Association, as
Administrator, and Harris Trust and Savings Bank, as Collateral Custodian and as
Backup Servicer (hereinafter, as such agreement may have been, or may from time
to time be amended, supplemented or otherwise modified, the "Receivables
Purchase Agreement"). This Servicer's Certificate relates to applicable Monthly
Period (the "Monthly Period") and relating to applicable Settlement Date, (the
"Settlement Date") and the Monthly Report for such Monthly Period, which Monthly
Report is set forth on attached Schedule A.
A. Capitalized terms used and not otherwise defined herein
have the meanings assigned them in the Receivables Purchase
Agreement referred to above. References hereto to certain
subsections are referenced to the respective subsections of
the Receivables Purchase Agreement.
B. The Servicer is the Servicer under the Receivables Purchase
Agreement.
C. The undersigned hereby certifies to the Administrator and
MSFC that all of the foregoing information set forth on
attached Schedule A is true and accurate in all material
respects of the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this Servicer's Certificate to be
duly executed this ____ day of ___________, 19__.
FIDELITY LEASING, INC.,
as Servicer
By:
<PAGE>
EXHIBIT G
FORM OF PURCHASE CERTIFICATE
PURCHASE CERTIFICATE, dated as of ___________________, 199_ by FIDELITY
LEASING SPC II, INC. (the "Seller") in favor of PNC BANK, NATIONAL ASSOCIATION,
as Administrator (the "Administrator").
1. Reference is made to the Receivables Purchase Agreement dated as of
December 29, 1998 (the "Agreement") among Fidelity Leasing SPC II, Inc., as the
Seller, Fidelity Leasing, Inc., as the Servicer, Market Street Funding
Corporation ("MSFC"), PNC Bank, National Association, as Administrator, and
Harris Trust and Savings Bank, as the Collateral Custodian and as the Backup
Servicer. All capitalized terms shall have the meanings set forth in the
Agreement.
2. The Seller does hereby sell, transfer, assign, set over and convey
to the Administrator, all right, title and interest of the Seller in and to the
Assets listed on Schedule I hereto (each, a "Sold Asset").
3. The Seller does hereby make the representations and warranties
referred to in Sections 4.1 and 4.2 of the Agreement with respect to each Sold
Asset with full force and effect as if fully set forth herein.
IN WITNESS WHEREOF, the Seller has caused this Purchase Certificate to
be executed by one of its officers thereunto duly authorized, as of the date
first above written.
FIDELITY LEASING SPC II, INC.
By
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF HEDGE AGREEMENT
[see attached]
<PAGE>
PURCHASE AND SALE AGREEMENT
Dated as of February 4, 1999
Among
FIDELITY LEASING SPE III, LLC
as the Buyer
------------
FIDELITY LEASING, INC.
as the Servicer
---------------
and
JLA CREDIT CORPORATION
as the Originator
-----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE II - GENERAL..............................................................................................1
SECTION 1.1. Certain Defined Terms......................................................................1
SECTION 1.2. Other Definitional Provisions..............................................................1
ARTICLE II - SALE AND CONVEYANCE..................................................................................2
SECTION 2.1. Sale.......................................................................................2
SECTION 2.2. Provisions Regarding Vehicles..............................................................3
ARTICLE III - PURCHASE PRICE AND PAYMENT; MONTHLY REPORT..........................................................4
SECTION 3.1. Purchase Price.............................................................................4
SECTION 3.2. Payment of Purchase Price..................................................................4
ARTICLE IV - REPRESENTATIONS AND WARRANTIES.......................................................................4
SECTION 4.1. Representations and Warranties of the Originator and Servicer..............................4
SECTION 4.2. Originator's Representations and Warranties Regarding the Purchase Agreement and the
Contracts..................................................................................8
SECTION 4.3. Representations and Warranties of the Buyer................................................9
ARTICLE V - COVENANTS............................................................................................10
SECTION 5.1. Covenants of the Originator...............................................................10
ARTICLE VI - REPURCHASE OBLIGATION...............................................................................12
SECTION 6.1. Retransfer of Ineligible Contracts........................................................12
SECTION 6.2. Retransfer of Purchased Assets............................................................13
SECTION 6.3. Adjustments...............................................................................13
SECTION 6.4. Substitution of Contracts.................................................................14
ARTICLE VII - CONDITIONS PRECEDENT...............................................................................15
SECTION 7.1. Conditions to the Buyer's Obligations Regarding Contracts.................................15
ARTICLE VIII - TERM AND TERMINATION..............................................................................15
SECTION 8.1. Term and Termination......................................................................16
ARTICLE IX - MISCELLANEOUS PROVISIONS............................................................................16
SECTION 9.1. Amendment.................................................................................16
SECTION 9.2. Governing Law.............................................................................16
SECTION 9.3. Notices...................................................................................16
SECTION 9.4. Severability of Provisions................................................................17
SECTION 9.5. Assignment................................................................................17
SECTION 9.6. Further Assurances........................................................................18
SECTION 9.7. No Waiver; Cumulative Remedies............................................................18
SECTION 9.8. Counterparts..............................................................................19
SECTION 9.9. Binding Effect; Third-Party Beneficiaries.................................................19
SECTION 9.10. Merger and Integration....................................................................19
SECTION 9.11. Headings..................................................................................19
SECTION 9.12. Schedules and Exhibits....................................................................19
SECTION 9.13. No Proceedings............................................................................19
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.14. Merger or Consolidation of, or Assumption of the Obligations of, the Originator...........20
SECTION 9.15. Costs, Expenses and Taxes.................................................................20
SECTION 9.16. Recourse Against Certain Parties..........................................................21
</TABLE>
Schedule I List of Contracts
Schedule II Tradenames, Fictitious Names and "Doing Business As" Names
-ii-
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT (the "Purchase Agreement") is
made as of February 4, 1999, by and among FIDELITY LEASING SPE III, LLC, a
Delaware limited liability company (the "Buyer"), FIDELITY LEASING, INC., a
Pennsylvania corporation (the "Servicer"), and JLA CREDIT CORPORATION, a
Delaware corporation (the "Originator").
W I T N E S S E T H :
---------------------
WHEREAS, the Buyer desires to purchase from the Originator and
the Originator desires to sell to the Buyer certain Contracts originated or
purchased by the Originator in its normal course of business, together with,
among other things, the related rights of payment thereunder and the interest of
the Originator in the related Equipment and other interests securing the
payments to be made under such Contracts; and
WHEREAS, the Servicer wishes to service such Contracts and, as
an inducement to the Buyer, has agreed to enter into this Purchase Agreement.
NOW, THEREFORE, it is hereby agreed by and between the Buyer,
the Servicer, and the Originator as follows:
ARTICLE I
GENERAL
Section 1.1. Certain Defined Terms. Certain capitalized terms
used throughout this Purchase Agreement are defined above or in this Section
1.1. In addition, capitalized terms used but not defined herein have the
meanings given to such terms in the Receivables Credit Agreement, dated as of
the date hereof among the Buyer, the Servicer, the Investors, VFCC, FCMC, First
Union and Harris, as such Receivables Credit Agreement may be amended,
supplemented or modified from time to time.
"Purchase" Any purchase made hereunder pursuant to Section
2.1 hereof.
"Purchase Price" As defined in Section 3.1 hereof.
"Purchased Assets" The interests and property purchased
pursuant to Section 2.1(a).
"Sale Papers" As defined in Section 4.1(a) hereof.
Section 1.2 Other Definitional Provisions.
<PAGE>
The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Purchase Agreement or any Sale Paper shall
refer to this Purchase Agreement as a whole and not to any particular provision
of this Purchase Agreement. Section, Subsection and Schedule references
contained in this Purchase Agreement are references to Sections, Subsections and
Schedules in or to this Purchase Agreement unless otherwise specified. In the
event that any term or provision contained herein shall conflict with or be
inconsistent with any term or provision contained in the Receivables Credit
Agreement, the terms and provisions contained herein shall govern, with respect
to this Purchase Agreement.
ARTICLE II
SALE AND CONVEYANCE
Section 2.1. Sale.
(a) As of the Closing Date, the Originator hereby sells,
transfers, assigns, sets over and otherwise conveys to the Buyer, and the Buyer
hereby purchases from the Originator, without recourse, all right, title and
interest of the Originator in, to and under the following property, whether now
existing or hereafter created or acquired (all such assets, the "Purchased
Assets"):
(i) the Contracts that are owned by the Originator on the
Closing Date and that are listed on the List of Contracts, together
with all Collections and all monies due or to become due in payment of
such Contracts on and after the Cut Off Date, including but not limited
to any Prepayment Amounts, any payments in respect of a Casualty Loss
or early termination, and any Recoveries received with respect thereto,
but excluding any Scheduled Payments due prior to the Cut Off Date and
any Excluded Amounts;
(ii) the Equipment related to such Contracts including all
proceeds from any sale or other disposition of such Equipment;
(iii) the Contract Files;
(iv) all payments made or to be made in the future with
respect to such Contracts or the Obligor thereunder and under any
guarantee or similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
and
(vi) all income and proceeds of the foregoing.
The foregoing sale, transfer, assignment, set over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Buyer of any obligation of the Originator or any other Person in connection with
the Contracts or under any agreement or instrument relating thereto including,
without limitation, any obligation to any Obligors.
-2-
<PAGE>
(b) In connection with the sale of the Purchased Assets, the
Originator agrees (i) to record and file, at its own expense, any financing
statements (and continuation statements with respect to such financing
statements when applicable) with respect to the Purchased Assets, meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect, and maintain the perfection of, the sale of the
Purchased Assets from the Originator to the Buyer on and after the Closing Date,
(ii) that such financing statements shall name the Originator, as seller, and
the Buyer, as purchaser, of the Purchased Assets, and (iii) to deliver a
file-stamped copy of such financing statements or other evidence of such filings
(excluding continuation statements, which shall be delivered as filed) to the
Buyer on or prior to the Closing Date.
(c) In connection with the sale of the Purchased Assets, the
Originator further agrees that it will, at its own expense, indicate clearly and
unambiguously in its computer files, on or prior to the Closing Date, that such
Contracts have been sold to the Buyer pursuant to this Purchase Agreement. The
Originator further agrees to deliver to the Buyer on the Closing Date, a
computer file or microfiche list containing a true and complete list of all
Contracts, identified by account number and Outstanding Balance as of the Cut
Off Date. Such file or list shall be marked as Schedule I to the Receivables
Credit Agreement and is hereby incorporated into and made a part of this
Purchase Agreement.
(d) It is the intention of the parties hereto that the
conveyance of the Contracts and the other Purchased Assets by the Originator to
the Buyer as provided in this Section 2.1 be, and be construed as, an absolute
sale, without recourse, of the Contracts and the other Purchased Assets by the
Originator to the Buyer. Furthermore, it is not intended that such conveyance be
deemed a pledge of the Contracts and the other Purchased Assets by the
Originator to the Buyer to secure a debt or other obligation of the Originator.
If, however, notwithstanding the intention of the parties, the conveyance
provided for in this Section 2.1 is determined to be a transfer for security,
then this Agreement shall also be deemed to be a "security agreement" within the
meaning of Article 9 of the UCC, and the Originator hereby Grants to the Buyer a
"security interest" within the meaning of Article 9 of the UCC in all of the
Originator's right, title and interest in and to the Contracts and the other
Purchased Assets, now existing and hereafter created, in an amount equal to the
aggregate Purchase Price and each of the Originator's other payment obligations
under this Purchase Agreement.
SECTION 2.2. Provisions Regarding Vehicles.
In the event a Contract related to a Vehicle becomes a
Defaulted Contract, the Originator, shall, at the request of the Servicer,
transfer the title to the related Vehicle as instructed by the Servicer. In
connection therewith, the Buyer will pay to the Originator any amounts realized
upon liquidation of the Vehicle (net of expenses of liquidation, Servicer
Advances with respect to such Contract, and an amount equal to Interest on the
discounted value of such Contract for any period during which payments were not
made and Servicer Advances were not made) which exceeds the Discounted Contract
Balance of the related Defaulted Contract.
-3-
<PAGE>
ARTICLE III
PURCHASE PRICE AND PAYMENT; MONTHLY REPORT
SECTION 3.1. Purchase Price.
The purchase price for each Contract sold to the Buyer by the
Originator under this Agreement (the "Purchase Price") shall be a dollar amount
equal to the Discounted Contract Balance determined as of the Cut Off Date.
SECTION 3.2. Payment of Purchase Price.
(a) The Purchase Price for each Contract existing on the
Closing Date shall be paid or provided for on the Closing Date (i) by payment of
$142,997,336.98 in immediately available funds, and (ii) the remainder shall be
deemed paid through a contribution to capital of the Buyer by the Originator in
an amount equal to such remainder.
(b) Unless otherwise specified herein, all payments of the
Purchase Price of any Contract sold hereunder shall be made in the bank account
designated in writing by the Originator to the Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the
Originator and Servicer.
The Originator and the Servicer hereby represent and warrant
to the Buyer, as of the Closing Date, that:
(a) Organization and Good Standing. The Originator is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware, and has full corporate power, authority and legal
right to own or lease its properties and conduct its business as such properties
are presently owned or leased and as such business is presently conducted and to
execute, deliver and perform its obligations under this Purchase Agreement and
each other document or instrument to be delivered by the Originator hereunder
(collectively, the "Sale Papers").
(b) Due Qualification. The Originator is duly qualified to do
business and is in good standing as a corporation, and has obtained all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have a material adverse
effect on its ability to perform its obligations hereunder or under the Sale
Papers.
-4-
<PAGE>
(c) Due Authorization. The execution and delivery of this
Purchase Agreement and each of the Sale Papers, and the consummation of the
transactions provided for herein and therein have been duly authorized by the
Originator by all necessary corporate action on the part of the Originator.
(d) No Conflict. The execution and delivery of this Purchase
Agreement and each of the Sale Papers, the performance of the transactions
contemplated hereby and thereby, and the fulfillment of the terms hereof and
thereof will not conflict with or result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any material indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Originator is a party
or by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Purchase
Agreement and each of the Sale Papers, the performance of the transactions
contemplated hereby and thereby, and the fulfillment of the terms hereof and
thereof (including, without limitation, the sale of Purchased Assets by the
Originator or remittance of Collections in accordance with the provisions of
this Purchase Agreement), will not conflict with or violate, in any material
respect, any Requirements of Law applicable to the Originator.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Originator or the Servicer, threatened
against the Originator before any court, regulatory body, administrative agency,
or other tribunal or governmental instrumentality (i) asserting the invalidity
of this Purchase Agreement or any of the Sale Papers, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this Purchase
Agreement or any of the Sale Papers, or (iii) seeking any determination or
ruling that could reasonably be expected to be adversely determined, and if
adversely determined, would materially and adversely affect the performance by
the Originator of its obligations under this Purchase Agreement or any of the
Sale Papers.
(g) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental Authority
required in connection with the execution and delivery by the Originator of this
Purchase Agreement and the Sale Papers, the performance of the transactions
contemplated by this Purchase Agreement and the Sale Papers, and the fulfillment
of or terms hereof and thereof, have been obtained.
(h) Solvency. The Originator is Solvent and transactions
contemplated by this Agreement and the Sale Papers do not and will not impair
such Solvent state of the Originator.
(i) Bulk Sales. The execution, delivery and performance of
this Purchase Agreement do not require compliance with any "bulk sales" law by
the Originator.
(j) Other Names. The legal name of the Originator is as set
forth in this Purchase Agreement, and within the preceding five years the
Originator has not used, and the
-5-
<PAGE>
Originator currently does not use, any tradenames, fictitious names, assumed
names or "doing business as" names other than those set forth on Schedule II
hereto.
(k) Selection Procedures; Credit and Collection Policy. No
procedures believed by the Originator to be materially adverse to the interests
of the Buyer were utilized by the Originator in identifying and/or selecting the
Contracts to be sold, assigned, transferred, set-over and otherwise conveyed
hereunder. In addition, each Contract shall have been underwritten in accordance
with and satisfy the standards of any Credit and Collection Policy which has
been established by the Originator and is then in effect.
(l) Taxes. The Originator has filed or caused to be filed all
Tax returns which, to its knowledge, are required to be filed. The Originator
has paid or made adequate provisions for the payment of all Taxes and all
assessments made against it or any of its property (other than any amount of Tax
the validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of the Borrower), and no Tax lien has been filed and, to
the Originator's knowledge, no claim is being asserted, with respect to any such
Tax, fee or other charge.
(m) Agreements Enforceable. This Purchase Agreement and the
Sale Papers constitute the legal, valid and binding obligation of the Originator
enforceable against the Originator in accordance with their respective terms,
except as such enforceability may be limited by Insolvency Laws and except as
such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(n) Exchange Act Compliance. The proceeds of the sale of any
Purchased Assets will not be used by the Originator to acquire any security in
any transaction which is subject to Section 13 or 14 of the Securities Exchange
Act of 1934, as amended.
(o) No Liens. Each Purchased Asset, together with the Contract
related thereto, shall, at all times, be owned by the Originator free and clear
of any Lien except as provided herein, and upon the sale, transfer or assignment
hereunder, the Buyer shall acquire (subject to recordation where necessary) a
valid and perfected first priority undivided ownership interest in each
Purchased Asset then existing or thereafter arising and Collections with respect
thereto, free and clear of any Adverse Claim except as provided hereunder. No
effective financing statement or other instrument similar in effect covering any
Purchased Asset or Collections with respect thereto shall at any time be on file
in any recording office except such as may be filed in favor of the Buyer
relating to this Purchase Agreement and except for those related solely to the
Subordinated Note.
(p) Reports Accurate. No report (if prepared by the
Originator, or to the extent that information contained therein is supplied by
the Originator), information, exhibit, financial statement, document, book,
record or report furnished or to be furnished by the Originator to the Buyer in
connection with this Purchase Agreement is or will be inaccurate in any material
respect as of the date it is or shall be dated or (except as otherwise disclosed
to the Buyer at such time) as of the date so furnished, and no such document
contains or will
-6-
<PAGE>
contain any material misstatement of fact or omits or shall omit to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
(q) Location of Offices. The principal place of business and
chief executive office of the Originator and the office where the Originator
keeps all the Records are located at the address of the Originator listed in
Section 9.3 herein.
(r) Lock-Boxes. The names and addresses of all the Lock-Box
Banks, together with the account numbers of the Lock-Box Accounts of the
Originator at such Lock-Box Banks, and the names, addresses and account numbers
of all accounts to which Collections of the Purchased Assets have been sent, are
specified in Schedule II of the Receivables Credit Agreement (which shall be
deemed to be amended in respect of terminating or adding any Lock-Box Account or
Lock-Box Bank upon satisfaction of the notice and other requirements specified
in respect thereof).
(s) Value Given. (i) The Buyer shall have given reasonably
equivalent value to the Originator in consideration for the transfer to the
Buyer of the Purchased Assets under this Purchase Agreement, (ii) no such
transfer shall have been made for or on account of an antecedent debt owed by
the Originator to the Buyer, (iii) no such transfer is or may be voidable or
subject to avoidance under any section of the Bankruptcy Code.
(t) Accounting. The Originator accounts for the transfers by
it to the Buyer of interests in Assets and Collections under this Purchase
Agreement as sales of such Purchased Assets in its books, records and financial
statements, in each case consistent with GAAP and with the requirements set
forth herein.
(u) Separate Entity. The Originator is operated as an entity
with assets and liabilities distinct from those of the Servicer, the Buyer and
any Affiliates thereof, and the Buyer hereby acknowledges that the Deal Agent
and the Secured Parties under the Receivables Credit Agreement are entering into
the transactions contemplated by the Receivables Credit Agreement in reliance
upon the Originator's identity as a separate legal entity from the Buyer and
from each such other Affiliate of the Buyer.
(v) Security Interest. The Originator has granted a security
interest (as defined in the UCC) to the Buyer, in the Purchased Assets and
Collections, which is enforceable in accordance with applicable law upon
execution and delivery of this Agreement. Upon the filing of UCC-1 financing
statements naming the Buyer as secured party and the Originator as debtor, the
Buyer shall have a first priority perfected security interest in the Purchased
Assets and Collections (except for any Permitted Liens). All filings (including,
without limitation, such UCC filings) as are necessary in any jurisdiction to
perfect the interest of the Buyer in the Purchased Assets and Collections have
been made.
(w) Investment Company Act. The Originator is not, and is not
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
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(x) Confirmation from the Originator. The Originator agrees
that, for a period of one year and one day after the Aggregate Unpaids have been
paid in full, the Originator will not cause the Buyer to file a voluntary
petition or institute, cause to be instituted or join in any insolvency petition
or proceeding under the Bankruptcy Code or any other Insolvency Laws. Each of
the Buyer and the Originator is aware that in light of the circumstances
described in the preceding sentence and other relevant facts, the filing of a
voluntary petition under the Bankruptcy Code for the purpose of making any
Purchased Asset or any other assets of the Buyer available to satisfy claims of
the creditors of the Originator would not result in making such assets available
to satisfy such creditors under the Bankruptcy Code.
(y) Accuracy of Representations and Warranties. Each
representation or warranty by the Originator and Servicer contained herein or in
any certificate or other document furnished by the Originator and Servicer
pursuant hereto or in connection herewith is true and correct in all material
respects.
The representations and warranties set forth in this Section 4.1 shall survive
the sale, transfer and assignment of the Purchased Assets to the Buyer. Upon
discovery by the Originator or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice thereof to the other and to the Deal Agent immediately
upon obtaining knowledge of such breach.
SECTION 4.2. Originator's Representations and Warranties
Regarding the Purchase Agreement and the Contracts.
The Originator hereby represents and warrants to the Buyer, as
of the Closing Date:
(a) Binding Obligation; Valid Transfer and Security Interest.
(i) This Purchase Agreement and each of the Sale Papers
constitutes a legal, valid and binding obligation of the Originator,
enforceable against the Originator in accordance with its terms, except
as such enforceability may be limited by Insolvency Laws and except as
such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(ii) This Purchase Agreement constitutes a valid transfer
to the Buyer of all right, title and interest of the Originator in, to
and under the Purchased Assets, and such transfer will be free and
clear of any Lien of any Person claiming through or under the
Originator or its Affiliates, except for Permitted Liens. Upon the
filing of the financing statements described in Section 4.1(v), the
Buyer shall have a first priority perfected security interest in such
property, subject only to Permitted Liens. Neither the Originator nor
any Person claiming through or under the Originator shall have any
claim to or interest in the Collections.
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(b) Eligibility of Contracts. As of the Closing Date, (i) the
Contract List and the computer file or microfiche or written list delivered in
connection therewith is an accurate and complete listing in all material
respects of all the Contracts transferred hereunder, and the information
contained therein with respect to the identity of such Contracts and the amounts
owing thereunder is true and correct in all material respects as of the Closing
Date, (ii) each such Contract is an Eligible Contract, (iii) each such Contract
and the Equipment or Vehicle is free and clear of any Lien of any Person (other
than Permitted Liens) and in compliance, in all material respects, with all
Requirements of Law applicable to the Originator, and (iv) with respect to each
such Contract, all material consents, licenses, approvals or authorizations of
or registrations or declarations with any Governmental Authority required to be
obtained, effected or given by the Originator in connection with the transfer of
such Contract and the related Equipment or Vehicle to the Buyer have been duly
obtained, effected or given and are in full force and effect.
(c) Notice of Breach. The representations and warranties set
forth in this Section 4.2 shall survive the transfer and assignment of the
security interest in the Contracts to the Buyer. Upon discovery by the
Originator or the Buyer of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give written notice thereof
to the other and to the Deal Agent under the Receivables Credit Agreement
immediately upon obtaining knowledge of such breach.
SECTION 4.3. Representations and Warranties of the Buyer.
The Buyer hereby represents and warrants to the Originator, as
of the Closing Date, that:
(a) Organization and Good Standing. The Buyer is a limited
liability company duly organized and validly existing in good standing under the
laws of the State of Delaware, and has full limited liability company power,
authority and legal right to own its properties and conduct its business as such
properties are presently owned and such business is presently conducted, and to
execute, deliver and perform its obligations under this Purchase Agreement and
each of the Sale Papers.
(b) Due Qualification. The Buyer is duly qualified to do
business and is in good standing as a foreign limited liability company (or is
exempt from such requirements), and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which failure to so qualify or
to obtain such licenses and approvals would have a material adverse effect on
its ability to perform its obligations hereunder or under the Sale Papers.
(c) Due Authorization. The execution and delivery of this
Purchase Agreement and each of the Sale Papers and the consummation of the
transactions provided for herein or therein have been duly authorized by the
Buyer by all necessary limited liability company action on the part of the
Buyer.
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(d) No Conflicts. The execution and delivery of this Purchase
Agreement and each of the Sale Papers, the performance of the transactions
contemplated hereby or thereby and the fulfillment of the terms hereof and
thereof will not conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any material indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Buyer is a party or by
which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Purchase
Agreement and each of the Sale Papers, the performance of the transactions
contemplated hereby and thereby, and the fulfillment of the terms hereof and
thereof (including, without limitation, the purchase of Purchased Assets by the
Buyer in accordance with the provisions of this Purchase Agreement) will not
conflict with or violate, in any material respect, any Requirements of Law
applicable to the Buyer.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Buyer, threatened against the Buyer,
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Purchase
Agreement or any of the Sale Papers, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Purchase Agreement or any of the
Sale Papers, or (iii) seeking any determination or ruling that could reasonably
be expected to be adversely determined, and if adversely determined, would
materially and adversely affect the performance by the Buyer of its obligations
under this Purchase Agreement or any of the Sale Papers.
ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Originator.
The Originator hereby covenants with respect to each Contract,
that:
(a) Compliance with Laws; Preservation of Corporate Existence.
The Originator will comply in all material respects with all applicable laws,
rules, regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
(b) Contracts Not to be Evidenced by Promissory Notes. The
Originator will take no action to cause any Contract which is not, as of the
Closing Date, evidenced by an Instrument, to be so evidenced except in
connection with the enforcement or collection of such Contract.
(c) Security Interests. Except for the transfers hereunder,
the Originator will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or
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suffer to exist any Lien on any Contract transferred hereunder or related
Equipment or Vehicle, whether now existing or hereafter transferred hereunder,
or any interest therein, and Originator will not sell, pledge, assign or suffer
to exist any Lien on its interest, if any, hereunder. The Originator will
promptly notify the Buyer of the existence of any Lien on any Contract
transferred hereunder or related Equipment or Vehicle; and the Originator shall
defend the right, title and interest of the Buyer in, to and under the Contracts
transferred hereunder and the related Equipment, against all claims of third
parties; provided, however, that nothing in this Section 5.1(c) shall prevent or
be deemed to prohibit the Originator from suffering to exist Permitted Liens
upon any of the Contracts transferred hereunder or any related Equipment or
Vehicle.
(d) Delivery of Collections. The Originator agrees to pay to
the Buyer promptly (but in no event later than two Business Days after receipt)
all Collections received by the Originator in respect of the Contracts
transferred hereunder.
(e) Compliance with Law. The Originator hereby agrees to
comply in all material respects with all Requirements of Law applicable to the
Originator, the Contracts, the Equipment, and the Vehicles.
(f) Activities of the Originator. The Originator shall not
engage in any business or activity of any kind with the Buyer, or enter into any
transaction or indenture, mortgage, instrument, agreement, contract, lease or
other undertaking with the Buyer, which is not directly related to the
transactions contemplated and authorized by this Purchase Agreement, the
Receivables Credit Agreement, and the organizational documents of the Buyer.
(g) Guarantees. The Originator shall not become or remain
liable, directly or contingently, in connection with any Indebtedness or other
liability of the Buyer, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business), agreement to purchase or repurchase, agreement to supply or
advance funds, or otherwise.
(h) Location of Originator, Records; Instruments. The
Originator (i) shall not move outside the State of California, the location of
its chief executive office, without 30 days' prior written notice to the Buyer
and the Deal Agent, (ii) shall not move the location of the Contract Files from
the locations thereof on the Closing Date, without 30 days' prior written notice
to the Buyer and the Deal Agent, and (iii) will promptly take all actions
required of each relevant jurisdiction in order to continue the first priority
perfected security interest of the Buyer in all Contracts transferred hereunder.
The Originator will give the Buyer and the Deal Agent prompt notice of a change
within the State of California of the location of its chief executive office.
(i) Accounting of Purchases. The Originator will not account
for or treat (whether in financial statements or otherwise) the transactions
contemplated hereby in any manner other than the sale of Purchased Assets by the
Originator to the Buyer.
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(j) ERISA Matters. The Originator will not (i) engage in any
prohibited transaction for which an exemption is not available or has not
previously been obtained from the United States Department of Labor, (ii) permit
to exist any accumulated funding deficiency, as defined in Section 302(a) of
ERISA and Section 412(a) of the Code, or funding deficiency with respect to any
Benefit Plan other than a Multiemployer Plan, (iii) fail to make any payments to
an Multiemployer Plan that the Originator may be required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto,
(iv) terminate any Benefit Plan so as to result in any liability, or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of liability of the Originator under ERISA or
the Code.
(k) Nature of Business. The Originator will engage in no
business with the Buyer other than the sale and transfer of Purchased Assets
hereunder and the other transactions permitted or contemplated by this Purchase
Agreement.
(l) Change in the Purchase Agreement. The Originator will not
amend, modify, waive or terminate any terms or conditions of this Agreement
except as provided herein.
ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.1. Retransfer of Ineligible Contracts.
In the event of a breach of any representation or warranty set
forth in Section 4.2 with respect to a Contract transferred hereunder (each such
Contract, an "Ineligible Contract"), immediately upon knowledge by the
Originator of such breach, (a) the Originator shall accept a retransfer of each
such Ineligible Contract and any related Equipment selected by the Buyer as to
which such breach related, (ii) the Buyer shall retransfer to the Originator,
without recourse, representation or warranty, all of its right, title and
interest in such Ineligible Contract, and (iii) the Buyer shall, in connection
with such conveyance and without further action, be deemed to represent and
warrant that it has the limited liability company authority and has taken all
necessary limited liability company action to accomplish such conveyance, but
without any other representation or warranty, express or implied. In any of the
foregoing instances, the Originator shall accept the retransfer of each such
Ineligible Contract, and the ADCB shall be reduced by the Discounted Contract
Balance of each such Ineligible Contract and, if applicable, increased by the
Discounted Contract Balance of each such Substitute Contact. On and after the
date of retransfer, the Ineligible Contract so retransferred shall not be
included in the Collateral. In consideration of such retransfer, the Originator
shall, on the date of retransfer of such Ineligible Contract, make a deposit to
the Collection Account (for allocation pursuant to Sections 2.4(a) and 2.5(a) of
the Receivables Credit Agreement, as applicable) in immediately available funds
in an amount equal to the Discounted Contract Balance of such Ineligible
Contract plus interest thereon from the last day of the immediately preceding
Interest Period to and including the date of repurchase at a rate per annum
equal to
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the Interest Rate. Upon each retransfer to the Originator of such Ineligible
Contract, the Buyer shall automatically and without further action be deemed to
transfer, assign, and set over to the Originator, free and clear of any Lien
created pursuant to this Purchase Agreement, all the right, title and interest
of the Buyer in, to and under such Ineligible Contract and all monies due or to
become due with respect thereto, the related Equipment, and all proceeds of such
Ineligible Contract and Recoveries and Insurance Proceeds relating thereto and
all rights to security for any such Ineligible Contract, and all proceeds and
products of the foregoing. The Buyer shall, in connection with such transfer,
assignment and set over, and without further action, be deemed to represent and
warrant that it has the limited liability company authority and has taken all
necessary limited liability company action to accomplish such transfer,
assignment and set over, but without any other representation or warranty,
express or implied. The Buyer shall, at the sole expense of the Originator,
execute such documents and instruments of retransfer as may be prepared by the
Buyer on behalf of the Originator and take such other actions as shall
reasonably be requested by the Originator to effect the transfer of such
Ineligible Contract pursuant to this Section 6.1.
Section 6.2. Retransfer of Purchased Assets.
In the event of a breach of any of the representations and
warranties set forth in Section 4.2 hereof which breach could reasonably be
expected to have a material adverse effect on the rights of the Secured Parties
or the Deal Agent, as agent of the Secured Parties under the Receivables Credit
Agreement, or on the ability of the Buyer to perform its obligations under the
Receivables Credit Agreement, by notice then given in writing to the Originator,
the Buyer may direct the Originator to accept retransfer of all of the Purchased
Assets, in which case the Originator shall be obligated to accept retransfer of
such Purchased Assets on the Payment Date next following such notice (such date,
the "Retransfer Date"). The Originator shall deposit on the Retransfer Date an
amount equal to the deposit amount provided below for such Purchased Assets in
the Collection Account for distribution to the Secured Parties under the
Receivables Credit Agreement. The deposit amount for such retransfer will be
equal to (a) the sum of (i) the Aggregate Unpaids, and (ii) all Interest accrued
and to accrue, as reasonably determined by the Deal Agent, and (iii) all Hedge
Breakage Costs and any other amounts payable by Borrower under or with respect
to any Hedging Agreement minus (b) the amount, if any, available in the
Collection Account on such Payment Date. On the Retransfer Date, provided that
full Retransfer Amount has been deposited into the Collection Account, the
Purchased Assets and all proceeds thereof, all rights to security for such
Purchased Assets, and all proceeds and products of the foregoing, shall be
transferred to the Originator, and the Buyer shall, at the sole expense of the
Originator, execute and deliver such instruments of retransfer, in each case
without recourse, representation or warranty, as shall be prepared as reasonably
requested by the Originator, to vest in the Originator, or its designee or
assignee, all right, title and interest of the Buyer in, to and under the
Purchased Assets transferred hereunder, all monies due or to become due with
respect thereto, and all proceeds thereof and Insurance Proceeds relating
thereto.
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Section 6.3. Adjustments.
The Originator hereby agrees that, with respect to each
Contract transferred hereunder which provides for any payment constituting a
Prepayment, which amount is less than an amount equal to the aggregate remaining
Scheduled Payments related to such Contract, the Originator shall indemnify the
Buyer in an amount equal to the aggregate remaining Scheduled Payments related
to such Contract.
Section 6.4. Substitution of Contracts.
On any day prior to the occurrence of the Termination Date,
the Buyer may in its sole discretion, by written notice to the Originator,
request that any Contract be replaced by one or more other Contracts (each, a
"Substitute Contract"), provided that no such replacement shall occur unless
each of the following conditions is satisfied as of the date of such replacement
and substitution:
(i) the Servicer has previously recommended to the Deal Agent
(with a copy to the Collateral Custodian) in writing that the Contract
to be replaced should be replaced (each, a "Replaced Contract");
(ii) each Substitute Contract is an Eligible Contract on the
date of such substitution;
(iii) after giving effect to any such substitution, the
aggregate outstanding Principal does not exceed the lesser of (A) the
Borrowing Base and (B) the Credit Limit;
(iv) the aggregate Discounted Contract Balance of such
Substitute Contracts shall be equal to or greater than the aggregate
Discounted Contract Balances of the Replaced Contracts;
(v) such Substitute Contracts, at the time of substitution by
the Originator, shall have approximately the same remaining weighted
average life as the Replaced Contracts;
(vi) all representations and warranties of the Originator
contained in Section 4.1 and 4.2 shall be true and correct as of the
date of substitution of any such Substitute Contract;
(vii) the substitution of any Substitute Contract does not
cause an Event to Default to occur; and
(viii) the Buyer shall deliver to the Deal Agent on the date
of such substitution a certificate of a Responsible Officer certifying
that each of the foregoing is true and correct as of such date.
In addition, the Buyer shall deliver to the Collateral Custodian the related
Contract File as required by Section 3.2 of the Receivables Credit Agreement. In
connection with any such
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substitution, the Buyer shall, automatically and without further action, be
deemed to retransfer to the Originator, free and clear of any Lien created
pursuant to this Purchase Agreement, all of the right, title and interest of the
Buyer in, to and under such Replaced Contract, and the Buyer shall be deemed to
represent and warrant that it has the limited liability company authority and
has taken all necessary limited liability company action to accomplish such
transfer, but without any other representation or warranty, express or implied.
Any right of the Buyer to substitute any Contract pursuant to this Section 6.4
shall be in addition to, and without limitation of, any other rights or remedies
that the Buyer may have to require the Originator to substitute for, or accept
retransfer of, any Contract pursuant to the terms of this Purchase Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1. Conditions to the Buyer's Obligations Regarding
Contracts.
The obligations of the Buyer to purchase Purchased Assets from
the Originator on the Closing Date shall be subject to the satisfaction of the
following conditions:
(a) all representations and warranties of the Originator
contained in Sections 4.1 and 4.2 shall be true and correct on and as of such
day as though made on and as of such date;
(b) the Originator shall have performed all obligations
required to be performed by it on or prior to such day pursuant to the
provisions of this Purchase Agreement;
(c) no event has occurred and is continuing, or would result
from such purchase which constitutes an Event of Default under the Receivables
Credit Agreement;
(d) no law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental body,
agency or instrumentality shall prohibit or enjoin, the making of any such
purchase by the Buyer in accordance with the provisions hereof; and
(e) all corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Purchase Agreement shall
be satisfactory in form and substance to the Buyer, and the Buyer shall have
received from the Originator copies of all documents (including, without
limitation, records of corporate proceedings, approvals and opinions) relevant
to the transactions herein contemplated as the Buyer may reasonably have
requested.
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ARTICLE VIII
TERM AND TERMINATION
Section 8.1. Term and Termination.
This Purchase Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the occurrence of the Collection Date pursuant to the Receivables Credit
Agreement; provided, however, that the termination of this Purchase Agreement
pursuant to this Section 8.1 shall not discharge any Person from obligations
incurred prior to any such termination of this Purchase Agreement, including,
without limitation, any obligations to repurchase Contracts sold prior to such
termination pursuant to Section 6.1 or 6.2 hereof, or to make the payments
required under Section 6.3 hereof.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment.
This Purchase Agreement and any other Sale Papers and the
rights and obligations of the parties hereunder may not be amended, waived or
changed orally, but only by an instrument in writing signed by the Buyer and the
Originator, with the prior written consent of the Deal Agent. The Buyer shall
provide not less than ten Business Days prior written notice of any such
amendment to the Deal Agent.
Section 9.2. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE
OF NEW YORK. EACH OF THE PARTIES HERETO 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 CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
Section 9.3. 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 registered mail, return receipt requested, to:
(a) in the case of the Buyer, to:
Fidelity Leasing SPE III, LLC
c/o Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attn: Crit Dement
Facsimile No.: (610) 719-4515
Confirmation No.: (610) 719-4510
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(b) in the case of the Servicer, to:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attn: Crit Dement
Facsimile No.: (610) 719-4515
Confirmation No.: (610) 719-4510
(c) in the case of the Originator, to:
JLA Credit Corporation
12677 Alcosta Boulevard
San Ramon, California 94583
Attn: Steve Dietsch
Facsimile No.: (925) 327-3606
Confirmation No.: (925) 277-3306
(d) in the case of the Deal Agent, to:
First Union Capital Markets Corp.
One First Union Center, TW9
Charlotte, North Carolina 28288
Attn: Conduit Administration
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 374-2520
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
Section 9.4. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Purchase Agreement or any of the Sale Papers shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Purchase Agreement and the Sale Papers and shall in
no way affect the validity or enforceability of the other provisions of this
Purchase Agreement or any of the Sale Papers.
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Section 9.5. Assignment.
(a) Notwithstanding anything to the contrary contained herein,
this Purchase Agreement may not be assigned by the Buyer or the Originator
except as permitted by this Section 9.5 or by the Receivables Credit Agreement.
Simultaneously with the execution and delivery of this Purchase Agreement, the
Buyer shall assign all of its right, title and interest herein to the Deal Agent
as agent for the Lender under the Receivables Credit Agreement as provided in
the Receivables Credit Agreement, to which assignment the Originator hereby
expressly consents. The Originator agrees to perform its obligations hereunder
for the benefit of the Deal Agent as agent for the Lender under the Receivables
Credit Agreement and the Deal Agent, as agent for the Lender under the
Receivables Credit Agreement under the Receivables Credit Agreement shall be a
third party beneficiary hereof. The Deal Agent as agent for the Lender under the
Receivables Credit Agreement may enforce the provisions of this Purchase
Agreement, exercise the rights of the Buyer and enforce the obligations of the
Originator hereunder as provided in of the Receivables Credit Agreement. This
Purchase Agreement may not be assigned by the Originator except in connection
with a merger or consolidation of the Originator with or into, or disposition of
the Originator's properties and assets to, another Person, provided, however,
that any such merger, consolidation or disposition shall satisfy the
requirements of Section 9.14, upon not less than ten Business Days' prior
written notice to the Buyer and the Deal Agent.
(b) In connection with any permitted assignment of this
Purchase Agreement by the Originator, the Originator shall deliver to the Buyer
and the Deal Agent an Officer's Certificate that such assignment complies with
this Section 9.5, and shall cause such assignee to execute an agreement
supplemental hereto, in form and substance satisfactory to the Originator,
pursuant to which such assignee shall expressly assume and agree to the
performance of every covenant and obligation of the Originator hereunder, to
provide for the delivery of an Opinion of Counsel that such supplemental
agreement is legal, valid and binding with respect to such assignee, and to take
such other actions and execute such other instruments as may reasonably be
required to effectuate such assignment.
Section 9.6. Further Assurances.
The Buyer and the Originator agree to do and perform, from
time to time, any and all acts and to execute any and all further instruments
required or reasonably requested by the other party more fully to effect the
purposes of this Purchase Agreement and the Sale Papers, including, without
limitation, the execution of any financing statements, continuation statements,
termination statements, releases or equivalent documents relating to the
Contracts for filing under the provisions of the UCC or other laws of any
applicable jurisdiction.
Section 9.7. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part
of the Buyer or the Originator, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy,
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power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privilege
provided by law.
Section 9.8. Counterparts.
This Purchase Agreement may be executed in two or more
counterparts including facsimile transmission thereof (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.
Section 9.9. Binding Effect; Third-Party Beneficiaries.
This Purchase Agreement shall inure to the benefit of and the
obligations thereunder shall be binding upon the parties hereto and their
respective successors and permitted assigns. Any permitted assigns shall be
third-party beneficiaries of this Purchase Agreement.
Section 9.10. Merger and Integration.
Except as specifically stated otherwise herein, this Purchase
Agreement sets forth the entire understanding of the parties relating to the
subject matter hereof, there are no other agreements between the parties for
transactions relating to or similar to the transactions contemplated by this
Purchase Agreement, and all prior understandings, written or oral, are
superseded by this Purchase Agreement. This Purchase Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 9.11. Headings.
The headings herein are for purposes of reference only and
shall not otherwise affect the meaning or interpretation of any provision
hereof.
Section 9.12. Schedules and Exhibits.
The schedules and exhibits attached hereto and referred to
herein shall constitute a part of this Purchase Agreement and are incorporated
into this Purchase Agreement for all purposes.
Section 9.13. No Proceedings.
The Originator and the Servicer each hereby convenants and
agrees that, prior to the date which is one year and one day after the payment
in full of the Loan, it will not institute against or join any other Person in
instituting against the Buyer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
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SECTION 9.14. Merger or Consolidation of, or Assumption of
the Obligations of, the Originator.
The Originator shall not consolidate with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any person, unless:
(a) the Person formed by such consolidation or into which the
Originator is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Originator substantially as
an entirety shall be, if the Originator is not the surviving entity,
organized and existing under the laws of the United States or any state
or the District of Columbia and shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Buyer in form
satisfactory to the Buyer, the performance of every covenant and
obligation of the Originator hereunder (to the extent that any right,
covenant or obligation of the Originator, as applicable hereunder, is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity);
(b) the Originator shall have delivered to the Buyer and the
Deal Agent an Officer's Certificate that such consolidation, merger,
conveyance or transfer and such supplemental agreement complies with
this Section 9.14 and that all conditions precedent herein provided for
relating to such transaction have been complied with and an Opinion or
Counsel that such supplemental agreement is legal, valid and binding
with respect to the successor entity and that the entity surviving such
consolidation, conveyance or transfer is organized and existing under
the laws of the United States or any state or the District of Columbia.
The Deal Agent shall receive prompt written notice of such merger or
consolidation of the Originator; and
(c) after giving effect thereto, no Event of Default under the
Receivables Credit Agreement or any event which with notice or lapse of
time or both would constitute such an Event of Default thereunder shall
have occurred.
Section 9.15. Costs, Expenses and Taxes.
(a) The Originator agrees to pay on demand all costs and
expenses of the Buyer incurred in connection with the preparation,
execution, delivery, administration (including periodic auditing),
amendment or modification of, or any waiver or consent issued in
connection with, this Purchase Agreement and the other documents to be
delivered hereunder or in connection herewith, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Buyer with respect thereto and with respect to advising the
Buyer as to its rights and remedies under this Purchase Agreement and
the other documents to be delivered hereunder or in connection
herewith, and all costs and out-of-pocket expenses, if any (including
reasonable counsel fees and expenses), incurred by the Buyer in
connection with the enforcement of this Purchase Agreement and the
other documents to be delivered hereunder or in connection herewith.
-20-
<PAGE>
(b) The Originator shall pay on demand any and all stamp,
sales, excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Purchase
Agreement or any agreement or other document delivered in connection with this
Purchase Agreement
(c) The Originator shall pay on demand any and all damages,
losses, claims, liabilities, fees and related costs and expenses, including
attorney's fees and expenses, incurred by or awarded against the Buyer or any of
its Affiliates (each, an "Indemnified Party") arising out of or as a result of
the transactions contemplated under this Agreement and owed by such Indemnified
Party to any other Person; provided, that the Originator shall not be liable to
pay any portion of any such damages, losses, claims or liabilities resulting
from the gross negligence or willful misconduct of an Indemnified Party or the
breach of a Requirement of Law by an Indemnified Party.
Section 9.16. Recourse Against Certain Parties.
(a) No recourse under or with respect to any obligation,
covenant or agreement (including, without limitation, the payment of any fees or
any other obligations) of the Originator as contained in this Purchase Agreement
or any other agreement, instrument or document entered into by it pursuant
hereto or in connection herewith shall be had against any administrator of the
Originator or any incorporator, officer, employee or director of the Originator
or of any such administrator, as such, by the enforcement of any assessment or
by any legal or equitable proceeding, by virtue of any statute or otherwise; it
being expressly agreed and understood that the agreements of the Originator
contained in this Purchase Agreement and all of the other agreements,
instruments and documents entered into by it pursuant hereto or in connection
herewith are, in each case, solely the corporate obligations of the Originator
and that no personal liability whatsoever shall attach to or be incurred by any
administrator of the Originator or any incorporator, officer, employee or
director of Originator or of any such administrator, as such, or any of them,
under or by reason of any of the obligations, covenants or agreements of the
Originator contained in this Purchase Agreement or in any other such
instruments, documents or agreements, or which are implied therefrom, and that
any and all personal liability of every such administrator of the Originator and
each incorporator, officer, employee or director of the Originator or of any
such administrator, or any of them, for breaches by the Originator of any such
obligations, covenants or agreements, which liability may arise either at common
law or in equity, by statute or constitution, or otherwise, is hereby expressly
waived as a condition of, and in consideration for, the execution of this
Purchase Agreement. The provisions of this Section 9.16(a) shall survive the
termination of this Purchase Agreement.
(b) No recourse under or with respect to any obligation,
covenant or agreement (including, without limitation, the payment of any fees or
any other obligations) of the Buyer as contained in this Purchase Agreement or
any other agreement, instrument or document entered into by it pursuant hereto
or in connection herewith shall be had against any administrator of the Buyer or
any incorporator, officer, manager, member, employee or director of the Buyer or
of any such administrator, as such, by the enforcement of any
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<PAGE>
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise; it being expressly agreed and understood that the agreements of the
Buyer contained in this Purchase Agreement and all of the other agreements,
instruments and documents entered into by it pursuant hereto or in connection
herewith are, in each case, solely the limited liability company obligations of
the Buyer, and that no personal liability whatsoever shall attach to or be
incurred by any administrator of the Buyer or any incorporator, officer,
manager, member, employee or director of the Buyer or of any such administrator,
as such, or any other them, under or by reason of any of the obligations,
covenants or agreements of the Buyer contained in this Agreement or in any other
such instruments, documents or agreements, or which are implied therefrom, and
that any and all personal liability of every such administrator of the Buyer and
each incorporator, officer, manager, member, employee or director of the Buyer
or of any such administrator, or any of them, for breaches by the Buyer of any
such obligations, covenants or agreements, which liability may arise either at
common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Purchase Agreement. The provisions of this Section 9.16(b) shall survive
the termination of this Purchase Agreement.
[SIGNATURES SET FORTH ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the Buyer, the Servicer, and the
Originator have caused this Purchase Agreement to be duly executed as of the day
and year first above written.
THE BUYER:
FIDELITY LEASING SPE III, LLC, a Delaware limited
liability company
JLA Credit Corporation, a Delaware corporation,
its Managing Member
By: ______________________________
Name: ______________________________
Title: ______________________________
THE SERVICER:
FIDELITY LEASING, INC., a Pennsylvania corporation
By: __________________________________
Name: __________________________________
Title: __________________________________
THE ORIGINATOR:
JLA CREDIT CORPORATION, a Delaware corporation
By: __________________________________
Name: __________________________________
Title: __________________________________
<PAGE>
SCHEDULE I
LIST OF CONTRACTS
[SET FORTH ON FOLLOWING PAGE]
<PAGE>
SCHEDULE II
TRADENAMES, FICTITIOUS NAMES AND "DOING BUSINESS AS" NAMES
<TABLE>
<CAPTION>
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airplanelease jlacredit leasemator momlease
applicationonly leaseairplanes leasemedical moneyovermoney
applicationonlylease leaseamator leasemker municpallease
apponly leasearmatic leasenetwork munilease
apponlylease leaseautos leasenetworks non-recourselease
biolease leasebuilder leasenotbooks operatinglease
builttoorderlease leaseclock leaseofficeequipment progresspayment
buycomplesaing leasecommerce leasepcs progresspaymentlease
buylease leasecommercecenter leaseperipherals projectfinancialease
cadlease leasecomp leasephones quotemaker
capitalmaster leaseconduit leasepostpress recourselease
channelcapital leaseconstruction leasepre-press resellerlease
channelcredit leaseconstruction leasepresses resellerleasing
channellease leaseconverter leaseprinters scitexleasing
clicklease leaseconverter leaseprinting shrinkwraplease
configureking leasecopiers leasequick siglease
ctileasing leasecopiers leaserate skippaymentlease
dollaroutlease leasecreator leasescltex softwarelease
fairmarketvaluelease leasecreator leaseservers steplease
fasblease leasectl leasesite techfresh
federallease leasectl leasesoft techrefreshlease
fmvlease leasecyberian leasesrus telephonyleasing
fullpayoutlease leasecyberian leasestorage trueoperatinglease
goconfigure leasedental leasetelephony turnkeylease
governmentlease leasedental leasetrucks unixleasing
hardwarelease leasedesktops leasevsbuy vendorlease
infolease leasedesktops leasewheels venturetechleasing
ingrammicroleasing leasefactor leasewhitebox virtualcaptive
interconnectleasing leaseforklifts leasezone whitebox
internationallease leaseitonline leasingcenter worldwidelease
isgleasing leaseking leasingzone wraplease
itclease leasemachinetools leveragelease
japanleasingofamerica leasematic majoraccountsleasing
</TABLE>
<PAGE>
================================================================================
U.S. $150,000,000.
RECEIVABLES CREDIT AGREEMENT
Dated as of February 4, 1999
Among
FIDELITY LEASING SPE III, LLC
as the Borrower
FIDELITY LEASING, INC.
as the Servicer
the INVESTORS
named herein
VARIABLE FUNDING CAPITAL CORPORATION
as a Lender
FIRST UNION CAPITAL MARKETS CORP.
as the Deal Agent
FIRST UNION NATIONAL BANK
as the Liquidity Agent
and
HARRIS TRUST AND SAVINGS BANK
as the Collateral Custodian and the Backup Servicer
================================================================================
<PAGE>
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
Section 1.1 Certain Defined Terms.................................................................................1
Section 1.2 Other Terms..........................................................................................24
Section 1.3 Computation of Time Periods..........................................................................24
ARTICLE II THE LOAN
Section 2.1 The Loan; Grant of Security..........................................................................24
Section 2.2 Procedures for the Loan..............................................................................25
Section 2.3 Determination of Interest............................................................................26
Section 2.4 Settlement Procedures Prior to Termination Date......................................................26
Section 2.5 Settlement Procedures Following a Termination Date...................................................27
Section 2.6 Collections and Allocations..........................................................................28
Section 2.7 Payments, Computations, Etc..........................................................................28
Section 2.8 Optional Prepayment..................................................................................29
Section 2.9 Fees.................................................................................................29
Section 2.10 Increased Costs; Capital Adequacy; Illegality.......................................................30
Section 2.11 Taxes...............................................................................................31
Section 2.12 Assignment of the Purchase Agreement................................................................33
Section 2.13 Substitution of Contracts...........................................................................34
ARTICLE III CONDITIONS OF THE ADVANCE
Section 3.1 Conditions Precedent to the Loan.....................................................................35
Section 3.2 Delivery of Contract Files...........................................................................37
ARTICLE IV REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Borrower.......................................................37
Section 4.2 Representations and Warranties of Borrower Relating to the Agreement and the Contracts...............46
ARTICLE V GENERAL COVENANTS OF THE BORROWER
Section 5.1 General Covenants....................................................................................47
Section 5.2 Covenants of Borrower................................................................................47
Section 5.3 Release of Lien on Equipment and Vehicles............................................................49
Section 5.4 Hedging of Contracts.................................................................................49
Section 5.5 Release of Ineligible Contracts......................................................................51
Section 5.6 Retransfer of Assets.................................................................................51
ARTICLE VI ADMINISTRATION AND SERVICING OF CONTRACTS
Section 6.1 Appointment and Acceptance; Duties...................................................................52
Section 6.2 Collection of Payments...............................................................................55
Section 6.3 Servicer Advances....................................................................................56
</TABLE>
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Section 6.4 Realization Upon Defaulted Contract..................................................................57
Section 6.5 Maintenance of Insurance Policies....................................................................57
Section 6.6 Representations and Warranties of Servicer...........................................................59
Section 6.7 Representations and Warranties of Backup Servicer and Collateral Custodian...........................60
Section 6.8 Covenants of Servicer................................................................................62
Section 6.9 Covenants of Backup Servicer and Collateral Custodian................................................62
Section 6.10 Servicing Compensation..............................................................................63
Section 6.11 Custodial Compensation..............................................................................63
Section 6.13 Reports.............................................................................................64
Section 6.14 Annual Statement as to Compliance...................................................................64
Section 6.15 Annual Independent Public Accountant's Servicing Reports............................................65
Section 6.16 Adjustments.........................................................................................65
Section 6.17 Merger or Consolidation of the Servicer.............................................................65
Section 6.18 Limitation on Liability of the Servicer and Others..................................................66
Section 6.19 Indemnification of the Borrower, the Backup Servicer, the Collateral Custodian, the Deal Agent and
the Secured Parties..............................................................................................66
Section 6.20 The Servicer Not to Resign..........................................................................67
Section 6.21 Access to Certain Documentation and Information Regarding the Contracts.............................67
Section 6.22 Backup Servicer.....................................................................................68
Section 6.23 Identification of Records...........................................................................70
Section 6.24 Servicer Defaults...................................................................................70
Section 6.25 Appointment of Successor Servicer...................................................................72
Section 6.26 Notification........................................................................................73
Section 6.27 Protection of Right, Title and Interest to Assets...................................................73
Section 6.28 Subservicers........................................................................................74
Section 6.29 Release of Contract Files...........................................................................74
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default....................................................................................75
Section 7.2 Remedies.............................................................................................76
ARTICLE VIII INDEMNIFICATION
Section 8.1 Indemnities by the Borrower..........................................................................78
ARTICLE IX THE DEAL AGENT AND THE LIQUIDITY AGENT
Section 9.1 Authorization and Action.............................................................................80
Section 9.2 Delegation of Duties.................................................................................81
Section 9.3 Exculpatory Provisions...............................................................................81
Section 9.4 Reliance.............................................................................................82
Section 9.5 Non-Reliance on Deal Agent, Liquidity Agent and Other Lenders........................................83
Section 9.6 Reimbursement and Indemnification....................................................................83
Section 9.7 Deal Agent and Liquidity Agent in their Individual Capacities........................................83
Section 9.8 Successor Deal Agent or Liquidity Agent..............................................................84
</TABLE>
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ARTICLE X ASSIGNMENTS; PARTICIPATIONS
Section 10.1 Assignments and Participations......................................................................84
ARTICLE XI MISCELLANEOUS
Section 11.1 Amendments and Waivers..............................................................................88
Section 11.2 Notices, Etc........................................................................................88
Section 11.3 Ratable Payments....................................................................................89
Section 11.4 No Waiver, Rights and Remedies......................................................................89
Section 11.5 Binding Effect; Benefit of Agreement................................................................89
Section 11.6 Term of this Agreement..............................................................................89
Section 11.7 Governing Law; Consent to Jurisdiction; Waiver of Objection to Venue................................90
Section 11.8 Waiver of Jury Trial................................................................................90
Section 11.9 Costs, Expenses and Taxes...........................................................................90
Section 11.10 No Proceedings.....................................................................................91
Section 11.11 Recourse Against Certain Parties...................................................................91
Section 11.12 Protection of Ownership Interests of the Lenders; Intent of Parties; Security Interest.............92
Section 11.13 Confidentiality....................................................................................93
Section 11.14 Execution in Counterparts; Severability; Integration...............................................94
Section 11.15 Year 2000 Compliance...............................................................................94
</TABLE>
EXHIBITS
--------
EXHIBIT A Form of Lock-Box Notices
EXHIBIT B Form of Assignment and Acceptance
EXHIBIT C Form of Monthly Report
EXHIBIT D Form of Servicer's Certificate
EXHIBIT E Form of Borrowing Certificate and Assignment
EXHIBIT F Form of Notice of Borrowing
EXHIBIT G Form of Release of Documents and Receipt
SCHEDULES
---------
SCHEDULE I Condition Precedent Documents
SCHEDULE II Lock-Box Banks and Lock-Box Accounts
SCHEDULE III Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV Location of Contract Files
SCHEDULE V List of Contracts
SCHEDULE VI Commitment Amount of Each Investor
iii
<PAGE>
THIS RECEIVABLES CREDIT AGREEMENT (the "Agreement") is made as
of February 4, 1999, among:
(1) FIDELITY LEASING SPE III, LLC, a Delaware limited
liability company, as borrower (the "Borrower");
(2) FIDELITY LEASING, INC., a Pennsylvania corporation
("Fidelity"), as servicer (the "Servicer");
(3) the financial institutions listed on the signature pages
of this Agreement under the heading "Investors" and their respective successors
and assigns (the "Investors");
(4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware
corporation ("VFCC");
(5) FIRST UNION CAPITAL MARKETS CORP., a North Carolina
corporation ("FCMC"), as deal agent (the "Deal Agent");
(6) FIRST UNION NATIONAL BANK, a national banking association
("First Union"), as liquidity agent (the "Liquidity Agent"); and
(7) Harris Trust and Savings Bank, an Illinois banking
corporation ("Harris"), as collateral custodian (the "Collateral Custodian") and
backup servicer (the "Backup Servicer").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
----------------------
(a) Certain capitalized terms used throughout this Agreement
are defined above or in this Section 1.1.
(b) As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
ADCB: On any date of determination, the sum of the Discounted
Contract Balance of each Eligible Contract (excluding all Defaulted Contracts,
Casualty Loss Contracts, Early Termination Contracts and Contracts subject to a
Warranty Event) included in the Borrowing Base as of the date of such
determination.
<PAGE>
Adjusted Eurodollar Rate: On any day, an interest rate per
annum equal to the quotient, expressed as a percentage and rounded upwards (if
necessary), to the nearest 1/100 of 1%, obtained by dividing (i) the LIBOR Rate
on such day by (ii) the decimal equivalent of 100% minus the Eurodollar Reserve
Percentage on such day.
Adjusted Eurodollar Rate Advance: The Principal of the Loan
during any period when Interest accrues at a rate based upon the Adjusted
Eurodollar Rate.
Administration Agreement: That certain Administration
Agreement executed between VFCC and FCMC, as the same may be amended,
supplemented, or otherwise modified from time to time.
Advance Rate: A rate equal to the lesser of (i) .89 and (ii)
one minus an amount equal to five times the Default Ratio.
Adverse Claim: A lien, security interest, charge, encumbrance
or other right or claim of any Person.
Affected Party: As defined in Section 2.10(a).
Affiliate: With respect to a Person means any other Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
Agent's Account: A special account (account number 01 41 96
47) in the name of the Deal Agent or, so long as VFCC is the sole Lender
hereunder, in the name of VFCC maintained at Bankers Trust Company.
Aggregate Unpaids: At any time, an amount, equal to the sum of
all Interest (accrued and to accrue), Principal, and all other amounts owed
hereunder, under any Hedging Agreement (including, without limitation, payments
in respect of the termination of any such Hedging Agreement) or under any fee
letter delivered by the Originator to the Deal Agent and the Lenders at such
time (whether due or accrued).
Agreement: This Receivables Credit Agreement, dated as of
February 4, 1999, as amended, modified, supplemented or restated from time to
time.
Alternative Rate: On any day, an interest rate per annum equal
to the Adjusted Eurodollar Rate or the Base Rate; provided, however, that the
Alternative Rate shall be the Base Rate only in the event that, (i) on or before
the first day of such Interest Period, the relevant Lender shall have notified
the Deal Agent that a Eurodollar Disruption Event has occurred, or (ii) such
Interest Period is a period of less than one month.
2
<PAGE>
Asset: All right, title and interest of the transferring party
in, to and under any and all of the following:
(i) the Contracts, together with all Collections and all
monies due or to become due in payment of such Contracts on and after
the Cut Off Date, including but not limited to any Prepayment Amounts,
any payments in respect of a Casualty Loss or early termination, and
any Recoveries received with respect thereto, but excluding any
Scheduled Payments due prior to the Cut Off Date and any Excluded
Amounts;
(ii) the Equipment related to such Contracts including all
proceeds from any sale or other disposition of such Equipment;
(iii) the Contract Files,
(iv) all payments made or to be made in the future with
respect to such Contracts or the Obligor thereunder and under any
guarantee or similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
and
(vi) all income and proceeds of the foregoing.
Assignment and Acceptance: An assignment and acceptance
entered into by an Investor and an Eligible Assignee, and accepted by the Deal
Agent, in substantially the form of Exhibit B hereto.
Backup Servicer: Harris Trust and Savings Bank, and its
permitted successors and assigns.
Backup Servicer and Collateral Custodian Fee Letter: The
letter dated as of the Closing Date, among Fidelity, the Deal Agent, the Backup
Servicer and Collateral Custodian, setting forth among other things the Backup
Servicer Fee and the Collateral Custodial Fee.
Backup Servicer Fee Rate: The rate per annum set forth in the
Backup Servicer and Collateral Custodian Fee Letter, dated as of the Closing
Date.
Backup Servicing Fee: As defined in Section 6.22.
Bankruptcy Code: The Federal Bankruptcy Code, as amended from
time to time (Title 11 of the United States Code).
Base Rate: On any date, a fluctuating rate of interest per
annum equal to the higher of (i) the Prime Rate or (ii) the Federal Funds Rate
plus the Federal Funds Margin.
Base Rate Advance: The Principal of the Loan during any period
when Interest accrues at a rate based upon the Base Rate.
3
<PAGE>
Benefit Plan: Any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Borrower or any ERISA Affiliate of the
Borrower is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
Borrower: Fidelity Leasing SPE III, LLC, or any permitted
successor thereto.
Borrowing Base: At any time, an amount equal to the product of
the ADCB and the Advance Rate.
Breakage Costs: Any amount or amounts as shall compensate a
Lender for any loss, cost or expense incurred by such Lender (as reasonably
determined by such Lender) as a result of a prepayment by the Borrower of
Principal or Interest pursuant to the terms hereof.
Business Day: Any day of the year other than a Saturday or a
Sunday on which (i) banks are not required or authorized to be closed in New
York City, Philadelphia, Pennsylvania, Charlotte, North Carolina, and Chicago,
Illinois, and (ii) if the term "Business Day" is used in connection with the
Adjusted Eurodollar Rate, dealings in United States dollar deposits are carried
on in the London interbank market.
Casualty Loss: With respect to any item of Equipment or
Vehicle, the loss, theft, damage beyond repair or governmental condemnation or
seizure of such item of Equipment or Vehicle.
Casualty Loss Contract: Any Contract that is subject to a
Casualty Loss.
Closing Date: February 4, 1999.
Code: The Internal Revenue Code of 1986, as amended.
Collateral: At any time, all of the outstanding Assets Granted
to the Lenders hereunder.
Collateral Custodian: Harris Trust and Savings Bank, and its
permitted successors and assigns.
Collection Account: As defined in Section 6.2(f).
Collection Date: The date following the Termination Date on
which the aggregate outstanding Principal has been reduced to zero, the Lender
has received all Interest and other amounts due to the Lender in connection with
this Agreement, each Hedge Transaction has been terminated and each Hedge
Counterparty has received all amounts owing to it under its respective Hedging
Agreement, and the Deal Agent has received all amounts due to it in connection
with this Agreement.
4
<PAGE>
Collections: (i) All cash collections and other cash proceeds
of any Asset, including, without limitation, Scheduled Payments, Prepayments,
Insurance Proceeds, Recoveries, and Residual Proceeds, all as related to amounts
attributable to the Contracts in the Borrowing Base or the related Equipment or
Vehicles, but excluding any Excluded Amounts, (ii) any other funds received by
the Borrower or the Servicer with respect to any Contract or related Equipment
or Vehicle, and (iii) all payments received pursuant to any Hedging Agreement or
Hedge Transaction.
Commercial Paper Notes: On any day, any short-term promissory
notes issued by VFCC with respect to its making the Loan.
Commitment: For each Investor, the commitment of such Investor
to fund the Loan in an amount not to exceed the amount set forth opposite such
Investor's name on Schedule VI, as such amount may be modified in accordance
with the terms hereof.
Contract: Each lease of Equipment or Vehicles by the
Originator to an Obligor, as set forth on the Contract List.
Contract Files: With respect to each Contract, the fully
executed original counterpart (for UCC purposes) of the Contract, the original
certificate of title or other title document with respect to the related
Equipment (if applicable), and otherwise such documents, if any, that the
Collateral Custodian holds, evidencing ownership of such Equipment (if
applicable) and all other documents originally delivered to the Borrower or held
by the Collateral Custodian with respect to any Contract.
Contract List: The contract list provided by the Borrower to
the Deal Agent and the Collateral Custodian, in the form of Schedule V hereto.
CP Rate: For any Interest Period, the per annum rate
equivalent to the weighted average of the per annum rates paid or payable by
VFCC from time to time as interest on or otherwise (by means of interest rate
hedges or otherwise, including incremental carrying costs associated with notes
maturing on dates other than those dates on which VFCC is to receive funds) in
respect of the promissory notes issued by VFCC that are allocated, in whole or
in part, by the Deal Agent (on behalf of VFCC) to fund or maintain the Loan
during such period, as determined by the Deal Agent (on behalf of VFCC) and
reported to the Borrower and the Servicer, which rates shall reflect and give
effect to the commissions of placement agents and dealers in respect of such
promissory notes, to the extent such commissions are allocated, in whole or in
part, to such promissory notes by the Deal Agent (on behalf of VFCC); provided,
however, that if any component of such rate is a discount rate, in calculating
the "CP Rate", the Deal Agent shall for such component use the rate resulting
from converting such discount rate to an interest bearing equivalent rate per
annum.
CP Rate Advance: The Principal of the Loan during any period
when Interest accrues at a rate based upon the CP Rate.
Credit and Collection Policy: The written credit and
collection policies of the Originator and Servicer in effect on the date hereof,
as amended or supplemented from time to time in accordance with Section 4.1(j).
5
<PAGE>
Credit Limit: As of the Closing Date, $150,000,000, and on the
Termination Date, the "Credit Limit" shall mean the aggregate outstanding
Principal.
Custodial Fee: As defined in Section 6.11.
Cut Off Date: January 31, 1999.
Default Ratio: As of any Determination Date, the percentage
equivalent of a fraction, the numerator of which is equal to four times the sum
of the Discounted Contract Balance of Contracts that became Defaulted Contracts
(net of Recoveries related thereto) during the immediately preceding three
calendar months (regardless of whether a Substitute Contract was provided
therefor) and the denominator of which is the average of the ADCB as of each of
the current Determination Date and each of the immediately preceding two
Determination Dates.
Defaulted Contract: (i) A Contract included in the Collateral
as to which the Servicer has determined or should have determined in accordance
with its Credit and Collection Policy that such Contract is not collectible or
is subject to repossession, or (ii) a Contract in the Borrowing Base as to which
all or a portion of any one or more Scheduled Payments is more than 120 days
past due in an aggregate amount equal to the higher of (A) ten dollars or more
or (B) ten percent or more of any Scheduled Payment.
Delinquency Ratio: As of any Determination Date, the
percentage equivalent of a fraction, the numerator of which is the average of
the Discounted Contract Balance of Delinquent Contracts as of such Determination
Date and each of the immediately preceding two Determination Dates and the
denominator of which is the average of the ADCB as of such Determination Date
and each of the immediately preceding two Determination Dates.
Delinquent Contract: A Contract in the Borrowing Base as to
which all or a portion of any one or more Scheduled Payments is 30 days or more
past due.
Derivatives: Any exchange-traded or over-the-counter (i)
forward, future, option, swap, cap, collar, floor, foreign exchange contract,
any combination thereof, whether for physical delivery or cash settlement,
relating to any interest rate, interest rate index, currency, currency exchange
rate, currency exchange rate index, debt instrument, debt price, debt index,
depositary instrument, depositary price, depositary index, equity instrument,
equity price, equity index, commodity, commodity price or commodity index, (ii)
any similar transaction, contract, instrument, undertaking or security, or (iii)
any transaction, contract, instrument, undertaking or security containing any of
the foregoing.
Determination Date: The last Business Day of each calendar
month.
Discount Rate: For any Contract, a rate per annum, equal to
the sum of (i) the Hedge Rate for that Contract, (ii) the Maximum Program Fee
Rate, (iii) .05%, (iv) the Servicing Fee Rate, and (v) the Backup Servicer Fee
Rate.
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Discounted Contract Balance: With respect to any Contract at
any time, the present value of all remaining Scheduled Payments becoming due
under such Contract after the Cut Off Date discounted monthly at the Discount
Rate. The Discounted Contract Balance for each Contract shall be calculated
assuming:
(i) all payments due in any Monthly Period as due on the last
day of the Monthly Period;
(ii) payments are discounted on a monthly basis using a 30 day
month and a 360 day year; and
(iii) all security deposits and drawings under letters of
credit, if any, issued in support of a Contract are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
Early Termination Contracts: Any Contract that the Servicer
has allowed the related Obligor to terminate prior to the date on which the
final Scheduled Payment is due thereunder.
Eligible Assignee: (i) A Person whose short-term rating is at
least "A-1" from S&P and "P-1" from Moody's, or whose obligations under this
Agreement are guaranteed by a Person whose short-term rating is at least "A-1"
from S&P and "P-1" from Moody's, or (ii) such other Person satisfactory to VFCC,
the Deal Agent and each of the rating agencies rating the Commercial Paper Notes
and approved, in writing, by the Borrower; provided, however, that no such
approval shall be required in the event any Investor is required by any rating
agency rating VFCC's commercial paper notes or by any regulatory agency to make
an assignment.
Eligible Contract: On any Determination Date, each Contract
with respect to which each of the following is true:
(i) the information furnished to the Deal Agent or the Lender
with respect to the Contract and the Equipment or Vehicle subject to the
Contract is true and correct in all material respects;
(ii) immediately prior to the Grant hereunder of the Contract
and any related Equipment (or security interest therein), the Contract was owned
by the Borrower free and clear of any Adverse Claim;
(iii) no Scheduled Payment related to the Contract is (A) more
than 60 days delinquent, (B) a payment as to which the Servicer has failed to
make a Servicer Advance, (C) a payment as to which the related Equipment or
Vehicle has been or is in the process of being repossessed, (D) a payment as to
which the related Equipment or Vehicle has been charged-off in accordance with
the credit and collection policies of the Servicer, or (E) a payment due on
other than a monthly basis; provided however, up to 3% (by ADCB) may have
payments due less frequently than on a monthly basis;
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(iv) the Contract is not a Defaulted Contract;
(v) no provision of the Contract has been waived, altered,
modified or extended in any respect except as allowed under the Credit and
Collection Policy of the Servicer and no payment terms of the Contract have been
rewritten or extended;
(vi) the Contract is a valid and binding payment obligation of
the Obligor and is enforceable in accordance with its terms (except as may be
limited by applicable Insolvency Laws and the availability of equitable
remedies);
(vii) the Contract is not and will not be subject to rights of
rescission, setoff, counterclaim or defense and no such rights have been
asserted or threatened with respect to the Contract;
(viii) the Contract, at the time it is Granted to VFCC does
not violate the laws of the United States or any state in any manner which would
create liability for any Lender or which would materially and adversely affect
the enforceability or collectibility of such Contract;
(ix) the Contract and any related Equipment or Vehicle have
not been sold, transferred, assigned or pledged by the Borrower to any other
Person and, (A) with respect to a Contract that is a "true lease," any Equipment
related to such true lease is owned by the Borrower free and clear of any Liens
of any third parties (except for any Permitted Liens), (B) with respect to any
Contract that is a Vehicle lease, the related Vehicle is owned by the Originator
free and clear of any Liens of any third parties (except for Permitted Liens),
and (C) with respect to any other Contract that is not a "true lease," such
Contract is secured by a fully perfected Lien of the first priority on the
related Equipment;
(x) the Contract constitutes chattel paper, an account, an
instrument or a general intangible as defined under the UCC and if the Contract
constitutes "chattel paper" for purposes of the UCC, there is not more than one
"secured party's original" counterpart of the Contract;
(xi) all filings necessary to evidence the conveyance or
transfer to the Deal Agent of the Contract and all right, title and interest in
the related Equipment have been made in all appropriate Jurisdictions;
(xii) the Obligor is not the subject of bankruptcy or other
insolvency proceedings;
(xiii) the Obligor's billing address is in the United States,
the Contract is a U.S. dollar-denominated obligation, and the Contract is
secured by Collateral physically located within the United States, provided,
however, that up to 1% (by ADCB) may have related Equipment physically located
outside the United States;
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(xiv) the Contract does not require the prior written consent
of an Obligor or contain any other restriction on the transfer or assignment of
the Contract (other than a consent or waiver of such restriction that has been
obtained prior to the Closing Date);
(xv) the obligations of the related Obligor under the Contract
are irrevocable, unconditional, non-cancelable, and due and payable on a fixed,
monthly basis (without the right to set off for any reason and net of any
maintenance or cost per copy charges);
(xvi) the Contract has a remaining term to maturity of not
greater than 60 months, provided, however, that up to 10% (by ADCB) may have a
remaining term to maturity of not greater than 96 months;
(xvii) no adverse selection procedure was used in selecting
the Contract for the Collateral;
(xviii) the Obligor under the Contract is required to maintain
casualty insurance with respect to the related Equipment in accordance with the
Servicer's normal requirements and, in the case of Vehicle leases, fire, theft,
liability, collision, and other insurance in an amount equal to the higher of
(A) that required by law, (B) that required in accordance with the Servicer's
Credit and Collection Policy, and (C) that maintained in accordance with
industry standards;
(xix) the Contract is not a "consumer lease" as defined In
Section 2A-103(1)(e) of the UCC;
(xx) the Contract is not subject to any guarantee by the
Servicer nor has the Borrower or the Originator established any specific credit
reserve with respect to the related Obligor;
(xxi) the Contract provides that (A) the Originator, the
Borrower or the Servicer may accelerate all remaining Scheduled Payments if the
Obligor is in default under any of its obligations under such Contract and (B)
the Obligor thereof may not elect to utilize its security deposit to offset any
remaining Scheduled Payment;
(xxii) the Obligor under the Contract is required to maintain
the Equipment or Vehicle in good working order and bear all costs of operating
the Equipment or Vehicle (including the payment of Taxes);
(xxiii) no provision of such Contract provides for a
Prepayment Amount less than the amount calculated in accordance with the
definition of Prepayment Amount;
(xxiv) the Contract has not been terminated as a result of a
Casualty Loss to the related Equipment or Vehicle or for any other reason;
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(xxv) the Discounted Contract Balance of such Contract, when
aggregated with the Discounted Contract Balance of each other Contract having
the same Obligor, does not exceed the Portfolio Concentration Criteria;
(xxvi) the Discounted Contract Balance of such Contract does
not include the amount of any security deposit held by the Servicer or the
Borrower;
(xxvii) such Contract provides that in the event of a Casualty
Loss, the Obligor is required to pay an amount not less than the present value
of all remaining Scheduled Payments discounted at the applicable Discount Rate
plus any past due amounts as of the date of determination;
(xxviii) the Obligor thereunder has represented to the
Originator that such Obligor has accepted the related Equipment or Vehicle and
has had a reasonable opportunity to inspect and test such Equipment or Vehicle
and the Originator has not been notified of any defects therein;
(xxix) all payments in respect of a Contract will be made free
and clear of, and without deduction or withholding for or on account of, any
Taxes, unless such withholding or deduction is required by law;
(xxx) the Obligor under the Contract is not a municipality or
government-related organization; and
(xxxi) the Obligor is acceptable to the Lender in its
reasonable discretion.
Equipment: The tangible assets financed or leased by an
Obligor pursuant to a Contract and/or, unless the context otherwise requires, a
security interest in such assets, such tangible assets to consist of small
ticket equipment, including without limitation small manufacturing, automotive
repair, printing, information and document processing and storage,
telecommunications and office equipment; provided, however, such Equipment shall
not include Vehicles.
ERISA: The U.S. Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
ERISA Affiliate: (i) Any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as the Borrower, (ii) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with the Borrower, or (iii) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as the Borrower, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above.
Eurocurrency Liabilities: As defined in Regulation D of the
Board of Governors of the Federal Reserve System, as in effect from time to
time.
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Eurodollar Disruption Event: The occurrence of any of the
following: (i) a determination by a Lender that it would be contrary to law or
to the directive of any central bank or other governmental authority (whether or
not having the force of law) to obtain United States dollars in the London
interbank market to make, fund or maintain the Loan, (ii) the failure of one or
more of the Reference Banks to furnish timely information for purposes of
determining the Adjusted Eurodollar Rate, (iii) a determination by a Lender that
the rate at which deposits of United States dollars are being offered to such
Lender in the London interbank market does not accurately reflect the cost to
such Lender of making, funding or maintaining the Loan, or (iv) the inability of
a Lender to obtain United States dollars in the London interbank market to make,
fund or maintain the Loan.
Eurodollar Reserve Percentage: For any day in any Interest
Period, the reserve percentage applicable on such day under regulations issued
from time to time by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for First Union National Bank with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (as defined in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from time
to time) and having a term equal to such Interest Period).
Event of Default: As defined in Section 7.1.
Excluded Amounts: (i) Any collections on deposit in the
Collection Account or otherwise received by the Servicer on or with respect to
the Collateral or related Equipment or Vehicles, which collections are
attributable to any Taxes, fees or other charges imposed by any Governmental
Authority, (ii) any collections representing reimbursements of insurance
premiums or payments for services that were not financed by the Originator,
(iii) any collections with respect to Contracts retransferred or substituted for
with respect to a Warranty Event, or otherwise replaced by a Substitute
Contract, and (iv) any late fees, insufficient funds charges, inspection
charges, collection fees, delinquency fees, repossession fees or UCC fees,
extension fees, documentation fees, maintenance fees and insurance fees.
Facility Financing Statement: As defined in Schedule I.
Federal Funds Margin: As defined in the Fee Letter.
Federal Funds Rate: For any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the federal funds rates as quoted by First Union and confirmed in Federal
Reserve Board Statistical Release H.15(519) or any successor or substitute
publication selected by First Union (or, if such day is not a Business Day, for
the next preceding Business Day), or, if, for any reason, such rate is not
available on any day, the rate determined, in the sole opinion of First Union,
to be the rate at which federal funds are being offered for sale in the national
federal funds market at 9:00 a.m. (New York City time).
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Fee Letter: The letter agreement, dated as of the Closing
Date, among the Borrower, the Servicer and the Deal Agent, setting forth, among
other things, the Commitment Fee, the Program Fee and the Structuring Fee.
First Union: First Union National Bank, in its individual
capacity, and its successors or assigns.
GAAP: Generally accepted accounting principles as in effect
from time to time the United States.
Governmental Authority: With respect to any Person, any nation
or government, any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any court or arbitrator having
jurisdiction over such Person.
Grant: To grant, bargain, sell, warrant, alienate, remise,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in and right of set-off against, deposit, set over and confirm. A Grant of the
Contracts or of any other instrument shall include all rights, powers and
options (but none of the obligations) of the granting party thereunder,
including without limitation the immediate and continuing right to claim,
collect, receive and receipt for payments in respect of the Contracts, or any
other payment due thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring proceedings in the name of the granting party or otherwise,
and generally to do and receive anything which the granting party is or may be
entitled to do or receive thereunder or with respect thereto.
H.15: Federal Reserve Statistical Release H.15.
Hedge Breakage Costs: For any Hedge Transaction, any amount
payable by the Borrower for the early termination of that Hedge Transaction or
any portion thereof.
Hedge Counterparty: Any entity which (i) on the date of
entering into any Hedge Transaction (A) is an interest rate swap dealer that is
either a Lender or an Affiliate of a Lender, or has been approved in writing by
the Deal Agent (which approval shall not be unreasonably withheld), and (B) has
a long-term unsecured debt rating of not less than "A" by S&P and not less than
"A-2" by Moody's ("Long-term Rating Requirement") and a short-term unsecured
debt rating of not less than "A-1" by S&P and not less than "P-1" by Moody's
("Short-term Rating Requirement"), and (ii) in a Hedging Agreement (A) consents
to the assignment of the Borrower's rights under the Hedging Agreement to the
Deal Agent pursuant to Section 5.4(b) and (B) agrees that in the event that
Moody's or S&P reduces its long-term unsecured debt rating below the Long-term
Rating Requirement, or reduces its short-term unsecured debt rating below the
Short-term Rating Requirement, it shall transfer its rights and obligations
under each Hedging Transaction to another entity that meets the requirements of
clauses (i) and (ii) hereof and has entered into a Hedging Agreement with the
Borrower on or prior to the date of such transfer.
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Hedge Notional Amount: For any Purchase, the aggregate
notional amount in effect on any day under all Hedge Transactions entered into
pursuant to Section 5.4(a) for that Purchase.
Hedge Rate: For any Contract, the "Fixed Rate" of the Hedge
Transaction to be used in computing the Discount Rate of that Contract.
Hedge Transaction: Each interest rate swap transaction between
the Borrower and a Hedge Counterparty which is entered into pursuant to Section
5.4(a) and is governed by a Hedging Agreement.
Hedging Agreement: Each agreement between the Borrower and a
Hedge Counterparty which governs one or more Hedge Transactions entered into
pursuant to Section 5.4(a), which agreement shall consist of a "Master
Agreement" in a form published by the International Swaps and Derivatives
Association, Inc., together with a "Schedule" thereto in a form acceptable to
the Deal Agent, and each "Confirmation" thereunder confirming the specific terms
of each such Hedge Transaction.
Increased Costs: Any amounts required to be paid by the
Borrower to an Affected Party pursuant to Section 2.10.
Indebtedness: With respect to any Person at any date, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (ii) all obligations of such Person under capital leases, (iii) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (iv) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, and (v) all indebtedness, obligations or
liabilities of that Person in respect of Derivatives.
Indemnified Amounts: As defined in Section 8.1.
Indemnified Persons: As defined in Section 6.19.
Independent Director: A Person serving on the board of
directors of the Independent Manager who is not at the time of appointment and
has not been at any time during the preceding five (5) years: (i) a stockholder,
director, officer, employee or partner of the Borrower, any member of the
Borrower, the Servicer, or any Affiliate of any of them; (ii) a Person having
any direct financial interest in the Borrower, or in any Affiliate of the
Borrower; (iii) a customer, supplier or other Person who derives more than 10%
of its purchases or revenues from its activities with the Borrower, any member
of the Borrower, the Servicer, or any Affiliate of any of them; (iv) a Person
controlling or under common control (as such "control" is defined in the
definition of "Affiliate" set forth herein) with any such stockholder, director,
officer, employee, partner, customer, supplier or other Person; or (v) a member
of the immediate family of any such stockholder, director, officer, employee,
partner, customer, supplier or other Person. Notwithstanding the foregoing, an
Independent Director may serve in similar capacities for other special purpose
entities formed by the Servicer or any Affiliate thereof.
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Independent Manager: A manager of the Borrower who (i) is a
corporation having a board of directors comprised of at least two (2)
Independent Directors and (ii) is not at the time of appointment and has not
been at any time during the preceding five (5) years: (A) a stockholder,
director, officer, employee or partner of the Borrower, any member of the
Borrower, the Servicer, or any Affiliate of any of them; (B) a person having any
direct financial interest in the Borrower, or in any Affiliate of the Borrower;
(C) a customer, supplier or other Person who derives more than 10% of its
purchases or revenues from its activities with the Borrower, any member of the
Borrower, the Servicer, or any Affiliate of any of them; (D) a Person
controlling or under common control (as such "control" is defined in the
definition of "Affiliate" set forth herein) with any such stockholder, director,
officer, employee, partner, customer, supplier or other Person; or (v) a member
of the immediate family of any such stockholder, director, officer, employee,
partner, customer, supplier or other Person. Notwithstanding the foregoing, an
Independent Manager may serve in similar capacities for other special purpose
entities formed by the Servicer or any affiliate thereof.
Ineligible Contract: As defined in Section 5.5.
Insolvency Event: With respect to a specified Person, (i) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Insolvency Law now or hereafter in effect,
or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or ordering the winding-up or liquidation of such Person's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (ii) the commencement by such Person of a voluntary case
under any applicable Insolvency Law now or hereafter in effect, or the consent
by such Person to the entry of an order for relief in an involuntary case under
any such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of any
of the foregoing.
Insolvency Laws: The Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debtor relief laws from time to time in effect affecting
the rights of creditors generally.
Instrument: Any "instrument" (as defined in Article 9 of the
UCC), other than an instrument which constitutes part of chattel paper.
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Insurance Policy: With respect to any Contract, an insurance
policy covering physical damage to or loss of the related Equipment or Vehicle.
Insurance Proceeds: Depending on the context, any amounts
payable or any payments made, to the Servicer under any Insurance Policy.
Interest: For any Interest Period, the sum of the product (for
each such day during such Interest Period) of:
IR x P x 1
---
360
where:
IR = the Interest Rate applicable on such day
P = the Principal outstanding on such day
provided, however, that (i) no provision of this Agreement shall require the
payment or permit the collection of Interest in excess of the maximum permitted
by applicable law, and (ii) Interest shall not be considered paid by any
distribution if at any time such distribution is rescinded or must otherwise be
returned for any reason.
Interest Period: For any Payment Date, the period beginning
on, and including the 13th day of the immediately preceding calendar month (or,
with respect to the first Interest Period, the Closing Date) and ending on and
including the 12th day of the calendar month in which such Payment Date occurs.
Interest Rate: For any day,
(i) to the extent the relevant Lender funded the Loan through
the issuance of commercial paper, a rate equal to the CP Rate for such day, and
(ii) to the extent the relevant Lender did not fund the Loan
through the issuance of commercial paper, a rate equal to the Alternative Rate.
Investment: With respect to any Person, any direct or indirect
loan, advance or investment by such Person in any other Person, whether by means
of share purchase, capital contribution, loan or otherwise, excluding the
acquisition of Assets pursuant to the Purchase Agreement and excluding
commission, travel and similar advances to officers, employees and directors
made in the ordinary course of business.
Investor: First Union and each other liquidity bank that is a
party to a liquidity agreement entered into at any time with the Lender.
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Issuer: VFCC and any other Lender whose principal business
consists of issuing commercial paper or other securities to fund its acquisition
and maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar assets.
JLC: Japan Leasing (U.S.A.), Inc., a Delaware corporation.
Lender: Collectively, VFCC and the Investors and any other
Person that agrees, pursuant to the pertinent Assignment and Acceptance, to fund
the Loan.
LIBOR Rate: For any Interest Period, an interest rate per
annum equal to the average (rounded upward to the nearest one-sixteenth (1/16th)
of one percent) per annum rate of interest determined by First Union National
Bank on the basis of the offered rates for deposits in dollars for a term equal
to the Interest Period; and commencing on the first day of such Interest Period
appearing on Telerate Page 3750 (or, if, for any reason, Telerate Page 3750 is
not available, the Reuters Screen LIBO Page) as of 11:00 a.m. (London time) on
the Business Day which is the second Business Day immediately preceding the
first day of the applicable Interest Period. If neither Telerate Page 3750 nor
the Reuters Screen LIBO Page is available, then the LIBOR Rate shall be the rate
determined by First Union National Bank at its principal office in Charlotte,
North Carolina as its LIBOR Rate (each such determination, absent manifest
error, to be conclusive and binding on all parties hereto and their assignees)
as of the two Business Days prior to the applicable Interest Period as the rate
at which deposits in immediately available funds in U.S. dollars are being,
having been, or would be offered or quoted by First Union National Bank or major
banks in the applicable interbank market for Eurodollar deposits at or about
11:00 a.m. (Charlotte, North Carolina time) on the Business Day which is the
second Business Day immediately preceding the first day of the applicable
Interest Period for delivery on the first day of such Interest Period for a term
equal to such Interest Period.
Lien: With respect to any Asset, (i) any mortgage, lien,
pledge, charge security interest or encumbrance of any kind in respect of such
Asset or (ii) the interest of a vendor or lessor under any conditional sale
agreement, financing lease or other title retention agreement relating to such
Asset.
Liquidation Expenses: With respect to any Contract, the
aggregate amount of all out-of-pocket expenses reasonably incurred by the
Servicer (including amounts paid to any subservicer) and any reasonably
allocated costs of internal counsel, in each case in accordance with the
Servicer's customary procedures in connection with the repossession,
refurbishing and disposition of any related Equipment or Vehicle upon or after
the expiration or earlier termination of such Contract and other out-of-pocket
costs related to the liquidation of any such Equipment or Vehicle, including the
attempted collection of any amount owing pursuant to such Contract if it is a
Defaulted Contract.
Loan: The loan by the Lender to the Borrower made pursuant to
the provisions of Article II hereof.
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Lock-Box: A post office box to which Collections are remitted
for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank into a
Lock-Box Account.
Lock-Box Account: An account maintained for the purpose of
receiving Collections at a bank or other financial institution which has
executed a Lock-Box Notice for the purpose of receiving Collections.
Lock-Box Bank: Any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
Lock-Box Notice: A notice, in substantially the form of
Exhibit A, between the Originator and a Lock-Box Bank.
Maturity Date: February 2, 2000, or such later date to which
the Maturity Date may be extended (if extended) in the sole discretion of VFCC
and each Investor in accordance with the terms of Section 2.1(c).
Maximum Program Fee Rate: The highest Program Fee Rate.
Minimum Overcollateralization: On any date,
Overcollateralization equal to 100% minus the Advance Rate.
Monthly Period: As to any Determination Date, the calendar
month ended on such Determination Date.
Monthly Report: As defined in Section 6.13(a).
Moody's: Moody's Investors Service, Inc., and any successor
thereto.
Multiemployer Plan: A "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by the Borrower or any
ERISA Affiliate on behalf of its employees.
Notice of Borrowing: A notice, substantially in the form of
Exhibit F hereto, delivered pursuant to Section 2.2.
Obligor: A Person obligated to make payments pursuant to a
Contract including any guarantor thereof.
Officer's Certificate: A certificate signed by any manager of
the Borrower or any officer the Servicer, as the case may be, and delivered to
the Collateral Custodian.
Opinion of Counsel: A written opinion of counsel, who may be
counsel for Borrower or the Servicer and who shall be reasonably acceptable to
the Deal Agent.
Originator: JLA Credit Corporation, a Delaware corporation.
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Outstanding Balance: Of any Asset at any time, the then
outstanding principal balance thereof.
Overcollateralization: On any day, the difference determined
by subtracting the Principal on such day from the ADCB on such day.
Payment Date: The 20th day of each calendar month or, if such
day is not a Business Day, the next succeeding Business Day.
Permitted Investments: Any one or more of the following types
of investments:
(i) marketable obligations of the United States of America,
the full and timely payment of which are backed by the full faith and credit of
the United States of America and which have a maturity of not more than 270 days
from the date of acquisition;
(ii) marketable obligations, the full and timely payment of
which are directly and fully guaranteed by the full faith and credit of the
United States of America and which have a maturity of not more than 270 days
from the date of acquisition;
(iii) bankers' acceptances and certificates of deposit and
other interest-bearing obligations (in each case having a maturity of not more
than 270 days from the date of acquisition) denominated in dollars and issued by
any bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term obligations of which are rated "A-1" by S&P and
"P-1" by Moody's;
(iv) repurchase obligations with a term of not more than ten
days for underlying securities of the types described in clauses (i), (ii) and
(iii) above entered into with any bank of the type described in clause (iii)
above;
(v) commercial paper rated at least "A-1" by S&P and "P-1" by
Moody's; and,
(vi) demand deposits, time deposits or certificates of deposit
(having original maturities of no more than 365 days) of depository institutions
or trust companies incorporated under the laws of the United States of America
or any state thereof (or domestic branches of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however that at the time such investment, or
the commitment to make such investment, is entered into, the short-term debt
rating of such depository institution or trust company shall be at least "A-1"
by S&P and "P-1" by Moody's.
Permitted Liens: (i) With respect to Contracts in the
Collateral:
(A) Liens for state, municipal or other local taxes if such
taxes shall not at the time be due and payable, (B) Liens in favor of
the Borrower created pursuant to a Purchase Agreement and transferred
to the Borrowing Base hereunder, and (C) Liens in favor of the Deal
Agent as agent for the Lender created pursuant to this Agreement; and
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(ii) with respect to the related Equipment or Vehicles:
(A) materialmen's, warehousemen's and mechanics' liens and
other Liens arising by operation of law in the ordinary course of
business for sums not due, (B) Liens for state, municipal or other
local taxes if such taxes shall not at the time be due and payable, (C)
Liens in favor of the Borrower created pursuant to the Purchase
Agreement and transferred to the Borrowing Base hereunder, and (D)
Liens in favor of the Deal Agent as agent for the Lender created
pursuant to this Agreement.
Person: An individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, sole proprietorship, joint venture, government (or
any agency or political subdivision thereof) or other entity.
Portfolio Concentration Criteria: The following concentration
limitations at all times measured on the basis of percentage of ADCB:
(i) the sum of the Discounted Contract Balances of Contracts
relating to any one Obligor is no more than of 1.5% of the ADCB;
(ii) the sum of the Discounted Contract Balance of Contracts
relating to the five (5) Obligors with the largest aggregate Discounted Contract
Balances is limited to 10% of the ADCB;
(iii) the sum of the Discounted Contract Balances of Contracts
relating to Obligors located in California is limited to 50% of the ADCB;
(iv) the sum of the Discounted Contract Balances of Contracts
relating to Obligors located in any state (other than California) is limited to
10% of the ADCB;
(v) the sum of the Discounted Contract Balances of Contracts
secured by, or representing leases of, software is limited to 1% of the ADCB;
(vi) the sum of the Discounted Contract Balances of Contracts
relating to Obligors having the same standard industry code is limited to 5% of
the ADCB;
(vii) the sum of the Discounted Contract Balances of Contracts
having terms up to 96 months is limited to 10% of the ADCB;
(viii) the sum of the Discounted Contract Balances of
Contracts constituting leases of Vehicles is limited to 4% of the ADCB; and
(ix) the sum of the Discounted Contract Balances of Contracts
constituting leases of Equipment physically located outside the United States is
limited to 1% of the ADCB.
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Prepaid Contract: Any Contract that has terminated or been
prepaid in full prior to its scheduled expiration date (including because of a
Casualty Loss), other than a Defaulted Contract.
Prepayment Amount: As specified in Section 6.2(b).
Prepayments: Any and all (i) partial and full prepayments on a
Contract (including, with respect to any Contract and any Monthly Period, any
Scheduled Payment or portion thereof which is due in a subsequent Monthly Period
which the Servicer has received, and expressly permitted the related Obligor to
make, in advance of its scheduled due date, and which will be applied to such
Scheduled Payment on such due date), (ii) cash proceeds or rents realized from
the sale, lease, re-lease or re-financing of Equipment or Vehicles under a
Prepaid Contract, net of Liquidation Expenses, and (iii) Recoveries.
Prime Rate: The rate announced by First Union from time to
time as its prime rate in the United States, such rate to change as and when
such designated rate changes. The Prime Rate is not intended to be the lowest
rate of interest charged by First Union in connection with extensions of credit
to debtors.
Principal: The original amount of the Loan, reduced from time
to time by Collections distributed on account of such Principal pursuant to
Sections 2.4 and 2.5; provided, however, that the Principal shall not be reduced
by any distribution or any portion of Collections if at any time such
distribution is rescinded or must be returned for any reason.
Program Fee: As defined in Section 2.9(a).
Program Fee Rate: The rate per annum set forth in the Program
Fee Agreement.
Purchase Agreement: The Purchase and Sale Agreement dated as
of the date hereof, between the Originator and the Borrower, as amended,
modified, supplemented or restated from time to time with the prior written
consent of the Lender.
Qualified Institution: As defined in Section 6.2(f).
RAI: Resource America, Inc., a Delaware corporation.
Rating Agency: Each of S&P, Moody's, and any other rating
agency that has been requested to issue a rating with respect to the commercial
paper notes issued by the Issuer.
Records: All Contracts and other documents, books, records and
other information (including without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
maintained with respect to Assets and the related Obligors which the Borrower
has itself generated, in which the Borrower has acquired an interest pursuant to
the Purchase Agreement or in which the Borrower has otherwise obtained all
interest.
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Recoveries: With respect to a Defaulted Contract, proceeds
from the sale, lease, re-lease or refinancing of the Equipment or Vehicle,
proceeds of any related Insurance Policy and any other recoveries with respect
to such Defaulted Contract and the related Equipment or Vehicle and related
property, and other amounts representing late fees and penalties net of
Liquidation Expenses and amounts, if any, so received that are required to be
refunded to the Obligor on such Contract.
Reference Bank: Any bank which furnishes information for
purposes of determining the Adjusted Eurodollar Rate.
Register: As defined in Section 10.1(c).
Release Date: As defined in Section 5.6.
Replaced Contract: As defined in Section 2.13(a).
Reporting Date: The 16th day of the month or the first
Business Day thereafter.
Required Investors: At a particular time, all (or 100%) of the
Investors.
Required Reports: Collectively, the Monthly Report, the
Servicer's Certificate and the quarterly financial statement of the Servicer
required to be delivered to the Deal Agent pursuant to Section 6.13(c) hereof.
Requirements of Law: For any Person shall mean the certificate
of incorporation or articles of association and by-laws or other organizational
or governing documents of such Person, and any law, treaty, rule or regulation,
or order or determination of an arbitrator or Governmental Authority, in each
case applicable to or binding upon such Person or to which such Person is
subject, whether Federal, state or local (including, without limitation, usury
laws, the Federal Truth in Lending Act, and Regulation Z and Regulation B of the
Board of Governors of the Federal Reserve System).
Residual Proceeds: With respect to any Contract or any item of
Equipment, the net proceeds from the sale, re-lease or other disposition of the
equipment upon the expiration, or early termination, of the term of such
Contract.
Responsible Officer: As to any Person (other than the
Collateral Custodian and Backup Servicer), any officer of such Person with
direct responsibility for the administration of this Agreement and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject, and with respect to the Collateral Custodian and Backup
Servicer it shall mean any officer within the office at the address set forth
under its name on the signature pages hereof including any Vice President,
Managing Director, Assistant Vice President, Secretary, Assistant Secretary or
Assistant Treasurer or any other officer of the Collateral Custodian and Backup
Servicer customarily performing functions similar to those performed by any of
the above designated officers and, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge and familiarity with the particular subject.
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S&P: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. and any successor thereto.
Scheduled Payments: On any Determination Date with respect to
any Contract, (i) each monthly, quarterly, annual or seasonal rent or financing
(whether principal or principal and interest) payment scheduled to be made by
the Obligor thereof after such Determination Date under the terms of such
Contract, reduced by a number of such scheduled payments equal to a number
(rounding upwards to the next highest integer if such number is not an integer)
obtained by dividing (A) the dollar amount of any security deposit related to
such Contract by (B) the amount of a single scheduled payment under such
Contract, (ii) any payment due from the Obligor of such Contract at the
expiration or other termination of such Contract, and (iii) any payments in
connection with a Warranty Event.
Secured Party: (i) Each Lender and (ii) each Hedge
Counterparty that is either a Lender or an Affiliate of a Lender if such
Affiliate executes a counterpart of this Agreement agreeing to be bound by the
terms of this Agreement applicable to a Secured Party.
Servicer: Fidelity Leasing, Inc., and its permitted successors
and assigns.
Servicer Advance: An advance of Scheduled Payments made by the
Servicer pursuant to Section 6.3.
Servicer Default: As specified in Section 6.24.
Servicer's Certificate: As defined in Section 6.13(b).
Servicing Fee: As specified in Section 2.9(b).
Servicing Fee Letter: The letter, dated as of the Closing
Date, among the Borrower, the Servicer, and the Deal Agent setting forth, among
other things, the Servicer Fee.
Servicing Fee Rate: The rate per annum set forth in the
Servicing Fee Letter.
Solvent: As to any Person at any time, having a state of
affairs such that all of the following conditions are met: (i) the fair value of
the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code, (ii) the present fair salable value of the
property of such Person in an orderly liquidation of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (iii) such Person is
able to realize upon its property and pay its debts and other liabilities
(including disputed, contingent and unliquidated liabilities) as they mature in
the normal course of business, (iv) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature, and (v) such Person is not engaged in
a business or a transaction, and is not about to engage in a business or a
transaction, for which such Person's property would constitute unreasonably
small capital.
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Stock Purchase Agreement: That certain agreement by and
between Fidelity and JLC, dated as of December 15, 1998, as amended by Amendment
No. 1, dated as of December 31, 1998, and as further amended by Amendment No. 2,
dated as of January 12, 1999.
Structuring Fee: The arrangement fee agreed to between the
Borrower and the Deal Agent in the Program Fee Agreement.
Subordinated Promissory Note: That certain Subordinated
Promissory Note, dated as of February 4, 1999, made by Fidelity and payable to
the order of Resource Leasing, Inc., a Delaware corporation.
Subservicer: JLA Credit Corporation, a Delaware corporation.
Substitute Contract: On any day, an Eligible Contract which
meets each of the conditions for substitution set forth in Section 2.13.
Successor Servicer: As defined in Section 6.25(a).
Taxes: Any present or future taxes, levies, imposts, duties,
charges, assessments or fees of any nature (including interest, penalties, and
additions thereto) that are imposed by any government or other taxing authority.
Termination Date: The earliest of (i) the date of repayment in
full of the Loan pursuant to Section 2.8, (ii) the date of the occurrence of an
Event of Default pursuant to Section 7.1, and (iii) the Maturity Date.
Termination Notice: As defined in Section 6.24.
Transaction: As defined in Section 3.1.
Transaction Documents: (i) This Agreement, (ii) the Purchase
Agreement, (iii) the Hedging Agreement, (iv) the guaranty, dated as of the date
hereof, given by Fidelity in favor of the Deal Agent, (v) the guaranty, dated as
of the date hereof, given by RAI in favor of the Deal Agent, (vi) the liquidity
purchase agreement, dated as of the date hereof, by and among the Lender, the
Investors, the Deal Agent, and the Liquidity Agent, (vii) the custodial
agreement, dated as of the date hereof, by and among the Borrower, the Servicer,
the Deal Agent and the Collateral Custodian, and (viii) any additional document
the execution of which is necessary or incidental to carrying out the terms of
the foregoing documents.
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UCC: The Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
United States: The United States of America.
Unreimbursed Servicer Advances: At any time, the amount of all
previous Servicer Advances (or portions thereof) as to which the Servicer has
not been reimbursed as of such time pursuant to Section 2.7 and which the
Servicer has determined in its sole discretion will not be recoverable from
Collections with respect to the related Contract.
Unsecured Promissory Note: That certain Unsecured Promissory
Note, dated as of February 4, 1999, made by Fidelity and payable to the order of
Resource Leasing, Inc., a Delaware corporation.
Vehicle: Any motor vehicle which is subject to a Contract
included in the Collateral.
Warranty Event: As to any Asset, the occurrence and
continuance of a material breach of any representation or warranty relating to
such Contract.
Section 1.2 Other Terms.
------------
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9. The word "including" shall mean "including without
limitation," and the word "herein" shall refer to this Agreement and not to any
particular Section herein unless expressly stated.
Section 1.3 Computation of Time Periods.
----------------------------
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 mean "to
but excluding."
ARTICLE II
THE LOAN
Section 2.1 The Loan; Grant of Security.
----------------------------
(a) On the terms and conditions hereinafter set forth, the
Lender shall, on the Closing Date, make the Loan to the Borrower in an amount
equal to the lesser of (i) the Borrowing Base and (ii) the Credit Limit.
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(b) In order to secure the payment of the Principal, Interest,
Aggregate Unpaids, and all other amounts payable with respect to the Loan and
under the Fee Letter, and in order to secure the performance and observance of
all of the covenants and conditions contained in this Agreement and in the Fee
Letter, the Borrower hereby Grants to the Deal Agent, for the ratable benefit of
the Secured Parties, a first priority security interest in all of the
Collateral, including Collections, any and all replacements, substitutions,
distributions on and proceeds and products thereof. The Borrower shall mark its
records (including, without limitation, its computer records and tapes) to
evidence the Grant and the interest of the Deal Agent on behalf of the Secured
Parties in the Collateral.
(c) The Borrower may, within 60 days, but no later than 45
days, prior to the then existing Maturity Date, by written notice to the Deal
Agent (and delivery to the Deal Agent of a new Opinion of Counsel in
substantially the same form and substance as that certain Opinion of Counsel
delivered as of the Closing Date and rendered by Morgan, Lewis & Bockius LLP
with respect to certain federal income tax consequences, such new opinion given
with respect to such extension), make written request for VFCC and the Investors
to extend the Maturity Date for an additional period of 364 days. The Deal Agent
will give prompt notice to VFCC and each of the Investors of its receipt of such
request for extension of the Maturity Date. VFCC and each Investor shall make a
determination, in their sole discretion and after a full credit review, not less
than 15 days prior to the then applicable Maturity Date as to whether or not it
will agree to extend the Maturity Date; provided, however, that the failure of
VFCC or any Investor to make a timely response to the Borrower's request for
extension of the Maturity Date shall be deemed to constitute a refusal by VFCC
or the Investor, as the case may be, to extend the Maturity Date. The Maturity
Date shall only be extended upon the consent of both (i) VFCC and (ii) 100% of
the Investors.
Section 2.2 Procedures for the Loan.
------------------------
Subject to the conditions described in Section 2.1, the Loan
shall be made pursuant to the terms of a Borrowing Certificate and Assignment in
the form of Exhibit E hereto, after receipt by the Lender of a Notice of
Borrowing delivered by the Borrower to the Deal Agent (with a copy to the
Collateral Custodian) at least one Business Day prior to the proposed Closing
Date. Such Notice of Borrowing shall specify (a) the aggregate amount of the
Borrowing Base and (b) the proposed Closing Date. Following receipt of such
Notice of Borrowing, the Deal Agent will consult with VFCC in order to assist
VFCC in determining whether or not to fund the Loan. If VFCC declines to fund
the Loan, the Loan will be made by the Investors. On the Closing Date, VFCC or
each Investor shall, upon satisfaction of the applicable conditions set forth in
Article III, make available to the Borrower in same day funds, at such bank or
other location reasonably designated by Borrower in its Notice of Borrowing
given pursuant to this Section 2.2, an amount equal to (i) the Principal of the
Borrowing Base, in the case of a purchase by VFCC, or (ii) such Investor's pro
rata share of the Principal related to such Borrowing Base, in case the Loan is
made by the Investors.
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Section 2.3 Determination of Interest.
The Deal Agent shall determine the Interest (including unpaid
Interest, if any, due and payable on a prior Payment Date) to be paid on each
Payment Date for the Interest Period and shall advise the Servicer thereof on
the first Business Day after the Interest Period.
Section 2.4 Settlement Procedures Prior to a Termination Date.
The provisions of this Section 2.4 shall apply during the term
of this Agreement prior to the occurrence of a Termination Date.
(a) On each Payment Date, the Servicer shall pay to the
following Persons, from (i) the Collection Account, to the extent of available
funds, and (ii) a Servicer Advance if made or required pursuant to Section 6.3,
the following amounts in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
(vii) SEVENTH, to the extent not paid for by Fidelity, to the
Deal Agent for the ratable payment to each Lender, in an amount equal
to any accrued and unpaid Program Fees for such Payment Date;
(viii) EIGHTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Lenders in respect
thereof;
(ix) NINTH, to the Deal Agent for the ratable payment to each
Lender, in an amount equal to any accrued and unpaid Interest (for the
related Interest Period), with priority to any arrearage;
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(x) TENTH, to the Deal Agent for payment necessary to reduce
the Principal to an amount equal to the Borrowing Base as of the
immediately proceeding Determination Date; and
(xi) ELEVENTH, any remaining amount shall be distributed to
the Borrower.
(b) Notwithstanding anything to the contrary contained in this Section
2.4 or any other provision in this Agreement, if on any Business Day the
aggregate outstanding amount of Principal shall exceed the Borrowing Base, the
Borrower shall contribute Eligible Contracts or remit to the Deal Agent a
payment, no later than the close of business of the Deal Agent on the next
succeeding Business Day, in such amount as may be necessary so that the
outstanding Principal is an amount less than or equal to the Borrowing Base.
Section 2.5 Settlement Procedures Following a Termination
----------------------------------------------
Date.
-----
The provisions of this Section 2.5 shall apply during the term
of this Agreement after the occurrence of a Termination Date.
(a) On each Payment Date, the Servicer shall pay to the
following Persons, from (i) the Collection Account, to the extent of available
funds and (ii) a Servicer Advance if made or required pursuant to Section 6.3,
the following amounts in the following order of priority:
(i) FIRST, pro rata to each Hedge Counterparty, any amounts,
including any Hedge Breakage Costs, owing that Hedge Counterparty under
its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;
(ii) SECOND, to the Servicer, in an amount equal to any
Unreimbursed Servicer Advances, for the payment thereof;
(iii) THIRD, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee arrearage, for the payment thereof;
(iv) FOURTH, to the Servicer, in an amount equal to any
accrued and unpaid Servicing Fee, for the payment thereof;
(v) FIFTH, to the extent not paid for by Fidelity, to the
Backup Servicer, in an amount equal to any accrued and unpaid Backup
Servicing Fee, for the payment thereof;
(vi) SIXTH, to the extent not paid for by Fidelity, to the
Collateral Custodian, in an amount equal to any accrued and unpaid
Custodial Fee, for the payment thereof;
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(vii) SEVENTH, to the extent not paid for by Fidelity, to the
Deal Agent, for the ratable payment to each Lender in an amount equal
to any accrued and unpaid Program Fees for such Payment Date;
(viii) EIGHTH, to the Deal Agent, in the amount of unpaid
Increased Costs and/or Taxes, for payment to the Lenders in respect
thereof;
(ix) NINTH, to the Deal Agent for the ratable payment to each
Lender, in an amount equal to any accrued and unpaid Interest (for the
related Interest Period), with priority to any arrearage;
(x) TENTH, to the Deal Agent for the ratable payment to each
Lender, in an amount to reduce the Principal to zero and to pay in full
the Aggregate Unpaids; and
(xi) ELEVENTH, any remaining amount shall be distributed to
the Borrower.
(b) Notwithstanding anything to the contrary contained in this
Section 2.5 or any other provision in this Agreement, if on any Business Day the
aggregate outstanding amount of Principal shall exceed the Borrowing Base, the
Borrower shall contribute Eligible Contracts or remit to the Deal Agent a
payment, no later than the close of business of the Deal Agent on the next
succeeding Business Day, in such amount as may be necessary so that the
outstanding Principal is an amount less than or equal to the Borrowing Base.
Section 2.6 Collections and Allocations.
----------------------------
(a) Collections. The Servicer shall transfer, or cause to be
transferred, all Collections on deposit in the form of available funds in the
Lock-Box Account to the Collection Account by the close of business on the
Business Day such Collections are received in the Lock-Box Account. The Servicer
shall promptly (but in no event later than two Business Days after the receipt
thereof) deposit all Collections received directly by it in the Collection
Account. The Servicer shall make such deposits or payments on the date indicated
therein by electronic funds transfer through the automated clearing house
system, or by wire transfer, in immediately available funds.
(b) Servicer Deposit. On the Closing Date, the Servicer will
deposit (in immediately available funds) into the Collection Account all
Collections received after the Cut Off Date and through and including the
Closing Date, in respect of Contracts included in the Collateral.
(c) Excluded Amounts. The Servicer may withdraw from the
Collection Account any Collections constituting Excluded Amounts if the Servicer
has, prior to such withdrawal, delivered to the Deal Agent a report setting
forth the calculation of such Excluded Amounts in a format reasonably
satisfactory to the Deal Agent.
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Section 2.7 Payments, Computations, Etc.
----------------------------
(a) Unless otherwise expressly provided herein, all amounts to
be paid or deposited by the Borrower or the Servicer hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 a.m.
(Charlotte, North Carolina time) on the day when due in lawful money of the
United States in immediately available funds to the Agent's Account. The
Borrower shall, to the extent permitted by law, pay to the Secured Parties
interest on all amounts not paid or deposited when due hereunder at 1% per annum
above the Base Rate, payable on demand; provided, however, that such interest
rate shall not at any time exceed the maximum rate permitted by applicable law.
Such interest shall be retained by the Deal Agent except to the extent that such
failure to make a timely payment or deposit has continued beyond the date for
distribution by the Deal Agent of such overdue amount to the Secured Parties, in
which case such interest accruing after such date shall be for the account of,
and distributed by the Deal Agent to the Secured Parties. All computations of
interest and all computations of Interest and other fees hereunder shall be made
on the basis of a year of 360 days for the actual number of days (including the
first but excluding the last day) elapsed.
(b) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of Interest, interest or any fee payable
hereunder, as the case may be.
(c) If the Loan requested by the Borrower pursuant to Section
2.2 is not, for any reason whatsoever related to a default or nonperformance by
the Borrower, made or effectuated, as the case may be, on the date specified
therefor, the Borrower shall indemnify such Lender against any reasonable loss,
cost or expense incurred by such Lender, including, without limitation, any loss
(including loss of anticipated profits, net of anticipated profits in the
reemployment of such funds in the manner determined by such Lender), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund the Loan.
Section 2.8 Optional Prepayment.
--------------------
Upon thirty (30) days written notice to the Deal Agent, as
agent for the Lender, the Borrower shall have the right to repay in whole or in
part the outstanding Principal, provided that all Hedge Transactions have been
terminated. On the Payment Date next succeeding any such notice, the Borrower
shall pay to the Deal Agent, as agent for the Lender, an amount equal to the sum
of (a) the Aggregate Unpaids, (b) all Interest accrued and to accrue, as
reasonably determined by the Deal Agent, and (c) all accrued and unpaid
Commitment Fees, Program Fees, Backup Servicing Fees, Custodial Fees, Increased
Costs, Taxes, Hedge Breaking Costs, Breakage Costs and any other amounts payable
by the Borrower hereunder or under or with respect to any Hedging Agreement, and
the proceeds of such purchase will be deposited into the Collection Account and
paid in accordance with Section 2.5(a).
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Section 2.9 Fees.
-----
(a) Fidelity, in its individual capacity, shall pay to the
Deal Agent from the Collection Account on each Payment Date, monthly in arrears,
a fee (the "Program Fee") agreed to between Fidelity and the Deal Agent in the
Fee Letter.
(b) The Servicer shall be entitled to receive a fee (the
"Servicing Fee"), monthly in arrears in accordance with Sections 2.4(a) and
2.5(a), as applicable, which fee shall be equal to the product of (i) the
Servicing Fee Rate agreed to between the Servicer and the Deal Agent in the
Servicing Fee Letter and (ii) ADCB on the immediately preceding Determination
Date.
(c) The Backup Servicer shall be entitled to receive the
Backup Servicing Fee in accordance with Section Sections 2.4(a) and 2.5(a), as
applicable.
(d) The Collateral Custodian shall be entitled to receive the
Custodial Fee in accordance with Sections Section 2.4(a) and 2.5(a), as
applicable.
(e) The Borrower shall pay to the Deal Agent, on the Closing
Date, the Structuring Fee in immediately available funds.
Section 2.10 Increased Costs; Capital Adequacy; Illegality.
----------------------------------------------
(a) If either (i) the introduction of or any change
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any law or regulation or
(ii) the compliance by a Lender or any Affiliate thereof (each of which, an
"Affected Party") with any guideline or request from any central bank or other
governmental agency or authority (whether or not having the force of law), (A)
shall subject an Affected Party to any Tax (except for Taxes on the overall net
income of such Affected Party or its branch) with respect to the Loan or the
Collateral, or any right to make the Loan hereunder, or on any payment made
hereunder or (B) shall impose, modify or deem applicable any reserve requirement
(including, without limitation, any reserve requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve requirement,
if any, included in the determination of Interest), special deposit or similar
requirement against assets of, deposits with or for the amount of, or credit
extended by, any Affected Party or (C) shall impose any other condition
affecting the Loan or the Collateral or a Lender's rights hereunder, the result
of which is to increase the cost to any Affected Party or to reduce the amount
of any sum received or receivable by an Affected Party under this Agreement,
then within ten days after demand by such Affected Party (which demand shall be
accompanied by a statement setting forth the basis for such demand), the
Borrower shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such additional or increased
cost incurred or such reduction suffered.
(b) If either (i) the introduction of or any change in or in
the interpretation of any law, guideline, rule, regulation, directive or request
or (ii) compliance by any Affected Party with any law, guideline, rule,
regulation, directive or request from any central bank or other governmental
authority or agency (whether or not having the force of law), including, without
limitation, compliance by an Affected Party with any request or directive
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regarding capital adequacy, has or would have the effect of reducing the rate of
return on the capital of any Affected Party as a consequence of its obligations
hereunder or arising in connection herewith to a level below that which any such
Affected Party could have achieved but for such introduction, change or
compliance (taking into consideration the policies of such Affected Party with
respect to capital adequacy) by an amount deemed by such Affected Party to be
material, then from time to time, within ten days after demand by such Affected
Party (which demand shall be accompanied by a statement setting forth the basis
for such demand), the Borrower shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
reduction.
(c) If as a result of any event or circumstance similar to
those described in clauses (a) or (b) of this section, any Affected Party is
required to compensate a bank or other financial institution providing liquidity
support, credit enhancement or other similar support to such Affected Party in
connection with this Agreement or the funding or maintenance of Purchases
hereunder, then within ten days after demand by such Affected Party, the
Borrower shall pay to such Affected Party such additional amount or amounts as
may be necessary to reimburse such Affected Party for any amounts paid by it.
(d) In determining any amount provided for in this section,
the Affected Party may use any reasonable averaging and attribution methods. Any
Affected Party making a claim under this section shall submit to the Borrower a
certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error.
(e) If a Lender shall notify the Deal Agent that a Eurodollar
Disruption Event as described in clause (i) of the definition of "Eurodollar
Disruption Event" has occurred, the Deal Agent shall in turn so notify the
Borrower, whereupon all Principal in respect of which Interest accrues at the
Adjusted Eurodollar Rate shall immediately be converted into Principal in
respect of which Interest accrues at the Base Rate.
Section 2.11 Taxes.
------
(a) All payments made by an Obligor in respect of a Contract
and all payments made by the Borrower or the Servicer under this Agreement will
be made free and clear of and without deduction or withholding for or on account
of any Taxes, unless such withholding or deduction is required by law. In such
event, the Borrower or the Servicer (as the case may be) shall pay to the
appropriate taxing authority any such Taxes required to be deducted or withheld
and the amount payable to each Lender or the Deal Agent (as the case may be)
will be increased (such increase, the "Additional Amount") such that every net
payment made under this Agreement after deduction or withholding for or on
account of any Taxes (including, without limitation, any Taxes on such increase)
is not less than the amount that would have been paid had no such deduction or
withholding been deducted or withheld. The foregoing obligation to pay
Additional Amounts, however, will not apply with respect to (i) net income or
franchise taxes imposed on a Lender or the Deal Agent, respectively, with
respect to payments required to be made by the Borrower or Servicer under this
Agreement, by a taxing jurisdiction in which such Lender or Deal Agent is
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organized, conducts business or is subject to Taxes on a net income basis as of
the Closing Date (as the case may be), or (ii) a participant to the extent such
withholding or deduction was required as of the date of the participation. If a
Lender or the Deal Agent pays any Taxes in respect of which the Borrower is
obligated to pay Additional Amounts under this Section 2.11(a), the Borrower
shall promptly reimburse such Lender or Deal Agent in full.
(b) The Borrower will indemnify each Lender and the Deal Agent
for the full amount of Taxes in respect of which the Borrower is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
jurisdiction on such Additional Amounts) paid by such Lender or the Deal Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; provided, however, that
such Lender or the Deal Agent, as appropriate, making a demand for indemnity
payment shall provide the Borrower, at its address set forth under its name on
the signature pages hereof, with a certificate from the relevant taxing
authority or from a responsible officer of such Lender or the Deal Agent stating
or otherwise evidencing that response such Lender or the Deal Agent has made
payment of such Taxes and will provide a copy of or extract from documentation,
if available, furnished by such taxing authority evidencing assertion or payment
of such Taxes. This indemnification shall be made within ten days from the date
the Lender or the Deal Agent (as the case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the
Borrower of any Taxes, the Borrower will furnish to the Deal Agent, at its
address set forth under its name on the signature pages hereof, appropriate
evidence of payment thereof.
(d) If a Lender or a participant with respect to this
Agreement is not created or organized under the laws of the United States or a
political subdivision thereof, such Lender or participant shall, to the extent
that it may then do so under applicable laws and regulations, deliver to the
Borrower with a copy to the Deal Agent (i) within 15 days after the date hereof,
or, if later, the date on which such Lender or participant becomes a Lender
hereof or participant or with respect hereto two (or such other number as may
from time to time be prescribed by applicable laws or regulations) duly
completed copies of IRS Form W-8, Form 4224 or Form 1001 (or any successor forms
or other certificates or statements which may be required from time to time by
the relevant United States taxing authorities or applicable laws or
regulations), as appropriate, to permit the Borrower to make payments hereunder
for the account of such Lender or participant, as the case may be, without
deduction or withholding of United States federal income or similar Taxes and
(ii) upon the obsolescence of or after the occurrence of any event requiring a
change in, any form or certificate previously delivered pursuant to this Section
2.11(d), copies (in such numbers as may from time to time be prescribed by
applicable laws or regulations) of such additional, amended or successor forms,
certificates or statements as may be required under applicable laws or
regulations to permit the Borrower to make payments hereunder for the account of
such Lender or participant, without deduction or withholding of United States
federal income or similar Taxes. If a Lender or participant is created or
organized under the laws of the United States or a political subdivision
thereof, but is not a corporation, such Lender or participant shall, to the
extent that it may then do so under applicable laws and regulations, deliver to
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the Borrower with a copy to the Deal Agent within 15 days of the date hereof,
or, if later, the date such Lender or participant becomes a Lender hereof or
becomes a participant or with respect hereto, a duly competed IRS Form W-9. The
Lender shall notify the Borrower of any participants with respect to its rights
under this Agreement.
(e) For any period with respect to which a Lender, or
participant, or the Deal Agent has failed to provide the Borrower with the
appropriate form, certificate or statement described in clause (d) of this
section (other than if such failure is due to a change in law occurring after
the date of this Agreement), the Deal Agent or such Lender or participant, as
the case may be, shall not be entitled to indemnification under clauses (a) or
(b) of this section with respect to any Taxes.
(f) Within 30 days of the written request of the Borrower
therefor, the Deal Agent and the Lenders and participants, as appropriate, shall
execute and deliver to the Borrower such certificates, forms or other documents
which can be furnished consistent with the facts and which are reasonably
necessary to assist the Borrower in applying for refunds of Taxes remitted
hereunder; provided, however, that the Deal Agent, the Lenders and participants
shall not be required to deliver such certificates, forms or other documents if
in their respective sole discretion it is determined that the deliverance of
such certificate, form or other document would have a material adverse affect on
the Deal Agent, any Lender or participant; and provided further, however, that
the Borrower shall reimburse the Deal Agent or any such Lender or participant
for any reasonable expenses incurred in the delivery of such certificate, form
or other document.
(g) If, in connection with an agreement or other document
providing liquidity support, credit enhancement or other similar support to the
Lenders in connection with this Agreement or the funding or maintenance of the
Loan hereunder, the Lenders are required to compensate a bank or other financial
institution in respect of Taxes under circumstances similar to those described
in this section then within ten days after demand by the Lenders, the Borrower
shall pay to the Lenders such additional amount or amounts as may be necessary
to reimburse the Lenders for any amounts paid by them.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this section shall survive the termination of this Agreement.
Section 2.12 Assignment of the Purchase Agreement.
-------------------------------------
The Borrower hereby represents, warrants and confirms to the
Deal Agent that the Borrower has assigned to the Deal Agent, for the ratable
benefit of the Secured Parties hereunder, all of the Borrower's right and title
to and interest in the Purchase Agreement. The Borrower confirms that following
an Event of Default the Deal Agent shall have the sole right to enforce the
Borrower's rights and remedies under the Purchase Agreement for the benefit of
the Secured Parties, but without any obligation on the part of the Deal Agent,
the Lenders or any of their respective Affiliates, to perform any of the
obligations of the Borrower under the Purchase Agreement. The Borrower further
confirms and agrees that such assignment to the Deal Agent shall terminate upon
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the Collection Date; provided, however, that the rights of the Deal Agent and
the Secured Parties pursuant to such assignment with respect to rights and
remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Purchase Agreement, which rights and remedies survive the termination of the
Purchase Agreement, shall be continuing and shall survive any termination of
such assignment.
Section 2.13 Substitution of Contracts.
--------------------------
On any day prior to the occurrence of the Termination Date,
the Borrower may, and upon the request of the Deal Agent shall, subject to the
conditions set forth in this Section 2.13, replace any Contract (a) which is a
Defaulted Contract, (b) which is subject to a Warranty Event, or (c) in respect
of which the Obligor thereunder has requested the rewriting and/or restructuring
of such Contract with one or more other Contracts (each, a "Substitute
Contract"), provided that no such replacement shall occur unless each of the
following conditions is satisfied as of the date of such replacement and
substitution:
(i) the Borrower has previously recommended to the Deal Agent
(with a copy to the Collateral Custodian) in writing that the Contract to be
replaced should be replaced (each, a "Replaced Contract");
(ii) each Substitute Contract is an Eligible Contract on the
date of substitution;
(iii) after giving effect to any such substitution, the
aggregate outstanding Principal does not exceed the lesser of the (i) Borrowing
Base and (ii) the Credit Limit;
(iv) the aggregate Discounted Contract Balance of such
Substitute Contracts shall be equal to or greater than the aggregate Discounted
Contract Balances of Contracts being replaced;
(v) such Substitute Contracts, at the time of substitution by
the Borrower, shall have approximately the same weighted average life as the
replaced Contracts;
(vi) all representations and warranties of the Borrower
contained in Sections 4.1 and 4.2 shall be true and correct on and as of the
date of substitution of any such Substitute Contract;
(vii) the substitution of any Substitute Contract does not
cause an Event of Default to occur; and
(viii) the Borrower shall deliver to the Deal Agent on the
date of such substitution a certificate of a Responsible Officer certifying that
each of the foregoing is true and correct as of such date.
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In addition, the Borrower shall deliver to the Collateral Custodian the related
Contract File as required by Section 3.2. In connection with any such
substitution, the Deal Agent as agent for the Secured Parties shall,
automatically and without further action, be deemed to release to the Borrower,
free and clear of any Lien created pursuant to this Agreement, all of the right,
title and interest of the Deal Agent as agent for the Secured Parties in, to and
under such Replaced Contract, and the Deal Agent as agent for the Secured
Parties shall be deemed to represent and warrant that it has the corporate
authority and has taken all necessary corporate action to accomplish such
transfer, but without any other representation and warranty, express or implied.
Any right of the Deal Agent as agent for the Secured Parties to substitute any
Contract in the Collateral pursuant to this Section 2.13 shall be in addition
to, and without limitation of, any other rights and remedies that the Deal Agent
as agent for the Secured Parties or any Secured Party may have to require the
Borrower or the Servicer, as applicable, to substitute for, or accept release
of, any Contract pursuant to the terms of this Agreement.
ARTICLE III
CONDITIONS OF THE ADVANCE
Section 3.1 Conditions Precedent to the Loan.
---------------------------------
The advance of the Loan is subject to the condition precedent
that the Deal Agent shall have received on or before the Closing Date the items
listed in Schedule I, each (unless otherwise indicated) dated such date, in form
and substance satisfactory to the Deal Agent and the Lenders. The advance of the
Loan and the right of the Servicer to remit Collections to the Borrower pursuant
to Section 2.4 (each, a "Transaction") shall be subject to the further
conditions precedent that:
(a) with respect to the advance of the Loan, the Servicer
shall have delivered to the Deal Agent, on or prior to the Closing Date in form
and substance satisfactory to the Deal Agent:
(i) a Borrowing Certificate and Assignment (Exhibit E), and
(ii) a Notice of Borrowing (Exhibit F); and
(b) on the date of such Transaction the following statements
shall be true and the Borrower shall be deemed to have certified that:
(i) The representations and warranties contained in Sections
4.1 and 4.2 are true and correct on and as of such day as though made
on and as of such date,
(ii) No event has occurred and is continuing, or would result
from such Transaction which constitutes an Event of Default,
(iii) On and as of such day, after giving effect to such
Transaction, (A) the outstanding Principal does not exceed the lesser
of (I) the Borrowing Base and (II) the Credit Limit, and (B) the
Overcollateralization shall not be less than the Minimum
Overcollateralization,
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(iv) On and as of such day, the Borrower and the Servicer each
has performed all of the agreements contained in this Agreement to be
performed by such person at or prior to such day,
(v) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
the Loan or remittance of Collections in accordance with the provisions
hereof,
(vi) Copies of all amendments to the Stock Purchase Agreement,
its exhibits, the disclosure letter, or related transaction documents
have been furnished to the Deal Agent,
(vii) Arthur Andersen has furnished the Deal Agent audit
results with respect to stratification and pool confirmation, an oral
verification with lessees, a tape to file the audit, and an annualized
loss analysis,
(viii) For the purpose of consummating the acquisition of the
stock of the Originator by Fidelity, the Deal Agent has received
confirmation that an amount equal to or greater than the excess of (A)
the "Purchase Price" as defined in the Section 2.2 of the Stock
Purchase Agreement over (B) Principal as of the Closing Date was
provided by RAI to Fidelity on or before the Closing Date in the form
of subordinated debt as evidenced by the fully executed Subordinated
Promissory Note and the fully executed Unsecured Promissory Note, and
both such notes are in the physical possession of the Deal Agent, and
(ix) No events of default in transaction documents relating to
JLA Funding Corporation II or JLA Funding Corporation III have occurred
and are continuing;
(c) on the date of such Transaction all documents executed in
connection with the acquisition by Fidelity of the stock of the Originator shall
be in form and substance satisfactory to the Deal Agent, including, without
limitation:
(i) an amendment to the Stock Purchase Agreement in the form
of the draft of Amendment No. 3 to the Stock Purchase Agreement
previously furnished to the Deal Agent and its counsel,
(ii) the Escrow Agreement, in the form of Exhibit 7.1(h) to
the Stock Purchase Agreement, executed by an escrow agent which is a
responsible financial institution acceptable to the Deal Agent,
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(iii) opinions of counsel delivered on the Closing Date
substantially in the form of the drafts previously furnished to the
Deal Agent and its counsel, with such changes therein as shall be
requested by or acceptable to the Deal Agent,
(iv) documents evidencing a permanent waiver of the events of
default in the Sale and Servicing Agreement and Indenture of JLA
Funding Corporation II, a Delaware corporation, resulting from ultimate
parent bankruptcy proceedings,
(v) documents evidencing a permanent waiver of the events of
default in the Sale and Servicing Agreement and Indenture of JLA
Funding Corporation III, a Delaware corporation, resulting from
ultimate parent bankruptcy proceedings, and
(vi) documents evidencing a waiver of the event of default in
the Sale and Servicing Agreement and Indenture of JLA Funding
Corporation II with respect to the average default calculation for a
period acceptable to the Deal Agent which shall not be less than three
months; and
(d) on the date of such Transaction, the Deal Agent shall have
received such other approvals, opinions or documents as the Deal Agent may
reasonably require.
Section 3.2 Delivery of Contract Files.
---------------------------
As a condition subsequent to the advance of the Loan or
substitution of Substitute Contracts made hereunder, the Borrower shall deliver
to the Collateral Custodian, no less than (i) two Business Days prior to such
advance or (ii) five Business Days prior to such substitution, the related
Contract Files; provided, however, the Borrower shall deliver to the Collateral
Custodian no less than one Business Day the Contract Files related to Eligible
Contracts contributed to cause the Overcollateralization to equal or exceed the
Minimum Overcollateralization.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Borrower.
-----------------------------------------------
The Borrower represents and warrants as follows:
(a) Organization and Good Standing. The Borrower is a limited
liability company duly organized and validly existing in good standing under the
laws of the State of Delaware, and has full limited liability company power,
authority and legal right to own or lease its properties and conduct its
business as such properties are presently owned or leased and as such business
is presently conducted, and to execute, deliver and perform its obligations
under this Agreement and the Purchase Agreement.
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(b) Due Qualification. The Borrower is duly qualified to do
business and is in good standing as a limited liability company, and has
obtained or will obtain all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would have a material adverse effect on its ability to perform its
obligations hereunder.
(c) Due Authorization. The execution and delivery of this
Agreement, the Purchase Agreement, and the Fee Letter, and the consummation of
the transactions provided for herein and therein have been duly authorized by
the Borrower by all necessary limited liability company action on the part of
the Borrower.
(d) No Conflict. The execution and delivery of this Agreement,
the Purchase Agreement, and the Fee Letter, the performance by the Borrower of
the transactions contemplated hereby and thereby and the fulfillment of the
terms hereof and thereof will not conflict with or result in any breach of any
of the material terms and provisions of, and will not constitute (with or
without notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to which the
Borrower is a party or by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this
Agreement, the Purchase Agreement, and the Fee Letter, the performance of the
transactions contemplated hereby and thereby and the fulfillment of the terms
hereof and thereof will not conflict with or violate, in any material respect,
any Requirements of Law applicable to the Borrower.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Borrower, threatened against the
Borrower, before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement, the Purchase Agreement or the Fee Letter, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement, the
Purchase Agreement or the Fee Letter, or (iii) seeking any determination or
ruling that could reasonably be expected to be adversely determined, and if
adversely determined, would materially and adversely affect the performance by
the Borrower of its obligations under this Agreement, the Purchase Agreement or
the Fee Letter.
(g) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental Authority
required in connection with the execution and delivery by the Borrower of this
Agreement, the Purchase Agreement, and the Fee Letter, the performance by the
Borrower of the transactions contemplated by this Agreement, the Purchase
Agreement, and the Fee Letter, and the fulfillment of the terms hereof and
thereof by the Borrower, have been obtained.
(h) Solvency. The Borrower is Solvent and transactions
contemplated by this Agreement, the Purchase Agreement, and the Fee Letter do
not and will not impair such Solvent state of the Borrower.
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(i) Selection Procedures; Credit and Collection Policy. No
procedures believed by the Borrower to be materially adverse to the interests of
the Lenders were utilized by the Borrower in identifying and/or selecting the
Contracts in the Collateral. In addition, each Contract shall have been
underwritten in accordance with and satisfy the standards of any Credit and
Collection Policy which has been established by the Borrower or the Originator
and is then in effect. Such Credit and Collection Policy or procedure may be
amended from time to time in the Borrower's or the Originator's normal course of
business provided that the Borrower shall not materially change such credit and
collection policy or procedure without the prior written consent of the Deal
Agent.
(j) Taxes. The Borrower has filed or caused to be filed all
Tax returns which, to its knowledge, are required to be filed. The Borrower has
paid or made adequate provisions for the payment of all Taxes and all
assessments made against it or any of its property (other than any amount of Tax
the validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of the Borrower), and no Tax lien has been filed and, to
the Borrower's knowledge, no claim is being asserted, with respect to any such
Tax, fee or other charge.
(k) Agreements Enforceable. This Agreement, the Purchase
Agreement, and the Fee Letter constitute the legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with their
respective terms, except as such enforceability may be limited by Insolvency
Laws and except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
(l) Exchange Act Compliance. The proceeds of the Loan will not
be used by the Borrower to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(m) No Liens. Each Asset, together with the Contract related
thereto, shall, at all times, be owned by the Borrower free and clear of any
Adverse Claim except as provided herein, and upon the advance of the Loan, any
Substitution, or remittance of Collections, the Secured Parties shall acquire
(subject to recordation where necessary) a valid and perfected first priority
undivided ownership interest in each Asset then existing or thereafter arising
and Collections with respect thereto, free and clear of any Adverse Claim except
as provided hereunder. No effective financing statement or other instrument
similar in effect covering any Asset or Collections with respect thereto shall
at any time be on file in any recording office except such as may be filed in
favor of the Deal Agent relating to this Agreement.
(n) Reports Accurate. No Monthly Report (if prepared by the
Borrower, or to the extent that information contained therein is supplied by the
Borrower), information, exhibit, financial statement, document, book, record or
report furnished or to be furnished by the Borrower to the Deal Agent or a
Lender in connection with this Agreement is or will be inaccurate in any
material respect as of the date it is or shall be dated or (except as otherwise
disclosed to the Deal Agent or such Lender, as the case may be, at such time) as
of the date so furnished, and no such document contains or will contain any
material misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.
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(o) Location of Offices. The principal place of business and
chief executive office of the Borrower and the office where the Borrower keeps
all the Records are located at the address of the Borrower referred to in
Section 11.2 hereof (or at such other locations as to which the notice and other
requirements specified in Section 5.2(m) shall have been satisfied).
(p) Lock-Boxes. The names and addresses of all the Lock-Box
Banks, together, with the account numbers of the Lock-Box Accounts of the
Originator at such Lock-Box Banks and the names, addresses and account numbers
of all accounts to which Collections of the Assets outstanding before the
advance hereunder has been made, are specified in Schedule II (which shall be
deemed to be amended in respect of terminating or adding any Lock-Box Account or
Lock-Box Bank upon satisfaction of the notice and other requirements specified
in respect thereof).
(q) Tradenames. Except as described in Schedule III, the
Borrower has no trade names, fictitious names, assumed names or "doing business
as" names or other names under which it has done or is doing business.
(r) Purchase Agreement. The Purchase Agreement is the only
agreement pursuant to which the Borrower purchases Assets.
(s) Value Given. (i) The Borrower shall have given reasonably
equivalent value to the Originator in consideration for the transfer to the
Borrower of the Assets under the Purchase Agreement, (ii) no such transfer shall
have been made for or on account of an antecedent debt owed by the Originator to
the Borrower, (iii) no such transfer is or may be voidable or subject to
avoidance under any section of the Bankruptcy Code, and (iv) no event or
circumstance has occurred that would constitute an Event of Default pursuant to
Section 7.1 hereof.
(t) Accounting. The Borrower accounts for the transfers to it
from the Originator of interests in Assets and Collections under the Purchase
Agreement as sales of such Assets and for the Loan as debt of the Borrower in
its books, records and financial statements, in each case consistent with GAAP
and with the requirements set forth herein.
(u) Separate Entity. The Borrower is operated as an entity
with assets and liabilities distinct from those of the Originator and any
Affiliates thereof (other than the Borrower), and the Borrower hereby
acknowledges that the Deal Agent and the Secured Parties are entering into the
transactions contemplated by this Agreement in reliance upon the Borrower's
identity as a separate legal entity from the Originator and from each such other
Affiliate of the Originator.
(v) Security Interest. The Borrower has granted a security
interest (as defined in the UCC) to the Deal Agent, as agent for the Secured
Parties, in the Assets and Collections, which is enforceable in accordance with
applicable law upon execution and delivery of this Agreement. Upon the filing of
UCC-1 financing statements naming the Deal Agent as secured party and the
Borrower as debtor, the Deal Agent, as agent for the Secured Parties, shall have
a first priority perfected security interest in the Assets and Collections
(except for any Permitted Liens). All filings (including, without limitation,
such UCC filings) as are necessary in any jurisdiction to perfect the interest
of the Deal Agent as agent for the Secured Parties, in the Collateral have been
made.
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(w) Investments. The Borrower does not own or hold directly or
indirectly, any Investment.
(x) Investment Company Act. The Borrower is not, and is not
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(y) Special Purpose Entity.
(i) The Borrower shall respect and appropriately document the
separate and independent nature of its activities, as compared with
those of any other Person, take all reasonable steps to continue its
identity as a separate legal entity, and make it apparent to Persons
that the Borrower is an entity with assets and liabilities distinct
from those of any other Person. Without limiting the foregoing, the
Borrower:
(A) shall maintain a principal executive and
administrative office through which its business is conducted
separately from those of any other Person, and, to the extent
that the Borrower and any other Persons have offices in
contiguous space, there shall be fair and appropriate
allocation of overhead costs and expenses related to services
performed by any employee of an Affiliate among them, and each
such entity shall bear its fair share of such expenses and
expenses relating to services;
(B) shall engage only in those transactions described in
Section 3.1 of its limited liability company agreement and
matters necessarily incident thereto;
(C) shall have stationery and other business forms and a
mailing address and a telephone number separate from that of
any other Person;
(D) shall maintain an arm's-length relationship with its
Affiliates and enter into transactions with Affiliates only on
commercially reasonable terms, including without limitation,
ensuring that, to the extent that it jointly contracts with
any of its members or Affiliates to do business with vendors
or service providers or to share overhead expenses, the costs
incurred in so doing shall be allocated fairly among such
entities and that each such entity shall bear its fair share
of such costs and shall ensure that, to the extent that the
Borrower contracts or does business with vendors or service
providers where the goods and services provided are partially
for the benefit of any other Person, the costs incurred in so
doing shall be fairly allocated to or among such entities for
whose benefit the goods and services are provided and that
each such entity shall bear its fair share of such costs;
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(E) shall at all times be adequately capitalized in light
of its contemplated business, shall at all times provide for
its own operating expenses and liabilities from its own funds,
shall not allow its funds to be diverted to any other Person
or for other than the use of the Borrower, and shall not,
except as may be expressly permitted by agreements of the
Borrower, allow its funds to be commingled with those of any
Affiliate of the Borrower or any other Person;
(F) shall maintain its assets and transactions separately
from those of any other Person, reflect such assets and
transactions in financial statements separate and distinct
from those of any other Person, evidence such assets and
transactions by appropriate entries in books and records
separate and distinct from those of any other Person and to
the extent that the financial statements or the books and
records of the Borrower are consolidated with those of any
other Person, the fact of such consolidation shall be noted in
a footnote to such Person's financial statements or books and
records, as the case may be;
(G) shall ensure that all material transactions between
the Borrower and any of its Affiliates shall be only on an
arm's-length basis;
(H) shall hold itself out to the public under its own name
as a legal entity separate and distinct from any other Person,
shall act solely in its own name and through its own
authorized officers and agents, and no Affiliate of the
Borrower shall be appointed to act as agent by the Borrower,
except as may be expressly permitted by any written agreements
of the Borrower;
(I) shall ensure that decisions with respect to its
business and daily operations shall be independently made by
the Borrower (although the officer making any particular
decision may also be an officer or director of any Affiliate
of the Borrower) and shall not be dictated by an Affiliate of
the Borrower;
(J) shall have, if appropriate, UCC-1 financing
statements, with respect to all assets purchased from any
other Person;
(K) shall file its own tax returns or, if it is a member
of a consolidated group, will join in the consolidated return
of such group as a separate member thereof and shall ensure
that any financial reports required of the Borrower shall
comply with GAAP and shall be issued separately from, but may
be consolidated with, any reports prepared for any of its
Affiliates;
(L) shall ensure that any tax payments made on the
Borrower's behalf are allocated appropriately;
(M) shall comply with all provisions of its limited
liability company agreement and shall observe all necessary,
appropriate and customary limited liability formalities;
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(N) shall maintain its bank accounts separate from any
other Person; and
(O) shall correct any known misunderstanding regarding its
separate identity.
Failure to comply with any of the foregoing covenants shall not affect
the status of the Borrower as a separate legal entity.
(ii) The Borrower shall not:
(A) incur any indebtedness for borrowed money, or assume
or guaranty any indebtedness for borrowed money of any other
entity, other than (I) any indebtedness incurred in connection
with the sale or financing of leases to any third-party
purchaser or lender, including, without limitation, the Loan,
(II) any indebtedness to the Originator or any Affiliate
thereof incurred in connection with the acquisition of Leases,
which indebtedness to the Originator or such Affiliate shall
be subordinated to all other obligations of the Borrower,
(III) any indebtedness incurred in connection with the entry
by the Borrower into interest rate swap, hedge and other
related agreements, as set forth in Section 3.1 of its limited
liability company agreement, and (IV) any trade payables
incurred in the ordinary cause of its business as set forth in
Section 3.1 of its limited liability company agreement;
(B) direct or participate in the management of any other
Person's operations, and no other Person shall be permitted to
direct or participate in the management of the Borrower;
(C) hold itself out as having agreed to pay, or as being
liable, primarily or secondarily, for any obligations of any
other Person, except as may be expressly permitted in any
written agreements of the Borrower;
(D) become liable as a guarantor or otherwise with respect
to any debt or contractual obligation of any other Person;
(E) make any payment or distribution of assets with
respect to any obligation of any other Person or grant any
lien, security interest or encumbrance on any of its assets to
secure any obligation of any other Person;
(F) make loans, advances or otherwise extend credit to any
other Person, except on an arm's-length basis, and shall not
permit any Affiliate of the Borrower to advance funds to the
Borrower or otherwise supply funds to, or guaranty debts of,
the Borrower, except as may be expressly permitted by any
written agreements of the Borrower;
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(G) fail to maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Person;
(H) acquire the obligations or securities of its
Affiliates;
(I) shall not identify itself as a division of any other
Person;
(J) file or consent to the filing of any petition to take
advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment
for the benefit of creditors, except pursuant to Section
7.3(b) of its limited liability company agreement;
(K) transfer any direct or indirect ownership interest in
the Borrower such that the transferee owns, in the aggregate
with the ownership interests of its Affiliates and family
members in the Borrower, more than a 49% interest in the
Borrower, unless such transfer is accompanied by the delivery
of an acceptable non-consolidation opinion to the Lender and
to any applicable Rating Agency concerning, as applicable, the
Borrower, the new transferee and/or their respective owners;
(L) acquire the obligations or securities of its
Affiliates or owners, including partners, members or
shareholders, as applicable;
(M) buy or hold evidence of indebtedness issued by any
other person or entity (other than cash and investment-grade
securities);
(N) identify itself as a division of any other person or
entity; and
(O) take or refrain from taking, as applicable, each of
the activities specified in the assumptions set forth in the
opinions of Morgan, Lewis & Bockius LLP, delivered on the
Closing Date as a condition to the Loan.
Failure to comply with any of the foregoing covenants shall not affect
the status of the Borrower as a separate legal entity.
(iii) The Borrower shall have an Independent Manager, and the
Independent Manager cannot be removed without the prior appointment of
a successor Independent Manager. In addition, as long as the Loan is
outstanding, upon the bankruptcy, dissolution or withdrawal of the
Independent Manager or upon any event that causes the Independent
Manager to cease to be the Independent Manager, a successor Independent
Manager shall be appointed by the Borrower's managing member promptly
thereafter. Any such appointment of a successor Independent Manager
shall require the prior consent of the Deal Agent, and such consent
shall not be unreasonably withheld. As long as the Loan is outstanding,
the Borrower and any member, manager or other Person on behalf of the
Borrower, may take the following actions only with the prior written
approval of the Independent Manager (including, with respect to the
Independent Manager, the approval of its two Independent Directors):
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(A) make an assignment for the benefit of creditors;
(B) file a voluntary petition in bankruptcy or make or
commence an insolvency filing or proceeding or any similar
filing or proceeding;
(C) file a petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or
regulation;
(D) file an answer or other pleading admitting or failing
to contest the material allegations of a petition filed
against the Borrower in any proceeding of the type described
in subclauses (A) through (C) of this Subsection (iii);
(E) seek, consent to, or acquiesce in the appointment of a
trustee, receiver or liquidator of the Borrower or of all or
any substantial part of the Borrower's properties;
(F) amend the Borrower's limited liability company
agreement;
(G) voluntarily dissolve and wind up, or consolidate or
merge the Borrower or sell all or substantially all of the
assets of the Borrower;
(H) admit in writing its inability to pay its debts
generally as they become due or take any action in furtherance
of the foregoing; or
(I) engage in any business activity not set forth in
Section 3.1 of its limited liability company agreement.
To the fullest extent permitted by law, the Independent Manager shall
not be guilty of breaching any fiduciary duty to any Member by refusing
to consent to any of the above listed actions, and
(iv) Notwithstanding anything in this Agreement, as long as
the Loan is outstanding, (A) the Borrower may not take any of the
actions set forth in subsection (G) of Subparagraph (ii) of this
Section, and (B) Sections 3.1, 7.1, 7.2, 7.3, 8.1, Article IX and
Article XI of the Borrower's limited liability company agreement, in
effect as of the Closing Date, may not be amended.
(z) Confirmation from the Originator. The Borrower has
received in writing from the Originator confirmation that, so long as the
Borrower is not "insolvent" within the meaning of the Bankruptcy Code, the
Originator will not cause the Borrower to file a voluntary petition under the
Bankruptcy Code or any other bankruptcy or insolvency laws. Each of the Borrower
and the Originator is aware that in light of the circumstances described in the
preceding sentence and other relevant facts, the filing of a voluntary petition
under the Bankruptcy Code for the purpose of making any Asset in the Borrowing
Base or any other assets of the Borrower available to satisfy claims of the
creditors of the Originator would not result in making such assets available to
satisfy such creditors under the Bankruptcy Code.
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(aa) Accuracy of Representations and Warranties. Each representation or
warranty by the Borrower contained herein or in any certificate or other
document furnished by the Borrower pursuant hereto or in connection herewith is
true and correct in all material respects.
The representations and warranties set forth in this section shall survive the
Grant of the Assets to the Deal Agent as agent for the Secured Parties. Upon
discovery by the Borrower, the Servicer, any Secured Party, the Liquidity Agent
or the Deal Agent of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written notice
to the others.
Section 4.2 Representations and Warranties of Borrower
-------------------------------------------
Relating to the Agreement and the Contracts.
--------------------------------------------
The Borrower hereby represents and warrants to the Deal Agent,
each Secured Party, the Liquidity Agent and each Investor that, as of the
Closing Date:
(a) Binding, Obligation, Valid Transfer and Security Interest.
----------------------------------------------------------
(i) This Agreement and the Purchase Agreement each constitute
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with its terms, except as such
enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(ii) This Agreement constitutes a Grant in all Collateral to
the Deal Agent as agent for the Secured Parties. Upon the filing of the
financing statements described in Section 6.8(c), the Deal Agent as
agent for the Secured Parties shall have a first priority perfected
security interest in all Collateral, subject only to Permitted Liens.
Neither the Borrower nor any Person claiming through or under Borrower
shall have any claim to or interest in the Collection Account and,
except for the interest of Borrower in such property, as a debtor for
purposes of the UCC.
(b) Eligibility of Contracts. As of the Closing Date, (i)
Schedule I to this Agreement and the information contained in the Borrowing
Certificate delivered pursuant to Section 2.2 is an accurate and complete
listing in all material respects of all the Contracts in the Collateral as of
the Closing Date and the information contained therein with respect to the
identity of such Contracts and the amounts owing thereunder is true and correct
in all material respects as of the Cut Off Date, (ii) each such Contract is an
Eligible Contract, (iii) each such Contract and the related Equipment or Vehicle
is free and clear of any Lien of any Person (other than Permitted Liens) and in
compliance with all Requirements of Law applicable to the Borrower, and (iv)
with respect to each such Contract, all consents, licenses, approvals or
authorizations of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Borrower in
connection with the transfer of an interest in such Contract and the related
Equipment or Vehicle to the Deal Agent as agent for the Secured Parties have
been duly obtained, effected or given and are in full force and effect.
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(c) Notice of Breach. The representations and warranties set
forth in this Section 4.2 shall survive the advance of the Loan and the Grant in
the Collateral to the Deal Agent as agent for the Secured Parties. Upon
discovery by the Borrower, the Servicer, any Secured Party, the Deal Agent, the
Liquidity Agent or any Investor of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others. Failure by any Secured Party, the Deal
Agent, the Liquidity Agent or any Investor to give such notice shall not in any
manner effect, alter, modify or limit the rights and remedies of any such
Persons under this Agreement, the Fee Agreement, or otherwise.
ARTICLE V
GENERAL COVENANTS OF THE BORROWER
Section 5.1 General Covenants.
------------------
Until the date on which all Aggregate Unpaids have been
indefeasibly paid in full, the Borrower hereby covenants that:
(a) Compliance with Laws, Preservation of Corporate Existence.
The Borrower will comply in all material respects with all applicable laws,
rules, regulations and orders and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges.
Section 5.2 Covenants of Borrower.
----------------------
The Borrower hereby covenants that:
(a) Contracts Not to be Evidenced by Instruments. The Borrower
will take no action to cause any Contract which is not, as of the Closing Date,
evidenced by an Instrument, to be so evidenced except in connection with the
enforcement or collection of such Contract.
(b) Security Interests. The Borrower will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien on any Contract in the Collateral or related Equipment
or Vehicle, whether now existing or hereafter transferred hereunder, or any
interest therein, and the Borrower will not sell, pledge, assign or suffer to
exist any Lien on its interest, if any, hereunder. The Borrower will promptly
notify the Deal Agent of the existence of any Lien on any Contract in the
Collateral or related Equipment or Vehicle and the Borrower shall defend the
right, title and interest of the Deal Agent as agent for the Secured Parties in,
to and under the Contracts in the Collateral and the related Equipment, against
all claims of third parties; provided, however, that nothing in this Section
5.2(b) shall prevent or be deemed to prohibit the Borrower from suffering to
exist Permitted Liens upon any of the Contracts in the Collateral or any related
Equipment or Vehicles.
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(c) Delivery of Collections. The Borrower agrees to pay to the
Servicer promptly (but in no event later than two Business Days after receipt)
all Collections received by Borrower in respect of the Contracts in the
Collateral.
(d) Compliance with the Law. Borrower hereby agrees to comply
in all material respects with all Requirements of Law applicable to Borrower,
the Contracts and the Equipment.
(e) Distributions. The Borrower shall not declare or pay,
directly or indirectly, any dividend or make any other distribution (whether in
cash or other property) with respect to the profits, assets or capital of the
Borrower or any Person's interest therein, or purchase, redeem or otherwise
acquire for value any of its capital stock now or hereafter outstanding, except
that so long as no Event of Default has occurred and is continuing and no Event
of Default would occur as a result thereof or after giving effect thereto and
the Borrower would continue to be Solvent as a result thereof and after giving
effect thereto, the Borrower may declare and pay cash or stock dividends on its
capital stock.
(f) Separate Corporate Existence. The Borrower shall be in
compliance with the Special Purpose Entity requirements set forth in Section
4.1(y).
(g) Location of Borrower, Records; Instruments. The Borrower
(i) shall not move outside the Commonwealth of Pennsylvania, the location of its
chief executive office, without 30 days' prior written notice to the Deal Agent
and (ii) shall not move, or consent to the Collateral Custodian or Servicer
moving, the Contract Files from the possession of the Collateral Custodian
thereof on the Closing Date, without 30 days' prior written notice to the Deal
Agent and (iii) will promptly take all actions required of each relevant
jurisdiction in order to continue the first priority perfected security interest
of the Deal Agent as agent for the Secured Parties in all Assets in the
Collateral. The Borrower will give the Deal Agent prompt notice of a change
within the Commonwealth of Pennsylvania of the location of its chief executive
office.
(h) Accounting of Purchases. The Borrower will not account for
or treat (whether in financial statements or otherwise) the transactions
contemplated hereby in any manner other than as indebtedness of the Borrower to
a Lender. The Borrower will not account for or treat (whether in financial
statements or otherwise) the transaction contemplated by the Purchase Agreement
in any manner other than as the sale, or absolute assignment, of the Assets by
the Originator to the Borrower, as the case may be.
(i) ERISA Matters. The Borrower will not (i) engage or permit
any ERISA Affiliate to engage in any prohibited transaction for which an
exemption is not available or has not previously been obtained from the United
States Department of Labor; (ii) permit to exist any accumulated funding
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deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of the
Code, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to a Multiemployer Plan that
the Borrower or any ERISA Affiliate may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (iv)
terminate any Benefit Plan so as to result in any liability; or (e) permit to
exist any occurrence of any reportable event described in Title IV of ERISA.
(j) Originator Assets. With respect to each Asset acquired by
the Borrower, the Borrower will (i) acquire such Asset pursuant to and in
accordance with the terms of the Purchase Agreement, (ii) take all action
necessary to perfect, protect and more fully evidence the Borrower's ownership
of such Asset, including, without limitation, (A) filing and maintaining,
effective financing statements (Form UCC-1) against the Originator in all
necessary or appropriate filing offices, and filing continuation statements,
amendments or assignments with respect thereto in such filing offices and (B)
executing or causing to be executed such other instruments or notices as may be
necessary or appropriate and (iii) take all additional action that the Deal
Agent may reasonably request to perfect, protect and more fully evidence the
respective interests of the parties to this Agreement in the Assets and interest
therein.
(k) Debt; Investments. The Borrower will not incur any debt
other than the debt arising under the Transaction Documents. The Borrower will
not make any Investments other than Permitted Investments.
(l) Change in the Purchase Agreement. The Borrower will not
amend, modify, waive or terminate any terms or conditions of the Purchase
Agreement.
(m) Credit and Collection Policy. The Borrower shall not cause
or permit any changes to be made to the Credit and Collection Policy in any
manner that would materially and adversely affect the collectibility of the
Contracts sold hereunder without the prior written consent of the Deal Agent,
which consent shall not be unreasonably withheld.
Section 5.3 Release of Lien on Equipment and Vehicles.
------------------------------------------
At the same time as (a) any Contract in the Collateral expires
by its terms and all amounts in respect thereof have been paid by the related
Obligor and deposited in the Collection Account or (b) any Contract becomes a
Prepaid Contract and all amounts in respect thereof have been paid by the
related Obligor and deposited in the Collection Account, the Deal Agent as agent
for the Lenders will, to the extent requested by the Servicer, release its
interest in such Contract and the related Equipment or Vehicle; provided,
however, that the Deal Agent as agent for the Lenders will make no
representation or warranty, express or implied, with respect to any such
Contract or Equipment or Vehicle. Nothing in this section shall diminish the
Servicer's obligations pursuant to Section 6.1(c) with respect to the proceeds
of any such sale.
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Section 5.4 Hedging of Contracts.
---------------------
(a) On or prior to the Closing Date, the Borrower shall enter
into one or more Hedge Transactions, provided that each such Hedge Transaction
shall:
(i) be entered into with a Hedge Counterparty and governed
by a Hedging Agreement;
(ii) have a scheduled Termination Date that coincides with
the last Scheduled Payment due to occur for the
Contracts;
(iii) provide a notional amount from time to time equal to one
hundred percent (100%) of the Principal (the "Hedged
Level"), or the aggregate amount (discounted to the
present value at the "Swap Rate" defined below) of all
remaining Scheduled Payments on the Contracts (the
"Hedged Amount");
(iv) provide that the Hedge Counterparty's payment
obligations shall be calculated by reference to the
Hedge Amount and a per annum rate determined by
reference to the LIBOR Rate, as determined on the
immediately preceding Payment Date;
(v) provide that the Borrower's payment obligations shall be
calculated by reference to the Hedged Amount and a per
annum fixed rate agreed to between the Borrower and the
Hedge Counterparty (the "Swap Rate"); and
(vi) provide for net payments to be paid on each Payment Date
and on any early Termination Date thereunder (A) on
behalf of the Borrower, solely out of funds in the
Collection Account and (B) by the Hedge Counterparty for
deposit into the Collection Account.
On each date following the Closing Date, the aggregate notional amount (adjusted
for constant payment rate) of such Hedging Agreement shall be equal to or
greater than the product of one hundred percent (100%) and the Principal on such
date. The Borrower shall assign to the Deal Agent on behalf of the Lender all of
the Borrower's rights under the Hedging Agreements relating to the Contracts.
(b) As additional security hereunder, the Borrower hereby
assigns to the Deal Agent, as agent for the Secured Parties, all right, title
and interest of the Borrower in each Hedging Agreement, each Hedge Transaction,
and all present and future amounts payable by a Hedge Counterparty to the
Borrower under or in connection with the respective Hedging Agreement and Hedge
Transaction(s) with that Hedge Counterparty ("Hedge Collateral"), and grants a
security interest to the Deal Agent, as agent for the Secured Parties, in the
Hedge Collateral. The Borrower acknowledges that, as a result of that
assignment, the Borrower may not, without the prior written consent of the Deal
Agent, exercise any rights under any Hedging Agreement or Hedge Transaction,
except for the Borrower's right under any Hedging Agreement to enter into Hedge
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Transactions in order to meet the Borrower's obligations under this Section 5.4.
Nothing herein shall have the effect of releasing the Borrower from any of its
obligations under any Hedging Agreement or any Hedge Transaction, nor be
construed as requiring the consent of the Deal Agent, any Lender, or any Hedge
Counterparty for the performance by the Borrower of any such obligations.
Section 5.5 Release of Ineligible Contracts.
--------------------------------
In the event of a breach of any representation or warranty set
forth in Section 4.2 with respect to a Contract in the Collateral (each such
Contract, an "Ineligible Contract"), no later than the earlier of (i) knowledge
by the Borrower of such Contract becoming an Ineligible Contract and (ii)
receipt by the Borrower from the Deal Agent or Servicer of written notice
thereof, the Borrower shall either (a) accept the release of each such
Ineligible Contract and any related Equipment or Vehicle selected by the
Servicer as to which such breach related, and the Deal Agent as agent for the
Secured Parties shall release to the Borrower, without recourse, representation
or warranty, all of its right, title and interest in such Ineligible Contract;
or (b) subject to the satisfaction of the conditions in Section 2.13, substitute
for such Ineligible Contract a Substitute Contract. In any of the foregoing
instances, the Borrower shall accept the retransfer of each such Ineligible
Contract, and the ADCB shall be reduced by the Discounted Contract Balance of
each such Ineligible Contract and, if applicable, increased by the Discounted
Contract Balance of each such Substitute Contract. On and after the date of
retransfer, the Ineligible Contract so retransferred shall not be included in
the Collateral and, as applicable, the Substitute Contract shall be included in
the Collateral. In consideration of such retransfer, without substitution, the
Borrower shall, on the date of retransfer of such Ineligible Contract, make a
deposit to the Collection Account (for allocation pursuant to Sections 2.4(a)
and 2.5(a), as applicable) in immediately available funds in an amount equal to
the Discounted Contract Balance of such Ineligible Contract. Upon each
retransfer to the Borrower of such Ineligible Contract, the Deal Agent, as agent
for the Secured Parties, shall automatically and without further action be
deemed to release to the Borrower, without recourse, representation or warranty,
all the right, title and interest of the Deal Agent, as agent for the Secured
Parties in, to and under such Ineligible Contract and all monies due or to
become due with respect thereto, the related Equipment or Vehicle and all
proceeds of such Ineligible Contract and Recoveries and Insurance Proceeds
relating thereto and all rights to security for any such Ineligible Contract,
and all proceeds and products of the foregoing. The Deal Agent, as agent for the
Secured Parties, shall, at the sole expense of the Servicer execute such
documents and instruments of release as may be prepared by the Servicer on
behalf of the Borrower and take other such actions as shall reasonably be
requested by the Borrower to effect the transfer of such Ineligible Contract
pursuant to this subsection.
Section 5.6 Retransfer of Assets.
---------------------
In the event of a breach of any representation or warranty set
forth in Section 4.2 hereof which breach could reasonably be expected to have a
material adverse affect on the rights of the Secured Parties or the Deal Agent,
as agent of the Secured Parties, or on the ability of the Borrower to perform
its obligations hereunder, by notice then given in writing to the Borrower, the
Deal Agent may direct the Borrower to accept the release of all of the Assets,
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in which case the Borrower shall be obligated to accept release of such Assets
on a Payment Date specified by the Borrower (such date, the "Release Date") and
to terminate all Hedge Transactions prior to the Release Date. The Borrower
shall deposit on the Release Date an amount equal to the deposit amount provided
below for such Assets in the Collection Account for distribution to the Secured
Parties in accordance with Section 2.4 or 2.5, as applicable. The deposit amount
(the "Release Amount") for such release will be equal to the (a) sum of (i) the
Aggregate Unpaids, (ii) all Interest accrued and to accrue, as reasonably
determined by the Deal Agent, and (iii) all Hedge Breakage Costs and any other
amounts payable by Borrower under or with respect to any Hedging Agreement minus
(b) the amount, if any, available in the Collection Account on such Payment
Date. On the Release Date, provided that full Release Amount has been deposited
into the Collection Account, the security interest of the Secured Parties in the
Assets shall be transferred to the Borrower; and the Deal Agent as agent for the
Secured Parties shall, at the sole expense of the Servicer, execute and deliver
such instruments of release, in each case without recourse, representation or
warranty, as shall be prepared and reasonably requested by the Servicer on
behalf of the Borrower. If the Deal Agent gives a notice directing the Borrower
to accept such a release as provided above, the obligation of Borrower to accept
a release pursuant to this Section 5.6 shall constitute the sole remedy
respecting a breach of the representations and warranties contained in Section
4.2 available to the Secured Parties and the Deal Agent on behalf of the Secured
Parties.
ARTICLE VI
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 6.1 Appointment and Acceptance; Duties.
-----------------------------------
(a) Appointment of Initial Servicer and Collateral Custodian.
Fidelity Leasing, Inc. is hereby appointed as Servicer pursuant to this
Agreement. Fidelity Leasing, Inc. accepts the appointment and agrees to act as
the Servicer pursuant to this Agreement. Harris Trust and Savings Bank is hereby
appointed as Collateral Custodian pursuant to this Agreement. Harris Trust and
Savings Bank accepts the appointment and agrees to act as the Collateral
Custodian pursuant to this Agreement.
(b) General Duties. The Servicer will manage, service,
administer, collect and enforce the Assets in the Collateral on behalf of the
Lenders (the "Servicing Duties") and will have full power and authority to do
any and all things in connection with the performance of the Servicing Duties
which it deems necessary or desirable provided, however, nothing it does may
contravene the provisions of this Agreement. The Servicer will perform the
Servicing Duties with reasonable care, using that degree of skill and attention
that a prudent person engaging in such activities would exercise, but in any
event shall not act with less care than the Servicer exercises with respect to
all comparable contracts that it services for itself or others. The Servicing
Duties will include, without limitation, collection and posting of all payments,
responding to inquiries of Obligors regarding the Assets in the Collateral,
investigating delinquencies and making Servicer Advances, remitting payments to
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the Deal Agent in a timely manner, furnishing monthly, quarterly and annual
statements with respect to collections and payments in accordance with the
provisions of this Agreement, and using its best efforts to maintain the
perfected first priority security interest of the Deal Agent as agent for the
Secured Parties in the Assets. The Servicer will follow customary standards,
policies, and procedures and will have full power and authority, acting alone,
to do any and all things in connection with the performance of the Servicing
Duties that it deems necessary or desirable. If the Servicer commences a legal
proceeding to enforce a Defaulted Contract or commences or participates in a
legal proceeding (including a bankruptcy proceeding) relating to or involving an
Asset in the Collateral, the Deal Agent as agent for the Secured Parties will be
deemed to have automatically assigned its interest in the related Contract to
the Servicer to the extent necessary for purposes of commencing or participating
in any such proceeding as a party or claimant, and the Servicer is authorized
and empowered by the Secured Parties, pursuant to this Section 6.1(b), to
execute and deliver, on behalf of itself and the Deal Agent as agent for the
Secured Parties, any and all instruments of satisfaction or cancellation, or
partial or full release or discharge, and all other notices, demands, claims,
complaints, responses, affidavits or other documents or instruments in
connection with any such proceedings. If in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, then the Deal Agent will, at the Servicer's expense and direction,
take steps on behalf of the Deal Agent as agent for the Secured Parties to
enforce the Contract, including bringing suit in the name of the Deal Agent as
agent for the Secured Parties.
(c) Disposition Upon Termination of Contract. Upon the
termination of a Contract included in the Collateral as a result of a default by
the Obligor thereunder the Servicer will use commercially reasonable efforts to
dispose of any related Equipment or Vehicle. Without limiting the generality of
the foregoing, the Servicer may dispose of any such Equipment or Vehicle by
purchasing such Equipment or Vehicle or by selling such Equipment or Vehicle to
any of its Affiliates for a purchase price equal to the fair market value
thereof, any such sale to be evidenced by a certificate of a Responsible Officer
of the Servicer delivered to the Deal Agent setting forth the Contract, the
Equipment, the sale price of the Equipment or Vehicle and certifying that such
sale price is the fair market value of such Equipment or Vehicle.
(d) Further Assurances. The Deal Agent will, at the sole
expense of the Servicer, furnish the Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
(e) Custodial Duties. The Collateral Custodian shall take and
retain custody of the Contract Files delivered by the Borrower pursuant to
Section 3.3 hereof in accordance with the terms and conditions of this
Agreement, all for the benefit of the Secured Parties and subject to the Lien
thereon in favor of the Deal Agent as agent for the Secured Parties. Within five
Business Days of its receipt of any Contract File, the Collateral Custodian
shall review the related Contract to verify that such Contract has been executed
and has no missing or mutilated pages and to confirm (in reliance on the related
contract number and Lessee name) that such Contract is referenced on the related
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list of Contracts. In order to facilitate the foregoing review by the Collateral
Custodian, in connection with each delivery of Contract Files hereunder to the
Collateral Custodian, the Servicer shall provide to the Collateral Custodian an
electronic file (in EXCEL or a comparable format) that contains the related list
of Contracts or which otherwise contains the Contract number and the name of the
Lessee with respect to each related Contract. If, at the conclusion of such
review, the Collateral Custodian shall determine that such Contract is not
executed or in proper form on its face, or that it is not referenced on such
list of Contracts, the Collateral Custodian shall promptly notify the Borrower
and the Deal Agent of such determination by providing a written report to such
Persons setting forth, with particularity, the lack of execution of such
Contract, that such Contract has missing or mutilated pages, or the fact that
such Contract was not referenced on the related list of Contracts. In addition,
unless instructed otherwise in writing by the Borrower or the Deal Agent within
10 days of the Collateral Custodian's delivery of such report, the Collateral
Custodian shall return any Contract not referenced on such list of Contracts to
the Borrower. Other than the foregoing, the Collateral Custodian shall not have
any responsibility for reviewing any Contract File.
(f) In taking and retaining custody of the Contract Files, the
Collateral Custodian shall be deemed to be acting as the agent of the Deal Agent
as agent for the Secured Parties; provided, however, that the Collateral
Custodian makes no representations as to the existence, perfection or priority
of any Lien on the Contract Files or the instruments therein; and provided,
further, that the Collateral Custodian's duties as agent shall be limited to
those expressly contemplated herein. All Contract Files shall be kept in
fireproof vaults or cabinets at the locations specified on Schedule IV attached
hereto, or at such other office as shall be specified to the Deal Agent by the
Collateral Custodian in a written notice delivered at least 45 days prior to
such change. All Contract Files shall be placed together in a separate file
cabinet with an appropriate identifying label and maintained in such a manner so
as to permit retrieval and access. All Contract Files shall be clearly
segregated from any other documents or instruments maintained by the Collateral
Custodian. The Collateral Custodian shall clearly indicate that such Contract
Files are the sole property of the Borrower and that the Borrower has granted an
interest therein to the Deal Agent on behalf of the Secured Parties. In
performing its duties, the Collateral Custodian shall use the same degree of
care and attention as it employs with respect to similar Contracts which it
holds as Collateral Custodian.
(g) Concerning the Collateral Custodian.
------------------------------------
(i) The Collateral Custodian may conclusively rely on and
shall be fully protected in acting upon any certificate, instrument,
opinion, notice, letter, telegram or other document delivered to it and
which in good faith it reasonably believes to be genuine and which has
been signed by the proper party or parties. The Collateral Custodian
may rely conclusively on and shall be fully protected by in acting upon
(A) the written instructions of any designated officer of the Deal
Agent or (B) the verbal instructions of the Deal Agent.
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(ii) The Collateral Custodian may consult counsel satisfactory
to it and the advice or opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(iii) The Collateral Custodian shall not be liable for any
error of judgment, or for any act done or step taken or omitted by it,
in good faith, or for any mistakes of fact or law, or for anything
which it may do or refrain from doing in connection herewith except in
the case of its willful misconduct or grossly negligent performance or
omission.
(iv) The Collateral Custodian makes no warranty or
representation and shall have no responsibility (except as expressly
set forth in this Agreement) as to the content, enforceability,
completeness, validity, sufficiency, value, genuineness, ownership or
transferability of the Contracts, and will not be required to and will
not make any representations as to the validity or value (except as
expressly set forth in this Agreement) of any of the Contracts. The
Collateral Custodian shall not be obligated to take any legal action
hereunder which might in its judgment involve any expense or liability
unless it has been furnished with an indemnity reasonably satisfactory
to it.
(v) The Collateral Custodian shall have no duties or
responsibilities except such duties and responsibilities as are
specifically set forth in this Agreement and no covenants or
obligations shall be implied in this Agreement against the Collateral
Custodian.
(vi) The Collateral Custodian shall not be required to expend
or risk its own funds in the performance of its duties hereunder.
(vii) It is expressly agreed and acknowledged that the
Collateral Custodian is not guaranteeing performance of or assuming any
liability for the obligations of the other parties hereto or any
parties to the Contracts.
Section 6.2 Collection of Payments.
-----------------------
(a) Collection Efforts, Modification of Contracts. The
Servicer will make reasonable efforts to collect all payments called for under
the terms and provisions of the Contracts in the Collateral as and when the same
become due, and will follow those collection procedures which it follows with
respect to all comparable Contracts that it services for itself or others. The
Servicer may not waive, modify or otherwise vary any provision of a Contract.
The Servicer may in its discretion waive any late payment charge or any other
fees that may be collected in the ordinary course of servicing any Contract in
the Collateral.
(b) Prepaid Contract. The Servicer may not permit a Contract
in the Collateral to become a Prepaid Contract (which shall not include a
Contract that becomes a Prepaid Contract due to a Casualty Loss), unless such
prepayment will result in the Collection Account receiving an amount (the
"Prepayment Amount") not less than the sum of (i) the Discounted Contract
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Balance on the date of such prepayment, (ii) any outstanding Servicer Advances
thereon (and to the extent not included therein any accrued and unpaid interest)
and (iii) all Hedge Breakage Costs owing to the relevant Hedge Counterparty for
any termination of one or more Hedge Transactions, in whole or in part, as
required by the terms of any Hedging Agreement as the result of any such
Contract becoming a Prepaid Contract.
(c) Acceleration. The Servicer shall accelerate the maturity
of all or any Scheduled Payments under any Contract in the Collateral under
which a default under the terms thereof has occurred and is continuing (after
the lapse of any applicable grace period) promptly after such Contract becomes a
Defaulted Contract.
(d) Taxes and other Amounts. To the extent provided for in any
Contract in the Collateral, the Servicer will use its best efforts to collect
all payments with respect to amounts due for taxes, assessments and insurance
premiums relating to such Contracts or the Equipment or Vehicles and remit such
amounts to the appropriate Governmental Authority or insurer on or prior to the
date such payments are due.
(e) Payments to Lock-Box Account. On or before the Closing
Date, the Servicer shall have instructed all Obligors to make all payments in
respect of the Contracts in the Collateral to a Lock-Box or directly to a
Lock-Box Account.
(f) Establishment of the Collection Account. The Servicer
shall cause to be established, on or before the Closing Date, and maintained in
the name of the Deal Agent as agent for the Secured Parties, with an office or
branch of a depository institution or trust company 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) a segregated corporate trust
account (the "Collection Account"); provided, however, that at all times such
depository institution or trust company shall be a depository institution
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any domestic branch of a foreign
bank), (i) (A) which has either (I) a long-term unsecured debt rating of "A" or
better by S&P and "A-2" or better by Moody's or (II) a short-term unsecured debt
rating or certificate of deposit rating of "A-1" or better by S&P or "P-1" or
better by Moody's, (B) the parent corporation of which has either (I) a
long-term unsecured debt rating of "A-" or better by S&P and "A-3" or better by
Moody's or (II) a short-term unsecured debt rating or certificate of deposit
rating of "A-1" or better by S&P and "P-1" or better by Moody's or (C) is
otherwise acceptable to the Deal Agent and (ii) whose deposits are insured by
the Federal Deposit Insurance Corporation (any such depository institution or
trust company, a "Qualified Institution").
Section 6.3 Servicer Advances.
------------------
For each Monthly Period, if the Servicer determines that any
Scheduled Payment (or portion thereof) which was due and payable pursuant to a
Contract in the Collateral during such Monthly Period was not received prior to
the end of such Monthly Period, the Servicer shall make an advance in an amount
up to the amount of such delinquent Scheduled Payment (or portion thereof) (any
such advance, a "Servicer Advance"). Notwithstanding the preceding sentence, (a)
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the Servicer shall be required to make a Servicer Advance with respect to any
Contract if, and only if, the Servicer determines (such determination to be
conclusive and binding) in good faith that such Servicer Advance will ultimately
be recoverable from future collections on, or the liquidation of, the Collateral
(and, in the case of Contracts related to Vehicles, liquidation of the Vehicles)
and payments by one or more Hedge Counterparties under one or more Hedging
Agreements, (b) the Servicer's obligation to make a Servicer Advance for any
Contract shall cease on the day such Contract becomes a Defaulted Contract or is
charged-off pursuant to the Servicer's Credit and Collection Policies and (c)
any successor Servicer, including the Backup Servicer, will not be obligated to
make any Servicer Advances. The Servicer will deposit any Servicer Advances into
the Collection Account on or prior to 11:00 a.m. (Charlotte, North Carolina
time) on the related Payment Date, in immediately available funds.
Section 6.4 Realization Upon Defaulted Contract.
------------------------------------
The Servicer will use reasonable efforts to repossess or
otherwise comparably convert the ownership of any Equipment and Vehicles
relating to a Defaulted Contract and will act as sales and processing agent for
Equipment and Vehicles which it repossesses. The Servicer will follow such other
practices and procedures as it deems necessary or advisable and as are customary
and usual in its servicing of contracts and other actions by the Servicer in
order to realize upon such Equipment and Vehicles, which practices and
procedures may include reasonable efforts to enforce all obligations of Obligors
and repossessing and selling such Equipment and Vehicles at public or private
sale in circumstances other than those described in the preceding sentence.
Without limiting the generality of the foregoing, the Servicer may sell any such
Equipment to the Servicer or its Affiliates for a purchase price equal to the
then fair market value thereof, any such sale to be evidenced by a certificate
of a Responsible Officer of the Servicer delivered to the Deal Agent setting
forth the Contract, the Equipment, the sale price of the Equipment (or Vehicle)
and certifying that such sale price is the fair market value of such Equipment
(or Vehicle). In any case in which any such Equipment or Vehicle has suffered
damage, the Servicer will not expend funds in connection with any repair or
toward the repossession of such Equipment or Vehicle unless it reasonably
determines that such repair and/or repossession will increase the Recoveries by
an amount greater than the amount of such expenses. The Servicer will remit to
the Collection Account the Recoveries received in connection with the sale or
disposition of Equipment or Vehicle relating to a Defaulted Contract.
Section 6.5 Maintenance of Insurance Policies.
----------------------------------
(a) In the case of Equipment leases, (i) the Servicer shall
use its best efforts to ensure that each Obligor maintains an Insurance Policy
with respect to the related Equipment in an amount at least equal to the sum of
the Discounted Contract Balance of the related Contract and shall ensure that
each such Insurance Policy names the Deal Agent, as agent for the Secured
Parties, as loss payee and as an insured thereunder; provided, however, that the
Servicer, in accordance with its Credit and Collection Policy, may allow
Obligors to self-insure, (ii) the Borrower and the Servicer hereby assign all of
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their right, title and interest (together with a respective security interest)
in each Insurance Policy to the Deal Agent, as agent for the Secured Parties,
and (iii) the Servicer shall require that each Obligor maintain property damage
liability insurance during the term of each Contract in amounts and against
risks customarily insured against by the Obligor on Equipment owned by it. If an
Obligor fails to maintain the insurance required in this Section 6.5(a), the
Servicer shall purchase and maintain such insurance on behalf of, and at the
expense of, the Obligor. In connection with its activities as Servicer, the
Servicer agrees to present, on behalf of the Deal Agent as agent for the Secured
Parties, claims to the insurer under each policy required in this Section
6.5(a), and to settle, adjust and compromise such claims, in each case,
consistent with the terms of each Contract. The Servicer's policies required in
this Section 6.5(a) with respect to the related Equipment will insure against
liability for personal injury and property damage relating to such Equipment.
All policies required in this Section 6.5(a) will name the Deal Agent as agent
for the Secured Parties as loss payee and as an insured thereunder and will
contain a breach of warranty clause.
(b) In the case of Vehicle leases, the Servicer shall use its
best efforts to ensure that the Obligor under each such lease have, and maintain
in full force and effect during the term of such lease, a comprehensive and
collision damage insurance policy covering the actual cash value of the Vehicle
to which such lease relates and naming the Borrower, the Lender, and the Deal
Agent as a loss payee and additional insured, as well as public liability,
bodily injury and property damage coverage equal to the greater of the amounts
required by applicable state law or industry standards and naming the Borrower,
the Lender and the Deal Agent as an additional insured. The Servicer shall remit
to the Deal Agent as agent for the Lender any proceeds of any such insurance
policy in this Section 6.5(b) that the Servicer may receive with respect to any
Vehicle lease. In addition to the other provisions of this Section 6.5(b), the
Servicer or the Subservicer shall have, and maintain in full force and effect
during the term of any Vehicle lease, a "single interest insurance policy" which
insures against any risk of loss in respect to any Vehicle due to a failure of
the lessee to provide adequate insurance for any mistake or omission in titling
and any risk associated with the lessee's misuse, loss, theft or conversion of
the related Vehicle. Upon its termination as Servicer, the Servicer shall either
continue the coverage described in this Section 6.5(b) for the benefit of the
Borrower and the Lender, or provide for equivalent coverage by any substitute or
successor Servicer.
(c) In the event that at any time proceeds of such insurance
policy described in Section 6.5(a) and Section 6.5(b) would be recoverable and
otherwise paid to the Borrower as loss payee but for the fact that: (i) such
insurance policy has lapsed (without the obtaining by the related Obligor (or
the Servicer, on behalf of such Obligor) of a new insurance policy meeting the
requirements of Section 6.5(a) and Section 6.5(b)), (ii) the Servicer has failed
to maintain the Lender's rights to receive all proceeds of such insurance policy
up to the full amount of the Obligor's obligations under the related lease (but
not excluding the policy limits), or (iii) such insurance policy has not been
maintained in full force and effect prior to the operation of such lease, the
Servicer shall, as soon as reasonably practicable, remit an amount of cash equal
to such amounts as would at such time otherwise be recoverable in respect of
such Vehicle as Insurance Proceeds. The foregoing obligation of the Servicer
shall survive the resignation of the Servicer or any termination of it as
Servicer under this Agreement.
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Section 6.6 Representations and Warranties of Servicer.
-------------------------------------------
The Servicer represents and warrants to the Deal Agent, as
agent for the Secured Parties, the Secured Parties, the Collateral Custodian and
Backup Servicer that, as of the Closing Date, insofar as any of the following
affects the Servicer's ability to perform its obligations pursuant to this
Agreement in any material respect:
(a) Organization and Good Standing. The Servicer is a
corporation duly organized, validly existing and in good standing under the laws
of Pennsylvania with all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.
(b) Due Qualification. The Servicer is qualified to do
business as a corporation, is in good standing, and has obtained all licenses
and approvals as required under the laws of all jurisdictions in which the
ownership or lease of its property and or the conduct of its business (other
than the performance of its obligations hereunder) requires such qualification,
standing, license or approval, except to the extent that the failure to so
qualify, maintain such standing or be so licensed or approved would not have an
adverse effect on the interests of the Borrower or of the Secured Parties. The
Servicer is qualified to do business as a corporation, is in good standing, and
has obtained all licenses and approvals as required under the laws of all states
in which the performance of its obligations pursuant to this Agreement requires
such qualification, standing, license or approval and where the failure to
qualify or obtain such license or approval would have a material adverse effect
on its ability to perform hereunder.
(c) Power and Authority. The Servicer has the corporate power
and authority to execute and deliver this Agreement and to carry out its terms.
The Servicer has duly authorized the execution, delivery and performance of this
Agreement by all requisite corporate action. The execution, delivery and
performance of this Agreement does not contravene the Servicer's Certificate of
Incorporation or by-laws.
(d) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by the
Servicer (with or without notice or lapse of time) will not (i) conflict with,
result in any breach of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws of the Servicer, or any
term of any agreement, indenture, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it or any of its property is bound,
(ii) result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, or (iii) violate any law, regulation, order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority applicable to the Servicer or any of its properties.
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(e) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Servicer or any of its
properties is required to be obtained by or with respect to the Servicer in
order for the Servicer to enter into this Agreement or perform its obligations
hereunder.
(f) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable against the Servicer
in accordance with its terms, except as such enforceability may be limited by
(i) applicable Insolvency Laws and (ii) general principles of equity (whether
considered in a suit at law or in equity).
(g) No Proceeding. There are no proceedings or investigations
pending or threatened against the Servicer, before any Governmental Authority
(i) asserting the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or (iii)
seeking any determination or ruling that might (in the reasonable judgment of
the Servicer) materially and adversely affect the performance by the Servicer of
its obligations under, or the validity or enforceability of, this Agreement.
(h) Reports Accurate. No Servicer Certificate, information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished by the Servicer to the Deal Agent or a Lender in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Deal Agent or
such Lender, as the case may be, at such time) as of the date so furnished, and
no such document contains or will contain any material misstatement of fact or
omits or shall omit to state a material fact or any fact necessary to make the
statements contained therein not misleading.
Section 6.7 Representations and Warranties of Backup Servicer
-------------------------------------------------
and Collateral Custodian.
-------------------------
Each of the Backup Servicer and the Collateral Custodian
represents and warrants to the Deal Agent, as agent for the Secured Parties, and
the Secured Parties that, as of the Closing Date, insofar as any of the
following affects the Backup Servicer's or the Collateral Custodian's, as the
case may be, ability to perform its obligations pursuant to this Agreement in
any material respect:
(a) Organization and Good Standing. Harris is an Illinois
banking corporation duly organized, validly existing and in good standing under
the laws of the State of Illinois with all requisite corporate power and
authority to own its properties and to conduct its business as presently
conducted and to enter into and perform its obligations pursuant to this
Agreement.
(b) Power and Authority. Each of the Backup Servicer and the
Collateral Custodian has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms. Each of the Backup Servicer
and the Collateral Custodian has duly authorized the execution, delivery and
performance of this Agreement by all requisite corporate action.
(c) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by the
Backup Servicer and the Collateral Custodian will not (i) conflict with, result
in any breach of any of the terms or provisions of, or constitute a default
under, the charter or bylaws of the Backup Servicer or the Collateral Custodian,
or any term of any material agreement, indenture, mortgage, deed of trust or
other instrument to which the Backup Servicer or the Collateral Custodian is a
party or by which it or any of its property is bound, (ii) result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (iii) violate any law, regulation, order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority
applicable to Harris and Savings Bank or any of its properties that might (in
the reasonable judgment of the Backup Servicer or the Collateral Custodian, as
the case may be) materially and adversely affect the performance by the Backup
Servicer or the Collateral Custodian of its obligations under, or the validity
or enforceability of, this Agreement.
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(d) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit (collectively, the
"Consents") of or with any Governmental Authority having jurisdiction over the
Backup Servicer or the Collateral Custodian or any of its respective properties
is required to be obtained by or with respect to the Backup Servicer or the
Collateral Custodian in order for the Backup Servicer or the Collateral
Custodian, as the case may be, to enter into this Agreement or perform its
obligations hereunder (except with respect to performance only, such Consents as
the Backup Servicer or the Collateral Custodian, as the case may be, may need to
obtain prior to the commencement of its performance of its duties hereunder in
the certain jurisdictions outside of Illinois, provided that in lieu of
obtaining for itself the requisite Consents, the Backup Servicer or the
Collateral Custodian, as the case may be, may and shall be permitted to delegate
the performance of its duties to parties having the requisite Consents in such
jurisdictions; provided, however, in the case of such delegation of performance
the Backup Servicer or the Collateral Custodian, as the case may be, shall not
be relieved of their responsibility under this Agreement with respect to such
duties).
(e) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of Harris, enforceable against the Backup Servicer
and the Collateral Custodian in accordance with its terms, except as such
enforceability may be limited by (i) applicable Insolvency Laws and (ii) general
principles of equity (whether considered in a suit at law or in equity).
(f) No Proceeding. There are no proceedings or investigations
pending or, to the best of its knowledge, threatened, against the Backup
Servicer or the Collateral Custodian, before any Governmental Authority (i)
asserting the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or (iii)
seeking any determination or ruling that might (in the reasonable judgment of
the Backup Servicer or the Collateral Custodian, as the case may be) materially
and adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.
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Section 6.8 Covenants of Servicer.
----------------------
The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply with all
laws and regulations of any Governmental Authority applicable to the Servicer or
the Contracts in the Collateral and related Equipment, Vehicles, and Contract
Files or any part thereof.
(b) Obligations with Respect to Contracts; Modifications. The
Servicer will duly fulfill and comply with all obligations on the part of the
Borrower to be fulfilled or complied with under or in connection with each
Contract in the Collateral and will do nothing to impair the rights of the Deal
Agent as agent for the Secured Parties or of the Secured Parties in, to and
under the Assets. The Servicer will perform such obligations under the Contracts
in the Collateral and will not change or modify the Contracts.
(c) Preservation of Security Interest. The Servicer will
execute and file such financing and continuation statements and any other
documents which may be required by any law or regulation of any Governmental
Authority to preserve and protect fully the interest of the Deal Agent as agent
for the Secured Parties in, to and under the Assets.
(d) No Bankruptcy Petition. Prior to the date that is one year
and one day after the payment in full of all amounts owing in respect of all
outstanding commercial paper issued by VFCC, the Servicer will not institute
against the Borrower or VFCC, or join any other Person in instituting against
the Borrower or VFCC, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceedings under the laws of the
United States or any state of the United States. This Section 6.8(d) will
survive the termination of this Agreement.
Section 6.9 Covenants of Backup Servicer and Collateral
-------------------------------------------
Custodian.
----------
Each of the Backup Servicer and the Collateral Custodian
hereby covenants that:
(a) Contract Files. The Collateral Custodian will not dispose
of any documents constituting the Contract Files in any manner which is
inconsistent with the performance of its obligations as the Collateral Custodian
pursuant to this Agreement and will not dispose of any Contract except as
contemplated by this Agreement.
(b) Compliance with Law. Each of the Backup Servicer and the
Collateral Custodian will comply with all laws and regulations of any
Governmental Authority applicable to the Backup Servicer and the Collateral
Custodian.
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(c) No Bankruptcy Petition. Prior to the date that is one year
and one day after the payment in full of all amounts owing in respect of all
outstanding commercial paper issued by VFCC, neither the Backup Servicer nor the
Collateral Custodian will institute against the Borrower or VFCC, or join any
other Person in instituting against the Borrower or VFCC, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States. This Section 6.9(d) will survive the termination of this
Agreement.
(d) Location of Contract Files. The Contract Files shall
remain at all times in the possession of the Collateral Custodian at the address
set forth herein unless notice of a different address is given in accordance
with the terms hereof.
(e) No Changes in Backup Servicer and Collateral Custodian
Fee. The Backup Servicer and Collateral Custodian will not make any changes to
the fees set forth in the Backup Servicer and Collateral Custodian Fee Letter
without the prior written approval of the Deal Agent.
(f) Year 2000 Compatibility. The Backup Servicer and
Collateral Custodian shall take all action necessary to assure that, prior to
January 1, 2000, the Backup Servicer and Collateral Custodian's computer system
is able to operate and effectively process data including dates on and after
January 1, 2000 ("Year 2000 Compatibility"). At the request of the Deal Agent,
the Backup Servicer and Collateral Custodian shall provide assurance acceptable
to the Deal Agent of the Backup Servicer and Collateral Custodian's Year 2000
Compatibility.
Section 6.10 Servicing Compensation.
-----------------------
As compensation for its servicing activities hereunder and
reimbursement for its expenses, the Servicer shall be entitled to receive a
servicing fee (the "Servicing Fee") in respect of each Monthly Period (or
portion thereof) equal to one-twelfth of the product of (A) the Servicing Fee
Rate and (B) the ADCB as on the most recent Determination Date, such Servicing
Fee to be payable monthly in arrears on each Payment Date to the extent of funds
available therefor pursuant to the provisions of Sections 2.4 or 2.5, as
applicable.
Section 6.11 Custodial Compensation.
-----------------------
As compensation for its custodial activities hereunder and
reimbursement for its expenses, the Collateral Custodian shall be entitled to
receive a custodial fee (the "Custodial Fee") as provided in the Backup Servicer
and Collateral Custodian Fee Letter.
Section 6.12 Payment of Certain Expenses by Servicer.
----------------------------------------
The Servicer will be required to pay all expenses incurred by
it in connection with its activities under this Agreement, including fees and
disbursements of independent accountants, Taxes imposed on the Servicer,
expenses incurred in connection with payments and reports pursuant to this
Agreement, and all other fees and expenses not expressly stated under this
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Agreement for the account of the Borrower, but excluding Liquidation Expenses
incurred as a result of activities contemplated by Section 6.4. The Servicer
will be required to pay all reasonable fees and expenses owing to any bank or
trust company in connection with the maintenance of the Collection Account and
the Lock-Box Account. The Servicer shall be required to pay such expenses for
its own account and shall not be entitled to any payment therefor other than the
Servicing Fee.
Section 6.13 Reports.
--------
(a) Monthly Report. With respect to each Determination Date
and the related Monthly Period, the Servicer will provide to the Borrower, the
Deal Agent and the Backup Servicer, on the related Reporting Date, a monthly
statement (a "Monthly Report"), signed by a Responsible Officer of the Servicer
and substantially in the form of Exhibit C.
(b) Servicer's Certificate. Together with each Monthly Report,
the Servicer shall submit to the Lender a certificate (a "Servicer's
Certificate"), signed by a Responsible Officer of the Servicer and substantially
in the form of Exhibit D.
(c) Financial Statements. The Servicer will submit to the
Lender and the Backup Servicer, within 45 days of the end of each of its fiscal
quarters, commencing with the quarter ended March 31, 1999, unaudited financial
statements (including a balance sheet, statements of income and cash flow, and
an analysis of delinquencies and losses for each fiscal quarter) as of the end
of each such fiscal quarter. The Servicer will submit to the Lender, within 90
days of the end of each of its fiscal years, commencing with the fiscal year
ending September 30, 1999, audited financial statements (including a balance
sheet, statements of income and cash flow, and an analysis of delinquencies and
losses for each fiscal year describing the causes thereof and sufficient to
determine whether an Event of Default has occurred or is reasonably likely to
occur and otherwise reasonably satisfactory to the Deal Agent) as of the end of
each such fiscal year.
Section 6.14 Annual Statement as to Compliance.
The Servicer will provide to the Deal Agent and the Backup
Servicer, on or prior to December 31 of each year, commencing with the year
ending December 31, 1999, an annual report signed by a Responsible Officer of
the Servicer certifying that (a) a review of the activities of the Servicer, and
the Servicer's performance pursuant to this Agreement, for the period ending on
the last day of the immediately preceding fiscal year has been made under such
Person's supervision and (b) the Servicer has performed or has caused to be
performed in all material respects all of its obligations under this Agreement
throughout such year and no Servicer Default has occurred and is continuing (or
if a Servicer Default has so occurred and is continuing, specifying each such
event, the nature and status thereof and the steps necessary to remedy such
event, and, if a Servicer Default occurred during such year and no notice
thereof has been given to the Deal Agent, specifying such Servicer Default and
the steps taken to remedy such event).
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Section 6.15 Annual Independent Public Accountant's Servicing
------------------------------------------------
Reports.
--------
The Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer) to furnish to the Deal Agent and the Backup Servicer, on or prior to
December 31 of each year, commencing December 31, 1999, (a) a report relating to
the previous fiscal year to the effect that (i) such firm has reviewed certain
documents and records relating to the servicing of the Contracts in the
Collateral, and (ii) based on such examination, such firm is of the opinion that
the Monthly Reports for such year were prepared in compliance with this
Agreement, except for such exceptions as it believes to be immaterial and such
other exceptions as will be set forth in such firm's report and (b) a report
covering the preceding fiscal year to the effect that such accountants have
applied certain agreed-upon procedures to certain documents and records relating
to the servicing of Contracts under this Agreement, compared the information
contained in the Servicer's Certificates delivered during the period covered by
such report with such documents and records and that no matters came to the
attention of such accountants that caused them to believe that such servicing
was not conducted in compliance with this Article VI of this Agreement, except
for such exceptions as such accountants shall believe to be immaterial and such
other exceptions as shall be set forth in such statement. In the event such firm
requires the Backup Servicer to agree to the procedures performed by such firm,
the Servicer shall direct the Backup Servicer in writing to so agree; it being
understood and agreed that the Backup Servicer will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Backup Servicer makes no independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
Section 6.16 Adjustments.
------------
If (a) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Contract in the Collateral and such
Collection was received by the Servicer in the form of a check which is not
honored for any reason or (b) the Servicer makes a mistake with respect to the
amount of any Collection and deposits an amount that is less than or more than
the actual amount of such Collection, the Servicer shall appropriately adjust
the amount subsequently deposited into the Collection Account to reflect such
dishonored check or mistake. Any Scheduled Payment in respect of which a
dishonored check is received shall be deemed not to have been paid.
Section 6.17 Merger or Consolidation of the Servicer.
----------------------------------------
The Servicer shall not consolidate with or merge into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person, unless the Servicer is the surviving entity and unless:
(a) the Servicer has delivered to the Deal Agent and the
Backup Servicer an Officer's Certificate and an Opinion of Counsel each stating
that any consolidation, merger, conveyance or transfer and such supplemental
agreement comply with this Section 6.17 and that all conditions precedent herein
provided for relating to such transaction have been complied with and, in the
case of the Opinion of Counsel, that such supplemental agreement is legal, valid
and binding with respect to the Servicer and such other matters as the Deal
Agent may reasonably request;
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(b) the Servicer shall have delivered notice of such
consolidation, merger, conveyance or transfer to the Deal Agent; and
(c) after giving effect thereto, no Event of Default or event
which with notice or lapse of time would constitute an Event of Default shall
have occurred.
Section 6.18 Limitation on Liability of the Servicer and
-------------------------------------------
Others.
-------
Except as provided herein, neither the Servicer nor any of the
directors or officers or employees or agents of the Servicer shall be under any
liability to the Deal Agent, the Secured Parties or any other Person for any
action taken or for refraining from the taking of any action pursuant to this
Agreement whether arising from express or implied duties under this Agreement;
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability which would otherwise be imposed by reason of
its willful misfeasance, bad faith or gross negligence in the performance of
duties or by reason of its willful misconduct hereunder.
Section 6.19 Indemnification of the Borrower, the Backup
-------------------------------------------
Servicer, the Collateral Custodian, the Deal
--------------------------------------------
Agent and the Secured Parties.
------------------------------
The Servicer shall indemnify and hold harmless the Borrower,
the Backup Servicer, the Collateral Custodian, the Deal Agent, the Liquidity
Agent and each Secured Party and their respective officers, directors, employees
and agents (collectively, the "Indemnified Persons") from and against any loss,
liability, expense, damage or injury suffered or sustained by any Indemnified
Person by reason of any acts, omissions or alleged acts or omissions of the
Servicer, including, but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim, but
excluding allocations of overhead expenses of any such Indemnified Party or
other non-monetary damages of any such Indemnified Party. Notwithstanding the
foregoing, the Servicer shall not indemnify an Indemnified Person if such loss,
liability, expense, damage or injury results or arises (a) as a result of fraud,
gross negligence or breach of fiduciary duty by such Indemnified Person; and (b)
under any federal, state or local income or franchise taxes or any other Tax
imposed on or measured by income (or any interest or penalties with respect
thereto or arising from a failure to comply therewith) required to be paid by
the Borrower, the Backup Servicer, the Collateral Custodian, the Deal Agent, the
Liquidity Agent or the Secured Parties in connection herewith to any taxing
authority. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof. If the
Servicer has made any indemnity payment pursuant to this Section 6.19 and such
payment fully indemnified the recipient thereof and the recipient thereafter
collects any payments from others in respect of such Indemnified Amounts, the
recipient shall repay to the Servicer an amount equal to the amount it has
collected from others in respect of such indemnified amounts.
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If for any reason the indemnification provided above in this
Section 6.19 is unavailable to the Indemnified Person or is insufficient to hold
an Indemnified Person harmless, then Servicer shall contribute to the amount
paid or payable by such Indemnified Person as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by such Indemnified Person on the one hand and
Servicer on the other hand but also the relative fault of such Indemnified
Person as well as any other relevant equitable considerations.
The parties hereto agree that the provisions of this Section
6.19 shall not be interpreted to provide recourse to the Borrower against loss
by reason of the bankruptcy or insolvency (or other credit condition) of, or
default by, a related Obligor on any Asset in the Collateral.
Any indemnification pursuant to this Section shall not be
payable from the Assets.
The obligations of the Servicer under this Section 6.19 shall
survive the resignation or removal of the Deal Agent, the Liquidity Agent, the
Backup Servicer or the Collateral Custodian and the termination of this
Agreement.
Section 6.20 The Servicer Not to Resign.
---------------------------
The Servicer shall not resign from the obligations and duties
hereby imposed on it except upon the Servicer's determination that (a) the
performance of its duties hereunder is or becomes impermissible under applicable
law and (b) there is no reasonable action which the Servicer could take to make
the performance of its duties hereunder permissible under applicable law. Any
such determination permitting the resignation of the Servicer shall be evidenced
as to clause (a) above by an Opinion of Counsel to such effect delivered to the
Deal Agent and the Backup Servicer. No such resignation shall become effective
until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 6.25.
Section 6.21 Access to Certain Documentation and Information
------------------------------------------------
Regarding the Contracts.
------------------------
The Collateral Custodian shall provide to the Deal Agent
access to the Contract Files and all other documentation regarding the Contracts
in the Collateral and the related Equipment or Vehicles in such cases where the
Deal Agent is required in connection with the enforcement of the rights or
interests of the Secured Parties, or by applicable statutes or regulations to
review such documentation, such access being afforded without charge but only
(a) upon two business days prior written request, (b) during normal business
hours and (c) subject to the Servicer's and Collateral Custodian's normal
security and confidentiality procedures. Prior to the Closing Date and
periodically thereafter at the discretion of the Deal Agent, the Deal Agent may
review the Servicer's collection and administration of the Contracts in order to
assess compliance by the Servicer with the Servicer's written policies and
procedures, as well as with this Agreement and may conduct an audit of the
Contracts and Contract Files in conjunction with such a review. Such review
shall be reasonable in scope and shall be completed in a reasonable period of
time.
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Section 6.22 Backup Servicer.
----------------
(a) On or before the date on which the initial Purchase
occurs, until the receipt by the Servicer of a Termination Notice, the Backup
Servicer shall perform, on behalf of the Deal Agent and the Secured Parties, the
following duties and obligations:
(i) On or before the Closing Date, the Backup Servicer shall
accept from the Servicer delivery of the information required to be set
forth in the Monthly Reports in hard copy and on computer tape;
provided, however, the computer tape is in an MS-DOS, PC readable ASCII
format or format to be agreed upon by the Backup Servicer and the
Servicer on or prior to closing.
(ii) Not later than 12:00 noon (New York City time) two
Business Days prior to each Reporting Date, the Backup Servicer shall
accept delivery of tape from the Servicer, which shall include but not
be limited to the following information: the name, number and name of
the related Lessee for each Contract, the collection status, the
contract status, the principal balance and the ADCB (the "Tape").
The Servicer shall provide, or cause the Subservicer to
provide, the Tape on each Reporting Date as described above.
(b) On or before the date on which the initial Purchase
occurs, and until the receipt by the Servicer of a Termination Notice, the
Backup Servicer shall perform, on behalf of the Secured Parties and the Deal
Agent, the following duties and obligations:
(i) Prior to the related Payment Date, the Backup Servicer
shall review the Monthly Report to ensure that it is complete on its
face and that the following items in such Monthly Report have been
accurately calculated, if applicable, and reported: (A) the ADCB, (B)
the Backup Servicing Fee, (C) the Average ADCB, (D) the accounts that
are 30-60 days past due, (E) the accounts that are 61-90 days past due,
(E) the accounts that are 90+ days past due, (F) the accounts that are
Defaulted Contracts, (G) the Delinquency Ratio and (H) the Default
Ratio. The Backup Servicer shall notify the Deal Agent and the Servicer
of any disagreements with the Monthly Report based on such review not
later than the Business Day preceding such Payment Date to such
Persons.
(ii) If the Servicer disagrees with the report provided under
paragraph (i) above by the Backup Servicer or if the Servicer or any
subservicer has not reconciled such discrepancy, the Backup Servicer
agrees to confer with the Servicer to resolve such disagreement on or
prior to the next succeeding Determination Date and shall settle such
discrepancy with the Servicer if possible, and notify the Deal Agent of
the resolution thereof. The Servicer hereby agrees to cooperate at its
own expense, with the Backup Servicer in reconciling any discrepancies
herein. If within 20 days after the delivery of the report provided
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under paragraph (i) above by the Backup Servicer, such discrepancy is
not resolved, the Backup Servicer shall promptly notify the Deal Agent
of the continued existence of such discrepancy. Following receipt of
such notice by the Deal Agent, the Servicer shall deliver to the Deal
Agent, the Secured Parties, and the Backup Servicer no later than the
related Payment Date a certificate describing the nature and amount of
such discrepancies and the actions the Servicer proposes to take with
respect thereto.
With respect to the foregoing, the Backup Servicer, in the
performance of its duties and obligations hereunder, is entitled to rely
conclusively, and shall be fully protected in so relying, on the contents of
each Tape, including, but not limited to, the completeness and accuracy thereof,
provided by the Servicer.
(c) After the receipt of an effective Termination Notice by
the Servicer in accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this Agreement, whether with respect to
the Contracts or otherwise shall pass to and be vested in the Backup Servicer,
subject to and in accordance with the provisions of Section 6.25, as long as the
Backup Servicer is not prohibited by an applicable provision of law from
fulfilling the same, as evidenced by an Opinion of Counsel.
(d) Any Person (i) into which the Backup Servicer may be
merged or consolidated, (ii) which may result from any merger or consolidation
to which the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on the
part of any of the parties to this Agreement.
(e) As compensation for its back-up servicing obligations
hereunder, the Backup Servicer shall be entitled to receive the Backup Servicing
Fee in respect of each Monthly Period (or portion thereof) until the first to
occur of the date on which the Backup Servicer becomes a Successor Servicer,
resigns or is removed as Backup Servicer or termination of this Agreement.
(f) The Backup Servicer may resign at any time by not less
than 120 days notice to the Deal Agent, the Liquidity Agent, the Servicer, the
Borrower and the Originator, if the Backup Servicer finds a replacement backup
servicer approved in writing by the Deal Agent. In addition, the Backup Servicer
may be removed without cause by the Deal Agent by notice then given in writing
to the Servicer, the Borrower and the Backup Servicer. In the event of any such
resignation or removal, the Backup Servicer may be replaced by (i) the Servicer,
acting with the consent of the Deal Agent or (ii) if no such replacement is
appointed within 30 days following such removal or resignation, by the Deal
Agent.
(g) The Backup Servicer undertakes to perform only such duties
and obligations as are specifically set forth in this Agreement, it being
expressly understood by all parties hereto that there are no implied duties or
obligations of the Backup Servicer hereunder. Without limiting the generality of
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the foregoing, the Backup Servicer, except as expressly set forth herein, shall
have no obligation to supervise, verify, monitor or administer the performance
of the Servicer or the Subservicer. The Backup Servicer may act through its
agents, attorneys and custodians in performing any of its duties and obligations
under this Agreement, it being understood by the parties hereto that the Backup
Servicer will be responsible for any misconduct or negligence on the part of
such agents, attorneys or custodians acting on the routine and ordinary
day-to-day operations for and on behalf of the Backup Servicer. Neither the
Backup Servicer nor any of its officers, directors, employees or agents shall be
liable, directly or indirectly, for any damages or expenses arising out of the
services performed under this Agreement other than damages or expenses which
result from the gross negligence or willful misconduct of it or them or the
failure to perform materially in accordance with this Agreement.
(h) The Backup Servicer shall not be liable for any obligation
of the Servicer contained in this Agreement or for any errors of the Servicer
contained in any computer tape, certificate or other data or document delivered
to the Backup Servicer hereunder or on which the Backup Servicer must rely in
order to perform its obligations hereunder, and the Borrower, Secured Parties,
Deal Agent, Liquidity Agent, Collateral Custodian and Backup Servicer, shall
look only to the Servicer to perform such obligations. The Backup Servicer, and
the Collateral Custodian shall have no responsibility and shall not be in
default hereunder or incur any liability for any failure, error, malfunction or
any delay in carrying out any of their respective duties under this Agreement if
such failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer or
the failure of any such other Person to prepare or provide such information. The
Backup Servicer shall have no responsibility, shall not be in default and shall
incur no liability for (i) any act or failure to act of any third party,
including the Servicer (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party, (iii) the
invalidity or unenforceability of any Asset or Contract under applicable law,
(iv) the breach or inaccuracy of any representation or warranty made with
respect to any Asset, Contract or any item of Equipment, or (v) the acts or
omissions of any successor Backup Servicer.
Section 6.23 Identification of Records.
--------------------------
The Servicer shall clearly and unambiguously identify each
Contract in the Collateral and the related Equipment in its computer or other
records to reflect that such Contracts and Equipment have been transferred to
and are owned by the Borrower and that a security interest therein has been
Granted by the Borrower pursuant to this Agreement.
Section 6.24 Servicer Defaults.
------------------
If any one of the following events (a "Servicer Default")
shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer
or deposit or to give instructions or notice to the Deal Agent as required by
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this Agreement including, without limitation, while Fidelity is Servicer, any
payment required to be made under the Backup Servicer and Collateral Custodian
Fee Letter, or to deliver any required Monthly Report or other Required Reports
hereunder on or before the date occurring two Business Days after the date such
payment, transfer, deposit, instruction of notice or report is required to be
made or given, as the case may be, under the terms of this Agreement;
(b) any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or the Purchase Agreement which has a
material adverse effect on the Secured Parties, which continues unremedied for a
period of 30 days after the first to occur of (i) the date on which written
notice of such failure requiring the same to be remedied shall have been given
to the Servicer by the Deal Agent and (ii) the date on which the Servicer
becomes aware thereof;
(c) any representation, warranty or certification made by the
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, which has a material
adverse effect on the Secured Parties and which continues to be unremedied for a
period of 30 days after the first to occur of (i) the date on which written
notice of such incorrectness requiring the same to be remedied shall have been
given to the Servicer by the Deal Agent and (ii) the date on which the Servicer
becomes aware thereof;
(d) an Insolvency Event shall occur with respect to the
Servicer;
(e) any material delegation of the Servicer's duties which is
not permitted by Section 6.28;
(f) any financial or Asset information reasonably requested by
the Deal Agent or the Lender as provided herein is not reasonably provided as
requested;
(g) the rendering against the Servicer of a final judgment,
decree or order for the payment of money in excess of U.S. $100,000 and the
continuance of such judgment, decree or order unsatisfied and in effect for any
period of 61 consecutive days without a stay of execution;
(h) the failure of the Servicer to make any payment due with
respect to aggregate recourse debt or other obligations with an aggregate
principal amount exceeding U.S. $1,000,000 or the occurrence of any event or
condition which would permit acceleration of such recourse debt or other
obligations if such event or condition has not been waived;
(i) any change in the management of the Servicer relating to
the positions of President, CEO, Chairman of the Board and Executive Vice
President;
(j) any change in the control of the Servicer which takes the
form of either a merger or consolidation in which the Servicer is not the
surviving entity; or
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(k) the failure of the Servicer to make such operational
changes at the Originator as itemized for the Lender in due diligence within a
reasonable period of time, including (i) separation of the Vendor Service
Manager role into a credit role and a marketing role, (ii) implementation of
more rigorous asset value testing procedures in the underwriting and collections
process, (iii) modification and/or replacement of the Originator's collections
and charge-off policies with those of the Borrower and Servicer, and (iv)
implementation of a treasury/compliance function which will ensure accurate and
timely internal and external reporting.
Notwithstanding anything herein to the contrary, so long as any such Servicer
Default shall not have been remedied, the Deal Agent, by written notice to the
Servicer (with a copy to the Backup Servicer) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer as Servicer under
this Agreement.
Section 6.25 Appointment of Successor Servicer.
----------------------------------
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 6.24, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Deal Agent in writing or, if no
such date is specified in such Termination Notice or otherwise specified by the
Deal Agent, until a date mutually agreed upon by the Servicer and the Deal
Agent. The Deal Agent may at the time described in the immediately preceding
sentence in its sole discretion, appoint the Backup Servicer as the Servicer
hereunder, and the Backup Servicer shall on such date assume all obligations of
the Servicer hereunder, and all authority and power of the Servicer under this
Agreement shall pass to and be vested in the Backup Servicer; provided, however,
that the Successor Servicer shall not (i) be responsible or liable for any past
actions or omissions of the outgoing Servicer or (ii) be obligated to make
Servicer Advances. In the event that the Deal Agent does not so appoint the
Backup Servicer, there is no Backup Servicer or the Backup Servicer is unwilling
or unable to assume such obligations on such date, the Deal Agent shall as
promptly as possible appoint a successor servicer (the Backup Servicer or any
such other successor, the "Successor Servicer"), and such Successor Servicer
shall accept its appointment by a written assumption in a form acceptable to the
Deal Agent. If the Deal Agent within 60 days of receipt of a Termination Notice
is unable to obtain any bids from Eligible Servicers and the Servicer delivers
an Officer's Certificate to the effect that it cannot in good faith cure the
Servicer Default which gave rise to a transfer of servicing, then the Deal Agent
shall offer the Borrower the right to accept retransfer of all the Assets and
the Borrower may accept re-transfer of all the Assets, provided, however, that
if the long-term unsecured debt obligations of the Borrower are not rated at the
time of such purchase at least investment grade by each rating agency providing
a rating in respect of such long-term unsecured debt obligations, no such
re-transfer shall occur unless the Borrower shall deliver an Opinion of Counsel
reasonably acceptable to the Deal Agent that such re-transfer would not
constitute a fraudulent conveyance of the Borrower. The amount to be paid and
deposited in respect of such re-transfer shall be equal to the sum of the
Principal outstanding plus all Interest that has accrued thereon and that will
accrue thereon. In the event that a Successor Servicer has not been appointed
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and has not accepted its appointment at the time when the Servicer ceases to act
as Servicer, the Deal Agent shall petition a court of competent Jurisdiction to
appoint any established financial institution having a net worth of not less
than U.S. $50,000,000 and whose regular business includes the servicing of
Contracts as the Successor Servicer hereunder.
(b) Upon its appointment, the Backup Servicer (subject to
Section 6.25(a)) or the Successor Servicer, as applicable, shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Backup Servicer or the Successor Servicer, as applicable.
(c) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of this
Agreement and shall pass to and be vested in the Borrower and, without
limitation, the Borrower is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The Servicer agrees to cooperate with the Borrower in
effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing on the Contracts in the Collateral.
(d) Upon the Backup Servicer receiving notice that it is
required to serve as the Servicer hereunder pursuant to the foregoing provisions
of this Section 6.25, the Backup Servicer will promptly begin the transition to
its role as Servicer.
(e) The Backup Servicer shall be entitled to receive its
reasonable costs incurred in transitioning to Servicer.
Section 6.26 Notification.
-------------
Upon the Servicer becoming aware of the occurrence of any
Servicer Default, the Servicer shall promptly give written notice thereof to the
Deal Agent and the Backup Servicer.
Section 6.27 Protection of Right, Title and Interest to
------------------------------------------
Assets.
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(a) The Servicer shall cause this Agreement, all amendments
hereto and/or all financing statements and continuation statements and any other
necessary documents covering the right, title and interest of the Deal Agent as
agent for the Secured Parties and of the Secured Parties to the Assets to be
promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the Deal
Agent as agent for the Secured Parties hereunder to all property comprising the
Assets. The Servicer shall deliver to the Deal Agent file-stamped copies of, or
filing receipts for, any document recorded, registered or filed as provided
above, as soon as available following such recording, registration or filing.
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The Borrower shall cooperate fully with the Servicer in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this Section 6.27(a).
(b) The Servicer will give the Deal Agent at least 30 days'
prior written notice of any relocation of any office from which it services
Contracts in the Collateral or keeps the Contract Files or of its principal
executive office and whether, as a result of such relocation, the applicable
provisions of the UCC or any other applicable law governing the perfection of
interests in property would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to continue the perfection of the security interest of the Deal Agent
as agent for the Secured Parties in the Contracts in the Collateral and the
proceeds thereof. The Servicer will at all times maintain each office from which
it services Contracts in the Collateral within the United States of America.
Section 6.28 Subservicers.
-------------
The Servicer shall have the right to delegate to the
Subservicer the performance of the duties and obligations of the Servicer
hereunder. The Deal Agent shall be provided a copy by the Servicer of any
written contracts with the Subservicer. Notwithstanding the performance of any
of its obligations hereunder by the Subservicer, the Servicer shall remain
obligated and liable to the Deal Agent and the Lenders for the servicing of the
Contracts in accordance with the provisions of this Agreement, without any
diminution of such obligation or of any liability by virtue of such performance
by the Subservicer. The fees and expenses of any such Subservicer shall be as
agreed between the Servicer and such Subservicer from time to time and neither
the Issuer, the Deal Agent nor any Lender shall have any responsibility
therefor. Servicer covenants and agrees that in the event the Deal Agent and the
Lenders shall notify the Servicer that they have reason to believe that the
Subservicer would be unable to perform its obligations hereunder, the Servicer
shall terminate all of the rights and obligations of the Subservicer.
Section 6.29 Release of Contract Files.
--------------------------
The Borrower may, with the prior written consent of the Deal
Agent (such consent not to be unreasonably withheld), require that the
Collateral Custodian release each Contract File (a) delivered to the Collateral
Custodian in error, (b) for which a Substitute Contract has been substituted in
accordance with Section 2.13, (c) as to which the lien on the related Equipment
has been so released pursuant to Section 5.3, (d) which has been retransferred
to the Borrower pursuant to Section 5.5 or 5.6, or (e) which is required to be
redelivered to the Borrower in connection with the termination of this
Agreement, in each case by submitting to the Collateral Custodian and the Deal
Agent a written request substantially in the form of Exhibit G hereto (signed by
both the Borrower and the Deal Agent) specifying the Contracts to be so released
and reciting that the conditions to such release have been met (and specifying
the section or sections of this Agreement being relied upon for such release).
The Collateral Custodian shall upon its receipt of each such request for release
executed by the Borrower and the Deal Agent promptly, but in any event within 5
Business Days, release the Contract Files so requested to the Borrower.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default.
------------------
Each of the following events shall constitute an Event of
Default (an "Event of Default") under this Agreement:
(a) as of any Reporting Date, the Delinquency Ratio for the
preceding Determination Date exceeds 5.0%;
(b) as of any Reporting Date, the Default Ratio for the
preceding Determination Date exceeds 3.0%;
(c) the Overcollateralization is less than the Minimum
Overcollateralization, and the Borrower does not, within one Business Day,
contribute Eligible Contracts and/or pay down the outstanding balance of the
Loan in an amount sufficient to cause the Overcollateralization to equal or
exceed the Minimum Overcollateralization;
(d) the Borrower is not in compliance with the Portfolio
Concentration Criteria, and such noncompliance is not cured within 5 Business
Days;
(e) a Servicer Default occurs and is continuing;
(f) (i) failure on the part of the Borrower to make any
payment or deposit required by the terms of this Agreement on the day such
payment or deposit is required to be made or
(ii) failure on the part of the Borrower to observe or perform
any of its covenants or agreements set forth in this Agreement, which
failure has a material adverse effect on the interests of the Deal
Agent, any Secured Party, the Liquidity Agent or any Investor and which
continues unremedied for a period of 30 days or more after written
notice to Borrower; provided, that only a five Business Day cure period
shall apply in the case of a failure by the Borrower to observe its
covenants not to grant a security interest or otherwise intentionally
create a Lien on the Contracts;
(g) any representation or warranty made by the Borrower in
this Agreement or any information required to be given by the Borrower to the
Deal Agent to identify Contracts pursuant to this Agreement, shall prove to have
been incorrect in any material respect when made or delivered and which
continues to be incorrect in any material respect for a period of 30 days after
written notice or actual knowledge thereof;
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(h) the occurrence of an Insolvency Event relating to the
Originator, the Borrower or the Servicer;
(i) the Borrower shall become, or become controlled by, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (the "40 Act") or the arrangements contemplated by this Agreement
shall require registration as an "investment company" within the meaning of the
40 Act;
(j) a regulatory, tax or accounting body has ordered that the
activities of the Borrower or any Affiliate of the Borrower, contemplated hereby
be terminated or, as a result of any other event or circumstance, the activities
of the Borrower contemplated hereby may reasonably be expected to cause the
Borrower or any of its respective Affiliates to suffer materially adverse
regulatory, accounting or tax consequences; or
(k) any (i) breach of any provision set forth in the
Subordinated Promissory Note or the Unsecured Promissory Note, or (ii) amendment
of either of such notes without the prior written approval of the Deal Agent.
Section 7.2 Remedies.
---------
(a) Upon the occurrence of an Event of Default the Termination
Date shall be deemed to have occurred automatically. Upon the occurrence of an
Event of Default other than that referred to in Section 7.1(h) in addition to
the other remedies provided for herein, the Deal Agent and the Lender may
declare the Principal and all other Aggregate Unpaids to be immediately due and
payable, together with all Interest thereon and fees and expenses accruing under
this Agreement, and shall have all rights and remedies provided under the UCC
and other applicable laws, which rights shall be cumulative. Upon the occurrence
of an Event of Default referred to in Section 7.1(h), in addition to the
remedies provided herein, such amounts referenced in the immediately preceding
sentence shall immediately and automatically become due and payable without any
further action by any Person. Upon such declaration or such automatic
acceleration, the balance then outstanding under this Agreement shall become
immediately due and payable, without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower and the Servicer.
(b) Upon the occurrence of an Event of Default, and in
addition to the remedies provided herein, the Deal Agent and the Lender shall
have the right to obtain physical possession of the Servicer's records and all
other files of the Borrower relating to the Collateral and all documents
relating to the Collateral which are then or may thereafter come into the
possession of the Borrower or any third party acting for the Borrower, and the
Borrower shall deliver to the Deal Agent such assignments as the Deal Agent
shall request. The Borrower shall be responsible for paying any fees of any
Servicer resulting from the termination of a Servicer due to an Event of
Default. The Deal Agent shall have the right to demand transfer of all servicing
rights and obligations to a new servicer acceptable to the Deal Agent (such new
servicer shall receive a servicing fee or any other amounts necessary to assure
the ability of the Deal Agent to find an appropriate successor servicer). The
Deal Agent and the Lender shall be entitled to specific performance of all
agreements of the Borrower contained in this Agreement.
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(c) Without limiting the generality of the foregoing
provisions of this Section 7.2, the Deal Agent and the Lender without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Borrower or any other Person (each and all of which demands, presentments,
protests, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell (on a servicing
released basis, at the Deal Agent or the Lender's option), lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of the Deal Agent or the Lender or elsewhere
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Deal Agent and the Lender shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Borrower, which right or
equity is hereby waived or released. The Borrower further agrees, at the Deal
Agent or the Lender's request, to assemble the Collateral and make it available
to the Deal Agent or the Lender at places which the Deal Agent or the Lender
shall reasonably select, whether at the Borrower's premises or elsewhere. The
Lender shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Lender hereunder, including without limitation reasonable attorneys' fees
and disbursements, to the payment in whole or in part of the amounts owing to
the Lender hereunder in respect of Principal, Interest, fees, expenses,
indemnification or otherwise, in such order as the Lender may elect, and only
after such application and after the payment by the Lender of any other amount
required or permitted by any provision of law, including without limitation
Section 9-504(1)(c) of the UCC, need the Lender account for the surplus, if any,
to the Borrower. To the extent permitted by applicable law, the Borrower waives
all claims, damages and demands it may acquire against the Deal Agent and the
Lender arising out of the exercise by the Deal Agent or the Lender of any of its
rights hereunder, other than those claims, damages and demands arising from the
gross negligence or willful misconduct of the Deal Agent or the Lender. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition. The Borrower shall remain liable for
any deficiency (together with all Interest thereon and fees and expenses
accruing under this Agreement) if the proceeds of any sale or other disposition
of the Collateral are insufficient to pay the amounts owing to the Lender and
the fees and disbursements of any attorneys employed by the Lender to collect
such deficiency.
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(d) The Deal Agent's and the Lender's duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with
it in the same manner as the Deal Agent or the Lender, as the case may be, deals
with similar property for its own account. Neither the Deal Agent, the Lender
nor any of their directors, officers or employees shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Borrower or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnities by the Borrower.
----------------------------
Without limiting any other rights which the Deal Agent, the
Backup Servicer, the Collateral Custodian, the Liquidity Agent, the Secured
Parties or any of their respective Affiliates may have hereunder or under
applicable law, the Borrower hereby agrees to indemnify the Deal Agent, the
Backup Servicer, the Collateral Custodian, the Liquidity Agent, the Secured
Parties, and each of their respective Affiliates and officers, directors,
employees and agents thereof from and against any and all damages, losses,
claims, liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") awarded against or incurred by, but
excluding allocations of overhead expenses of any such Indemnified Party or
other non-monetary damages of any such Indemnified Party any of them arising out
of or as a result of this Agreement or the Grant of the Collateral or in respect
of any Asset or any Contract, excluding, however, Indemnified Amounts to the
extent resulting from negligence or willful misconduct on the part of the Deal
Agent, the Backup Servicer, the Collateral Custodian, the Liquidity Agent, such
Secured Parties or such Affiliate. If the Borrower has made any indemnity
payment pursuant to this Section 8.1 and such payment fully indemnified the
recipient thereof and the recipient thereafter collects any payments from others
in respect of such Indemnified Amounts then, the recipient shall repay to the
Borrower an amount equal to the amount it has collected from others in respect
of such indemnified amounts. Without limiting the foregoing, the Borrower shall
indemnify the Deal Agent, the Backup Servicer, the Collateral Custodian, the
Liquidity Agent, the Secured Parties and each of their respective Affiliates and
officers, directors, employees and agents thereof for Indemnified Amounts
relating to or resulting from:
(a) any Contract treated as or represented by the Borrower to
be an Eligible Contract which is not at the applicable time an Eligible
Contract;
(b) reliance on any representation or warranty made or deemed
made by the Borrower, the Servicer (if the Originator or one of its
Affiliates) or any of their respective officers under or in connection
with this Agreement, which shall have been false or incorrect in any
material respect when made or deemed made or delivered;
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(c) the failure by the Borrower or the Servicer (if the
Originator or one of its Affiliates) to comply with any term, provision
or covenant contained in this Agreement or any agreement executed in
connection with this Agreement, or with any applicable law, rule or
regulation with respect to any Asset, the related Contract, or the
nonconformity of any Asset, the related Contract with any such
applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the relevant
Lender or to transfer to such Lender, an undivided ownership interest
in the Assets, together with all Collections, free and clear of any
Adverse Claim whether existing as of the Closing Date or at any time
thereafter;
(e) the failure to maintain, as of the close of business on
each Business Day prior to the Termination Date, an amount of Principal
outstanding which is less than or equal to the lesser of (i) the Credit
Limit on such Business Day, or (ii) the Borrowing Base on such Business
Day;
(f) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Assets which are, or are purported to be, Collateral, whether at
the time of any Grant or at any subsequent time;
(g) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Asset which is, or is purported to be, Collateral (including,
without limitation, a defense based on such Asset or the related
Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or services
related to such Asset or the furnishing or failure to furnish such
merchandise or services;
(h) any failure of the Borrower or the Servicer (if the
Originator or one of its Affiliates) to perform its duties or
obligations in accordance with the provisions of this Agreement or any
failure by the Originator, the Borrower or any Affiliate thereof to
perform its respective duties under the Contracts;
(i) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Asset or Contract;
(j) the failure by Borrower to pay when due any Taxes for
which the Borrower is liable, including without limitation, sales,
excise or personal property taxes payable in connection with the
Collateral;
(k) any repayment by the Deal Agent, the Liquidity Agent or a
Secured Party of any amount previously distributed in reduction of
Principal or payment of Interest or any other amount due hereunder or
under any Hedging Agreement, in each case which amount the Deal Agent,
the Liquidity Agent or a Secured Party believes in good faith is
required to be repaid;
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(l) the commingling of Collections of Assets in the Collateral
at any time with other funds;
(m) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of the Loan or reinvestments or
the ownership of the Collateral or in respect of any Asset or Contract;
(n) any failure by the Borrower to give reasonably equivalent
value to the Originator in consideration for the transfer by the
Originator to the Borrower of any Assets or any attempt by any Person
to void or otherwise avoid any such transfer under any statutory
provision or common law or equitable action, including, without
limitation, any provision of the Bankruptcy Code; or
(o) the failure of the Borrower, the Originator or any of
their respective agents or representatives to remit Collections to the
Servicer or the Deal Agent.
Any amounts subject to the indemnification provisions of this Section
8.1 shall be paid by the Borrower solely pursuant to the provisions of Sections
2.4 and 2.5 hereof, as the case may be, to the Deal Agent within two Business
Days following the Deal Agent's demand therefor.
If for any reason the indemnification provided above in this
Section 8.1 is unavailable to the Indemnified Person or is insufficient to hold
an Indemnified Person harmless, then Servicer shall contribute to the amount
paid or payable by such Indemnified Person as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by such Indemnified Person on the one hand and the
Borrower on the other hand but also the relative fault of such Indemnified
Person as well as any other relevant equitable considerations.
ARTICLE IX
THE DEAL AGENT AND THE LIQUIDITY AGENT
Section 9.1 Authorization and Action.
-------------------------
(a) Each Secured Party hereby designates and appoints the Deal
Agent as Deal Agent hereunder, and authorizes the Deal Agent to take such
actions as agent on its behalf and to exercise such powers as are delegated to
the Deal Agent by the terms of this Agreement together with such powers as are
reasonably incidental thereto. The Deal Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Deal
Agent shall be read into this Agreement or otherwise exist for the Deal Agent.
In performing its functions and duties hereunder, the Deal Agent shall act
solely as agent for the Secured Parties and does not assume nor shall be deemed
to have assumed any obligation or relationship of trust or agency with or for
the Borrower or any of its successors or assigns. The Deal Agent shall not be
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required to take any action which exposes the Deal Agent to personal liability
or which is contrary to this Agreement or applicable law. The appointment and
authority of the Deal Agent hereunder shall terminate at the indefeasible
payment in full of the Aggregate Unpaids.
(b) Each Investor hereby designates and appoints First Union
as Liquidity Agent hereunder, and authorizes the Liquidity Agent to take such
actions as agent on its behalf and to exercise such powers as are delegated to
the Liquidity Agent by the terms of this Agreement together with such powers as
are reasonably incidental thereto. The Liquidity Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Liquidity Agent shall be read into this Agreement or otherwise exist for the
Liquidity Agent. In performing its functions and duties hereunder, the Liquidity
Agent shall act solely as agent for the Investors and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Borrower or any of its successors or assigns. The Liquidity Agent
shall not be required to take any action which exposes the Liquidity Agent to
personal liability or which is contrary to this Agreement or applicable law. The
appointment and authority of the Liquidity Agent hereunder shall terminate at
the indefeasible payment in full of the Aggregate Unpaids.
Section 9.2 Delegation of Duties.
---------------------
(a) The Deal Agent may execute any of its duties under this
Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The Deal
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
(b) The Liquidity Agent may execute any of its duties under
this Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Liquidity Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
Section 9.3 Exculpatory Provisions.
-----------------------
(a) Neither the Deal Agent nor any of its directors, officers,
agents or employees shall be (i) liable for any action lawfully taken or omitted
to be taken by it or them under or in connection with this Agreement (except for
its, their or such Person's own gross negligence or willful misconduct or, in
the case of the Deal Agent, the breach of its obligations expressly set forth in
this Agreement), or (ii) responsible in any manner to any of the Secured Parties
for any recitals, statements, representations or warranties made by the Borrower
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document furnished
in connection herewith, or for any failure of the Borrower to perform its
obligations hereunder, or for the satisfaction of any condition specified in
Article III. The Deal Agent shall not be under any obligation to any Secured
Party to ascertain or to inquire as to the observance or performance of any of
the agreements or covenants contained in, or conditions of, this Agreement, or
to inspect the properties, books or records of the Borrower. The Deal Agent
shall not be deemed to have knowledge of any Event of Default unless the Deal
Agent has received notice from the Borrower or a Secured Party.
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(b) Neither the Liquidity Agent nor any of its directors,
officers, agents or employees shall be (i) liable for any action lawfully taken
or omitted to be taken by it or them under or in connection with this Agreement
(except for its, their or such Person's own gross negligence or willful
misconduct or, in the case of the Liquidity Agent, the breach of its obligations
expressly set forth in this Agreement), or (ii) responsible in any manner to the
Deal Agent or any of the Secured Parties for any recitals, statements,
representations or warranties made by the Borrower contained in this Agreement
or in any certificate, report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other document furnished in connection herewith, or for
any failure of the Borrower to perform its obligations hereunder, or for the
satisfaction of any condition specified in Article III. The Liquidity Agent
shall not be under any obligation to the Deal Agent or any Secured Party to
ascertain or to inquire as to the observance or performance of any of the
agreements or covenants contained in, or conditions of, this Agreement, or to
inspect the properties, books or records of the Borrower. The Liquidity Agent
shall not be deemed to have knowledge of any Event of Default unless the
Liquidity Agent has received notice from the Borrower, the Deal Agent or a
Secured Party.
Section 9.4 Reliance.
---------
(a) The Deal Agent shall in all cases be entitled to rely, and
shall be fully protected in relying, upon any document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Deal Agent. The Deal Agent shall
in all cases be fully justified in failing or refusing to take any action under
this Agreement or any other document furnished in connection herewith unless it
shall first receive such advice or concurrence of VFCC or the Required Investors
or all of the Secured Parties, as applicable, as it deems appropriate or it
shall first be indemnified to its satisfaction by the Secured Parties, provided
that unless and until the Deal Agent shall have received such advice, the Deal
Agent may take or refrain from taking any action, as the Deal Agent shall deem
advisable and in the best interests of the Secured Parties. The Deal Agent shall
in all cases be fully protected in acting, or in refraining from acting, in
accordance with a request of VFCC or the Required Investors or all of the
Secured Parties, as applicable, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Secured Parties.
(b) The Liquidity Agent shall in all cases be entitled to
rely, and shall be fully protected in relying, upon any document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Liquidity Agent. The Liquidity
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Agent shall in all cases be fully justified in failing or refusing to take any
action under this Agreement or any other document furnished in connection
herewith unless it shall first receive such advice or concurrence of Required
Investors as it deems appropriate or it shall first be indemnified to its
satisfaction by the Investors, provided that unless and until the Liquidity
Agent shall have received such advice, the Liquidity Agent may take or refrain
from taking any action, as the Liquidity Agent shall deem advisable and in the
best interests of the Investors. The Liquidity Agent shall in all cases be fully
protected in acting, or in refraining from acting, in accordance with a request
of the Required Investors and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Investors.
Section 9.5 Non-Reliance on Deal Agent, Liquidity Agent and
-----------------------------------------------
Other Lenders.
--------------
Each Secured Party expressly acknowledges that neither the
Deal Agent, the Liquidity Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Deal Agent or the Liquidity Agent
hereafter taken, including, without limitation, any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Deal Agent or the Liquidity Agent. Each Secured Party represents and warrants to
the Deal Agent and to the Liquidity Agent that it has and will, independently
and without reliance upon the Deal Agent, the Liquidity Agent or any other
Secured Party and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and
creditworthiness of the Borrower and made its own decision to enter into this
Agreement or Hedging Agreement, as the case may be.
Section 9.6 Reimbursement and Indemnification.
----------------------------------
The Investors agree to reimburse and indemnify VFCC, the Deal
Agent, the Liquidity Agent and each of their respective officers, directors,
employees, representatives and agents ratably according to their pro rata
shares, to the extent not paid or reimbursed by the Borrower (i) for any amounts
for which VFCC, the Liquidity Agent, acting in its capacity as Liquidity Agent,
or the Deal Agent, acting in its capacity as Deal Agent, is entitled to
reimbursement by the Borrower hereunder and (ii) for any other expenses incurred
by VFCC, the Liquidity Agent, acting in its capacity as Liquidity Agent, or the
Deal Agent, in its capacity as Deal Agent and acting on behalf of the Secured
Parties, in connection with the administration and enforcement of this
Agreement.
Section 9.7 Deal Agent and Liquidity Agent in their Individual
--------------------------------------------------
Capacities.
-----------
The Deal Agent, the Liquidity Agent and each of their
respective Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower or any Affiliate of the
Borrower as though the Deal Agent or the Liquidity Agent, as the case may be,
were not the Deal Agent or the Liquidity Agent, as the case may be, hereunder.
With respect to the acquisition of interests in the Loan pursuant to this
Agreement, the Deal Agent, the Liquidity Agent and each of their respective
Affiliates shall have the same rights and powers under this Agreement as any
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Lender and may exercise the same as though it were not the Deal Agent or the
Liquidity Agent, as the case may be, and the terms "Investor," "Lender,"
"Investors" and "Lenders" shall include the Deal Agent or the Liquidity Agent,
as the case may be, in its individual capacity.
Section 9.8 Successor Deal Agent or Liquidity Agent.
----------------------------------------
(a) The Deal Agent may, upon 5 days' notice to the Borrower
and the Secured Parties, and the Deal Agent will, upon the direction of all of
the Secured Parties (other than the Deal Agent, in its individual capacity)
resign as Deal Agent. If the Deal Agent shall resign, then the Required
Investors during such 5-day period shall appoint from among the Secured Parties
a successor agent. If for any reason no successor Deal Agent is appointed by the
Required Investors during such 5-day period, then effective upon the expiration
of such 5-day period, the Secured Parties shall perform all of the duties of the
Deal Agent hereunder and the Borrower shall make all payments in respect of the
Aggregate Unpaids or under any fee letter delivered by the Originator to the
Deal Agent and the Secured Parties directly to the applicable Secured Party and
for all purposes shall deal directly with the Secured Party. After any retiring
Deal Agent's resignation hereunder as Deal Agent, the provisions of this Article
VIII and Article IX shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Deal Agent under this Agreement.
(b) The Liquidity Agent may, upon 5 days' notice to the
Borrower, the Deal Agent and the Investors, and the Liquidity Agent will, upon
the direction of all of the Investors (other than the Liquidity Agent, in its
individual capacity) resign as Liquidity Agent. If the Liquidity Agent shall
resign, then the Required Investors during such 5-day period shall appoint from
among the Investors a successor Liquidity Agent. If for any reason no successor
Liquidity Agent is appointed by the Required Investors during such 5-day period,
then effective upon the expiration of such 5-day period, the Investors shall
perform all of the duties of the Liquidity Agent hereunder and all payments in
respect of the Aggregate Unpaids. After any retiring Liquidity Agent's
resignation hereunder as Liquidity Agent, the provisions of this Article VIII
and Article IX shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Liquidity Agent under this Agreement.
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1 Assignments and Participations.
-------------------------------
(a) Each Investor may upon at least 30 days' notice to VFCC,
the Deal Agent, the Liquidity Agent and S&P and Moody's, assign to one or more
banks or other entities all or a portion of its rights and obligations under
this Agreement; provided, however, that (i) each such assignment shall be of a
constant, and not a varying percentage of all of the assigning Investor's rights
and obligations under this Agreement, (ii) the amount of the Loan of the
assigning Investor being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Acceptance with respect to such assignment)
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shall in no event be less than the lesser of (A) $15,000,000 or an integral
multiple of $1,000,000 in excess of that amount and (B) the full amount of the
assigning Investor's Loan, (iii) each such assignment shall be to an Eligible
Assignee, (iv) the parties to each such assignment shall execute and deliver to
the Deal Agent, for its acceptance and recording in the Register, an Assignment
and Acceptance, together with a processing and recordation fee of $3,500 or such
lesser amount as shall be approved by the Deal Agent, (v) the parties to each
such assignment shall have agreed to reimburse the Deal Agent, the Liquidity
Agent and VFCC for all fees, costs and expenses (including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for each of the Deal
Agent, the Liquidity Agent and VFCC) incurred by the Deal Agent, the Liquidity
Agent and VFCC, respectively, in connection with such assignment and (vi) there
shall be no increased costs, expenses or taxes incurred by the Deal Agent, the
Liquidity Agent or VFCC upon such assignment or participation, and provided
further that upon the effective date of such assignment the provisions of
Section 3.03(f) of the Administration Agreement shall be satisfied. Upon such
execution, delivery and acceptance by the Deal Agent and the Liquidity Agent and
the recording by the Deal Agent, from and after the effective date specified in
each Assignment and Acceptance, which effective date shall be the date of
acceptance thereof by the Deal Agent and the Liquidity Agent, unless a later
date is specified therein, (i) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
of an Investor hereunder and (ii) the Investor assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Investor's
rights and obligations under this Agreement, such Investor shall cease to be a
party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Investor assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Investor makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of VFCC or the performance or observance by VFCC of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Deal Agent or the
Liquidity Agent, such assigning Investor or any other Investor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assigning Investor and such assignee confirm that such
assignee is an Eligible Assignee; (vi) such assignee appoints and authorizes
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each of the Deal Agent and the Liquidity Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
such agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as an Investor.
(c) On behalf of the Borrower, the Deal Agent shall maintain
at its address referred to herein a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders, the participants, the Investors and the Commitment
of, and the interest of, the Loan owned by each investor from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and VFCC, the Borrower and the Investors may
treat each Person whose name is recorded in the Register as an Investor
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by VFCC, the Liquidity Agent or any Investor at any reasonable
time and from time to time upon reasonable prior notice.
(d) Subject to the provisions of Section 10.1(a), upon its
receipt of an Assignment and Acceptance executed by an assigning Investor and an
assignee, the Deal Agent and the Liquidity Agent shall each, if such Assignment
and Acceptance has been completed and is in substantially the form of Exhibit B
hereto, accept such Assignment and Acceptance, and the Deal Agent shall then (i)
record the information contained therein in the Register and (ii) give prompt
notice thereof to VFCC.
(e) Each Investor may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the Loan owned by it); provided, however, that (i) such
Investor's obligations under this Agreement (including, without limitation, its
Commitment hereunder) shall remain unchanged, (ii) such Investor shall remain
solely responsible to the other parties hereto for the performance of such
obligations and (iii) the Deal Agent and the other Investors shall continue to
deal solely and directly with such Investor in connection with such Investor's
rights and obligations under this Agreement, and provided further that the Deal
Agent shall have confirmed that upon the effective date of such participation
the provisions of Section 3.03(f) of the Administration Agreement shall be
satisfied. Notwithstanding anything herein to the contrary, each participant
shall have the rights of an Investor (including any right to receive payment)
under Sections 2.12 and 2.13; provided, however, that no participant shall be
entitled to receive payment under either such Section in excess of the amount
that would have been payable under such Section by the Borrower to the Investor
granting its participation had such participation not been granted, and no
Investor granting a participation shall be entitled to receive payment under
either such Section in an amount which exceeds the sum of (i) the amount to
which such Investor is entitled under such Section with respect to any portion
of the Loan owned by such Investor which is not subject to any participation
plus (ii) the aggregate amount to which its participants are entitled under such
Sections with respect to the amounts of their respective participations. With
respect to any participation described in this Section 10.1, the participant's
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rights as set forth in the agreement between such participant and the applicable
Investor to agree to or to restrict such Investor's ability to agree to any
modification, waiver or release of any of the terms of this Agreement or to
exercise or refrain from exercising any powers or rights which such Investor may
have under or in respect of this Agreement shall be limited to the right to
consent to any of the matters set forth in Section 11.1 of this Agreement.
(f) Each Investor may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.1, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower or VFCC furnished to such
Investor by or on behalf of the Borrower or VFCC.
(g) In the event (i) an Investor ceases to qualify as an
Eligible Assignee, or (ii) an Investor makes demand for compensation pursuant to
Section 2.9 or Section 2.10, VFCC may, and, upon the direction of the Borrower
and prior to the occurrence of an Event of Default, shall, in any such case,
notwithstanding any provision to the contrary herein, replace such Investor with
an Eligible Assignee by giving three Business Days' prior written notice to such
Investor. In the event of the replacement of an Investor, such Investor agrees
(A) to assign all of its rights and obligations hereunder to an Eligible
Assignee selected by VFCC upon payment to such Investor of the amount of such
Investor's Principal together with any accrued and unpaid Interest thereon and
all other amounts owing to such Investor hereunder and (B) to execute and
deliver an Assignment and Acceptance and such other documents evidencing such
assignment as shall be necessary or reasonably requested by VFCC or the Deal
Agent. In the event that any Investor ceases to qualify as an Eligible Assignee,
such affected Investor agrees (I) to give the Deal Agent, the Borrower and VFCC
prompt written notice thereof and (II) subject to the following proviso, to
reimburse the Deal Agent, the Liquidity Agent, the Borrower, VFCC and the
relevant assignee for all fees, costs and expenses (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for each
of the Deal Agent, the Liquidity Agent, the Borrower and VFCC and such assignee)
incurred by the Deal Agent, the Liquidity Agent, the Borrower, VFCC and such
assignee, respectively, in connection with any assignment made pursuant to this
Section 10.1(g) by such affected Investor; provided, however, that such affected
Investor's liability for such costs, fees and expenses shall be limited to the
amount of any up-front fees paid to such affected Investor at the time that it
became a party to this Agreement.
(h) Nothing herein shall prohibit any Investor from pledging
or assigning as collateral any of its rights under this Agreement to any Federal
Reserve Bank in accordance with applicable law and any such pledge or collateral
assignment may be made without compliance with Section 10.1(a) or Section
10.1(b).
(i) In the event any Investor causes increased costs, expenses
or taxes to be incurred by the Deal Agent, Liquidity Agreement or VFCC in
connection with the assignment or participation of such Investor's rights and
obligations under this Agreement to an Eligible Assignee then such Investor
agrees that it will make reasonable efforts to assign such increased costs,
expenses or taxes to such Eligible Assignee in accordance with the provisions of
this Agreement.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendments and Waivers.
-----------------------
(a) Except as provided in this Section 11.1, no amendment, waiver or
other modification of any provision of this Agreement shall be effective without
the written agreement of the Borrower, the Deal Agent and the Required
Investors; provided, however, that no such amendment, waiver or modification
affecting the rights or obligations of any Hedge Counterparty, the Backup
Servicer or the Collateral Custodian shall be effective as against that Hedge
Counterparty, the Backup Servicer and/or the Collateral Custodian, as the case
may be, without the written agreement of such Persons. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) No amendment, waiver or other modification of this Agreement shall:
(i) without the consent of each affected Lender, (A) extend
the Maturity Date or the date of any payment or deposit of Collections
by the Borrower or the Servicer, (B) reduce the rate or extend the time
of payment of Interest (or any component thereof), (C) reduce any fee
payable to the Deal Agent for the benefit of the Lenders, (D) except
pursuant to Article X hereof, change the amount of the Principal of any
Lender, an Investor's pro rata share or an Investor's Commitment, (E)
amend, modify or waive any provision of the definition of Required
Investors or this Section 11.1(b), (F) consent to or permit the
assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (G) amend or modify any defined
term (or any defined term used directly or indirectly in such defined
term) used in clauses (A) through (E) above in a manner which would
circumvent the intention of the restrictions set forth in such clauses;
or
(ii) without the written consent of the Deal Agent, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Agent.
(c) Notwithstanding the foregoing provisions of this Section 11.1,
without the consent of the Investors, the Deal Agent may, with the consent of
the Borrower amend this Agreement solely to add additional Persons as Investors
hereunder. Any modification or waiver shall apply to each of the Lenders equally
and shall be binding upon the Borrower, the Lenders and the Deal Agent.
Section 11.2 Notices, Etc.
-------------
All notices and other communications provided for hereunder
shall, unless otherwise stated herein, be in writing (including telex
communication and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or specified in such party's
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Assignment and Acceptance or at such other address as shall be designated by
such party in a written notice to the other parties hereto. All such notices and
communications shall be effective, upon receipt, or in the case of (a) notice by
mail, five days after being deposited in the United States mail, first class
postage prepaid, (b) notice by telex, when telexed against receipt of answer
back, or (c) notice by facsimile copy, when verbal communication of receipt is
obtained, except that notices and communications pursuant to Article 11 shall
not be effective until received with respect to any notice sent by mail or
telex.
Section 11.3 Ratable Payments.
-----------------
If any Secured Party, whether by setoff or otherwise, has
payment made to it with respect to any portion of the Aggregate Unpaids owing to
such Secured Party (other than payments received pursuant to Section 8.1 in a
greater proportion than that received by any other Secured Party), such Secured
Party agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of the Aggregate Unpaids held by the other Secured Parties so
that after such purchase each Secured Party will hold its ratable proportion of
the Aggregate Unpaids; provided, however, that if all or any portion of such
excess amount is thereafter recovered from such Secured Party, such purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, but without interest.
Section 11.4 No Waiver, Rights and Remedies.
-------------------------------
No failure on the part of the Deal Agent, the Collateral
Custodian, the Backup Servicer or a Secured Party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right. The
rights and remedies herein provided are cumulative and not exclusive of any
rights and remedies provided by law.
Section 11.5 Binding Effect; Benefit of Agreement.
-------------------------------------
This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Deal Agent, the Backup Servicer, the Collateral Custodian,
the Secured Parties and their respective successors and permitted assigns and,
in addition, the provisions of 2.4(a)(i) and 2.5(a)(i) shall inure to the
benefit of each Hedge Counterparty, whether or not that Hedge Counterparty is a
Secured Party.
Section 11.6 Term of this Agreement.
-----------------------
This Agreement, including, without limitation, the Borrower's
obligation to observe its covenants set forth in Article V, and the Servicer's
obligation to observe its covenants set forth in Article VI, shall remain in
full force and effect until the Collection Date; provided, however, that the
rights and remedies with respect to any breach of any representation and
warranty made or deemed made by the Borrower pursuant to Articles III and IV and
the indemnification and payment provisions of Article VIII and Article IX and
the provisions of Section 11.9 and Section 11.10 shall be continuing and shall
survive any termination of this Agreement.
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Section 11.7 Governing Law; 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 SECURED PARTIES,
THE BORROWER, THE LIQUIDITY AGENT AND THE DEAL AGENT HEREBY AGREES TO THE
NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW
YORK. EACH OF THE PARTIES HERETO AND EACH SECURED PARTY 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 CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT.
Section 11.8 Waiver of Jury Trial.
---------------------
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE SECURED
PARTIES, THE BORROWER AND THE DEAL AGENT 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 11.9 Costs, Expenses and Taxes.
--------------------------
(a) In addition to the rights of indemnification granted to
the Deal Agent, the Liquidity Agent, the Backup Servicer, the Collateral
Custodian, the Secured Parties and its or their Affiliates and officers,
directors, employees and agents thereof under Article VIII hereof, the Borrower
agrees to pay on demand all costs and expenses of the Deal Agent, the Liquidity
Agent, the Backup Servicer, the Collateral Custodian and the Secured Parties
incurred in connection with the preparation, execution, delivery, administration
(including periodic auditing), amendment or modification of, or any waiver or
consent issued in connection with, this Agreement and the other documents to be
delivered hereunder or in connection herewith (excluding any Hedging Agreement),
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Deal Agent, the Liquidity Agent, the Backup Servicer, the
Collateral Custodian and the Secured Parties with respect thereto and with
respect to advising the Deal Agent, the Liquidity Agent, the Backup Servicer,
the Collateral Custodian and the Secured Parties as to their respective rights
and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith (excluding any Hedging Agreement), and all
costs and expenses, if any (including reasonable counsel fees and expenses),
incurred by the Deal Agent, the Liquidity Agent, the Backup Servicer, the
Collateral Custodian or the Secured Parties in connection with the enforcement
of this Agreement and the other documents to be delivered hereunder or in
connection herewith (including any Hedging Agreement).
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(b) The Borrower shall pay on demand any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement,
the other documents to be delivered hereunder or any agreement or other document
providing liquidity support, credit enhancement or other similar support to the
Lender in connection with this Agreement or the funding or maintenance of
Purchases hereunder.
(c) The Borrower shall pay on demand all other costs, expenses
and Taxes (excluding income taxes) incurred by any Issuer or any shareholder of
such Issuer ("Other Costs"), including, without limitation, all costs and
expenses incurred by the Deal Agent in connection with periodic audits of the
Borrower's or the Servicer's books and records and the cost of rating such
Issuer's commercial paper with respect to financing its purchase of Borrowing
Bases hereunder by independent financial rating agencies.
Section 11.10 No Proceedings.
---------------
Each of the Borrower, the Deal Agent, the Liquidity Agent, the
Servicer, the Subservicer, the Backup Servicer, the Collateral Custodian and the
Secured Parties hereby agrees that it will not institute against, or join any
other Person in instituting against, VFCC any proceedings of the type referred
to in the definition of Insolvency Event hereunder until one year and one day
have elapsed since the last day on which any Commercial Paper Notes remained
outstanding.
Section 11.11 Recourse Against Certain Parties.
---------------------------------
(a) No recourse under or with respect to any obligation,
covenant or agreement (including, without limitation, the payment of any fees or
any other obligations) of any Secured Party as contained in this Agreement or
any other agreement, instrument or document entered into by it pursuant hereto
or in connection herewith shall be had against any administrator of such Secured
Party or any incorporator, affiliate, stockholder, officer, employee or director
of such Secured Party or of any such administrator, as such, by the enforcement
of any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise; it being expressly agreed and understood that the
agreements of such Secured Party contained in this Agreement and all of the
other agreements, instruments and documents entered into by it pursuant hereto
or in connection herewith are, in each case, solely the corporate obligations of
such Secured Party, provided that, in the case of VFCC, such liabilities shall
be paid only after the repayment in full of all Commercial Paper Notes and all
other liabilities contemplated in the program documents with respect to VFCC,
and that no personal liability whatsoever shall attach to or be incurred by any
administrator of such Secured Party or any incorporator, stockholder, affiliate,
officer, employee or director of such Secured Party or of any such
administrator, as such, or any of them, under or by reason of any of the
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obligations, covenants or agreements of such Secured Party contained in this
Agreement or in any other such instrument, document or agreement, or which are
implied therefrom, and that any and all personal liability of every such
administrator of such Secured Party and each incorporator, stockholder,
affiliate, officer, employee or director of such Secured Party or of any such
administrator, or any of them, for breaches by such Secured Party of any such
obligations, covenants or agreements, which liability may arise either at common
law or in equity, by statute or constitution, or otherwise, is hereby expressly
waived as a condition of, and in consideration for, the execution of this
Agreement.
(b) Notwithstanding anything contained in this Agreement, VFCC
shall have no obligation to pay any amount required to be paid by it hereunder
to any of the Liquidity Agent, the Deal Agent, any Investor, the Collateral
Custodian, or the Backup Servicer in excess of any amount available to VFCC
after paying or making provision for the payment of its Commercial Paper Notes.
All payment obligations of VFCC hereunder are contingent upon the availability
of funds in excess of the amounts necessary to pay Commercial Paper Notes; and
each of the Liquidity Agent, the Deal Agent, each Investor, the Collateral
Custodian, and the Backup Servicer agrees that they shall not have a claim under
Section 101(5) of the Bankruptcy Code if and to the extent that any such payment
obligation exceeds the amount available to VFCC to pay such amounts after paying
or making provision for the payment of its Commercial Paper Notes.
(c) The provisions of this Section 11.11 shall survive the
termination of this Agreement.
Section 11.12 Protection of Ownership Interests of the
-----------------------------------------
Lenders; Intent of Parties; Security Interest.
----------------------------------------------
(a) The Borrower agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and documents, and
take all actions, that may reasonably be necessary or desirable, or that the
Deal Agent may reasonably request, to perfect, protect or more fully evidence
the Grant and the interests of the Secured Parties in and to the Collateral, or
to enable the Deal Agent or the Secured Parties to exercise and enforce their
rights and remedies hereunder.
(b) If the Borrower or the Servicer fails to perform any of
its obligations hereunder after five Business Days' notice from the Deal Agent,
the Deal Agent or any Secured Party may (but shall not be required to) perform,
or cause performance of, such obligation; and the Deal Agent's or such Secured
Party's costs and expenses incurred in connection therewith shall be payable by
the Borrower (if the Servicer that fails to so perform is the Borrower or an
Affiliate thereof) as provided in Article VIII, as applicable. The Borrower
irrevocably authorizes the Deal Agent and appoints the Deal Agent as its
attorney-in-fact to act on behalf of the Borrower (i) to execute on behalf of
the Borrower as debtor and to file financing statements necessary or desirable
in the Deal Agent's sole discretion to perfect and to maintain the perfection
and priority of the interest of the Secured Parties in the Assets and (ii) to
file a carbon, photographic or other reproduction of this Agreement or any
financing statement with respect to the Assets as a financing statement in such
offices as the Deal Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the interests of the
Secured Parties in the Assets. This appointment is coupled with an interest and
is irrevocable.
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(c) The parties hereto intend that this Agreement constitutes
a security agreement and the transactions effected hereby constitute secured
loans by the Lenders to the Borrower under applicable law. For such purpose, the
Borrower hereby transfers, conveys, assigns and grants to the Deal Agent, for
the benefit of the Secured Parties, a continuing security interest in all
Assets, all Collections, all Hedging Agreements and the proceeds of the
foregoing to secure the repayment of all Principal, all payments at any time due
or accrued in respect of the Interest, all Aggregate Unpaids, and all other
payments at any time due (whether accrued or due) by the Borrower hereunder
(including without limit any amount owing under Article VIII hereof), under any
Hedging Agreement (including, without limitation, payments in respect of the
termination of any such Hedging Agreement) or under any fee letter to the Deal
Agent and each Lender.
Section 11.13 Confidentiality.
----------------
(a) Each of the Deal Agent, the Secured Parties, the Liquidity
Agent, the Servicer, the Collateral Custodian, the Backup Servicer and the
Borrower shall maintain and shall cause each of its employees and officers to
maintain the confidentiality of the Agreement and all information with respect
to the other parties, including all information regarding the business of the
Borrower and the Servicer hereto and their respective businesses obtained by it
or them in connection with the structuring, negotiating and execution of the
transactions contemplated herein, except that each such party and its officers
and employees may (i) disclose such information to its external accountants,
attorneys, investors, potential investors and the agents of such Persons
("Excepted Persons"), provided, however, that each Excepted Person shall, as a
condition to any such disclosure, agree for the benefit of the Deal Agent, the
Secured Parties, the Liquidity Agent, the Servicer, the Collateral Custodian,
the Backup Services and the Borrower that such information shall be used solely
in connection with such Excepted Person's evaluation of, or relationship with,
the Borrower and its affiliates, (ii) disclose the existence of the Agreement,
but not the financial terms thereof, (iii) disclose such information as is
required by an applicable law or an order of an judicial or administrative
proceeding and (iv) disclose the Agreement and such information in any suit,
action, proceeding or investigation (whether in law or in equity or pursuant to
arbitration) involving any of the Transaction Documents or any Hedging Agreement
for the purpose of defending itself, reducing its liability, or protecting or
exercising any of its claims, rights, remedies, or interests under or in
connection with any of the Transaction Documents or any Hedging Agreement. It is
understood that the financial terms that may not be disclosed except in
compliance with this Section 11.13(a) include, without limitation, all fees and
other pricing terms, and all Events of Default, Servicer Defaults, and priority
of payment provisions
93
<PAGE>
(b) Anything herein to the contrary notwithstanding, the
Borrower and the Servicer each hereby consents to the disclosure of any
nonpublic information with respect to it (i) to the Deal Agent, the Liquidity
Agent, the Collateral Custodian, the Backup Servicer or the Secured Parties by
each other, (ii) by the Deal Agent or the Lenders to any prospective or actual
assignee or participant of any of them or (iii) by the Deal Agent, the Liquidity
Agent or a Lender to any Rating Agency, Commercial Paper dealer or provider of a
surety, guaranty or credit or liquidity enhancement to a Lender and to any
officers, directors, employees, outside accountants and attorneys of any of the
foregoing, provided each such Person is informed of the confidential nature of
such information. In addition, the Secured Parties, the Liquidity Agent and the
Deal Agent may disclose any such nonpublic information as required pursuant to
any law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law).
(c) Notwithstanding anything herein to the contrary, the
foregoing shall not be construed to prohibit (i) disclosure of any and all
information that is or becomes publicly known, (ii) disclosure of any and all
information (A) if required to do so by any applicable statute, law, rule or
regulation, (B) to any government agency or regulatory body having or claiming
authority to regulate or oversee any respects of the Collateral Custodian's or
Backup Servicer's business or that of their affiliates, (C) pursuant to any
subpoena, civil investigative demand or similar demand or request of any court,
regulatory authority, arbitrator or arbitration to which the Collateral
Custodian or Backup Servicer or an affiliate or an officer, director, employer
or shareholder thereof is a party, (D) in any preliminary or final offering
circular, registration statement or contract or other document pertaining to the
transactions contemplated herein approved in advance by the Borrower or Servicer
or (E) to any affiliate, independent or internal auditor, agent, employee or
attorney of the Collateral Custodian or Backup Servicer having a need to know
the same, provided that the Collateral Custodian or Backup Servicer advises such
recipient of the confidential nature of the information being disclosed, or
(iii) any other disclosure authorized by the Borrower or Servicer.
Section 11.14 Execution in Counterparts; Severability;
----------------------------------------
Integration.
------------
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Originator to the Deal Agent and the
Lenders.
94
<PAGE>
Section 11.15 Year 2000 Compliance.
---------------------
(a) The Servicer has (i) initiated a review and assessment of
all areas within its business and operations (including those affected by
suppliers, vendors and service providers) that could be adversely affected by
the risk that computer applications used by the Borrower or the Servicer, as
applicable (or by such suppliers, vendors or service providers), may be unable
to recognize and perform properly date sensitive functions involving certain
dates prior to and any date after December 31, 1999 (the "Year 2000 Problem")
and (ii) initiated a plan and timeline for addressing the Year 2000 Problem on a
timely basis. Based upon the foregoing, each of the Borrower and the Servicer
believes that all computer applications (including those of its suppliers,
vendors and service providers) that are material to its business and operations
are reasonably expected on or before September 30, 1999 to be able to perform
properly date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 Compliant"), except to the extent that failure to do so
could not reasonably be expected to (A) have a material adverse effect on the
Borrower, the Servicer, the Loan, the Collateral, the Deal Agent or the Lender,
or (B) result in an Event of Default.
(b) Subject to the foregoing, the Servicer (i) has initiated a
review and assessment of all computer applications of the Borrower and the
Servicer (including, but not limited to those of its subsidiaries), and of its
suppliers, vendors and service providers that are material to its business or
which are related to or involved in the collection management or servicing of
the Assets (the "Asset Systems") and (ii) reasonably expects that the Asset
Systems are Year 2000 Compliant or will be Year 2000 Compliant on or before
September 30, 1999, and thereafter, except to the extent that failure to do so
could not reasonably be expected to (A) have a material adverse effect on the
Borrower, the Servicer, the Loan, the Collateral, the Deal Agent or the Lender,
or (B) result in an Event of Default.
(c) The Servicer reasonably expects that the costs of all
assessment, remediation, testing and integration related to the Borrower's and
the Servicer's plans for becoming Year 2000 Compliant will not have a material
adverse effect on the financial condition or operations of the Borrower or the
Servicer.
(d) The Borrower and the Servicer, as applicable, shall
promptly notify the Deal Agent in the event it discovers or determines that any
Asset Systems will not be Year 2000 Compliant on or before September 30, 1999
and thereafter except to the extent that such failure could not reasonably be
expected to (i) have a material adverse effect on the Borrower, the Servicer,
the Loan, the Collateral, the Deal Agent or the Lender, or (ii) result in an
Event of Default.
(e) The Borrower and the Servicer will deliver to the Deal
Agent, simultaneously with any quarterly or annual financial statements, an
Officer's Certificate signed by the chief financial officer or chief accounting
officer thereof, that no material event, problems or conditions have occurred,
to the best of management's knowledge, which in the opinion of management would
(i) prevent or materially delay the Borrower's or the Servicer's, as applicable,
plan to become Year 2000 Compliant or (ii) cause or be likely to cause the
Borrower's or the Servicer's representations and warranties set forth herein
with respect to becoming Year 2000 Compliant to no longer be true; provided,
however, that such letter, report, certificate or statement need not be
delivered after January 1, 2000 for so long as the Borrower and the Servicer, as
applicable, remains Year 2000 Compliant.
95
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE BORROWER: FIDELITY LEASING SPE III, LLC, a Delaware
limited liability company
By: JLA Credit Corporation, a Delaware
corporation, its Managing Member
By: ______________________________
Name: ______________________________
Title: ______________________________
Fidelity Leasing SPE III, LLC
c/o Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attention: Crit Dement
Facsimile Number: (610) 719-4515
Telephone Number: (610) 719-4510
THE SERVICER: FIDELITY LEASING, INC., a Pennsylvania
corporation
By: __________________________________
Name: __________________________________
Title: __________________________________
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attention: Crit Dement
Facsimile Number: (610) 719-4515
Telephone Number: (610) 719-4510
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
THE INVESTORS: FIRST UNION NATIONAL BANK, a national banking
association
By: __________________________________
Name: __________________________________
Title: __________________________________
First Union National Bank
One First Union Center, TW9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit
Administration
Facsimile Number: (704) 374-3254
Telephone Number: (704) 374-4001
VFCC: VARIABLE FUNDING CAPITAL CORPORATION,
a Delaware corporation
By: First Union Capital Markets Corp., a North
Carolina corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
First Union Capital Markets Corp.
One First Union Center, TW9
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile Number: (704) 383-6036
Telephone Number: (704) 374-2520
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS CORP., a
North Carolina corporation
By: __________________________________
Name: __________________________________
Title: __________________________________
First Union Capital Markets Corp.
One First Union Center, TW9
Charlotte, North Carolina 28288
Attention: Conduit Administration
Facsimile Number: (704) 383-6036
Telephone Number: (704) 374-2520
THE LIQUIDITY AGENT: FIRST UNION NATIONAL BANK, a national
banking association
By: __________________________________
Name: __________________________________
Title: __________________________________
First Union National Bank
One First Union Center, TW9
Charlotte, North Carolina 28288
Attention: Capital Markets Credit
Administration
Facsimile Number: (704) 374-3254
Telephone Number: (704) 374-4001
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
THE COLLATERAL CUSTODIAN HARRIS TRUST AND SAVINGS BANK, an Illinois
AND BACK-UP SERVICER: banking corporation
By: __________________________________
Name: __________________________________
Title: __________________________________
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administrator
Facsimile Number: (312) 461-3525
Telephone Number: (312) 461-2532
<PAGE>
EXHIBIT A
FORM OF LOCK-BOX NOTICE
____________ ___, 1999
[Name and Address of Lock-Box Bank]
Re: JLA Credit Corporation
Lock-Box No. _____________
Lock-Box Account No. ___________
Ladies and Gentleman:
JLA Credit Corporation (the "Assignor") hereby notifies you
that in connection with certain transactions involving the Assignor's accounts
receivables, the Assignor will transfer exclusive ownership and control of its
lock-box number _____________ (the "Lock-Box") and the corresponding lock-box
account no. ____________ maintained with you (the "Lock-Box Account") to First
Union Capital Market Corp., as deal agent (the "Agent"). These transfers will
become effective upon your receipt of notice of effectiveness, substantially in
the form attached hereto as Attachment 1 (the "Notice of Effectiveness"), which
shall be delivered via facsimile transmission to your attention.
In connection with the foregoing, the Assignor and the Agent
hereby instruct you, beginning on the date of receipt of the Notice of
Effectiveness: (a) to collect the monies, checks, instruments and other items of
payment mailed to the Lock-Box, (b) to deposit into the Lock-Box Account all
such monies, checks, instruments and other items of payment (unless otherwise
instructed by the Agent), and (c) to transfer all funds deposited and collected
in the Lock-Box Account pursuant to instructions given to you by the Agent from
time to time.
You are hereby further instructed: (a) that unless and until
the Agent notifies you to the contrary, you shall make such transfers from the
Lock-Box Account at such times and in such manner as the Assignor, in its
capacity as servicer for the Agent, shall from time to time instruct to the
extent such instructions are not inconsistent with the instructions set forth
herein, and (b) to permit the Assignor (in its capacity as servicer for the
Agent) and the Agent to obtain upon request any information relating to the
Lock-Box Account, including, without limitation, any information regarding the
balance or activity of the Lock-Box Account.
The Assignor also hereby notifies you that, beginning on the
date of receipt by facsimile of the Notice of Effectiveness from the Agent,
notwithstanding anything herein or elsewhere to the contrary, the Agent shall be
irrevocably entitled to exercise any and all rights in respect of or in
<PAGE>
connection with the Lock-Box and the Lock-Box Account, including, without
limitation, the right to specify when payments are to be made out of or in
connection with the Lock-Box and the Lock-Box Account. The Agent acts as agent
for persons having a continuing interest in all of the checks and their proceeds
and all monies and earnings, if any, thereon in the Lock-Box Account, and you
shall be the Agent's agent for the purpose of holding and collection such
property. The monies, checks, instruments and other items of payment mailed to
the Lock-Box and the funds deposited into the Lock-Box Account will not be
subject to deduction, set-off, banker's lien, or any other right in favor of any
person other than the Agent (except that you may set off (a) all amounts due to
you in respect of your customary fees and expenses for the routine maintenance
and operation of the Lock-Box Account, and (b) the face amount of any checks
returned unpaid because of uncollected or insufficient funds).
This Agreement may not be terminated at any time by the
Assignor or you, without the prior written consent of the Agent. Neither this
Agreement nor any provisions hereof may be changed, amended, modified or waived
orally but only by an instrument in writing signed by the Agent and the
Assignor.
You shall not assign or transfer your rights or obligations
hereunder (other than to the Agent) without the prior written consent of the
Agent and the Assignor. Subject to the preceding sentence, this Agreement shall
be binding upon each of the parties hereto and their respective successors and
assigns, and shall inure to the benefit of, and be enforceable by, the Agent,
each of the parties hereto and their respective successors and assigns.
You hereby represent that the person signing this Agreement on
your behalf is duly authorized by you to so sign.
You agree to give the Agent and the Assignor prompt notice if
the Lock-Box or the Lock-Box Account becomes subject to any writ, judgment,
warrant of attachment, execution or similar process.
Any notice, demand or other communications required or
permitted to be given hereunder shall be in writing and may be (a) personally
served, (b) sent by courier service, (c) telecopied, or (d) sent by United
States mail, and shall be deemed to have been given when (a) delivered in
person, (b) delivered by courier service, (c) upon receipt of the telecopy, or
(d) three Business Days after deposit in the United States mail (registered or
certified, with postage prepaid and properly addressed); provided, however, that
notices to the Agent hereunder shall not be effective until actually received by
the Agent. For the purposes hereof, (i) the addresses of the parties hereto
shall be as set forth below each party's name below, or, as to each party, at
such other address as may be designated by such party in a written notice to the
other and the Agent, and (ii) the address of the Agent shall be One First Union
Center, TW9, Charlotte, North Carolina 28288, Attn.: Conduit Administration, or
at such other address as may be designated by the Agent in a written notice to
each of the parties hereto.
<PAGE>
Please agree to the terms of, and acknowledge receipt of, this
Agreement by signing in the space provided below.
Very truly yours,
JLA CREDIT CORPORATION, a Delaware
corporation
By: _______________________________
Name: _______________________________
Title: _______________________________
[Address]
[Attention:]
Telecopy #:
ACKNOWLEDGED AND AGREED:
[Name of Lock-Box Bank]
By: __________________________
Name: __________________________
Title: __________________________
Date: __________________________
[Address]
[Attention:]
<PAGE>
ATTACHMENT 1
TO EXHIBIT A
NOTICE OF EFFECTIVENESS
TO LOCK-BOX NOTICE
VIA FACSIMILE TRANSMISSION
TO: [Name of Lock-Box Bank]
DATED: [Date]
ATTENTION:
Re: Lock-Box No. _______________
Lock-Box Account No. ________
Ladies and Gentlemen:
Pursuant to the Lock-Box Agreement between JLA Credit
Corporation and you, dated as of _____________ (the "Agreement"), we hereby give
you notice that the transfers of the above-referenced Lock-Box and the Lock-Box
Account, as described in the Agreement, are effective as of the date hereof. You
are hereby instructed to comply immediately with the instructions set forth in
the Agreement and, until we notify you to the contrary, to transfer all funds
deposited and collected in Lock-Box Account to account number _________ at
- ---------------------.
FIRST UNION CAPITAL MARKETS CORP., a
North Carolina corporation, as Agent
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
ACKNOWLEDGED AND AGREED:
[Name of Lock-Box Bank]
By: _________________________
Name: _________________________
Title: _________________________
Dated: _________________________
[Address]
[Attention:]
Telecopy #:
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE
Dated ___________ __, 1999
Reference is made to the Receivables Credit Agreement dated as
of February 4, 1999 (the "Agreement"), among Fidelity Leasing SPE III, LLC, as
the Borrower, Fidelity Leasing, Inc., as the Servicer, the Investors named
therein, Variable Funding Capital Corporation ("VFCC"), as a Lender, First Union
Capital Markets Corp., as the Deal Agent, First Union National Bank, as the
Liquidity Agent, and Harris Trust and Savings Bank, as the Collateral Custodian
and Backup Servicer. Terms defined in the Agreement are used herein with the
same meaning.
_____________________ (the "Assignor") and
______________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, that interest in
and to all of the Assignor's rights and obligations under the Agreement as of
the date hereof which represents the percentage interest specified in Section 1
of Schedule 1 of all outstanding rights and obligations of the Assignor under
the Agreement, including, without limitation, such interest in the Assignor's
Commitment and the Principal of Assets owned by the Assignor. After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
Principal of Assets owned by the Assignee will be as set forth in Section 2 of
Schedule 1.
2. The Assignor (a) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Agreement or any other instrument or document
furnished pursuant thereto; and (c) makes no representation or warranty and
assumes no responsibility with respect to the financial conditions of VFCC or
the performance or observance by VFCC of any of its obligations under the
Agreement or any other instrument or document furnished pursuant thereto.
3. The Assignee (a) confirms that it has received a copy of
the Agreement, together with copies of such financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (b) agrees
that it will, independently and without reliance upon the Deal Agent, the
Liquidity Agent, the Assignor or any other Investor and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Agreement; (c)
confirms that it is an Eligible Assignee; (d) appoints and authorizes the
Liquidity Agent each to take such action as agent on its behalf and to exercise
such powers under the Agreement as are delegated to the Liquidity Agent,
together with such powers as are reasonably incidental thereto; and (e) agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of the Agreement are required to be performed by it as an Investor.
<PAGE>
4. Following the execution of this Assignment and Acceptance
by the Assignor and the Assignee, it will be delivered to the Liquidity Agent
for acceptance. The effective date of this Assignment and Acceptance (the
"Transfer Date") shall be the date of acceptance thereof by the Liquidity Agent,
unless a later date is specified in Section 3 of Schedule 1.
5. Upon such acceptance by the Liquidity Agent, as of the
Transfer Date, (a) the Assignee shall be a party to the Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of an Investor thereunder, and (b) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish is rights and be released
from its obligations under the Agreement.
6. Upon such acceptance by the Liquidity Agent, from and after
the Transfer Date, the Deal Agent and the Liquidity Agent shall make, or cause
to be made, all payments under the Agreement in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
commitment fee with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Agreement for
periods prior to the Transfer Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed by their respective officers thereunto
duly authorized, as of the date first above written, such execution being made
on Schedule 1 hereto.
[ASSIGNOR]
By: ______________________________
Name: ______________________________
Title: ______________________________
Address for notice
[Address]
By: ______________________________
Name: ______________________________
Title: ______________________________
Address for notice
[Address]
Acknowledged and accepted this ____ day of
________, ________
FIRST UNION NATIONAL BANK, a national banking
association, as Liquidity Agent
By: ___________________________
Name: ___________________________
Title: ___________________________
Acknowledged and accepted this ____ day of
________, ________
FIRST UNION CAPITAL MARKETS CORP., a North Carolina
corporation, as Deal Agent
By: ___________________________
Name: ___________________________
Title: ___________________________
<PAGE>
Schedule 1
to
Assignment and Acceptance
Dated _______ ___, 1999
Section 1.
Percentage Interest: ________________%
Section 2.
Assignee's Commitment: $_________________
Aggregate Outstanding Principal of Assets: $________________
Section 3.
Transfer Date: _____________ ___, 1999
<PAGE>
EXHIBIT C
FORM OF MONTHLY REPORT
[SET FORTH ON FOLLOWING PAGES]
<PAGE>
EXHIBIT D
FORM OF SERVICER'S CERTIFICATE
This Servicer's Certificate is delivered pursuant to the provisions of Section
____ of the Receivables Credit Agreement, dated as of February 4, 1999, among
Fidelity Leasing SPE III, LLC, as Borrower, Fidelity Leasing, Inc., as Servicer,
the Investors named therein, Variable Funding Capital Corporation, as a Lender,
First Union Capital Markets Corp., as the Deal Agent, First Union National Bank,
as the Liquidity Agent, and Harris Trust and Savings Bank, as the Collateral
Custodian and Back-up Servicer (hereinafter as such agreement may have been, or
may from time to time be amended, supplemented or otherwise modified (the
"Receivables Credit Agreement"). This Servicer's Certificate relates to
[applicable Monthly Period (the "Monthly Period") or applicable Collection
Period (the "Collection Period"), as the case may be] and relating to
[applicable Payment Date], (the "Payment Date") and the Monthly Report for such
Monthly Period, which Monthly Report is set forth on attached Schedule A.
A. Capitalized terms used but not otherwise defined herein have
the meanings assigned them in the Receivables Credit Agreement
referred to above. References to certain subsections herein
are references to the respective subsections of the
Receivables Credit Agreement.
B. The Servicer is the Servicer under the Receivables Credit
Agreement.
C. The undersigned hereby certifies to the Deal Agent and the
Lenders that all of the information set forth on attached
Schedule A is true and accurate in all material respects as of
the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this Servicer's Certificate to be
duly executed this [___] day of [_________], 1999.
FIDELITY LEASING, INC.,
a Pennsylvania corporation, as Servicer
By: ________________________________
Name: ________________________________
Title: ________________________________
<PAGE>
EXHIBIT E
FORM OF BORROWING CERTIFICATE AND ASSIGNMENT
THIS BORROWING CERTIFICATE AND ASSIGNMENT, dated as of
________________ __, 1999, is given by Fidelity Leasing SPE III, LLC, as
Borrower (the "Borrower"), in favor of FIRST UNION CAPITAL MARKETS CORP., as
Deal Agent (the "Deal Agent").
1. Reference is made to the Receivables Credit Agreement,
dated as of February 4, 1999 (the "Agreement"), by and among Fidelity Leasing
SPE III, LLC, as the Borrower, Fidelity Leasing, Inc., as the Servicer, the
Investors named therein, Variable Funding Capital Corporation, as a Lender,
First Union Capital Markets Corp., as the Deal Agent, First Union National Bank,
as the Liquidity Agent, and Harris Trust and Savings Bank, as the Collateral
Custodian and Backup Servicer. All capitalized terms shall have the meanings set
forth in the Agreement.
2. The Borrower does hereby sell, transfer, assign, set over
and convey to the Deal Agent, all right, title and interest of the Borrower in
and to the Assets listed on Schedule 1 hereto (each, a "Sold Asset").
3. The Borrower does hereby make the representations and
warranties referred to in Section 4.1 and 4.2 of the Agreement with respect to
each Sold Asset with full force and effect as if fully set forth herein.
IN WITNESS WHEREOF, the Borrower has caused this Borrowing
Certificate and Assignment to be executed by its manager thereunto duly
authorized, as of the date first above written.
FIDELITY LEASING SPE III, LLC, a Delaware
limited liability company
By: JLA Credit Corporation, a Delaware
corporation, its Managing Member
By: _________________________
Name: _________________________
Title: _________________________
<PAGE>
EXHIBIT F
FORM OF NOTICE OF BORROWING
I, _____________, ______________ of JLA Credit Corporation, Managing
Member of Fidelity Leasing SPE III, LLC, as the borrower (the "Borrower"),
hereby certify as follows, with respect to that certain Receivables Credit
Agreement (the "Agreement"), dated as of February 4, 1999, by and among the
Borrower, Fidelity Leasing, Inc., as the Servicer (the "Servicer"), the
Investors named therein, Variable Funding Capital Corporation, as a Lender,
First Union Capital Markets Corp., as the Deal Agent, First Union National Bank,
as the Liquidity Agent, and Harris Trust and Savings Bank, as the Collateral
Custodian and Back-up Servicer, as amended from time to time. All capitalized
terms shall have the meanings set forth in the Agreement.
The Borrower hereby requests that the Loan be funded in
accordance of the following terms:
(a) The aggregate amount of the Loan shall be
___________________.
(b) The date the funding of the Loan shall be
____________________.
The representations and warranties contained in Section 4.1
and 4.2 of the Agreement are true and correct as though made on the date hereof.
No event has occurred and is continuing, or would result from
making the Loan on the date hereof, which constitutes an Event of Default.
As of the date hereof, the aggregate outstanding Principal
(after giving effect to the Loan funded on the date hereof) does not exceed the
Credit Limit. For purposes hereof, the Credit Limit has been recalculated based
upon amounts and percentages as the date hereof.
On and as of such day, the Borrower and the Servicer has each
performed in all material respects all of the agreements contained in the
Agreement to be performed by such Person at or prior to such day.
No law, rule or regulation prohibits, and no order, judgment
or decree of any federal, state or local court or governmental body, agency or
instrumentality prohibits or enjoins, the funding the Loan occurring on the date
hereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Notice of
Borrowing to be duly executed this ____ day of February, 1999.
FIDELITY LEASING SPE III, LLC, a Delaware limited liability
company
By: JLA Credit Corporation, a Delaware corporation, its
Managing Member
By: ______________________
Name: ______________________
Title: ______________________
<PAGE>
EXHIBIT G
FORM OF
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
[Delivery Date]
BY FACSIMILE: (704) 383-6036
- -----------------------------
FIRST UNION CAPITAL MARKETS CORP.
One First Union Center, TW9
Charlotte, North Carolina 28288
Attn: Conduit Administration
Re: Receivables Credit Agreement, dated as of February 4, 1999 (the
"Agreement"), by and among Fidelity Leasing SPE III, LLC, as the
Borrower (the "Borrower"), Fidelity Leasing, Inc., as the Servicer,
the Investors named therein, Variable Funding Capital Corporation, as
a Lender, First Union Capital Markets Corp., as the Deal Agent (the
"Deal Agent"), First Union National Bank, as the Liquidity Agent, and
Harris Trust and Savings Bank, as the Collateral Custodian and Backup
Servicer (the "Collateral Custodian").
Ladies and Gentlemen:
In connection with the administration of the contracts held by you as the
Collateral Custodian on behalf of the Deal Agent under the Agreement, we request
the release, and acknowledge receipt, of the contract file for the contracts
described below, for the reason indicated.
Obligor's Name Address & Zip Code:
- ----------------------------------
Contract Number:
- ----------------
Reason for Requesting Documents (check one and recite applicable section in the
- -------------------------------
Agreement)
____ 1. Contract Paid in Full. (The Borrower hereby certifies that all
amounts received in connection therewith have been credited to the
account of the Deal Agent.) The Agreement, Section ____.
____ 2. Contract Liquidated By ___________________________ (The Borrower
hereby certifies that all proceeds of foreclosure, insurance,
condemnation or other liquidation have been finally received and
credited to the account of the Deal Agent.) The Agreement, Section
____.
____ 3. Contract in Foreclosure. The Agreement, Section ____.
<PAGE>
____ 4. Other (explain) ______________________. The Agreement, Section ____.
If box 1 or 2 above is checked, and if all or part of the contract file was
previously released to us, please release to us our previous request and receipt
on file with you, as well as any additional documents in your possession
relating to the specified contract.
If box 3 or 4 above is checked, upon our return of all of the above documents to
you as the Collateral Custodian, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
FIDELITY LEASING SPE III, LLC, a Delaware limited liability
company
By: JLA Credit Corporation, a Delaware corporation, its
Managing Member
By: ______________________
Name: ______________________
Title: ______________________
APPROVED:
FIRST UNION CAPITAL MARKET CORP.,
a North Carolina corporation
By: ________________________
Name: ________________________
Title: ________________________
ACKNOWLEDGMENT OF DOCUMENTS
RETURNED BY THE COLLATERAL CUSTODIAN:
HARRIS TRUST AND SAVINGS BANK,
an Illinois banking corporation
By: ______________________
Name: ______________________
Title: ______________________
<PAGE>
SCHEDULE I
CONDITION PRECEDENT DOCUMENTS
As required by Section 3.1 of the Agreement, each of the
following items must be delivered to the Deal Agent prior to the Closing Date:
1. A copy of this Agreement duly executed by the Borrower and
the Servicer;
2. Officer's Certificates of each of the Borrower and of the
Servicer, each dated the date of this Agreement, certifying (a) that the names
and true signatures of the incumbent officers of such Person authorized to sign
this Agreement and the other documents to be delivered by it hereunder, on which
certificate the Deal Agent, the Liquidity Agent and the Lender may conclusively
rely until such time as the Deal Agent shall receive from the Borrower or the
Servicer, as the case may be, a revised certificate meeting the requirements of
this paragraph (2), (b) that the copy of the certificate of formation of the
Borrower and the certificate of incorporation of the Servicer attached thereto
is a complete and correct copy and that such documents have not been amended,
modified or supplemented and is in full force and effect, (c) that the copy of
the limited liability company agreement of the Borrower attached thereto is a
complete and correct copy and that such limited liability company agreement has
not been amended, modified or supplemented and is in full force and effect, (d)
that the copy of the by-laws of the Servicer attached thereto is a complete and
correct copy and that such by-laws have not been amended, modified or
supplemented and are in full force and effect, and (e) that the resolutions of
such Person's members or board of directors approving and authorizing the
execution, delivery and performance by such Person of this Agreement and the
documents related thereto;
3. Good standing certificate for the Borrower issued by the
Secretary of State of the State of Delaware;
4. Good standing certificate for the Servicer issued by the
Secretary of State of the Commonwealth of Pennsylvania;
5. Qualification to do Business Certificate of the Borrower
issued by the Secretary of State of the Commonwealth of Pennsylvania;
6. Acknowledgment copies of proper financing statements, dated
a date reasonably near to the Closing Date, describing the Assets and naming the
Originator as debtor and the Borrower as secured party, or other, similar
instruments or documents, as may be necessary or, in the opinion of the Deal
Agent, desirable under the UCC of all appropriate jurisdictions or any
comparable law to perfect the Borrower's interests in all Assets;
<PAGE>
7. Acknowledgment copies of proper financing statements, dated
a date reasonably near to the Closing Date, describing the Assets and naming the
Borrower as debtor and the Deal Agent, on behalf of the Lender, as secured
party, or other, similar instruments or documents, as may be necessary or, in
the opinion of the Deal Agent or the Lender, desirable under the UCC of all
appropriate jurisdictions or any comparable law to perfect the Lender's
interests in all Assets;
8. Acknowledgment copies of proper financing statements, if
any, necessary to release all security interests and other rights of any Person
in the Assets previously granted by the Borrower;
9. Certified copies of requests for information or copies (or
a similar search report certified by a party acceptable to the Deal Agent),
dated a date reasonably near to the Closing Date, listing all effective
financing statements which name the Borrower (under its present name and any
previous name) as debtor and which are filed in the applicable jurisdictions
together with copies of such financing statements (none of which, other than the
financing statements filed in connection with this transaction, shall cover any
Assets or Contracts);
10. An accurate and complete listing in all material respects
of all the Contracts in the Borrowing Base as of the Closing Date;
11. Payment of the Structuring Fee and the estimated legal
fees and expenses of counsel to the Deal Agent; and
12. Opinions of Morgan, Lewis & Bockius LLP, Ledgewood Law
Firm, and Richards, Layton & Finger, P.A., counsel to the Borrower, and Skadden,
Arps, Slate, Meagher & Flom, Minerva Law Offices, and Reiko Kasano, counsel to
JLC, all such opinions in form and substance acceptable to the Deal Agent.
<PAGE>
SCHEDULE II
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Wells Fargo, Account Number: 05969
<PAGE>
SCHEDULE III
TRADENAMES, FICTITIOUS NAMES AND
"DOING BUSINESS AS" NAMES
None.
<PAGE>
SCHEDULE IV
LOCATION OF CONTRACT FILES
The Contracts are located at the following offices of Harris:
Harris Trust and Saving Bank
111 West Monroe Street
Lower Level West - Document Custody Department
Chicago, Illinois 60603
<PAGE>
SCHEDULE V
LIST OF CONTRACTS
[SET FORTH ON FOLLOWING PAGES]
<PAGE>
SCHEDULE VI
COMMITMENT OF EACH INVESTOR
First Union National Bank - $153,000,000.
<PAGE>
GUARANTEE
(FIDELITY LEASING, INC.)
This Guarantee, dated as of February 4, 1999, is made FIDELITY
LEASING, INC., a Pennsylvania corporation (the "Guarantor"), in favor of FIRST
UNION CAPITAL MARKETS CORP., a North Carolina corporation, as Deal Agent (in
such capacity, the "Agent") for VARIABLE FUNDING CAPITAL CORPORATION, a Delaware
corporation, as Lender (together with any additional Lenders, the "Lenders"),
parties to the Receivables Credit Agreement referred to below.
RECITALS
A. WHEREAS, pursuant to that certain Purchase and Sale
Agreement, dated as of February 4, 1999, by and among Fidelity Leasing SPE III,
LLC, as the Buyer (the "Buyer"), the Guarantor, as the Servicer, and JLA Credit
Corporation, as the Originator (the "Originator"), the Buyer agreed to purchase
from the Originator, and the Originator agreed to sell to the Buyer, certain
Purchased Assets defined therein;
B. WHEREAS, pursuant to that certain Receivables Credit
Agreement, dated as of February 4, 1999, by and among the Buyer, as the
Borrower, the Guarantor, as the Servicer, the Investors named therein, the
Lenders, the Agent, First Union National Bank, as the Liquidity Agent, and
Harris Trust and Savings Bank, as the Collateral Custodian and the Backup
Servicer, the Lenders have agreed to make a Loan to the Buyer upon the terms and
conditions set forth therein;
C. WHEREAS, pursuant to Section 9.5 of the Purchase and Sale
Agreement, the Buyer assigned all of its right, title and interest in the
Purchase and Sale Agreement, including all of its rights to enforce any and all
of the provisions thereof, to the Agent; and
D. WHEREAS, it is a condition precedent to the obligation of
the Lenders to make their Loan to the Buyer pursuant to the Receivables Credit
Agreement that the Guarantor shall have executed and delivered this Guarantee to
the Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of the premises and to induce
the Agent and the Lenders to enter into the Receivables Credit Agreement and to
induce the Lenders to make the Loan to the Borrower under the Receivables Credit
Agreement, the Guarantor hereby agrees with the Agent, for the ratable benefit
of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the
Receivables Credit Agreement and used herein shall have the meanings given to
them in the Receivables Credit Agreement.
<PAGE>
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee. (a) The Guarantor hereby, unconditionally and
irrevocably, guarantees to the Agent, for the ratable benefit of the Lenders and
their respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by the Originator when due (whether at the
stated maturity, by acceleration or otherwise) of the obligations of the
Originator arising from (i) any breach of any representation, warranty, covenant
or agreement (including, without limitation, any Warranty Event) and (ii) any
amounts payable by the Originator in connection with any indemnification
provision set forth in the Purchase and Sale Agreement (all such obligations in
clause (i) and (ii) of this sentence, the "Obligations"). The parties hereto
agree that the provisions of this Guarantee shall not be interpreted to provide
recourse to the Guarantor against loss by reason of the bankruptcy or insolvency
(or other credit condition) of, or default by, a related Obligor on any Asset.
(b) The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Agent or any Lender in enforcing, or obtaining advice
of counsel in respect of, any rights with respect to, or collecting, any or all
of the Obligations and/or enforcing any rights with respect to, or collecting
against, the Guarantor under this Guarantee.
(c) The Guarantor agrees that the Obligations may at any time and from
time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Agent or any Lender hereunder.
(d) No payment or payments made by the Borrower, the Guarantor, any
other guarantor or any other Person or received or collected by the Agent or any
Lender from the Borrower, the Guarantor, any other guarantor or any other Person
by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations shall be deemed to modify, reduce, release or otherwise affect
the liability of the Guarantor hereunder which shall, notwithstanding any such
payment or payments other than payments made by the Guarantor in respect of the
Obligations or payments received or collected from the Guarantor in respect of
the Obligations, remain liable for the Obligations up to the maximum liability
of the Guarantor hereunder until the Obligations are paid in full and the
Commitments are terminated.
(e) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Agent or any Lender on account of its
liability hereunder, it will notify the Agent in writing that such payment is
made under this Guarantee for such purpose.
-2-
<PAGE>
3. Right of Set-off. The Guarantor hereby irrevocably authorizes each
Lender at any time and from time to time without notice to the Guarantor, any
such notice being expressly waived by the Guarantor, to set-off and appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender to or for the
credit or the account of the Guarantor, or any part thereof in such amounts as
such Lenders may elect, against and on account of the obligations and
liabilities of the Guarantor to such Lender hereunder and claims of every nature
and description of such Lender against the Guarantor, in any currency, whether
arising hereunder, under the Purchase and Sale Agreement, any of the Transaction
Documents or otherwise, as such Lender may elect, whether or not the Agent or
any Lender has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Agent and each Lender
shall notify the Guarantor promptly of any such set-off and the application made
by the Agent or such Lender, provided that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of the Agent
and each Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Agent or such
Lender may have.
4. No Subrogation. Notwithstanding any payment or payments made by the
Guarantor hereunder or any set-off or application of funds of the Guarantor by
any Lender, the Guarantor shall not be entitled to be subrogated to any of the
rights of the Agent or any Lender against the Borrower or any other guarantor or
any collateral security or guarantee or right of offset held by any Lender for
the payment of the Obligations, nor shall the Guarantor seek or be entitled to
seek any contribution or reimbursement from the Borrower or any other guarantor
in respect of payments made by the Guarantor hereunder, until all amounts owing
to the Agent and the Lenders by the Borrower on account of the Obligations are
paid in full and the Commitments are terminated. If any amount shall be paid to
the Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by the
Guarantor in trust for the Agent and the Lenders, segregated from other funds of
the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned
over to the Agent in the exact form received by the Guarantor (duly indorsed by
the Guarantor to the Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Agent and the Lenders may
determine.
5. Amendments, etc. with respect to the Obligations; Waiver of Rights.
The Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor and without notice to or further
assent by the Guarantor, any demand for payment of any of the Obligations made
by the Agent or any Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Agent or any Lender, and the Purchase and Sale
Agreement, and any other Transaction Documents executed and delivered in
connection therewith may be amended,
-3-
<PAGE>
modified, supplemented or terminated, in whole or in part, as the Agent may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
this Guarantee or any property subject thereto. When making any demand hereunder
against the Guarantor, the Agent or any Lender may, but shall be under no
obligation to, make a similar demand on the Borrower or any other guarantor, and
any failure by the Agent or any Lender to make any such demand or to collect any
payments from the Borrower or any such other guarantor or any release of the
Borrower or such other guarantor shall not relieve the Guarantor of its
obligations or liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the Agent or any
Lender against the Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. The Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent or any Lender upon
this Guarantee or acceptance of this Guarantee, the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon this Guarantee; and
all dealings between the Borrower and the Guarantor, on the one hand, and the
Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Borrower or the Guarantor with respect
to the Obligations. The Guarantor understands and agrees that this Guarantee
shall be construed as a continuing, absolute and unconditional guarantee of
payment without regard to (a) the validity, regularity or enforceability of the
Purchase and Sale Agreement, any of the other Transaction Documents, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the Agent
or any Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment of performance) which may at any time be available to or be asserted by
the Borrower against the Agent or any Lender, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Borrower or the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Borrower for the Obligations, or of the Guarantor
under this Guarantee, in bankruptcy or in any other instance. When pursuing its
rights and remedies hereunder against the Guarantor, the Agent and any Lender
may, but shall be under no obligation to, pursue such rights and remedies as it
may have against the Borrower or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the Agent or any Lender to pursue such other rights
or remedies or to collect any payments from the Borrower or any such other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower or any such
other Person or any such collateral security, guarantee or right of offset,
shall not relieve the Guarantor of any liability hereunder, and shall not impair
or affect the rights and remedies, whether express, implied or available as a
matter of law, of the Agent and
-4-
<PAGE>
the Lenders against the Guarantor. This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to be benefit
of the Agent and the Lenders, and their respective successors, indorsees,
transferees and assigns, until all the Obligations and the obligations of the
Guarantor under this Guarantee shall have been satisfied by payment in full and
the Commitments shall be terminated.
7. Reinstatement. This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or the Guarantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or the Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
8. Payments. The Guarantor hereby guarantees that payments hereunder
will be paid to the Agent without set-off or counterclaim in U.S. Dollars at the
office of the Agent specified in the Receivables Credit Agreement.
9. Representations and Warranties. The Guarantor hereby represents and
warrants that:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate power and
authority and the legal right to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee and
any other Transaction Documents to which it is a party, and has taken all
necessary corporate action to authorize its execution, delivery and performance
of this Guarantee and any other Transaction Documents to which it is a party;
(c) this Guarantee and each of the other Transaction Documents to which
the Guarantor is a party has been duly executed and delivered on behalf of the
Guarantor, and constitutes a legal, valid and binding obligation of the
Guarantor enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing;
(d) the execution, delivery and performance of this Guarantee and any
other Transaction Documents to which the Guarantor is a party will not violate
any provision of any Requirement of Law or contractual obligation of the
Guarantor and will not result in or require the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or contractual obligation of the Guarantor;
-5-
<PAGE>
(e) no consent or authorization of, filing with, notice to, or other
act by or in respect of, any Governmental Authority or any other Person
(including, without limitation, any stockholder or creditor of the Guarantor) is
required in connection with the execution, delivery, performance, validity or
enforceability of this Guarantee or any other Transaction Documents to which the
Guarantor is a party;
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (i) with respect to this Guarantee or any other
Transaction Document to which the Guarantor is a party or any of the
transactions contemplated hereby or thereby, or (ii) which has any reasonable
likelihood of having a material adverse effect on the business, operations,
property or financial or other condition of the Guarantor;
(g) it has good record and marketable title in fee simple to, or a
valid leasehold interest in, all its real property that it purports to own, and
good title to, or a valid leasehold interest in, all its other property, and
none of such property is subject to any Lien of any nature whatsoever;
(h) it has filed or caused to be filed all tax returns which, to its
knowledge, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Guarantor); no tax Lien has been filed, and, to the knowledge of
the Guarantor, no claim is being asserted, with respect to any such tax, fee or
other charge; and
(i) the balance sheets of the Guarantor as of September 30, 1997 and
September 30, 1998, and the related statements of income and of cash flows for
the fiscal years ended on each such date, reported on by Grant Thornton LLP,
copies of which have heretofore been furnished to each Lender, are complete and
correct and present fairly the financial condition of the Guarantor as at such
dates, and the results of its operations and its cash flow for the fiscal years
then ended. The unaudited balance sheet of the Guarantor as of December 31, 1998
and the related unaudited statements of income and of cash flows for the
three-month period ended on such date, certified by a Responsible Officer,
copies of which have heretofore been furnished to each Lender, are complete and
correct and present fairly the financial condition of the Guarantor as at such
date, and the results of its operations and its cash flows for the three-month
period then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by such accountants or Responsible Officer,
as the case may be, and as disclosed therein). At the date of the most recent
balance sheet referred to above, the Guarantor had no material guarantee
obligation, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation, any
interest rate
-6-
<PAGE>
or foreign currency swap or exchange transaction or other financial derivative,
which is not reflected in the foregoing statements or in the notes thereto.
During the period from December 31, 1998, to and including the date hereof there
has been no sale, transfer or other disposition by the Guarantor of any material
party of its business or property and no purchase or other acquisition of any
business or property (including any capital stock of any other Person) material
in relation to the financial condition of the Guarantor as of the date hereof.
10. Authority of Agent. The Guarantor acknowledges that the rights and
responsibilities of the Agent under this Guarantee with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this guarantee shall, as between the Agent and the
Lenders, be governed by the Receivables Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Agent and the Guarantor, the Agent shall be conclusively presumed
to be acting as agent for the Lenders with full and valid authority so to act or
refrain from acting, and the Guarantor shall not be under any obligation, or
entitlement, to make any inquiry respecting such authority.
11. Notices. All notices, requests and demands to or upon the Agent,
any Lender or the Guarantor to be effective shall be in writing (or by telex,
fax or similar electronic transfer confirmed in writing) and shall be deemed to
have been duly given or made (1) when delivered by hand or (2) if given by mail,
when deposited in the mails by certified mail, return receipt requested, or (3)
if by telex, fax or similar electronic transfer, when sent and receipt has been
confirmed, addressed as follows:
(a) if to the Agent or any Lender, at its address or transmission
number for notices provided in the Receivables Credit Agreement; and
(b) if to the Guarantor, at its address or transmission number for
notices set forth under its signature below.
The Agent, each Lender and the Guarantor may change its address and
transmission numbers for notices by notice in the manner provided in this
Section.
12. Severability. Any provision of this Guarantee which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. Integration. This Guarantee represents the agreement of the
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Agent or any Lender relative to the subject matter hereof
not reflected herein.
14. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise
-7-
<PAGE>
modified except by a written instrument executed by the Guarantor
and the Agent, provided that any provision of this Guarantee may be waived by
the Agent and the Lenders in a letter or agreement executed by the Agent or by
telex or facsimile transmission from the Agent.
(b) Neither the Agent nor any Lender shall by any act (except by a
written instrument pursuant to Section 14(a) hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Agent
or such Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
15. Section Headings. The section headings used in this Guarantee are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
16. Successors and Assigns. This Guarantee shall be binding upon the
successors and assigns of the Guarantor and shall inure to the benefit of the
Agent and the Lenders and their successors and assigns.
17. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
18. Submission To Jurisdiction; Waivers. The Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of
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<PAGE>
mail), postage prepaid, to the Guarantor at its address set forth under its
signature below or at such other address of which the Agent shall have been
notified pursuant hereto;
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
19. Acknowledgments. The Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Guarantee and any other Transaction Documents to which it is a
party;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Guarantor arising out of or in connection with this
Guarantee or any of the other Transaction Documents to which it is a party, and
the relationship between the Guarantor, the Borrower and the other loan parties,
on one hand, and Agent and Lenders, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Transaction
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Guarantor, the Borrower, any of the other loan
parties and the Lenders.
20. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS GUARANTEE OR ANY OTHER TRANSACTION DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
FIDELITY LEASING, INC.,
a Pennsylvania corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
1255 Wrights Lane
West Chester, Pennsylvania 19380
Facsimile No.: (610) 719-4515
Telephone No.: (610) 719-4510
<PAGE>
================================================================================
TRANSFER AND SALE AGREEMENT
between
FIDELITY LEASING, INC.
as Seller
and
FIDELITY EQUIPMENT LEASE DEPOSITOR I, LLC
as Trust Depositor
Dated as of June 2, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01 General.......................................................................................1
ARTICLE II
TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT
Section 2.01 Closing.......................................................................................1
Section 2.02 Conditions to the Closing.....................................................................3
Section 2.03 Assignment of Agreement.......................................................................3
Section 2.04 Acknowledgment with Respect to Prior Transactions.............................................4
Section 2.05 Release of Excluded Amounts...................................................................4
Section 2.06 Delivery of Instruments.......................................................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Seller..................................................4
Section 3.02 Representations and Warranties of Fidelity....................................................6
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
Section 4.01 Custody of Contracts..........................................................................6
Section 4.02 Filing........................................................................................6
Section 4.03 Name Change or Relocation.....................................................................7
Section 4.04 Sale Treatment................................................................................7
ARTICLE V
MISCELLANEOUS
Section 5.01 Prohibited Transactions with Respect to the Trust Depositor...................................8
Section 5.02 Termination...................................................................................8
Section 5.03 Assignment or Delegation by the Seller........................................................8
Section 5.04 Amendment.....................................................................................8
Section 5.05 Notices.......................................................................................9
Section 5.06 Merger and Integration.......................................................................10
Section 5.07 Headings.....................................................................................10
Section 5.08 GOVERNING LAW................................................................................10
Section 5.09 No Bankruptcy Petition.......................................................................10
Section 5.10 Third Party Beneficiaries....................................................................10
Section 5.11 Severability of Provisions...................................................................10
Section 5.12 No Waiver; Cumulative Remedies...............................................................10
Section 5.13 Counterparts.................................................................................11
</TABLE>
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EXHIBITS
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Exhibit A Form of Assignment
Exhibit B Purchase Price of Contracts
<PAGE>
TRANSFER AND SALE AGREEMENT
This TRANSFER AND SALE AGREEMENT, dated as of June 2, 1999, is
made between Fidelity Leasing, Inc. ("Fidelity or the "Seller"), as the seller
hereunder, and Fidelity Equipment Lease Depositor I, LLC, as the purchaser
hereunder (the "Trust Depositor").
WHEREAS, the Seller and the Trust Depositor wish to set forth
the terms and conditions pursuant to which the Trust Depositor will acquire all
right, title and interest of the Seller in and to the Initial Contracts on the
Closing Date (such Initial Contracts together with certain related property as
more fully described herein, constituting the "Contract Assets" as more
particularly defined below);
WHEREAS, the Trust Depositor intends concurrently with the
transfer of the Contract Assets hereunder to convey all right, title and
interest in such Contracts to Fidelity Equipment Lease Trust 1999-1 (the
"Trust") pursuant to a Sale and Servicing Agreement dated as of June 2, 1999 by
and among the Trust, the Trust Depositor, Fidelity Leasing, Inc., as Seller and
Servicer, the Back-Up Servicer (as defined therein), the Collateral Custodian
(as defined therein) and the Indenture Trustee (as defined therein) (the "Sale
and Servicing Agreement") executed concurrently herewith;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the Seller and the Trust Depositor
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 General. Unless otherwise defined in this
Agreement, capitalized terms used herein (including in the preamble above) shall
have the meanings assigned to them in the Sale and Servicing Agreement, and if
not defined therein, shall have the meanings assigned to them in the Indenture.
ARTICLE II
TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT
Section 2.01 Closing. Subject to and upon the terms and
conditions set forth in this Agreement, the Seller hereby sells, transfers,
assigns, sets over and otherwise conveys to the Trust Depositor on the Closing
Date, in consideration of the Trust Depositor's payment of the purchase price to
the Seller set forth on Exhibit B hereto in cash as the purchase price therefor,
all the right, title and interest of the Seller in and to the following items
(items (a)-(g) below, being collectively referred to herein as the "Contract
Assets"):
(a) the Initial Contracts, and all monies due or to become due
in payment of such Contracts on and after the Initial Cutoff Dates, any
Prepayment Amounts, any payments in respect of a casualty or early
termination, and any Defaulted Contract Recoveries received with
respect thereto, but excluding any Scheduled Payments due prior to the
Cutoff Date or any Excluded Amounts;
<PAGE>
(b) the Financed Items related to such Contracts, including
all proceeds from any sale or other disposition of such Financed Items
(but subject to the exclusion and release herein of Excluded Amounts);
(c) the Contract Files;
(d) all payments made or to be made in the future with respect
to such Contracts or the Obligor thereunder under any Program Agreement
and under any guarantee or similar credit enhancement with respect to
such Contracts;
(e) all Insurance Proceeds with respect to each such Contract;
(f) all income from and proceeds of the foregoing; and
(g) the security interest of the Seller or its affiliates in
the Equipment or other property securing such Contracts and the
proceeds thereof.
The foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by the
Trust Depositor of (i) any obligation of the Seller in connection with the
Contract Assets, (ii) any agreement or instrument relating thereto, including,
without limitation, any obligation to any Obligor or any other Person in respect
of services not financed by the Seller, (iii) any taxes, fees, or other charges
imposed by any Governmental Authority, or (iv) any insurance premiums which
remain owing with respect to any Contract at the time such Contract is sold
hereunder. Although the Seller and the Trust Depositor agree that any such
transfer is intended to be a sale of ownership of the Contract Assets, rather
than the mere granting of a security interest to secure a borrowing, in the
event any such transfer is deemed to be of a mere security interest to secure
indebtedness, the Seller shall be deemed to have granted the Trust Depositor a
perfected first priority security interest in such Contract Assets and this
Agreement shall constitute a security agreement under applicable law, securing
the repayment of the purchase price paid hereunder and the obligations and/or
interests represented by the Notes, in the order and priorities, and subject to
the other terms and conditions of, the Sale and Servicing Agreement and the
Indenture, together with such other obligations or interests as may arise
hereunder and thereunder in favor of the parties hereto and thereto. If such
transfer is deemed to be the mere granting of a security interest to secure a
borrowing, the Trust Depositor may, repledge and reassign (i) all or a portion
of the Contract Assets pledged to the Trust Depositor and not released from the
security interest of this Agreement at the time of such pledge and assignment,
and (ii) all proceeds thereof. Such repledge and reassignment may be made by the
Trust Depositor with or without a repledge and reassignment by the Trust
Depositor of its rights under this Agreement, and without further notice to or
acknowledgments from the Seller. The Seller waives, to the extent permitted by
applicable law, all claims, causes of action and remedies, whether legal or
equitable (including any right of setoff), against the Trust Depositor or any
assignee of the Trust Depositor relating to such action by the Trust Depositor
in connection with the transactions contemplated by the Sale and Servicing
Agreement.
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<PAGE>
Section 2.02 Conditions to the Closing. On or before the
Closing Date, the Seller shall deliver or cause to be delivered to the Trust
Depositor (or in the case of the Contract Files, to the Collateral Custodian)
each of the documents, certificates and other items as follows:
(a) a List of Contracts, certified by the Chairman of the
Board, President or any Vice President of the Seller together with an
Assignment substantially in the form attached as Exhibit A hereto;
(b) a certificate of an officer of the Seller substantially in
the form of Exhibit C-2 to the Sale and Servicing Agreement;
(c) an opinion of counsel for the Seller substantially in the
form of Exhibit E to the Sale and Servicing Agreement;
(d) a letter from Arthur Andersen LLP, or another nationally
recognized accounting firm, addressed to the Trust Depositor and the
Indenture Trustee and stating that such firm has reviewed a sample of
the Contracts and performed specific procedures for such sample with
respect to certain contract terms and identifying those Contracts which
do not so conform;
(e) copies of resolutions of the board of directors of the
Seller approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereunder, certified in
each case by the Secretary or an Assistant Secretary of the Seller;
(f) officially certified recent evidence of due incorporation
or other formation and good standing of the Seller under the laws of
its jurisdiction of organization;
(g) the Seller shall have delivered the related Contract Files
to the Collateral Custodian; (h) evidence of proper filing with
appropriate offices in the UCC Filing Locations of UCC financing
statements executed by the Seller, as debtor, naming the Trust
Depositor as secured party and the Trust as assignee and identifying
the Contract Assets as collateral;
(i) a fully executed Transfer and Sale Agreement; and
(j) a fully executed Sale and Servicing Agreement, together
with the documents, certificates and other items described in Section
2.02 of the Sale and Servicing Agreement, to the extent not already
described above.
Section 2.03 Assignment of Agreement. The parties hereto
expressly acknowledge and agree that the Trust Depositor has the right to assign
its interest under this Agreement to the Trust as may be required to effect the
purposes of the Sale and Servicing Agreement, and that the Trust will in turn
have the right to assign such interest to the Indenture Trustee as may be
required to effect the purposes of the Indenture. The parties hereto further
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<PAGE>
acknowledge and agree that each such assignment may be made without further
notice to, or consent of, the Seller, and the Trust and the Indenture Trustee
shall succeed to such of the rights of the Trust Depositor hereunder as shall be
so assigned.
Section 2.04 Acknowledgment with Respect to Prior
Transactions. Each party hereto hereby represents to the other parties hereto
that the Recitals to this Agreement are true and correct insofar as they relate
to such party, and acknowledges and agrees that the sales of Contract Assets by
the Seller and the other transactions contemplated hereby are undertaken by
Fidelity Leasing, Inc. as described therein.
Section 2.05 Release of Excluded Amounts. Immediately upon the
release to the Trust Depositor by the Trust of Excluded Amounts, the Trust
Depositor hereby irrevocably agrees to release to the Seller such Excluded
Amounts, which release shall be automatic and shall require no further act by
the Trust Depositor, provided, that the Trust Depositor shall execute and
deliver such instruments of release and assignment, or otherwise confirming the
foregoing release of any Excluded Amounts, as may be reasonably requested by the
Seller.
Section 2.06 Delivery of Instruments. On the Closing Date, the
Seller shall deliver possession of all "instruments" (within the meaning of
Article 9 of the UCC) not constituting part of chattel paper (within the meaning
of such Article 9), which evidence any Contract to the Trust Depositor, in each
case endorsed in blank without recourse. Pursuant to Section 2.06 of the Sale
and Servicing Agreement, the Trust Depositor is required to deliver any such
instrument to the Trust (or the Owner Trustee on its behalf), which in turn
(pursuant to Section 2.06 of the Sale and Servicing Agreement and Section 3.05
of the Indenture) is required to deliver such instruments to the Indenture
Trustee as pledgee under the Indenture. Accordingly, the Trust Depositor hereby
authorizes and directs the Seller to deliver possession of any such instruments
to the Trust (or the Owner Trustee on its behalf) on behalf of and for the
account of the Trust Depositor, and agrees that such delivery shall satisfy the
condition set forth in the first sentence of this Section 2.06. The Seller shall
also identify on the related List of Contracts, whether by attached schedule or
marking or other effective identifying designation, all Contracts which are or
are evidenced by such instruments.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Seller. The
Seller makes the following representations and warranties, on which the Trust
Depositor will rely in purchasing Contract Assets from the Seller on the Closing
Date and on which the Noteholders and the Trustees will rely under the
Indenture. Such representations speak as of the execution and delivery of this
Agreement and as of the Closing Date.
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<PAGE>
(a) Due Organization and Good Standing. The Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of formation or incorporation and is duly qualified to
do business, and is in good standing, in such jurisdiction and in every other
jurisdiction in which the nature of its business requires it to be so qualified.
(b) Due Authorization and No Conflict. The execution, delivery
and performance by the Seller of this Agreement and all other Transaction
Documents to which it is a party, and the transactions contemplated hereby and
thereby, are within the Seller's corporate or other powers, have been duly
authorized by all necessary corporate or other action on the part of the Seller,
do not contravene (i) the Seller's charter or by-laws, (ii) any law, rule or
regulation applicable to the Seller, (iii) any contractual restriction contained
in any indenture, loan or credit agreement, contract, mortgage, security
agreement, bond, note, or other agreement or instrument binding on the Seller or
its property (except to the extent waived in writing by the party having the
benefit of such restriction) or (iv) any order, writ, judgment, award,
injunction or decree binding on the Seller or its property, and do not result in
or require the creation of any adverse claim upon or with respect to any of its
properties pursuant to any material indenture, loan or credit agreement,
contract, mortgage, security agreement, bond, note or other material agreement
binding on the Seller or its property (other than in favor of the Trust
Depositor as contemplated hereunder); and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law. This Agreement has
been duly executed and delivered on behalf of the Seller.
(c) Governmental Consent. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by the Seller of this
Agreement or any other agreement, document or instrument to be delivered
hereunder.
(d) No Litigation. There are no actions, suits or proceedings
pending, or to the knowledge of the Seller threatened in writing, against the
Seller or any of its subsidiaries, or the property of the Seller or any of its
subsidiaries, in any court, or before any arbitrator of any kind, or before or
by any governmental body, which (i) assert the invalidity of any Transaction
Document or any action to be taken by the Seller in connection therewith, or
(ii) seek to prevent the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents. The Seller is not in default with
respect to any order of any Governmental Authority.
(e) Use of Proceeds. No proceeds of any sale will be used by
the Seller to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(f) Perfection of Interest in Contract Assets. Prior to the
Trust Depositor's purchase and/or acquisition of each Contract Asset to be sold
by the Seller hereunder, each Contract Asset shall, together with the Contract
related thereto, be owned by the Seller, free and clear of any adverse claim
arising as a result of any action taken by the Seller, and upon each purchase,
the Trust Depositor shall acquire all of the right, title and interest of the
Seller in each Contract Asset then existing or thereafter arising and in the
related security, Collections and Financed Items (except Software) (if any) with
respect thereto, in each case free and clear of any adverse claim arising as a
result of any action taken by the Seller; and no effective financing statement
or other instrument similar in effect filed by or permitted to be filed by the
Seller covering any Contract Asset, the related security, Collections or the
other Contract Asset with respect thereto shall at any time be on file in any
recording office except as such may be filed in favor of the Trust Depositor or
its assignees in accordance with this Agreement, and, with respect to the
Financed Items, against the related Obligor in favor of Fidelity or its
predecessor in interest.
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<PAGE>
(g) Location of Chief Executive Office and Records. The chief
place of business and chief executive office of the Seller is located at 1225
Wrights Lane, West Chester, Pennsylvania 19380.
(h) Transaction Documents. The Transaction Documents are the
only agreements pursuant to which the Trust Depositor purchases Contracts and
any other accounts receivable from the Seller, and the Transaction Documents
represent all material agreements between the Seller and the Trust Depositor.
All such Contract Assets are transferred without recourse to the Seller, except
to the extent of the representations and warranties made by the Seller hereunder
and under the Sale and Servicing Agreement and as otherwise expressly provided
herein or therein.
(i) Solvency. The Seller is not "insolvent" (as such term is
defined in ss.101(32)(A) of the Bankruptcy Code).
(j) No Fraudulent Conveyance. The transactions contemplated by
this Agreement and by each of the Transaction Documents are being consummated by
the Seller in furtherance of the Seller's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. By its receipt of the purchase price
hereunder the Seller shall have received reasonably equivalent value for the
Contract Assets sold or otherwise conveyed to the Trust Depositor under this
Agreement.
Section 3.02 Representations and Warranties of Fidelity. Under
the Sale and Servicing Agreement, the Seller will represent and warrant to, and
covenant with, the Trust Depositor and for the benefit of the Trust, the
Trustees, the Noteholders and the Certificateholder with respect to all the
Contract Assets as provided in Sections 3.02, 3.03, 3.04 and 3.05 of the Sale
and Servicing Agreement.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
Section 4.01 Custody of Contracts. Subject to the terms and
conditions of this Section 4.01, the contents of each Contract File shall be
held in the custody of the Collateral Custodian for the benefit of the
Noteholders, the Certificateholder, the Indenture Trustee and the Trust as the
owner thereof. The Seller agrees to cooperate with the Collateral Custodian and
the Servicer in their efforts to comply with all of their obligations under the
Sale and Servicing Agreement in respect of the Contract Assets, and acknowledges
and consents to the transactions contemplated therein.
Section 4.02 Filing. On or prior to the Closing Date, the
Seller shall cause the UCC financing statement(s) referred to in Section 2.02(h)
hereof to be filed and from time to time. The Seller shall take and cause to be
taken such actions and execute such documents as are necessary or desirable or
as the Trust Depositor or the Servicer may reasonably request to perfect and
protect the Trust Depositor's ownership interest in the Contract Assets against
all other persons, including, without limitation, the filing of financing
statements, amendments thereto and continuation statements, the execution of
transfer instruments and the making of notations on or taking possession of all
records or documents of title.
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<PAGE>
Section 4.03 Name Change or Relocation.
(a) During the term of this Agreement, the Seller shall not
change its name, identity or structure or relocate its chief executive office,
or relocate or establish a new location where Contract Files are maintained,
without first giving at least 30 days' prior written notice to the Trust
Depositor, the Indenture Trustee and the Owner Trustee (on behalf of the Trust).
(b) If any change in the Seller's name, identity or structure
or other action would make any financing or continuation statement or notice of
ownership interest or lien filed under this Agreement seriously misleading
within the meaning of applicable provisions of the UCC or any title statute, the
Seller, no later than five days after the effective date of such change, shall
file such amendments as may be required to preserve and protect the Trust's and
the Indenture Trustee's interests in the Trust Assets and proceeds thereof. In
addition, the Seller shall not change its place of business or its chief
executive office (within the meaning of Article 9 of the UCC) from the location
specified in Section 3.01(g) above, or relocate or establish a location where it
maintains Contract Files which is other than in one the UCC Filing Locations,
unless it has first taken such action as is advisable or necessary to preserve
and protect the Trust's and the Indenture Trustee's interest in the Contract
Assets. Promptly after taking any of the foregoing actions, the Seller shall
deliver to the Trust Depositor and the Trustees an opinion of counsel stating
that, in the opinion of such counsel, all financing statements or amendments
necessary to preserve and protect the interests of the Trust and the Indenture
Trustee in the Contract Assets have been filed, and reciting the details of such
filing.
Section 4.04 Sale Treatment. The Seller and the Trust
Depositor shall treat the transfer of Contract Assets made hereunder for all
purposes as a sale and purchase on all of its relevant books, records, financial
statements and other applicable documents. Without limiting the generality of
the foregoing, such purposes include all financial accounting purposes;
provided, however, that if GAAP principals require such assets be shown on the
Seller's books, the Seller shall cause to be footnoted or otherwise indicated on
its books that such assets are shown on the books of the Seller solely because
of principles of consolidation under GAAP, that the Seller does not own such
assets, and that such assets are owned by the Trust. Notwithstanding the
preceding sentence, solely for state and federal income tax purposes the
transfer of Contract Assets by the Seller hereunder may not be treated as a sale
and purchase for state and federal income tax purposes so long as the Trust
Depositor is disregarded as a separate entity pursuant to Treasury Regulations
Sections 301.7701-3(b)(i)(ii).
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<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.01 Prohibited Transactions with Respect to the Trust
Depositor. The Seller shall not:
(a) provide credit to any Noteholder for the purpose of
enabling such Noteholder to purchase Notes; or
(b) purchase any Notes in an agency or trustee capacity;
(c) lend any money to the Trust Depositor.
Section 5.02 Termination. This Agreement shall terminate
(after distribution of all amounts distributable pursuant to Section 7.05 of the
Sale and Servicing Agreement) on the Distribution Date on which the principal
balance of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class B Notes, Class C Notes, Class D Notes and the Certificate is
reduced to zero; provided, however, that the Seller's representations and
warranties, covenants and indemnities shall survive termination of this
Agreement.
Section 5.03 Assignment or Delegation by the Seller. Except as
specifically authorized hereunder, the Seller may not convey and assign or
delegate any of its rights or obligations hereunder absent the prior written
consent of the Trust Depositor, the Trust and the Indenture Trustee, and any
attempt to do so without such consent shall be void.
Section 5.04 Amendment.
(a) This Agreement may be amended from time to time by the
Seller and the Trust Depositor, with notice to the Rating Agencies and the
Trustees, but without the consent of the Trust, the Indenture Trustee or any of
the Noteholders or the Certificateholder to correct manifest error, to cure any
ambiguity, to correct or supplement any provisions herein or therein which may
be inconsistent with any other provisions herein or therein, as the case may be,
or to add any other provisions with respect to matters or questions arising
under this Agreement which shall not be inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
opinion of Counsel for the Seller acceptable to the Trustees, adversely affect
the interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by
the Seller and the Trust Depositor, with notice to the Rating Agencies and with
the consent of the Required Holders and the Trustees, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Trustees for
the benefit of Noteholders or Certificateholder; provided, however, that no such
amendment or waiver shall (a) reduce in any manner the amount of, or delay the
timing of, collections of payments on the Contracts or distributions which are
required to be made on any Note or Certificate or (b) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of the
holders of all affected Securities then outstanding.
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<PAGE>
(c) Promptly after the execution of any amendment or consent
pursuant to this Section 5.04, the Trust Depositor shall furnish written
notification of the substance of such amendment and a copy of such amendment to
the Trustees and the Rating Agencies.
(d) It shall not be necessary for the consent of Noteholders
or the Certificateholder under this Section 5.04 to approve the particular form
of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Noteholders and the
Certificateholder shall be subject to such reasonable requirements as the
Trustees may prescribe.
(e) Upon the execution of any amendment or consent pursuant to
this Section 5.04, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every holder of Notes and Certificates theretofore or thereafter issued
hereunder shall be bound thereby.
Section 5.05 Notices. All notices, demands, certificates,
requests and communications hereunder ("notices") shall be in writing and shall
be effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier for delivery the next
Business Day, or (c) on the date personally delivered to an authorized officer
of the party to which sent, or (d) on the date transmitted by legible telecopier
transmission with a confirmation of receipt, in all cases addressed to the
recipient as follows:
(i) If to the Seller:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attention:
Facsimile Number: (610) 719-4515
Telephone Number: (610) 719-4500
(ii) If to the Trust Depositor:
Fidelity Equipment Lease Depositor I, LLC
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attention:
Facsimile Number: (610) 719-4515
Telephone Number: (610) 719-4500
(iii) If to the Servicer, Indenture Trustee, Owner Trustee, Collateral
Custodian or Rating Agencies:
At the address specified for Notices thereto in the Sale and Servicing
Agreement.
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
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<PAGE>
All communications and notices pursuant hereto to a Noteholder
shall be in writing and delivered or mailed at the address shown in the Note
Register.
Section 5.06 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
Section 5.07 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 5.08 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
Section 5.09 No Bankruptcy Petition. The Seller covenants and
agrees that, prior to the date that is one year and one day after the payment in
full of all amounts owing in respect of all outstanding Securities, it will not
institute against the Trust Depositor, or join any other Person in instituting
against the Trust Depositor any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceedings under the
laws of the United States or any state of the United States. This Section 5.09
will survive the termination of this Agreement.
Section 5.10 Third Party Beneficiaries. The Trust and each
Trustee is a third-party beneficiary to this Agreement to the extent of rights
and benefits specifically granted or established hereunder in favor of the Trust
or such Trustee in its capacity as such Trustee, and may enforce the provisions
hereof in such regard as if it were a direct party hereto.
Section 5.11 Severability of Provisions. If one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
Certificates or the rights of the Holders thereof.
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<PAGE>
Section 5.12 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trust Depositor (or any
assignee thereof) or the Seller, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein, provided are
cumulative and not exhaustive (except to the extent specifically provided
herein) of any rights, remedies, powers or privileges provided by law.
Section 5.13 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
together constitute but one and the same instrument.
[remainder of page intentionally blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first written above.
FIDELITY EQUIPMENT LEASE DEPOSITOR I, LLC
By: _________________________________
Name:
Title:
FIDELITY LEASING, INC.
By: ___________________________________
Name:
Title:
<PAGE>
Exhibit A
FORM OF ASSIGNMENT
In accordance with the Transfer and Sale Agreement (the
"Agreement") dated as of June 2, 1999 made by and between the undersigned, as
the Seller thereunder ("Seller"), and the Fidelity Equipment Lease Depositor I,
LLC, as purchaser thereunder (the "Trust Depositor"), the undersigned does
hereby sell, transfer, convey and assign, set over and otherwise convey to the
Trust Depositor all its right, title and interest in and to:
(a) the Initial Contracts, and all monies due or to become due
in payment of such Contracts on and after the Initial Cutoff Dates, any
Prepayment Amounts, any payments in respect of a casualty or early
termination, and any Defaulted Contract Recoveries received with
respect thereto, but excluding any Scheduled Payments due prior to the
Cutoff Date or any Excluded Amounts;
(b) the Financed Items related to such Contracts, including
all proceeds from any sale or other disposition of such Financed Items
(but subject to the exclusion and release herein of Excluded Amounts);
(c) the Contract Files;
(d) all payments made or to be made in the future with respect
to such Contracts or the Obligor thereunder under any Program Agreement
and under any guarantee or similar credit enhancement with respect to
such Contracts;
(e) all Insurance Proceeds with respect to each such Contract;
(f) all income from and proceeds of the foregoing; and
(g) the security interest of the Seller or its affiliates in
the Equipment or other property securing such Contracts and the
proceeds thereof.
This Assignment is made pursuant to and in reliance upon the
representation and warranties on the part of the undersigned contained in
Article III of the Agreement and no others. Capitalized terms used in this
Assignment and not defined shall have the same meanings as such terms would have
if used in the Agreement.
A-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment
to be duly executed this 2nd day of June, 1999.
FIDELITY LEASING, INC.
By: _________________________________________
Name:
Title:
FIDELITY EQUIPMENT LEASE DEPOSITOR I, LLC
By:
Name:
Title:
<PAGE>
Exhibit B
Purchase Price of Contracts: $142,036,314
<PAGE>
================================================================================
FIDELITY EQUIPMENT LEASE TRUST 1999-1
as Issuer,
and
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely in its capacity
as Indenture Trustee
-----------------------------------
INDENTURE
Dated as of June 2, 1999
-----------------------------------
$56,955,084 Receivable-Backed Notes, Class A-1
$27,949,428 Receivable-Backed Notes, Class A-2
$20,880,822 Receivable-Backed Notes, Class A-3
$33,961,804 Receivable-Backed Notes, Class A-4
$9,749,800 Receivable-Backed Notes, Class B
$4,874,900 Receivable-Backed Notes, Class C
$4,468,658 Receivable-Backed Notes, Class D
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.....................................................2
Section 1.02 Rules of Construction...........................................8
ARTICLE TWO
THE NOTES
Section 2.01 Form............................................................9
Section 2.02 Execution, Authentication and Delivery.........................11
Section 2.03 Temporary Notes................................................11
Section 2.04 Registration; Registration of Transfer and Exchange............12
Section 2.05 Mutilated, Destroyed, Lost or Stolen Notes.....................13
Section 2.06 Persons Deemed Owner...........................................14
Section 2.07 Payment of Principal and Interest; Defaulted Interest..........14
Section 2.08 Cancellation...................................................15
Section 2.09 Book-Entry Notes...............................................16
Section 2.10 Notices to Depository..........................................20
Section 2.11 Definitive Notes...............................................21
Section 2.12 Release of Collateral..........................................21
Section 2.13 Tax Treatment..................................................21
Section 2.14 Noteholder Direction...........................................21
Section 2.15 Additional Restrictions on the Class D Notes...................22
Section 2.16 Listing Restrictions...........................................22
ARTICLE THREE
COVENANTS
Section 3.01 Payment of Principal and Interest..............................23
Section 3.02 Maintenance of Office or Agency................................23
Section 3.03 Money for Payments to be Held in Trust.........................23
Section 3.04 Existence......................................................25
Section 3.05 Protection of Collateral.......................................25
Section 3.06 Opinions as to Collateral......................................26
Section 3.07 Performance of Obligations; Servicing of Contracts.............26
Section 3.08 Negative Covenants.............................................27
Section 3.09 Issuer May Consolidate, etc. Only on Certain Terms.............28
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<PAGE>
Section 3.10 Successor or Transferee........................................29
Section 3.11 No Other Business..............................................30
Section 3.12 No Borrowing...................................................30
Section 3.13 Notice of Events of Default....................................30
Section 3.14 Further Instruments and Acts...................................30
Section 3.15 Compliance with Laws...........................................30
Section 3.16 Amendments of the Sale and Servicing Agreement
and the Trust Agreement.......................................30
Section 3.17 Removal of Administrator.......................................30
Section 3.18 Representations and Warranties of Issuer.......................30
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01 Satisfaction and Discharge of Indenture........................31
Section 4.02 Application of Trust Money.....................................32
Section 4.03 Repayment of Moneys Held by Paying Agent.......................33
ARTICLE FIVE
REMEDIES
Section 5.01 Events of Default..............................................33
Section 5.02 Rights Upon Event of Default...................................34
Section 5.03 Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee; Authority of Indenture Trustee..........34
Section 5.04 Remedies.......................................................37
Section 5.05 Optional Preservation of the Contracts.........................37
Section 5.06 Priorities.....................................................38
Section 5.07 Limitation of Suits............................................38
Section 5.08 Unconditional Rights of Noteholders to Receive
Principal and Interest........................................39
Section 5.09 Restoration of Rights and Remedies.............................39
Section 5.10 Rights and Remedies Cumulative.................................39
Section 5.11 Delay or Omission Not a Waiver.................................39
Section 5.12 Control by Noteholders.........................................39
Section 5.13 Waiver of Past Defaults........................................40
Section 5.14 Undertaking for Costs..........................................40
Section 5.15 Waiver of Stay or Extension Laws...............................40
Section 5.16 Action on Notes................................................41
Section 5.17 Performance and Enforcement of Certain Obligations.............41
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<PAGE>
ARTICLE SIX
THE INDENTURE TRUSTEE
Section 6.01 Duties of Indenture Trustee....................................41
Section 6.02 Rights of Indenture Trustee....................................43
Section 6.03 Individual Rights of Indenture Trustee.........................44
Section 6.04 Indenture Trustee's Disclaimer.................................44
Section 6.05 Notice of Defaults.............................................44
Section 6.06 Reports by Indenture Trustee to Holders........................45
Section 6.07 Compensation and Indemnity.....................................45
Section 6.08 Replacement of Indenture Trustee...............................45
Section 6.09 Successor Indenture Trustee by Merger..........................47
Section 6.10 Appointment of Co-Indenture Trustee
or Separate Indenture Trustee.................................47
Section 6.11 Eligibility....................................................48
Section 6.12 [Reserved].....................................................49
Section 6.13 Representations and Warranties of Indenture Trustee............49
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01 Issuer to Furnish Indenture Trustee Names
and Addresses of Noteholders..................................49
Section 7.02 Preservation of Information: Communication to Noteholders......50
Section 7.03 Reports by Indenture Trustee...................................50
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01 Collection of Money............................................50
Section 8.02 Trust Accounts.................................................50
Section 8.03 General Provisions Regarding Accounts..........................53
Section 8.04 Release of Collateral..........................................53
Section 8.05 Opinion of Counsel.............................................54
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without Consent of Noteholders.........54
Section 9.02 Supplemental Indentures With Consent of Noteholders............55
Section 9.03 Execution of Supplemental Indentures...........................56
Section 9.04 Effect of Supplemental Indenture...............................56
Section 9.05 Reference in Notes to Supplemental Indentures..................56
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<PAGE>
ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01 Redemption.....................................................57
Section 10.02 Form of Redemption Notice......................................57
Section 10.03 Notes Payable on Redemption Date...............................57
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01 Compliance Certificates and Opinions, etc......................58
Section 11.02 Form of Documents Delivered to Indenture Trustee...............58
Section 11.03 Acts of Noteholders............................................59
Section 11.04 Notices........................................................60
Section 11.05 Notices to Noteholders; Waiver.................................60
Section 11.06 Alternate Payment and Notice Provisions........................61
Section 11.07 Effect of Headings and Table of Contents.......................61
Section 11.08 Successors and Assigns.........................................61
Section 11.09 Separability...................................................61
Section 11.10 Benefits of Indenture..........................................61
Section 11.11 Legal Holidays.................................................61
Section 11.12 Governing Law..................................................61
Section 11.13 Counterparts...................................................61
Section 11.14 Recording of Indenture.........................................61
Section 11.15 Trust Obligation...............................................62
Section 11.16 No Petition....................................................62
Section 11.17 Inspection.....................................................62
Section 11.18 No Substantive Review of Compliance Documents..................62
EXHIBITS
Exhibit A -- Form of Sale and Servicing Agreement....................A-1
Exhibit B-1 -- Form of Class A-1 Note................................B-1-1
Exhibit B-2 -- Form of Class A-2 Note................................B-2-1
Exhibit B-3 -- Form of Class A-3 Note................................B-3-1
Exhibit B-4 -- Form of Class A-4 Note................................B-4-1
Exhibit C -- Form of Class B Note....................................C-1
Exhibit D -- Form of Class C Note....................................D-1
Exhibit E -- Form of Class D Note....................................E-1
Exhibit F -- Form of Note Assignment.................................F-1
Exhibit G -- Form of Note Depository Agreement.......................G-1
Annex A -- Form of Investor's Letter
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<PAGE>
INDENTURE
This Indenture, dated as of June 2, 1999 (this "Indenture"), is between
Fidelity Equipment Lease Trust 1999-1, a Delaware business trust (the "Issuer")
and Harris Trust and Savings Bank in its capacity as indenture trustee (the
"Indenture Trustee") and not in its individual capacity.
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Issuer's 5.155%
Receivable-Backed Notes, Class A-1 (the "Class A-1 Notes"), 5.860%
Receivable-Backed Notes, Class A-2 (the "Class A-2 Notes"), 6.090%
Receivable-Backed Notes, Class A-3 (the "Class A-3 Notes"), 6.300%
Receivable-Backed Notes, Class A-4 (the "Class A-4 Notes"), 6.590%
Receivable-Backed Notes, Class B (the "Class B Notes"), 7.860% Receivable-Backed
Notes, Class C (the "Class C Notes"), and 6.180% Receivable-Backed Notes, Class
D (the "Class D Notes" and, together with the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby grants, transfers, assigns and otherwise conveys to
the Indenture Trustee on the Closing Date, on behalf of and for the benefit of
the Holders of the Notes, without recourse, all of the Issuer's right, title and
interest in, to and under the Contract Assets as may be held from time to time
by the Issuer (as each such defined term is defined in Section 1.01)
(collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction and all other
sums owing by the Issuer hereunder or under any other Transaction Document, and
to secure compliance with the provisions of this Indenture, all as provided in
this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
<PAGE>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
(a) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Indenture.
"Act" has the meaning assigned in Section 11.03(a).
"Administration Agreement" means the Administration Agreement, dated as
of the date hereof, among the Administrator, the Issuer, the Trust Depositor and
the Indenture Trustee.
"Administrator" means Fidelity Leasing, Inc. or any successor
Administrator under the Administration Agreement.
"Applicable Procedures" has the meaning assigned in Section
2.09(h)(ii).
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Book-Entry Notes" has the meaning assigned in Section 2.01(c).
"Business Day" means any day other than a Saturday, Sunday or other day
on which banking institutions in the city of Philadelphia, Pennsylvania,
Chicago, Illinois, Charlotte, North Carolina, or New York, New York are
authorized or obligated by law, executive order or governmental decree to be
closed.
"Certificate of Trust" means the Certificate of Trust of the Issuer
substantially in the form of Exhibit A to the Trust Agreement.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Class D Purchaser" has the meaning assigned in Section 2.15.
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<PAGE>
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Collateral" means the Collateral Granted to the Indenture Trustee
under the Granting Clause of this Indenture, including all proceeds thereof.
"Collateral Custodian" shall mean Harris Trust and Savings Bank, as
collateral custodian, or any successor thereto.
"Contract Assets" has the meaning assigned in Section 2.01 of the Sale
and Servicing Agreement.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered which office at date of the execution of this Agreement is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, Attention:
Indenture Trust Administration; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee (the address of which the successor Indenture Trustee will notify the
Noteholders and the Issuer).
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning assigned in Section 2.01(d).
"Depository": The Depository Trust Company, or any successor Depository
hereafter named. The nominee of the initial Depository for purposes of
registering those Notes that are to be Book-Entry Notes, is Cede & Co. The
Depository shall at all times be a "clearing corporation" as defined in Section
8-102(3) of the Uniform Commercial Code of the State of New York and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act.
"DTC" means The Depository Trust Company, and its successors.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning assigned in Section 5.01.
"Exchange Act" means The Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Senior Vice President, the Secretary or the
Treasurer of such corporation; and with respect to any partnership, any general
partner thereof.
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<PAGE>
"General Partner" means each Certificateholder obligated to pay the
expenses of the Issuer pursuant to Section 2.07 of the Trust Agreement.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" or "Note Owner" means, with respect to a Book-
Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on
the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency) and with respect to a Definitive Note the Person in whose name
a Note is registered on the Note Register.
"IAI Notes" has the meaning assigned in Section 2.01(d).
"Indenture Securities" means the Notes.
"Indenture Trustee" means Harris Trust and Savings Bank, as Indenture
Trustee under this Indenture, or any successor Indenture Trustee under this
Indenture.
"Indenture Trustee Documents" has the meaning assigned in Section 6.13.
"Independent" means, when used with respect to any specified Person,
such a Person who (i) is in fact independent of the Issuer, the Trust Depositor,
the Seller, the Servicer and any of their respective Affiliates, (ii) is not a
director, officer or employee of any Affiliate of the Issuer other than an
Affiliate organized as a special purpose corporation or similar entity, the
Trust Depositor, the Seller or the Servicer, (iii) is not a person related to
any officer or director of the Issuer, the Trustee Depositor, the Seller or the
Servicer or any of their respective Affiliates, (iv) is not a holder (directly
or indirectly) of more than 10% of any voting securities of the Issuer, the
Trust Depositor, the Seller or the Servicer or any of their respective
Affiliates, and (v) is not connected with the Issuer, the Trustee Depositor, the
Seller or the Servicer or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, made by
an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
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<PAGE>
"Institutional Accredited Investor" means an institutional "accredited
investor" as defined in Rule 501(a)(1), (2), (3), or (7) of Regulation D under
the Securities Act.
"Issuer Documents" has the meaning assigned in Section 3.18(a).
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Note Depository Agreement" means the agreement dated as of the Closing
Date, among the Issuer, the Administrator the Indenture Trustee and DTC, as the
initial Clearing Agency, relating to the Notes, substantially in the form of
Exhibit F hereto.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee
and which shall comply with any applicable requirements of Section 11.01, and
shall be addressed to and in form and substance satisfactory to the Indenture
Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision for such
notice, satisfactory to the Indenture Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
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<PAGE>
provided, however, that in determining whether the Holders of the requisite
Outstanding Amount have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any other Transaction Document,
Notes owned by the Issuer, any other obligor upon the Notes, the Trust
Depositor, either Seller or any of their respective Affiliates shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that the Indenture Trustee actually knows to be so owned shall be so
disregarded. Notes so owned that have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes, the Trust
Depositor, either Seller or any of their respective Affiliates.
"Outstanding Amount" means the aggregate principal amount of all Notes
of one Class or of all Classes, as the case may be, Outstanding at the date of
determination.
"Owner Trustee" means First Union Trust Company, National Association,
not in its individual capacity but solely as Owner Trustee under the Trust
Agreement, or any successor trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make the distributions from the Note
Distribution Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Qualified Institutional Buyer" means a "qualified institutional buyer"
as defined in Rule 144A of the Securities Act.
"Rating Agency" means Standard and Poor's, a division of the McGraw
Hill Companies, Inc. ("S&P") and Duff & Phelps Credit Rating Co. ("DCR").
"Rating Agency Condition" means as to any action, that such action
would not result in the downgrade, qualification or withdrawal of the rating
then assigned by S&P or DCR to any Class of Notes.
"Redemption Date" means in the case of a redemption of the Notes
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
10.01(b), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.01(a) or 10.01(b), as the case may be.
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<PAGE>
"Redemption Price" means (i) in the case of a redemption of the Notes
pursuant to Section 10.01(a), an amount equal to (x) the unpaid principal amount
of the Notes redeemed plus (y) accrued and unpaid interest thereon at the
weighted average of the Interest Rate for each Class of Notes being so redeemed
to but excluding the Redemption Date, (ii) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (i)
above.
"Registered Holder" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office (or any successor group of the
Indenture Trustee), including any managing director, vice president, assistant
vice president, secretary, assistant secretary, vice president or any other
officer of the Indenture Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Required Holders" means (i) prior to the payment in full of the Class
A Notes outstanding, Class A-1 Noteholders, Class A-2 Noteholders, Class A-3
Noteholders and/or Class A-4 Noteholders evidencing more than 66 2/3% of the
aggregate Principal Amount of all Class A Notes outstanding (ii) from and after
the payment in full of the Class A Notes outstanding, Class B Noteholders
evidencing more than 66 2/3% of the aggregate Principal Amount of all Class B
Notes outstanding, (iii) from and after the payment in full of the Class B Notes
outstanding, Class C Noteholders evidencing more than 66 2/3% of the aggregate
Principal Amount of all Class C Notes outstanding, or (iv) from and after the
payment in full of the Class C Notes outstanding, Class D Noteholders evidencing
more than 66 2/3% of the aggregate Principal Amount of all Class D Notes
outstanding.
"Restricted Securities" has the meaning assigned in Section
2.01(e)(ii).
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of the date hereof, among the Issuer, the Trust Depositor, the
Collateral Custodian, the Back-Up Servicer, the Indenture Trustee and the
Servicer, substantially in the form of Exhibit A hereto.
"Securities Act" means The Securities Act of 1933, as amended.
"State" means any one of the 50 states of the United States, or the
District of Columbia or any of its territories.
"Targeted Holder" means any holder of a right to receive interest or
principal with respect to the Class D Notes or other interests in the Trust
(other than interests with respect to which an opinion is rendered that such
interest will be treated as debt for federal income tax purposes) and any holder
of a right to receive any amount in respect of the Certificate; provided, that
any Person holding more than one interest each of which would cause such Person
to be a Targeted Holder shall be treated as a single Targeted Holder.
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"Termination Date" means the date on which the Indenture Trustee shall
have received payment and performance of all amounts and obligations which the
Issuer may owe to or on behalf of the Indenture Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"Transfer" has the meaning assigned in Section 2.15(c).
"Trust Agreement" means the Trust Agreement, dated as of the date
hereof, between the Trust Depositor and the Owner Trustee.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"U.S. Person" means a citizen or resident of the United States, a
corporation, or partnership (unless, in the case of a partnership, Treasury
regulations are adopted that provide otherwise) created or organized in or under
the laws of the United States, any state thereof or the District of Columbia,
including an entity treated as a corporation or partnership for federal income
tax purposes, an estate whose income is subject to United States federal income
tax regardless of its source, or a trust if a court within the United States is
able to exercise primary supervision over the administration of such trust, and
one or more such U.S. Persons have the authority to control all substantial
decisions of such trust (or, to the extent provided in applicable Treasury
regulations, certain trusts in existence on August 20, 1996 which are eligible
to elect to be treated as U.S. Persons).
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used herein that are not otherwise defined
shall have the meanings ascribed thereto in the Sale and Servicing Agreement.
Section 1.02 Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular.
(vi) any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns; and
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(vii) the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Indenture shall refer to this Indenture as a whole
and not to any particular provision of this Indenture; Section, subsection
and Schedule references contained in this Indenture are references to
Sections, subsections and Schedules in or to this Indenture unless
otherwise specified.
ARTICLE TWO
THE NOTES
Section 2.01 Form.
(a) The Notes, in each case together with the Indenture Trustee's
certificate of authentication, shall be in substantially the forms set forth as
Exhibits to this Indenture with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
(b) The Definitive Notes shall be printed, typewritten, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Notes may be listed, all as determined by the
officers executing such Notes, as evidenced by their execution of such Notes.
(c) Notes of any Class offered to Qualified Institutional Buyers shall
be issued in the form of a single global security (a "Book-Entry Note") in
definitive, fully registered form, without interest coupons, substantially in
the form of the Notes of such Class, and with such applicable legends as are set
forth in Exhibits B-1, B-2, B-3, B-4, C and D hereof. Each such Book-Entry Note
shall initially be registered in the name of Cede & Co., as nominee of the
Depository, and deposited with the Indenture Trustee, at its Corporate Trust
Office, as custodian for the Depository, duly executed by the Issuer and
authenticated by the Indenture Trustee as hereinafter provided. The aggregate
initial principal amount of each Book-Entry Note may from time to time be
increased or decreased by adjustments made on the records of the Indenture
Trustee, as custodian for the Depository, as provided in Section 2.09(h).
(d) Notes sold to an Institutional Accredited Investor (the "IAI
Notes") and not in reliance on Rule 144A shall be issued in definitive, fully
registered form ("Definitive Notes"), without interest coupons, substantially in
the form of the Notes of such Class, and with such applicable legends as are set
forth in Exhibits B-1, B-2, B-3, B-4, C, D and E hereof. IAI Notes shall be
delivered to such Institutional Accredited Investor(s) only upon the execution
and delivery to the Placement Agent, the Issuer and the Indenture Trustee of a
letter, substantially in the form of the letter attached as Annex A to this
Indenture. IAI Notes may not be exchanged for interests in a Book-Entry Note
except as provided in Section 2.09(g) and 2.09(h) hereof.
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(e) (i) Each Restricted Security shall bear the following legend:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
ANY STATE SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR
ANY FOREIGN SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE,
AGREES FOR THE BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH
THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER,
WITHIN THE MEANING OF RULE 144A ("QUALIFIED INSTITUTIONAL BUYER"),
PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED INSTITUTIONAL BUYER
PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE, OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING THEREOF IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT
TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT, IN THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A)
THE RECEIPT BY THE NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM
PROVIDED IN ANNEX A TO THE INDENTURE AND (B) IF REQUESTED BY THE NOTE
REGISTRAR, THE RECEIPT BY THE NOTE REGISTRAR OF SUCH CERTIFICATES, LEGAL
OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO THE NOTE REGISTRAR THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS."
(ii) During the period beginning on the Closing Date and ending on the
date two years from the Closing Date, all Notes, and all Notes issued upon
registration of transfer of, or in exchange for, or in lieu of, such Notes,
shall be deemed "Restricted Securities" and shall be subject to the
restrictions on transfer provided in the applicable legend set forth in
Section 2.01(e)(i); provided, however, that the term "Restricted
Securities" shall not include (a) Notes which are issued upon transfer of,
or in exchange for, Notes that are not Restricted Securities or (b) Notes
as to which restrictions on transfer have been terminated in accordance
with Section 2.09. All Restricted Securities shall bear the applicable
legend set forth pursuant to Section 2.01(e). Notes that are not Restricted
Securities shall not bear such legend.
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(f) Each Note shall be dated the date of its authentication. The terms
of the Notes set forth in Exhibits B-1, B-2, B-2, B-4, C, D and E hereto are
part of the terms of this Indenture.
(g) The "Depository" for the Notes to be authenticated and delivered in
the form of a Book-Entry Note upon original issuance shall be The Depository
Trust Company.
Section 2.02 Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile. Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall, upon receipt of an Issuer Order,
authenticate and deliver for original issue (i) Class A-1 Notes in an aggregate
principal amount of $56,955,084, (ii) Class A-2 Notes in an aggregate principal
amount of $27,949,428, (iii) Class A-3 Notes in an aggregate principal amount of
$20,880,883, (iv) Class A-4 Notes in an aggregate principal amount of
$33,961,804, (v) Class B Notes in an aggregate principal amount of $9,749,800,
(vi) Class C Notes in an aggregate principal amount of $4,874,900 and (vii)
Class D Notes in an aggregate principal amount of $4,468,658. The aggregate
principal amount of such Classes of Notes Outstanding at any time may not exceed
such respective amounts, except as otherwise provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Class A
Notes, the Class B Notes and the Class C Notes shall be issuable as registered
Notes in the minimum denomination of $250,000 and in integral multiples of
$1,000 in excess thereof, except that one Note of each Class may be issued in an
integral multiple of less than $1,000 in excess thereof. The Class D Notes shall
be issuable as registered Notes in the minimum denomination of $500,000 and in
integral multiples of $1,000 in excess thereof, except that one Note of such
Class may be issued in an integral multiple of less than $1,000 in excess
thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein by
the Indenture Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
Section 2.03 Temporary Notes. Pending the preparation of Book-Entry
Notes or Definitive Notes, the Issuer may execute, and upon receipt of an Issuer
Order the Indenture Trustee shall authenticate and deliver, temporary Notes that
are printed, lithographed, typewritten, mimeographed or otherwise produced, of
the tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
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If temporary Notes are issued, the Issuer will cause Book-Entry Notes
or Definitive Notes to be prepared without unreasonable delay. After the
preparation of Book-Entry Notes or Definitive Notes, the temporary Notes shall
be exchangeable for Book-Entry Notes or Definitive Notes upon surrender of the
temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more Notes, the Issuer shall execute and the
Indenture Trustee shall authenticate and deliver in exchange therefor a like
tenor and principal amount of definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Book-Entry Notes or Definitive Notes.
Section 2.04 Registration; Registration of Transfer and Exchange.
(a) The Issuer shall cause to be kept a register (the "Note Register")
in which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and the amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
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Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in substantially the form set forth as Exhibit F or in a form
satisfactory to the Indenture Trustee duly executed by, the Holder thereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by a commercial bank or trust company located, or having a
correspondent located in the city in which the Corporate Trust Office is
located, or by a member firm of a national securities exchange, and such other
documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.03 not involving
any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
Neither the Indenture Trustee nor the Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership in
any Note an interest in which is transferable through the facilities of the
Depository.
(b) Notwithstanding any other provision of this Indenture, no transfer
of the Class D Notes shall be made or shall be valid or effective hereunder
unless such transfer is made in a transaction which does not require
registration or qualification under the Securities Act or qualification under
any state securities or "Blue Sky" laws. In addition, neither the Indenture
Trustee nor the Note Registrar shall effect the registration of any transfer of
the Class D Notes if, following such transfer, there would be more than 99
Targeted Holders; provided, however, that the Indenture Trustee and the Note
Registrar shall incur no liability for determining compliance with such
requirement or compliance with any rules of aggregation under applicable law.
For all purposes hereunder, the Indenture Trustee and the Note Registrar shall
be entitled to rely upon its list of Registered Holders.
Section 2.05 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by them to hold the Issuer and the Indenture
Trustee harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, the Issuer shall execute and upon its request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note of the same Class;
provided, however, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within seven days shall be due and payable,
or shall have been called for redemption, instead of issuing a replacement Note,
the Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
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the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, and the Indenture Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer or the Indenture Trustee may require the payment by the Holder of such
Note of a sum sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other reasonable expenses (including the
fees and expenses of the Indenture Trustee or the Note Registrar) connected
therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost of stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 2.06 Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, and any
of their respective agents may treat the Person in whose name any Note is
registered in the Note Registrar (as of the day of determination) as the owner
of such Note for the purpose of receiving payments of principal and interest, if
any, on such Note and for all other purposes whatsoever, whether or not such
Note be overdue, and none of the Issuer, the Indenture Trustee nor any of their
respective agents shall be affected by notice to the contrary.
Section 2.07 Payment of Principal and Interest; Defaulted Interest.
(a) Each Class of Notes shall accrue interest at the related Interest
Rate, and such interest shall be payable on each Distribution Date as specified
therein, subject to Section 3.01. Any installment of interest or principal, if
any, payable on any Note which is punctually paid or duly provided for by the
Issuer on the applicable Distribution Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered on the Record
Date, by wire transfer in immediately available funds to the account designated
by such nominee and except for the final installment of principal payable with
respect to such Note on a Distribution Date or on the related Final Distribution
Date, as the case may be (and except for the Redemption Price for any Note
called for redemption pursuant to Section 10.01(a)), which shall be payable as
provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
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(b) The principal of each Note shall be payable on each Distribution
Date to the extent provided in the form of the related Note set forth as an
Exhibit hereto. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing unless
the Required Holders have waived such Event of Default in the manner provided in
Section 5.02. All principal payments on each Class of Notes shall be made pro
rata to the Noteholders of such Class entitled thereto. The Indenture Trustee
shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Distribution Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such Notice shall be mailed within five Business Days of receipt
of notice of termination of the Trust pursuant to Section 9.01(c) of the Trust
Agreement and shall specify that such final installment will be payable only
upon presentation and surrender of such Note and shall specify the place where
such Note may be presented and surrendered for payment of such installment,
provided the Issuer provides the Indenture Trustee with timely written notice of
such expected final payment. Notices in connection with redemptions of Notes
shall be mailed to Noteholders as provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the related payment date. The Issuer shall fix or cause to be fixed any
such special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to the Indenture Trustee and each
Noteholder a notice that states the special record date, the payment date and
the amount of defaulted interest to be paid.
(d) All payments to be made by the Issuer under this Indenture shall be
made only from the income and proceeds from the Collateral and only to the
extent that the Issuer shall have sufficient income or proceeds from the Trust
Assets to enable the Issuer to make payments in accordance with the terms
hereof. The Indenture Trustee is not personally liable for any amounts paid by
the Issuer under this Indenture.
Section 2.08 Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Order that they
be destroyed or returned to it; provided that such Issuer Order is timely and
the Notes have not been previously disposed of by the Indenture Trustee.
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Section 2.09 Book-Entry Notes.
(a) The Notes, other than the Class D Notes, upon original issuance,
will be issued in the form of a typewritten Note or Notes representing the
Book-Entry Notes, to be delivered to DTC, the initial Depository, by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Noteholder will receive a Definitive Note representing such Noteholder's
interest in such Note, except as provided in Section 2.11. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Noteholders pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including
the payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole Holder of the Notes, and
shall have no obligation to the Noteholders;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Noteholders shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Noteholders and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Note Depository Agreement,
unless and until Definitive Notes are issued pursuant to Section 2.11, the
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest
on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Noteholders evidencing a specified
percentage of the Outstanding Amount, the Clearing Agency shall be deemed
to represent such percentage only to the extent that it has received
instructions to such effect from Noteholders and/or Clearing Agency
Participants owning or representing, respectively, such required percentage
of the beneficial interest in the Notes and has delivered such instructions
to the Indenture Trustee.
(b) Notwithstanding any other provisions of this Indenture or the
Notes, a Book-Entry Note shall not be exchanged in whole or in part for a Note
registered in the name of any Person other than the Depository or one or more
nominees thereof, provided, that a Book-Entry Note may be exchanged for Notes
registered in the names of any Person designated by the Depository in the event
of the occurrence of any of the events specified in Section 2.11 as provided
therein.
(c) Notes issued in exchange for a Book-Entry Note or any portion
thereof shall be issued as Definitive Notes, shall have an aggregate initial
principal amount equal to that of such Book-Entry Note or portion thereof to be
so exchanged, shall be registered in such names and be in such authorized
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denominations as the Depository shall designate and shall bear the applicable
legends provided for herein. Any Book-Entry Note to be exchanged in whole shall
be surrendered by the Depository to the Indenture Trustee. With respect to any
Book-Entry Note to be exchanged in part, either such Book-Entry Note shall be so
surrendered for exchange or, if the Indenture Trustee is acting as custodian for
the Depository or its nominee with respect to such Book-Entry Note, the initial
principal amount thereof shall be reduced, by an amount equal to the portion
thereof to be so exchanged, by means of an appropriate adjustment made on the
records of the Indenture Trustee. Upon any such surrender or adjustment, the
Indenture Trustee shall authenticate and deliver the Note issuable on such
exchange to or upon the order of the Depository or an authorized representative
thereof. Any Note delivered in exchange for a Book-Entry Note or any portion
thereof shall bear the legend regarding transfer restrictions applicable to the
Book-Entry Note set forth in the form of Note.
(d) Subject to the provisions of Section 2.01, the registered Holder
may grant proxies and otherwise authorize any person, including Clearing Agency
Participants and persons that may hold interests through Clearing Agency
Participants, to take any action which a Holder is entitled to take under this
Indenture or the Notes.
(e) In the event of the occurrence of any of the events specified in
Section 2.11, the Issuer will promptly make available to the Indenture Trustee a
reasonable supply of Definitive Notes.
(f) Neither any members of, or participants in, the Depository
("Clearing Agency Participants") nor any other Persons on whose behalf Clearing
Agency Participants may act shall have any rights under this Indenture with
respect to any Book-Entry Note registered in the name of the Depository or any
nominee thereof, or under any such Book-Entry Note, and the Depository or such
nominee, as the case may be, may be treated by the Issuer, the Indenture Trustee
and any agent of the Issuer or the Indenture Trustee as the absolute owner and
holder of such Book-Entry Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Issuer, the Indenture Trustee or any
agent of the Issuer or the Indenture Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or such
nominee, as the case may be, or impair, as between the Depository, its Clearing
Agency Participants and any other Person on whose behalf a Clearing Agency
Participant may act, the operation of customary practices of such Persons
governing the exercise of the rights of a Holder of any Note. The Depository
must, at all times while it serves as such Depository, be a clearing agency
registered under the Exchange Act and any other applicable statute or
regulation.
(g) Definitive Notes (other than Class D Notes) held by Holders other
than Institutional Accredited Investors may be transferred at the option of the
Holder thereof, at any time prior to the issuance of Definitive Notes in
exchange for a Book-Entry Note pursuant to Section 2.09(b) and in accordance
with Section 2.11, to the Depository for credit to the account of any Clearing
Agency Participant at any time after the issuance of the Notes. Thereafter, the
Depository or its nominee shall be the Holder of the portion of the Book-Entry
Note evidencing any Definitive Notes so transferred and the beneficial ownership
thereof and the transfer of such ownership interest shall be effected only
through records maintained by the Depository or its nominee.
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(h) Notwithstanding any other provision of this Indenture or the Notes,
transfers of a Book-Entry Note, in whole or in part, shall be made only in
accordance with this Section 2.09(h).
(i) Transfer of a Book-Entry Note. Unless and until it is exchanged in
whole or in part for the Definitive Notes represented thereby in accordance
with Section 2.11 of this Indenture, a Book-Entry Note representing all or
a portion of the Notes may not be transferred, except as a whole by the
Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by
such Depository or any such nominee to a successor Depository or a nominee
of such successor Depository, and no such transfer to any such other Person
may be registered; provided that this clause (i) shall not prohibit any
transfer of a Note that is issued in exchange for a Book-Entry Note but is
not itself a Book-Entry Note. No transfer of a Note to any Person shall be
effective under this Indenture or the Notes unless and until such Note has
been registered in the name of such Person. Nothing in this Section shall
prohibit or render ineffective any transfer of a beneficial interest in a
Book-Entry Note effected in accordance with the other provisions of this
Section 2.09(h).
(ii) IAI Note to Book-Entry Note. If the Holder of an IAI Note (other
than a Class D Note) wishes at any time to transfer such Note to a Person
who wishes to take delivery thereof in the form of a beneficial interest in
a Book-Entry Note, such transfer may be effected, subject to the rules and
procedures of the Depository, to the extent applicable (the "Applicable
Procedures"), only in accordance with this clause (ii). Upon receipt by the
Indenture Trustee, as Registrar at the Corporate Trust Office, of (A) the
IAI Note to be transferred with appropriate bond powers, (B) written
instructions given in accordance with the Applicable Procedures from a
Clearing Agency Participant directing the Indenture Trustee to credit or
cause to be credited to another specified Clearing Agency Participant's
account a beneficial interest in a Book-Entry Note in an initial principal
amount equal to the initial principal amount of the IAI Note to be so
transferred, (C) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Clearing
Agency Participant to be credited with such beneficial interest, and (D) a
certificate in substantially the form set forth in Annex A, the Indenture
Trustee shall cancel such IAI Note, the Issuer shall execute, and the
Indenture Trustee shall authenticate and deliver a new Definitive Note for
the initial principal amount of the IAI Note not so transferred, registered
in the name of the Holder transferring such IAI Note or, if the remaining
initial principal amount of the IAI Note is transferred, the Holder's
transferee, and the Indenture Trustee shall instruct the Depository to
increase the initial principal amount of the Book-Entry Note by the initial
principal amount of the IAI Note so transferred, and to credit or cause to
be credited to the account of the Person specified in such instructions a
corresponding initial principal amount of the Book-Entry Note.
(iii) Other Exchanges. In the event that a Book-Entry Note or any
portion thereof is exchanged for Definitive Notes, such Definitive Notes
may in turn be exchanged (on transfer or otherwise) for Definitive Notes or
for beneficial interests in a Book-Entry Note (if any is then outstanding)
only in accordance with such procedures, which shall be substantially
consistent with the provisions of clauses (i) and (ii) above (including the
certification requirements intended to ensure that transfers of beneficial
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interests in a Book-Entry Note comply with Rule 144A or Rule 144 (if
available), as the case may be) and any Applicable Procedures, as may be
from time to time adopted by the Issuer and the Indenture Trustee.
(i) Whenever any IAI Note is presented or surrendered for registration
of transfer or for exchange for a Note registered in a name other than that of
the Holder, such IAI Note must be accompanied by a certificate in substantially
the form of Annex A, dated the date of such surrender and signed by the Holder
of such IAI Note, as to compliance with such restrictions on transfer. The
Indenture Trustee shall not be required to accept for such registration of
transfer or exchange any IAI Note not so accompanied by a properly completed
certificate.
(j) Every Restricted Security shall be subject to the restrictions on
transfer provided in the applicable legend required to be set forth on the face
of each Restricted Security pursuant to Section 2.01(e)(i), and the Holder of
each Restricted Security, by such Holder's acceptance thereof, agrees to be
bound by such restrictions on transfer. The restrictions imposed by Section
2.01(e) and this Section 2.09 upon the transferability of any particular
Restricted Security shall cease and terminate when such Restricted Security has
been sold pursuant to an effective registration statement under the Securities
Act or transferred pursuant to Rule 144 under the Securities Act (or any
successor provision thereto), unless the Holder thereof is an affiliate of the
Issuer within the meaning of Rule 144 (or such successor provision). Any
Restricted Security as to which such restrictions on transfer shall have expired
in accordance with their terms or shall have terminated may, upon surrender of
such Restricted Security for exchange to the Registrar in accordance with the
provisions of this Section 2.09 (accompanied, in the event that such
restrictions on transfer have terminated by reason of a transfer pursuant to
Rule 144 (or any successor provision), by an Opinion of Counsel reasonably
acceptable to the Issuer and the Indenture Trustee, addressed to the Issuer and
the Indenture Trustee and in form acceptable to the Issuer and the Indenture
Trustee, to the effect that the transfer of such Restricted Security has been
made in compliance with Rule 144 (or any such successor provision) and that such
restrictions on transfer are no longer applicable), be exchanged for a new Note,
of like tenor and aggregate initial principal amount, which shall not bear the
restrictive legend required by Section 2.01(e). The Indenture Trustee and the
Issuer (unless the Holder thereof is an affiliate of the Issuer within the
meaning of Rule 144 (or such successor provision)) shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
aforementioned Opinion of Counsel.
As used in Section 2.09(i) and in this Section 2.09(j), the term
"transfer" encompasses any sale, pledge, transfer or other disposition of any
Restricted Security.
(k) If at any time the Depository notifies the Issuer that it is
unwilling or unable to continue as Depository or if at any time the Depository
shall no longer be eligible under Section 2.11, the Issuer or the Administrator
on its behalf shall appoint a successor Depository. If a successor Depository is
not appointed by the Issuer within 90 days after the Issuer receives such notice
or becomes aware of such ineligibility, the Issuer will execute, and the
Indenture Trustee, upon receipt of an Issuer Order for the authentication and
delivery of individual Notes, will authenticate and deliver, individual Notes in
physical, certificated form in an aggregate initial
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principal amount equal to the initial principal amount of a Book-Entry Note or
Book-Entry Notes representing Notes in exchange for such Book-Entry Note or
Book-Entry Notes.
(i) The Issuer may at any time and in its sole discretion determine
that individual Notes issued in the form of one or more Book-Entry Notes
shall in whole or in part no longer be represented by such Book-Entry Note
or Book-Entry Notes and may require the Depository to submit any Book-Entry
Note held by it for transfer pursuant to subsection (iii) hereof. In such
event, or if an Event of Default has occurred and is continuing, the Issuer
will execute, and the Indenture Trustee, upon receipt of an Issuer Order
for the authentication and delivery of individual Notes, will authenticate
and deliver, individual Notes in physical, certificated form in an
aggregate initial principal amount equal to the initial principal amount of
the Book-Entry Note or Book-Entry Notes to be exchanged therefor. In the
event the Issuer fails to execute such individual Notes, the Issuer hereby
irrevocably appoints the Indenture Trustee as its lawful attorney-in-fact,
coupled with an interest, to do so.
(ii) The Depository may surrender a Book-Entry Note, in exchange in
whole or in part for individual Notes on such terms as are acceptable to
the Issuer and such Depository. Thereupon, the Issuer shall execute, and
the Indenture Trustee shall authenticate and deliver, without service
charge,
to each Person specified by such Depository a new individual Note
or Notes in physical, certificated form of any authorized
denomination as requested by such Person in aggregate initial
principal amount equal to and in exchange for such Person's
beneficial interest in the Book-Entry Note; and
to such Depository a new Book-Entry Note in a denomination equal
to the difference, if any, between the initial principal amount
of the surrendered Book-Entry Note and the aggregate initial
principal amount of individual Notes delivered to Holders
thereof.
(iii) Upon the exchange of a Book-Entry Note for individual Notes, such
Book-Entry Note shall be canceled by the Indenture Trustee. Individual
Notes issued in exchange for a Book-Entry Note pursuant to this Section
shall be registered in such names and in such authorized denominations as
the Depository for such Book-Entry Note, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Indenture
Trustee in writing. The Indenture Trustee and the Issuer shall not have any
liability for the accuracy of the instructions received from the
Depository. The Indenture Trustee shall deliver such Notes to the Persons
in whose names such Notes are so registered.
Section 2.10 Notices to Depository. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Noteholders pursuant to Section
2.11, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders of the Notes to the Depository, and
shall have no obligation to the Noteholders.
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Section 2.11 Definitive Notes. The Class D Notes shall be initially
issued in the form of Definitive Notes. With respect to the other Classes of
Notes, if (i)(A) the Administrator advises the Indenture Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as described in the Note Depository Agreement, and (B) the
Administrator or the Indenture Trustee is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Indenture Trustee in
writing that it elects to terminate the book-entry system through the
Depository, or (iii) after the occurrence of an Event of Default, the
Noteholders representing not less than 66 2/3% of the Outstanding Amount of such
Class of Notes advises the Indenture Trustee and the Depository through the
Clearing Agency Participants in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the related
Noteholders, then the Indenture Trustee shall notify all Noteholders of the
related Class of Notes, through the Depository, of the occurrence of any such
event and of the availability of Definitive Notes of the related Class of Notes
to Noteholders requesting the same. Upon surrender to the Indenture Trustee of
the Note or Notes representing the Book-Entry Notes by the Depository,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Depository. None of the Issuer, the Note Registrar or the
Indenture Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes of a Class, the Indenture
Trustee shall recognize the Noteholders of the Definitive Notes as Noteholders
hereunder.
The Indenture Trustee shall not be liable if the Administrator or the
Indenture Trustee is unable to locate a qualified successor Depository. The
Definitive Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Section 2.12 Release of Collateral. Subject to Section 11.01 and the
terms of the Transaction Documents, the Indenture Trustee shall release property
from the lien of this Indenture only (a) upon the payment of all Scheduled
Payments under the Contract relating to such property and (b) upon receipt of an
Issuer Request accompanied by an Officer's Certificate.
Section 2.13 Tax Treatment. The Issuer and the purchasers of the Notes
intend, and will take all actions consistent with the intention, that the Notes
be treated as indebtedness which is solely secured by the assets of the Trust
for all federal, state, local, and foreign income and franchise tax purposes and
that, pursuant to Treasury Regulations Section 301.7701-3(b)(1)(ii) as in effect
for periods after January 1, 1997, the Trust be disregarded as a separate entity
from the Trust Depositor for federal income tax purposes. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of its Note
agrees to treat the Notes for federal, state and local income, single business
and franchise tax purposes as indebtedness.
Section 2.14 Noteholder Direction. Notwithstanding anything to the
contrary contained in this Indenture, provided the Indenture Trustee has sent
out notices to Noteholders in accordance with this Indenture, the Indenture
Trustee may act as directed by a majority of the outstanding Noteholders
responding in writing to the request contained in such notice; provided,
however, that Noteholders representing at least 66-2/3% of the outstanding
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principal balance of the Notes as of the time such notice is sent to Noteholders
must have responded to such notice from the Indenture Trustee. In addition, the
Indenture Trustee shall not have any liability to any Noteholder or Note Owner
with respect to any action taken pursuant to such notice if the Noteholder or
Note Owner does not respond to such notice within the time period set forth in
such notice.
Section 2.15 Additional Restrictions on the Class D Notes. Each
purchaser of Class D Notes (a "Class D Purchaser") from the Trust Depositor and
the Placement Agent, by acceptance thereof, will be required to provide a
certificate representing to and agreeing with the Trust Depositor, the Servicer
and the Placement Agent as indicated on Annex A hereto, including without
limitation:
(a) The Class D Purchaser is a U.S. Person and the sole legal and
beneficial owner of the Class D Note.
(b) The Class D Purchaser is not and will not become a partnership,
Subchapter S corporation or grantor trust for United States federal income tax
purposes or, if it is or becomes such an entity, less than 50 percent of the
aggregate value of the assets of such entity are and at all times will be
attributable to interests in the Issuer.
(c) The Class D Purchaser understands that no subsequent sale or
transfer (each such act, a "Transfer") of a Class D Note is permitted unless (i)
such Transfer is of a Class D Note with a denomination of at least $500,000 and
(ii) the Trust Depositor and the Servicer each consent in writing to the
proposed Transfer, which consent shall be granted unless either the Trust
Depositor or the Servicer, acting pursuant to advice of counsel, determines that
such Transfer would create a material risk that the Trust would be classified
for federal or any applicable state tax purposes as an association or publicly
traded partnership taxable as a corporation; provided, that an attempted
Transfer that would cause the number of Targeted Holders to exceed one hundred
shall be void.
Class D Notes shall be delivered to such Class D Purchaser only upon
the execution and delivery to the Placement Agent, the Issuer and the Indenture
Trustee of a letter, substantially in the form of the letter attached as Annex A
to this Indenture. Any purported Transfer of any Class D Note in contravention
of the restrictions and conditions in Annex A hereto (including any violation of
the representation in paragraph (b) above by an investor who continues to hold a
Class D Note occurring any time after the Transfer in which it acquired such
Class D Note) shall be null and void and the purported transferee shall not be
recognized by the Trust or any other person as a Class D Noteholder for any
purpose.
Section 2.16 Listing Restrictions. Neither the Issuer nor the Owner
Trustee acting on behalf of the Issuer will (i) list or cause the Class D Notes
to be listed or traded on an established securities market (within the meaning
of Treasury Regulation Section 1.7704-1(b)), or (ii) cooperate in, or
facilitate, the establishment of such a market.
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ARTICLE THREE
COVENANTS
Section 3.01 Payment of Principal and Interest. The Issuer will duly
and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, subject to Section 8.02(c), the Issuer and the Indenture Trustee will
cause to be deposited in the Note Distribution Account amounts allocated
pursuant to Section 7.05 of the Sale and Servicing Agreement and cause to be
distributed all such amounts therein (i) for the benefit of the Class A-1 Notes,
to the Class A-1 Noteholders, (ii) for the benefit of the Class A-2 Notes, to
the Class A-2 Noteholders, (iii) for the benefit of the Class A-3 Notes, to the
Class A-3 Noteholders, (iv) for the benefit of the Class A-4 Notes, to the Class
A-4 Noteholders, (v) for the benefit of the Class B Notes, to the Class B
Noteholders, (vi) for the benefit of the Class C Notes, to the Class C
Noteholders, and (vii) for the benefit of the Class D Notes, to the Class D
Noteholders. Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
Section 3.02 Maintenance of Office or Agency. The Issuer will maintain
in Chicago, Illinois or New York, New York, an office or agency where Notes may
be surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer hereby initially designates the Corporate Trust Office as
such office, and appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 3.03 Money for Payments to be Held in Trust. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account and the
Note Distribution Account pursuant to Section 8.02 shall be made on behalf of
the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts
so withdrawn from the Collection Account and the Note Distribution Account for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
On or before the Business Day immediately preceding each Distribution
Date and Redemption Date, the Issuer shall deposit or cause to be deposited in
the Note Distribution Account an aggregate sum sufficient to pay the amounts
then becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall
promptly notify the Indenture Trustee in writing of its action or failure to so
act.
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The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee written notice of any default by the
Issuer (or any other obligor upon the Notes) in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and upon receipt of an Issuer Request shall be deposited by the Indenture
Trustee in the Collection Account; and the Holder of such Note shall thereafter,
as an unsecured general creditor, look only to the Issuer for payment thereof,
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that if such money or
any portion thereof had been previously deposited by the Issuer with the
Indenture Trustee for the payment of principal or interest on the Notes, and
provided, further, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Issuer cause to
be published once, in a newspaper published in the English language, customarily
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published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to or for the
account of the Issuer. The Indenture Trustee may also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but not have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
Section 3.04 Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Collateral.
Section 3.05 Protection of Collateral. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Indenture Trustee on
behalf of the Noteholders to be prior to all other liens in respect of the
Collateral, and the Issuer shall take all actions necessary to obtain and
maintain, for the benefit of the Indenture Trustee on behalf of the Noteholders,
a first lien on and a first priority, perfected security interest in the
Collateral. The Issuer (or the Owner Trustee on its behalf) will from time to
time execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, all as prepared by the Servicer and delivered to the
Issuer, and will take such other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) created by this Indenture or carry out more effectively
the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Collateral and the rights of the
Indenture Trustee and the Noteholders in such Collateral against the claims
of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Collateral when due.
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The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute all financing statements, continuation statements or
other instruments required to be executed pursuant to this Section.
Section 3.06 Opinions as to Collateral.
(a) Upon the execution and delivery of this Indenture, the Issuer shall
furnish to the Rating Agencies and the Indenture Trustee an Opinion of Counsel
to the effect that, in the opinion of such counsel, either (i) all financing
statements and continuation statements have been executed and filed that are
necessary to create and continue the Indenture Trustee's first priority
perfected security interest in the collateral for the benefit of the
Noteholders, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (ii) no such action
shall be necessary to perfect such security interest; and
(b) Within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the Initial
Cutoff Date, the Issuer shall furnish to the Rating Agencies and the Indenture
Trustee an Opinion of Counsel, dated as of a date during such 90-day period, to
the effect that, in the opinion of such counsel, either (i) all financing
statements and continuation statements have been executed and filed that are
necessary to create and continue the Indenture Trustee's first priority
perfected security interest in the Collateral for the benefit of the Noteholders
and reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (ii) no such action shall be
necessary to perfect such security interest.
Section 3.07 Performance of Obligations; Servicing of Contracts.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any such Person's material covenants or obligations under any instrument or
agreement included in the Collateral or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in the Transaction Documents or such other instrument or
agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties and obligations under this Indenture, and any performance
of such duties by a Person identified to the Indenture Trustee in an Officer's
Certificate shall be deemed to be action taken by the Issuer. The Indenture
Trustee shall not be responsible for the action or inaction of the Servicer or
the Administrator. Initially, the Issuer has contracted with the Servicer and
the Administrator to assist the Issuer in performing its duties under this
Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Transaction
Documents and in the instruments and agreements included in the Collateral,
including but not limited to filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture and the Sale and Servicing Agreement in accordance with and within the
time periods provided for herein and therein. Except as otherwise expressly
provided therein, the Issuer shall not waive, amend, modify, supplement or
terminate any Transaction Document or any provision thereof without the consent
of the Indenture Trustee or the Required Holders.
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(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default, the Issuer shall promptly notify the Indenture Trustee and each Rating
Agency in writing thereof. Upon any termination of the Servicer's rights and
powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee in writing. As soon as a Successor Servicer is
appointed, the Issuer shall notify the Indenture Trustee and the Rating Agencies
of such appointment, specifying in such notice the name and address of such
Successor Servicer.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Servicer, the Administrator or the Seller of their respective
duties under the Transaction Documents if the effect thereof would adversely
affect the Holders of the Notes.
Section 3.08 Negative Covenants. Until the Termination Date, the Issuer
shall not:
(i) except as expressly permitted by the Transaction Documents, sell,
transfer, exchange or otherwise dispose of any of the properties or assets
of the Issuer, including those included in the Collateral, unless directed
to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code or applicable state law) or
assert any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Collateral; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien created by this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenant; or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Collateral or any part
thereof or any interest therein or the proceeds thereof (other than
Permitted Liens), (C) permit the lien created by this Indenture not to
constitute a valid first priority (other than with respect to any such tax,
mechanics' or other lien) security interest in the Collateral, or (D)
amend, modify or fail to comply with the provisions of the Transaction
Documents without the prior written consent of the Indenture Trustee,
except where the Transaction Documents allow for amendment or modification
without the consent or approval of the Indenture Trustee; or
(iv) dissolve or liquidate in whole or in part.
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Section 3.09 Issuer May Consolidate, etc. Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States or any State and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Indenture
Trustee, in form and substance satisfactory to the Indenture Trustee, the
due and punctual payment of the principal of and interest on all Notes and
the performance or observance of every agreement and covenant of this
Indenture and each other Transaction Document on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Indenture Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions will
be taken) each stating that such consolidation or merger and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction have
been complied with; and
(vii) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (A) greater than zero and (B) not less
than the net worth of the Issuer immediately prior to giving effect to such
consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Collateral, to any
Person (except as expressly permitted by the Transaction Documents), unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States or any State,
(B) expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form and substance satisfactory to
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the Indenture Trustee, the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every agreement
and covenant of this Indenture and each other Transaction Document on the
part of the Issuer to be performed or observed, all as provided herein, (C)
expressly agree by means of such supplemental indenture that all right,
title and interest so conveyed or transferred shall be subject and
subordinate to the rights of Holders of the Notes and (D) unless otherwise
provided in such supplemental indenture, expressly agree to indemnify,
defend and hold harmless the Issuer against and from any loss, liability or
expense arising under or related to this Indenture and the Notes;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel which shall
be delivered to and shall be satisfactory to the Indenture Trustee to the
effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel (which shall describe the
actions taken as required by clause (v) above or that no such actions will
be taken) each stating that such conveyance or transfer and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction have
been complied with (including any filings required by Exchange Act); and
(vii) the Issuer has a net worth, immediately after such conveyance or
transfer, that is (A) greater than zero and (B) not less than the net worth
of the Issuer immediately prior to giving effect to such conveyance or
transfer.
Section 3.10 Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.09(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with same
effect as if such Person has been named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all the
assets or properties of the Issuer which complies with Section 3.09(b), the
Issuer will be released from every covenant and agreement of this Indenture to
be observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Indenture Trustee stating
that the Issuer is to be so released.
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(c) The Person that acquires by conveyance or transfer the properties
and assets of the Issuer shall succeed to, and be substituted for, may exercise
every right and power of, and shall assume every obligation of, the Issuer under
this Indenture with same effect as if such Person has been named as the Issuer
herein.
Section 3.11 No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the other Transaction
Documents and activities incidental thereto.
Section 3.12 No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes and (ii) any other Indebtedness permitted
by or arising under the other Transaction Documents. The proceeds of the Notes
and the Certificate shall be used exclusively to fund the Issuer's purchase of
the Contracts and the other assets specified in the Sale and Servicing
Agreement, to fund the Reserve Fund, the Pre-Funding Account and the Capitalized
Interest Account and to pay the transactional expenses of the Issuer.
Section 3.13 Notice of Events of Default. The Issuer agrees to give the
Indenture Trustee and each Rating Agency prompt written notice of each Event of
Default hereunder and a Servicer Default under the Sale and Servicing Agreement.
Section 3.14 Further Instruments and Acts. Upon request of the
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
Section 3.15 Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other Transaction Document.
Section 3.16 Amendments of the Sale and Servicing Agreement and the
Trust Agreement. The Issuer shall not agree to any amendment to Section 11.01 of
the Trust Agreement, Section 5.04 of the Transfer and Sale Agreement or Section
13.01 of the Sale and Servicing Agreement to eliminate the requirements
thereunder that the Indenture Trustee or the Holders of the Notes, consent to
amendments thereto as provided therein.
Section 3.17 Removal of Administrator. So long as any Notes are issued
and outstanding, the Issuer shall not remove the Administrator without cause
unless the Rating Agency Condition shall have been satisfied in connection with
such removal.
Section 3.18 Representations and Warranties of Issuer. The Issuer
represents and warrants as follows:
(a) Power and Authority. It has full power, authority and legal right
to execute, deliver and perform its obligations as Issuer under this Indenture
and the Notes (the foregoing documents, the "Issuer Documents").
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(b) Due Authorization. The execution and delivery of the Issuer
Documents and the consummation of the transactions provided for therein have
been duly authorized by all necessary action on its part.
(c) No Conflict. The execution and delivery of the Issuer Documents,
the performance of the transactions contemplated thereby and the fulfillment of
the terms thereof will not conflict with, result in any breach of any of the
materials terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Issuer is a party or
by which it or any of its property is bound.
(d) No Violation. The execution and delivery of the Issuer Documents,
the performance of the transactions contemplated thereby and the fulfillment of
the terms thereof will not conflict with or violate, in any material respect,
any Requirements of Law applicable to the Issuer.
(e) All Consents Required. All approvals, authorizations, consents,
orders or other actions of Governmental Authority required in connection with
the execution and delivery of the Transaction Documents, the performance of the
transactions contemplated thereby and the fulfillment of the terms thereof have
been obtained.
(f) Location. The Issuer has its chief executive office and place of
business (as such terms are used in Article 9 of the UCC) in Wilmington,
Delaware. The Issuer agrees that it will not change the location of such office
to a location outside of Wilmington, Delaware, without at least 30 days prior
written notice to the Seller, the Servicer, the Indenture Trustee and the Rating
Agencies.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.01, 3.03, 3.04, 3.05,
3.07, 3.08, 3.10, 3.12, 3.13, 3.15 and 3.16, (v) the rights, obligations and
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.07 and the obligations of the Indenture
Trustee under Section 4.02) and (vi) the rights of Noteholders as beneficiaries
hereof with respect to the property so deposited with the Indenture Trustee
payable to all or any of them, and the Indenture Trustee, on demand of and at
the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.05 and (ii) Notes
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for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 3.03) have
been delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at the applicable Maturity Date within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of notice
of redemption by the Indenture Trustee in the name, and at the expense, of
the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture Trustee
cash or direct obligations of or obligations guaranteed by the United
States (which will mature prior to the date such amounts are payable), in
trust in an Eligible Deposit Account (which shall be the Collection Account
or Note Distribution Account) for such purpose, in an amount sufficient to
pay and discharge the entire indebtedness on such Note not theretofore
delivered to the Indenture Trustee for cancellation when due to the final
scheduled Distribution Date (if Notes shall have been called for redemption
pursuant to Section 10.01(a)), as the case may be;
(B) the Issuer has paid or performed or caused to be paid or performed all
amounts and obligations which the Issuer may owe to or on behalf of the
Indenture Trustee for the benefit of the Noteholders under this
Indenture or the Notes; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel and (if required by the Indenture
Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01
and, subject to Section 11.02, stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with and the Rating Agency Condition has
been satisfied.
Section 4.02 Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Indenture Trustee
may determine, to the Holders of the particular Notes for the payment or
redemption of which such moneys have been deposited with the Indenture Trustee,
of all sums due and to become due thereon for principal and interest; but such
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moneys need not be segregated from other funds except to the extent required
herein or in the Sale and Servicing Agreement or required by law.
Section 4.03 Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE FIVE
REMEDIES
Section 5.01 Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) failure to pay on each Distribution Date the full amount of accrued
interest on any Note;
(b) failure to pay the then outstanding principal amount of any Note,
if any, on its related Maturity Date;
(c) failure on the part of the Servicer to make any payment or deposit
required under the Sale and Servicing Agreement within three Business Days after
the date the payment or deposit is required to be made, or (ii) failure on the
part of the Servicer, the Seller, the Trust Depositor, the Owner Trustee or the
Trust to observe or perform any other covenants or agreements of such entity set
forth in the Transfer and Sale Agreement, the Sale and Servicing Agreement or
the Indenture, which failure has a material adverse effect on the Noteholders
and which continues unremedied for a period of 60 days after written notice
(provided that no such cure period shall apply to the Seller's failure to accept
the reassignment of any Ineligible Contract, and further provided, only a five
(5) day cure period will apply to the Seller's, the Owner Trustee's or the
Indenture Trustee's covenant not to grant a security interest in or otherwise
intentionally create a lien on the Contracts);
(d) any representation or warranty made by the Indenture Trustee, the
Owner Trustee or the Trust Depositor in the Sale and Servicing Agreement or the
Indenture or any information required to be given by the Seller or the Trust
Depositor to the Indenture Trustee to identify the Contracts proves to have been
incorrect in any material respect when made and continues to be incorrect in any
material respect for a period of 60 days after written notice and as a result of
which the interests of the Noteholders are materially and adversely affected;
provided, however, that an Event of Default shall not be deemed to occur
thereunder if the Seller has repurchased the related Contracts through the Trust
Depositor during such period in accordance with the provisions of the Sale and
Servicing Agreement;
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(e) the occurrence of an Insolvency Event relating to the Servicer, the
Seller, the Trust Depositor or the Trust; or
(f) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Section 5.02 Rights Upon Event of Default.
If an Event of Default referred to in subparagraph (e) of Section 5.01
has occurred, the unpaid principal of the Notes, together with interest accrued
but unpaid thereon, and all other amounts due to the Noteholders under the
Indenture, shall immediately and without further act become due and payable.
In the case of any event described in clause (a), (b), (c) (d) or (f)
above, an Event of Default with respect to the Notes will be deemed to have
occurred provided such Event of Default may be waived if the Required Holders
provide written notice to the Trust Depositor, Indenture Trustee and the
Servicer of such waiver. In the event the Indenture Trustee has actual knowledge
of an Event of Default, it shall give written notice thereof to the Trust
Depositor, the Seller, the Servicer, the Owner Trustee and the Rating Agencies.
If an Insolvency Event relating to the Trust Depositor occurs, pursuant
to the Trust Agreement and the Sale and Servicing Agreement, on the day of such
Insolvency Event, the Trust Depositor shall promptly give written notice to the
Indenture Trustee of the Insolvency Event, and the Indenture Trustee shall,
unless notified to the contrary by the Required Holders, promptly act pursuant
to and in accordance with the terms thereof to sell, dispose of or otherwise
liquidate the Collateral in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation of
Contracts shall be deposited in the Collection Account and allocated as
described in the Sale and Servicing Agreement and herein.
Promptly following its receipt of notice hereunder or under any other
Transaction Document of any Event of Default, the Indenture Trustee shall send a
copy thereof to the Issuer and each Rating Agency.
Section 5.03 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee; Authority of Indenture Trustee.
(a) The Issuer covenants that if the Notes are accelerated following
the occurrence of an Event of Default, the Issuer will, upon demand of the
Indenture Trustee pay to it, for the benefit of the Holders of the Notes, the
whole amount then due and payable on such Notes for principal and interest, with
interest, with interest upon the overdue principal, and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue installments
of interest, at the applicable Interest Rate and in addition thereto such
further amount as shall be sufficient to cover costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel.
(b) The Indenture Trustee, following the occurrence of an Event of
Default, shall have full right, power and authority to take, or defer from
taking, any and all acts with respect to the administration, maintenance or
disposition of the Collateral, including the exercise of any of the remedies
specified in Sections 5.03 and 5.04.
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(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may in its discretion (except as provided in Section 5.03(d)), proceed
to protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture if an Event of Default shall have occurred and be continuing, if the
Issuer fails to perform its obligations under Section 5.03(a) when and as due,
the Indenture Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Noteholders by such appropriate proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for specific performance of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy or legal or equitable right vested in the Indenture
Trustee by this Indenture or by law, provided that the Indenture Trustee shall
only be entitled to take any such actions to the extent such actions (i) are
taken only to enforce the Issuer's obligations to redeem the principal amount of
Notes, and (ii) are taken only against the Collateral, any investments therein
and any proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Collateral, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
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(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official
in any such Proceeding is hereby authorized by each of such Noteholders to
make payments to the Indenture Trustee, and, in the event that the
Indenture Trustee shall consent to the making of payments directly to such
Noteholders, to pay to the Indenture Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture Trustee
except as a result of negligence or bad faith.
(f) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
compensation affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(g) All rights of action and of asserting claims under this Indenture
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any Proceedings brought by the Indenture Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture),
the Indenture Trustee shall be held to represent all of the Holders of the
Notes, and it shall not be necessary to make any Noteholder a party to any such
proceedings.
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Section 5.04 Remedies. If an Event of Default shall have occurred and
be continuing the Indenture Trustee (subject to Section 5.05) may, and shall if
so directed by the Required Holders in writing:
(i) institute Proceedings in its own name and as or on behalf of a
trustee of an express trust for the collection of all amounts then payable
on the Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and any
other remedy available to the Indenture Trustee and take any other
appropriate action to protect and enforce the rights and remedies of the
Indenture Trustee on behalf of the Noteholders and the Required Holders
under this Indenture or the Notes; and
(iv) direct the Owner Trustee to sell the Collateral or any portion
thereof or rights or interest therein, at one or more public or private
sales called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Collateral following an Event of Default, other than an Event
of Default described in Section 5.01(e), unless (A) the Holders of 100% of
the Principal Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for
principal and interest or (C) the Indenture Trustee determines that the
Collateral will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as they would have become due if the
Notes had not been declared due and payable, and the Indenture Trustee
provides prior written notice to each Rating Agency and obtains the consent
of the Required Holders. In determining such sufficiency or insufficiency
with respect to clauses (B) and (C), the Indenture Trustee may, but need
not, obtain and conclusively rely upon an opinion of an Independent
investment banking or accounting firm or national reputation as to the
feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose. Notwithstanding the foregoing provisions of
this Section 5.04, upon the occurrence of an event of Default described in
Section 5.01(e), caused solely from an event described in such subparagraph
occurring with respect to the Trust Depositor, the related Contracts of the
Trust will be liquidated by the Indenture Trustee and the Trust will be
terminated 90 days after the date of such Insolvency Event, unless, before
the end of such 90 day period, the related Trustee shall have received
written instructions from the Required Holders to the effect that each such
Required Holders disapprove of the liquidation of such Contracts and
termination of such Trust.
Section 5.05 Optional Preservation of the Contracts. Following an Event
of Default and if such Event of Default has not been rescinded and annulled, and
except as otherwise provided above, the Indenture Trustee may, but need not,
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elect to maintain possession of the Collateral. In determining whether to
maintain possession of the Collateral, the Indenture Trustee may, but need not,
at the expense of the Issuer, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Collateral
for such purpose.
Section 5.06 Priorities.
(a) If the Indenture Trustee collects any money or property pursuant to
this Article Five, it shall pay out the money or property in accordance with
Section 8.02(c).
(b) At least 15 days prior to the calendar day immediately preceding
each Distribution Date (or, with respect to any Definitive Note, the last
calendar day of the month preceding the month in which such Distribution Date
occurs), the Issuer shall mail to each Noteholder and the Indenture Trustee a
notice that states the record date, the payment date and the amount to be paid.
Section 5.07 Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes, voting together as a
single class.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatsoever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
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Section 5.08 Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provisions in the Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
Section 5.09 Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholders has instituted any Proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Indenture Trustee
and the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default of Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.12 Control by Noteholders. The Required Holders shall have
the right to direct the time, method and place of conducting any Proceeding for
any remedy available to the Indenture Trustee with respect to the Notes or
exercising any trust or power conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or
with any other provision of this Indenture;
(ii) subject to the terms of Section 5.04, any direction to the
Indenture Trustee to sell or liquidate the Collateral shall be by the
Holders of Notes representing not less than 100% of the Outstanding Amount
of the Notes;
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(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Collateral pursuant to such
Section, then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to sell
or liquidate the Collateral shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section,
subject to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially and adversely
affect the rights of any Noteholders not consenting to such action.
Section 5.13 Waiver of Past Defaults. In the case of any waiver of an
Event of Default, the Issuer, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other Event of Default or
impair any right consequent thereto. Upon any such waiver, such Event of Default
shall cease to exist and be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereto.
Section 5.14 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to (i) any suit instituted by the
Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (iii) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
Section 5.15 Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantages of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
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Section 5.16 Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Collateral or upon any of
the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.06.
Section 5.17 Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee to do so
and at the Administrator's expense, the Issuer shall take all such lawful action
as the Indenture Trustee may request to compel or secure the performance and
observance by the Trust Depositor and the Servicer, as applicable, of each of
their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement in accordance with the terms thereof, and to exercise any
and all rights, remedies, powers and privileges lawfully available to the Issuer
under or in connection with the Sale and Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee, including the transmission of
notices of default on the part of the Trust Depositor or the Servicer thereunder
and the institution of legal or administrative actions or proceedings to compel
or secure performance by the Trust Depositor or the Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in
writing, including facsimile) of the Required Holders shall, exercise all
rights, remedies, powers, privileges and claims of the Issuer against the Trust
Depositor or the Servicer under or in connection with the Sale and Servicing
Agreement, including the right or power to take any action to compel or secure
performance or observance by the Trust Depositor or the Servicer of each of its
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension or waiver under the Sale and Servicing Agreement,
and any right of the Issuer to take such action shall be suspended.
ARTICLE SIX
THE INDENTURE TRUSTEE
Section 6.01 Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing of which a
Responsible Officer has actual knowledge, the Indenture Trustee shall exercise
the rights and powers vested in it by this Indenture and in the same degree of
care and skill in their exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
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(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Indenture Trustee and conforming to the requirements of this Indenture;
however, the Indenture Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture and the other Transaction Documents to which the Indenture
Trustee is a party.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of Section 6.01(b);
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or indemnity satisfactory to it against such risk or liability is
not reasonably assured to it.
(h) The Indenture Trustee shall have no discretionary duties other than
performing those ministerial acts set forth above necessary to accomplish the
purpose of the Trust as set forth in this Indenture.
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(i) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this section.
Section 6.02 Rights of Indenture Trustee.
(a) The Indenture Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any document believed by it
to be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate (with respect to factual matters) or an Opinion
of Counsel, as applicable. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the Officer's
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel selected by it in due care with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes,
pursuant to the provisions of this Indenture, unless such Holders of Notes shall
have offered to the Indenture Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities that may be
incurred therein or thereby; provided, however, that the Indenture Trustee
shall, upon the occurrence of an Event of Default (that has not been cured),
exercise the rights and powers vested in it by this Indenture in a manner
consistent with Section 6.01.
(g) The Indenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless so requested by the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes; provided, however,
that if the payment within a reasonable time to the Indenture Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Indenture Trustee, not reasonably
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assured to the Indenture Trustee by the security afforded to it by the terms of
this Indenture or the Sale and Servicing Agreement, the Indenture Trustee may
require indemnity reasonably satisfactory to it against such cost, expense or
liability as a condition to so proceeding; the reasonable expense of every such
examination shall be paid by the Person making such request, or, if paid by the
Indenture Trustee, shall be reimbursed by the Person making such request upon
demand.
(h) The Indenture Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Indenture. (i) The
Indenture Trustee shall not be charged with knowledge of any Default or Event of
Default unless either
(i) a Responsible Officer of the Indenture Trustee shall have actual
knowledge or (ii) the Indenture Trustee shall have received written notice
thereof from the Issuer or a Holder.
(j) The Indenture Trustee shall have no duty to monitor the performance
of the Issuer nor shall it have any liability (in its capacity as Indenture
Trustee) in connection with the malfeasance or nonfeasance by the Issuer. The
Indenture Trustee shall have no liability in connection with compliance by the
Issuer with statutory or regulatory requirements related to the Collateral. The
Indenture Trustee shall not make or be deemed to have made any representations
or warranties with respect to the Collateral or adequacy thereof or the validity
or sufficiency of any assignment of the Collateral to the Indenture Trustee.
(k) The Indenture Trustee shall have no duty or obligation, implied or
otherwise, to (i) attend any meeting of the Issuer's management or membership,
(ii) inspect the accounts or books and records of the Issuer, (iii) otherwise
insure that the Holders of the Notes remain informed about the business of the
Issuer or (iv) furnish to the Holders of the Notes any information from the
Issuer by the Indenture Trustee, except as otherwise explicitly set forth in
this Indenture.
Section 6.03 Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee is required to comply with Section 6.11.
Section 6.04 Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Collateral or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
Section 6.05 Notice of Defaults. If a Default occurs and is continuing
and if it is actually known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to the Rating Agencies and each Noteholder
notice of the Default within 90 days after obtaining knowledge of the occurrence
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thereof. Except in the case of a Default in payment of principal of or interest
on any Note (including payments pursuant to the redemption of such Notes), the
Indenture Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
Section 6.06 Reports by Indenture Trustee to Holders. On or before
January 31 of each calendar year, commencing in the year 2000, the Indenture
Trustee shall deliver to each Noteholder such information, including without
limitation, IRS Form 1099, as may be required to enable such Holder to prepare
its federal and state income tax returns; provided, the Servicer has provided
the Indenture Trustee with any such required information in a timely manner.
Section 6.07 Compensation and Indemnity. The Issuer shall pay or shall
cause the Administrator or Servicer to pay the Indenture Trustee from time to
time reasonable compensation for its services. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Issuer shall or shall cause the Administrator or Servicer to
reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Indenture Trustee's
agents, counsel, accountants and experts. The Issuer shall indemnify or shall
cause the Administrator or Servicer to indemnify the Indenture Trustee against
any and all loss, liability or expense (including attorneys' fees and expenses)
incurred by it in connection with the administration of this Trust and the
performance of its duties hereunder and under the Transaction Documents to which
it is a party. The Indenture Trustee shall notify the Administrator or Servicer
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer shall not relieve the Issuer or the
Administrator of its obligations hereunder. The Issuer shall defend or cause the
Administrator or Servicer to defend any such claim, and the Indenture Trustee
may have separate counsel and the Issuer shall pay or shall cause the
Administrator or Servicer to pay the fees and expenses of such counsel. Neither
the Issuer, the Administrator nor the Servicer need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith or breach by the Indenture Trustee of any of its obligations
hereunder. The parties hereto agree and acknowledge that, notwithstanding
anything to the contrary, all payments required to be made pursuant to this
Section 6.07 shall not be made from Trust Assets.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.01(e) with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or similar law.
Section 6.08 Replacement of Indenture Trustee. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Servicer. The Issuer
may remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
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(ii) a court having jurisdiction in the premises in respect of the
Indenture Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar
law, shall have entered a decree or order granting relief or appointing a
receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or similar official) for the Indenture Trustee or for any
substantial part of the Indenture Trustee's property, or ordering the
winding-up or liquidation of the Indenture Trustee's affairs, provided any
such decree or order shall have continued unstayed and in effect for a
period of 30 consecutive days;
(iii) the Indenture Trustee commences a voluntary case under any
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator or other similar official for the Indenture
Trustee or for any substantial part of the Indenture Trustee's property, or
makes any assignment for the benefit of creditors or fails generally to pay
its debts as such debts become due or takes any corporate action in
furtherance of any of the foregoing; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
Upon the removal or resignation of the Indenture Trustee, the Servicer
shall promptly appoint a successor Indenture Trustee by written notice to the
resigning Indenture Trustee and the successor Indenture Trustee. Any such
appointment shall be subject to the satisfaction of the Rating Agency Condition
with respect thereto.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer and the
Servicer. Thereupon the resignation or removal of the retiring Indenture Trustee
shall become effective, and the successor Indenture Trustee shall have all the
rights, powers and duties of the Indenture Trustee under this Indenture. The
Issuer or the successor Indenture Trustee shall mail a notice of its succession
to Noteholders. The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of
a successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section and payment of all fees and expenses
owed to the outgoing Indenture Trustee. Notwithstanding the replacement of the
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Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall
be entitled to payment or reimbursement of such amounts as such Person is
entitled pursuant to Section 6.07.
Section 6.09 Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide each Rating
Agency prompt notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor Indenture Trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provision of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Collateral may at the time be located, the Indenture Trustee and
the Administrator acting jointly shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a co-Indenture
Trustee or co-Indenture Trustees, jointly with the Indenture Trustee, or
separate Indenture Trustee or separate Indenture Trustees, of all or any part of
the Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Collateral, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee and the Administrator
may consider necessary or desirable. If the Administrator shall not have joined
in such appointment within 15 days after the receipt by it of a request so to
do, the Indenture Trustee alone shall have the power to make such appointment.
No co-Indenture Trustee or separate Indenture Trustee hereunder shall be
required to meet the terms of eligibility of a successor Indenture Trustee under
Section 6.11 and no notice to Noteholders of the appointment of any co-Indenture
Trustee or separate Indenture Trustee shall be required under Section 6.08.
(b) Every separate Indenture Trustee and co-Indenture Trustee shall, to
the extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate Indenture Trustee
or co-Indenture Trustee jointly (it being understood that such separate
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Indenture Trustee or co-Indenture Trustee is not authorized to act
separately without the Indenture Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Collateral or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate Indenture Trustee or
co-Indenture Trustee, but solely at the direction of the Indenture Trustee;
(ii) no Indenture Trustee hereunder shall be personally liable by
reason of any act or omission of any other Indenture Trustee hereunder
selected by it in due care; and
(iii) the Indenture Trustee and the Administrator may at any time
accept the resignation of or remove any separate Indenture Trustee or
co-Indenture Trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate Indenture
Trustees and co-Indenture Trustees, as effectively as if given to each of them.
Every instrument appointing any separate Indenture Trustee or co-Indenture
Trustee shall refer to this Agreement and the conditions of this Article. Each
separate Indenture Trustee and co-Indenture Trustee, upon its acceptance of the
trusts conferred, shall be vested with the estates or property specified in its
instrument of co-appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture relating to
the conduct of, affecting the liability of or affording protection to, the
Indenture Trustee. Every such instrument shall be filed with the Indenture
Trustee and a copy thereof given to the Administrator.
(d) Any separate Indenture Trustee or co-Indenture Trustee may at any
time constitute the Indenture Trustee, its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do any lawful act
under or in respect of this Agreement on its behalf and in its name. If any
separate Indenture Trustee or co-Indenture Trustee shall die, become incapable
of acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Indenture Trustee, to
the extent permitted by law, without the appointment of a new or successor
Indenture Trustee. Notwithstanding anything to the contrary in this Indenture,
the appointment of any separate Indenture Trustee or co-Indenture Trustee shall
not relieve the Indenture Trustee of its obligations and duties under this
Indenture.
Section 6.11 Eligibility. The Indenture Trustee hereunder shall at all
times be a financial institution organized and doing business under the laws of
the United States of America or any state, authorized under such laws to
exercise corporate trust powers, and shall have a combined capital and surplus
of at least $50,000,000 or shall be a member of a bank holding system the
aggregate combined capital and surplus of which is $50,000,000 and subject to
supervision or examination by federal or state authority. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of a supervising or examining authority, then for the purposes of
this Section 6.11, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Indenture Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.11, the Indenture Trustee shall resign immediately in the manner and with the
effect specified in Section 6.08.
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Section 6.12 [Reserved].
Section 6.13 Representations and Warranties of Indenture Trustee. The
Indenture Trustee in its individual capacity and as Indenture Trustee represents
and warrants as follows:
(a) Organization and Corporate Power. It is a duly organized and
validly existing Illinois banking corporation in good standing under the laws of
each jurisdiction where its business so requires. It has full corporate power,
authority and legal right to execute, deliver and perform its obligations as
Indenture Trustee under this Indenture and the Sale and Servicing Agreement (the
foregoing documents, the "Indenture Trustee Documents") and to authenticate the
Notes.
(b) Due Authorization. The execution and delivery of the Indenture
Trustee Documents, the consummation of the transactions provided for therein and
the authentication of the Notes have been duly authorized by all necessary
corporate action on its part, either in its individual capacity or as Indenture
Trustee, as the case may be.
(c) No Violation. The execution and delivery of the Indenture Trustee
Documents, the performance of the transactions contemplated thereby and the
fulfillment of the terms thereof (including the authentication of the Notes),
will not conflict with or violate, in any material respect, the Indenture
Trustee's charter or by-laws.
(d) Validity, Etc. Each Indenture Trustee Document constitutes a legal,
valid and binding obligation of the Indenture Trustee, enforceable against the
Indenture Trustee in accordance with its terms, except as such enforceability
may be limited by Insolvency Laws and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at law or
in equity) or by an implied covenant of good faith and fair dealing.
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01 Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (i) not more than five days after the earlier of (a) each Record Date
and (b) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Noteholders as of such Record Date and (ii) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
ten days prior to the time such list is furnished; provided, however, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished.
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Section 7.02 Preservation of Information: Communication to Noteholders.
The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Noteholders contained in the most
recent list furnished to the Indenture Trustee as provided in Section 7.01 and
the names and addresses of Noteholders received by the Indenture Trustee in its
capacity as Note Registrar. The Indenture Trustee may destroy any list furnished
to it as provided in such Section 7.01 upon receipt of a new list so furnished.
Section 7.03 Reports by Indenture Trustee. On each Distribution Date,
the Indenture Trustee shall forward (or cause to be forwarded) to each
Noteholder a copy of each Monthly Report; provided, the Servicer has provided
the Indenture Trustee with such Monthly Report as required in Section 9.01 of
the Sale and Servicing Agreement.
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01 Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture and the Sale
and Servicing Agreement. The Indenture Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Collateral,
the Indenture Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article Five.
Section 8.02 Trust Accounts.
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Indenture Trustee, for
the benefit of the Noteholders and the Certificateholder, the Collection
Account, the Note Distribution Account, the Reserve Fund, the Pre-Funding
Account and the Capitalized Interest Account as provided in Section 7.01 of the
Sale and Servicing Agreement.
(b) On or before each Distribution Date, all amounts required to be
disbursed to the Indenture Trustee with respect to the preceding Collection
Period pursuant to Section 7.05 of the Sale and Servicing Agreement will be
transferred from the Collection Account (and, if applicable, the Reserve Fund)
and deposited by the Indenture Trustee upon receipt to the Note Distribution
Account.
(c) On each Distribution Date, the Indenture Trustee shall distribute
all amounts on deposit in the Note Distribution Account to Noteholders in
respect of the Notes to the extent of amounts due and unpaid on the Notes for
principal and interest as follows and in the following order of priority:
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FIRST, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class A Notes shall be distributed to the Class A Noteholders ratably,
without priority of any one Class A Note over any other Class A Note, in
the proportion that the aggregate amount of all accrued but unpaid interest
to the date of distribution on each Class A Note bears to the aggregate
amount of all accrued but unpaid interest to the date of distribution on
all Class A Notes;
SECOND, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class B Notes shall be distributed to the Class B Noteholders ratably,
without priority of any one Class B Note over any other Class B Note, in
the proportion that the aggregate amount of all accrued but unpaid interest
to the date of distribution on each Class B Note bears to the aggregate
amount of all accrued but unpaid interest to the date of distribution on
all Class B Notes;
THIRD, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class C Notes shall be distributed to the Class C Noteholders ratably,
without priority of any one Class C Note over any other Class C Note, in
the proportion that the aggregate amount of all accrued but unpaid interest
to the date of distribution on each Class C Note bears to the aggregate
amount of all accrued but unpaid interest to the date of distribution on
all Class C Notes;
FOURTH, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect of
the Class D Notes shall be distributed to the Class D Noteholders ratably,
without priority of any one Class D Note over any other Class D Note, in
the proportion that the aggregate amount of all accrued but unpaid interest
to the date of distribution on each Class D Note bears to the aggregate
amount of all accrued but unpaid interest to the date of distribution on
all Class D Notes;
FIFTH, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-1 Noteholders to pay
in full the aggregate amount of the Class A-1 Principal Payment then due
pursuant to or in respect of the Class A-1 Notes, without priority of any
one Class A-1 Note over any other Class A-1 Note, in the proportion that
the aggregate unpaid principal amount of each Class A-1 Note bears to the
aggregate unpaid principal amount of all Class A-1 Notes;
SIXTH, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-2 Noteholders to pay
in full the aggregate amount of the Class A-2 Principal Payment then due
pursuant to or in respect of the Class A-2 Notes, without priority of any
one Class A-2 Note over any other Class A-2 Note, in the proportion that
the aggregate unpaid principal amount of each Class A-2 Note bears to the
aggregate unpaid principal amount of all Class A-2 Notes;
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SEVENTH, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-3 Noteholders to pay
in full the aggregate amount of the Class A-3 Principal Payment then due
pursuant to or in respect of the Class A-3 Notes, without priority of any
one Class A-3 Note over any other Class A-3 Note, in the proportion that
the aggregate unpaid principal amount of each Class A-3 Note bears to the
aggregate unpaid principal amount of all Class A-2 Notes;
EIGHTH, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A-4 Noteholders to pay
in full the aggregate amount of the Class A-4 Principal Payment then due
pursuant to or in respect of the Class A-4 Notes, without priority of any
one Class A-4 Note over any other Class A-4 Note, in the proportion that
the aggregate unpaid principal amount of each Class A-4 Note bears to the
aggregate unpaid principal amount of all Class A-4 Notes
NINTH, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class B Noteholders to pay
in full the aggregate amount of the Class B Principal Payment then due
pursuant to or in respect of the Class B Notes, without priority of any one
Class B Note over any other Class B Note, in the proportion that the
aggregate unpaid principal amount of each Class B Note bears to the
aggregate unpaid principal amount of all Class B Notes;
TENTH, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class C Noteholders to pay
in full the aggregate amount of the Class C Principal Payment then due
pursuant to or in respect of the Class C Notes, without priority of any one
Class C Note over any other Class C Note, in the proportion that the
aggregate unpaid principal amount of each Class C Note bears to the
aggregate unpaid principal amount of all Class C Notes;
ELEVENTH, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class D Noteholders to pay
in full the aggregate amount of the Class D Principal Payment then due
pursuant to or in respect of the Class D Notes, without priority of any one
Class D Note over any other Class D Note, in the proportion that the
aggregate unpaid principal amount of each Class C Note bears to the
aggregate unpaid principal amount of all Class D Notes; and
TWELFTH, the aggregate amount of Additional Principal, if any, of such
installment or payment remaining thereafter shall be paid, to the Class A
Notes sequentially until the Principal Amount of the Class A Notes has been
reduced to zero, then to the Class B Notes until the Principal Amount of
the Class B Notes has been reduced to zero, then to the Class C Notes until
the Principal Amount of the Class C Notes has been reduced to zero, and
then to the Class D Notes until the Principal Amount of the Class D Notes
has been reduced to zero.
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Section 8.03 General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the funds in the Trust Accounts shall be
invested in accordance with the provisions of Section 7.03 of the Sale and
Servicing Agreement. Except as otherwise provided in Section 7.03 of the Sale
and Servicing Agreement, all income or other gain from investments of moneys
deposited in such Trust Accounts shall be deposited by the Indenture Trustee in
the Collection Account, and any loss resulting from such investments shall be
charged to the Servicer in accordance with Section 7.03 of the Sale and
Servicing Agreement. The Issuer will not direct the Indenture Trustee to make
any investment of any funds or to sell any investment held any of the Trust
Accounts unless the security interest granted and perfected in such account will
continue to be perfected in such investment or the proceeds of such sale, in
either case without any further action by any Person, and, in connection with
any direction to the Indenture Trustee to make any such investment or sale, if
requested by the Indenture Trustee, the Issuer shall deliver to the Indenture
Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such
effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as Indenture Trustee, in accordance with their
terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00
a.m., New York City time (or such other time as may be agreed by the Issuer and
Indenture Trustee), on any Business Day or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Notes but the Notes
shall not have been declared due and payable pursuant to Section 5.02 or (iii)
if such Notes shall have been declared due and payable following an Event of
Default, but amounts collected or receivable from the Collateral are being
applied in accordance with Section 5.05 as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments described in clause (vi) of the definition thereof in the
Sale and Servicing Agreement.
Section 8.04 Release of Collateral.
(a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Indenture Trustee may, and when required by the provisions of this
Indenture or the Sale and Servicing Agreement shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article shall
be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
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(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Collateral that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel.
Section 8.05 Opinion of Counsel. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.04(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form and substance satisfactory to the Indenture Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions for this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Collateral. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without Consent of Noteholders.
Without the consent of the Holders of any Notes and with prior written
notice to each Rating Agency, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, and the other parties hereto at any time from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien created by this Indenture, or to subject to the lien
created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee;
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(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or the Transaction
Documents or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided that such action shall not adversely affect the interests of the
Holders of the Notes; and
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor Indenture Trustee with respect to the Notes and to
add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by more
than one Indenture Trustee, pursuant to the requirements of Article Six.
The Indenture Trustee is hereby authorized to join in the exemption of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
Section 9.02 Supplemental Indentures With Consent of Noteholders. At
any time and from time to time, when authorized by an Issuer Order and with
prior written notice to the Rating Agencies, the Issuer and the Indenture
Trustee, with the written consent of the Required Holders, may execute a
supplement to this Indenture for the purpose of adding provisions to, or
changing or eliminating provisions of, this Indenture (including any appendix or
schedule hereto); provided, however, that, without the consent of each
Noteholder under the Indenture, no such amendment, supplement, waiver or consent
shall
(i) reduce the amount or extend the time of payment of any amount owing
or payable under any Note or (except as provided in this Indenture)
increase or reduce the interest payable on any Note (except that only the
consent of the affected Noteholder shall be required for any decrease in an
amount of or the rate of interest payable on such Note or any extension for
the time of payment of any amount payable under such Note), or alter or
modify the provisions of the Sale and Servicing Agreement with respect to
the order of priorities in which distributions thereunder shall be made or
with respect to the amount or time of payment of any such distribution,
(ii) reduce, modify or amend any indemnities in favor of any Noteholder
or in favor of or to be paid by the Trust Depositor (except as consented to
by each Person adversely affected thereby),
(iii) make any Note payable in money other than U.S. dollars,
(iv) modify, amend or supplement the provisions of the Sale and
Servicing Agreement relating to amendments, waivers and supplements to the
Indenture, the Sale and Servicing Agreement or any other document, or
(v) modify the definition of "Required Holders" or the percentage of
Noteholders required to effect any modification of this Agreement.
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The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of the Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the parties hereto of any supplemental
indenture pursuant to this Section, the Indenture Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 9.03 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Indenture Trustee shall be entitled to receive, and subject
to Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture and all conditions precedent to the
execution of such supplemental indenture have been met. The Indenture Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
that affects the Indenture Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise.
Section 9.04 Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the parties hereto and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes. Notwithstanding the foregoing, no
supplemental indenture shall be effective unless prior written notice of the
execution of such supplemental indenture was delivered to each Rating Agency.
Section 9.05 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01 Redemption.
(a) In the event that the Seller pursuant to Section 11.03 of the Sale
and Servicing Agreement purchases (through the Trust Depositor) the corpus of
the Trust, the Notes are subject to redemption in whole, but not in part, on the
Distribution Date on which such repurchase occurs, for a purchase price equal to
the outstanding principal, and accrued interest on the Notes. The Seller, the
Servicer or the Issuer shall furnish each Rating Agency notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a),
the Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 20 days prior to the Redemption Date and the
Issuer shall deposit with the Indenture Trustee in the Note Distribution Account
the Redemption Price of the Notes to be redeemed whereupon all such Notes shall
be due and payable on the Redemption Date upon the furnishing of a notice
complying with Section 10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement and Section 5.02 of this Indenture, the
proceeds of such sale shall be distributed as provided in Section 5.06. If
amounts are to be paid to Noteholders pursuant to this Section 10.01(b), the
Servicer or the Issuer shall, to the extent practicable, furnish notice of such
event to the Indenture Trustee not later than 20 days prior to the Redemption
Date whereupon all such amounts shall be payable on the Redemption Date.
Section 10.02 Form of Redemption Notice. Notice of redemption under
section 10.01(a) shall be given by the Indenture Trustee by first-class mail,
postage prepaid, mailed not less than five days prior to the applicable
Redemption Date to each Holder of Notes, as of the close of business on the
Record Date preceding the applicable Redemption Date, at such Holder's address
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
Section 10.03 Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 10.02, on the Redemption Date become due and payable at the
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Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01 Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with, and (ii) an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
Section 11.02 Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Person as to other matters, and any such Person may certify or given an opinion
as to such matters in one or several documents.
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Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the Seller
or the Issuer, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article Six.
Section 11.03 Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing and shall be subject to Section 5.12 hereof; and
except as herein otherwise expressly provided such action shall become effective
when such instrument or instruments are delivered to the Indenture Trustee, and,
where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
-59-
<PAGE>
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
Section 11.04 Notices. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows at the address specified in the Sale and
Servicing Agreement for such recipient.
Each party hereto may, by notice given in accordance herewith to each
of the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 11.05 Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event of Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
-60-
<PAGE>
Section 11.06 Alternate Payment and Notice Provisions. Notwithstanding
any provisions of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
Section 11.07 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 11.08 Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-Indenture Trustees and agents.
Section 11.09 Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 11.10 Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 11.11 Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.12 Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 11.13 Counterparts. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 11.14 Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
-61-
<PAGE>
Section 11.15 Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, Owner Trustee or the
Indenture Trustee on the Notes or under the Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or Owner Trustee in its individual capacity, (ii) any owner of
a beneficiary interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director, employee or agent of the Indenture Trustee or the
Owner Trustee in its individual capacity, any holder of a beneficial interest in
the Issuer, Owner Trustee or the Indenture Trustee or of any successor or assign
of the Indenture Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Indenture, in
the performance of any duties or obligations of the Issuer hereunder, the Owner
Trustee shall be subject to, and entitled to the benefits of, the terms and
provisions of Articles VI, VII and VIII of the Trust Agreement.
Section 11.16 No Petition. The parties hereto, by entering into this
Indenture, and each Noteholder, by accepting a Note or a beneficial interest in
a Note, hereby covenant and agree that prior to the date that is one year and
one day after the payment in full of all amounts owing in respect of all
outstanding Securities they will not at any time institute against the Issuer,
or join in any institution against the Issuer, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, this Indenture or any of the other
Transaction Documents.
Section 11.17 Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested, the Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
Section 11.18 No Substantive Review of Compliance Documents. Other than
as specifically set forth in the Indenture, any reports, information or other
documents provided to the Indenture Trustee are for purposes only of enabling
the sending party to comply with its document delivery requirements hereunder
and such party's receipt of any such information shall not, in and of itself,
constitute constructive or actual notice to the Indenture Trustee of any
information contained therein or determinable from any information contained
therein, including the Issuer or the Servicer's compliance with any of its
covenants, representations or warranties hereunder.
-62-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered as of the day and year first above written.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: First Union Trust Company, National
Association, not in its individual capacity,
but solely as Owner Trustee
By:_________________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as Indenture
Trustee
By:_________________________________________
Name:
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On June ___, 1999 before me, _________________________________________,
personally appeared ____________________________,
[_] personally known to me, or
[_] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument, and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which such
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature__________________________ [Seal]
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On June ___, 1999 before me, _________________________________________,
personally appeared ____________________________,
[_] personally known to me, or
[_] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument, and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which such
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature__________________________ [Seal]
<PAGE>
EXHIBIT A
FORM OF SALE AND SERVICING AGREEMENT
A-1
<PAGE>
EXHIBIT B-1
FORM OF CLASS A-1 NOTE
[oBOOK-ENTRY ONLY: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE
REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE 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.o]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
THEREOF IN RULE 501(a)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT, IN
THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A) THE RECEIPT BY THE
NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN ANNEX A TO THE
INDENTURE AND (B) IF REQUESTED BY THE NOTE REGISTRAR, THE RECEIPT BY THE NOTE
REGISTRAR OF SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO
THE NOTE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
B-1-1
<PAGE>
TRANSFERS AND EXCHANGES OF PORTIONS OF THIS NOTE ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW.
THIS NOTE DOES NOT REPRESENT AN INTEREST IN, OR OBLIGATION OF, THE ISSUER, THE
SERVICER, THE INDENTURE TRUSTEE OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES OR ANY OTHER PERSON. THIS NOTE IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY INSURER OR ANY OTHER PERSON. THIS NOTE IS NOT A SAVINGS
ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR
FUND OF THE UNITED STATES.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS NOTE WILL BE MADE IN
THE MANNER DESCRIBED IN THE INDENTURE. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
5.155% RECEIVABLE-BACKED NOTES, CLASS A-1
No. ___ $56,955,084
CUSIP: 316136 AA 8
Fidelity Equipment Lease Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of Fifty-six million, nine hundred
fifty five thousand, eighty four and 00/100 Dollars ($56,955,084) payable on the
earlier of June 15, 2000 (the "Class A-1 Maturity Date") and the Redemption
Date, if any, pursuant to Section 10.01 of the Indenture referred to on the
reverse hereof.
This Class A-1 Note is transferable as provided in the
Indenture, subject to certain limitations therein contained, only upon the books
for registration and transfer kept by the Indenture Trustee, and only upon
surrender of this Class A-1 Note for transfer to the Indenture Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Indenture Trustee duly executed by, the
registered Holder hereof or his attorney duly authorized in writing. No such
transfer shall be so permitted unless (i) such transfer is made in a transaction
which does not require registration under the Securities Act, and pursuant to an
effective registration or qualification under any State securities or "Blue Sky"
laws, or in a transaction which does not require such registration or
qualification and (ii) the Holder thereof delivers to the Indenture Trustee the
certification required under the Indenture with respect to the Securities Act,
and the Employee Retirement Income Security Act of 1974, as amended.
B-1-2
<PAGE>
The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid to but excluding such Distribution Date or,
if no interest has yet been paid, from the Closing Date. Interest will be
computed on the basis of a 360-day year and actual days elapsed. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer, as of the date
set forth below.
Date: June 2, 1999 FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner
Trustee
By: _______________________
Name:
Title:
B-1-4
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Indenture Trustee
By: ______________________
Name:
Title:
B-1-5
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 5.155% Receivable-Backed Notes, Class A-1 (the "Class
A-1 Notes"), all issued under an Indenture, dated as of June 2, 1999 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class A-1 Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-1 Notes and the other Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture subject to the subordination of certain Classes of Notes under certain
circumstances as described in the Indenture and the Sale and Servicing
Agreement.
Principal of the Class A-1 Notes will be payable on the
earlier of the Class A-1 Maturity Date and the Redemption Date, if any, selected
pursuant to the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
unless the Required Holders waive such Event of Default in the manner provided
in the Indenture. All principal payments on the Class A-1 Notes shall be made
pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date shall be made by wire transfer to the account to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such payment shall be made
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Corporate Trust Office of the Indenture Trustee or at the office of the
Indenture Trustee's agent appointed for such purposes.
B-1-6
<PAGE>
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
eligible guarantor institution which is a participant in the Securities Transfer
Agent's Medallion Program (STAMP) or similar signature guarantee program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new program, and such other documents as the Indenture Trustee may require,
and thereupon one or more new Class A-1 Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that no recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that by accepting the benefits of the
Indenture and such Note that such Noteholder will not at any time institute
against the Trust Depositor or the Issuer, or join in any institution against
the Trust Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness
which is solely secured by the Collateral and that the Issuer will be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by
acceptance of a Note (and each Noteholder by acceptance of a beneficial interest
in a Note), agrees to treat the Notes for the federal, state and local income,
single business and franchise tax purposes as indebtedness.
B-1-7
<PAGE>
Prior to the due presentment for registration of transfer of
this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and
the Indenture Trustee may treat the Person in whose name this Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Noteholders under the Indenture
at any time by the Issuer and with the consent of the Required Holders. The
Indenture also contains provisions permitting the Noteholders representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Noteholder (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Noteholders and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and remedies
of the parties hereunder and thereunder shall be determined in accordance with
such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
B-1-8
<PAGE>
EXHIBIT B-2
FORM OF CLASS A-2 NOTE
[oBOOK-ENTRY ONLY: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE
REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE 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.o]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
THEREOF IN RULE 501(a)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT, IN
THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A) THE RECEIPT BY THE
NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN ANNEX A TO THE
INDENTURE AND (B) IF REQUESTED BY THE NOTE REGISTRAR, THE RECEIPT BY THE NOTE
REGISTRAR OF SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO
THE NOTE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
B-2-1
<PAGE>
TRANSFERS AND EXCHANGES OF PORTIONS OF THIS NOTE ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW.
THIS NOTE DOES NOT REPRESENT AN INTEREST IN, OR OBLIGATION OF, THE ISSUER, THE
SERVICER, THE INDENTURE TRUSTEE OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES OR ANY OTHER PERSON. THIS NOTE IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY INSURER OR ANY OTHER PERSON. THIS NOTE IS NOT A SAVINGS
ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR
FUND OF THE UNITED STATES.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS NOTE WILL BE MADE IN
THE MANNER DESCRIBED IN THE INDENTURE. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
5.860% RECEIVABLE-BACKED NOTES, CLASS A-2
No. ___ $27,949,428
CUSIP: 316136 AB 6
Fidelity Equipment Lease Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of Twenty-seven million, nine hundred
forty-nine thousand, four hundred twenty-eight and 00/100 Dollars ($27,949,428)
payable on the earlier of September 15, 2001 (the "Class A-2 Maturity Date") and
the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred
to on the reverse hereof.
This Class A-2 Note is transferable as provided in the
Indenture, subject to certain limitations therein contained, only upon the books
for registration and transfer kept by the Indenture Trustee, and only upon
surrender of this Class A-2 Note for transfer to the Indenture Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Indenture Trustee duly executed by, the
registered Holder hereof or his attorney duly authorized in writing. No such
transfer shall be so permitted unless (i) such transfer is made in a transaction
which does not require registration under the Securities Act, and pursuant to an
effective registration or qualification under any State securities or "Blue Sky"
laws, or in a transaction which does not require such registration or
qualification and (ii) the Holder thereof delivers to the Indenture Trustee the
certification required under the Indenture with respect to the Securities Act,
and the Employee Retirement Income Security Act of 1974, as amended.
B-2-2
<PAGE>
The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid to but excluding such Distribution Date or,
if no interest has yet been paid, from the Closing Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-2-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer, as of the date
set forth below.
Date: June 2, 1999 FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner
Trustee
By: _______________________
Name:
Title:
B-2-4
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as
Indenture Trustee
By: ______________________
Name:
Title:
B-2-5
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 5.860% Receivable-Backed Notes, Class A-2 (the "Class
A-2 Notes"), all issued under an Indenture, dated as of June 2, 1999 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class A-2 Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-2 Notes and the other Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture subject to the subordination of certain Classes of Notes under certain
circumstances as described in the Indenture and the Sale and Servicing
Agreement.
Principal of the Class A-2 Notes will be payable on the
earlier of the Class A-2 Maturity Date and the Redemption Date, if any, selected
pursuant to the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
unless the Required Holders waive such Event of Default in the manner provided
in the Indenture. All principal payments on the Class A-2 Notes shall be made
pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date shall be made by wire transfer to the account to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such payment shall be made
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Corporate Trust Office of the Indenture Trustee or at the office of the
Indenture Trustee's agent appointed for such purposes.
B-2-6
<PAGE>
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
eligible guarantor institution which is a participant in the Securities Transfer
Agent's Medallion Program (STAMP) or similar signature guarantee program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new program, and such other documents as the Indenture Trustee may require,
and thereupon one or more new Class A-2 Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that no recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that by accepting the benefits of the
Indenture and such Note that such Noteholder will not at any time institute
against the Trust Depositor or the Issuer, or join in any institution against
the Trust Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness
which is solely secured by the Collateral and that the Issuer will be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by
acceptance of a Note (and each Noteholder by acceptance of a beneficial interest
in a Note), agrees to treat the Notes for the federal, state and local income,
single business and franchise tax purposes as indebtedness.
B-2-7
<PAGE>
Prior to the due presentment for registration of transfer of
this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and
the Indenture Trustee may treat the Person in whose name this Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Noteholders under the Indenture
at any time by the Issuer and with the consent of the Required Holders. The
Indenture also contains provisions permitting the Noteholders representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Noteholder (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Noteholders and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and remedies
of the parties hereunder and thereunder shall be determined in accordance with
such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
B-2-8
<PAGE>
EXHIBIT B-3
FORM OF CLASS A-3 NOTE
[oBOOK-ENTRY ONLY: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE
REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE 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.o]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
THEREOF IN RULE 501(a)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT, IN
THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A) THE RECEIPT BY THE
NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN ANNEX A TO THE
INDENTURE AND (B) IF REQUESTED BY THE NOTE REGISTRAR, THE RECEIPT BY THE NOTE
REGISTRAR OF SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO
THE NOTE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
B-3-1
<PAGE>
TRANSFERS AND EXCHANGES OF PORTIONS OF THIS NOTE ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW.
THIS NOTE DOES NOT REPRESENT AN INTEREST IN, OR OBLIGATION OF, THE ISSUER, THE
SERVICER, THE INDENTURE TRUSTEE OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES OR ANY OTHER PERSON. THIS NOTE IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY INSURER OR ANY OTHER PERSON. THIS NOTE IS NOT A SAVINGS
ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR
FUND OF THE UNITED STATES.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS NOTE WILL BE MADE IN
THE MANNER DESCRIBED IN THE INDENTURE. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
6.090% RECEIVABLE-BACKED NOTES, CLASS A-3
No. ___ $20,880,822
CUSIP: 316136 AC 4
Fidelity Equipment Trust 1999-1, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of Twenty million, eight hundred eighty
thousand, eight hundred twenty-two and 00/100 Dollars ($20,880,822) payable on
the earlier of July 15, 2002 (the "Class A-3 Maturity Date") and the Redemption
Date, if any, pursuant to Section 10.01 of the Indenture referred to on the
reverse hereof.
This Class A-3 Note is transferable as provided in the
Indenture, subject to certain limitations therein contained, only upon the books
for registration and transfer kept by the Indenture Trustee, and only upon
surrender of this Class A-3 Note for transfer to the Indenture Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Indenture Trustee duly executed by, the
registered Holder hereof or his attorney duly authorized in writing. No such
transfer shall be so permitted unless (i) such transfer is made in a transaction
which does not require registration under the Securities Act, and pursuant to an
effective registration or qualification under any State securities or "Blue Sky"
laws, or in a transaction which does not require such registration or
qualification and (ii) the Holder thereof delivers to the Indenture Trustee the
certification required under the Indenture with respect to the Securities Act,
and the Employee Retirement Income Security Act of 1974, as amended.
B-3-2
<PAGE>
The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid to but excluding such Distribution Date or,
if no interest has yet been paid, from the Closing Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-3-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer, as of the date
set forth below.
Date: June 2, 1999 FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee
By: _______________________
Name:
Title:
B-3-4
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Indenture
Trustee
By: ______________________
Name:
Title:
B-3-5
<PAGE>
[REVERSE OF CLASS A-3 NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 6.090% Receivable-Backed Notes, Class A-3 (the "Class
A-3 Notes"), all issued under an Indenture, dated as of June 2, 1999 (the
"Indenture"), among the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class A-3 Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-3 Notes and the other Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture subject to the subordination of certain Classes of Notes under certain
circumstances as described in the Indenture and the Sale and Servicing
Agreement.
Principal of the Class A-3 Notes will be payable on the
earlier of the Class A-3 Maturity Date and the Redemption Date, if any, selected
pursuant to the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
unless the Required Holders waive such Event of Default in the manner provided
in the Indenture. All principal payments on the Class A-3 Notes shall be made
pro rata to the Class A-3 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date shall be made by wire transfer to the account to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such payment shall be made
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Corporate Trust Office of the Indenture Trustee or at the office of the
Indenture Trustee's agent appointed for such purposes.
B-3-6
<PAGE>
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
eligible guarantor institution which is a participant in the Securities Transfer
Agent's Medallion Program (STAMP) or similar signature guarantee program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new program, and such other documents as the Indenture Trustee may require,
and thereupon one or more new Class A-3 Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that no recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that by accepting the benefits of the
Indenture and such Note that such Noteholder will not at any time institute
against the Trust Depositor or the Issuer, or join in any institution against
the Trust Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness
which is solely secured by the Collateral and that the Issuer will be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by
acceptance of a Note (and each Noteholder by acceptance of a beneficial interest
in a Note), agrees to treat the Notes for the federal, state and local income,
single business and franchise tax purposes as indebtedness.
B-3-7
<PAGE>
Prior to the due presentment for registration of transfer of
this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and
the Indenture Trustee may treat the Person in whose name this Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Noteholders under the Indenture
at any time by the Issuer and with the consent of the Required Holders. The
Indenture also contains provisions permitting the Noteholders representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Noteholder (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Noteholders and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and remedies
of the parties hereunder and thereunder shall be determined in accordance with
such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
B-3-8
<PAGE>
EXHIBIT B-4
FORM OF CLASS A-4 NOTE
[oBOOK-ENTRY ONLY: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE
REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE 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.o]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
THEREOF IN RULE 501(a)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT, IN
THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A) THE RECEIPT BY THE
NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN ANNEX A TO THE
INDENTURE AND (B) IF REQUESTED BY THE NOTE REGISTRAR, THE RECEIPT BY THE NOTE
REGISTRAR OF SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO
THE NOTE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
B-4-1
<PAGE>
TRANSFERS AND EXCHANGES OF PORTIONS OF THIS NOTE ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW.
THIS NOTE DOES NOT REPRESENT AN INTEREST IN, OR OBLIGATION OF, THE ISSUER, THE
SERVICER, THE INDENTURE TRUSTEE OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES OR ANY OTHER PERSON. THIS NOTE IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY INSURER OR ANY OTHER PERSON. THIS NOTE IS NOT A SAVINGS
ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR
FUND OF THE UNITED STATES.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS NOTE WILL BE MADE IN
THE MANNER DESCRIBED IN THE INDENTURE. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
6.300% RECEIVABLE-BACKED NOTES, CLASS A-4
No. ___ $33,961,804
CUSIP: 316136 AD 2
Fidelity Equipment Lease Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of Thirty-three million, nine hundred
sixty-one thousand, eight hundred four and 00/100 Dollars ($33,961,804) payable
on the earlier of November 15, 2004 (the "Class A-4 Maturity Date") and the
Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to
on the reverse hereof.
This Class A-4 Note is transferable as provided in the
Indenture, subject to certain limitations therein contained, only upon the books
for registration and transfer kept by the Indenture Trustee, and only upon
surrender of this Class A-4 Note for transfer to the Indenture Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Indenture Trustee duly executed by, the
registered Holder hereof or his attorney duly authorized in writing. No such
transfer shall be so permitted unless (i) such transfer is made in a transaction
which does not require registration under the Securities Act, and pursuant to an
effective registration or qualification under any State securities or "Blue Sky"
laws, or in a transaction which does not require such registration or
qualification and (ii) the Holder thereof delivers to the Indenture Trustee the
certification required under the Indenture with respect to the Securities Act,
and the Employee Retirement Income Security Act of 1974, as amended.
B-4-2
<PAGE>
The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid to but excluding such Distribution Date or,
if no interest has yet been paid, from the Closing Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-4-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer, as of the date
set forth below.
Date: June 2, 1999 FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
By: _______________________
Name:
Title:
B-4-4
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Indenture
Trustee
By: ______________________
Name:
Title:
B-4-5
<PAGE>
[REVERSE OF CLASS A-4 NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 6.300% Receivable-Backed Notes, Class A-4 (the "Class
A-4 Notes"), all issued under an Indenture, dated as of June 2, 1999 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class A-4 Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-4 Notes and the other Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture subject to the subordination of certain Classes of Notes under certain
circumstances as described in the Indenture and the Sale and Servicing
Agreement.
Principal of the Class A-4 Notes will be payable on the
earlier of the Class A-4 Maturity Date and the Redemption Date, if any, selected
pursuant to the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
unless the Required Holders waive such Event of Default in the manner provided
in the Indenture. All principal payments on the Class A-4 Notes shall be made
pro rata to the Class A-4 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date shall be made by wire transfer to the account to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such payment shall be made
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Corporate Trust Office of the Indenture Trustee or at the office of the
Indenture Trustee's agent appointed for such purposes.
B-4-6
<PAGE>
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
eligible guarantor institution which is a participant in the Securities Transfer
Agent's Medallion Program (STAMP) or similar signature guarantee program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new program, and such other documents as the Indenture Trustee may require,
and thereupon one or more new Class A-4 Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that no recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that by accepting the benefits of the
Indenture and such Note that such Noteholder will not at any time institute
against the Trust Depositor or the Issuer, or join in any institution against
the Trust Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness
which is solely secured by the Collateral and that the Issuer will be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by
acceptance of a Note (and each Noteholder by acceptance of a beneficial interest
in a Note), agrees to treat the Notes for the federal, state and local income,
single business and franchise tax purposes as indebtedness.
B-4-7
<PAGE>
Prior to the due presentment for registration of transfer of
this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and
the Indenture Trustee may treat the Person in whose name this Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Noteholders under the Indenture
at any time by the Issuer and with the consent of the Required Holders. The
Indenture also contains provisions permitting the Noteholders representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Noteholder (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Noteholders and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and remedies
of the parties hereunder and thereunder shall be determined in accordance with
such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
B-4-8
<PAGE>
EXHIBIT C
FORM OF CLASS B NOTE
[oBOOK-ENTRY ONLY: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE
REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE 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.o]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
THEREOF IN RULE 501(a)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT, IN
THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A) THE RECEIPT BY THE
NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN ANNEX A TO THE
INDENTURE AND (B) IF REQUESTED BY THE NOTE REGISTRAR, THE RECEIPT BY THE NOTE
REGISTRAR OF SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO
THE NOTE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
C-1
<PAGE>
TRANSFERS AND EXCHANGES OF PORTIONS OF THIS NOTE ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW.
THIS NOTE DOES NOT REPRESENT AN INTEREST IN, OR OBLIGATION OF, THE ISSUER, THE
SERVICER, THE INDENTURE TRUSTEE OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES OR ANY OTHER PERSON. THIS NOTE IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY INSURER OR ANY OTHER PERSON. THIS NOTE IS NOT A SAVINGS
ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR
FUND OF THE UNITED STATES.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS NOTE WILL BE MADE IN
THE MANNER DESCRIBED IN THE INDENTURE. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
6.590% RECEIVABLE-BACKED NOTES, CLASS B
No. ___ $9,749,800
CUSIP: 316136 AE 0
Fidelity Equipment Lease Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of Nine million, seven hundred
forty-nine thousand, eight hundred and 00/100 Dollars ($9,749,800) payable on
the earlier of February 15, 2006 (the "Class B Maturity Date") and the
Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to
on the reverse hereof.
This Class B Note is transferable as provided in the
Indenture, subject to certain limitations therein contained, only upon the books
for registration and transfer kept by the Indenture Trustee, and only upon
surrender of this Class B Note for transfer to the Indenture Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Indenture Trustee duly executed by, the
registered Holder hereof or his attorney duly authorized in writing. No such
transfer shall be so permitted unless (i) such transfer is made in a transaction
which does not require registration under the Securities Act, and pursuant to an
effective registration or qualification under any State securities or "Blue Sky"
laws, or in a transaction which does not require such registration or
qualification and (ii) the Holder thereof delivers to the Indenture Trustee the
certification required under the Indenture with respect to the Securities Act,
and the Employee Retirement Income Security Act of 1974, as amended.
C-2
<PAGE>
The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid to but excluding such Distribution Date or,
if no interest has yet been paid, from the Closing Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
C-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer, as of the date
set forth below.
Date June 2, 1999 FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
By: _______________________
Name:
Title:
C-4
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as
Indenture Trustee
By: ______________________
Name:
Title
C-5
<PAGE>
[REVERSE OF CLASS B NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 6.590% Receivable-Backed Notes, Class B (the "Class B
Notes"), all issued under an Indenture, dated as of June 2, 1999 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class B Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class B Notes and the other Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture subject to the subordination of certain Classes of Notes under certain
circumstances as described in the Indenture and the Sale and Servicing
Agreement.
Principal of the Class B Notes will be payable on the earlier
of the Class B Maturity Date and the Redemption Date, if any, selected pursuant
to the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, unless
the Required Holders waive such Event of Default in the manner provided in the
Indenture. All principal payments on the Class B Notes shall be made pro rata to
the Class B Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date shall be made by wire transfer to the account to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such payment shall be made
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Corporate Trust Office of the Indenture Trustee or at the office of the
Indenture Trustee's agent appointed for such purposes.
C-6
<PAGE>
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
eligible guarantor institution which is a participant in the Securities Transfer
Agent's Medallion Program (STAMP) or similar signature guarantee program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new program, and such other documents as the Indenture Trustee may require,
and thereupon one or more new Class B Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that no recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that by accepting the benefits of the
Indenture and such Note that such Noteholder will not at any time institute
against the Trust Depositor or the Issuer, or join in any institution against
the Trust Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness
which is solely secured by the Collateral and that the Issuer will be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by
acceptance of a Note (and each Noteholder by acceptance of a beneficial interest
in a Note), agrees to treat the Notes for the federal, state and local income,
single business and franchise tax purposes as indebtedness.
C-7
<PAGE>
Prior to the due presentment for registration of transfer of
this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and
the Indenture Trustee may treat the Person in whose name this Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Noteholders under the Indenture
at any time by the Issuer and with the consent of the Required Holders. The
Indenture also contains provisions permitting the Noteholders representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Noteholder (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Noteholders and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and remedies
of the parties hereunder and thereunder shall be determined in accordance with
such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
C-8
<PAGE>
EXHIBIT D
FORM OF CLASS C NOTE
[oBOOK-ENTRY ONLY: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE NOTE
REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE 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.o]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
THEREOF IN RULE 501(a)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT, IN
THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A) THE RECEIPT BY THE
NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN ANNEX A TO THE
INDENTURE AND (B) IF REQUESTED BY THE NOTE REGISTRAR, THE RECEIPT BY THE NOTE
REGISTRAR OF SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO
THE NOTE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
E-1
<PAGE>
TRANSFERS AND EXCHANGES OF PORTIONS OF THIS NOTE ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW.
THIS NOTE DOES NOT REPRESENT AN INTEREST IN, OR OBLIGATION OF, THE ISSUER, THE
SERVICER, THE INDENTURE TRUSTEE OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES OR ANY OTHER PERSON. THIS NOTE IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY INSURER OR ANY OTHER PERSON. THIS NOTE IS NOT A SAVINGS
ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR
FUND OF THE UNITED STATES.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS NOTE WILL BE MADE IN
THE MANNER DESCRIBED IN THE INDENTURE. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
7.860% RECEIVABLE-BACKED NOTES, CLASS C
No. ___ $4,874,900
CUSIP: 316136 AF 7
Fidelity Equipment Lease Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of Four million, eight hundred
seventy-four thousand, nine hundred and 00/100 Dollars ($4,874,900) payable on
the earlier of August 15, 2006 (the "Class C Maturity Date") and the Redemption
Date, if any, pursuant to Section 10.01 of the Indenture referred to on the
reverse hereof.
This Class C Note is transferable as provided in the
Indenture, subject to certain limitations therein contained, only upon the books
for registration and transfer kept by the Indenture Trustee, and only upon
surrender of this Class C Note for transfer to the Indenture Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Indenture Trustee duly executed by, the
registered Holder hereof or his attorney duly authorized in writing. No such
transfer shall be so permitted unless (i) such transfer is made in a transaction
which does not require registration under the Securities Act, and pursuant to an
effective registration or qualification under any State securities or "Blue Sky"
laws, or in a transaction which does not require such registration or
qualification and (ii) the Holder thereof delivers to the Indenture Trustee the
certification required under the Indenture with respect to the Securities Act,
and the Employee Retirement Income Security Act of 1974, as amended.
E-2
<PAGE>
The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid to but excluding such Distribution Date or,
if no interest has yet been paid, from the Closing Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
E-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer, as of the date
set forth below.
Date: June 2, 1999 FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner
Trustee
By: _______________________
Name:
Title:
E-4
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Indenture Trustee
By: ______________________
Name:
Title:
E-5
<PAGE>
[REVERSE OF CLASS C NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 7.860% Receivable-Backed Notes, Class C (the "Class C
Notes"), all issued under an Indenture, dated as of June 2, 1999 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class C Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class C Notes and the other Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture subject to the subordination of certain Classes of Notes under certain
circumstances as described in the Indenture and the Sale and Servicing
Agreement.
Principal of the Class C Notes will be payable on the earlier
of the Class C Maturity Date and the Redemption Date, if any, selected pursuant
to the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, unless
the Required Holders waive such Event of Default in the manner provided in the
Indenture. All principal payments on the Class C Notes shall be made pro rata to
the Class C Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date shall be made by wire transfer to the account to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such payment shall be made
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Corporate Trust Office of the Indenture Trustee or at the office of the
Indenture Trustee's agent appointed for such purposes.
E-6
<PAGE>
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
eligible guarantor institution which is a participant in the Securities Transfer
Agent's Medallion Program (STAMP) or similar signature guarantee program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new program, and such other documents as the Indenture Trustee may require,
and thereupon one or more new Class C Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that no recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that by accepting the benefits of the
Indenture and such Note that such Noteholder will not at any time institute
against the Trust Depositor or the Issuer, or join in any institution against
the Trust Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness
which is solely secured by the Collateral and that the Issuer will be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by
acceptance of a Note (and each Noteholder by acceptance of a beneficial interest
in a Note), agrees to treat the Notes for the federal, state and local income,
single business and franchise tax purposes as indebtedness.
E-7
<PAGE>
Prior to the due presentment for registration of transfer of
this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and
the Indenture Trustee may treat the Person in whose name this Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Noteholders under the Indenture
at any time by the Issuer and with the consent of the Required Holders. The
Indenture also contains provisions permitting the Noteholders representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Noteholder (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Noteholders and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and remedies
of the parties hereunder and thereunder shall be determined in accordance with
such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
E-8
<PAGE>
EXHIBIT E
FORM OF CLASS D NOTE
EACH TRANSFEREE ACQUIRING THIS NOTE AND EACH OWNER OF A BENEFICIAL INTEREST IN
THIS NOTE ACQUIRING SUCH BENEFICIAL INTEREST (THE PROSPECTIVE TRANSFEREE AND THE
PROSPECTIVE OWNER OF A BENEFICIAL INTEREST, COLLECTIVELY, THE "PROSPECTIVE
HOLDER"), SHALL, UNLESS THE ISSUER AND THE SERVICER SHALL OTHERWISE CONSENT IN
WRITING, REPRESENT AND WARRANT, IN WRITING TO THE ISSUER, THE SERVICER, AND THE
INDENTURE TRUSTEE THAT THE PROSPECTIVE HOLDER IS NOT AN "EMPLOYEE BENEFIT PLAN"
WITHIN THE MEANING OF SECTION 3(3) OF ERISA THAT IS SUBJECT TO THE PROVISIONS OF
TITLE I OF ERISA OR A "PLAN" WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE
CODE (ANY SUCH PLAN OR EMPLOYEE BENEFIT PLAN, A "BENEFIT PLAN"), AND THAT THE
PROSPECTIVE HOLDER IS NOT DIRECTLY OR INDIRECTLY PURCHASING THIS NOTE IN ANY
OTHER CAPACITY ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS
TRUSTEE OF, IN ANY OTHER CAPACITY ON BEHALF OF OR WITH THE ASSETS OF, A BENEFIT
PLAN.
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE INDENTURE TRUSTEE THAT THIS NOTE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
THEREOF IN RULE 501(a)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR PURSUANT TO ANY OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT, IN
THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE (3), TO (A) THE RECEIPT BY THE
NOTE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN ANNEX A TO THE
INDENTURE AND (B) IF REQUESTED BY THE NOTE REGISTRAR, THE RECEIPT BY THE NOTE
REGISTRAR OF SUCH CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO
THE NOTE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
E-1
<PAGE>
TRANSFERS AND EXCHANGES OF PORTIONS OF THIS NOTE ARE SUBJECT TO RESTRICTIONS AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW.
THIS NOTE DOES NOT REPRESENT AN INTEREST IN, OR OBLIGATION OF, THE ISSUER, THE
SERVICER, THE INDENTURE TRUSTEE OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES OR ANY OTHER PERSON. THIS NOTE IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR ANY INSURER OR ANY OTHER PERSON. THIS NOTE IS NOT A SAVINGS
ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR
FUND OF THE UNITED STATES.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS NOTE WILL BE MADE IN
THE MANNER DESCRIBED IN THE INDENTURE. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
6.180% RECEIVABLE-BACKED NOTES, CLASS D
No. ___ $4,468,658
CUSIP: 316136 AG 5
Fidelity Equipment Lease Trust 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Fidelity
Equipment Lease Depositor I, LLC, or registered assigns, the principal sum of
Four million, four hundred sixty eight thousand, six hundred fifty-eight and
00/100 Dollars ($4,468,658) payable on the earlier of April 15, 2008 (the "Class
D Maturity Date") and the Redemption Date, if any, pursuant to Section 10.01 of
the Indenture referred to on the reverse hereof.
This Class D Note is transferable as provided in the
Indenture, subject to certain limitations therein contained, only upon the books
for registration and transfer kept by the Indenture Trustee, and only upon
surrender of this Class D Note for transfer to the Indenture Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Indenture Trustee duly executed by, the
registered Holder hereof or his attorney duly authorized in writing. No such
transfer shall be so permitted unless (i) such transfer is made in a transaction
which does not require registration under the Securities Act, and pursuant to an
effective registration or qualification under any State securities or "Blue Sky"
laws, or in a transaction which does not require such registration or
qualification and (ii) the Holder thereof delivers to the Indenture Trustee the
certification required under the Indenture with respect to the Securities Act,
and the Employee Retirement Income Security Act of 1974, as amended.
E-2
<PAGE>
The Issuer will pay interest on this Note at the rate per
annum shown above on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date), subject to
certain limitations contained in Section 3.01 of the Indenture. Interest on this
Note will accrue for each Distribution Date from the most recent Distribution
Date on which interest has been paid to but excluding such Distribution Date or,
if no interest has yet been paid, from the Closing Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
E-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by an Authorized Officer, as of the date
set forth below.
Date: June 2, 1999 FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner
Trustee
By: _______________________
Name:
Title:
E-4
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within- mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Indenture Trustee
By: ______________________
Name:
Title:
E-5
<PAGE>
[REVERSE OF CLASS D NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its 6.180% Receivable-Backed Notes, Class D (the "Class D
Notes"), all issued under an Indenture, dated as of June 2, 1999 (the
"Indenture"), between the Issuer and Harris Trust and Savings Bank, as Indenture
Trustee (the "Indenture Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class D Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class D Notes and the other Notes described in the
Indenture (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture subject to the subordination of certain Classes of Notes under certain
circumstances as described in the Indenture and the Sale and Servicing
Agreement.
Principal of the Class D Notes will be payable on the earlier
of the Class D Maturity Date and the Redemption Date, if any, selected pursuant
to the Indenture. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, unless
the Required Holders waive such Event of Default in the manner provided in the
Indenture. All principal payments on the Class D Notes shall be made pro rata to
the Class D Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
Distribution Date shall be made by wire transfer to the account to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such payment shall be made
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
within five days of such Distribution Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Corporate Trust Office of the Indenture Trustee or at the office of the
Indenture Trustee's agent appointed for such purposes.
E-6
<PAGE>
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his
attorney duly authorized in writing, with such signature guaranteed by an
eligible guarantor institution which is a participant in the Securities Transfer
Agent's Medallion Program (STAMP) or similar signature guarantee program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new program, and such other documents as the Indenture Trustee may require,
and thereupon one or more new Class D Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that no recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial
interest in a Note covenants and agrees that by accepting the benefits of the
Indenture and such Note that such Noteholder will not at any time institute
against the Trust Depositor or the Issuer, or join in any institution against
the Trust Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness
which is solely secured by the Collateral and that the Issuer will be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3 (b)(1)(ii). Each Noteholder, by
acceptance of a Note (and each Noteholder by acceptance of a beneficial interest
in a Note), agrees to treat the Notes for the federal, state and local income,
single business and franchise tax purposes as indebtedness.
E-7
<PAGE>
Prior to the due presentment for registration of transfer of
this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and
the Indenture Trustee may treat the Person in whose name this Note (as of the
day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Noteholders under the Indenture
at any time by the Issuer and with the consent of the Required Holders. The
Indenture also contains provisions permitting the Noteholders representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Noteholder (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holders and upon all future
Noteholders and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the Indenture
without the consent of Noteholders issued thereunder.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, and the obligations, rights and remedies
of the parties hereunder and thereunder shall be determined in accordance with
such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
E-8
<PAGE>
EXHIBIT F
FORM OF NOTE ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
- -------------------------------------
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------
- -------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- -------------------------------------------------------------------------------
the within Note, and all rights thereunder, hereby irrevocably constituting and
appointing
- -------------------------------------------------------------------------------
to transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated: _______________________
Signature Guaranteed:
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------------------------------------
<S> <C>
Signature must be guaranteed by an eligible Notice: The signature(s) on this assignment
guarantor institution which is a participant must correspond with the name(s) as it appears
in the Securities Transfer Medallion Program on the face of the within Note in every
(STAMP) or similar guarantee program. particular, without Agent's alteration
signature or enlargement or any change whatsoever.
__________________________________
(Authorized Officer)
</TABLE>
F-1
<PAGE>
EXHIBIT G
FORM OF NOTE DEPOSITORY AGREEMENT
[Standard Form DTC Letter of Representations]
G-1
<PAGE>
ANNEX A
FORM OF INVESTOR'S LETTER
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Re: Fidelity Equipment Lease Trust 1999-1,
Receivable-Backed Notes, Series 1999-1
Ladies and Gentlemen:
In connection with our proposed purchase of $____________
aggregate principal amount of ___% Class [A-1] [A-2] [A-3] [A-4] [B] [C] [D]
Receivable-Backed Notes, Series 1999-1, Due [_______] (the "Notes"), issued
pursuant to the Indenture, dated as of June 2, 1999 (the "Indenture"), between
Fidelity Equipment Lease Trust 1999-1 (the "Trust") and Harris Trust and Savings
Bank, as Trustee, we represent and agree as follows:
[[For Institutional Accredited Investors only] 1. We are an
institutional "accredited investor" (an entity meeting the requirements of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act")) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment. We are
acquiring the Notes purchased by us for our own account or for one or more
accounts (each of which is an "institutional accredited investor") as to each of
which we exercise sole investment discretion.]
[[For Qualified Institutional Buyers only] 1. The Purchaser is
a "qualified institutional buyer" within the meaning of Rule 144A ("Rule 144A")
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The Purchaser is aware that the transfer is being made in reliance on Rule 144A,
and the Purchaser has had the opportunity to obtain the information required to
be provided pursuant to paragraph (d)(4)(i) or Rule 144A.]
2. The Purchaser's intention is to acquire the Notes (a)
for investment for the Purchaser's own account or (b) for resale to (i)
"qualified institutional buyers" in transactions under Rule 144A, or (ii) to
institutional "accredited investors" meeting the requirements of Rule 501(a)(1),
(2), (3) or (7) of Regulation D promulgated under the Securities Act, pursuant
to any other exemption from the registration requirements of the Securities Act,
subject in the case of this clause (ii) to (a) the receipt by the Note Registrar
of a letter substantially in the form hereof, and (b) the receipt by the Note
Registrar of such other evidence acceptable to the Note Registrar that such
reoffer, resale, pledge or transfer is in compliance with the Securities Act and
other applicable laws. It understands that the Notes have not been registered
under the Securities Act, by reason of a specified exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the Purchaser's investment intent (or intent to
resell to only certain investors in certain exempted transactions) as expressed
herein.
3. The Purchaser acknowledges that the Notes (and any
Note issued on transfer or exchange thereof) have not been registered or
qualified under the Securities Act or the securities laws of any State or any
other jurisdiction, and that the Notes cannot be resold unless they are
registered or qualified thereunder or unless an exemption from such registration
or qualification is available.
4. The Purchaser has received and reviewed the Private
Placement Memorandum dated May 26, 1999, relating to the Notes (the "Private
Placement Memorandum") and the agreements and other materials referred to
therein and has had the opportunity to ask questions and receive answers
concerning the terms and conditions of the transactions contemplated by the
Private Placement Memorandum.
Annex A-1
<PAGE>
5. The Purchaser will not sell or otherwise transfer any
portion of the Note, except in compliance with the Indenture.
6. Check one of the following:*
___ The Purchaser is a "U.S. Person" and it has attached hereto an
Internal Revenue Service ("IRS") Form W-9 (or successor form).
___ The Purchaser is not a "U.S. Person" and under applicable law in effect
on the date hereof, no taxes will be required to be withheld by the
Note Registrar (or its agent) with respect to distributions to be made
on the Note(s). The Purchaser has attached hereto either (i) a duly
executed IRS Form W-8 (or successor form), which identifies such
Purchaser as the beneficial owner of the Note(s) and states that such
Purchaser is not a U.S. Person or (ii) two duly executed copies of IRS
Form 4224 (or successor form), which identify such Purchaser as the
beneficial owner of the Note(s) and state that interest on the Note is,
or is expected to be, effectively connected with a U.S. trade or
business. The Purchaser agrees to provide to the Note Registrar updated
IRS Forms W-8 or IRS Forms 4224, as the case may be, any applicable
successor IRS forms, or such other certificates as the Note Registrar
may reasonably request, on or before the date that any such IRS form or
certification expires or becomes obsolete, or promptly after the
occurrence of any event requiring a change in the most recent IRS form
of certification furnished by it to the Note Registrar.
For this purpose, "U.S. Person" means a citizen or resident of the United
States, a corporation, or partnership (unless, in the case of a partnership,
Treasury regulations are adopted that provide otherwise) created or organized in
or under the laws of the United States, any state thereof or the District of
Columbia, including an entity treated as a corporation or partnership for
federal income tax purposes, an estate whose income is subject to United States
federal income tax regardless of its source, or a trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust, and one or more such U.S. Persons have the authority to control all
substantial decisions of such trust (or, to the extent provided in applicable
Treasury regulations, certain trusts in existence on August 20, 1996 which are
eligible to elect to be treated as U.S. Persons).
7. The Purchaser represents and warrants that either:(i) it
is not purchasing the Notes with the assets of an employee benefit plan subject
to Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or a plan subject to Section 4975 of the Internal Revenue Code
of 1986, as amended, or (ii) part of the assets to be used to purchase the Notes
constitutes assets of any such plan and one or more exemptions from the
prohibited transaction rules of ERISA, including but not limited to Prohibited
Transaction Class Exemptions ("PTCE") 84-14, PTCE 90-1, PTCE 95-60, PTCE 91-38,
and PTCE 96-23 applies such that use of such assets to acquire and hold the
Notes does not and will not constitute a non-exempt prohibited transaction for
purposes of ERISA.
8. The Purchaser will treat the Notes as indebtedness for tax
and U.S. GAAP purposes
[Paragraphs 9 through 15 apply for Purchasers of Class D
Notes only]
9. The Purchaser has neither acquired nor will it Transfer any
Class D Note it acquires (or any interest therein) or cause any Class D Note (or
any interest therein) to be marketed on or through an "established securities
market" within the meaning of Section 7704(b)(1) of the Internal Revenue Code of
1986, as amended (the "Code") and any Treasury regulation thereunder, including,
without limitation, an over-the-counter-market or an interdealer quotation
system that regularly disseminates firm buy or sell quotations. The Purchaser
understands that any transfer effected through an established securities market
shall be void.
10. The Purchaser is a U.S. Person and the sole legal and
beneficial owner of the Class D Note.
- --------
*Each Purchaser must include one of the two alternative certifications.
Annex A-2
<PAGE>
11. The Purchaser is not and will not become a partnership,
Subchapter S corporation or grantor trust for United States federal income tax
purposes or, if it is or becomes such an entity, less than 50 percent of the
aggregate value of the assets of such entity are and at all times will be
attributable to interests in the Trust.
12. The Purchaser understands that no subsequent Transfer of a
Class D Note is permitted unless (i) such Transfer is of a Class D Note with a
denomination of at least $500,000 and (ii) the Trust Depositor and the Servicer
each consent in writing to the proposed Transfer, which consent shall be granted
unless either the Trust Depositor or the Servicer, acting pursuant to advice of
counsel, determines that such Transfer would create a material risk that the
Trust would be classified for federal or any applicable state tax purposes as an
association or publicly traded partnership taxable as a corporation; provided,
that an attempted Transfer that would cause the number of Targeted Holders (as
defined in the Private Placement Memorandum) to exceed one hundred shall be
void.
13. The Purchaser understands that the opinion of tax counsel
to the Trust that the Trust is not a publicly traded partnership taxable as a
corporation is dependent in part on the accuracy of the representations in
paragraphs 8, 9, 10, 11 and 12 and that in addition to its being subject to
having its purchase rescinded, it will be liable for damages.
14. The Purchaser understands that any purported Transfer of
any Class D Note in contravention of the restrictions and conditions in the
paragraphs above (including any violation of the representation in paragraph 11
by an investor who continues to hold a Class D Note occurring any time after the
Transfer in which it acquired such Class D Note) shall be null and void and the
purported transferee shall not be recognized by the Trust or any other person as
a Class D Noteholder for any purpose.
15. The Purchaser further understands that, on any proposed
resale, pledge or Transfer of any Class D Notes, it will be required to furnish
to the Indenture Trustee and other appropriate parties as required, such
certification and other information as the Indenture Trustee or such other party
may reasonably require to confirm that the proposed sale complies with the
foregoing restrictions and with the restrictions and conditions of the Class D
Notes, and the Indenture pursuant to which the Class D Notes were issued and it
agrees that if it determines to Transfer any Class D Note, it will cause its
proposed transferee to provide the Trust Depositor, the Servicer, the Indenture
Trustee and the Owner Trustee with a letter substantially in the form of this
letter subject to the qualification set forth in the Private Placement
Memorandum related to paragraphs 1 and 3 hereof. The Purchaser further
understands that Class D Notes purchased by it will bear a legend to the
foregoing effect.
Terms used but not defined herein shall have the meanings
ascribed thereto in the Indenture.
Very truly yours,
[Purchaser]
By: ______________________________
Name:
Title:
Annex A-3
<PAGE>
- -------------------------------------------------------------------------------
SALE AND SERVICING AGREEMENT
among
FIDELITY EQUIPMENT LEASE TRUST 1999-1,
as Issuer,
FIDELITY EQUIPMENT LEASE DEPOSITOR I, LLC,
as Trust Depositor,
FIDELITY LEASING, INC.,
as Seller and as Servicer,
HARRIS TRUST AND SAVINGS BANK,
as Back-Up Servicer and as Collateral Custodian
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
Dated as of June 2, 1999
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
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<S> <C> <C>
Section 1.01 Definitions....................................................................................2
Section 1.02 Usage of Terms................................................................................32
Section 1.03 Section References............................................................................32
Section 1.04 Calculations..................................................................................32
Section 1.05 Accounting Terms..............................................................................32
ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACT ASSETS
Section 2.01 Creation and Funding of Trust; Transfer of Contract Assets....................................32
Section 2.02 Conditions to Transfer of Trust Assets to Trust...............................................34
Section 2.03 Acceptance by Owner Trustee...................................................................36
Section 2.04 Conveyance of Subsequent Contracts............................................................36
Section 2.05 Release of Excluded Amounts...................................................................39
Section 2.06 Delivery of Instruments.......................................................................39
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties Regarding the Seller...........................................40
Section 3.02 Representations and Warranties Regarding Each Contract and as to Certain Contracts in
the Aggregate..............................................................................42
Section 3.03 Representations and Warranties Regarding the Initial Contracts in the Aggregate...............42
Section 3.04 Representations and Warranties Regarding the Contract Files...................................42
Section 3.05 Representations and Warranties Regarding Concentrations of Initial Contracts..................43
Section 3.06 Representations and Warranties Regarding the Trust Depositor..................................43
Section 3.07 Representations and Warranties Regarding the Servicer.........................................45
Section 3.08 Representations and Warranties of Back-Up Servicer and Collateral Custodian...................46
</TABLE>
i
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<TABLE>
<CAPTION>
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
<S> <C> <C>
Section 4.01 Custody of Contracts..........................................................................47
Section 4.02 Filing........................................................................................48
Section 4.03 Name Change or Relocation.....................................................................49
Section 4.04 Sale Treatment................................................................................49
Section 4.05 Separateness from Trust Depositor.............................................................49
Section 4.06 Covenants of the Collateral Custodian.........................................................49
Section 4.07 Duties of Collateral Custodian................................................................50
Section 4.08 Access to Certain Documentation and Information Regarding the Contracts.......................52
Section 4.09 Release of Collateral.........................................................................52
ARTICLE V
SERVICING OF CONTRACTS
Section 5.01 Appointment and Acceptance; Responsibility for Contract Administration........................53
Section 5.02 General Duties................................................................................53
Section 5.03 Consent to Assignment or Replacement..........................................................54
Section 5.04 Disposition Upon Termination of Contract......................................................54
Section 5.05 Subservicers..................................................................................54
Section 5.06 Further Assurance.............................................................................54
Section 5.07 Notice to Obligors............................................................................54
Section 5.08 Collection Efforts; Modification of Contracts.................................................55
Section 5.09 Prepaid Contract..............................................................................55
Section 5.10 Acceleration..................................................................................56
Section 5.11 Taxes and Other Amounts.......................................................................56
Section 5.12 Lockboxes, Etc................................................................................56
Section 5.13 Remittances...................................................................................56
Section 5.14 Servicer Advances.............................................................................56
Section 5.15 Realization Upon Defaulted Contract...........................................................57
Section 5.16 Maintenance of Insurance Policies.............................................................57
Section 5.17 Other Servicer Covenants......................................................................57
Section 5.18 Servicing Compensation........................................................................59
Section 5.19 Payment of Certain Costs and Expenses by Servicer.............................................59
Section 5.20 Records.......................................................................................60
Section 5.21 Inspection....................................................................................60
Section 5.22 Trustees to Cooperate in Releases.............................................................60
Section 5.23 Servicer Not to Resign........................................................................61
Section 5.24 Merger or Consolidation of Servicer...........................................................61
Section 5.25 Indemnification...............................................................................61
Section 5.26 Back-Up Servicer..............................................................................62
Section 5.27 Back-Up Servicer Indemnification..............................................................64
Section 5.28 Back-Up Servicer Covenants....................................................................64
</TABLE>
ii
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<TABLE>
<CAPTION>
ARTICLE VI
COVENANTS OF THE TRUST DEPOSITOR
<S> <C> <C>
Section 6.01 Corporate Existence...........................................................................64
Section 6.02 Contracts Not to be Evidenced by Promissory Notes.............................................65
Section 6.03 Security Interests............................................................................65
Section 6.04 Delivery of Collections.......................................................................65
Section 6.05 Regulatory Filings............................................................................65
Section 6.06 Compliance with Law...........................................................................65
Section 6.07 Activities....................................................................................65
Section 6.08 Indebtedness..................................................................................65
Section 6.09 Guarantees....................................................................................66
Section 6.10 Investments...................................................................................66
Section 6.11 Merger; Sales.................................................................................66
Section 6.12 Distributions.................................................................................66
Section 6.13 Other Agreements..............................................................................66
Section 6.14 Separate Corporate Existence..................................................................66
Section 6.15 Location; Records.............................................................................67
Section 6.16 Liability of Trust Depositor; Indemnities.....................................................67
Section 6.17 Bankruptcy Limitations........................................................................68
Section 6.18 Limitation on Liability of Trust Depositor and Others.........................................69
Section 6.19 Chief Executive Office........................................................................69
ARTICLE VII
ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS
Section 7.01 Trust Accounts; Collections...................................................................69
Section 7.02 Reserve Fund..................................................................................70
Section 7.03 Trust Account Procedures......................................................................70
Section 7.04 Securityholder Distributions..................................................................71
Section 7.05 Allocations and Distributions.................................................................71
Section 7.06 Pre-Funding Account...........................................................................78
Section 7.07 Capitalized Interest Account..................................................................78
ARTICLE VIII
SERVICER DEFAULT; SERVICER TRANSFER
Section 8.01 Servicer Default..............................................................................79
Section 8.02 Servicer Transfer.............................................................................80
Section 8.03 Appointment of Successor Servicer; Reconveyance; Successor Servicer to Act....................80
Section 8.04 Notification to Securityholders...............................................................82
Section 8.05 Effect of Transfer............................................................................83
Section 8.06 Database File.................................................................................83
Section 8.07 Successor Servicer Indemnification............................................................83
Section 8.08 Responsibilities of the Successor Servicer....................................................83
Section 8.09 Rating Agency Condition For Servicer Transfer.................................................84
</TABLE>
iii
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<TABLE>
<CAPTION>
ARTICLE IX
REPORTS
<S> <C> <C>
Section 9.01 Monthly Reports...............................................................................84
Section 9.02 Officer's Certificate.........................................................................84
Section 9.03 Other Data....................................................................................84
Section 9.04 Annual Report of Accountants..................................................................84
Section 9.05 Annual Statement of Compliance from Servicer..................................................85
Section 9.06 Annual Summary Statement......................................................................85
ARTICLE X
TERMINATION
Section 10.01 Sale of Trust Assets..........................................................................86
ARTICLE XI
REMEDIES UPON MISREPRESENTATION; REPURCHASE OPTION
Section 11.01 Repurchases of, or Substitution For, Contracts for Breach of Representations and
Warranties.................................................................................86
Section 11.02 Reassignment of Repurchased or Substituted Contracts..........................................87
Section 11.03 Servicer's Repurchase Option..................................................................87
Section 11.04 Conveyance of Additional Contracts............................................................87
Section 11.05 Seller's Covenant to Deliver Additional Contracts.............................................88
Section 11.06 Mandatory Redemption..........................................................................88
ARTICLE XII
SELLER INDEMNITIES
Section 12.01 Seller's Indemnification......................................................................88
Section 12.02 Liabilities to Obligors.......................................................................89
Section 12.03 Tax Indemnification...........................................................................89
Section 12.04 Adjustments...................................................................................89
Section 12.05 Operation of Indemnities......................................................................90
Section 12.06 Additional Covenants of the Seller............................................................90
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XIII
MISCELLANEOUS
<S> <C> <C>
Section 13.01 Amendment.....................................................................................93
Section 13.02 Protection of Title to Trust..................................................................94
Section 13.03 Governing Law.................................................................................95
Section 13.04 Notices.......................................................................................95
Section 13.05 Severability of Provisions....................................................................97
Section 13.06 Third Party Beneficiaries.....................................................................97
Section 13.07 Counterparts..................................................................................97
Section 13.08 Headings......................................................................................97
Section 13.09 No Bankruptcy Petition; Disclaimer............................................................97
Section 13.10 Jurisdiction..................................................................................98
Section 13.11 Tax Characterization..........................................................................99
Section 13.12 Prohibited Transactions with Respect to the Trust.............................................99
Section 13.13 Merger or Consolidation of the Seller.........................................................99
Section 13.14 Assignment or Delegation by the Seller........................................................99
</TABLE>
EXHIBITS
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<TABLE>
<CAPTION>
<S> <C>
Exhibit A Form of Assignment
Exhibit B Form of Closing Certificate of the Trust Depositor
Exhibit C Form of Closing Certificate of the Seller and the Servicer
Exhibit D Form of Opinion of Counsel for the Trust Depositor and the Seller Regarding General Corporate
Matters (including Perfection Opinion)
Exhibit E Form of Opinion of Counsel for the Trust Depositor, the Servicer and the Seller Regarding Non-Consolidation
and the "True Sale" Nature of the Transaction
Exhibit F Location of Contract Files
Exhibit G Form of Certificate Regarding Repurchased Contracts
Exhibit H List of Contracts
Exhibit I Form of Monthly Report to Noteholders and Certificateholder
Exhibit J Lockbox Bank and Lockbox Account
Exhibit K Form of Subsequent Transfer Agreement
Exhibit L Form of Subsequent Purchase Agreement
</TABLE>
v
<PAGE>
This SALES AND SERVICING AGREEMENT, dated as of June 2, 1999,
is among Fidelity Equipment Lease Trust 1999-1 (together with its successors and
assigns, the "Trust"), Fidelity Equipment Lease Depositor I, LLC, (together with
its successors and assigns, the "Trust Depositor"), Harris Trust and Savings
Bank (solely in its capacity as Indenture Trustee, together with its successors
and assigns, the "Indenture Trustee"), Fidelity Leasing, Inc. (together with its
successors and assigns, "Fidelity", in its capacity as Servicer, together with
its successor and assigns, the "Servicer", and in its capacity as Seller,
together with its successor and assigns, the "Seller") and Harris Trust and
Savings Bank (in its capacity as Back-Up Servicer, together with its successors
and assigns, the "Back-Up Servicer", and in its capacity as Collateral
Custodian, together with its successors and assigns, the "Collateral
Custodian").
W I T N E S S E T H
WHEREAS pursuant to the Transfer and Sale Agreement (as
defined herein), the Seller will sell, convey and assign a designated pool of
Contracts (as defined herein) together with certain related security therefor
and other related rights and property as further described herein, which
Contracts were originated by JLA Credit Corporation ("JLA") or a Source, or
acquired by purchase and assignment from the owner thereof; and
WHEREAS, the Trust Depositor desires to fund the Trust by
selling, conveying and assigning a designated pool of Contracts together with
certain related security therefor and other related rights and property as
further described herein;
WHEREAS, the Trust Depositor acquired the Initial Contracts
from the Seller pursuant to the Transfer and Sale Agreement and may acquire from
time to time thereafter certain Subsequent Contracts from the Seller (such
Initial Contracts and Subsequent Contracts, together with certain related
property as more fully described herein, being the Contract Assets as defined
herein);
WHEREAS, it was a condition to the Trust Depositor's
acquisition of the Initial Contracts from the Seller that the Seller make
certain representations and warranties regarding the Contract Assets for the
benefit of the Trust Depositor and the Trustees as well as the Trust;
WHEREAS, on the Closing Date the Trust Depositor will fund the
Trust by selling, conveying and assigning all its right, title and interest in
such Contract Assets and certain other assets to the Trust;
WHEREAS, the Trust is willing to purchase and accept
assignment of the Trust Assets from the Trust Depositor pursuant to the terms
hereof; and
WHEREAS, the Servicer is willing to service the Contracts for
the benefit and account of the Trust pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Accountant's Report" has the meaning assigned such term in
Section 9.04.
"Accrual Period" means, with respect to a Distribution Date,
the period from and including the immediately preceding Distribution Date to but
excluding the following Distribution Date, provided, that the initial Accrual
Period following the Closing Date shall be the period from and including the
Closing Date to but excluding the first Distribution Date following the Closing
Date.
"ADCB" with respect to the Contracts means the sum of the
Discounted Contract Balances of each Contract included in the group of Contracts
for which an ADCB determination is being made (excluding Defaulted Contracts,
Prepaid Contracts, Expired Contracts, Contracts repurchased or substituted for
by the Seller and Warranty Contracts).
"Addition Notice" means, with respect to any transfer of
Additional Contracts to the Trust pursuant to Section 2.04 (and the Trust
Depositor's corresponding prior purchase of such Contracts from the Seller), a
notice, which shall be given at least 5 days prior to the related Subsequent
Transfer Date, identifying the Additional Contracts to be transferred and the
ADCB of such Additional Contracts, with such notice to be signed both by the
Trust Depositor and the Seller.
"Additional Contract" means additional Contracts which the
Seller will convey to the Trust Depositor (and the Trust Depositor will
concurrently convey to the Trust) from time to time during the Pre-Funding
Period having an aggregate value approximately equal to the Original Pre-Funded
Amount.
"Additional Contract Qualification Conditions" means, with
respect to any Additional Contract being transferred to the Trust pursuant to
Section 2.04, the accuracy of each of the following statements as of the related
Cutoff Date for such Contract:
(a) the Pre-Funding Period shall not have ended;
(b) such Additional Contract was not selected in a manner that
the Seller reasonably believes is adverse to the interests of the Noteholders;
(c) all actions or additional actions (if any) necessary to
perfect the security interest and assignment of such Additional Contract to the
Trust Depositor, the Trust and the Indenture Trustee shall have been taken as of
or prior to the Subsequent Transfer Date;
(d) the final date for the last Scheduled Payment due under
such Additional Contract is not later than July 2007 (except to the extent the
final payment on such Contract is due after July 2007, only Scheduled Payments
due on or prior to such date may be included in the Discount Contract Balance of
such Contract for the purpose of making any calculation under this Agreement or
the Indenture);
-2-
<PAGE>
(e) the sum of the Discounted Contract Balances of Additional
Contracts relating to Obligors located within the same zip code area of the
State of California will not exceed 5% of the ADCB;
(f) the weighted average life of the Contract Pool (after
giving effect to the conveyance of Additional Contracts) does not exceed 1.9
years;
(g) the sum of the Discounted Contract Balances of Contracts
in the Contract Pool that are not monthly-pay contracts does not exceed 2.5% of
the ADCB (after giving effect to the conveyance of Additional Contracts);
(h) the sum of the Discounted Contract Balances of Additional
Contracts having a remaining term to maturity of greater than 84 months and less
than or equal to 96 months does not exceed 5% of the ADCB (after giving effect
to the conveyance of Additional Contracts); and
(i) the sum of the Discounted Contract Balances of Contracts
in the Contract Pool that are conditional sales contracts does not exceed 8.0%
of the ADCB (after giving effect to the conveyance of Additional Contracts).
"Additional Principal" means, with respect to each
Distribution Date, zero if each of the Class Target Investor Principal Amounts
for Classes B, C and D exceed their respective Class Floors on such Distribution
Date. If any of these conditions is not met, the "Additional Principal" with
respect to each Distribution Date equals the greater of (i) zero and (ii) the
excess, if any, of (a) the Monthly Principal Amount, over (b) the sum of the
Class A Principal Payment, the Class B Principal Payment, the Class C Principal
Payment and the Class D Principal Payment to be paid on such Distribution Date.
"Adjusted Contract" means a Contract which has been the
subject of a material modification or adjustment which is not permitted under
this Agreement.
"Administration Agreement" means the Administration Agreement,
dated as of the date hereof, among the Trust Depositor, the Trust, the Indenture
Trustee and the Administrator.
"Administrative Fee" means, with respect to any Collection
Period, the sum of the fees owed the Back-Up Servicer, the Indenture Trustee,
the Owner Trustee and Collateral Custodian, payable on the related Distribution
Date (or annually, in the case of the Collateral Custodian and the Owner
Trustee) from Available Funds, which sum is equal to the product of (a) 1/12,
(b) the Administrative Fee Rate and (c) the ADCB of the Contract Pool (not
including amounts in the Pre-Funding Account during the Pre-Funding Period) as
of the second preceding Calculation Date.
"Administrative Fee Rate" means 0.03%.
-3-
<PAGE>
"Affiliate" of any specified Person means any other person
controlling or controlled by, or under common control with, such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" or
"controlled" have meanings correlative to the foregoing.
"Aggregate Collateral Value" means the sum of (a) the ADCB and
(b)(i) the Pre-Funded Amount divided by (ii) 97.75%. For purposes of this
calculation, on the last day of the Pre-Funding Period, the Pre-Funded Amount
shall be deemed to equal zero.
"Agreement" means this Sale and Servicing Agreement, as
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Aggregate Principal Amount" means, with respect to any group
of Notes or the Certificate, at any date of determination, the sum of the
Principal Amounts of such Notes or the Certificate on such date of
determination.
"Assignment" means each Assignment, substantially in the form
of Exhibit A, relating to an assignment, transfer and conveyance of Contracts
and related property by the Trust Depositor to the Trust.
"Available Funds" means, with respect to any Distribution
Date, the sum of (i) all amounts on deposit in the Collection Account (including
investment earnings) as of the immediately preceding Determination Date on
account of Scheduled Payments, but excluding the Excluded Amounts, as well as
any Prepayments received on or before the last day of the Collection Period
immediately preceding such Distribution Date, (ii) Servicer Advances, (iii)
Defaulted Contract Recoveries to the extent the Servicer has not substituted a
Substitute Contract for or repurchased such Defaulted Contract, (iv) proceeds
from a Prepaid Contract, (v) proceeds from repurchases of a Warranty Contract by
the Trust Depositor, (vi) proceeds from the investment of funds in the
Collection Account, (vii) on each Distribution Date on or prior to the
Distribution Date in August, 1999, the amount on deposit in the Capitalized
Interest Account (up to the Capitalized Interest Requirement), if any, and
(viii) on the Distribution Date immediately following the termination of the
Pre-Funding Period, the amount on deposit in the Pre-Funding Account at such
time.
"Back-Up Servicer" means Harris Trust and Savings Bank, as the
back-up servicer, or any successor thereto.
"Business Day" means any day which is neither a Saturday or
Sunday, nor another day on which banking institutions in the city of New York
City, Philadelphia, Pennsylvania, Charlotte, North Carolina, and Chicago,
Illinois are authorized or obligated by law, executive order, or governmental
decree to be closed.
"Business Trust Statute" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del Code 3801 et seq., as the same may be amended from time to
time.
"Calculation Date" means, with respect to any Distribution
Date, the last day of the immediately preceding calendar month.
-4-
<PAGE>
"Capitalized Interest Account" means the Trust Account so
designated established pursuant to Section 7.01.
"Capitalized Interest Required Reserve Amount" means, with
respect to any Distribution Date, an amount equal to the product of (i) the
Discount Rate less the sum of (a) the Servicing Fee Rate and (b) 2.5%, (ii) the
amount remaining in the Pre-Funding Account as of such Distribution Date and
(iii) a fraction, the numerator of which is the number of days remaining until
the Distribution Date immediately following the termination of the Pre-Funding
Period and the denominator of which is 360.
"Capitalized Interest Requirement" means an amount equal to
one month's interest on the amount on deposit in the Pre-Funding Account,
calculated on the weighted average of the interest rates on the Notes.
"Casualty Loss" means, with respect to any Financed Item, the
loss, theft, damage beyond repair or governmental condemnation or seizure of
such Financed Item.
"Certificate" means the $3,656,176 aggregate initial principal
amount Fidelity Equipment Lease Trust 1999-1 Certificate, representing a
beneficial equity interest in the Trust and issued pursuant to the Trust
Agreement.
"Certificate Distribution Account" has the meaning specified
in the Trust Agreement.
"Certificate Register" has the meaning specified in the Trust
Agreement.
"Certificateholder" means the holder of the Certificate.
"Class" means any of the group of Notes or the Certificate
identified herein, as applicable, the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes, the
Class D Notes or the Certificate.
"Class A Notes" means the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes.
"Class A Percentage" means 78.4450%, which is the ratio of (a)
the sum of the Initial Note Principal Balance of the Class A-2, A-3 and A-4
Notes to (b) the initial Aggregate Collateral Value minus the Initial Note
Principal Balance of the Class A-1 Notes.
"Class A Principal Payment Amount" means , with respect to a
Distribution Date, (a) while the Class A-1 Notes are outstanding, (i) on all
Distribution Dates prior to the Class A-1 Maturity Date, the lesser of (1) the
amount necessary to reduce the outstanding Principal Amount on the Class A-1
Notes to zero and (2) the Monthly Principal Amount, and (ii) on the Class A-1
Maturity Date, the entire outstanding Principal Amount on the Class A-1 Notes
and (b) after the Class A-1 Notes have been paid in full, the amount necessary
to reduce the aggregate outstanding Principal Amount on the Class A Notes to the
Class A Target Investor Principal Amount. With respect to the Distribution Date
immediately following the termination of the Pre-Funding Period, the Class A
Principal Payment Amount shall also include the amount, if any, on deposit in
the Pre-Funding Account (in addition to the applicable amount determined
pursuant to the preceding sentence).
-5-
<PAGE>
"Class A Target Investor Principal Amount" means, with respect
to each Distribution Date, an amount equal to the product of (a) the Class A
Percentage and (b) the Aggregate Collateral Value as of the last day of the
related Collection Period.
"Class A-1 Interest Rate" means 5.155% per annum.
"Class A-1 Maturity Date" means June 15, 2000.
"Class A-1 Noteholders" means the holders of record of the
Class A-1 Notes.
"Class A-1 Notes" means the $56,955,084 aggregate principal
amount of Fidelity Equipment Lease Trust 1999-1, 5.155% Class A-1
Receivable-Backed Notes, Series 1999-1.
"Class A-2 Interest Rate" means 5.860% per annum.
"Class A-2 Maturity Date" means September 15, 2001.
"Class A-2 Noteholders" means the holders of record of the
Class A-2 Notes.
"Class A-2 Notes" means the $27,949,428 aggregate principal
amount of Fidelity Equipment Lease Trust 1999-1, 5.860% Class A-2
Receivable-Backed Notes, Series 1999-1.
"Class A-3 Interest Rate" means 6.090% per annum.
"Class A-3 Maturity Date" means July 15, 2002.
"Class A-3 Noteholders" means the holders of record of the
Class A-3 Notes.
"Class A-3 Notes" means the $20,880,822 aggregate principal
amount of Fidelity Equipment Lease Trust 1999-1, 6.090% Class A-3
Receivable-Backed Notes, Series 1999-1.
"Class A-4 Interest Rate" means 6.300% per annum.
"Class A-4 Maturity Date" means November 15, 2004.
"Class A-4 Noteholders" means the holders of record of the
Class A-4 Notes.
"Class A-4 Notes" means the $33,961,804 aggregate principal
amount of Fidelity Equipment Lease Trust 1999-1, 6.300% Class A-4
Receivable-Backed Notes, Series 1999-1.
"Class B Floor" means, with respect to each Distribution Date,
(a) 3.75% of the initial Aggregate Collateral Value plus (b) the Cumulative Loss
Amount with respect to such Distribution Date, minus (c) the sum of the
outstanding Principal Amount of the Class C Notes, the outstanding Principal
Amount of the Class D Notes, the amount on deposit in the Reserve Fund and the
Overcollateralization Balance as of the immediately preceding Distribution Date
after giving effect to all principal payments made on that day.
-6-
<PAGE>
"Class B Interest Rate" means 6.590% per annum.
"Class B Maturity Date" means February 15, 2006.
"Class B Noteholders" means the holders of record of the Class
B Notes.
"Class B Notes" means the $9,749,800 aggregate principal
amount of Fidelity Equipment Lease Trust 1999-1, 6.590% Class B
Receivable-Backed Notes, Series 1999-1.
"Class B Percentage" means 9.2379% which is the ratio of (a)
the Initial Note Principal Balance of the Class B Notes to (b) the initial
Aggregate Collateral Value minus the Initial Note Principal Balance of the Class
A-1 Notes.
"Class B Principal Payment Amount" means (a) while the Class
A-1 Notes are outstanding, zero and (b) after the outstanding Principal Amount
on the Class A-1 Notes has been reduced to zero, the amount necessary to reduce
the outstanding Principal Amount of the Class B Notes to the greater of the
Class B Target Investor Principal Amount and the Class B Floor.
"Class B Target Investor Principal Amount" means, with respect
to each Distribution Date, an amount equal to the product of (a) the Class B
Percentage and (b) the Aggregate Collateral Value as of the last day of the
related Collection Period.
"Class C Floor" means, with respect to each Distribution Date,
(a) 2.25% of the initial Aggregate Collateral Value plus (b) the Cumulative Loss
Amount with respect to such Distribution Date, minus (c) the sum of the
outstanding Principal Amount of the Class D Notes, the amount on deposit in the
Reserve Fund and the Overcollateralization Balance as of the immediately
preceding Distribution Date after giving effect to all principal payments made
on that day; provided, however, that if the outstanding Principal Amount of the
Class B Notes is less than or equal to the Class B Floor on such Distribution
Date, the Class C Floor will equal the outstanding Principal Amount of the Class
C Notes utilized in the calculation of the Class B Floor for such Distribution
Date.
"Class C Interest Rate" means 7.860% per annum.
"Class C Maturity Date" means August 15, 2006.
"Class C Noteholders" means the holders of record of the Class
C Notes.
"Class C Notes" means the $4,874,900 aggregate principal
amount of Fidelity Equipment Lease Trust 1999-1, 7.860% Class C
Receivable-Backed Notes, Series 1999-1.
"Class C Percentage" means 4.6189%, which is the ratio of (a)
the Initial Note Principal Balance of the Class C Notes to (b) the initial
Aggregate Collateral Value minus the Initial Note Principal Balance of the Class
A-1 Notes.
-7-
<PAGE>
"Class C Principal Payment Amount" means (a) while the Class
A-1 Notes are outstanding, zero and (b) after the outstanding Principal Amount
on the Class A-1 Notes has been reduced to zero, the amount necessary to reduce
the outstanding Principal Amount of the Class C Notes to the greater of the
Class C Target Investor Principal Amount and the Class C Floor.
"Class C Target Investor Principal Amount" means, with respect
to each Distribution Date, an amount equal to the product of (a) the Class C
Percentage and (b) the Aggregate Collateral Value as of the last day of the
related Collection Period.
"Class D Floor" means, with respect to each Distribution Date,
(a) 1.50% of the initial Aggregate Collateral Value plus (b) the Cumulative Loss
Amount with respect to such Distribution Date, minus (c) the sum of the amount
on deposit in the Reserve Fund and the Overcollateralization Balance as of the
immediately preceding Distribution Date after giving effect to all principal
payments made on that day; provided, however, that if the outstanding Principal
Amount of the Class C Notes is less than or equal to the Class C Floor on such
Distribution Date, the Class D Floor will equal the outstanding Principal Amount
of the Class D Notes utilized in the calculation of the Class C Floor for such
Distribution Date.
"Class D Interest Rate" means 6.180% per annum.
"Class D Maturity Date" means April 15, 2008.
"Class D Notes" means the $4,468,658 aggregate principal
amount of Fidelity Equipment Lease Trust 1999-1, 6.180%% Class D
Receivable-Backed Notes, Series 1999-1.
"Class D Percentage" means 4.2340%, which is the ratio of (a)
the Initial Note Principal Balance of the Class D Notes to (b) the initial
Aggregate Collateral Value minus the Initial Note Principal Balance of the Class
A-1 Notes.
"Class D Principal Payment Amount" means (a) while the Class
A-1 Notes are outstanding, zero and (b) after the outstanding Principal Amount
on the Class A-1 Notes has been reduced to zero, the amount necessary to reduce
the outstanding Principal Amount of the Class D Notes to the greater of the
Class D Target Investor Principal Amount and the Class D Floor.
"Class D Target Investor Principal Amount" means, with respect
to each Distribution Date, an amount equal to the product of (a) the Class D
Percentage and (b) the Aggregate Collateral Value as of the last day of the
related Collection Period.
"Class Target Investor Principal Amount" means any of the
Class A Target Investor Principal Amount, the Class B Target Investor Principal
Amount, the Class C Target Investor Amount or the Class D Target Investor
Principal Amount.
"Closing Date" means June 2, 1999.
"Collateral" has the meaning given such term in the "granting
clause" of the Indenture.
-8-
<PAGE>
"Collateral Custodian" means Harris Trust and Savings Bank, as
collateral custodian.
"Collection Account" means the Trust Account so designated
established pursuant to Section 7.01.
"Collection Period" means a period from and including the
first day of a calendar month to and including the last day of such calendar
month, provided that the first Collection Period shall be the period from and
including the Initial Cutoff Date to and including the last day of the calendar
month immediately preceding the calendar month in which the Closing Date occurs.
"Collections" means all payments received on or with respect
to the Contracts in the Contract Pool or the related Financed Items, including,
without limitation, Scheduled Payments, Prepayments, Defaulted Contract
Recoveries, Late Charges and Expired Contract Proceeds, all as related to
amounts attributable to the Contracts in the Contract Pool or the related
Financed Items (including any such amounts derived from Source recourse
provisions), but excluding any Excluded Amounts.
"Commission" means the United States Securities and Exchange
Commission.
"Computer Disk" means the computer disk which provides
information relating to the Contracts and which was used by the Seller in
selecting the Contracts conveyed to the Trust Depositor pursuant to Section 2.01
of the Transfer and Sale Agreement (and any Subsequent Purchase Agreement
conveyed to the Trust Depositor pursuant to Section 2.04 of this Agreement), and
includes the master file and the history file as well as servicing information
with respect to the Contracts.
"Contract" means any finance lease, operating lease or other
similar type of financing agreement evidencing the indebtedness of the related
Obligor conveyed to the Trust, including as applicable, schedules, supplements
and amendments thereto and which are identified on the List of Contracts
delivered to the Collateral Custodian on the Closing Date, or, with respect to
Subsequent Contracts, on the Subsequent List of Contracts delivered on the
related Subsequent Transfer Date.
"Contract Assets" has the meaning assigned in Section 2.01
(and Section 2.04, as applicable in the case of Subsequent Contracts).
"Contract File" means, with respect to each Contract, the
fully executed original counterpart (for UCC purposes) of the contract, the
original certificate of title or other title document with respect to the
related Financed Items (if applicable) and all other documents originally
delivered to the Seller or held by the Collateral Custodian with respect to any
Contract.
"Contract Pool" as of any date means the Initial Contracts and
the Subsequent Contracts (if any), other than any such Contracts which (i) have
been reconveyed by the Trust to the Trust Depositor, and concurrently by the
Trust Depositor to the Seller, pursuant to Section 11.02 hereof, or (ii) have
been paid (or prepaid) in full.
"Corporate Trust Office" means, with respect to the Indenture
Trustee or Owner Trustee, as applicable, the office of the Indenture Trustee or
Owner Trustee at which at any particular time its corporate trust business shall
be principally administered, which offices at the date of the execution of this
Agreement are located at the addresses set forth in Section 13.04.
-9-
<PAGE>
"CPR" means a constant payment rate which represents an
assumed constant rate of prepayment each month (expressed as an annual
percentage) relative to the then outstanding principal balance of the Contracts
in the Contract Pool for the life of such Contracts.
"Cumulative Loss Amount" means, with respect to each
Distribution Date, an amount equal to the excess, if any, of (a) the total of
(i) the outstanding Principal Amount of the Notes as of the immediately
preceding Distribution Date after giving effect to all principal payments made
on that day, plus (ii) the Overcollateralization Balance as of the immediately
preceding Distribution Date, minus (iii) the lesser of (a) the Monthly Principal
Amount and (B) Available Funds remaining after the payment of amounts owing the
Servicer and in respect of interest on the Notes on such Distribution Date, over
(b) the Aggregate Collateral Value as of the last day of the related Collection
Period.
"Cutoff Date" means either or both (as the context may
require) the Initial Cutoff Date and any Subsequent Cutoff Date, as applicable
to the Contract or Contracts in question.
"Date of Processing" means, with respect to any transaction or
Collection, the date on which such transaction or Collection is first recorded
(and, in the case of a transaction or Collection related to a particular
Contract, identified as to such particular Contract) on the Seller's or the
Servicer's computer master file of Contracts (without regard to the effective
date of such recordation).
"DCR" means Duff & Phelps Credit Rating Co.
"Defaulted Contract" means a Contract in the Contract Pool
with respect to which the earlier of (i) and (ii) has occurred: (i) any
Scheduled Payment under the Contract is more than 180 days delinquent, or (ii)
the Servicer has determined in its sole discretion, in accordance with its usual
and customary practices, that such Contract is not collectible and should be
charged-off.
"Defaulted Contract Recoveries" means all proceeds of the sale
of Financed Items related to Defaulted Contracts and any amounts collected as
judgments against an Obligor or others related to the failure of such Obligor to
pay any required amounts under the related Contract or to return the Financed
Items (including insurance proceeds), in each case as reduced by (i) any
unreimbursed Servicer Advances with respect to such Contract or such Financed
Items, (ii) any reasonably incurred out-of-pocket expenses incurred by the
Servicer in enforcing such Contract or other Liquidation Expenses, and (iii) any
Excluded Amounts.
"Determination Date" means, with respect to any Distribution
Date, the second Business Day prior to such Distribution Date.
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<PAGE>
"Discount Rate" means, at any date of determination, 6.708%.
The Discount Rate is equal to the sum of (i) the weighted average of the Class
A-1 Interest Rate, Class A-2 Interest Rate, Class A-3 Interest Rate, Class A-4
Interest Rate, Class B Interest Rate, Class C Interest Rate and Class D Interest
Rate, weighted by (x) the Initial Class A-1 Note Principal Balance, Initial
Class A-2 Note Principal Balance, Initial Class A-3 Note Principal Balance,
Initial Class A-4 Note Principal Balance, Initial Class B Note Principal
Balance, Initial Class C Note Principal Balance and Initial Class D Note
Principal Balance, as applicable, and (y) the expected weighted average life of
each Class of Notes, as applicable, assuming a CPR of 5.0%, (ii) the Servicing
Fee Rate and (iii) the Administrative Fee Rate.
"Discounted Contract Balance" means, with respect to any
Contract, (A) as of the related Cutoff Date, the present value of all the
remaining Scheduled Payments becoming due under such Contract on or after the
applicable Cutoff Date discounted monthly at the Discount Rate, and (B) as of
any other date of determination, the sum of (i) the present value of all the
remaining Scheduled Payments becoming due under such Contract after such date of
determination discounted monthly at the Discount Rate, and (ii) the aggregate
amount of all Scheduled Payments due and payable under such Contract after the
applicable Cutoff Date and on or prior to such date of determination that have
not been received by the Servicer.
The Discounted Contract Balance for each Contract shall be
calculated assuming:
(i) All Scheduled Payments due in any Collection Period are
due on the last day of the Collection Period and Scheduled Payments are
discounted to the last day of the Collection Period prior to the Determination
Date;
(ii) Scheduled Payments are discounted on a monthly basis
using a 30 day month and a 360 day year; and
(iii) All Security Deposits, if any, issued in support of a
Contract are applied to reduce Scheduled Payments in inverse order of the due
date thereof and Scheduled Payments reduced by the application of a Security
Deposit thereto are not included in the Discounted Contract Balance.
The Discounted Contract Balance of any Defaulted Contract will
be zero.
"Distribution Date" shall mean the fifteenth day of each
calendar month or, if such fifteenth day is not a Business Day, the next
succeeding Business Day, with the first such Distribution Date hereunder being
June 15, 1999.
"Dollar" and "$" means lawful currency of the United States of
America.
"Eligible Contract" means at any date of determination, each
Contract with respect to which each of the following is true (to the extent
applicable to such type of Contract):
(a) the information concerning such Contract contained in the
List of Contracts is true and correct in all material respects;
(b) the computer tape from which the selection of Contracts
was made, was made available to the Placement Agent by the Seller prior to the
Closing Date with respect to an Initial Contract or the Subsequent Transfer Date
with respect to a Subsequent Contract and was complete and accurate as of its
date and includes a description of the same Contracts that are described in the
List of Contracts;
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(c) immediately prior to the transfer of the Contract to the
Trust Depositor and any related Financed Item (or security interest therein),
the Contract was owned by the Seller free and clear of any adverse claim;
(d) no Scheduled Payment related to the Contract, as of the
respective Cutoff Date, is (A) more than 61 days delinquent, (B) a payment as to
which the related Financed Item has been or is in the process of being
repossessed, (C) a payment as to which the related Financed Item has been
charged-off in accordance with the credit and collection policies of the
Servicer, or (D) a payment due on other than a monthly basis; provided however,
up to 2.5% of the Contracts (by ADCB) may have payments due less frequently than
on a monthly basis;
(e) the Contract is not a Defaulted Contract
(f) no provision of the Contract has been waived, altered,
modified or extended in any respect except as allowed under the credit and
collection policy of the Servicer and no payment terms of the Contract have been
rewritten or extended;
(g) the Contract is a valid and binding payment obligation of
the Obligor and is enforceable in accordance with its terms (except as may be
limited by applicable Insolvency Laws and the availability of equitable
remedies);
(h) except to the extent conditional sales contracts provide
for the possibility of a prepayment less than the Prepayment Amount, the
Contract contains a "hell or high water" provision in favor of JLA pursuant to
which the Obligor's obligation to make payments scheduled under such Contract
are unconditional, irrevocable and not subject to rights of rescission, setoff,
counterclaim or defense and no such rights have been asserted or threatened with
respect to the Contract;
(i) the Contract, at the time it is transferred to the Trust
Depositor does not violate the laws of the United States or any state, including
without limitation, usury, truth-in-lending and equal credit opportunities laws
applicable to such Contract, in any manner which would create liability for the
Trust Depositor, the Trust or the Indenture Trustee or which would materially
and adversely affect the enforceability or collectibility of such Contract;
(j) as of the Closing Date, with respect to an Initial
Contract, or the Subsequent Transfer Date, with respect to a Subsequent
Contract, the Contract and any related Financed Item have not been sold,
transferred, assigned or pledged by the Seller to any other Person and, (A) with
respect to a Contract that is a "true lease," any Equipment related to such true
lease is owned by the Trust Depositor free and clear of any liens of any third
parties (except for any Permitted Liens), and (B) with respect to any other
Contract that is not a "true lease," such Contract is secured by a fully
perfected lien of the first priority on the related Equipment (except with
respect to Equipment having an original cost less than $25,000 and except with
respect to Equipment located outside of the United States (but only to the
extent the Contracts relating to Equipment so located do not exceed 1% of the
ADCB));
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(k) the Contract constitutes chattel paper, an account, an
instrument or a general intangible as defined under the UCC and if the Contract
constitutes "chattel paper" for purposes of the UCC, there is not more than one
"secured party's original" counterpart of the Contract;
(l) all filings necessary to evidence the conveyance or
transfer to the Trust Depositor of the Contract and all right, title and
interest in the related Equipment (except with respect to Equipment having an
original cost less than $25,000 and except with respect to Equipment located
outside of the United States (but only to the extent the Contracts relating to
Equipment so located do not exceed 1% of the ADCB)) have been made in all
appropriate jurisdictions;
(m) the Obligor is not the subject of bankruptcy or other
insolvency proceedings;
(n) the Obligor's billing address is in the United States, the
Contract is a U.S. dollar-denominated obligation, and the Contract is secured by
Collateral physically located within the United States, provided, however, that
up to 1.0% (by ADCB) may have related Financed Items physically located outside
of the United States;
(o) the Contract does not require the prior written consent of
an Obligor or contain any other restriction on the transfer or assignment of the
Contract (other than a consent or waiver of such restriction that has been
obtained prior to the Closing Date, with respect to an Initial Contract, or the
Subsequent Transfer Date, with respect to a Subsequent Contract);
(p) the obligations of the related Obligor under the Contract
are irrevocable, unconditional, non-cancelable, and due and payable on a fixed
basis (without the right to set off for any reason and net of any maintenance or
cost per copy charges);
(q) the Contract has a remaining term to maturity of not
greater than 84 months, provided, however, that up to 5.0% (by ADCB) may have a
remaining term to maturity of not greater than 96 months;
(r) the Contract was not selected in a manner that the Seller
reasonably believes is adverse to the interests of the Noteholders;
(s) the Obligor under the Contract is required to maintain
casualty insurance with respect to the related Equipment in accordance with the
Servicer's normal requirements;
(t) the Contract is not a "consumer lease" as defined in
Section 2A-103(1)(e) of the UCC;
(u) the Contract is not subject to any guarantee by Fidelity
in respect of the obligations of the Obligor thereunder nor has Fidelity
established any specific credit reserve with respect to the related Obligor;
(v) the Contract provides that (A) Fidelity may accelerate all
remaining Scheduled Payments if the Obligor is in default under any of its
obligations under such Contract and (B) the Obligor thereof may not elect to
utilize its security deposit to offset any remaining Scheduled Payment;
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(w) the Obligor under the Contract is required to maintain the
Equipment in good working order and bear all costs of operating the Equipment
(including the payment of taxes and insurance relating thereto);
(x) no provision of such Contract (other than conditional
sales contracts) provides for a Prepayment Amount less than the amount
calculated in accordance with the definition of Prepayment Amount;
(y) the Contract has not been terminated as a result of a
casualty loss to the related Equipment or for any other reason;
(z) the Discounted Contract Balance of such Contract, when
aggregated with the Discounted Contract Balance of each other Contract having
the same Obligor, does not exceed the concentration limits described in Section
3.05;
(aa) the Discounted Contract Balance of such Contract does not
include the amount of any security deposit held by Fidelity;
(bb) such Contract provides that in the event of a casualty
loss, the Obligor is required to pay an amount not less than the present value
of all remaining Scheduled Payments discounted at the applicable Discount Rate
plus any past due amounts as of the date of determination;
(cc) the Obligor thereunder has represented to JLA that such
Obligor has accepted the related Financed Item and has had a reasonable
opportunity to inspect and test such Financed Item and neither JLA nor the
Seller has been notified of any defects therein;
(dd) all payments in respect of a Contract will be made free
and clear of, and without deduction or withholding for or on account of, any
taxes, unless such withholding or deduction is required by law;
(ee) the inclusion of the Contract in the Contract Pool does
not cause the amount of Contracts therein having Obligors that are
municipalities or government-related organizations to exceed 1% of the ADCB;
(ff) the Contract provides for periodic payments;
(gg) each party executing the Contract on behalf of JLA had
the legal capacity and authority to execute such Contract and, to the Seller's
knowledge, all other parties to such Contract had the legal capacity to execute
such Contract;
(hh) the Contract does not provide for the substitution,
addition or exchange of any Financed Item which would result in any reduction of
payments due under such Contract;
(ii) as of the Cutoff Date, the Obligor will not have been
released, in whole or in part, from any of its obligations in respect of the
Contract; the Contract will not have been satisfied, canceled, extended or
subordinated, in whole or in part, or rescinded, and the Financed Item covered
by the Contract will not have been released from the Contract, in whole or in
part, nor will any instrument have been executed that would effect any such
satisfaction, release, cancellation, subordination or rescission;
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(jj) the Seller has duly fulfilled all material obligations on
its part to be fulfilled under or in connection with the Contract, including,
without limitation, giving any notices or consents necessary to effect the
contribution, assignment, transfer and conveyance of the Contract from the
Seller to the Trust Depositor and has done nothing to materially impair the
rights of the Indenture Trustee, the Trust Depositor or the Noteholders in the
Contract or the proceeds with respect thereto;
(kk) no proceedings or, to Fidelity's knowledge,
investigations, are pending, or have been threatened asserting the invalidity of
the Contract, or seeking any determination or ruling that might adversely affect
the validity or enforceability of the Contract;
(ll) any guarantees required by JLA's credit and collection
policy relating to a Contract at the time of origination of the Contract remain
in full force and effect;
(mm) the transfer, assignment and contribution to the Trust
Depositor of the Contract and the Seller's right, title and interest in and to
any Financed Item will not violate the terms or provisions of the Contract or
any other agreement to which the Seller then is a party or by which it is bound;
(nn) after giving effect to each pledge, assignment and
transfer contemplated by the Indenture, the Indenture Trustee on behalf of the
Noteholders, as their interests may appear, will be the holder of a valid
perfected first priority security interest in the Contracts and the related
Equipment (except with respect to any Equipment having an original cost less
than $25,000 and except with respect to Equipment located outside of the United
States (but only to the extent the Contracts relating to Equipment so located do
not exceed 1% of the ADCB));
(oo) the Contract has not been originated in, and will not
otherwise be subject to, the laws of any jurisdiction whose laws would make the
assignment and transfer thereof pursuant to the terms hereof or any transaction
contemplated by the Transaction Documents unlawful;
(pp) to the Seller's knowledge, no Financed Item has been
relocated from the jurisdiction set forth in the Contract or, if the Seller has
knowledge of any such relocation, all UCC filings necessary to continue the
first priority security interest in such Financed Item (except Software and with
respect to Financed Items located outside of the United States) have been made;
(qq) the Contract was originated or acquired by JLA in the
ordinary course of its business;
(rr) the origination and collection practices used by JLA with
respect to the Contract have been legal in all respects except where the failure
to do so would not result in a material adverse effect on the Contract;
(ss) as of the Cutoff Date, no Financed Item subject to the
Contract has been repossessed;
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(tt) no Financed Item subject to the Contract has been
subleased to or from any person; and
(uu) the total amount of all Scheduled Payments attributable
to incidental transportation, installation, upfront sales taxes and software are
de minimis.
"Eligible Deposit Account" means either (a) a segregated
account with a Qualified Institution, or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), and acting as a trustee for
funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from each Rating Agency in one
of its short-term credit rating categories which signifies investment grade.
"Eligible Investments" with respect to any Distribution Date
means negotiable instruments or securities or other investments maturing on or
before such Distribution Date (a) which, except in the case of demand or time
deposits, investments in money market funds and Eligible Repurchase Obligations,
are represented by instruments in bearer or registered form or ownership of
which is represented by book entries by a Clearing Agency or by a Federal
Reserve Bank in favor of depository institutions eligible to have an account
with such Federal Reserve Bank who hold such investments on behalf of their
customers, (b) which, as of any date of determination, mature by their terms on
or prior to the Distribution Date immediately following such date of
determination, and (c) which evidence:
(i) direct obligations of, and obligations fully guaranteed as
to full and timely payment by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit
of the United States of America);
(ii) demand deposits, time deposits or certificates of deposit
of depository institutions or trust companies incorporated under the laws of the
United States of America or any state thereof and subject to supervision and
examination by federal or state banking or depository institution authorities;
provided, however, that at the time of the Trust's investment or contractual
commitment to invest therein, the commercial paper, if any, and short-term
unsecured debt obligations (other than such obligation whose rating is based on
the credit of a Person other than such institution or trust company) of such
depository institution or trust company shall have a credit rating from each
Rating Agency in the Highest Required Investment Category granted by such Rating
Agency;
(iii) commercial paper or other short term obligations, other
than commercial paper or obligations issued by the Seller or the Placement Agent
or any of their respective Affiliates, having, at the time of the Trust's
investment or contractual commitment to invest therein, a rating in Highest
Required Investment Category granted by each Rating Agency;
(iv) demand deposits, time deposits or certificates of deposit
that are fully insured by the FDIC; (v) notes that are payable on demand or
bankers' acceptances issued by any depository institution or trust company
referred to in (ii) above;
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(vi) investments in money market funds having, at the time of
the Trust's investment or contractual commitment to invest therein, a rating of
the Highest Required Investment Category from each Rating Agency or whose
portfolio is limited to the investments described in clause (i) of this
definition;
(vii) time deposits (having maturities of not more than 90
days) by an entity, other than the Seller or the Placement Agent or any of their
respective Affiliates, the commercial paper of which has, at the time of the
Trust's investment or contractual commitment to invest therein, a rating of the
Highest Required Investment Category granted by each Rating Agency;
(viii) Eligible Repurchase Obligations; and
(ix) any negotiable instruments or securities or other
investments in which the investment by the Trust therein has been approved in
writing by the Rating Agency.
The Indenture Trustee may purchase or sell to itself or an
Affiliate or advisor, as principal or agent, the Eligible Investments described
above.
"Eligible Repurchase Obligations" means repurchase obligations
with respect to any security that is a direct obligation of, or fully guaranteed
by, the United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (c)(ii) of the
definition of Eligible Investments.
"Equipment" means the tangible assets (including but not
limited to printing, pre-press, machine tools, plastics, computer hardware,
restaurant, transportation, energy related, medical and industrial equipment)
financed or leased by an Obligor pursuant to a Contract and/or, unless the
context otherwise requires, a security interest in such assets.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means, with respect to any Person, (a) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person; (b) a trade
or business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with such Person or (c) a member of the
same affiliated service group (within the meaning of Section 414(m) of the Code)
as such Person, any corporation described in clause (a) above or any trade or
business described in clause (b) above.
"Event of Default" shall have the meaning specified in Section
5.01 of the Indenture.
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"Excess Contract", as of any date of determination, means each
Contract selected by the Servicer in accordance with Section 11.01 at such time
as there shall have been discovered a breach of any of the representations and
warranties set forth in Section 3.01, the removal of which pursuant to Section
11.01 hereof and the Seller's repurchase thereof or substitution of a Substitute
Contract therefor pursuant to Section 11.01, shall remedy such breach.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended or supplemented from time to time.
"Excluded Amounts" means (i) collections on deposit in the
Collection Account or otherwise received by the Servicer on or with respect to
the Contract Pool or related Financed Items, which collections are attributable
to any taxes, fees or other charges imposed by any Governmental Authority, (ii)
collections representing reimbursements of insurance premiums or payments for
certain services that were not financed by JLA, (iii) Late Charges, (iv)
Security Deposits, and (v) Expired Contract Proceeds.
"Expired Contract" means any Contract that has terminated on
its scheduled expiration date and to which all amounts due and owing under such
Contract have been paid in full.
"Expired Contract Proceeds" means any and all cash proceeds or
rents realized from the sale or re-lease of Financed Items under an Expired
Contract (net of Liquidation Expenses).
"FDIC" shall mean the Federal Deposit Insurance Corporation,
or any successor thereto.
"Fidelity" means Fidelity Leasing, Inc.
"Financed Items" means Equipment, Software and other property
and services that are permitted to be financed under Contracts in accordance
with the standard policies and procedures of the Seller.
"Governmental Authority" means the United States of America,
any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government.
"Highest Required Investment Category" means (i) with respect
to ratings assigned by S&P, A-1 for short-term instruments and AAA for long-term
instruments, (ii) with respect to ratings assigned by DCR, D-1+ for short-term
instruments, and AAA for long-term instruments.
"Holder" means (i) with respect to a Certificate, the Person
in whose name such Certificate is registered in the Certificate Register, and
(ii) with respect to a Note, the Person in whose name such Note is registered in
the Note Register.
"Indebtedness" means, with respect to any Person at any date,
(a) all indebtedness of such person for borrowed money or for the deferred
purchase price of property or services (other than current liabilities incurred
in the ordinary course of business and payable in accordance with customary
trade practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital leases, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, and (d) all liabilities secured by any Lien on any
property owned by such Person even though such person has not assumed or
otherwise become liable for the payment thereof.
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"Indenture" means the Indenture, dated as of the date hereof,
between the Trust and the Indenture Trustee.
"Indenture Trustee" means Harris Trust and Savings Bank in its
capacity as Indenture Trustee under the Indenture, its successors in interest or
any successor trustee under the Indenture.
"Independent" when used with respect to any specified Person,
means such a Person who (i) is in fact independent of the Trust, the Trust
Depositor, the Seller or the Servicer, (ii) is not a director, officer or
employee of any Affiliate of the Trust other than an Affiliate organized as a
special purpose corporation or similar entity, the Trust Depositor, the Seller
or the Servicer, (iii) is not a person related to any officer or director of the
Trust, the Trust Depositor, the Seller or the Servicer or any of their
respective Affiliates, (iv) is not a holder (directly or indirectly) of more
than 10% of any voting securities of the Trust, the Trust Depositor, the Seller
or the Servicer or any of their respective Affiliates, and (v) is not connected
with the Trust, the Trust Depositor, the Seller or the Servicer as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"Independent Accountants" has the meaning assigned in Section
9.04(a).
"Ineligible Contract" has the meaning specified in Section
11.01.
"Initial Class A-1 Note Principal Balance" means $56,955,084.
"Initial Class A-2 Note Principal Balance" means $27,949,428.
"Initial Class A-3 Note Principal Balance" means $20,880,822.
"Initial Class A-4 Note Principal Balance" means $33,961,804.
"Initial Class B Note Principal Balance" means $9,749,800.
"Initial Class C Note Principal Balance" means $4,874,900.
"Initial Class D Note Principal Balance" means $4,468,658.
"Initial Contracts" means those Contracts conveyed to the
Trust on the Closing Date.
"Initial Cutoff Date" means April 30, 1999.
"Initial Note Principal Balance" means any of the Initial
Class A-1 Note Principal Balance, the Initial Class A-2 Note Principal Balance,
the Initial Class A-3 Note Principal Balance, the Initial Class A-4 Note
Principal Balance, the Initial Class B Note Principal Balance, the Initial Class
C Note Principal Balance or the Initial Class D Note Principal Balance.
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"Insolvency Event" means, with respect to a specified Person,
(a) the filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable Insolvency Law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such person of a
voluntary case under any applicable Insolvency Law now or hereafter in effect,
or the consent by such person to the entry of an order for relief in an
involuntary case under such law, taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such Person
or for any substantial part of this property, or the making by such Person of
any general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due, or the taking of
action by such Person in furtherance of any of the foregoing.
"Insolvency Laws" means the Bankruptcy Code of the United
States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization,
suspension of payments, or similar debtor relief laws from time to time in
effect affecting the rights of creditors generally.
"Insolvency Proceeds" has the meaning assigned in Section
10.01.
"Insurance Policy" means, with respect to any Contract, an
insurance policy covering physical damage to or loss of the related Financed
Item and liability resulting from the use, operation or possession of such
Financed Items.
"Insurance Proceeds" means, depending on the context, any
amounts payable or any payments made to the Servicer under any Insurance Policy.
"Interest Rates" means any of the Class A-1 Interest Rate, the
Class A-2 Interest Rate, the Class A-3 Interest Rate, the Class A-4 Interest
Rate, the Class B Interest Rate, the Class C Interest Rate and the Class D
Interest Rate.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
"Investment Earnings" means the investment earnings (net of
losses and investment expenses) on amounts on deposit in the Collection Account,
the Reserve Fund, the Pre-Funding Account and the Capitalized Interest Account.
"JLA" means JLA Credit Corporation.
"Late Charges" means any late payment fees paid by Obligors on
Contracts after all sums received have been allocated first to regular
installments due or overdue and all such installments are then paid in full.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), equity interest, participation interest, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, and any financing lease having substantially the same economic effect
as any of the foregoing.
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"Liquidation Expenses" means, with respect to any Contract,
the aggregate amount of all out-of-pocket expenses reasonably incurred by the
Servicer (including amounts paid to any subservicer) and any reasonably
allocated costs of internal counsel, in each case in accordance with the
Servicer's customary procedures in connection with the repossession,
refurbishing and disposition of any related Financed Item upon or after the
expiration or earlier termination of such Contract and other reasonable
out-of-pocket costs related to the liquidation of any such Financed Items,
including the attempted collection of any amount owing pursuant to such Contract
if it is a Defaulted Contract.
"Liquidation Proceeds" means, with respect to a Defaulted
Contract, proceeds from the sale, lease or re-lease of the Financed Items,
proceeds of the related Insurance Policy and any other recoveries with respect
to such Defaulted Contract and the related Financed Items, net of Liquidation
Expenses and amounts, if any, so received that are required to be refunded to
the Obligor on such Contract.
"List of Contracts" means the list identifying each Contract
constituting part of the Trust Assets, which list shall consist of the initial
List of Contracts reflecting the Initial Contracts transferred to the Trust on
the Closing Date, together with any Subsequent List of Contracts reflecting the
Subsequent Contracts transferred to the Trust on the related Subsequent Transfer
Date, and which lists as of the applicable Cutoff Date (a) identifies each
Contract and (b) sets forth as to each Contract (i) the Discounted Contract
Balance, (ii) the sum of the remaining Scheduled Payments due from the Obligor,
(iii) the maturity date, (iv) the original term of the Contract, (v) the
remaining term to maturity of the Contract, (vi) the current payment status of
the related Obligor, (vii) the Obligor name and (viii) the related Financed Item
type, and which list in each case (a) identifies each Contract included in the
Contract Pool, and (b) sets forth as to each such Contract (i) the Discounted
Principal Balance as of the applicable Cutoff Date, and (ii) the maturity date,
and which list (as in effect on the Closing Date) is attached to this Agreement
as Exhibit H.
"Lockbox" means the post office box listed on Exhibit J hereto
to which the Obligors are instructed to remit payments on the Contracts included
in the Contract Pool and/or such other post office boxes for such purpose as may
be established or have been established from time to time.
"Lockbox Account" means the intervening account used by a
Lockbox Processor for deposit of funds with respect to the Contracts received in
a Lockbox prior to their transfer to the Collection Account.
"Lockbox Processor" means the depository institution or
processing company (which may be the Indenture Trustee) which processes payments
on the Contracts sent by the Obligors thereon forwarded to a Lockbox.
"Material Modification" means a termination or release
(including pursuant to prepayment), or an amendment, modification or waiver, or
equivalent similar undertaking or agreement, by the Servicer with respect to a
Contract which would not otherwise be permitted under the standards and criteria
set forth in Sections 5.08 and/or 5.09 hereof, as applicable.
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"Maturity Date" means, as applicable, the Class A-1 Maturity
Date, Class A-2 Maturity Date, Class A-3 Maturity Date, Class A-4 Maturity Date,
Class B Maturity Date, Class C Maturity Date or Class D Maturity Date.
"Monthly Principal Amount"' means, with respect to any
Distribution Date, the difference between (a) the sum of the aggregate
outstanding Principal Amount of all Classes of Notes and the
Overcollateralization Balance as of the immediately preceding Distribution Date
after giving effect to all principal payments on that day and (b) the Aggregate
Collateral Value as of the last day of the Collection Period immediately
preceding such Distribution Date.
"Monthly Report" has the meaning specified in Section 9.01.
"Multiemployer Plan" means, with respect to any Person, a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is or was
at any time during the current year or the immediately preceding five years
contributed to by such Person or any ERISA Affiliate on behalf of its employees.
"Note" means any one of the notes of the Trust of any Class
executed and authenticated in accordance with the Indenture.
"Note Distribution Account" means the account established and
maintained as such pursuant to Section 7.01.
"Note Register" has the meaning given such term in Section
2.04 of the Indenture.
"Obligor" means, with respect to any Contract, the Person or
Persons obligated to make payments with respect to such Contract, including any
guarantor thereof.
"Officer's Certificate" shall mean a certificate signed by any
officer of the Trust Depositor, the Seller, the Collateral Custodian, the
Back-Up Servicer or the Servicer and delivered to the Owner Trustee or the
Indenture Trustee, as the case may be.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel (including internal counsel) for the Trust Depositor, the Seller
or the Servicer and who shall be reasonably acceptable to the Owner Trustee or
the Indenture Trustee, as the case may be.
"Original Capitalized Interest Amount" means $153,250.
"Original Pre-Funded Amount" means $20,000,000.
"Other Assets" has the meaning assigned in Section 13.09(b).
"Outstanding" has the meaning given such term in the
Indenture.
"Overcollateralization Balance" means, with respect to each
Distribution Date, an amount equal to the excess, if any, of (a) the Aggregate
Collateral Value as of the last day of the related Collection Period over (b)
the sum of the outstanding Principal Amount of the Notes as of such Distribution
Date after giving effect to all principal payments made on that day.
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"Owner Trustee" means the Person acting, not in its individual
capacity, but solely as Owner Trustee, under the Trust Agreement, its successors
in interest and any successor owner trustee under the Trust Agreement.
"Paying Agent" means as described in Section 6.11 of the
Indenture and Section 3.09 of the Trust Agreement.
"Permitted Liens" means (a) with respect to Contracts in the
Contract Pool: (i) Liens for state, municipal or other local taxes if such taxes
shall not at the time be due and payable or if the Trust Depositor shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto, (ii) Liens in favor of the Trust Depositor created pursuant to the
Transfer and Sale Agreement and transferred to the Trust pursuant to this
Agreement, (iii) Liens in favor of the Trust created pursuant to this Agreement,
and (iv) Liens in favor of the Indenture Trustee created pursuant to this
Agreement and the Indenture; and (b) with respect to the related Equipment: (i)
materialmen's, warehousemen's, mechanics' and other liens arising by operation
of law in the ordinary course of business for sums not due, (ii) Liens for
state, municipal or other local taxes if such taxes shall not at the time be due
and payable, (iii) Liens in favor of the Trust Depositor created pursuant to the
Transfer and Sale Agreement and transferred to the Trust pursuant to this
Agreement, (iv) Liens in favor of the Trust created pursuant to this Agreement,
(v) Liens in favor of the Indenture Trustee created pursuant to this Agreement
and the Indenture, (vi) other subordinated liens which are subordinated to the
prior payment of the Notes on terms described in this Agreement, and (vii) Liens
granted by Obligors or Sources which are subordinated to the interest of the
Trust in such Equipment
"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof
"Placement Agent Agreement" means the Placement Agent
Agreement, dated May 26, 1999, among the Placement Agent, the Trust and
Fidelity, with respect to the private placement of the Notes.
"Placement Agent" means First Union Capital Markets Corp., as
Placement Agent under the Placement Agent Agreement.
"Pre-Funded Amount" means the amount on deposit from time to
time in the Pre-Funding Account.
"Pre-Funding Account" means the Trust Account so designated
established pursuant to Section 7.01.
"Pre-Funding Earnings" means, with respect to any Distribution
Date, all interest and any other investment earnings on amounts on deposit in
the Pre-Funding Account.
"Pre-Funding Period" means the period commencing on the
Closing Date and ending on the earlier to occur of (i) the date on which the
amount on deposit in the Pre-Funding Account is less than $100,000, (ii) the
date on which an Event of Default or Servicer Default occurs and (iii) July 31,
1999.
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"Prepaid Contract" means any Contract that has terminated or
been prepaid in full prior to its scheduled expiration date (including because
of a Casualty Loss), other than a Defaulted Contract.
"Prepayment Amount" has the meaning specified in Section 5.09.
"Prepayments" means any and all partial and full prepayments
on a Contract (including, with respect to any Contract and any Collection
Period, any Scheduled Payment (or portion thereof) which is due in a subsequent
Collection Period which the Servicer has received, and (if such Contract is not
otherwise prepayable by its terms) expressly permitted the related Obligor to
make, in advance of its scheduled due date and which will be applied to such
Scheduled Payment on such due date, and any and all cash proceeds or rents
realized from the sale, lease, re-lease or re-financing of any Financed Item
under a Prepaid Contract, net of Liquidation Expenses), Liquidation Proceeds,
amounts received in respect of Transfer Deposit Amounts and payments upon an
optional termination of the Trust pursuant to Section 7.08.
"Principal Amount" means, with respect to a Class of Notes,
the aggregate Initial Note Principal Balance thereof reduced by (i) the
aggregate amount of any Distributions applied in reduction of such Initial Note
Principal Balance (including, without limitation, any amounts released from the
Pre-Funding Account at the end of the Pre-Funding Period as a prepayment of
principal on such Class of Notes) and (ii) the aggregate amount of any
Distributions then on deposit in the note or certificate payment account, if
any, for such Class of Notes established in accordance with the Indenture or
this Agreement and to be applied in reduction of such Initial Note Principal
Balance in accordance therewith.
"Private Placement Memorandum" shall have the meaning assigned
in the Placement Agent Agreement.
"Program Agreement" means each vendor finance program
agreement pursuant to which Contracts originated by a Source are assigned to
JLA.
"Qualified Eligible Investments" means Eligible Investments
acquired by the Indenture Trustee in its name and in its capacity as Indenture
Trustee, which are held by the Indenture Trustee in the Collection Account, the
Reserve Fund, the Pre-Funding Account or the Capitalized Interest Account and
with respect to which (a) the Indenture Trustee has noted its interest therein
on its books and records, and (b) the Indenture Trustee has purchased such
investments for value without notice of any adverse claim thereto (and, if such
investments are securities or other financial assets or interests therein,
within the meaning of Section 8-102 of the UCC as enacted in Illinois, without
acting in collusion with a securities intermediary in violating such securities
intermediary's obligations to entitlement holders in such assets, under Section
8-504 of such UCC, to maintain a sufficient quantity of such assets in favor of
such entitlement holders), and (c) either (i) such investments are in the
possession of the Indenture Trustee, or (ii) such investments, (A) if
certificated securities and in bearer form, have been delivered to the Indenture
Trustee, or in registered form, have been delivered to the Indenture Trustee and
either registered by the issuer in the name of the Indenture Trustee or endorsed
by effective endorsement to the Indenture Trustee or in blank; (B) if
uncertificated securities, the ownership of which has been registered to the
Indenture Trustee on the books of the issuer thereof (or another person, other
than a securities intermediary, either becomes the registered owner of the
uncertified security on behalf of the Indenture Trustee or, having previously
become the registered owner, acknowledges that it holds for the Indenture
Trustee); or (C) if securities entitlements (within the meaning of Section 8-102
of the UCC as enacted in Illinois) representing interests in securities or other
financial assets (or interests therein) held by a securities intermediary
(within the meaning of said Section 8-102), a securities intermediary indicates
by book entry that a security or other financial asset has been credited to the
Indenture Trustee's securities account with such securities intermediary. Any
such Qualified Eligible Investment may be purchased by or through the Indenture
Trustee or any of its Affiliates.
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"Qualified Institution" means (a) the corporate trust
department of the Indenture Trustee, or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), (i) (A)
which has either (1) a long-term unsecured debt rating acceptable to the Rating
Agencies, or (2) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies, (B) the parent corporation of which
has either (1) a long-term unsecured debt rating acceptable to the Rating
Agencies, or (2) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies, or (C) is otherwise acceptable to the
Rating Agencies, and (ii) whose deposits are insured by the FDIC.
"Rating Agency" means each of DCR and S&P, so long as such
Persons maintain a rating on the Notes and the Certificate; and if either DCR or
S&P no longer maintains a rating on the Notes and the Certificate, such other
nationally recognized statistical rating organization selected by the Trust
Depositor.
"Rating Agency Condition" means, with respect to any action or
series of related actions or proposed transaction or series of related proposed
transactions, that each Rating Agency shall have notified the Trust Depositor,
the Owner Trustee and the Indenture Trustee in writing that such action or
series of related actions or the consummation of such proposed transaction or
series of related transactions will not result in a Ratings Effect.
"Ratings Effect" means, with respect to any action or series
of related actions or proposed transaction or series of related proposed
transactions, a reduction or withdrawal of the rating of any outstanding Class
with respect to which a Rating Agency has previously issued a rating as a result
of such action or series of related actions or the consummation of such proposed
transaction or series of related transactions.
"Record Date" means, with respect to any Distribution Date and
the Notes, the calendar day three days preceding each Distribution Date (or,
with respect to any Definitive Note as defined herein, the last calendar day of
the month preceding the month in which such Distribution Date occurs).
"Required Holders" means (i) prior to the payment in full of
the Class A Notes Outstanding, Class A-1 Noteholders, Class A-2 Noteholders,
Class A-3 Noteholders and/or Class A-4 Noteholders evidencing more than 66 2/3%
of the Aggregate Principal Amount of all Class A Notes outstanding (ii) from and
after the payment in full of the Class A Notes Outstanding, Class B Noteholders
evidencing more than 66 2/3% of the Aggregate Principal amount of all Class B
Notes Outstanding, and (iii) from and after the payment in full of the Class B
Notes Outstanding, Class C Noteholders evidencing more than 66 2/3% of the
Aggregate Principal Amount of all Class C Notes Outstanding or (iv) from and
after the payment in full of the Class C Notes outstanding, Class D Noteholders
evidencing more than 66 2/3% of the aggregate Principal Amount of all Class D
Notes Outstanding.
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"Requirements of Law" for any Person means the certificate of
incorporation or articles of association and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
order or determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
"Reserve Fund" means the Reserve Fund established and
maintained pursuant to Section 7.01 hereof.
"Reserve Fund Amount" means, initially as of the Closing Date,
$1,624,967 (representing the Reserve Fund Initial Deposit) and thereafter, at
any date of determination, means an amount equal to the lesser of (a) the
Reserve Fund Initial Deposit, and (b) the aggregate Principal Amount of the
Notes as of such date of determination.
"Reserve Fund Initial Deposit" means $1,624,967, which is
equal to 1% of the initial Aggregate Collateral Value.
"Responsible Officer" means, with respect to the Owner
Trustee, any officer in its Corporate Trust Administration Department (or any
similar group of a successor Owner Trustee) and with respect to the Indenture
Trustee, any officer within the Corporate Trust Office (or any successor group
of the Indenture Trustee), including any managing director, vice president,
assistant vice president, secretary, assistant secretary, vice president or any
other officer of the Indenture Trustee customarily performing functions similar
to those performed by any of the above designated officers and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Scheduled Payment" means, with respect to any Contract, the
monthly or quarterly or semi-annual or annual rent or financing (whether
principal or principal and interest) payment scheduled to be made by the related
Obligor under the terms of such Contract after the related Cutoff Date (it being
understood that Scheduled Payments do not include any Excluded Amounts.
"Secured Note" means each promissory note with a related
security interest evidenced by written agreement, pursuant to which the purchase
of specified assets by an Obligor is financed for specified monthly, quarterly,
semiannual or annual payments.
"Securities" means the Notes and the Certificate, or any of
them.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
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"Security Deposit" means any security deposit paid by an
Obligor with respect to a Contract.
"Securityholders" means the Holders of the Notes or the
Certificate.
"Seller" means Fidelity.
"Servicer" means initially Fidelity, or its successor, until
any Servicer Transfer hereunder and thereafter means the Successor Servicer
appointed pursuant to Article VIII below with respect to the duties and
obligations required of the Servicer under this Agreement.
"Servicer Advance" means, with respect to any Distribution
Date, the amounts, if any, deposited by the Servicer in the Collection Account
for such Distribution Date in respect of Scheduled Payments pursuant to Section
5.14.
"Servicer Default" shall have the meaning specified in Section
8.01.
"Services" means, in connection with the financing of Software
by the Seller, the support and consulting services related to such Software, the
procurement of which was also financed by the Seller pursuant to a Contract.
"Servicing Fee" has the meaning specified in Section 5.18.
"Servicing Fee Rate" means 0.50%.
"Servicer Transfer" has the meaning assigned in Section
8.02(a).
"Servicing Officer" means any officer of the Servicer involved
in, or responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Indenture Trustee by the Servicer, as the same may be amended
from time to time.
"Skipped Payment" has the meaning assigned in Section 5.08(b).
"Software" means the computer software programs financed or
leased by an Obligor pursuant to a Contract.
"Solvent" means, as to any Person at any time, that (a) the
fair value of the Property of such Person is greater than the amount of such
Person's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for purposes
of Section 101(31) of the Bankruptcy Code; (b) the present fair saleable value
of the Property of such Person in an orderly liquidation of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person is able
to realize upon its Property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in
business or a transaction, and is not about to engage in a business or a
transaction, for which such Person's property would constitute unreasonably
small capital.
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"Source" means, with respect to a Contract, the manufacturer,
dealer, broker, third-party originator or distributor of the Financed Item
subject to such Contract, or the licensor or distributor of any Software subject
to such Contract, or other Person that provided financing under such Contract in
connection with the acquisition or use by an Obligor of Financed Items.
"Subsequent Contract" means any Contracts conveyed, assigned
and transferred by the Trust Depositor to the Trust pursuant to Section 2.04(b)
(and which have been acquired by the Trust Depositor from the Seller pursuant to
Section 2.04(a)), whether an Additional Contract or a Substitute Contract.
"Subsequent Contract Qualification Conditions" means (i) in
the case of Additional Contracts, the Additional Contract Qualification
Conditions, and (ii) in the case of Substitute Contracts, the Substitute
Contract Qualification Conditions.
"Subsequent Cutoff Date" means the date specified as such for
Subsequent Contracts in the related Subsequent Transfer Agreement, which shall
be the last day of the month prior to the month in which the related transfer
occurs.
"Subsequent List of Contracts" means a list, in the form of
the initial List of Contracts delivered on the Closing Date, but listing each
Subsequent Contract transferred to the Trust pursuant to the related Subsequent
Transfer Agreement.
"Subsequent Notice" means (i) in the case of an Additional
Contract, an Addition Notice, and (ii) in the case of a Substitute Contract, a
Substitute Notice.
"Subsequent Purchase Agreement" means, with respect to any
Subsequent Contracts, the agreement between the Seller and the Trust Depositor
pursuant to which the Seller will transfer the Subsequent Contracts to the Trust
Depositor, the form of which is attached hereto as Exhibit L.
"Subsequent Transfer Agreement" means the agreement described
in Section 2.04 hereof.
"Subsequent Transfer Date" means any date on which Subsequent
Contracts are transferred to the Trust.
"Substitute Contract" means a Contract transferred to the
Trust under Section 2.04 with respect to which a related Substitution Event has
occurred with respect to a Contract or Contracts then held in the Contract Pool
and identified in the related Substitution Notice.
"Substitute Contract Qualification Conditions" means, with
respect to any Substitute Contract being transferred to the Trust pursuant to
Section 2.04, the accuracy of each of the following statements as of the related
Cutoff Date for such Contract:
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(a) the Discounted Contract Balance of such Substitute
Contract is not less than that of the Contract or Contracts identified on the
related Substitution Notice (as the Contract or Contracts to be released by the
Trust to the Trust Depositor and reconveyed to the Seller in exchange for such
Substitute Contract);
(b) for each separate Collection Period which corresponds to a
Collection Period in which a payment would have been owing on the Contract or
Contracts identified on the related Substitution Notice as the Contract or
Contracts to be released by the Trust to the Trust Depositor and reconveyed to
the Seller in exchange for such Substitute Contract, the amount in respect of
Scheduled Payments receivable (assuming Scheduled Payments are paid and received
when due) on the Substitute Contract in such Collection Period is not less than
that of such related Contract or Contracts;
(c) if, instead of such Substitute Contract being added to the
Contract Pool on the related Subsequent Transfer Date, such Substitute Contract
had instead been included in the Contract Pool as of the Initial Cutoff Date,
and the related Contract or Contracts identified on the related Substitution
Notice were not so included (and assuming such hypothetical inclusion satisfied
the criteria set forth in clause (a) and (b) above that would have been
applicable at such time), the representations of the Seller set forth in Section
3.05 concerning concentrations would not, as a result of such inclusion, have
become inaccurate or incorrect in any material respect;
(d) such Substitute Contract was not selected in a manner that
the Seller reasonably believes is adverse to the interests of the Noteholders;
(e) all actions or additional actions (if any) necessary to
perfect the security interest and assignment of such Substitute Contract to the
Trust Depositor, the Trust and the Indenture Trustee shall have been taken as of
or prior to the Subsequent Transfer Date;
(f) the substitution of such Substitute Contract into the
Contract Pool will not cause the ADCB of all Substitute Contracts in the
Contract Pool as of the related Subsequent Cutoff Date to exceed 10% of the ADCB
of the Contracts as of the Initial Cutoff Date (plus the ADCB of Additional
Contracts as of the Subsequent Cutoff Date acquired with funds from the
Pre-Funding Account), nor will it cause the ADCB of all Defaulted Contracts and
Adjusted Contracts for which the Seller has substituted Substitute Contracts as
of the related Subsequent Cutoff Date to exceed 6% of the ADCB as of the Initial
Cutoff Date (plus the ADCB of Additional Contracts as of the Subsequent Cutoff
Date acquired with funds from the Pre-Funding Account); and
(g) the final date for the last Scheduled Payment due under
such Substitute Contract is not later than July 2007 (to the extent the final
payment on such Contract is due after July 2007, only Scheduled Payments due on
or prior to such date may be included in the Discount Contract Balance of such
Contract for the purpose of making any calculation under this Agreement or the
Indenture).
"Substitution Event" means, with respect to any transfer of a
related Substitute Contract to the Trust under Section 2.04, the occurrence of
any of the following: (a) one or more Contracts then held in the Trust and
identified in the related Substitution Notice has become a Defaulted Contract,
(b) one or more Contracts then held in the Trust and identified in the related
Substitution Notice has become a Prepaid Contract, (c) one or more Contracts
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then held in the Trust and identified in the related Substitution Notice has
been subjected to a Material Modification, or (d) one or more Contracts then
held in the Trust has become the subject of a breach of a representation or
warranty under this Agreement or other provision which breach or other
provision, in the absence of a substitution of a Substitute Contract for such
Contract or Contracts pursuant to Section 2.04, would require the payment of a
Transfer Deposit Amount to the Trust in respect of such Contract pursuant to
Section 11.01.
"Substitution Notice" means, with respect to any transfer of
Substitute Contracts to the Trust pursuant to Section 2.04 (and the Trust
Depositor's corresponding prior purchase of such Contracts from the Seller), a
notice, which shall be given at least 5 days prior to the related Subsequent
Transfer Date, identifying the Substitute Contracts to be transferred, the ADCB
of such Substitute Contracts and the related Substitution Event (with respect to
an identified Contract or Contracts then in the Contract Pool) to which such
Substitute Contract relates, with such notice to be signed both by the Trust
Depositor and the Seller.
"Successor Servicer" has the meaning given such term in
Section 8.02(b).
"Supplemental Servicing Fee" has the meaning given such term
in Section 8.03.
"S&P" means Standard & Poor's, a division of the McGraw-Hill
Companies, Inc., or its successor in interest.
"Tax Opinion" means, with respect to any action, an opinion of
Counsel to the effect that, for federal income tax purposes, (i) following such
action the Trust will not be deemed to be an association (or publicly traded
partnership) taxable as a corporation, (ii) following such action the Trust will
be disregarded as a separate entity from the Trust Depositor, and (iii) such
action will not affect the tax characterization as debt of Notes of any
outstanding Class issued by the Trust for which an Opinion of Counsel has been
provided that such Notes are debt.
"Transaction Documents" means this Agreement, the Indenture,
the Transfer and Sale Agreement, the Trust Agreement, the Administration
Agreement, any Subsequent Transfer Agreement, any Subsequent Purchase Agreement,
the Placement Agent Agreement and the Note Purchase Agreement (as defined in the
Placement Agent Agreement).
"Transfer and Sale Agreement" means the Transfer and Sale
Agreement, dated as of June 2, 1999, between the Trust Depositor and the Seller.
"Transfer Date" means the Business Day immediately preceding
each Distribution Date.
"Transfer Deposit Amount" means, with respect to each
Ineligible Contract or Excess Contract, on any date of determination, the sum of
the Discounted Contract Balances of such Contracts, together with accrued
interest thereon through such date of determination at the Discount Rate, and
any outstanding Servicer Advances thereon.
"Trust" means the trust created by the Trust Agreement and
funded pursuant to this Agreement, consisting of the Trust Assets.
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"Trust Accounts" means, collectively, the Collection Account,
Note Distribution Account, the Certificate Distribution Account, the Reserve
Fund, the Pre-Funding Account and the Capitalized Interest Account, or any of
them.
"Trust Account Property" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise) and all proceeds of the foregoing.
"Trust Agreement" means the Trust Agreement, dated as of May
28, 1999, between the Trust Depositor and the Owner Trustee.
"Trust Assets" has the meaning given to such term in Section
2.01(b) hereof (and in Section 2.04(a) hereof in respect of Subsequent Contracts
and related assets transferred to the Trust pursuant to Subsequent Transfer
Agreements).
"Trust Depositor" has the meaning assigned such term in the
preamble hereunder, or any successor entity thereto.
"Trust Estate" shall have the meaning specified in the Trust
Agreement.
"Trustees" means the Owner Trustee and the Indenture Trustee,
or any of them individually as the context may require.
"UCC" means the Uniform Commercial Code as enacted in the
States of Illinois, Delaware or Pennsylvania, as applicable; provided, however,
in the event that, by reason of mandatory provisions of law (due to the location
of Equipment or otherwise), any and all of the attachment, perfection or
priority of the Lien of the Trust in and to the Trust Assets or the Lien of the
Indenture Trustee in and to the Collateral is governed by the Uniform Commercial
Code as in effect in Alabama, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio,
Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin or another
jurisdiction other than the State of Illinois, Delaware or Pennsylvania, the
term UCC shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.
"UCC Filing Locations" means the States of Illinois, each
other State in which the Collateral Custodian maintains the Contract Files
related to Contracts in the Contract Pool, and each State in which a Source is
located (as defined in the UCC in such State).
"Uncollectible Advance" means with respect to any
Determination Date and any Contract, the amount, if any, advanced by the
Servicer pursuant to Section 5.14 which the Servicer has as of such
Determination Date determined in good faith will not be ultimately recoverable
by the Servicer.
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"United States" means the United States of America.
"Vice President" of any Person means any vice president of
such Person, whether or not designated by a number or words before or after the
title "Vice President," who is a duly elected officer of such Person.
"Warranty Contract" means any Excess Contract or Ineligible
Contract.
Section 1.02 Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation."
Section 1.03 Section References. All section references,
unless otherwise indicated, shall be to Sections in this Agreement.
Section 1.04 Calculations. Except as otherwise provided
herein, all interest rate and basis point calculations hereunder will be made on
the basis of a 360-day year and twelve 30-day months and will be carried out to
at least three decimal places. To the extent final payments on Contracts in the
Contract are due after July 2007, only Scheduled Payments due on or prior to
such date may be included in the Discount Contract Balance of such Contract for
the purpose of making any calculation under this Agreement or the Indenture.
Section 1.05 Accounting Terms. All accounting terms used but
not specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States. ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACT ASSETS
Section 2.01 Creation and Funding of Trust; Transfer of
Contract Assets.
(a) The Trust shall be created pursuant to the terms and
conditions of the Trust Agreement, upon the execution and delivery of the Trust
Agreement and the filing by the Owner Trustee of an appropriately completed
Certificate of Trust under the Business Trust Statute. The Trust Depositor, as
depositor of the Trust, shall fund and convey assets to the Trust pursuant to
the terms and provisions hereof. The Trust shall be administered pursuant to the
provisions of this Agreement and the Trust Agreement for the benefit of the
Noteholders and Certificateholder. The Owner Trustee is hereby specifically
recognized by the parties hereto as empowered to conduct business dealings on
behalf of the Trust in accordance with the terms hereof and of the Trust
Agreement.
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(b) Subject to and upon the terms and conditions set forth
herein, the Trust Depositor hereby sells, transfers, assigns, sets over and
otherwise conveys to the Trust, for a purchase price of $142,036,314 in cash
(less private placement expenses and certain other expenses associated with the
initial offer and sale of the Notes the proceeds of which represent the
consideration paid by the Trust herein), all the right, title and interest of
the Trust Depositor in and to (items (i) - (vii) below, being collectively
referred to herein as the "Contract Assets"):
(i) the Initial Contracts, and all monies due or to become due
in payment of such Contracts on and after the Initial Cutoff Date, any
Prepayment Amounts, any payments in respect of a casualty or early termination,
and any Defaulted Contract Recoveries received with respect thereto, but
excluding any Scheduled Payments due prior to the Initial Cutoff Date and any
Excluded Amounts;
(ii) the Financed Items related to such Contracts, including
all proceeds from any sale or other disposition of such Financed Items (but
subject to the exclusion and release herein of Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with
respect to such Contracts or the Obligor thereunder under any Program Agreements
and under any guarantee or similar credit enhancement with respect to such
Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
(vi) all income from and proceeds of the foregoing; and
(vii) the security interest of the Trust Depositor or its
affiliates in the Equipment or other property securing such Contracts and the
proceeds thereof.
In addition to the Contract Assets, the Trust Depositor hereby
sells, transfers, assigns, sets over and otherwise conveys to the Trust (i) the
remittances, deposits and payments made into the Trust Accounts from time to
time, (ii) amounts in the Trust Accounts from time to time (and any investments
of such amounts), (iii) all of the Trust Depositor's rights under the Transfer
and Sale Agreement and (iv) all proceeds and products of the foregoing, which
together with the Contract Assets constitute the corpus of the Trust (and are
referred to as the "Trust Assets"). The Seller expressly acknowledges and agrees
that the Trust Depositor has the right to assign its interest under the Transfer
and Sale Agreement to the Trust.
(c) The Seller and the Trust Depositor acknowledge that the
representations and warranties of the Seller in Sections 3.02, 3.03, 3.04 and
3.05 will run to and be for the benefit of the Trust and the Trustees and the
Trust and the Trustees may enforce directly without joinder of Trust Depositor,
the repurchase obligations of the Seller with respect to breaches of such
representations and warranties as set forth herein and in Section 11.01.
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(d) The sale, transfer, assignment, set-over and conveyance of
the Trust Assets by the Trust Depositor to the Trust pursuant to this Agreement
does not constitute and is not intended to result in a creation or an assumption
by the Trust Depositor or the Trust of any obligation of the Seller in
connection with the Contract Assets, or any agreement or instrument relating
thereto, including, without limitation, any obligation to any Obligor, or any
other Person in respect of services not financed by the Seller, or (1) any
taxes, fees, or other charges imposed by any Governmental Authority and (2) any
insurance premiums which remain owing with respect to any Contract at the time
such Contract is sold hereunder.
(e) The Trust Depositor and the Trust intend and agree that
(i) the transfer of the Trust Assets by the Trust Depositor to the Trust are
intended to be a sale, conveyance and transfer of ownership of the Trust Assets
rather than the mere granting of a security interest to secure a borrowing and
(ii) such Trust Assets shall not be part of the Trust Depositor's estate in the
event of a filing of a bankruptcy petition or other action by or against such
Person under any Insolvency Law. In the event, however, that notwithstanding
such intent and agreement, such transfer is deemed to be of a mere security
interest to secure indebtedness, the Trust Depositor shall be deemed to have
granted the Trust a perfected first priority security interest in such Trust
Assets and this Agreement shall constitute a security agreement under applicable
law, securing the repayment of the purchase price paid hereunder and the
obligations and/or interests represented by the Securities, in the order and
priorities, and subject to the other terms and conditions of, this Agreement,
the Indenture and the Trust Agreement, together with such other obligations or
interests as may arise hereunder and thereunder in favor of the parties hereto
and thereto.
If any such transfer of the Contract Assets is deemed to be
the mere granting of a security interest to secure a borrowing, the Trust
Depositor may, to secure the Trust Depositor's own borrowing under the Transfer
and Sale Agreement (to the extent that the transfer of the Contract Assets
thereunder is deemed to be a mere granting of a security interest to secure a
borrowing) repledge and reassign (1) a portion of the Contract Assets pledged to
Trust Depositor by the Seller thereunder and with respect to which the Trust
Depositor has not released its security interest at the time of such pledge and
assignment, and (2) all proceeds thereof. Such repledge and reassignment, may be
made by Trust Depositor with or without a repledge and reassignment by Trust
Depositor of its rights under any agreement with the Seller, and without further
notice to or acknowledgment from the Seller. Under the Transfer and Sale
Agreement, the Seller has agreed to waive, to the extent permitted by applicable
law, all claims, causes of action and remedies, whether, legal or equitable
(including any right of setoff), against the Trust Depositor or any assignee of
the Trust Depositor relating to such action by the Trust Depositor in connection
with the transactions contemplated by this Agreement.
Section 2.02 Conditions to Transfer of Trust Assets to Trust.
On or before the Closing Date, the Seller, the Trust Depositor or the Servicer,
as applicable, shall deliver or cause to be delivered to the Owner Trustee and
Indenture Trustee each of the documents, certificates and other items as
follows:
(a) The initial List of Contracts, certified by the Chairman
of the Board, President or any Vice President of the Trust Depositor, together
with an Assignment substantially in the form of Exhibit A (along with the
delivery of any instruments as required under Section 2.06 below);
(b) A certificate of an officer of the Seller substantially in
the form of Exhibit C hereto;
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(c) A certificate of an officer of the Trust Depositor
substantially in the form of Exhibit B hereto;
(d) Opinions of counsel for the Trust Depositor, the Seller
and the Servicer substantially in the forms of Exhibits D and E hereto (and
including as an addressee thereof each Rating Agency);
(e) A letter from Arthur Andersen LLP, or another nationally
recognized accounting firm, addressed to the Seller, the Servicer and the Trust
Depositor, stating that such firm has reviewed a sample of the Initial Contracts
and performed specific procedures for such sample with respect to certain
contract terms and which identifies those Initial Contracts which do not
conform;
(f) Copies of resolutions of the Board of Directors of the
Seller or of the Executive Committee of the Board of Directors of the Seller
approving the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party, as applicable, and the
transactions contemplated hereunder and thereunder, certified by the Secretary
or an Assistant Secretary of the Seller;
(g) Officially certified, recent evidence of due incorporation
and good standing of the Seller under the laws of Pennsylvania;
(h) Copies of a consent of the members of the Trust Depositor
approving the execution, delivery and performance of this Agreement and the
other Transaction Documents to which the Trust Depositor is a party, as
applicable, and the transactions contemplated hereunder and thereunder,
certified by an officer of the Trust Depositor;
(i) Officially certified, recent evidence of due formation and
good standing of the Trust Depositor under the laws of Delaware;
(j) Evidence of proper filing with appropriate officers in the
UCC Filing Locations of UCC financing statements executed by the Seller, as
debtor, naming the Trust Depositor as secured party and identifying the Contract
Assets as collateral; evidence of proper filing with appropriate officers in the
UCC Filing Locations of UCC financing statements executed by the Trust
Depositor, as debtor, naming the Owner Trustee as secured party (and the
Indenture Trustee as assignee) and identifying the Trust Assets as collateral;
and evidence of proper filing with appropriate officers in the UCC Filing
Locations of UCC financing statements executed by the Trust and naming the
Indenture Trustee as secured party and identifying the Collateral, as
collateral;
(k) Copies of resolutions of the Board of Directors of the
Servicer or of the Executive Committee of the Board of Directors of the Servicer
approving the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party, as applicable, and the
transactions contemplated hereunder and thereunder, certified by the Secretary
or an Assistant Secretary of the Servicer;
(l) Officially certified, recent evidence of due incorporation
and good standing of the Servicer under the laws of Pennsylvania;
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(m) An Officer's Certificate listing the Servicer's Servicing
Officers;
(n) Evidence of deposit in the Collection Account of all funds
received with respect to the Initial Contracts after the Initial Cutoff Date to
the Closing Date, together with an Officer's Certificate from the Servicer to
the effect that such amount is correct;
(o) Evidence of deposit in the Reserve Fund of the Reserve
Fund Initial Deposit by the Trust Depositor;
(p) Evidence of deposit in the Pre-Funding Account of the
Original Pre-Funding Amount by the Trust Depositor;
(q) Evidence of deposit in the Capitalized Interest Account of
the Original Capitalized Interest Amount by the Trust Depositor;
(r) A fully executed Trust Agreement;
(s) A fully executed Administration Agreement;
(t) A fully executed Indenture; and
(u) An opinion of Morgan, Lewis & Bockius LLP to the effect
that (i) for federal income tax purposes, the Class A, Class B and Class C Notes
will be characterized as debt and the Trust will not be characterized as an
association (or publicly traded partnership) taxable as a corporation, and (ii)
for State of Pennsylvania income tax purposes, the characterization of the Trust
will correspond to its characterization for federal income tax purposes.
Section 2.03 Acceptance by Owner Trustee. On the Closing Date,
if the conditions set forth in Section 2.02 have been satisfied, the Owner
Trustee shall issue on behalf of the Trust to, or upon the order of, the Trust
Depositor the Certificate representing ownership of a beneficial interest in
100% of the Trust and the Owner Trustee shall issue, and the Indenture Trustee
shall authenticate, to, or upon the written order of, the Trust Depositor the
Notes secured by the Collateral. The Owner Trustee hereby acknowledges its
acceptance, on behalf of the Trust, of the Trust Assets, and declares that it
shall maintain such right, title and interest in accordance with the terms of
this Agreement and the Trust Agreement upon the Trust herein and therein set
forth.
Section 2.04 Conveyance of Subsequent Contracts.
(a) Conveyance of Subsequent Contracts to the Trust Depositor.
Subject to Section 2.01(d) above and the satisfaction of the conditions set
forth in paragraph (c) below, the Seller may, in the case of Substitute
Contracts pursuant to Section 11.01 hereof, or shall, in the case of Additional
Contracts pursuant to Section 11.04 hereof, sell, transfer, assign, set over and
otherwise convey to the Trust Depositor (by delivery of an executed Subsequent
Purchase Agreement substantially in the form attached as Exhibit L hereto),
without recourse other than as expressly provided herein and therein (and the
Trust Depositor shall be required to purchase (x) through payment by exchange of
one or more related Contracts released by the Trust to the Trust Depositor in
the case of Substitute Contracts and (y) through payment of funds from the
Pre-Funding Account in the case of Additional Contracts) on the Subsequent
Transfer Date all the right, title and interest of the Seller in and to (the
property in clauses (i)-(vii) below, upon such transfer, becoming part of the
"Contract Assets"):
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(i) the Subsequent Contracts identified in the related
Subsequent Notice, and all monies due or to become due in payment of such
Subsequent Contracts on and after the related Subsequent Cutoff Dates, any
Prepayment Amounts, any payments in respect of a casualty or early termination,
and any Defaulted Contract Recoveries received with respect thereto, but
excluding any Scheduled Payments due prior to the related Subsequent Cutoff Date
and any Excluded Amounts;
(ii) the Financed Items related to such Contracts, including
all proceeds from any sale or other disposition of such Financed Items (but
subject to the exclusion and release herein of Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with
respect to such Contracts or the Obligor thereunder under any Program Agreements
and under any guarantee or similar credit enhancement with respect to such
Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
(vi) all income from and proceeds of the foregoing; and
(vii) the security interest of the Seller or its affiliates in
the Equipment or other property securing such Contracts and the proceeds
thereof.
(b) Conveyance of Subsequent Contracts to the Trust. Subject
to Section 2.01(d) above and the conditions set forth in paragraph (c) below,
the Trust Depositor shall sell, transfer, assign, set over and otherwise convey
to the Trust, without recourse other than as expressly provided herein and
therein, (i) all the right, title and interest of the Trust Depositor in and to
the Subsequent Contracts purchased pursuant to Section 2.04(a) above, and (ii)
all other rights and property interests consisting of Contract Assets related to
such Subsequent Contracts (the property in clauses (i) - (ii) above, upon such
transfer, becoming part of the "Trust Assets").
(c) The Seller shall transfer to the Trust Depositor and the
Trust Depositor shall transfer to the Trust the Subsequent Contracts and the
other property and rights related thereto described in paragraphs (a), in the
case of the Seller, or (b), in the case of the Trust Depositor, above only upon
the satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date (and the delivery of a related Subsequent Notice by the
Trust Depositor shall be deemed a representation and warranty by the Trust
Depositor, and of the Seller, that such conditions have been or will be, as of
the related Subsequent Transfer Date, satisfied):
(i) The Trust Depositor shall have provided the Owner Trustee
and the Indenture Trustee with a timely Subsequent Notice complying with the
definition thereof contained herein;
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(ii) there shall have occurred, with respect to each such
Substitute Contract, a corresponding Substitution Event with respect to one or
more Contracts then in the Contract Pool;
(iii) the Subsequent Contract(s) being conveyed to the Trust,
satisfy the related Subsequent Contract Qualification Conditions;
(iv) the Seller shall have delivered to the Trust Depositor a
duly executed written assignment in substantially the form of Exhibit L hereto
(the "Subsequent Purchase Agreement"), which shall include a Subsequent List of
Contracts listing the Subsequent Contracts;
(v) the Trust Depositor shall have delivered to the Owner
Trustee a duly executed written assignment (including an acceptance by the Owner
Trustee) in substantially the form of Exhibit K hereto (the "Subsequent Transfer
Agreement"), which shall include a Subsequent List of Contracts listing the
Subsequent Contracts;
(vi) the Trust Depositor shall have deposited or caused to be
deposited in the Collection Account all Collections received with respect to the
Subsequent Contracts on or after the related Subsequent Cutoff Date;
(vii) as of each Subsequent Transfer Date, neither the Seller
nor the Trust Depositor were insolvent nor will any of them have been made
insolvent by such transfer nor are any of them aware of any pending insolvency;
(viii) no selection procedures reasonably believed by the
Seller or the Trust Depositor to be adverse to the interests of the Noteholders
or the Certificateholder shall have been utilized in selecting the Subsequent
Contracts;
(ix) each of the representations and warranties made by the
Seller pursuant to Sections 3.02, 3.04 and 3.05, applicable to the Subsequent
Contracts shall be true and correct as of the related Subsequent Transfer Date,
and the Seller shall have performed all obligations to be performed by it
hereunder on or prior to such Subsequent Transfer Date; provided, that, in the
case of Substitute Contracts, with respect to the representations and warranties
in Section 3.05, in the event a specific category described in Section 3.05 is
already in excess of a respective concentration limit prior to the substitution
of such Substitute Contracts because of the amortization of the Contract Pool,
neither the Seller nor the Trust Depositor will be in breach of such
representation or warranty, to the extent such Substitute Contracts replace
Contracts having an ADCB that causes the ADCB of the Contract Pool to exceed
such concentration limit due to the Contract Pool's amortization;
(x) the Seller shall, at its own expense, on or prior to the
Subsequent Transfer Date, indicate in its Computer Disk that ownership of the
Subsequent Contracts identified on the Subsequent List of Contracts in the
Subsequent Transfer Agreement have been sold to the Trust through the Trust
Depositor pursuant to this Agreement; and
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(xi) with respect to Additional Contracts, the relative levels
of credit enhancement provided by the subordination of the Class B, Class C and
Class D Notes and the Certificate will not fail to have been maintained during
the Pre-Funding Period.
Section 2.05 Release of Excluded Amounts.
(a) The Indenture Trustee hereby agrees to release to the
Trust from the Trust Assets, and the Trust hereby agrees to release to the Trust
Depositor, an amount equal to the Excluded Amounts immediately upon
identification thereof (which identification shall be delivered in writing by
the Servicer to the Indenture Trustee), which release shall be automatic and
shall require no further act by the Indenture Trustee or the Trust, provided
that the Indenture Trustee or Owner Trustee shall execute and deliver such
instruments of release and assignment, or otherwise confirm the foregoing
release, as may reasonably be requested in writing by the Trust Depositor. Upon
such release, such Excluded Amounts shall not constitute and shall not be
included in the Trust Assets.
(b) Immediately upon the release to the Trust Depositor by the
Trust of the Excluded Amounts, the Trust Depositor hereby irrevocably agrees to
release to the Seller such Excluded Amounts, which release shall be automatic
and shall require no further act by the Trust Depositor, provided, that the
Trust Depositor shall execute and deliver such instruments of release and
assignment, or otherwise confirming the foregoing release of any Excluded
Amounts, as may be reasonably requested by the Seller.
Section 2.06 Delivery of Instruments. (a) The Seller and the
Trust Depositor shall deliver possession of all "instruments" (within the
meaning of Article 9 of the UCC) not constituting part of chattel paper (within
the meaning, of such Article 9), which evidence any Contract to the Owner
Trustee on the Closing Date (or, if applicable, on the relevant Subsequent
Transfer Date), in each, case indorsed in blank without recourse. Pursuant to
Section 3.05 of the Indenture, the Owner Trustee is required to deliver such
instruments to the Indenture Trustee as pledgee under the Indenture.
Accordingly, the Owner Trustee hereby authorizes and directs the Seller and the
Trust Depositor to deliver possession of any such instruments to the Indenture
Trustee on behalf of and for the account of the Owner Trustee, and agrees that
such delivery shall satisfy the condition set forth in the first sentence of
this Section 2.06. The Seller and the Trust Depositor shall also identify on the
List of Contracts (including any deemed amendment thereof associated with any
Subsequent Contracts), whether by attached schedule or marking or other
effective identifying designation, all Contracts which are or are evidenced by
such instruments.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Seller makes, and upon execution of each Subsequent
Purchase Agreement is deemed to make, the following representations and
warranties, on which the Trust Depositor will rely in conveying the Contract
Assets on the Closing Date (and on any Subsequent Transfer Date) to the Trust,
and on which the Trust, the Indenture Trustee, the Noteholders and
Certificateholder will rely. The Trust Depositor acknowledges that such
representations and warranties are being made by the Seller for the benefit of
the Trust.
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Such representations and warranties speak as of the execution
and delivery of this Agreement and as of the Closing Date (or Subsequent
Transfer Date, as applicable), but shall survive the sale, transfer and
assignment of the Contracts to the Trust.
The repurchase obligation or substitution obligation of the
Seller set forth in Section 11.01 constitutes the sole remedy available for a
breach of a representation or warranty of the Seller set forth in Sections 3.02,
3.03, 3.04 or 3.05 of this Agreement. Notwithstanding the foregoing, the Seller
shall not be deemed to be remaking any of the representations set forth in
Section 3.03 on a Subsequent Transfer Date with respect to the Subsequent
Contracts, as such representations relate solely to the composition of the
Initial Contracts conveyed on the Closing Date.
Section 3.01 Representations and Warranties Regarding the
Seller. By its execution of this Agreement and each Subsequent Purchase
Agreement, the Seller represents and warrants that:
(a) Organization and Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The Seller
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business transacted
by it or properties owned or leased by it requires such qualification and in
which the failure so to qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or otherwise) of the
Seller or Trust Depositor. The Seller is properly licensed in each jurisdiction
to the extent required by the laws of such jurisdiction in order to originate
and service the Contracts in accordance with the terms of this Agreement.
(b) Authorization; Binding Obligation. The Seller has the
power and authority to make, execute, deliver and perform this Agreement and the
other Transaction Documents to which the Seller is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which the Seller is a party, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the other Transaction Documents to which the Seller is a party. This
Agreement and the other Transaction Documents to which the Seller is a party
constitute the legal, valid and binding obligation of the Seller and are
enforceable in accordance with their terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies.
(c) No Consent Required. The Seller is not required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement and the other
Transaction Documents to which the Seller is a party.
(d) No Violations. The Seller's execution, delivery and
performance of this Agreement and the other Transaction Documents to which the
Seller is a party will not violate any provision of any existing law or
regulation or any order or decree of any court or the Certificate of
Incorporation or Bylaws of the Seller, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Seller is a party
or by which the Seller or any of the Seller's properties may be bound.
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(e) Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Seller threatened, against the Seller or any of its
properties or with respect to this Agreement or any other Transaction Document
to which the Seller is a party which, if adversely determined, would in the
opinion of the Seller have a material adverse effect on the ability of the
Seller to perform its obligations under the transactions contemplated by this
Agreement or any other Transaction Document to which the Seller is a party.
(f) Place of Business; No Changes; No Trade Names. The
Seller's sole place of business or chief executive office (within the meaning of
Article 9 of the UCC) is as set forth in Section 13.04 below, and each location
where the Seller maintains custody of Contract Files is reflected in the
definition of UCC Filing Location or has otherwise been disclosed with all
necessary actions taken in accordance with Section 4.03 hereof. The Seller has
not changed its name as set forth herein, whether by amendment of its
Certificate of Incorporation, by reorganization or otherwise, and has not
changed the location of its place of business, within the four months preceding
the Closing Date (or Subsequent Transfer Date, as applicable, except in
accordance with the requirements of Section 4.03). The legal name of the Seller
is as set forth in this Agreement and within the five years preceding the
Closing Date the Seller has not used, nor currently does use, any trade names,
fictitious names, assumed names, or "doing business as" names.
(g) No Bulk Sales. The execution, delivery and performance of
this Agreement by the Seller does not require compliance with any "bulk sales"
laws by the Seller.
(h) Solvency. The Seller on the date of and after giving
effect to the transfer of the Contracts to the Trust Depositor is Solvent.
(i) Use of Proceeds. No proceeds of the sale of any Initial
Contract or Subsequent Contract hereunder received by the Seller will be used by
the Seller to purchase or carry any "margin stock" as such term is defined in
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
(j) Not an Investment Company. The Seller is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (or the Seller is exempt from all provisions of such Act).
(k) Taxes. To the best of the Seller's knowledge, (i) the
Seller has filed all tax returns required to be filed in the normal course of
its business and has paid or made adequate provisions for the payment of all
taxes, assessments and other governmental charges due from the Seller or is
contesting any such tax, assessment or other governmental charge in good faith
through appropriate proceedings, (ii) no tax lien has been filed with respect
thereto, and (iii) no claim is being asserted with respect to any such tax, fee
or other charge.
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(l) Sale Treatment. The Seller has treated each of its
transfers of Contracts to the Trust Depositor for all purposes (including
financial accounting purposes) as a sale and purchase on all of its relevant
books, records, financial statements and other applicable documents.
(m) Marking of Files. The Seller has, at its own expense,
prior to the Closing Date, indicated in its Computer Disk that ownership of the
Contracts transferred by it to the Trust Depositor and identified on the List of
Contracts have been sold to the Trust Depositor.
Section 3.02 Representations and Warranties Regarding Each
Contract and as to Certain Contracts in the Aggregate. The Seller represents and
warrants (x) with respect to subsections (a)-(c) below, as to each Contract as
of the execution and delivery of this Agreement and as of the Closing Date, and
as of each Subsequent Transfer Date with respect to each Subsequent Contract,
and (y) with respect to subsections (d)-(f) below, as to the Contract Pool in
the aggregate as of the Closing Date, and as of each Subsequent Transfer Date
with respect to Subsequent Contracts (after giving effect to the addition of
such Subsequent Contracts to the Contract Pool), that:
(a) List of Contracts. The information set forth in the List
of Contracts (as the same may be amended or deemed amended in respect of a
conveyance of Subsequent Contracts on a Subsequent Transfer Date) is true,
complete and correct as of the applicable Cutoff Date.
(b) Eligible Contract. Such Contract satisfies the criteria
for the definition of Eligible Contract set forth in this Agreement as of the
date of its conveyance hereunder.
Section 3.03 Representations and Warranties Regarding the
Initial Contracts in the Aggregate. The Seller represents and warrants, as of
the Closing Date, that:
(a) Amounts. The ADCB of the Contracts as of the Initial
Cutoff Date equals the sum of the principal balance of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and
the Class C Notes on the Closing Date.
(b) Characteristics. The Initial Contracts have the following
additional characteristics: (i) no Contract has a remaining maturity of more
than 96 months; (ii) the final scheduled Distribution Date on the Contract with
the latest maturity is not later than April 2007; (iii) no Contract was
originated after the Initial Cutoff Date; (iv) not more than 4.23% of Initial
Contracts (as measured by ADCB) have purchase options and a stated book value of
residual greater than 10% of the original Equipment Cost and (v) not more than
1.56% of the Initial Contracts (as measured by ADCB) provide for Scheduled
Payments due on a basis other than monthly.
Section 3.04 Representations and Warranties Regarding the
Contract Files. The Seller represents and warrants as of the Closing Date with
respect to the Initial Contracts (or as of the Subsequent Transfer Date, with
respect to Subsequent Contracts), that immediately prior to such date (as
applicable), that (i) the Seller had possession of each original Contract and
the related complete Contract File, and there were no other custodial agreements
relating to the same in effect, (ii) each of such documents which is required to
be signed by the Obligor has been signed by the Obligor in the appropriate
spaces; (iii) all blanks on any form have been properly filled in and each form
has otherwise been correctly prepared; and (iv) the complete Contract File for
each Contract is in the possession of the Collateral Custodian.
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Section 3.05 Representations and Warranties Regarding
Concentrations of Initial Contracts. The Seller represents and warrants as of
the Closing Date, as to the composition of the Initial Contracts in the Contract
Pool as of the Initial Cutoff Date, that:
(a) the sum of the Discounted Contract Balances of Contracts
relating to any one Obligor does not exceed 1.50% of the ADCB;
(b) the sum of the Discounted Contract Balance of Contracts
relating to the five (5) Obligors with the largest aggregate Discounted Contract
Balances does not exceed 5.00% of the ADCB;
(c) the sum of the Discounted Contract Balances of Contracts
relating to Obligors located in California does not exceed 45.00% of the ADCB;
(d) the sum of the Discounted Contract Balances of Contracts
relating to Obligors located in any state (other than California) does not
exceed 10.00% of the ADCB;
(e) the sum of the Discounted Contract Balances of Contracts
secured by, or representing leases of, Software does not exceed 3.00% of the
ADCB;
(f) the sum of the Discounted Contract Balances of Contracts
having remaining terms from 85 to 96 months does not exceed 3.00% of the ADCB;
(g) the sum of the Discounted Contract Balances of Contracts
relating to Obligors located within the same zip code area of the State of
California does not exceed 5.00% of the ADCB; and
(h) the sum of the Discounted Contract Balances of Contracts
with purchase options and a stated book value of residual greater than 10% of
the original Equipment Cost does not exceed 5.0% of the ADCB.
Section 3.06 Representations and Warranties Regarding the
Trust Depositor. By its execution of this Agreement and each Subsequent Transfer
Agreement, the Trust Depositor represents and warrants to the Trust, the
Indenture Trustee, the Noteholders and the Certificateholder that:
(a) Seller's Representations and Warranties. The
representations and warranties set forth in Section 3.02, Section 3.03, Section
3.04 and Section 3.05 are true and correct.
(b) Organization and Good Standing. The Trust Depositor is a
limited liability company duly formed, validly existing and in good standing
under the laws of Delaware and has the power to own its assets and to transact
the business in which it is currently engaged. The Trust Depositor is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business transacted by it or properties owned or leased by
it requires such qualification and in which the failure so to qualify would have
a material adverse effect on the Trust Depositor or the Trust.
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(c) Authorization; Valid Sale; Binding Obligations. The Trust
Depositor has the power and authority to make, execute, deliver and perform this
Agreement and the other Transaction Documents to which it is a party and all of
the transactions contemplated under this Agreement and the other Transaction
Documents to which it is a party, and to create the Trust and cause it to make,
execute, deliver and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and to
cause the Trust to be created. This Agreement and the related Subsequent
Transfer Agreement, if any, shall effect a valid sale, transfer and assignment
of the Trust Assets, enforceable against the Trust Depositor and creditors of
and purchasers from the Trust Depositor. This Agreement and the other
Transaction Documents to which the Trust Depositor is a party constitute the
legal, valid and binding obligation of the Trust Depositor enforceable in
accordance with their terms, except as enforcement of such terms may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable remedies.
(d) No Consent Required. The Trust Depositor is not required
to obtain the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any Governmental
Authority in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or the other Transaction Documents to which it
is a party.
(e) No Violations. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party by the
Trust Depositor, and the consummation of the transactions contemplated hereby
and thereby, will not violate any Requirement of Law applicable to the Trust
Depositor, or constitute a material breach of any mortgage, indenture, contract
or other agreement to which the Trust Depositor is a party or by which the Trust
Depositor or any of the Trust Depositor's properties may be bound, or result in
the creation or imposition of any security interest, lien, charge, pledge,
preference, equity or encumbrance of any kind upon any of its properties
pursuant to the terms of any such mortgage, indenture, contract or other
agreement, other than as contemplated by the Transaction Documents.
(f) Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Trust Depositor threatened, against the Trust Depositor or
any of its properties or with respect to this Agreement, the other Transaction
Documents to which it is a party or the Securities (1) which, if adversely
determined, would in the reasonable judgment of the Trust Depositor have a
material adverse effect on the ability of the Trust Depositor or the Trust to
perform their respective obligations under the transactions contemplated by this
Agreement or the other Transaction Documents to which the Trust Depositor is a
party or (2) seeking to adversely affect the federal income tax or other
federal, state or local tax attributes of the Certificate or Notes.
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(g) Bulk Sales. The execution, delivery and performance of
this Agreement do not require compliance with any "bulk sales" laws by the Trust
Depositor.
(h) Solvency. The Trust Depositor, at the time of and after
giving effect to each conveyance of Trust Assets hereunder, is Solvent on and as
of the date thereof.
(i) Taxes. The Trust Depositor has filed or caused to be filed
all tax returns which, to its knowledge, are required to be filed and has put
all taxes shown to be due and payable on such returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any amount of tax due, the validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
accordance with generally accepted accounting principles have been provided on
the books of the Trust Depositor); no tax lien has been filed and, to the Trust
Depositor's knowledge, no claim is being asserted, with respect to any such tax,
fee or other charge.
(j) Place of Business; No Changes. The Trust Depositor's sole
place of business (within the meaning of Article 9 of the UCC) is as set forth
in Section 13.04 below. The Trust Depositor has not changed its name, whether by
amendment of its Certificate of Formation, by reorganization or otherwise, and
has not changed the location of its place of business, within the four months
preceding the Closing Date.
Such representations speak as of the execution and delivery of
this Agreement and as of the Closing Date in the case of the Initial Contracts,
and as of the applicable Subsequent Transfer Date in the case of the Subsequent
Contracts, but shall survive the sale, transfer and assignment of the Contracts
to the Trust.
Section 3.07 Representations and Warranties Regarding the
Servicer. The Servicer represents and warrants to the Owner Trustee, the
Indenture Trustee, the Noteholders and the Certificateholder that:
(a) Organization and Good Standing. The Servicer is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the corporate power to own its
assets and to transact the business in which it is currently engaged. The
Servicer is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such qualification
and in which the failure so to qualify would have a material adverse effect on
the business, properties, assets, or condition (financial or otherwise) of the
Servicer or the Trust. The Servicer is properly licensed in each jurisdiction to
the extent required by the laws of such jurisdiction to service the Contracts in
accordance with the terms hereof.
(b) Authorization; Binding Obligations. The Servicer has the
power and authority to make, execute, deliver and perform this Agreement and the
other Transaction Documents to which the Servicer is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which the Servicer is a party, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Servicer is a party.
This Agreement and the other Transaction Documents to which the Servicer is a
party constitute the legal, valid and binding obligation of the Servicer
enforceable in accordance with their terms, except as enforcement of such terms
maybe limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies.
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(c) No Consent Required. The Servicer is not required to
obtain the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any Governmental
Authority in connection with the execution, delivery, performance, validity or
enforceability of this Agreement and the other Transaction Documents to which
the Servicer is a party.
(d) No Violations. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Servicer is a
party by the Servicer will not violate any Requirements of Law applicable to the
Servicer, or constitute a material breach of any mortgage, indenture, contract
or other agreement to which the Servicer is a party or by which the Servicer or
any of the Servicer's properties may be bound, or result in the creation of or
imposition of any security interest, lien, pledge, preference, equity or
encumbrance of any kind upon any of its properties pursuant to the terms of any
such mortgage, indenture, contract or other agreement, other than as
contemplated by the Transaction Documents.
(e) Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Servicer threatened, against the Servicer or any of its
properties or with respect to this Agreement, or any other Transaction Document
to which the Servicer is a party which, if adversely determined, would in the
reasonable judgment of the Servicer have a material adverse effect on the
ability of the Servicer or the Trust to perform their respective obligations
under the transactions contemplated by this Agreement or any other Transaction
Document to which the Servicer is a party.
Section 3.08 Representations and Warranties of Back-Up
Servicer and Collateral Custodian. Each of the Back-Up Servicer and the
Collateral Custodian represents and warrants to the Owner Trustee, the Indenture
Trustee, the Noteholders and the Certificateholder that, as of the Closing Date
and on each Subsequent Transfer Date, insofar as any of the following affects
the Back-Up Servicer's or the Collateral Custodian's, as the case may be,
ability to perform its obligations pursuant to this Agreement in any material
respect:
(a) Organization and Good Standing. Each of the Back-Up
Servicer and the Collateral Custodian is an Illinois banking corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois with all requisite corporate power and authority to own its properties
and to conduct its business as presently conducted and to enter into and perform
its obligations pursuant to this Agreement.
(b) Power and Authority. Each of the Back-Up Servicer and the
Collateral Custodian has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms. Each of the Back-Up Servicer
and the Collateral Custodian has duly authorized the execution, delivery and
performance of this Agreement by all requisite corporate action.
(c) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by the
Back-Up Servicer and the Collateral Custodian (with or without notice or lapse
of time) will not (i) conflict with, result in any breach of any of the terms or
provisions of, or constitute a default under, the articles of incorporation or
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by-laws of the Back-Up Servicer or the Collateral Custodian, or any term of any
material agreement, indenture, mortgage, deed of trust or other instrument to
which the Back-Up Servicer or the Collateral Custodian is a party or by which it
or any of its property is bound, (ii) result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or (iii) violate any
law, regulation, order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority applicable to each of the Back-Up Servicer
and the Collateral Custodian or any of its properties that might (in the
reasonable judgment of the Back-Up Servicer or the Collateral Custodian, as the
case may be) materially and adversely affect the performance by the Back-Up
Servicer or the Collateral Custodian of its obligations under, or the validity
or enforceability of, this Agreement.
(d) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Back-Up Servicer or the
Collateral Custodian or any of its respective properties is required to be
obtained by or with respect to the Back-Up Servicer or the Collateral Custodian
in order for the Back-Up Servicer or the Collateral Custodian, as the case may
be, to enter into this Agreement or perform its obligations hereunder.
(e) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Back-Up Servicer and the Collateral
Custodian, enforceable against each in accordance with its terms, except as such
enforceability may be limited by (i) applicable Insolvency Laws and (ii) general
principles of equity (whether considered in a suit at law or in equity).
(f) No Proceeding. There are no proceedings or investigations
pending or, to the best of its knowledge, threatened, against the Back-Up
Servicer or the Collateral Custodian, before any Governmental Authority (i)
asserting the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or (iii)
seeking any determination or ruling that might (in the reasonable judgment of
the Back-Up Servicer or the Collateral Custodian, as the case may be) materially
and adversely affect the performance by the Back-Up Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
Section 4.01 Custody of Contracts.
(a) Harris Trust and Savings Bank is hereby appointed as the
Collateral Custodian pursuant to this Agreement. Harris Trust and Savings Bank
accepts the appointment and agrees to act as the Collateral Custodian pursuant
to this Agreement. Subject to the terms and conditions of this Section 4.01, the
contents of each Contract File shall be held in the custody of the Collateral
Custodian for the benefit of, and as agent for, the Noteholders, the
Certificateholder, the Indenture Trustee, and the Owner Trustee as the owner
thereof.
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(b) The Collateral Custodian agrees to maintain the related
Contract Files at its offices where they are currently maintained, or at such
other offices of the Collateral Custodian in the UCC Filing Locations as shall
from time to time be identified to the Trustees by written notice. The
Collateral Custodian may temporarily move individual Contract Files or any
portion thereof without notice as necessary in accordance with its customary
practices and procedures; provided, however, that the Collateral Custodian will
take all action necessary to maintain the perfection of the Trust's interest in
the Contracts and the proceeds thereof. It is intended that by the Collateral
Custodian's agreement pursuant to Section 4.01(a) above and this Section 4.01(b)
the Trustees shall be deemed to have possession of the Contract Files for
purposes of Section 9-305 of the Uniform Commercial Code of the State in which
the Contract Files are located.
(c) As custodian, the Collateral Custodian shall have and
perform the following powers and duties:
(i) hold the Contract Files on behalf of the Noteholders, the
Certificateholder, the Trust and the Indenture Trustee, maintain accurate
records pertaining to each Contract to enable it to comply with the terms and
conditions of this Agreement, maintain a current inventory thereof and certify
to the Owner Trustee and the Indenture Trustee annually that it continues to
maintain possession of such Contract Files;
(ii) attend to all details in connection with maintaining
custody of the Contract Files on behalf of the Noteholders, the
Certificateholder, the Trust and the Indenture Trustee;
(iii) at all times maintain the original of each fully
executed Contract and store such original Contract in a fireproof vault; and
(iv) within 30 days of the Closing Date (or Subsequent
Transfer Date, as the case may be) deliver a certification to the Owner Trustee
and the Indenture Trustee certifying that as of a date no earlier than the
Closing Date (or Subsequent Transfer Date, as the case may be) it has conducted
an inventory of the Contract Files (which in the case of Subsequent Contracts,
need be only of the Contract Files related to such Subsequent Contracts) and
that there exists a Contract File for each Contract and stating all exceptions
to such statement, if any.
(d) In performing its duties under this Section 4.01, the
Collateral Custodian agrees to act with reasonable care, using that degree of
skill and care that it exercises with respect to similar contracts held by the
Collateral Custodian as custodian thereof, and in any event with no less degree
of skill and care than would be exercised by a prudent custodian of such
Financed Items. The Collateral Custodian shall promptly report to the Owner
Trustee and the Indenture Trustee any failure by it to hold the Contract Files
as herein provided and shall promptly take appropriate action to remedy any such
failure. In acting as custodian of the Contract Files, the Collateral Custodian
further agrees not to assert any legal or beneficial ownership interest in the
Contracts or the Contract Files, except as provided in Section 5.06.
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Section 4.02 Filing. On or prior to the Closing Date, the
Trust Depositor and the Servicer shall cause the UCC financing statement(s)
referred to in Section 2.02(j) hereof to be filed, and from time to time the
Servicer shall take and cause to be taken such actions and execute such
documents as are necessary or desirable or as the Owner Trustee or Indenture
Trustee may reasonably request to perfect and protect the Trust's first priority
perfected interest in the Trust Assets against all other persons, including,
without limitation, the filing of financing statements, amendments thereto and
continuation statements, the execution of transfer instruments and the making of
notations on or taking possession of all records or documents of title.
Section 4.03 Name Change or Relocation.
(a) During the term of this Agreement, none of the Collateral
Custodian, the Servicer or the Trust Depositor shall change its name, identity
or structure or relocate its chief executive office, or relocate or establish a
new location where Contract Files are maintained, without first giving at least
30 days' prior written notice to the Owner Trustee and the Indenture Trustee.
(b) If any change in either the Collateral Custodian's or the
Trust Depositor's name, identity or structure or other action would make any
financing or continuation statement or notice of ownership interest or lien
relating to any Contract Asset seriously misleading within the meaning of
applicable provisions of the UCC or any title statute, the Servicer, no later
than five days after the effective date of such change, shall file such
amendments as may be required to preserve and protect the Trust's interests in
the Trust Assets and the proceeds thereof. In addition, neither the Collateral
Custodian nor the Trust Depositor shall change its place of business (within the
meaning of Article 9 of the UCC), or the locations in which Contract Files are
maintained, from the locations specified in Section 13.04 below or the UCC
Filing Locations unless it has first taken such action as is advisable or
necessary to preserve and protect the Trust's interest in the Trust Assets.
Promptly after taking any of the foregoing actions, the Collateral Custodian or
the Trust Depositor, as the case may be, shall deliver to each Rating Agency,
the Owner Trustee and the Indenture Trustee an opinion of counsel reasonably
acceptable to the Owner Trustee stating that, in the opinion of such counsel,
all financing statements or amendments necessary to preserve and protect the
interests of the Owner Trustee in the Trust Assets have been filed, and reciting
the details of such filing.
Section 4.04 Sale Treatment. The Trust Depositor shall treat
the transfer of Trust Assets made hereunder for all purposes (including
financial accounting purposes) as a financing on all of its relevant books,
records, financial statements and other applicable documents. For federal income
tax purposes the transfer of Trust Assets by the Trust Depositor hereunder shall
not be treated as a sale and purchase for federal income tax purposes so long as
the Trust is disregarded as a separate entity pursuant to Treasury Regulations
Section 301.7701-3(b)(1)(ii).
Section 4.05 Separateness from Trust Depositor. The Servicer
agrees to take or refrain from taking or engaging in with respect to the Trust
Depositor, as applicable, each of the actions or activities specified in the
"substantive consolidation" opinion of Morgan, Lewis & Bockius LLP (including
any certificates of the Servicer attached thereto delivered on the Closing Date,
upon which the conclusions therein are based.)
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Section 4.06 Covenants of the Collateral Custodian. The
Collateral Custodian hereby covenants that:
(a) Contract Files. The Collateral Custodian will not dispose
of any documents constituting the Contract Files in any manner which is
inconsistent with the performance of its obligations as the Collateral Custodian
pursuant to this Agreement and will not dispose of any Contract except as
contemplated by this Agreement.
(b) Compliance with Law. The Collateral Custodian will comply
with all laws and regulations of any Governmental Authority applicable to the
Collateral Custodian or the Contracts in the Contract Pool and related Financed
Items and Contract Files or any part thereof.
(c) Location of Contract Files. The Contract Files shall
remain at all times in the possession of the Collateral Custodian at the address
set forth herein unless notice of a different address is given in accordance
with the terms hereof.
Section 4.07 Duties of Collateral Custodian.
(a) The Collateral Custodian shall take and retain custody of
the Contract Files delivered or cause to be delivered by the Trust Depositor or
the Seller, as the case may be, in accordance with the terms and conditions of
this Agreement, all for the benefit of the Trust, the Owner Trustee and the
Indenture Trustee. Within five Business Days of its receipt of any Contract
File, the Collateral Custodian shall review the related Contract to verify that
such Contract has been executed and has no missing or mutilated pages and to
confirm (in reliance on the related contract number and Obligor's name) that
such Contract is referenced on the related List of Contracts and to confirm that
the Contract File contains the original certificate of title or other title
document with respect to the related Financed Item (if applicable). In order to
facilitate the foregoing review by the Collateral Custodian, in connection with
each delivery of Contract Files hereunder to the Collateral Custodian, the
Servicer shall provide to the Collateral Custodian an electronic file, in EXCEL
or a comparable format, that contains the related List of Contracts or which
otherwise contains the Contract number and the name of the Obligor with respect
to each related Contract. If, at the conclusion of such review, the Collateral
Custodian shall determine that such Contract is not executed or in proper form
on its face, has missing or mutilated pages, or that it is not referenced on
such List of Contracts, or that such title document is not contained in the
Contract File, the Collateral Custodian shall promptly notify the Servicer, the
Seller, the Trust Depositor, the Owner Trustee and the Indenture Trustee of such
determination by providing a written report to such Persons setting forth, with
particularity, the lack of execution of such Contract, that such Contract has
missing or mutilated pages, or the fact that such Contract was not referenced on
the related List of Contracts or such title documents were missing. In addition,
unless instructed otherwise by the Trust Depositor, the Owner Trustee or
Indenture Trustee within 10 days of the Collateral Custodian's delivery of such
report, the Collateral Custodian shall return any Contract not referenced on
such List of Contracts to the Trust Depositor. Other than the foregoing, the
Collateral Custodian shall not have any responsibility for reviewing any
Contract File.
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(b) If the Collateral Custodian during the process of
reviewing the Contract Files finds any document constituting a part of a
Contract File which is not properly executed, has not been received, is
unrelated to a List of Contracts identified in the List of Contracts or does not
conform in a material respect to the description thereof as set forth in the
List of Contracts, the Collateral Custodian shall promptly so notify the
Servicer and the Trustees, respectively. In performing any such review, the
Collateral Custodian may conclusively rely on the Trust Depositor as to the
purported genuineness of any such document and any signature thereon. It is
understood that the scope of the Collateral Custodian's review of the Contract
Files is limited solely to confirming that the documents therein appear on their
face to have been executed and received and to relate to the Contracts
identified in the List of Contracts. The Seller and Trust Depositor agree to use
reasonable efforts to remedy a material defect in a document constituting part
of a Contract of which it is so notified. If, however, within 10 days after
notice to it respecting such defect neither the Seller nor the Trust Depositor
has remedied the defect and the defect materially and adversely affects the
interest of the Noteholders or the Certificateholder in the related Contract,
the Seller will (i) substitute in lieu of such Contract a Substitute Contract in
the manner and subject to the conditions set forth in Section 11.01 or (ii)
purchase such Contract at a purchase price equal to the Transfer Deposit Amount.
(c) In taking and retaining custody of the Contract Files, the
Collateral Custodian shall be deemed to be acting as the agent of the Trust, the
Owner Trustee and the Indenture Trustee, provided, however, that the Collateral
Custodian makes no representations as to the existence, perfection or priority
of any Lien on the Contract Files or the instruments therein, and provided,
further, that the Collateral Custodian's duties as agent shall be limited to
those expressly contemplated herein. All Contract Files shall be kept in
fireproof vaults or cabinets at the locations specified on Exhibit F attached
hereto, or at such other office as shall be specified to the Trust, the Owner
Trustee and the Indenture Trustee by the Collateral Custodian in a written
notice delivered at least 45 days prior to such change. The Collateral Custodian
shall place all Contract Files together in a separate file cabinet with an
appropriate identifying label and maintained in such a manner so as to permit
retrieval and access. The Collateral Custodian shall clearly segregate the
Contract Files from any other documents or instruments maintained by the
Collateral Custodian. The Collateral Custodian shall clearly indicate that such
Contract Files are the sole property of the Trust and that the Trust has granted
an interest therein to the Indenture Trustee. In performing its duties, the
Collateral Custodian shall use the same degree of care and attention as it
employs with respect to similar contracts which it holds as custodian.
(d) Concerning the Collateral Custodian. (i) The Collateral
Custodian may conclusively rely on and shall be fully protected in acting upon
any certificate, instrument, opinion, notice, letter, telegram or other document
delivered to it and which in good faith it reasonably believes to be genuine and
which has been signed by the proper party or parties. The Collateral Custodian
may rely conclusively on and shall be fully protected by in acting upon (a) the
written instructions of any designated officer of the Trust Depositor or (b) the
verbal instructions of any designated officer of the Trust Depositor.
(i) The Collateral Custodian may consult counsel satisfactory
to it and the written advice or opinion of such counsel selected by it 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
accordance with the advice or opinion of such counsel.
(ii) The Collateral Custodian shall not be liable for any
error of judgment, or for any act done or step taken or omitted by it, in good
faith, or for any mistakes of fact or law, or for anything which it may do or
refrain from doing in connection herewith except in the case of its willful
misconduct or negligent performance or omission.
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(iii) The Collateral Custodian makes no warranty or
representation and shall have no responsibility (except as expressly set forth
in this Agreement) as to the content, completeness, validity, sufficiency,
value, genuineness, ownership or transferability of the Contracts, and will not
be required to and will not make any representations as to the validity or value
(except as expressly set forth in this Agreement) of any of the Contracts. The
Collateral Custodian shall not be obligated to take any legal action hereunder
which might in its judgment involve any expense or liability unless it has been
furnished with an indemnity reasonably satisfactory to it.
(iv) The Collateral Custodian shall have no duties or
responsibilities except such duties and responsibilities as are specifically set
forth in this Agreement and no covenants or obligations shall be implied in this
Agreement against the Collateral Custodian.
(v) The Collateral Custodian shall not be required to expend
or risk its own funds in the performance of its duties hereunder.
(vi) It is expressly agreed and acknowledged that the
Collateral Custodian is not guaranteeing performance of or assuming any
liability for the obligations of the other parties hereto or any parties to the
Contracts.
Section 4.08 Access to Certain Documentation and Information
Regarding the Contracts. The Collateral Custodian shall provide to the Indenture
Trustee, the Owner Trustee and the Trust Depositor access to the Contract Files
and all other documentation regarding the Contracts in the Contract Pool and the
related Financed Items in such cases where the Indenture Trustee, the Owner
Trustee or the Trust Depositor is required in connection with the enforcement of
its rights or interests, or by applicable statutes or regulations to review such
documentation, such access being afforded without charge but only (i) upon
reasonable prior written request, (ii) during normal business hours and (iii)
subject to the Servicer's and Collateral Custodian's normal security and
confidentiality procedures. Prior to the Closing Date and once per fiscal year
thereafter, the Indenture Trustee, the Owner Trustee and the Trust Depositor may
review the Servicer's collection and administration of the Contracts in order to
assess compliance by the Servicer with the Servicer's written policies and
procedures, as well as with this Agreement and may conduct an audit of the
Contracts and Contract Files in conjunction with such a review. Such review
shall be reasonable in scope and shall be completed in a reasonable period of
time; provided, however, that such reviews may occur at any time following the
occurrence of an Event of Default; provided further, however, that such reviews
will in any case be subject to the same conditions as in clauses (i), (ii) and
(iii) above.
Section 4.09 Release of Collateral. The Collateral Custodian
shall, with the prior written consent of the Indenture Trustee, deliver to, or
at the written direction of, the Trust Depositor each Contract File for
Collateral released as described in Section 8.04 of the Indenture.
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ARTICLE V
SERVICING OF CONTRACTS
Section 5.01 Appointment and Acceptance; Responsibility for Contract
Administration. Fidelity is hereby appointed as Servicer pursuant to this
Agreement. Fidelity accepts the appointment and agrees to act as the Servicer
pursuant to this Agreement. Harris Trust and Savings Bank is hereby appointed as
the Back-Up Servicer pursuant to this Agreement. Harris Trust and Savings Bank
accepts the appointment and agrees to act as the Back-Up Servicer pursuant to
this Agreement.
The Servicer will have the sole obligation to manage, administer, service
and make collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Owner Trustee, at the written request of a Servicing Officer, shall
furnish the Servicer with any powers of attorney or other documents necessary or
appropriate in the opinion of the Owner Trustee to enable the Servicer to carry
out its servicing and administrative duties hereunder. The Servicer is hereby
appointed the servicer hereunder until such time as any Servicer Transfer may be
effected under Article VIII.
Section 5.02 General Duties. The Servicer will service, administer and
enforce the Contracts in the Contract Pool on behalf of the Trust and will have
full power and authority to do any and all things in connection with such
servicing and administration which it deems necessary or desirable and as shall
not contravene the provisions of this Agreement. The Servicer will manage,
service, administer, and make collections on the Contracts in the Contract Pool
with reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable contracts that it services for itself
or others. The Servicer's duties will include collection and posting of all
payments, responding to inquiries of Obligors regarding the Contracts in the
Contract Pool, investigating delinquencies, accounting for collections,
furnishing monthly and annual statements with respect to collections and
payments in accordance with Article Nine hereof, making Servicer Advances, and
using its best efforts to maintain the perfected first priority security
interest of the Indenture Trustee in the Trust Assets. The Servicer will follow
its customary standards, policies, and procedures and will have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration, and collection that it deems necessary or
desirable. If the Servicer commences a legal proceeding to enforce a Defaulted
Contract pursuant to Section 5.15 or commences or participates in a legal
proceeding (including a bankruptcy proceeding) relating to or involving a
Contract in the Contract Pool, the Trust will be deemed to have automatically
assigned such Contract to the Servicer for purposes of commencing or
participating in any such proceeding as a party or claimant, and the Servicer is
authorized and empowered by the Trust, pursuant to this Section 5.02, to execute
and deliver, on behalf of itself and the Trust, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceedings. If in any
enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Contract, then the Owner Trustee will, at the
Servicer's expense and direction, take steps on behalf of the Trust to enforce
the Contract, including bringing suit in the Trust's name.
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Section 5.03 Consent to Assignment or Replacement. At the request of an
Obligor, the Servicer may in its sole discretion consent to the assignment of
the related Contract or the sublease of a unit of any Financed Item relating to
a Contract, so long as such Obligor remains liable for all of its obligations
under such Contract. Upon the request of any Obligor, the Servicer may, in its
sole discretion, provide for the substitution or replacement of any unit of any
Financed Item for a substantially similar unit of any Financed Item, so long as
such Obligor remains liable for all of its obligations under such Contract.
Section 5.04 Disposition Upon Termination of Contract. Upon the termination
of a Contract included in the Contract Pool as a result of a default by the
Obligor thereunder, and upon any such Contract becoming a Defaulted Contract,
the Servicer will use commercially reasonable efforts to dispose of any related
Financed Item. Without limiting the generality of the foregoing, the Servicer
may dispose of any such Financed Item by purchasing such Financed Item or by
selling such Financed Item to any of its Affiliates for a purchase price equal
to the fair market value thereof. The Servicer will deposit any Prepayments and
any Expired Contracts Proceeds of any such disposition in accordance with
Section 7.01.
Section 5.05 Subservicers. The Servicer may enter into servicing agreements
with one or more subservicers (including any Affiliate of the Servicer) to
perform all or a portion of the servicing functions on behalf of the Servicer;
provided that the Servicer shall remain obligated and be liable to the Trust for
servicing and administering the Contracts in the Contract Pool in accordance
with the provisions of this Agreement without diminution of such obligation and
liability by virtue of the appointment of such subservicer, to the same extent
and under the same terms and conditions as if the Servicer alone were servicing
and administering such Contracts. The Servicer shall provide written
notification of the execution of any subservicing agreement to the Indenture
Trustee and shall provide the Indenture Trustee with a copy of such Agreement.
The fees and expenses of the subservicer (if any) will be as agreed between the
Servicer and its subservicer and neither the Owner Trustee, the Trust, the
Indenture Trustee nor the Holders will have any responsibility therefor. All
actions of a subservicer taken pursuant to such a subservicer agreement will be
taken as an agent of the Servicer with the same force and effect as though
performed by the Servicer. The Successor Servicer may terminate any subservicing
agreement on or after the date of transfer and shall have no obligation for the
payment of any termination fee. No subservicing agreement shall contain
provisions inconsistent with the preceding sentence.
Section 5.06 Further Assurance. The Owner Trustee and the Indenture Trustee
will furnish the Servicer, and the Servicer will furnish any subservicer, with
any limited powers of attorney and other documents necessary or appropriate to
enable the Servicer or a subservicer, as applicable, to carry out its servicing
and administrative duties under this Agreement.
Section 5.07 Notice to Obligors. The Servicer will not be required to
notify any Obligor that such Obligor's Contract or related Financed Item, or any
security interest in such Contract or any related Equipment, has been sold,
transferred, assigned, or conveyed pursuant to this Agreement; provided that, in
the event that the Servicer resigns or is replaced, then if the place for
payment pursuant to any Contract is changed, the Successor Servicer must give
each related Obligor prompt written notice of the appointment of the Successor
Servicer and the place to which such Obligor should make payments pursuant to
each such Contract.
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Section 5.08 Collection Efforts; Modification of Contracts.
(a) The Servicer will make reasonable efforts to collect all payments
called for under the terms and provisions of the Contracts in the Contract Pool
as and when the same become due, and will follow those collection procedures
which it follows with respect to all comparable contracts that it services for
itself or others.
(b) The Servicer may, subject to Sections 5.09 and 5.10, at the request of
an Obligor and at the Servicer's option, waive, modify or otherwise vary any
other provision of a Contract in accordance with its customary and usual
practices; provided, that no such waiver, modification or variance shall (except
as provided in Sections 5.09, 5.10 and 5.15), without the consent of each Rating
Agency,
(i) have the effect of accelerating, delaying or extending the date for or
the amount of any payment of Scheduled Payments with respect to such Contract;
(ii) be inconsistent with the servicing standards set forth in Section
5.02; or
(iii) have a material adverse effect on the interests of any of the Trust,
the Trustees or the Securityholders.
Notwithstanding the foregoing, to the extent consistent with the Servicer's
past practices, the Servicer may on only one occasion with respect to any
Contract, permit a deferment of not more than three consecutive Scheduled
Payments (collectively, a "Skipped Payment") under such Contract to the end of
the term of such Contract so long as, as of the Date of Processing for such
Skipped Payment (i) the sum of the Discounted Contract Balances of all Contracts
with respect to which there have been effected Skipped Payment modifications
since the Initial Cutoff Date does not exceed 5% of the ADCB for the Contract
Pool as of the Initial Cutoff Date, and (ii) such Skipped Payment is deferred to
no later than the last day of the Collection Period related to the Distribution
Date that is twelve months prior to the Class B Maturity Date. Additionally,
notwithstanding the foregoing, the Servicer may in its discretion waive any late
payment charge or any other fees that may be collected in the ordinary course of
servicing any Contract in the Contract Pool.
Section 5.09 Prepaid Contract. The Servicer may, at its option and in
accordance with its customary and usual practices, agree to permit a Contract in
the Contract Pool that is not otherwise contractually prepayable by its terms to
become a Prepaid Contract (which shall not include a Contract that becomes a
Prepaid Contract due to a Casualty Loss); provided, however, that the Servicer
shall not permit the early termination or full prepayment of such a Contract
unless (i) such early termination or full prepayment would not result in the
Trust receiving an amount (the "Prepayment Amount") less than the Discounted
Contract Balance on the Determination Date immediately prior to the date of such
prepayment plus any accrued and unpaid interest payments thereon (at the
Discount Rate), or (ii) if such early termination or full prepayment would
result in the Trust receiving a Prepayment Amount less than the amount set forth
in clause (i), either the Source or the Seller shall have agreed to pay the
Trust the difference between the Prepayment Amount actually paid and the amount
set forth in clause (i) (such payment by the Source or the Seller also to be
considered a "Prepayment Amount"). The Servicer shall not be entitled to recover
any outstanding Servicer Advances with respect to any Contract so permitted to
become a Prepaid Contract except to the extent of amounts in excess of the
required Prepayment Amount actually collected by the Servicer from the related
Obligor in connection with such prepayment. At the option of the Seller, the
Servicer may use the Prepayment Amount to purchase a Substitute Contract for
such Prepaid Contract from the Seller.
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Section 5.10 Acceleration. The Servicer, in its sole discretion, may
accelerate (or elect not to accelerate) the maturity of all or any Scheduled
Payments under any Contract in the Contract Pool under which a default under the
terms thereof has occurred and is continuing (after the lapse of any applicable
grace period); provided that the Servicer is required to accelerate the
Scheduled Payments due under any Contract in the Contract Pool (and take other
action in accordance with the Seller's past practice, including repossessing or
otherwise converting the related Financed Item, to realize upon the value of
such Contract and the related Financed Item) to the fullest extent permitted by
the terms of such Contract, promptly after such Contract becomes a Defaulted
Contract.
Section 5.11 Taxes and Other Amounts. To the extent provided for in any
Contract in the Contract Pool, the Servicer will make reasonable efforts to
collect (or cause to be collected) all payments with respect to amounts due for
taxes, assessments and insurance premiums relating to such Contracts or the
Financed Item and remit such amounts to the appropriate Governmental Authority
or insurer on or prior to the date such payments are due.
Section 5.12 Lockboxes, Etc. On or before the Closing Date with respect to
the Initial Contracts and on or before the relevant Subsequent Transfer Date,
with respect to Subsequent Contracts, the Servicer shall have instructed all
Obligors to make all payments in respect of the Contracts in the Contract Pool
to a Lockbox or directly to the Lockbox Account. All Collections received in a
Lockbox shall, within one Business Day of receipt thereof, be deposited in the
Lockbox Account. In the event that any payments in respect of the Contracts are
made directly to the Servicer, the Servicer shall, within two Business Days of
receipt thereof, deposit such amounts in the Collection Account. The Servicer
shall cause all Collections deposited in the Lockbox Account to be deposited in
the Collection Account within two Business Days of the date such Collections are
deposited in the Lockbox Account.
Section 5.13 Remittances. The Servicer will service all Collections in
accordance with Section 7.01 hereof. As soon as practicable but in any event not
later than the Business Day following the date of establishment by the Servicer
that any of the collected funds received in a Lockbox do not constitute
Collections on account of the Contracts in the Contract Pool, such monies which
do not constitute such Collections, including any Excluded Amounts, shall be
remitted to the Seller or other payee.
Section 5.14 Servicer Advances. For each Collection Period, if the Servicer
determines that any Scheduled Payment (or portion thereof) which was due and
payable pursuant to a Contract in the Contract Pool during such Collection
Period was not received prior to the end of such Collection Period, the Servicer
is required to make a Servicer Advance in an amount up to the amount of such
delinquent Scheduled Payment (or portion thereof), to the extent that in its
sole discretion it determines that it can recoup such amount from subsequent
Collections under the related Contract. The Servicer will deposit any Servicer
Advances into the Collection Account on or prior to 11:00 a.m. (New York time)
on the related Transfer Date, in immediately available funds. The Servicer will
be entitled to be reimbursed for Servicer Advances pursuant to Sections 7.05(a)
and 7.05(b).
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Section 5.15 Realization Upon Defaulted Contract. The Servicer will use its
best efforts consistent with its customary and usual practices and procedures in
its servicing of contracts to repossess or otherwise comparably convert the
ownership of any Financed Item relating to a Defaulted Contract and will act as
sales and processing agent for Financed Items which it repossesses. The Servicer
will follow such other practices and procedures as it deems necessary or
advisable and as are customary and usual in its servicing of contracts and other
actions by the Servicer in order to realize upon such Financed Item, which
practices and procedures may include reasonable efforts to enforce all
obligations of Obligors and repossessing and selling such Financed Item at
public or private sale in circumstances other than those described in the
preceding sentence. Without limiting the generality of the foregoing, the
Servicer may sell any such Financed Item to the Servicer or its Affiliates for a
purchase price equal to the then fair market value thereof. In any case in which
any such Financed Item has suffered damage, the Servicer will not expend funds
in connection with any repair or toward the repossession of such Financed Item
unless it determines in its discretion that such repair and/or repossession will
increase the Liquidation Proceeds by an amount greater than the amount of such
expenses. The Servicer will remit to the Collection Account the Liquidation
Proceeds received in connection with the sale or disposition of Financed Items
relating to a Defaulted Contract in accordance with Section 7.01 net of any
amounts payable to a Source.
Section 5.16 Maintenance of Insurance Policies. The Servicer will use its
best efforts to ensure that each Obligor maintains an Insurance Policy with
respect to the related Financed Items in an amount at least equal to the sum of
the Discounted Contract Balance of the related Contract in the Contract Pool;
provided that the Servicer, in accordance with its customary servicing
procedures, may allow Obligors to self-insure. Additionally, the Servicer will
require that each Obligor maintain property damage liability insurance during
the term of each Contract in the Contract Pool in amounts and against risks
customarily insured against by the Obligor on equipment owned by it. If an
Obligor fails to maintain property damage insurance, the Servicer may purchase
and maintain such insurance on behalf of, and at the expense of, the Obligor. In
connection with its activities as Servicer of the Contracts, the Servicer agrees
to present, on behalf of itself, the Trust, the Indenture Trustee and the
Holders, claims to the insurer under each Insurance Policy and any such
liability policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each Contract. The Servicer's Insurance
Policies with respect to the related Financed Items will insure against
liability for personal injury and property damage relating to such Financed
Items, will name the Indenture Trustee as an insured thereunder and will contain
a breach of warranty clause.
Section 5.17 Other Servicer Covenants. The Servicer hereby covenants that:
(a) Compliance with Law. The Servicer will comply, in all material
respects, with all laws and regulations of any Governmental Authority applicable
to the Servicer or the Contracts in the Contract Pool and related Financed Items
and Contract Files or any part thereof; provided that the Servicer may contest
any such law or regulation in any reasonable manner which will not materially
and adversely affect the value of (or the rights of the Trust on behalf of the
Holders or the Indenture Trustee on behalf of the Noteholders, with respect to)
the Trust Assets.
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(b) Obligations with Respect to Contracts; Modifications. The Servicer will
duly fulfill and comply with, in all material respects, all obligations on the
part of the Trust Depositor to be fulfilled or complied with under or in
connection with each Contract in the Contract Pool and will do nothing to impair
the rights of the Indenture Trustee and the Holders in, to and under the Trust
Assets. The Servicer will perform such obligations under the Contracts in the
Contract Pool and will not change or modify the Contracts, except as otherwise
provided herein and except insofar as any such failure to perform, change or
modify would not materially and adversely affect the value of(or the rights of
the Trust, on behalf of the Holders, or the Indenture Trustee, on behalf of the
Noteholders, with respect to) the Contracts or the related Financed Items.
(c) No Bankruptcy Petition. Prior to the date that is one year and one day
after the payment in full of all amounts owing in respect of all outstanding
Securities, the Servicer will not institute against the Trust Depositor, or the
Trust, or join any other Person in instituting against the Trust Depositor or
the Trust, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceedings under the laws of the
United States or any state of the United States. This Section 5.17(c) will
survive the termination of this Agreement.
(d) Year 2000 Compliance. The Servicer covenants that its computer and
other systems used in servicing the Contracts will be modified to operate in a
manner such that on and after January 1, 2000 (i) the Servicer can service the
Contracts in accordance with the terms of this Agreement and (ii) the Servicer
can operate its business in the same manner as it is operating on the date
hereof.
(e) Credit and Collection Policies. The Servicer will comply in all
material respects with its credit and collection policies in regard to each
Contract Asset and the related Contract.
(f) Compliance with ERISA. The Servicer will establish, maintain and
operate all Multiemployer Plans to comply in all material respects with the
provisions of ERISA, the Code, and all other applicable laws, and the
regulations and interpretations thereunder.
(g) Maintenance of Insurance. The Servicer will maintain, or cause each
Obligor to maintain, with respect to the Contracts which are the Contract Assets
and the Financed Item related thereto, casualty and general liability insurance
in an amount and of a nature consistent with the credit and collection policies,
which casualty insurance may be provided by a subsidiary or other affiliate of
the Seller. The Servicer shall remit, or shall cause to be remitted, the
proceeds of any such insurance policy to the Collection Account unless such
proceeds are immediately applied to pay the cost of repairs to or replacement of
the Financed Item.
(h) Change in Business or Credit and Collection Policies. The Servicer will
not, without the written consent of the Trust Depositor, make any material
change in its credit and collection policies, which change would materially
impair the collectibility of any Contract Asset.
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(i) Change in Lockbox Agreement. The Servicer will not make any amendment,
change or other modification to the terms of the Lockbox Agreement, except to
add parties thereto solely with respect to collections relating to assets other
than the Contract Assets, other than with the prior written consent of the
Indenture Trustee, such consent not to be unreasonably withheld.
(j) Terminate or Reject Contracts. The Servicer will not terminate or
reject any Contract under which a Contract Asset has arisen prior to the term of
such Contract, whether such rejection or early termination is made pursuant to
an equitable cause, statute, regulation, judicial proceeding or other applicable
law (including, without limitation, Section 365 of the Bankruptcy Code) unless,
prior to such termination or rejection, the Seller repurchases the Contract
Asset in the manner described in Section 11.01 hereof.
(k) Accounting Treatment. The Servicer will not prepare any financial
statements or other statements which shall account for the transactions
contemplated by the Transfer and Sale Agreement in any manner other than as the
sale of the Contract Assets by the Seller to the Trust Depositor.
(l) Extension or Amendment of Assets. The Servicer will not, except in
accordance with its credit and collection policy, extend, amend or otherwise
modify, the terms of any Contract Asset, or amend, modify or waive, any term or
condition of any Contract constituting part thereof.
Section 5.18 Servicing Compensation. As compensation for its servicing
activities hereunder and reimbursement for its expenses as set forth in Section
5.19, the Servicer shall be entitled to receive a monthly servicing fee in
respect of any Collection Period (or portion thereof) prior to the termination
of the Trust (with respect to each Collection Period, the "Servicing Fee") equal
to the product of (A) 1/12, (B) the Servicing Fee Rate and (C) the ADCB of the
Contract Pool as (not including amounts in the Pre-Funding Account during the
Pre-Funding Period) as of the second preceding Calculation Date.
Section 5.19 Payment of Certain Costs and Expenses by Servicer. The
Servicer will be required to pay all expenses incurred by it in connection with
its activities under this Agreement, including fees and disbursements of
independent accountants, the Owner Trustee, the Administrator, the Indenture
Trustee, the Back-Up Servicer, the Collateral Custodian, taxes imposed on the
Servicer, expenses incurred in connection with payments and reports pursuant to
this Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Trust or the Trust Depositor, but excluding
Liquidation Expenses incurred as a result of activities contemplated by Section
5.15; provided, however, that the Servicer shall be required to pay the fees and
expenses of the Back-Up Servicer, the Collateral Custodian, the Owner Trustee
and the Indenture Trustee only to the extent the Administrative Fee payable on
any applicable Distribution Date is insufficient for the payment thereof when
due. The Servicer will be required to pay all reasonable fees and expenses owing
to the Owner Trustee or the Indenture Trustee in connection with the maintenance
of the Trust Accounts. The Servicer shall be required to pay such expenses for
its own account and shall not be entitled to any payment or reimbursement
therefor other than the Servicing Fee.
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The Servicer also agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Trustees' and Trust's right, title and interest in and to
the Contract Assets (including, without limitation, the security interest in the
Equipment related thereto and the security interests provided for in the
Indenture).
Notwithstanding the foregoing, in connection with any termination of the
Servicer or other transition expenses following an Event of Default, the
Servicer shall not be required to reimburse the Indenture Trustee or the Back-Up
Servicer for expenses or transition costs to the extent such expenses or costs
of the Indenture Trustee and the Back-Up Servicer exceed, in the aggregate,
$150,000.
Section 5.20 Records. The Servicer shall, during the period it is Servicer
hereunder, maintain such books of account and other records as will enable the
Owner Trustee and the Indenture Trustee to determine the status of each
Contract.
Section 5.21 Inspection.
(a) At all times during the term hereof, upon prior request of the
Servicer, such request not to be unreasonably denied, the Servicer shall afford
the Owner Trustee, the Back-Up Servicer and the Indenture Trustee and their
respective authorized agents reasonable access during normal business hours to
the Servicer's records relating to the Contracts and will cause its personnel to
assist in any examination of such records by the Owner Trustee or the Indenture
Trustee, or such authorized agents, and allow copies of the same to be made. The
examination referred to in this Section will be (i) conducted in a manner which
does not unreasonably interfere with the Servicer's normal operations or
customer or employee relations, (ii) conducted during normal business hours and
(iii) subject to the Servicer's normal security and confidentiality procedures.
Without otherwise limiting the scope of the examination the Owner Trustee or the
Indenture Trustee may, using generally accepted audit procedures, verify the
status of each Contract and review the Computer Disk and records relating
thereto for conformity to Monthly Reports prepared pursuant to Article IX and
compliance with the standards represented to exist as to each Contract in this
Agreement.
(b) At all times during the term hereof, the Servicer shall keep available
a copy of the List of Contracts at its principal executive office for inspection
by Securityholders.
Section 5.22 Trustees to Cooperate in Releases. At the same time as (i) any
Contract in the Contract Pool becomes an Expired Contract and the Financed Items
related to such Contract is sold, (ii) any Contract becomes a Prepaid Contract
and in connection therewith the Financed Items related to such Prepaid Contract
is sold, or (iii) the Servicer substitutes or replaces any unit of Financed
Items as contemplated in Section 5.03, the Owner Trustee, on behalf of the
Trust, and the Indenture Trustee, on behalf of the Noteholders, will to the
extent requested in writing by the Servicer release the Trust's interest in the
Financed Items relating to such Expired Contract or Prepaid Contract or such
substituted or replaced Financed Items, as the case may be; provided that such
release will not constitute a release of the Trust's interest in the proceeds of
such sale (other than with respect to Financed Items that are replaced pursuant
to Section 5.03). In connection with any sale of such Financed Items, the Owner
Trustee, on behalf of the Trust, and the Indenture Trustee will execute and
deliver to the Servicer any assignments, bills of sale, termination statements
and any other releases and instruments as the Servicer may request in order to
effect such release and transfer; provided that neither the Owner Trustee nor
the Indenture Trustee will make any representation or warranty, express or
implied, with respect to any such Financed Items in connection with such sale or
transfer and assignment. Nothing in this Section 5.22 shall diminish the
Servicer's obligations pursuant to Section 7.01 with respect to the proceeds of
any such sale.
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Section 5.23 Servicer Not to Resign. The Servicer shall not resign from the
obligations and duties hereby imposed on it except upon determination that (i)
the performance of its duties hereunder is or becomes impermissible under
applicable law and (ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced as to clause (i) above by an Opinion of Counsel to
such effect delivered to the Rating Agencies, the Trust Depositor, the Owner
Trustee, the Indenture Trustee and the Back-Up Servicer. No such resignation
shall become effective until a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
8.03.
Section 5.24 Merger or Consolidation of Servicer. The Servicer shall not
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, unless the
Servicer is the surviving entity and unless:
(i) the Servicer has delivered to each Rating Agency, the Trust Depositor,
the Owner Trustee, the Indenture Trustee and the Back-Up Servicer an Officer's
Certificate and an Opinion of Counsel each stating that any consolidation,
merger, conveyance or transfer and such supplemental agreement comply with this
Section 5.24 and that all conditions precedent herein provided for relating to
such transaction have been complied with and, in the case of the Opinion of
Counsel, that such supplemental agreement is legal, valid and binding with
respect to the Servicer and such other matters as any Rating Agency, the Trust
Depositor, the Owner Trustee or the Indenture Trustee may request;
(ii) the Servicer shall have delivered notice of such consolidation,
merger, conveyance or transfer to the Rating Agencies, the Trust Depositor, the
Owner Trustee and the Indenture Trustee, and each such party shall have provided
its written consent of such action (or, in the case of each Rating Agency, the
Rating Agency Condition shall have been satisfied with respect thereto); and
(iii) after giving effect thereto, no Event of Default or event which with
notice or lapse of time would constitute an Event of Default shall have
occurred.
Section 5.25 Indemnification.
(a) The Servicer agrees to and hereby does indemnify and hold harmless the
Noteholders, the Certificateholder, the Owner Trustee, the Trust Depositor, the
Trust and the Indenture Trustee and its officers, directors, agents and
employees from and against any and all liabilities, claims, losses, costs,
penalties, expenses or damages of the Noteholders, the Certificateholder, the
Owner Trustee and the Indenture Trustee and its officers directors, agents and
employees resulting in any way from either the failure of such Servicer to
observe or perform any of its covenants or agreements contained in this
Agreement or the breach by such Servicer of a representation or warranty
contained in this Agreement or willful misfeasance, bad faith or negligence by
such Servicer in the performance of its obligations or duties hereunder or for
reckless disregard by such Servicer of such obligations and duties; provided,
however, that the Servicer shall not be liable for any portion of any such
amount resulting from the gross negligence or willful misconduct of any
Noteholder, the Certificateholder, the Owner Trustee or the Indenture Trustee.
The Servicer also agrees to indemnify the Issuer for any state or local taxes
imposed on the Trust as a result of the location of such Servicer's servicing
activities.
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(b) Each indemnified party hereunder shall give prompt written notice from
time to time to the applicable indemnifying party or parties of material
developments in matters which may give rise to liability of such indemnifying
parties hereunder; provided, however, that failure to give such notice shall not
relieve the indemnifying party of any liability except to the extent of actual
prejudice.
Section 5.26 Back-Up Servicer.
(a) On or before the Closing Date, until the receipt by the Servicer of a
Termination Notice, the Back-Up Servicer shall perform the following duties and
obligations:
(i) On or before the Closing Date, the Back-Up Servicer shall accept from
the Servicer delivery of the information required to be set forth in the Monthly
Reports in hard copy and on computer tape; provided, however, the computer tape
is in an MS-DOS, PC readable ASCII format or format to be agreed upon by the
Back-Up Servicer and the Servicer on or prior to closing.
(ii) Not later than 12:00 noon New York time four Business Days prior to
each Distribution Date, the Back-Up Servicer shall accept delivery of electronic
data from the Servicer, which shall contain the following information: the name,
number and name of the related Obligor for each Contract, the collection status,
the contract status, the principal balance, the maturity date, the remaining
term, the payment stream associated with each Contract and the ADCB (the
"Tape").
The Servicer shall provide, or cause any subservicer to provide, the Tape
on each Reporting Date as described above.
(b) On or before each Distribution Date, and until the receipt by the
Servicer of a Termination Notice, the Back-Up Servicer shall perform the
following duties and obligations:
(i) Prior to the related Distribution Date, the Back-Up Servicer shall
review the Monthly Report to ensure that it is complete on its face and that the
following items in such Monthly Report have been accurately calculated, if
applicable, and reported: (A) the ADCB, (B) the accounts that are 30-60 days
past due, (C) the accounts that are 61-90 days past due, (D) the accounts that
are 90+ days past due and (E) the accounts that are Defaulted Contracts. The
Back-Up Servicer shall notify the Indenture Trustee and the Servicer of any
disagreements with the Monthly Report based on such review not later than the
Business Day preceding such Distribution Date to such Persons.
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(ii) If the Servicer disagrees with the report provided under paragraph (i)
above by the Back-Up Servicer or if the Servicer or any subservicer has not
reconciled such discrepancy, the Back-Up Servicer agrees to confer with the
Servicer to resolve such disagreement on or prior to the next succeeding
Determination Date and shall settle such discrepancy with the Servicer if
possible, and notify the Trust Depositor, the Owner Trustee and the Indenture
Trustee of the resolution thereof. The Servicer hereby agrees to cooperate at
its own expense, with the Back-Up Servicer in reconciling any discrepancies
herein. If within 20 days after the delivery of the report provided under
paragraph (i) above by the Back-Up Servicer, such discrepancy is not resolved,
the Back-Up Servicer shall promptly notify the Trust Depositor, the Owner
Trustee and the Indenture Trustee of the continued existence of such
discrepancy. In such event, the Servicer shall cause the Independent
Accountants, at the Servicer's expense, to audit the Monthly Report and, prior
to the next succeeding Distribution Date, reconcile the discrepancies. The
effect, if any, of such reconciliation shall be reflected in the Monthly Report
for the related Determination Date.
With respect to the foregoing, the Back-Up Servicer, in the performance of
its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.
(c) After the receipt of an effective Termination Notice by the Servicer in
accordance with Section 8.02 of this Agreement, all authority, power, rights and
responsibilities of the Servicer under this Agreement, whether with respect to
the Contracts or otherwise, shall pass to and be vested in the Back-Up Servicer
or the Successor Servicer, as the case may be, subject to and in accordance with
the provisions of this Section 5.26 and Section 8.03 of this Agreement.
(d) Any Person (i) into which the Back-Up Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Back-Up Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Back-Up Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Back-Up Servicer hereunder, shall be the
successor to the Back-Up Servicer under this Agreement without further act on
the part of any of the parties to this Agreement.
(e) The Back-Up Servicer may resign at any time by not less than 90 days
notice to the Rating Agencies, the Indenture Trustee, the Owner Trustee, the
Servicer and the Trust Depositor. In addition, the Back-Up Servicer may be
removed without cause by the Issuer by notice then given in writing to the
Servicer and the Back-Up Servicer. In the event of any such resignation or
removal, the Back-Up Servicer may be replaced by (i) the Servicer, acting with
the consent of the Indenture Trustee or (ii) if no such replacement is appointed
within 30 days following such removal or resignation, by the Indenture Trustee.
(f) The Back-Up Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or obligations
of the Back-Up Servicer hereunder. Without limiting the generality of the
foregoing, the Back-Up Servicer, except as expressly set forth herein, shall
have no obligation to supervise, verify, monitor or administer the performance
of the Servicer. The Back-Up Servicer shall not be required to expend or risk
its own funds in the performance of its duties hereunder except to the extent of
the fees received by it hereunder in connection with such performance. The
Back-Up Servicer may act through its agents, attorneys and custodians in
performing any of its duties and obligations under this Agreement; provided,
however, that the Back-Up Servicer shall at all times remain primarily
responsible for the performance of such duties and obligations; provided
further, however, and without diminishing the obligation of the Back-Up Servicer
to perform such duties and obligations, to the extent such an agent, attorney or
custodian is necessary for the performance of the Back-Up Servicer's duties and
obligations hereunder, the Back-Up Servicer shall not be responsible for the
negligent acts of such an agent, attorney or custodian if the Back-Up Servicer
chose such agent, attorney or custodian with due care. Neither the Back-Up
Servicer nor any of its officers, directors, employees or agents shall be
liable, directly or indirectly, for any damages or expenses arising out of the
services performed under this Agreement other than damages or expenses which
result from the gross negligence or willful misconduct of it or them or the
failure to perform materially in accordance with this Agreement.
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Section 5.27 Back-Up Servicer Indemnification. The original Servicer shall
defend, indemnify and hold the Back-Up Servicer and any officers, directors,
employees or agents of the Back-Up Servicer harmless against any and all claims,
losses, penalties, fines, forfeitures, legal fees and related costs, judgments
and any other costs, fees, and expenses that the Back-Up Servicer may sustain in
connection with the claims asserted at any time by third parties against the
Back-Up Servicer which result from (i) any willful misconduct or gross
negligence of the Servicer or (ii) a breach of any representations of the
Servicer in Section 3.07 hereof. Notwithstanding the foregoing, the Servicer
shall not indemnify the Back-Up Servicer if such loss, liability, expense,
damage or injury results or arises as a result of fraud, negligence, (unless the
Back-Up Servicer is expressly held to a higher standard of care by this
Agreement) or breach of fiduciary duty, or representation or warranty, by the
Back-Up Servicer. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof. The
indemnification provided by this Section 5.27 shall survive the termination of
this Agreement.
Section 5.28 Back-Up Servicer Covenants. The Back-Up Servicer hereby
covenants that it will comply with all laws and regulations of any Governmental
Authority applicable to the Back-Up Servicer.
ARTICLE VI
COVENANTS OF THE TRUST DEPOSITOR
Section 6.01 Corporate Existence. During the term of this Agreement, the
Trust Depositor will keep in full force and effect its existence, rights and
franchises as a limited liability company under the laws of the jurisdiction of
its organization and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the other Transaction
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby. In addition, all transactions and dealings between the Trust Depositor
and its Affiliates will be conducted on an arm's-length basis.
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Section 6.02 Contracts Not to be Evidenced by Promissory Notes. The Trust
Depositor will take no action to cause any Contract not originally evidenced by
an instrument as described in Section 2.06 hereof, to be evidenced by an
instrument (as defined in the UCC), except in connection with the enforcement or
collection of such Contract.
Section 6.03 Security Interests. The Trust Depositor will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien on any Contract in the Contract Pool or related
Financed Items, whether now existing or hereafter transferred to the Trust, or
any interest therein (except as expressly set forth herein). The Trust Depositor
will immediately notify the Owner Trustee and the Indenture Trustee of the
existence of any Lien on any Contract in the Contract Pool or related Financed
Items; and the Trust Depositor shall defend the right, title and interest of the
Trust in, to and under the Contracts in the Contract Pool and the related
Financed Items, against all claims of third parties; provided, however, that
nothing in this Section 6.03 shall prevent or be deemed to prohibit the Trust
Depositor from suffering to exist Permitted Liens upon any of the Contracts in
the Contract Pool or any related Financed Items.
Section 6.04 Delivery of Collections. The Trust Depositor agrees to pay to
the Servicer promptly (but in no event later than two Business Days after
receipt) all Collections received by the Trust Depositor in respect of the
Contracts in the Contract Pool, for application in accordance with Section 7.01.
Section 6.05 Regulatory Filings. The Trust Depositor shall make any
filings, reports, notices, applications and registrations with, and seek any
consents or authorizations from, the Commission and any state securities
authority on behalf of the Trust as may be necessary or that Trust Depositor
deems advisable to comply with any federal or state securities or reporting
requirements laws.
Section 6.06 Compliance with Law. Trust Depositor hereby agrees to comply
in all material respects with all Requirements of Law applicable to Trust
Depositor.
Section 6.07 Activities. The Trust Depositor shall not engage in any
business or activity of any kind, or enter into any transaction or indenture,
mortgage, instrument, agreement, contract, lease or other undertaking, which is
not directly related to the transactions contemplated and authorized by this
Agreement or the other Transaction Documents; provided, however, that the Trust
Depositor may purchase and sell (or grant Liens in respect of) assets similar to
the Contract Assets to other Persons in securitization or other non-recourse
financing transactions involving the Seller or any of their Affiliates on terms
and conditions (with respect to liabilities and restrictions on its activities,
as well as restrictions on its interactions with the Seller or their Affiliates,
relevant to the "bankruptcy remoteness" or "substantive consolidation" analysis
relating to the Trust Depositor) substantially similar to the terms and
conditions applicable to the Trust Depositor under the Transaction Documents.
Section 6.08 Indebtedness. The Trust Depositor shall not create, incur,
assume or suffer to exist any Indebtedness or other liability whatsoever, except
(i) obligations incurred under this Agreement, (ii) liabilities incident to the
day to day operations of the Trust Depositor, or (iii) liabilities incident to
the maintenance of its existence in good standing.
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Section 6.09 Guarantees. The Trust Depositor shall not become or remain
liable, directly or contingently, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business), agreement to purchase or repurchase, agreement to supply or
advance funds, or otherwise except in connection with the transactions described
in Section 6.07.
Section 6.10 Investments. The Trust Depositor shall not make or suffer to
exist any loans or advances to, or extend any credit to, or make any investments
(by way of transfer of property, contributions to capital, purchase of stock or
securities or evidences of indebtedness, acquisition of the business or assets,
or otherwise) in, any Person except (i) for purchases of Contracts from the
Seller, or (ii) for investments in Eligible Investments in accordance with the
terms of this Agreement. Without limiting the generality of the foregoing, the
Trust Depositor shall not: (i) provide credit to any Securityholder for the
purpose of enabling such Securityholder to purchase any Securities or (ii) lend
any money to the Trust.
Section 6.11 Merger; Sales. The Trust Depositor shall not enter into any
transaction of merger or consolidation, or liquidate or dissolve itself (or
suffer any liquidation or dissolution) or acquire or be acquired by any Person,
or convey, sell, lease or otherwise dispose of all or substantially all of its
property or business, except as provided for in this Agreement.
Section 6.12 Distributions. The Trust Depositor shall not declare or pay,
directly or indirectly, any distribution (whether in cash or other property)
with respect to the profits, assets or capital of the Trust Depositor or any
Person's interest therein, or purchase, redeem or otherwise acquire for value
any of its limited liability company interests now or hereafter outstanding,
except that so long as no Event of Default has occurred and is continuing and no
Event of Default would occur as a result thereof or after giving effect thereto
and the Trust Depositor would continue to be Solvent as a result thereof and
after giving effect thereto, the Trust Depositor may make distributions in
respect of its limited liability company interests.
Section 6.13 Other Agreements. The Trust Depositor shall not become a party
to, or permit any of its properties to be bound by, any indenture, mortgage,
instrument, contract, agreement, lease or other undertaking, except this
Agreement and the other Transaction Documents to which it is a party and any
agreement relating to another securitization transaction permitted by Section
6.07 nor shall it amend or modify the provisions of its Certificate of Formation
or limited liability company agreement or issue any power of attorney except to
the Owner Trustee, the Indenture Trustee or the Servicer except in accordance
with the Transaction Documents.
Section 6.14 Separate Corporate Existence. The Trust Depositor shall:
(a) Maintain its own deposit account or accounts, or cause such accounts to
be maintained on its behalf, separate from those of any Affiliate, with
commercial banking institutions. The funds of the Trust Depositor will not be
diverted to any other Person or for other than corporate uses of the Trust
Depositor.
(b) Ensure that, to the extent that it shares the same officers or other
employees as any of its members or Affiliates, the salaries of and the expenses
related to providing benefits to such officers and other employees shall be
fairly allocated among such entities, and each such entity shall bear its fair
share of the salary and benefit costs associated with all such common officers
and employees.
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(c) Ensure that, to the extent that it jointly contracts with any of its
members or Affiliates to do business with vendors or service providers or to
share overhead expenses, the costs incurred in so doing shall be allocated
fairly among such entities, and each such entity shall bear its fair share of
such costs. To the extent that the Trust Depositor contracts or does business
with vendors or service providers when the goods and services provided are
partially for the benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose benefit the goods
and services are provided, and each such entity shall bear its fair share of
such costs. All material transactions between Trust Depositor and any of its
Affiliates shall be only on an arm's length basis.
(d) To the extent that the Trust Depositor and any of its members or
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses.
(e) Conduct its affairs strictly in accordance with its limited liability
company agreement.
(f) Take or refrain from taking, as applicable, each of the activities
specified in the "substantive consolidation" opinion of Morgan, Lewis & Bockius
LLP, delivered on the Closing Date, upon which the conclusions expressed therein
are based.
Section 6.15 Location; Records. The Trust Depositor (x) shall not move
outside the Commonwealth of Pennsylvania, the location of its chief executive
office, without 45 days' prior written notice to the Owner Trustee and the
Indenture Trustee and (y) will promptly take all actions required (including,
but not limited to, all filings and other acts necessary or advisable under the
UCC of each relevant jurisdiction) in order to continue the first priority
perfected security interest of the Indenture Trustee in all Contracts in the
Contract Pool. The Trust Depositor will give the Owner Trustee and the Indenture
Trustee prompt notice of a change within the State of Pennsylvania of the
location of its chief executive office.
Section 6.16 Liability of Trust Depositor; Indemnities. The Trust Depositor
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Trust Depositor under this Agreement.
The Trust Depositor shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Back-Up Servicer, the Collateral Custodian, the Indenture
Trustee and the Servicer from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions contemplated
herein and in the other Transaction Documents, including any sales, gross
receipts, general corporation, tangible personal property, Pennsylvania personal
property replacement privilege or license taxes (but, in the case of the Trust,
not including any taxes asserted with respect to, and as of the date of, the
sale of the Contracts to the Trust or the issuance and original sale of the
Securities, or asserted with respect to ownership of the Contracts, or federal
or other income taxes arising out of distributions on the Certificate or the
Notes) and costs and expenses in defending against the same.
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The Trust Depositor shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Back-Up Servicer, the Collateral Custodian, the Indenture
Trustee and the Securityholders from and against any loss, liability or expense
incurred by reason of the Trust Depositor's willful misfeasance, bad faith or
negligence (other than errors in judgment) in the performance of its duties
under this Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement.
The Trust Depositor shall indemnify, defend and hold harmless the Trust,
the Owner Trustee, the Back-Up Servicer, the Collateral Custodian and the
Indenture Trustee from and against all costs, expenses, losses, claims, damages
and liabilities arising out of or incurred in connection with the acceptance or
performance of the trusts and duties herein and, in the case of the Owner
Trustee, in the Trust Agreement and, in the case of the Indenture Trustee, in
the Indenture, except to the extent that such cost, expense, loss, claim, damage
or liability in the case of (i) the Owner Trustee, shall be due to the willful
misfeasance, bad faith or negligence of the Owner Trustee, or shall arise from
the breach by the Owner Trustee of any of its representations or warranties set
forth in Section 7.03 of the Trust Agreement, or (ii) the Indenture Trustee,
shall be due to the willful misfeasance, bad faith or negligence of the
Indenture Trustee.
The Trust Depositor shall indemnify, defend and hold harmless the Owner
Trustee, the Back-Up Servicer, the Collateral Custodian and the Indenture
Trustee from and against any loss, liability or expense incurred by reason of
the Trust Depositor's or Trust's violation of federal or state securities laws
in connection with the offering and sale of the Notes.
Notwithstanding the foregoing, the Trust Depositor shall not be liable for
any costs, expenses, losses, claims, damages or liabilities in an amount in
excess of the total assets of the Trust Depositor. Indemnification under this
Section shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If the Trust Depositor shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Trust Depositor,
without interest. The Trust Depositor's payment obligations under this Section
6.16 shall survive the discharge of this Agreement.
Section 6.17 Bankruptcy Limitations. The Trust Depositor shall not, without
the affirmative vote of a majority of the members of the Trust Depositor (which
must include the affirmative vote of at least one duly appointed Independent
member) (A) voluntarily dissolve or liquidate, in whole or in part, or institute
proceedings to be adjudicated bankrupt or insolvent, (B) consent to the
institution of bankruptcy or insolvency proceedings against it, (C) file a
petition seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, (D) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the corporation or a substantial part of its property, (E) make a
general assignment for the benefit of creditors, (F) admit in writing its
inability to pay its debts generally as they become due, or (G) take any action
in furtherance of the actions set forth in clauses (A) through (F) above;
provided, however, that no member of the Trust Depositor may be required to
consent to the institution of bankruptcy or insolvency proceedings against the
Trust Depositor so long as it is Solvent.
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Section 6.18 Limitation on Liability of Trust Depositor and Others. The
Trust Depositor and any director or officer or employee or agent of the Trust
Depositor may rely in good faith on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Trust Depositor and any director or officer or employee or agent
of the Trust Depositor shall be reimbursed by the Owner Trustee or the Indenture
Trustee, as the case may be, for any contractual damages, liability or expense
incurred by reason of the Owner Trustee's or the Indenture Trustee's willful
misfeasance, bad faith or negligence (or gross negligence in the case of the
Owner Trustee) (except errors in judgment) in the performance of their
respective duties hereunder, or by reason of reckless disregard of their
respective obligations and duties hereunder. The Trust Depositor shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its obligations under this Agreement, and that in its
opinion may involve it in any expense or liability.
Section 6.19 Chief Executive Office. During the term of this Agreement, the
Trust Depositor will maintain its chief executive office in the Commonwealth of
Pennsylvania.
ARTICLE VII
ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS
Section 7.01 Trust Accounts; Collections.
(a) On or before the Closing Date, the Servicer shall establish the
Collection Account, the Note Distribution Account, the Certificate Distribution
Account, the Reserve Fund, the Pre-Funding Account and the Capitalized Interest
Account, each in the name of the Indenture Trustee for the benefit of the
Noteholders and the Certificateholder, respectively. The Servicer and Indenture
Trustee are hereby required to ensure that each of the Trust Accounts is
established and maintained as an Eligible Account with a Qualified Institution.
If any institution with which any of the accounts established pursuant to this
Section 7.01(a) are established ceases to be a Qualified Institution, the
Servicer or the Indenture Trustee (as the case may be) shall within 10 Business
Days establish a replacement account at a Qualified Institution after notice of
such event.
(b) The Servicer shall deposit or cause to be deposited, without deposit
into any intervening account, into the Collection Account as promptly as
practical after the Date of Processing (but in any case not later than the
second Business Day following the Date of Processing thereof, and in all events
not later than five Business Days following actual receipt of such remittance by
the Servicer), all Collections on deposit with the Servicer in the form of
available funds in a Lockbox Account, and all Collections otherwise received by
the Servicer.
(c) Notwithstanding Section 7.01(b), the Servicer shall deposit or cause to
be deposited, on the Closing Date and on each Subsequent Transfer Date
thereafter, in immediately available funds into the Collection Account, all
Collections received after the applicable Cutoff Date and through and including
the Closing Date or Subsequent Transfer Date, as the case may be, in respect of
Contracts being transferred to the Trust on such date.
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(d) Notwithstanding Sections 7.01(b) and (c), the Servicer shall not be
required to deposit or cause to be deposited Collections on any Contracts in the
Contract Pool on which (and to the extent that) the Servicer has previously made
a Servicer Advance which has not been reimbursed, which amounts the Servicer may
retain (as reimbursement of such Servicer Advance).
(e) Notwithstanding Sections 7.01(b) and (c), if (i) the Servicer makes a
deposit into the Collection Account in respect of a Collection of a Contract in
the Contract Pool and such Collection was received by the Servicer in the form
of a check which is not honored for any reason, or (ii) the Servicer makes a
mistake with respect to the amount of any Collection and deposits an amount that
is less than or more than the actual amount of such Collection, the Servicer
shall appropriately adjust the amount subsequently deposited into the Collection
Account to reflect such dishonored check or mistake. Any Scheduled Payment in
respect of which a dishonored check is received shall be deemed not to have been
paid.
Section 7.02 Reserve Fund. (a) On the Closing Date, the Trust Depositor
shall deposit (or cause to be deposited) the Reserve Fund Initial Deposit into
the Reserve Fund from the net proceeds of the Securities.
(b) If on any Distribution Date, the amounts on deposit in the Reserve Fund
(after giving effect to all deposits thereto or withdrawals therefrom on such
Distribution Date) is greater than the Reserve Fund Amount, the Indenture
Trustee shall pursuant to the Monthly Report distribute the excess of the amount
on deposit in the Reserve Fund over the Reserve Fund Amount to the Holder of the
Certificate. Additionally, if on any Distribution Date, the amounts on deposit
in the Reserve Fund (after giving effect to all deposits thereto or withdrawals
therefrom on such Distribution Date) is greater than the aggregate outstanding
Principal Amounts of the Notes, the Indenture Trustee shall pursuant to the
Monthly Report distribute the excess of the amount on deposit in the Reserve
Fund over the aggregate outstanding Principal Amounts of the Notes to the Holder
of the Certificate.
Section 7.03 Trust Account Procedures. If the Servicer so directs, in
writing, the Indenture Trustee shall invest the amounts in the Trust Accounts in
Qualified Eligible Investments of the type specified in such written direction
that mature not later than one Business Day prior to the next succeeding
Distribution Date except for Eligible Investments described in item (vi) of that
definition. Any loss on such investments shall be deposited in the applicable
Trust Account by the Servicer out of its own funds immediately as realized.
Funds in the Trust Accounts not so invested must be insured to the extent
permitted by law by the Bank Insurance Fund or the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation. Subject to the restrictions
herein, the Indenture Trustee may purchase a Qualified Eligible Investment from
itself or an Affiliate. Subject to the other provisions hereof, the Indenture
Trustee shall have sole control over each such investment and the income
thereon, and any certificate or other instrument evidencing any such investment,
if any, shall be delivered directly to the Indenture Trustee or its agent,
together with each document of transfer, if any, necessary to transfer title to
such investment to the Indenture Trustee in a manner which complies with this
Section 7.03. All Investment Earnings on investments of funds in the Trust
Accounts (other than investment earnings on the Pre-Funding Account (which
earnings shall be deposited into the Capitalized Interest Account in accordance
with Section 7.06) or the Reserve Fund) shall be deposited in the Collection
Account pursuant to Section 7.01 and distributed on the next Distribution Date
pursuant to Section 7.05. The Trust Depositor and the Trust agree and
acknowledge that the Indenture Trustee is to have "control" (within the meaning
of Section 8-102 of the UCC as enacted in Illinois) of collateral comprised of
"Investment Property" (within the meaning of Section 9-115 of the UCC as enacted
in Illinois) for all purposes of this Agreement. In the absence of timely
written direction from the Servicer, the Indenture Trustee shall invest amounts
in the Trust Accounts in Qualified Eligible Investments of the type specified in
clause (vi) of the definition of Eligible Investments herein. In no event shall
the Indenture Trustee be liable for the selection of Eligible Investments or for
investment losses incurred thereon. The Indenture Trustee shall have no
liability in respect of losses incurred as a result of the liquidation of any
Eligible Investment prior to its stated maturity or the failure of the Servicer
to provided timely written investment direction.
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Section 7.04 Securityholder Distributions.
(a) Each Noteholder and Certificateholder as of the related Record Date
shall be paid on the next succeeding Distribution Date by check mailed to such
Noteholder or Certificateholder at the address for such Noteholder or
Certificateholder appearing on the Note Register or Certificate Register or by
wire transfer if such Noteholder or Certificateholder provides written
instructions to the Indenture Trustee, or Owner Trustee, respectively, at least
ten days prior to such Distribution Date.
(b) The Indenture Trustee shall serve as the Paying Agent hereunder and
shall make the payments to the Noteholders and Certificateholder required
hereunder. The Indenture Trustee hereby agrees that all amounts held by it for
payment hereunder will be held in trust for the benefit of the Noteholders and
Certificateholder.
Section 7.05 Allocations and Distributions.
(a) Allocations and Distributions Prior to an Event of Default. On each
Determination Date prior to an Event of Default, the Servicer, pursuant to
written monthly payment instructions and notification, shall instruct the
Indenture Trustee to withdraw, and on the succeeding Distribution Date the
Indenture Trustee acting in accordance with such written instructions shall
withdraw, the amounts required to be withdrawn from the Collection Account
pursuant to this Section and, with respect to the amounts described in clauses
(iv) through (xv) below, deposited to the Note Distribution Account (pursuant to
Sections 3.01 and 8.02(b) of the Indenture) in order to make the following
payments or allocations from the Available Funds for the related Distribution
Date (in each case, such payment or transfer to be made only to the extent funds
remain available therefor after all prior payments and transfers for such
Distribution Date have been made), in the following order of priority:
(i) pay to the Servicer, the amount of any unreimbursed Servicer Advance
(to the extent not reimbursed under Section 7.01(a));
(ii) pay to the Servicer, the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the Servicing Fee that
were due in respect of prior monthly periods that remain unpaid;
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(iii) pay to the Back-Up Servicer, the Collateral Custodian, the Owner
Trustee and the Indenture Trustee an amount equal to the Administrative Fee then
due, together with any accrued and unpaid Administrative Fees;
(iv) pay to the Indenture Trustee on behalf of the Class A-l Noteholders,
Class A-2 Noteholders, Class A-3 Noteholders and Class A-4 Noteholders an amount
equal to interest accrued in respect of the related Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class A-4 Notes at the Class A-1 Interest Rate, Class
A-2 Interest Rate, Class A-3 Interest Rate and Class A-4 Interest Rate,
respectively, for the Accrual Period immediately preceding such Distribution
Date, together with any such amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made; provided that if the
Available Funds remaining to be allocated pursuant to this clause are less than
the full amount required to be so allocated, such remaining Available Funds
shall be allocated to each Holder of a Class A Note pro rata based upon the
outstanding principal amount thereof;
(v) pay to the Indenture Trustee on behalf of the Class B Noteholders an
amount equal to the interest accrued thereon at the Class B Interest Rate for
the Accrual Period immediately preceding such Distribution Date, together with
any amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Funds remaining
to be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Funds shall be paid to each Holder of a
Class B Note pro rata based on the outstanding principal amount thereof;
(vi) pay to the Indenture Trustee on behalf of the Class C Noteholders, an
amount equal to the interest accrued thereon at the Class C Interest Rate for
the Accrual Period immediately preceding such Distribution Date, together with
any such amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Funds remaining
to be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Funds shall be paid to each Holder of a
Class C Note pro rata based on the outstanding principal amount thereof;
(vii) pay to the Indenture Trustee on behalf of the Class D Noteholders, an
amount equal to the interest accrued thereon at the Class D Interest Rate for
the Accrual Period immediately preceding such Distribution Date, together with
any such amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Funds remaining
to be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Funds shall be paid to each Holder of a
Class D Note pro rata based on the outstanding principal amount thereof;
(viii) pay to the Indenture Trustee, on behalf of the Class A-1
Noteholders, the Class A Principal Payment Amount for such Distribution Date;
provided that if the Available Funds remaining to be allocated pursuant to this
clause are less than the full amount required to be so paid, such remaining
Available Funds shall be allocated to each Class A-1 Note pro rata based on the
outstanding principal amount thereof;
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(ix) pay to the Indenture Trustee, on behalf of the Class A-2 Noteholders,
(A) $0 until the Distribution Date on which the Principal Amount of Class A-1
Notes is $0 and (B) on each subsequent Distribution Date, the Class A Principal
Payment Amount; provided that if the Available Funds remaining to be allocated
pursuant to this clause are less than the full amount required to be so paid,
such remaining Available Funds shall be allocated to each Class A-2 Note pro
rata based on the outstanding principal amount thereof;
(x) pay to the Indenture Trustee, on behalf of the Class A-3 Noteholders,
(A) $0 until the Distribution Date on which the Principal Amount of the Class
A-1 Notes and Class A-2 Notes is $0 and (B) on each subsequent Distribution
Date, the Class A Principal Payment Amount; provided that if the Available Funds
remaining to be allocated pursuant to this clause are less than the full amount
required to be so paid, such remaining Available Funds shall be allocated to
each Class A-3 Note pro rata based on the outstanding principal amount thereof;
(xi) pay to the Indenture Trustee, on behalf of the Class A-4 Noteholders,
(A) $0 until the Distribution Date on which the Principal Amount of the Class
A-1 Notes, Class A-2 Notes and Class A-3 Notes is $0 and (B) on each subsequent
Distribution Date, the Class A Principal Payment Amount; provided that if the
Available Funds remaining to be allocated pursuant to this clause are less than
the full amount required to be so paid, such remaining Available Funds shall be
allocated to each Class A-4 Note pro rata based on the outstanding principal
amount thereof;
(xii) pay to the Indenture Trustee, on behalf of the Class B Noteholders,
(A) $0 until the Distribution Date on which the Principal Amount of the Class
A-1 Notes is $0 and (B) on each subsequent Distribution Date, the Class B
Principal Payment Amount; provided that if the Available Funds remaining to be
allocated pursuant to this clause are less than the full amount required to be
so paid, such remaining Available Funds shall be allocated to each Class B Note
pro rata based on the outstanding principal amount thereof;
(xiii) pay to the Indenture Trustee, on behalf of the Class C Noteholders,
(A) $0 until the Distribution Date on which the Principal Amount of the Class
A-1 Notes is $0 and (B) on each subsequent Distribution Date, the Class C
Principal Payment Amount; provided that if the Available Funds remaining to be
allocated pursuant to this clause are less than the full amount required to be
so paid, such remaining Available Funds shall be allocated to each Class C Note
pro rata based on the outstanding principal amount thereof;
(xiv) pay to the Indenture Trustee, on behalf of the Class D Noteholders,
(A) $0 until the Distribution Date on which the Principal Amount of the Class
A-1 Notes is $0 and (B) on each subsequent Distribution Date, the Class D
Principal Payment Amount; provided that if the Available Funds remaining to be
allocated pursuant to this clause are less than the full amount required to be
so paid, such remaining Available Funds shall be allocated to each Class D Note
pro rata based on the outstanding principal amount thereof;
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(xv) pay to the Indenture Trustee:
(A) on behalf of the Class A-1 Noteholders, the Additional Principal, if any,
until the Principal Amount of the Class A-1 Notes is $0; provided, that if
the amount of Additional Principal exceeds the amount needed to reduce the
Principal Amount of the Class A-1 Notes is $0, then such excess shall be
paid to the Class A-2 Noteholders;
(B) on behalf of the Class A-2 Noteholders, (1) $0 until the Distribution Date
on which the Principal Amount of the Class A-1 Notes is $0 and (2) on each
subsequent Distribution Date, the Additional Principal, if any, until the
Principal Amount of the Class A-2 Notes is $0; provided, that if the
Additional Principal exceeds the amount needed to reduce the Principal
Amount of the Class A-2 Notes to $0, then such excess shall be paid to the
Class A-3 Noteholders;
(C) on behalf of the Class A-3 Noteholders, (1) $0 until the Distribution Date
on which the Principal Amount of the Class A-1 Notes and Class A-2 Notes is
$0 and (2) on each subsequent Distribution Date, the Additional Principal,
if any, until the Principal Amount of the Class A-3 Notes is $0; provided,
that if the Additional Principal exceeds the amount needed to reduce the
Principal Amount of the Class A-3 Notes to $0, then such excess shall be
paid to the Class A-4 Noteholders;
(D) on behalf of the Class A-4 Noteholders, (1) $0 until the Distribution Date
on which the Principal Amount of the Class A-1 Notes, Class A-2 Notes and
Class A-3 Notes is $0 and (2) on each subsequent Distribution Date, the
Additional Principal, if any, until the Principal Amount of the Class A-4
Notes is $0; provided, that if the Additional Principal exceeds the amount
needed to reduce the Principal Amount of the Class A-4 Notes to $0, then
such excess shall be paid to the Class B Noteholders;
(E) on behalf of the Class B Noteholders, (1) $0 until the Distribution Date on
which the Principal Amount of the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes is $0 and (2) on each subsequent Distribution
Date, the Additional Principal, if any, until the Principal Amount of the
Class B Notes is $0; provided, that if the Additional Principal exceeds the
amount needed to reduce the Principal Amount of the Class B Notes to $0,
then such excess shall be paid to the Class C Noteholders;
(F) on behalf of the Class C Noteholders, (1) $0 until the Distribution Date on
which the Principal Amount of the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes and Class B Notes is $0 and (2) on each
subsequent Distribution Date, the Additional Principal, if any, until the
Principal Amount of the Class C Notes is $0; provided, that if the
Additional Principal exceeds the amount needed to reduce the Principal
Amount of the Class C Notes to $0, then such excess shall be paid to the
Holder of the Certificate; and
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(G) on behalf of the Class D Noteholders, (1) $0 until the Distribution Date on
which the Principal Amount of the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes is $0 and (2)
on each subsequent Distribution Date, the Additional Principal, if any,
until the Principal Amount of the Class D Notes is $0; provided, that if
the Additional Principal exceeds the amount needed to reduce the Principal
Amount of the Class D Notes to $0, then such excess shall be paid to the
Holder of the Certificate.
(xvi) pay to the Indenture Trustee, for deposit into the Reserve Fund, any
Available Funds not necessary to make the payments described in paragraphs (A)
through (O) above to the extent that such amount is necessary to cause the
amounts on deposit in the Reserve Fund to equal the Reserve Fund Amount; and
(xvii) pay any remaining Available Funds to the Holder of the Certificate.
Prior to the occurrence of an Event of Default, if the Available Funds are
less than the amount required to make in full the payments and allocations set
forth in Sections 7.05(a)(i)-(xv), amounts held in the Reserve Fund shall be
withdrawn pursuant to the Monthly Report in order for any of such payments or
allocations to be made and such amounts will be considered as Available Funds
for such purpose only. In addition, to the extent Available Funds are
insufficient to provide for the repayment in full of the Class A-1 Notes on the
Class A-1 Maturity Date (or, following the repayment in full of the Class A-1
Notes, to the extent such Available Funds are insufficient to provide for the
repayment in full of the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class B Notes, Class C Notes or Class D Notes on their respective Maturity
Dates, in such order of priority), then amounts held in the Reserve Fund shall
be withdrawn and applied to repay principal of such Notes in such order of
priority on such respective Maturity Dates until the Reserve Fund is exhausted.
(b) Allocations and Payments After an Event of Default. On each
Determination Date after the occurrence and during the continuance of an Event
of Default, the Servicer, pursuant to monthly payment instructions and
notification, shall instruct the Indenture Trustee to withdraw, and on the
succeeding Distribution Date the Indenture Trustee acting in accordance with
such instructions shall withdraw, the amounts required to be withdrawn from the
Collection Account pursuant to this Section and, with respect to the amounts
described in clauses (iv) through (xii) below, deposited to the Note
Distribution Account (pursuant to Sections 3.01 and 8.02(b) of the Indenture) in
order to make the following payments or allocations from the Available Funds for
the related Distribution Date (in each case, such payment or transfer to be made
only to the extent funds remain available therefor after all prior payments and
transfers for such Distribution Date have been made), in the following order of
priority:
(i) pay to the Servicer, the amount of any unreimbursed Servicer Advances;
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(ii) pay to the Servicer, the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the Servicing Fee that
were due in respect of prior monthly periods that remain unpaid;
(iii) pay to the Back-Up Servicer, the Collateral Custodian, the Owner
Trustee and the Indenture Trustee an amount equal to the Administrative Fee then
due, together with any accrued and unpaid Administrative Fees;
(iv) pay to the Indenture Trustee on behalf of the Class A-1 Noteholders,
Class A-2 Noteholders, Class A-3 Noteholders, and Class A-4 Noteholders an
amount equal to interest accrued in respect of the related Class A-l Notes,
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes at the Class A-1 Interest
Rate, Class A-2 Interest Rate, Class A-3 Interest Rate and Class A-4 Interest
Rate, respectively, for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in respect of
prior Accrual Periods for which no allocation was previously made; provided that
if the Available Funds remaining to be allocated pursuant to this clause are
less than the full amount required to be so allocated, such remaining Available
Funds shall be allocated to each Holder of a Class A Note pro rata based upon
the outstanding Principal Amount thereof;
(v) pay to the Indenture Trustee on behalf of the Class B Noteholders an
amount equal to the interest accrued thereon at the Class B Interest Rate for
the Accrual Period immediately preceding such Distribution Date, together with
any amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Funds remaining
to be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Funds shall be paid to each Class B
Noteholder pro rata based on the outstanding Principal Amount thereof;
(vi) pay to the Indenture Trustee on behalf of the Class C Noteholders, an
amount equal to the interest accrued thereon at the Class C Interest Rate for
the Accrual Period immediately preceding such Distribution Date, together with
any such amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Funds remaining
to be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Funds shall be paid to each Class C
Noteholder pro rata based on the outstanding Principal Amount thereof;
(vii) pay to the Indenture Trustee on behalf of the Class D Noteholders, an
amount equal to the interest accrued thereon at the Class D Interest Rate for
the Accrual Period immediately preceding such Distribution Date, together with
any such amounts that accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the Available Funds remaining
to be allocated pursuant to this clause are less than the full amount required
to be so paid, such remaining Available Funds shall be paid to each Class D
Noteholder pro rata based on the outstanding Principal Amount thereof;
(viii) pay to the Indenture Trustee, on behalf of the Class A-1
Noteholders, the Principal Amount of the Class A-1 Notes; provided that if the
Available Funds remaining to be allocated pursuant to this clause are less than
the full amount required to be so paid, such remaining Available Funds shall be
allocated to each Class A-l Note pro rata based on the outstanding principal
amount thereof;
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(ix) pay to the Indenture Trustee, on behalf of the Class A-2 Noteholders,
Class A-3 Noteholders and Class A-4 Noteholders, the Principal Amounts of the
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes; provided that if the
Available Funds remaining to be allocated pursuant to this clause are less than
the full amount required to be so paid, such remaining Available Funds shall be
allocated to each Class A-2 Note, Class A-3 Note and Class A-4 Note pro rata
based on the outstanding principal amount of each such Class of Notes;
(x) pay to the Indenture Trustee, on behalf of the Class B Noteholders, the
Principal Amount of the Class B Notes; provided (i) that if the Available Funds
remaining to be allocated pursuant to this clause are less than the full amount
required to be so paid, such remaining Available Funds shall be allocated to
each Class B Note pro rata based on the outstanding principal amount thereof,
and (ii) if the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Class B Note principal in full, then such
excess shall be applied in repayment of principal on the Class C Notes;
(xi) pay to the Indenture Trustee, on behalf of the Class C Noteholders,
the Principal Amount of the Class C Notes; provided (i) that if the Available
Funds remaining to be allocated pursuant to this clause are less than the full
amount required to be so paid, such remaining Available Funds shall be allocated
to each Class C Note pro rata based on the outstanding principal amount thereof,
and (ii) if the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Class C Note principal in full, then such
excess shall be paid to the Holder of the Certificate;
(xii) pay to the Indenture Trustee, on behalf of the Class D Noteholders,
the Principal Amount of the Class D Notes; provided (i) that if the Available
Funds remaining to be allocated pursuant to this clause are less than the full
amount required to be so paid, such remaining Available Funds shall be allocated
to each Class D Note pro rata based on the outstanding principal amount thereof,
and (ii) if the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Class D Note principal in full, then such
excess shall be paid to the Holder of the Certificate;
(xiii) pay to the Indenture Trustee and the Back-Up Servicer the amount of
any unpaid fees and expenses to which the Indenture Trustee is entitled under
Section 6.07 of the Indenture or Section 5.19 hereof or the Back-Up Servicer is
entitled under Section 5.19 or Section 8.03 hereof; and
(xiv) pay all other remaining Available Funds to the Holder of the
Certificate.
Following the occurrence and during the continuance of an Event of Default,
if the Available Funds are less than the amount required to make in full the
payments and allocations set forth in Sections 7.05(b)(i)-(xii), amounts held in
the Reserve Fund shall be withdrawn in order for any of such payments or
allocations to be made (in the same order of priority) and such amounts will be
considered as Available Funds for such purpose only. In addition, to the extent
Available Amounts are insufficient to provide for the repayment in full of the
Class A-1 Notes on the Class A-1 Maturity Date (or, following the repayment in
full of the Class A-1 Notes, to the extent such Available Amounts are
insufficient to provide for the repayment in full of the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes or Class D Notes on
their respective Maturity Dates, in such order of priority), then amounts held
in the Reserve Fund shall be withdrawn pursuant to the Monthly Report and
applied to repay principal of such Notes in such order of priority on such
respective Maturity Dates until the Reserve Fund is exhausted.
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Section 7.06 Pre-Funding Account. On or before the Closing Date, the Seller
shall deposit an amount equal to the Original Pre-Funded Amount into the
Pre-Funding Account. The Pre-Funding Account shall be maintained in the name of
the Indenture Trustee for the benefit of the Noteholders.
Funds on deposit in the Pre-Funding Account shall be invested in Qualified
Eligible Investments pursuant to Section 7.03, including the limitation that
such Qualified Eligible Investments mature not later than the Business Day prior
to the next succeeding Distribution Date (except for Eligible Investments
described in paragraph (vi) of that definition (so long as the funds invested
therein are available for withdrawal by such Business Day)). All Pre-Funding
Earnings shall be deposited by the Indenture Trustee into the Capitalized
Interest Account on or prior to each Distribution Date during the Pre-Funding
Period.
The Pre-Funding Account and any amounts on deposit therein shall be part of
the Trust Assets and shall be for the benefit of the Noteholders.
Section 7.07 Capitalized Interest Account. On or before the Closing Date,
the Seller shall deposit an amount equal to the Original Capitalized Interest
Amount into the Capitalized Interest Account. The Capitalized Interest Account
shall be maintained in the name of the Indenture Trustee for the benefit of the
Noteholders. Funds on deposit in the Capitalized Interest Account shall be
invested in Qualified Eligible Investments pursuant to Section 7.03, including
the limitation that such Qualified Eligible Investments mature not later than
the Business Day prior to the next succeeding Distribution Date (except for
Eligible Investments described in paragraph (vi) of that definition (so long as
the funds invested therein are available for withdrawal by such Business Day)).
During the Pre-Funding Period, the Capitalized Interest Account and any amounts
on deposit therein shall be part of the Trust Assets and shall be for the
benefit of the Noteholders.
On each Distribution Date during the Pre-Funding Period, the Indenture
Trustee shall deposit into the Collection Account an amount equal to the
Capitalized Interest Requirement for such Distribution Date. If after making
such deposit in the Collection Account the amount remaining in the Capitalized
Interest Account exceeds the Capitalized Interest Required Reserve Amount, the
Indenture Trustee shall distribute such excess to the Seller. On the first
Distribution Date after the end of the Pre-Funding Period, any funds on deposit
in the Capitalized Interest Account shall be remitted promptly to the Seller
(after giving effect to any transfers made from the Capitalized Interest Account
on such Distribution Date).
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ARTICLE VIII
SERVICER DEFAULT; SERVICER TRANSFER
Section 8.01 Servicer Default. "Servicer Default" means the occurrence of
any of the following:
(a) any failure by the Servicer to make any payment, transfer or deposit or
to give instructions or notice to the Owner Trustee or the Indenture Trustee
pursuant to this Agreement on or before the date occurring three Business Days
after the date such payment, transfer, deposit, or such instruction or notice or
report is required to be made or given, as the case may be, under the terms of
this Agreement; or
(b) failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Agreement which has a material adverse effect on the Noteholders or
Certificateholder, which continues unremedied for a period of 30 days after the
first to occur of (i) the date on which written notice of such failure requiring
the same to be remedied shall have been given to the Servicer by the Indenture
Trustee or to the Servicer and the Indenture Trustee by the Noteholders or
Certificateholder or the Indenture Trustee on behalf of such Noteholders of
Notes aggregating not less than 25% of the Principal Amount of any Class
adversely affected thereby and (ii) the date on which the Servicer becomes aware
thereof and such failure continues to materially adversely affect such
Noteholders or Certificateholder for such period; or
(c) any representation, warranty or certification made by the Servicer in
this Agreement or in any certificate delivered pursuant to the this Agreement
shall prove to have been incorrect when made, which has a material adverse
effect on the Noteholders or Certificateholder and which continues to be
incorrect in any material respect for a period of 30 days after the first to
occur of (i) the date on which written notice of such incorrectness requiring
the same to be remedied shall have been given to the Servicer and the Owner
Trustee by the Indenture Trustee, or to the Servicer, the Owner Trustee and the
Indenture Trustee by Noteholders or Certificateholder or by the Indenture
Trustee on behalf of Noteholders of Notes aggregating not less than 25% of the
Principal Amount of any Class adversely affected thereby and (ii) the date on
which the Servicer becomes aware thereof, and such incorrectness continues to
materially adversely affect such Holders for such period; or
(d) an Insolvency Event shall occur with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of five Business Days or
referred to under clause (b) or (c) for a period of 60 days (in addition to any
period provided in (a), (b) or (c)) shall not constitute a Servicer Default
until the expiration of such additional five Business Days or 60 days,
respectively, if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or other similar occurrences. Upon the occurrence of any such event
the Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of this Agreement
and the Servicer shall provide the Owner Trustee, the Indenture Trustee, the
Back-Up Servicer and the Trust Depositor prompt notice of such failure or delay
by it, together with a description of its efforts to so perform its obligations.
The Servicer shall immediately notify the Indenture Trustee and the Back-Up
Servicer in writing of any Servicer Default.
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Section 8.02 Servicer Transfer.
(a) If a Servicer Default has occurred and is continuing, (x) the Required
Holders, or (y) the Indenture Trustee may, by written notice (a "Termination
Notice") delivered to the parties hereto, terminate all (but not less than all)
of the Servicer's management, administrative, servicing and collection
functions.
(b) Upon delivery of the notice required by Section 8.02(a) (or, if later,
on a date designated therein), and on the date that a successor Servicer shall
have been appointed pursuant to Section 8.03 (such appointment being herein
called a "Servicer Transfer"), all rights, benefits, fees, indemnities,
authority and power of the Servicer under this Agreement, whether with respect
to the Contracts, the Contract Files or otherwise, shall pass to and be vested
in such successor which, in the case of a Servicer Transfer from the Servicer,
shall be the Back-Up Servicer or a successor servicer (the Back-Up Servicer or
any other successor servicer, the "Successor Servicer") pursuant to and under
this Section 8.02. Without limiting the generality of the foregoing, the
Successor Servicer is authorized and empowered to execute and deliver on behalf
of the Servicer, as attorney-in-fact or otherwise, any and all documents and
other instruments, and to do any and all acts or things necessary or appropriate
to effect the purposes of such notice of termination. The Servicer agrees to
cooperate with the Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the Successor Servicer for administration by it of
all cash amounts which shall at the time be held by the Servicer for deposit, or
have been deposited by the Servicer, in the Collection Account, or for its own
account in connection with its services hereafter or thereafter received with
respect to the Contracts. The Servicer shall transfer to the Successor Servicer
all records held by the Servicer relating to the Contracts in such electronic
form as the Successor Servicer may reasonably request. In addition, the Servicer
shall permit access to its premises (including all computer records and
programs) to the Successor Servicer or its designee, and shall pay the
reasonable transition expenses, subject to the limitation described in Section
8.03, of the Successor Servicer. Upon a Servicer Transfer, the Successor
Servicer shall also be entitled to receive compensation as described in Section
8.03 for performing the obligations of the Servicer.
Section 8.03 Appointment of Successor Servicer; Reconveyance; Successor
Servicer to Act. Upon delivery of the notice required by Section 8.02(a) (or, if
later, on a date designated therein), the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or, if no such date is specified, until a date mutually
agreed by the Servicer and the Indenture Trustee. The Indenture Trustee may at
the time described in the immediately preceding sentence in its sole discretion,
appoint the Back-Up Servicer as the Servicer hereunder, and the Back-Up Servicer
shall on such date assume all obligations of the Servicer hereunder, and all
authority and power of the Servicer under this Agreement shall pass to and be
vested in the Back-Up Servicer; provided, however, that the Successor Servicer
shall not (i) assume any obligation to reacquire Contracts by reason of
misrepresentations or breaches of warranties, (ii) be required to make any
Servicer Advance or (iii) be liable for acts, omissions or breaches or
representations or warranties by the Servicer occurring prior to transfer of the
servicing functions. Notwithstanding such termination, the Servicer shall be
entitled to payment of all amounts payable to it prior to such termination for
services rendered prior to such termination. In the event that the Indenture
Trustee does not so appoint the Back-Up Servicer, there is no Back-Up Servicer
or the Back-Up Servicer is unwilling or unable to assume such obligations on
such date, the Trust Depositor shall as promptly as possible appoint a Successor
Servicer, and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Indenture Trustee and Owner Trustee. If
within 60 days of delivery of a Termination Notice the Indenture Trustee is
unable to obtain any bids from eligible servicers and the Servicer shall have
yet to cure the Servicer Default, then the Indenture Trustee shall offer the
Trust Depositor, and the Trust Depositor shall offer the Seller, the right to
accept retransfer of all the Trust Assets, and such parties may accept
retransfer of such Trust Assets in consideration of the Trust Depositor's
delivery to the Collection Account on or prior to the next upcoming Distribution
Date of a sum equal to the Aggregate Principal Amount of all Notes then
outstanding, together with accrued and unpaid interest thereon through such date
of deposit (provided, that the Indenture Trustee, if so directed by the Required
Holders, need not accept and effect such reconveyance in the absence of evidence
(which may include valuations of an investment bank or similar entity)
reasonably acceptable to such Trustee or Required Holders that such retransfer
would not constitute a fraudulent conveyance of the Trust Depositor or the
Seller).
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In the event that a Successor Servicer has not been appointed and has not
accepted its appointment at the time when the then Servicer has ceased to act as
Servicer, the Indenture Trustee without further action shall automatically be
appointed the Successor Servicer. Notwithstanding the foregoing, if the
Indenture Trustee is legally unable or prohibited from so acting, it shall
petition a court of competent jurisdiction to appoint any established financial
institution having a net worth of at least $50,000,000 and whose regular
business includes the servicing of contracts similar to the Contracts as the
Successor Servicer hereunder. Notwithstanding anything herein or in the
Indenture to the contrary, in no event shall the Indenture Trustee or the
Back-Up Servicer be liable for any Servicing Fee or for any differential in the
amount of Servicing Fee paid hereunder and the amount necessary to induce any
Successor Servicer to act as Successor Servicer under this Agreement and the
transactions set forth or provided therein. The Back-Up Servicer also may
appoint, or petition a court of competent jurisdiction for the appointment of a
successor Servicer in accordance with the procedures set forth in the
immediately preceding sentence. On or after a Servicer Transfer, the Successor
Servicer shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof, and
the terminated Servicer shall be relieved of such responsibilities, duties and
liabilities arising after such Servicer Transfer; provided, however, that (i)
the Successor Servicer will not assume any obligations of the Servicer described
in Section 8.03 and (ii) the Successor Servicer shall not be liable for any acts
or omissions of the Servicer occurring prior to such Servicer Transfer or for
any breach by the Servicer of any of its representations and warranties
contained herein or in any related document or agreement. As compensation
therefor, the Successor Servicer shall be entitled to receive reasonable
compensation equal to the monthly Servicing Fee and the Supplemental Servicing
Fee, each payable as and to the extent described in the last paragraph of this
Section 8.03. The Owner Trustee, Securityholders and the Indenture Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. To the extent the terminated
Servicer has made Servicer Advances, it shall be entitled to reimbursement of
the same notwithstanding its termination hereunder, to the same extent as if it
had continued to service the Contracts hereunder. In addition, it is understood
and agreed that if an Event of Default has occurred and a Servicer Transfer is
being effected by action of the Indenture Trustee hereunder, any documented
expenses reasonably incurred by the Indenture Trustee in connection with
effecting such Servicer Transfer shall be deemed expenses reimbursable from by
the initial Servicer, and if not reimbursed by the initial Servicer, paid from
Available Funds after an Event of Default pursuant to Section 7.05(b)(xiii)
hereof.
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Upon the Back-Up Servicer receiving notice that it is required to serve as
the Servicer hereunder pursuant to the foregoing provisions of this Section
8.03, the Back-Up Servicer will promptly begin the transition to its role as
Servicer. The Indenture Trustee and the Back-Up Servicer shall each be entitled
to receive reimbursement for all transition costs that the Indenture Trustee or
the Back-Up Servicer, as the case may be, incurs in connection with such
transition, up to an aggregate limit (for both the Indenture Trustee and the
Back-Up Servicer) of $150,000 (or, to the extent the Indenture Trustee and the
Back-Up Servicer are no longer the same person, $75,000 each). The outgoing
Servicer agrees to make such reimbursement of all such transition costs and to
cooperate with the Back-Up Servicer in effecting the termination of the
responsibilities and rights of such Servicer under this Agreement, including,
without limitation, the transfer to the Back-Up Servicer for the administration
by it of any cash amounts that shall at the time be held by such Servicer for
deposit or which may thereafter be received with respect to any Contracts
purchased hereunder, the delivery to the Back-Up Servicer in an orderly and
timely fashion of all files and records with respect to the Contracts and a
computer tape in form readable and compatible with the Back-Up Servicer's
computer system containing all information necessary to enable the Back-Up
Servicer to service the Contracts, and the provision to the Back-Up Servicer of
such access to such Servicer's personnel, records and other information as the
Back-Up Servicer shall reasonably request in order to enable it to perform its
obligations as Servicer hereunder.
Following the Back-Up Servicer's appointment as Servicer hereunder, the
Back-Up Servicer shall no longer be entitled to receive a portion of the
Administrative Fee, but shall instead be entitled to receive, pursuant to
Section 7.01(b)(ii), a servicing fee equal to the Servicing Fee paid to the
initial Servicer. In addition, the Back-Up Servicer as Successor Servicer shall
be entitled to receive, from the initial Servicer, and if not paid by the
initial Servicer, pursuant to Section 7.05(b)(xiii), a supplemental monthly
servicing fee (the "Supplemental Servicing Fee") in respect of any Collection
Period (or portion thereof) prior to the termination of the Trust equal to the
product of (A) 1/12, (B) 0.25% and (C) the ADCB of the Contract Pool (not
including amounts in the Pre-Funding Account during the Pre-Funding Period) as
of the second preceding Calculation Date.
Section 8.04 Notification to Securityholders.
(a) Promptly following the occurrence of any Servicer Default, the Servicer
shall give written notice thereof to the Trustees, the Trust Depositor, the
Back-Up Servicer and each Rating Agency at the addresses described in Section
13.04 hereof and to the Noteholders and Certificateholder at their respective
addresses appearing on the Note Register and the Certificate Register,
respectively.
(b) Within 10 days following any termination or appointment of a Successor
Servicer pursuant to this Article VIII, the Indenture Trustee shall give written
notice thereof to each Rating Agency, the Back-Up Servicer and the Trust
Depositor at the addresses described in Section 13.04 hereof, and to the
Noteholders and Certificateholder at their respective addresses appearing on the
Note Register and the Certificate Register, respectively.
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Section 8.05 Effect of Transfer.
(a) After a Servicer Transfer, the terminated Servicer shall have no
further obligations with respect to the management, administration, servicing or
collection of the Contracts and the Successor Servicer appointed pursuant to
Section 8.03 shall have all of such obligations, except that the terminated
Servicer will transmit or cause to be transmitted directly to the Successor
Servicer for its own account, promptly on receipt and in the same form in which
received, any amounts (properly endorsed where required for the Successor
Servicer to collect them) received as payments upon or otherwise in connection
with the Contracts.
(b) A Servicer Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer)
other than those relating to the management, administration, servicing, custody
or collection of the Contracts.
Section 8.06 Database File. The Servicer will provide the Successor
Servicer with a magnetic tape containing the database file for each Contract (i)
as of the Cutoff Date, (ii) the Subsequent Cutoff Date, (iii) thereafter, no
later than the fourth Business Day prior to the Distribution Date prior to a
Servicer Default and (iv) on and as of the Business Day before the actual
commencement of servicing functions by the Successor Servicer following the
occurrence of a Servicer Default.
Section 8.07 Successor Servicer Indemnification. The original Servicer
shall defend, indemnify and hold the Successor Servicer and any officers,
directors, employees or agents of the Successor Servicer harmless against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments and any other costs, fees, and expenses that the Successor
Servicer may sustain in connection with the claims asserted at any time by third
parties against the Successor Servicer which result from (i) any willful or
grossly negligent act taken or omission by the Servicer or (ii) a breach of any
representations of the Servicer in Section 3.07 hereof. The indemnification
provided by this Section 8.07 shall survive the termination of this Agreement.
Section 8.08 Responsibilities of the Successor Servicer. The Successor
Servicer will not be responsible for delays attributable to the Servicer's
failure to deliver information, defects in the information supplied by the
Servicer or other circumstances beyond the control of the Successor Servicer.
The Successor Servicer will make arrangements with the Servicer for the
prompt and safe transfer of, and the Servicer shall provide to the Successor
Servicer, all necessary servicing files and records, including (as deemed
necessary by the Successor Servicer at such time): (i) microfiche loan
documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv)
collections history and (v) the trial balances, as of the close of business on
the day immediately preceding conversion to the Successor Servicer, reflecting
all applicable Contract information.
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The Successor Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information. The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Trust Depositor or the Trustees or for any
inaccuracy or omission in a notice or communication received by the Successor
Servicer from any third party or (ii) which is due to or results from the
invalidity, unenforceability of any Contract with applicable law or the breach
or the inaccuracy of any representation or warranty made with respect to any
Contract.
If the Indenture Trustee or any other Successor Servicer assumes the role
of Successor Servicer hereunder such Successor Servicer shall be entitled to the
benefits of (and subject to the provisions of) Section 5.05 concerning
delegation of duties to subservicers.
Section 8.09 Rating Agency Condition For Servicer Transfer. Notwithstanding
the foregoing provisions relating to a Servicer Transfer, no Servicer Transfer
shall be effective hereunder unless prior written notice thereof shall have been
given to the Rating Agencies, and the Rating Agency Condition shall have been
satisfied with respect thereto.
ARTICLE IX
REPORTS
Section 9.01 Monthly Reports. With respect to each Distribution Date and
the related Collection Period, no later than the third Business Day prior to
such Distribution Date, the Servicer will provide to each Trustee, the Placement
Agent and each Rating Agency, a monthly statement (a "Monthly Report")
substantially in the form of Exhibit I hereto.
Section 9.02 Officer's Certificate. Each Monthly Report delivered pursuant
to Section 9.01 shall be accompanied by a certificate of a Servicing Officer
certifying the accuracy of the Monthly Report and that no Servicer Default or
event that with notice or lapse of time or both would become a Servicer Default
has occurred, or if such event has occurred and is continuing, specifying the
event and its status.
Section 9.03 Other Data. In addition, the Servicer shall, upon the request
of any Trustees, or any Rating Agency, furnish such Trustee or Rating Agency, as
the case may be, such underlying data used to generate a Monthly Report as may
be reasonably requested.
Section 9.04 Annual Report of Accountants.
(a) The Servicer shall cause a firm of nationally recognized independent
certified public accountants (the "Independent Accountants"), who may also
render other services to the Servicer or its Affiliates, to deliver to the
Trustees and each Rating Agency, on or before January 31 (or 120 days after the
end of the Servicer's fiscal year, if other than December 31) of each year,
beginning on January 31, 2000 (i) with respect to the twelve months ended the
immediately preceding December 31 (or other applicable date), a report addressed
to the Board of Directors of the Servicer and to the Trustees, to the effect
that such firm (A) has reviewed certain documents and records relating to the
servicing of the Contracts in the Contract Pool, and (B) based on such review,
such firm is of the opinion that the Monthly Reports for such year were prepared
in compliance with this Agreement, except for such exceptions as it believes to
be immaterial and such other exceptions as will be set forth in such firm's
report, and (ii) a report with respect to the twelve months ended the
immediately preceding December 31 (or other applicable date) to the effect that
such accountants have applied certain agreed-upon procedures to certain
documents and records relating to the servicing of Contracts under this
Agreement, compared the information contained in the Servicer's certificates
delivered during the period covered by such report with such documents and
records and that no matters came to the attention of such accountants that
caused them to believe that such servicing was not conducted in compliance with
this Agreement, except for such exceptions as such accountants shall believe to
be immaterial and such other exceptions as shall be set forth in such statement.
A copy of such report (the "Accountant's Report") may be obtained by any
Securityholder by a request in writing to the Indenture Trustee, in the case of
a Noteholder, or to the Owner Trustee, in the case of a Certificateholder,
addressed to its respective Corporate Trust Office. In the event such firm of
Independent Accountants requires the Indenture Trustee to agree to the
procedures performed by such firm of Independent Accountants, the Servicer shall
direct the Indenture Trustee in writing to so agree; it being understood and
agreed that the Indenture Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Indenture
Trustee has not made any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
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(b) The Accountant's Report shall also indicate that the firm is
independent of the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
Section 9.05 Annual Statement of Compliance from Servicer. The Servicer
will deliver to the Trustees, the Back-Up Servicer and each of the Rating
Agencies, on or before January 31 of each year commencing January 31, 2000, an
Officer's Certificate stating that (a) a review of the activities of the
Servicer during the prior calendar year and of its performance under this
Agreement was made under the supervision of the officer signing such certificate
and (b) to such officer's knowledge, based on such review, the Servicer has
fully performed or caused to be performed in all material respects all its
obligations under this Agreement and no Servicer Default has occurred or is
continuing, or, if there has been a Servicer Default, specifying each such
default known to such officer and the nature and status thereof and the steps
being taken or necessary to be taken to remedy such event. A copy of such
certificate may be obtained by any Securityholder by a request in writing to the
Indenture Trustee, with respect to any Noteholder, or the Owner Trustee, with
respect to the Certificateholder.
Section 9.06 Annual Summary Statement. On or prior to January 31 of each
year, commencing January 31, 2000, the Servicer shall prepare and provide to
each Trustee, the Back-Up Servicer and each Rating Agency, a cumulative summary
of the information required to be included in the Monthly Reports for the
Collection Periods ending during the immediately preceding calendar year.
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ARTICLE X
TERMINATION
Section 10.01 Sale of Trust Assets.
(a) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to allocate and apply (after the
application on such Distribution Date of Available Funds and funds on deposit in
the Reserve Fund pursuant to Section 7.04) the Insolvency Proceeds as if (and in
the same order of priority as) the Insolvency Proceeds were Available Funds
being allocated and distributed on such date pursuant to Section 7.04(b).
(b) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee and
the Indenture Trustee as soon as practicable after the Servicer has received
notice thereof.
(c) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholder will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
ARTICLE XI
REMEDIES UPON MISREPRESENTATION; REPURCHASE OPTION
Section 11.01 Repurchases of, or Substitution For, Contracts for Breach of
Representations and Warranties. Upon a discovery by the Servicer, the Trust
Depositor or the Trustees of a breach of a representation or warranty of the
Seller as set forth in Section 3.02, Section 3.03, Section 3.04, and Sections
3.05 or as made or deemed made in any Subsequent Notice or any Subsequent
Purchase Agreement relating to Subsequent Contracts that materially adversely
affects the Trust's interest in such Contract (without regard to the benefits of
the Reserve Fund) (an "Ineligible Contract"), or of an inaccuracy with respect
to the representations as to concentrations of the Initial Contracts made under
Section 3.05, the party discovering the breach shall give prompt written notice
to the other parties (and the Servicer shall, with respect to an inaccuracy
concerning concentrations, select one or more Contracts, without employing
adverse selection, as the related Excess Contract for purposes of this Section),
provided, that the Trustees shall have no duty or obligation to inquire or to
investigate the breach by the Seller of any of such representations or
warranties. The Trust Depositor shall repurchase from the Trust, and the Seller
shall contemporaneously repurchase from the Trust Depositor, each such
Ineligible Contract or Excess Contract, at a repurchase price equal to the
Transfer Deposit Amount, not later than sixty (60) days following the date the
Seller becomes aware of, or receives written notice from any Trustee, the
Servicer or the Trust Depositor of, any such breach or inaccuracy and which
breach or inaccuracy has not otherwise been cured; provided, however, that if
the Seller is able to effect a substitution for any such Ineligible Contract or
Excess Contract in compliance with Section 2.04, the Seller may, in lieu of
repurchasing such Contract, effect a substitution for such affected Contract
with a Substitute Contract not later than the date a repurchase of such affected
Contract would be required hereunder, and provided further that with respect to
a breach of representation or warranty relating to the Contracts in the
aggregate and not to any particular Contract the Seller may select Contracts
(without adverse selection) to repurchase (or substitute for) such that had such
Contracts not been included as part of the Trust Assets (and, in the case of a
substitution, had such Substitute Contract been included as part of the Trust
Assets instead of the selected Contract) there would have been no breach of such
representation or warranty. Notwithstanding any other provision of this
Agreement, the obligation of the Seller described in this Section 11.01 shall
not terminate or be deemed released by any party hereto upon a Servicer Transfer
pursuant to Article VIII. The repurchase obligation described in this Section
11.01 is in no way to be satisfied with monies in the Reserve Fund.
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Section 11.02 Reassignment of Repurchased or Substituted Contracts. Upon
receipt by the Indenture Trustee for deposit in the Collection Account of the
amounts described in Section 11.01 or Section 11.03 (or upon the Subsequent
Transfer Date related to a Substitute Contract described in Section 11.01), and
upon receipt of a certificate of a Servicing Officer in the form attached hereto
as Exhibit G, the Indenture Trustee shall assign to the Trust Depositor and the
Trust Depositor shall assign to the Seller all of the Trust's (or Trust
Depositor's, as applicable) right, title and interest in the repurchase or
substitute Contract and related Trust Assets without recourse, representation or
warranty. Such reassigned Contract shall no longer thereafter be included in any
calculations of Discounted Contract Balances required to be made hereunder or
otherwise be deemed a part of the Trust.
Section 11.03 Servicer's Repurchase Option. On written notice to the Owner
Trustee and the Indenture Trustee at least 20 days prior to a Distribution Date,
and provided that the ADCB of all Contracts in the Contract Pool is then less
than 15% of the sum of the ADCB of such Contracts as of the Initial Cutoff Date
plus the ADCB of all Subsequent Contracts as of the related Subsequent Cutoff
Date, the Servicer may (but is not required to) purchase from the Trust
Depositor (and the Trust Depositor shall concurrently from the Trust) on that
Distribution Date all outstanding Contracts at a price equal to the aggregate
outstanding Principal Amount of the Securities (other than the Certificates) as
of the current Distribution Date thereon, the amount of unreimbursed Servicer
Advances (if any) as well as accrued and unpaid monthly Servicing Fees to the
date of such repurchase. Such price is to be deposited in the Collection Account
not later than one Business Day before such Distribution Date, against the Owner
Trustee's and Indenture Trustee's and Trust Depositor's release of the Contracts
and the Contract Files to the Servicer.
Section 11.04 Conveyance of Additional Contracts. During the Pre-Funding
Period, the Seller shall sell to the Trust Depositor, and the Trust Depositor
shall purchase from the Seller, Additional Contracts (to the extent Additional
Contracts are available) having an aggregate principal balance equal to the
Original Pre-Funded Amount. On each related Subsequent Transfer Date during the
Pre-Funding Period, the Seller shall, subject to Section 2.04(a), sell, transfer
and assign to the Trust Depositor without recourse the Seller's entire interest
in the Additional Contracts designated by the Seller in the related Addition
Notice. Upon the conveyance of Additional Contracts to the Trust Depositor, the
Trust Depositor shall, subject to Section 2.04(b), convey such Contracts to the
Trust. Following the conveyance of the Additional Contracts to the Trust on the
related Subsequent Transfer Date, (i) the ADCB of the Contracts in the Contract
Pool shall increase in an amount equal to the ADCB of the Additional Contracts
and (ii) an amount equal to 97.75% of the ADCB of the Additional Contracts shall
be withdrawn from the Pre-Funding Account by the Indenture Trustee and paid to
the Trust Depositor, and the Trust Depositor shall concurrently convey such
amount to the Seller.
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Section 11.05 Seller's Covenant to Deliver Additional Contracts. The Seller
covenants to transfer to the Trust Depositor (and the Trust Depositor covenants
to concurrently transfer to the Trust), pursuant to Section 11.04 above,
Additional Contracts with an ADCB equal to the Original Pre-Funded Amount. In
the event that the Seller shall fail to deliver and sell to the Trust Depositor
any or all of such Additional Contracts, any funds remaining in the Pre-Funding
Account shall be distributed in accordance with Section 11.06 to the Noteholders
as principal on the Distribution Date immediately following the end of the
Pre-Funding Period; provided, however, that the foregoing shall be the sole
remedy of the Trustees or the Noteholders with respect to such failure of the
Seller to comply with such covenant contained in the first sentence of this
Section 11.05. Section 11.06 Mandatory Redemption. In accordance with the
definition of "Class A Principal Payment Amount" and the payment thereof
pursuant to Section 8.02 of the Indenture, the Notes then entitled to receive
distributions of principal will be redeemed in part on the Distribution Date on
or immediately following the last day of the Pre-Funding Period in the event
that any amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Additional Contracts, including any such purchase
on such date. The aggregate Principal Amount of such Notes to be redeemed will
be an amount equal the amount then on deposit in the Pre-Funding Account.
ARTICLE XII
SELLER INDEMNITIES
Section 12.01 Seller's Indemnification. The Seller will defend and
indemnify Trust Depositor, the Trust, the Trustees, the Placement Agent, the
Back-Up Servicer, the Collateral Custodian, any agents of the Trustees and the
Certificateholder and Noteholders (any of which, an "Indemnified Party") against
any and all costs, expenses, losses, damages, claims and liabilities, joint or
several, including reasonable fees and expenses of counsel and expenses of
litigation (collectively, "Costs") arising out of or resulting from (i) this
Agreement or the use, ownership or operation of any Financed Item by the Seller
or the Servicer or any Affiliate of either, (ii) any representation or warranty
or covenant made by the Seller in this Agreement being untrue or incorrect
(subject to the limitations described in the preamble to Article III of this
Agreement) and (iii) any untrue statement or alleged untrue statement of a
material fact contained in the Private Placement Memorandum or in any amendment
thereto or the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement was made in
conformity with information furnished to Trust Depositor by the Seller
specifically for use therein; provided, however, that the Seller shall not be
required to so indemnify any such Indemnified Party for such Costs to the extent
that such Cost shall be due to or arise from the willful misfeasance, bad faith
or gross negligence of such Indemnified Party, or the failure of such
Indemnified Party to comply with any express undertaking, agreement or covenant
made by such Indemnified Party in a Transaction Document to which it is a party.
Notwithstanding any other provision of this Agreement, the obligation of the
Seller under this Section 12.01 shall not terminate upon a Servicer Transfer
pursuant to Article VIII of this Agreement and shall survive any termination of
that agreement or this Agreement.
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Section 12.02 Liabilities to Obligors. No obligation or liability to any
Obligor under any of the Contracts is intended to be assumed by the Trustees,
the Trust, the Noteholders or the Certificateholder under or as a result of this
Agreement and the transactions contemplated hereby.
Section 12.03 Tax Indemnification.
(a) The Seller agrees to pay, and to indemnify, defend and hold harmless
the Trust Depositor, the Trust, the Trustees, the Noteholders or the
Certificateholder from, any taxes which may at any time be asserted with respect
to and as of the date of, the transfer of the Contracts to Trust Depositor and
the transfer by the Trust Depositor of the Contracts to the Trust and the
further pledge by the Trust to the Indenture Trustee, including, without
limitation, any sales, gross receipts, general corporation, personal property,
privilege or license taxes (but not including any federal, state or other taxes
arising out of the creation of the Trust and the issuance of the Notes and
Certificates) and costs, expenses and reasonable counsel fees in defending
against the same, whether arising by reason of the acts to be performed by the
Seller or the Servicer under this Agreement or imposed against the Trust, the
Back-Up Servicer, the Collateral Custodian, a Noteholder, a Certificateholder or
otherwise. Notwithstanding any other provision of this Agreement, the obligation
of the Seller under this Section 12.03 shall not terminate upon a Servicer
Transfer Pursuant to Article VIII of this Agreement and shall survive any
termination of this Agreement.
(b) The Seller agrees to pay and to indemnify, defend and hold harmless the
Trust, the Back-Up Servicer, the Collateral Custodian and the Trustees, on an
after-tax basis (as hereinafter defined), from any state or local personal
property taxes, gross rent taxes, leasehold taxes or similar taxes which may at
any time be asserted with respect to the ownership of the Contracts (including
security interests therein) and the receipt of rentals therefrom by the Trust,
and costs, expenses and reasonable counsel fees in defending against the same,
excluding, however, taxes based upon or measured by gross or net income or
receipts (other than taxes imposed specifically with respect to rentals). As
used in this Section, the term "after-tax basis" shall mean, with respect to any
Payment to be received by an indemnified person, that the amount to be paid by
the Seller shall be equal to the sum of (i) the amount to be received without
regard to this sentence, plus (ii) any additional amount that may be required so
that after reduction by all taxes imposed under any federal, state and local
law, and taking into account any current credits or deductions arising
therefrom, resulting either from the receipt of the payments described in both
clauses (i) and (ii) hereof, such sum shall be equal to the amount described in
clause (i) above.
Section 12.04 Adjustments. The Seller agrees that, with respect to each
Contract (i) which provides for a Prepayment Amount less than the amount
calculated in accordance with the definition thereof and (ii) as to which the
related Source has not agreed to indemnify the Trust Depositor or any assignee
of the Trust Depositor in an amount at least equal to the excess of the
"Prepayment Amount" as calculated in accordance with the definition thereof over
the amount otherwise payable upon prepayment of such Contract, the Seller shall
indemnify the Trust Depositor or the Trust as assignee thereof, in an amount
equal to the amount specified in the foregoing clause (ii).
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The Seller hereby further agree that if any real property collateral
securing any Contract described in Section 3.02(e) hereof becomes the subject of
any claims, proceedings, liens or encumbrances with respect to any violation or
claimed violation of any federal or state environmental laws or regulations,
such Contract shall for all purposes hereunder be, at and following the time of
discovery by the Seller, the Trust Depositor, the Servicer or any Trustee of
such fact, deemed an Ineligible Contract subject to the same remedial and
recourse provisions hereunder as other Contracts determined to be Ineligible
Contracts hereunder.
Section 12.05 Operation of Indemnities. Indemnification under this Article
XII shall include, without limitation, reasonable fees and expenses of counsel
and expenses of litigation. If the Seller has made any indemnity payments to the
Trust Depositor or the Trustees pursuant to this Article XII and Trust Depositor
or the Trustees thereafter collects any of such amounts from others, the Trust
Depositor or the Trustees will repay such amounts collected to the Seller,
except that any payments received by the Trust Depositor or the Trustees from an
insurance provider as a result of the events under which the Seller's indemnity
payments arose shall be repaid prior to any repayment of the Seller's indemnity
payment.
Section 12.06 Additional Covenants of the Seller.
(a) Affirmative Covenants The Seller hereby covenants and agrees with the
Trust Depositor, the Noteholders, the Certificateholder and the Trustees that it
shall:
(i) Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations and orders with respect to it, its business
and properties and all Contract Assets and related Contracts;
(ii) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the nature of its business
requires it to be so qualified;
(iii) Audits. At any time and from time to time upon reasonable prior
written notice to the Seller and during regular business hours, permit the Trust
Depositor, or their agents or representatives, (i) to examine and make copies of
and abstracts from all records, (ii) to visit the offices and properties of the
Seller for the purpose of examining such records, and (iii) to discuss matters
relating to the Contract Assets or the Seller's performance hereunder with any
of the officers or employees of the Seller having knowledge of such matters. The
activities referred to in this paragraph will be (i) conducted in a manner which
does not unreasonably interfere with the Seller's normal operations or customer
or employee relations, (ii) conducted during normal business hours and (iii)
subject to the Seller's normal sensitivity and confidentiality procedures;
(iv) Keeping of Records and Books of Accounts. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Contract Assets in the event of the
destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Contract Assets (including, without limitation, records
adequate to permit the daily identification of all Collections of and
adjustments to each Contract Asset). The original counterpart of each Contract
subject to a purchase hereunder shall be delivered to the Collateral Custodian
and all other records relating thereto shall be held by the Servicer; such
original counterpart and all such records shall in any event be marked with a
legend indicating the interests of the Trust Depositor and its successors and
assigns;
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(v) Location of Records. Keep its chief place of business and chief
executive office, and the offices where it keeps its records at 1255 Wrights
Lane, West Chester, Pennsylvania 19380 or, in any such case, upon 30 days' prior
written notice to the Trust Depositor and the Indenture Trustee at such other
locations within the United States as permitted in this Agreement;
(vi) Collections. Instruct all Obligors of Contract Assets to cause all
Collections to be deposited directly to the Lockbox Account and if the Seller
shall receive any Collections, the Seller shall remit such Collections to the
Collection Account within one Business Day following the Seller's receipt
thereof;
(vii) Compliance with ERISA. Establish, maintain and operate all
Multiemployer Plans to comply in all material respects with the provisions of
ERISA, the Code, and all other applicable laws, and the regulations and
interpretations thereunder;
(viii) Separate Identity. Acknowledge that the Seller and the Trust
Depositor are entering into the transactions contemplated by this Agreement and
the Transfer and Sale Agreement in reliance upon the Trust Depositor's identity
as a separate legal entity from the Seller;
(ix) Transaction Documents. Comply in all material respects with the terms
of and employ the procedures outlined in the Sale and Servicing Agreement and
all of the other Transaction Documents to which it is a party;
(x) Non-Consolidation. Take all action necessary to ensure that the Trust
Depositor would not be substantially consolidated with the Seller, such that the
separate corporate existence of the Seller and the Trust Depositor would be
ignored in the event of a bankruptcy of the Seller; or
(xi) Reporting Requirements. Unless the Trust Depositor shall otherwise
consent in writing, furnish to the Trust Depositor, as soon as reasonably
practicable, from time to time, such information, documents, records or reports
respecting the Contract Assets or the conditions or operations, financial or
otherwise, of the Seller or any of their Affiliates as the Trust Depositor may
from time to time reasonably request in order to protect the interests of the
Trust Depositor under or as contemplated by this Agreement or the Transfer and
Sale Agreement, and shall provide to the Trust Depositor promptly upon its
demand therefor, all such information, documents, records or reports which are
originally prepared by or on behalf of the Seller or any of their Affiliates as
the Trust Depositor may be required to deliver to the Seller pursuant to the
terms of this Agreement.
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(xii) Sale Treatment. The Seller shall treat the transfer of Contract
Assets made hereunder for all purposes as a sale and purchase on all of its
relevant books, records, financial statements and other applicable documents.
Without limiting the generality of the foregoing, such purposes include all
financial accounting purposes; provided, however, that if GAAP principals
require such assets be shown on the Seller's books, the Seller shall cause to be
footnoted or otherwise indicated on its books that such assets are shown on the
books of the Seller solely because of principles of consolidation under GAAP,
that the Seller does not own such assets, and that such assets are owned by the
Trust. Notwithstanding the preceding sentence, solely for state and federal
income tax purposes the transfer of Contract Assets by the Seller hereunder may
not be treated as a sale and purchase for state and federal income tax purposes
so long as the Trust Depositor is disregarded as a separate entity pursuant to
Treasury Regulations Sections 301.7701-3(b)(i)(ii).
(b) Negative Covenants From the date hereof, the Seller shall not, without
the written consent of the Trust Depositor:
(i) Change in Name. Make any change to its corporate names or use any
tradenames, fictitious names, assumed names or "doing business as" names other
than as set forth in Section 3.02(k), unless prior to the effective date of any
such name change or use, the Seller delivers to the Trust Depositor such
financing statements (Form UCC-1 and UCC-3) executed by the Seller which the
Trust Depositor may reasonably request to reflect such name change or use,
together with such other documents and instruments that the Trust Depositor may
request in connection therewith in order to maintain a first priority interest
of the Trust Depositor in the Contract Assets;
(ii) ERISA Matters. (a) Engage or permit any ERISA Affiliate to engage in
any prohibited transaction for which an exemption is not available or has not
previously been obtained from the Department of Labor; (b) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the code, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (c) fail to make any payments to any
Multiemployer Plan that the Seller or any ERISA Affiliate may be required to
make under the agreement relating to such Multiemployer Plan or any law
pertaining thereto; (d) terminate any Benefit Plan so as to result in any
material liability; or (e) permit to exist any occurrence of any reportable
event described in Title IV of ERISA which represents a material risk of a
material liability of the Seller or any ERISA Affiliate under ERISA or the Code;
or
(iii) Transaction Documents. Except as otherwise permitted, (a) terminate,
amend or otherwise modify any Transaction Document to which it is a party or
grant any waiver or consent thereunder, or (b), terminate, amend or otherwise
modify this Agreement, or grant any waiver or consent hereunder.
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ARTICLE XIII
MISCELLANEOUS
Section 13.01 Amendment.
(a) This Agreement may be amended by the Seller, the Trust Depositor, the
Servicer, the Indenture Trustee and the Owner Trustee on behalf of the Trust,
collectively, without the consent of any Securityholders, to cure any ambiguity,
to correct or supplement any provisions in this Agreement which are inconsistent
with the provisions herein, or to add any other provisions with respect to
matters or questions arising under this Agreement that shall not be inconsistent
with the provisions of this Agreement, provided, however, that any such action
shall not adversely affect in any material respect the interests of any
Securityholder; provided, further, that no such amendment, waiver or
modification affecting the rights or obligations of the Back-Up Servicer or the
Collateral Custodian shall be effective as against the Back-Up Servicer and/or
the Collateral Custodian, as the case may be, without the written agreement of
such Person.
(b) This Agreement may also be amended from time to time by the Seller, the
Trust Depositor, the Servicer, the Indenture Trustee and the Owner Trustee on
behalf of the Trust, with the consent of the Required Holders, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholder; provided, however, that no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate or delay
the timing of (A) Collections of payments on the Contracts or distributions that
shall be required to be made on any Note or Certificate (including by way of
amendment of related definitions) or (B) the manner in which the Reserve Fund is
applied, or (ii) change in any manner (including through amendment of related
definitions), the Holders which are required to consent to any such amendment,
or (iii) make any Note or Certificate payable in money other than Dollars,
without the consent of the Holders of all Notes and Certificates of the relevant
affected Class then outstanding; provided, further, that no such amendment,
waiver or modification affecting the rights or obligations of the Back-Up
Servicer or the Collateral Custodian shall be effective as against the Back-Up
Servicer and/or the Collateral Custodian, as the case may be, without the
written agreement of such Person.
(c) This Agreement may also be amended from time to time by the Seller, the
Servicer, the Trust Depositor, the Indenture Trustee and the Owner Trustee on
behalf of the Trust for any purpose, upon receipt from or on behalf of the party
requesting such amendment of an Opinion of Counsel that such amendment will not
have a material adverse affect upon the interests of any Securityholder.
(d) Prior to the execution of any such amendment or consent, the Indenture
Trustee shall furnish written notification of the substance of such amendment or
consent, together with a copy thereof, to each Rating Agency.
(e) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish
written notification of the substance of such amendment or consent to each
Certificateholder and Noteholder, respectively. It shall not be necessary for
the consent of Noteholders and Certificateholder pursuant to Section 13.01(b) to
approve the particular form of any proposed amendment or consent, but it shall
be sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization by Noteholders and
Certificateholder of the execution thereof shall be subject to such reasonable
requirements as the Owner Trustee or the Indenture Trustee may prescribe.
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(f) The Owner Trustee or the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects such Trustee's own
rights, duties or immunities under this Agreement or otherwise.
(g) Notwithstanding anything to the contrary in this Section 13.01, the
Trust Depositor or the Servicer, acting on behalf of the Trust Depositor, may
request each Rating Agency to approve a formula for determining the Reserve Fund
Amount that is different from the formula or result determined from the current
definition thereof contained herein so as to result in a decrease in the amount
of the Reserve Fund Amount or the manner by which such Reserve Fund is funded.
If each Rating Agency delivers to the Indenture Trustee and Owner Trustee a
written notice or letter satisfying the Rating Agency Condition in connection
with such change, then the Reserve Fund Amount will be theretofore determined in
accordance with such changed formula or manner of funding, and an amendment to
this Agreement effecting such change may be executed without the consent of any
Securityholders.
Section 13.02 Protection of Title to Trust.
(a) The Servicer shall execute and file (or cause to the executed and
filed) such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Trust, the Securityholders, the Indenture Trustee and the Owner Trustee in the
Contracts and in the proceeds thereof. The Servicer shall deliver (or cause to
be delivered) to the Owner Trustee and the Indenture Trustee file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) Neither the Seller, the Trust Depositor nor the Servicer shall change
its name, identity or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed in accordance
with Section 4.02(a) seriously misleading within the meaning of ss.9-402(7) of
the UCC, unless it shall have given the Trust, the Owner Trustee, the Collateral
Custodian and the Indenture Trustee at least 60 days' prior written notice
thereof and shall have promptly filed appropriate amendments to all previously
filed financing statements or continuation statements.
(c) The Seller, the Trust Depositor and the Servicer shall give the Trust,
the Owner Trustee and the Indenture Trustee at least 60 days' prior written
notice of any relocation of the principal executive office of the Seller, or the
Trust Depositor or the Servicer if, as a result of such relocation, the
applicable provisions of the UCC would require filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement, and the Servicer shall promptly file or cause to be filed any such
amendment or new financing statement. The Servicer shall at all times maintain
each office from which it shall service Contracts, and its principal executive
office, within the United States.
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(d) The Servicer shall maintain or cause to be maintained accounts and
records as to each Contract accurately and in sufficient detail to permit (i)
the reader thereof to know at any time the status of such Contract, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Contract and the amounts from time to time deposited in or credited to the
Collection Account in respect of each Contract.
(e) The Servicer shall maintain or cause to be maintained its computer
systems so that, from and after the time of sale under this Agreement of the
Contracts, the Servicer's master computer records (including any backup
archives) that shall refer to a Contract indicate clearly the interest of the
Trust and the Indenture Trustee in such Contract and that such Contract is owned
by the Trust and has been pledged to the Indenture Trustee. Indication of the
Trust's ownership of and the Indenture Trustee's interest in a Contract shall be
deleted from or modified on the Servicer's computer systems when, and only when,
the related Contract shall have been paid in full or repurchased or substituted
for.
(f) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee
and each Rating Agency promptly after the execution and delivery of this
Agreement and of each amendment hereto, an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and the Indenture Trustee and reciting
the details of each filings or referring to prior Opinions of Counsel in which
such details are given, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest.
Section 13.03 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 under the Agreement shall be determined in
accordance with such laws, except that the duties of the Owner Trustee shall be
governed by the laws of the State of Delaware.
Section 13.04 Notices. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Seller or the Servicer:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attention: John Dale, CFO
Fax No.: (610) 719-4515
Telephone No.: (610) 719-4500
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(ii) If to the Trust Depositor:
Fidelity Equipment Lease Depositor I, LLC
1255 Wrights Lane
West Chester, Pennsylvania 19380
Attention:
Fax No.: (610) 719-4515
Telephone No.: (610) 719-4500
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Fax No.: (312) 461-3525
Telephone No.: (312) 461-2532
(iv) If to the Owner Trustee:
First Union Trust Company, National Association
One Rodney Square
920 King Street
1st Floor
Wilmington, Delaware 19801-7475
Attention:
Fax No.: (302) 888-7532
Telephone No.: (302) 888-7544
(v) If to the Collateral Custodian:
Harris Trust and Savings Bank
111 West Monroe Street, Lower Level West
Chicago, Illinois 60606
Attention: Janet LeGrand-Rice
Fax No.: (312) 461-1522
Telephone No.: (312) 461-7567
(vi) If to the Back-Up Servicer:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Fax No.: (312) 461-3525
Telephone No.: (312) 461-2532
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(vii) If to DCR:
Duff & Phelps Credit Rating, Co.
55 East Monroe Street
Chicago, IL 60603
Attention: ABS Monitoring Department
Fax No.: (312) 263-2069
Telephone No.: (312) 368-3100
(viii) If to S&P:
Standard & Poor's Ratings Services,
a division of the McGraw -Hill Companies, Inc.
26 Broadway, 15th Floor
New York, NY 10004-1064
Attention: ABS Monitoring Department
Fax No.: (212) 208-0027
Telephone No.:
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 13.05 Severability of Provisions. If one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
Certificates or the rights of the Holders thereof.
Section 13.06 Third Party Beneficiaries. Except as otherwise specifically
provided herein, the parties hereto hereby manifest their intent that no third
party shall be deemed a third party beneficiary of this Agreement, and
specifically that the Obligors are not third party beneficiaries of this
Agreement; provided, however, that the Owner Trustee shall be an express
intended third party beneficiary of this Agreement.
Section 13.07 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same instrument.
Section 13.08 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 13.09 No Bankruptcy Petition; Disclaimer.
(a) Each of the Seller, the Indenture Trustee, the Servicer, the Owner
Trustee and each Holder (by acceptance of the applicable Securities) covenants
and agrees that, prior to the date that is one year and one day after the
payment in full of all amounts owing in respect of all outstanding Securities,
it will not make any claim for amounts owed hereunder in excess of funds
available in the Trust therefor, and that it will not institute against the
Trust Depositor, or the Trust, or join any other Person in instituting against
the Trust Depositor or the Trust, any involuntary bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States. This
Section 13.09 will survive the termination of this Agreement.
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(b) The Trust acknowledges and agrees that the Certificates represent a
beneficial interest in the Trust and Trust Assets only and the Securities do not
represent an interest in any assets (other than the Trust Assets) of the Trust
Depositor (including by virtue of any deficiency claim in respect of obligations
not paid or otherwise satisfied from the Trust Assets and proceeds thereof). In
furtherance of and not in derogation of the foregoing, to the extent that the
Trust Depositor enters into other securitization transactions as contemplated in
Section 6.07, the Trust acknowledges and agrees that it shall have no right,
title or interest in or to any assets (or interests therein) other than the
Trust Assets conveyed or purported to be conveyed (whether by way of a sale,
capital contribution or by the granting of a Lien) by the Trust Depositor to any
Person other than the Trust (the "Other Assets").
To the extent that notwithstanding the agreements contained in
this Section, the Trust or any Securityholder, either (i) asserts an interest in
or claim to, or benefit from any Other Assets, whether asserted against or
through the Trust Depositor or any other Person owned by the Trust Depositor, or
(ii) is deemed to have any interest, claim or benefit in or from any Other
Assets, whether by operation of law, legal process, pursuant to applicable
provisions of Insolvency Laws or otherwise (including without limitation
pursuant to Section 1111(b) of the federal Bankruptcy Code, as amended) and
whether deemed asserted against or through the Trust Depositor or any other
Person owned by the Trust Depositor, then the Trust and each Securityholder by
accepting a Note or Certificate further acknowledges and agrees that any such
interest, claim or benefit in or from the Other Assets is and shall be expressly
subordinated to the indefeasible payment in full of all obligations and
liabilities of the Trust Depositor which, under the terms of the documents
relating to the securitization of the Other Assets, are entitled to be paid
from, entitled to the benefits of, or otherwise secured by such Other Assets
(whether or not any such entitlement or security interest is legally perfected
or otherwise entitled to a priority of distribution under applicable law,
including Insolvency Laws, and whether asserted against the Trust Depositor or
any other Person owned by the Trust Depositor) including, without limitation,
the payment of post-petition interest on such other obligations and liabilities.
This subordination agreement shall be deemed a subordination agreement within
the meaning of Section 510(a) of the Bankruptcy Code. Each Securityholder is
deemed to have acknowledged and agreed that no adequate remedy at law exists for
a breach of this Section 13.09 and that the terms and provisions of this Section
13.09 may be enforced by an action for specific performance.
(c) The provisions of this Section 13.09 shall be for the third party
benefit of those entitled to rely thereon and shall survive the termination of
this Agreement.
Section 13.10 Jurisdiction. Any legal action or proceeding with respect to
this Agreement may be brought in the federal courts of the borough of Manhattan
in New York City, New York, and by execution and delivery of this Agreement,
each party hereto consents, for itself and in respect of its property, to the
non-exclusive jurisdiction of those courts. Each such party irrevocably waives
any objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction in respect of this
Agreement or any document related hereto.
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Section 13.11 Tax Characterization. Notwithstanding the provisions of
Section 2.01 and Section 2.04 hereof, the Trust Depositor and Owner Trustee
agree that pursuant to Treasury Regulations Section 301.7701-3(b)(l)(ii), the
Trust is to be disregarded as a separate entity from the Trust Depositor for
federal and State of Pennsylvania income tax purposes.
Section 13.12 Prohibited Transactions with Respect to the Trust. Fidelity
shall not:
(a) Provide credit to any Noteholder or Certificateholder for the purpose
of enabling such Noteholder or Certificateholder to purchase Notes or
Certificates, respectively:
(b) Purchase any Notes or Certificates in an agency or trustee capacity: or
(c) Except in its capacity as Servicer as provided in this Agreement, lend
any money to the Trust.
Section 13.13 Merger or Consolidation of the Seller.
(a) The Seller will keep in full force and effect its existence, rights and
franchise as a Pennsylvania corporation, and the Seller will obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and of any of the Contracts and to perform its
duties under this Agreement.
(b) Any person into which the Seller may be merged or consolidated, or any
corporation resulting from such merger or consolidation to which the Seller is a
party, or any person succeeding to the business of the Seller shall be the
successor to the Seller hereunder, without execution or filing of any paper or
any further act on the part of any of the parties hereto, notwithstanding
anything herein to the contrary.
(c) Upon the merger or consolidation of the Seller as described in this
Section 13.13, the Seller shall provide the Rating Agencies notice of such
merger or consolidation within thirty (30) days after completion of the same.
Section 13.14 Assignment or Delegation by the Seller. Except as
specifically authorized hereunder, the Seller may not convey and assign or
delegate any of its rights or obligations hereunder absent the prior written
consent of the Trust Depositor and the Trustees, and any attempt to do so
without such consent shall be void.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: First Union Trust Company, National Association,
not in its individual capacity but solely as Owner
Trustee
By: ____________________________________________
Name:
Title:
FIDELITY EQUIPMENT LEASE DEPOSITOR I, LLC, as Trust Depositor
By: _____________________________________________
Name:
Title:
FIDELITY LEASING, INC., as Seller and as Servicer
By: _____________________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as Indenture Trustee
By: _____________________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, in its capacity as Back-Up
Servicer and as Collateral Custodian
By: _____________________________________________
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF ASSIGNMENT]
In accordance with the Sale and Servicing Agreement (the "Sale and
Servicing Agreement") dated as of June 2, 1999 made by and among the
undersigned, as Trust Depositor (the "Trust Depositor"), Fidelity Leasing, Inc.,
as Seller and Servicer, Harris Trust and Savings Bank (the "Indenture Trustee")
as Indenture Trustee, Harris Trust and Savings Bank, as Back-Up Servicer and as
Collateral Custodian, and Fidelity Equipment Lease Trust 1999-1 (the "Trust"),
as assignee thereunder, the undersigned does hereby sell, transfer, convey and
assign, set over and otherwise convey to the Trust (i) all the right, title and
interest of the Trust Depositor in and to the Initial Contracts listed on the
initial List of Contracts delivered on the Closing Date (including, without
limitation, all rights to receive Collections with respect thereto on or after
the Initial Cutoff Date, but excluding any rights to receive payments which were
collected pursuant thereto prior to the Initial Cutoff Date), and (ii) all other
Contract Assets relating to the foregoing.
Capitalized terms used herein have the meaning given such terms in the Sale
and Servicing Agreement.
This Assignment is made pursuant to and in reliance upon the representation
and warranties on the part of the undersigned contained in Article III of the
Sale and Servicing Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ___ day of _______________, 1999.
FIDELITY EQUIPMENT LEASE
DEPOSITOR I, LLC
By: ___________________________________
Name:
Title:
A-1
<PAGE>
EXHIBIT B
[FORM OF CLOSING CERTIFICATE OF THE TRUST DEPOSITOR]
OFFICER'S CERTIFICATE
The undersigned certifies that he/she is [________________] of Fidelity
Equipment Lease Depositor I, LLC, a Delaware limited liability company (the
"Trust Depositor"), and that as such is duly authorized to execute and deliver
this certificate on behalf of the Trust Depositor in connection with the Sale
and Servicing Agreement (the "Sale and Servicing Agreement") dated as of June 2,
1999 (the "Effective Date") by and among the Trust Depositor, Harris Trust and
Savings Bank, as Indenture Trustee, Harris Trust and Savings Bank, as Back-Up
Servicer and as Collateral Custodian, Fidelity Leasing, Inc., as Seller and as
Servicer, and Fidelity Equipment Lease Trust 1999-1 ("Trust") (all capitalized
terms used herein without definition having the respective meanings set forth in
the Sale and Servicing Agreement), and further certifies as follows:
(1) Attached hereto as Exhibit I is a true and correct copy of the
Certificate of Formation of the Trust Depositor, together with all amendments
thereto as in effect on the date hereof.
(2) There has been no other amendment or other document filed affecting the
Certificate of Formation of the Trust Depositor since [____________], 19___, and
no such amendment has been authorized by any member of the Trust Depositor.
(3) Attached hereto as Exhibit II is a Certificate of the Secretary of
State of the State of Delaware dated May __, 1999 stating that the Trust
Depositor is duly formed under the laws of the State of Delaware and is in good
standing.
(4) Attached hereto as Exhibit III is a true and correct copy of the
Limited Liability Company Agreement of the Trust Depositor, as amended, which
was in full force and effect on May __, 1999, and at all times subsequent
thereto.
(5) Attached hereto as Exhibit IV is a true and correct copy of the
unanimous written consent of the members of the Trust Depositor relating to the
execution, delivery and performance of (among other things) the Transaction
Documents. Said resolutions have not been amended, modified, annulled or
revoked, and are on the date hereof in full force and effect and are the only
resolutions relating to these matters which have been adopted by the members.
(6) No event with respect to the Trust Depositor has occurred and is
continuing which would constitute an Event of Default or an event that, with
notice or the passage of time or both, would become an Event of Default as
defined in the Sale and Servicing Agreement. To the best of my knowledge after
reasonable investigation, there has been no material adverse change in the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Trust Depositor, whether or not arising in the ordinary course
of business since the respective dates as of which information is given in the
Private Placement Memorandum and except as set forth therein.
B-1
<PAGE>
(7) All federal, state and local taxes of the Trust Depositor due and owing
as of the date hereof have been paid.
(8) All representations and warranties of the Trust Depositor contained in
the Transaction Documents or any other related documents, or in any document,
certificate or financial or other statement delivered in connection therewith
are true and correct as of the date hereof.
(9) There is no action, investigation or proceeding pending or, to our
knowledge, threatened against the Trust Depositor before any court,
administrative agency or other tribunal (a) asserting the invalidity of the
Transaction Documents; (b) seeking to prevent the consummation of any of the
transactions contemplated by the Transaction Documents; or (c) which is likely
materially and adversely to affect the Trust Depositor's performance of its
obligations under, or the validity or enforceability of, the Transaction
Documents.
(10) No consent, approval, authorization or order of, and no notice to or
filing with, any governmental agency or body or state or federal court is
required to be obtained by the Trust Depositor for the Trust Depositor's
consummation of the transactions contemplated by the Transaction Documents,
except such as have been obtained or made and such as may be required under the
blue sky laws of any jurisdiction in connection with the issuance and sale of
the Securities.
(11) The Trust Depositor is not a party to any agreements or instruments
evidencing or governing indebtedness for money borrowed or by which the Trust
Depositor or its property is bound (other than the Transaction Documents).
Neither the Seller's transfer and assignment of the Contract Assets to the Trust
Depositor, the Trust Depositor's concurrent transfer and assignment of the Trust
Assets to the Trust, nor the concurrent transfer and assignment of the
Collateral by the Trust to the Indenture Trustee nor the issuance and sale of
the Notes and the Certificate, nor the execution and delivery of the Transaction
Documents, nor the consummation of any other of the transactions contemplated
therein, will violate or conflict with any agreement or instrument to which the
Trust Depositor is a party or by which it is otherwise bound.
(12) In connection with the transfer of Contracts and related collateral
contemplated in the Sale and Servicing Agreement, (a) the Trust Depositor has
not made such transfer with actual intent to hinder, delay or defraud any
creditor of the Trust Depositor, and (b) the Trust Depositor has not received
less than a reasonably equivalent value in exchange for such transfer, is not on
the date thereof insolvent (nor will become insolvent as a result thereof), is
not engaged (or about to engage) in a business or transaction for which it has
unreasonably small capital, and does not intend to incur or believe it will
incur debts beyond its ability to pay when matured. B-2
<PAGE>
(13) Each of the agreements and conditions of the Trust Depositor to be
performed on or before the Closing Date pursuant to the Transaction Documents
have been performed in all material respects.
[SIGNATURE PAGE FOLLOWS]
B-3
<PAGE>
IN WITNESS WHEREOF, I have affixed my signature hereto this ___ day of June
__, 1999.
By: ___________________________________
Name:
Title:
B-4
<PAGE>
EXHIBIT C
[FORM OF CLOSING CERTIFICATE OF THE SELLER AND THE SERVICER]
OFFICER'S CERTIFICATE
The undersigned certifies that he/she is [________]_ of Fidelity Leasing,
Inc., ("Fidelity"), and that as such he/she is duly authorized to execute and
deliver this certificate on behalf of Fidelity, as Servicer, in connection with
the Sale and Servicing Agreement (the "Sale and Servicing Agreement") dated as
of June 2, 1999 (the "Effective Date") by and among Fidelity, as Seller and
Servicer, Fidelity Equipment Lease Depositor I, LLC, as Trust Depositor, Harris
Trust and Savings Bank, as Indenture Trustee, Harris Trust and Savings Bank, as
Back-up Servicer and as Collateral Custodian, and Fidelity Equipment Lease Trust
1999-1 ("Trust"), (all capitalized terms used herein without definition having
the respective meanings set forth in the Sale and Servicing Agreement), and
further certifies as follows (it being understood that these certifications are
being relied upon by, among others, Morgan, Lewis & Bockius LLP in connection
with its delivery of a legal opinion (the "Opinion") required in connection with
the subject transactions addressing, among other things, enforceability and UCC
perfection issues, and by the Placement Agent in connection with its
undertakings in connection with the subject transactions):
(1) Attached hereto as Exhibit I is a true and correct copy of the
Certificate of Incorporation of Fidelity, together with all amendments thereto
as in effect on the date hereof.
(2) There has been no other amendment or other document filed affecting the
Certificate of Incorporation of Fidelity since __________, 19__, and no such
amendment has been authorized by the Board of Directors or shareholders of
Fidelity.
(3) Attached hereto as Exhibit II is a Certificate of the Secretary of
State of the State of Pennsylvania dated __________, 1999 stating that Fidelity
is duly incorporated under the laws of the State of Pennsylvania and is in good
standing.
(4) Attached hereto as Exhibit III is a true and correct copy of the Bylaws
of Fidelity which were in full force and effect on [__________], 19__ and at all
times subsequent thereto.
(5) Attached hereto as Exhibit IV is a true and correct copy of resolutions
adopted pursuant to a unanimous written consent of the Board of Directors of
Fidelity and relating to the authorization, execution, delivery and performance
of (among other things) the Transaction Documents. Said resolutions have not
been amended, modified, annulled or revoked, and are on the date hereof in full
force and effect and are the only resolutions relating to these matters which
have been adopted by the Board of Directors.
(6) Fidelity has been duly incorporated and is validly existing under the
laws of the State of its incorporation and has corporate and other power and
authority to own its properties and conduct its business, as now conducted by
it, and to enter into and perform its obligations under the Transaction
Documents. All other subsidiaries of Fidelity that have engaged in any business
activity have been duly incorporated are validly existing under the laws of the
State of their incorporation and have the corporate and other power and
authority to own their properties and conduct their businesses, as now conducted
by them
C-1-1
<PAGE>
(7) No event with respect to Fidelity has occurred and is continuing which
would constitute an Event of Default or Servicer Default or an event that, with
notice or the passage of time, would constitute an Event of Default or Servicer
Default as defined in the Sale and Servicing Agreement. No event has occurred,
which has affected the good standing of Fidelity, under the laws of the State of
Pennsylvania, or any other state in which Fidelity should be qualified to do
business in order to engage in the transactions contemplated hereunder and under
the other Transaction Documents. There has not occurred any material adverse
change, or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of Fidelity from the date of its formation or its subsidiaries, taken
as a whole, from [_____________];
(8) The information contained in the Private Placement Memorandum and the
Indenture relating to Fidelity and the Trust Assets is true and accurate in all
material respects and nothing has come to my attention that would lead me to
believe that the Private Placement Memorandum and the Indenture includes any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein not misleading.
(9) To the best of my knowledge after reasonable investigation, there has
been no material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of Fidelity, whether or not
arising in the ordinary course of business, since the respective dates as of
which information is given in the Private Placement Memorandum and except as set
forth therein.
(10) All federal, state and local taxes of Fidelity due and owing as of the
date hereof have been paid.
(11) All representations and warranties of Fidelity contained in the
Transaction Documents or in any document, certificate or financial or other
statement delivered in connection therewith are true and correct as of the date
hereof, and Fidelity has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date.
(12) There are no actions, investigations or proceedings pending or, to my
knowledge, threatened against Fidelity before any court, administrative agency
or other tribunal (a) asserting the invalidity of any Transaction Document to
which Fidelity is a party; or (b) which, determined individually or in the
aggregate, are likely materially and adversely to affect Fidelity's performance
of its obligations under, or the validity or enforceability of, the Transaction
Documents; and no merger, liquidation, dissolution or bankruptcy of Fidelity is
pending or contemplated.
C-1-2
<PAGE>
(13) No consent, approval, authorization or order of, and no notice to or
filing with, any governmental agency or body or state or federal court is
required to be obtained by Fidelity for Fidelity's consummation of the
transactions contemplated by the Transaction Documents, except such as have been
obtained or made and such as may be required under the blue sky laws of any
jurisdiction in connection with the issuance and sale of the Notes or
Certificates.
(14) Neither Fidelity's transfer and assignment of the Contract Assets to
the Trust Depositor, the Trust Depositor's concurrent transfer and assignment of
the Trust Assets to the Trust, nor the concurrent transfer and assignment by the
Trust of the Collateral to the Indenture Trustee, nor the issuance and sale of
the Notes or the Certificate or the entering into of the Transaction Documents,
nor the consummation of any other of the transactions contemplated therein, will
violate or conflict with any agreement or instrument to which Fidelity is a
party or by which it is otherwise bound.
(15) In connection with the transfers of Contracts and related assets
contemplated in the Agreement, (a) Fidelity has not made such transfer with
actual intent to hinder, delay or defraud any creditor of Fidelity, and (b)
Fidelity has not received less than a reasonably equivalent value in exchange
for such transfer, is not on the date hereof insolvent (nor will Fidelity become
insolvent as a result thereof), is not engaged (or about to engage) in a
business or transaction for which it has unreasonably small capital, and does
not intend to incur or believe it will incur debts beyond its ability to pay
when matured.
(16) Each of the agreements and conditions of Fidelity to be performed or
satisfied on or before the Closing Date under the Transaction Documents has been
performed or satisfied in all material respects.
(17) Fidelity has not executed for filing any UCC financing statements
listing the Contract Assets as collateral other than financing statements
relating to the transactions contemplated in the Agreement.
(18) Each person who, as an officer or representative of Fidelity signed or
signs 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 herein was, at the respective time 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.
C-1-3
<PAGE>
(19) [With respect to the financing statements described in the Opinion
which are identified as Specific Agreement Filings naming Fidelity as debtor,
Fidelity has conducted a review of its internal records and determined that the
individual financing agreements described as collateral in such Specific
Agreement Filings are not, and do not relate to, Contracts being conveyed by
Fidelity and constituting part of the Initial Contract Pool, and Fidelity
further represents that such agreements are never to be conveyed as a Subsequent
Contract.]
[SIGNATURE PAGE FOLLOWS]
C-1-4
<PAGE>
IN WITNESS WHEREOF, I have affixed my signature hereto this ___ day of
June, 1999.
By: ___________________________
Name:
Title:
C-1-5
<PAGE>
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE TRUST DEPOSITOR AND THE SELLER
REGARDING GENERAL CORPORATE MATTERS
(INCLUDING PERFECTION OPINION)
D-1
<PAGE>
EXHIBIT E
FORM OF OPINION OF COUNSEL FOR THE TRUST DEPOSITOR AND THE SELLER
REGARDING THE NON-CONSOLIDATION AND "TRUE SALE" NATURE
OF THE TRANSACTION
E-1
<PAGE>
EXHIBIT F
LOCATION OF CONTRACT FILES
111 West Monroe Street
Lower Level West
Chicago, Illinois 60603
F-1
<PAGE>
EXHIBIT G
[FORM OF CERTIFICATE REGARDING REPURCHASED CONTRACTS]
FIDELITY LEASING, INC.
CERTIFICATE REGARDING REPURCHASED CONTRACTS
The undersigned certifies that he/she is a __________ of Fidelity Leasing,
Inc., a Pennsylvania corporation (the "Seller"), and that as such he/she is duly
authorized to execute and deliver this certificate on behalf of the Seller
pursuant to Section 11.02 of the Sale and Servicing Agreement (the "Sale and
Servicing Agreement") dated as of June 2, 1999 by and among Fidelity Leasing,
Inc., as Seller and Servicer, Fidelity Equipment Lease Depositor I, LLC, as
Trust Depositor, Harris Trust and Savings Bank, as Indenture Trustee, Harris
Trust and Savings Bank, as Back-up Servicer and as Collateral Custodian, and
Fidelity Equipment Lease Trust 1999-1 (the "Trust") (all capitalized terms used
herein without definition having the respective meanings specified in the Sale
and Servicing Agreement), and further certifies that:
1. The Contracts on the attached schedule are to be repurchased by the
Seller on the date hereof, or substituted for by the Seller, pursuant to and in
accordance with Section 11.01 of the Sale and Servicing Agreement.
2. Upon deposit of the Transfer Deposit Amount for such Contracts (or the
effective conveyance of one or more Substitute Contracts therefor), such
Contracts may, pursuant to Section 11.02 of the Sale and Servicing Agreement, be
assigned by the Owner Trustee to the Seller.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ______ day of
__________, ____.
By: ___________________________________
Name:
Title:
G-1
<PAGE>
EXHIBIT H
[LIST OF CONTRACTS]
H-1
<PAGE>
I-1
EXHIBIT I
[FORM OF MONTHLY REPORT TO NOTEHOLDERS AND CERTIFICATEHOLDER]
I-1
<PAGE>
EXHIBIT J
LOCKBOX BANK AND LOCKBOX ACCOUNT
Lockbox Bank: Wells Fargo Bank
Lockbox Account: #4038146148
ABA #: 12100248
J-1
<PAGE>
EXHIBIT K
[FORM OF SUBSEQUENT TRANSFER AGREEMENT]
SUBSEQUENT TRANSFER AGREEMENT (the "Agreement"), dated as of [_________],
by and between Fidelity Equipment Lease Depositor I, LLC, a Delaware limited
liability company, as Trust Depositor (the "Trust Depositor"), and Fidelity
Equipment Lease Trust 1999-1 (the "Trust").
W I T N E S S E T H :
WHEREAS, the Trust and the Trust Depositor are parties to the Sale and
Servicing Agreement, dated as of June 2, 1999 (the "Sale and Servicing
Agreement");
WHEREAS, pursuant to the Sale and Servicing Agreement, the Trust Depositor
wishes to sell the Subsequent Contracts to the Trust, and the Trust wishes to
purchase the same, for the consideration described in the Sale and Servicing
Agreement; and
WHEREAS, the Trust Depositor has timely delivered a Subsequent Notice
related to such conveyance as required in Section 2.04(c) of the Sale and
Servicing Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Capitalized terms used herein shall have the meanings ascribed
to them in the Sale and Servicing Agreement unless otherwise defined herein.
"Subsequent Cutoff Date" shall mean, with respect to the Subsequent
Contracts transferred hereby, [_______].
"Subsequent Contracts" shall mean, for purposes of this Agreement, the
Subsequent Contracts listed in the Subsequent List of Contracts attached hereto
as Exhibit A.
"Subsequent Transfer Date" shall mean, with respect to the Subsequent
Contracts transferred hereby, [_______].
Section 2. Subsequent List of Contracts. The Subsequent List of Contracts
attached hereto as Exhibit A is an amendment to the initial List of Contracts
attached as Exhibit H to the Sale and Servicing Agreement, as contemplated in
the definition of List of Contracts set forth therein. The Subsequent List of
Contracts separately identifies the Subsequent Contracts to be transferred
pursuant to this Agreement on the Subsequent Transfer Date, and, in the case of
Substitute Contracts, also further separately identifies the related Contract or
Contracts with respect to which Substitution Event has occurred and which
Contracts are being deleted from the List of Contracts by virtue of the delivery
of the Subsequent List of Contracts.
K-1
<PAGE>
Section 3. Transfer of Subsequent Contracts. Subject to and upon the terms
and conditions set forth in Section 2.04(c) of the Sale and Servicing Agreement
and this Agreement, the Trust Depositor hereby sells, transfers, assigns, sets
over and otherwise conveys to the Trust:
(i) the Subsequent Contracts identified in the related Subsequent Notice,
and all monies due or to become due in payment of such Subsequent Contracts on
and after the related Subsequent Cutoff Dates, any Prepayment Amounts, any
payments in respect of a casualty or early termination, and any Defaulted
Contract Recoveries received with respect thereto, but excluding any Scheduled
Payments due prior to the related Subsequent Cutoff Date and any Excluded
Amounts;
(ii) the Financed Items related to such Contracts, including all proceeds
from any sale or other disposition of such Financed Items (but subject to the
exclusion and release herein of Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with respect to such
Contracts or the Obligor thereunder under any Program Agreements and under any
guarantee or similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
(vi) all rights (but not the obligations) of the Trust Depositor under the
Sale and Servicing Agreement related to such Contracts (to the extent not
already conveyed under Section 2.04(a) of the Sale and Servicing Agreement), as
well as all rights, but not the obligations, of the Trust Depositor under the
Subsequent Purchase Agreement related to such Contracts;
(vii) all income from and proceeds of the foregoing; and
(viii) the security interest of the Trust Depositor or its affiliates in
the Equipment or other property securing such Contracts and the proceeds
thereof.
It is the intention of the Trust Depositor and Owner Trustee that the transfer
contemplated by this Agreement shall constitute an absolute assignment and sale
of the Subsequent Contracts from the Trust Depositor to the Trust, conveying
good title thereto free and clear of any Liens.
Section 4. Representations and Warranties of the Trust Depositor. (a) The
Trust Depositor hereby represents and warrants to the Trust that the
representations and warranties of the Trust Depositor set forth in Section 3.06
of the Sale and Servicing Agreement are true and correct as of the Subsequent
Transfer Date.
(b) The Trust Depositor hereby repeats and remakes with respect to the
Subsequent Contracts as of the Subsequent Transfer Date the representations and
warranties set forth in Section 3.06 of the Sale and Servicing Agreement and
deemed to be made with respect to the Subsequent Contracts thereunder.
K-2
<PAGE>
(c) The Trust Depositor hereby represents and warrants that (a) the ADCB of
the Subsequent Contracts listed on the Subsequent List of Contracts and conveyed
to the Trust Depositor pursuant to this Agreement is $_________ as of the
Subsequent Cutoff Date, and (b) the conditions set forth in Section 2.04(c) of
the Sale and Servicing Agreement have been satisfied as of the Subsequent
Transfer Date.
Section 5. Ratification of Agreement. As supplemented by this Agreement,
the Sale and Servicing Agreement is in all respects ratified and confirmed and,
as so supplemented by this Agreement, shall be read, taken and construed as one
and the same instrument.
Section 6. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
Section 7. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
Section 8. Authorization of Trustee. By its execution hereof, the Trust
Depositor hereby authorizes and directs the Owner Trustee to execute and deliver
this Agreement on behalf of the Trust.
[SIGNATURE PAGE FOLLOWS]
K-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
FIDELITY EQUIPMENT LEASE
DEPOSITOR I, LLC
By: ___________________________________
Name:
Title:
FIDELITY EQUIPMENT LEASE TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner
Trustee
By: __________________________
Name:
Title:
K-4
<PAGE>
EXHIBIT L
FORM OF SUBSEQUENT PURCHASE AGREEMENT
SUBSEQUENT PURCHASE AGREEMENT (the "Agreement" dated as of [_______],
[_______], by and between Fidelity Equipment Lease Depositor I, LLC, a Delaware
limited liability company (the "Trust Depositor"), and Fidelity Leasing, Inc., a
Pennsylvania corporation (the "Seller"), pursuant to the Sale and Servicing
Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Trust Depositor and the Seller are parties to the Sale and
Servicing Agreement dated as of June 2, 1999 (the "Sale and Servicing
Agreement");
WHEREAS, pursuant to the Sale and Servicing Agreement, the Seller wishes to
sell the Subsequent Contracts to the Trust Depositor, and the Trust Depositor
wishes to purchase the same, for the purchase price set forth in Section 3
below; and
WHEREAS, the Seller has timely delivered a Subsequent Notice related to
such conveyance as required in the Sale and Servicing Agreement.
NOW, THEREFORE, the Seller and the Trust Depositor hereby agree as follows:
Section 1.________Defined Terms. Capitalized terms used herein shall have
the meanings ascribed to them in the Sale and Servicing Agreement unless
otherwise defined herein.
"Subsequent Contracts" shall mean, for purposes of this Agreement, the
Subsequent Contracts listed in the Subsequent List of Contracts attached hereto
as Exhibit A.
"Subsequent Cutoff Date" shall mean, with respect to the Subsequent
Contracts transferred hereby [_____].
"Subsequent Transfer Date" shall mean, with respect to the Subsequent
Contracts transferred hereby [_____].
Section 2.________Subsequent List of Contracts. The Subsequent List of
Contracts attached hereto as Exhibit A is an amendment to the initial List of
Contracts attached as Exhibit H to the Sale and Servicing Agreement, as
contemplated in the definition of List of Contracts set forth therein. The
Subsequent List of Contracts separately identifies (by attached schedule, or
marking or other effective identifying designation) the Subsequent Contracts to
be transferred pursuant to this Agreement on the Subsequent Transfer Date, and,
in the case of Substitute Contracts, also further separately identifies (by
attached schedule, or marking or other effective identifying designation) the
related Contract or Contracts with respect to which a Substitution Event has
occurred and which Contracts are being deleted from the List of Contracts by
virtue of the delivery of the Subsequent List of Contracts.
L-1
<PAGE>
Section 3.________Transfer of Subsequent Contracts. Subject to and upon the
terms and conditions set forth in Section 2.04 of the Sale and Servicing
Agreement and this Agreement, the Seller hereby sells, transfers, assigns, set
overs and otherwise conveys to Trust Depositor, in consideration of Trust
Depositor's release and redelivery to the Seller the related Contract Assets
with respect to which a Substitution Event has occurred,
(i) the Subsequent Contracts identified in the related Subsequent Notice,
and all monies due or to become due in payment of such Subsequent Contracts on
and after the related Subsequent Cutoff Dates, any Prepayment Amounts, any
payments in respect of a casualty or early termination, and any Defaulted
Contract Recoveries received with respect thereto, but excluding any Scheduled
Payments due prior to the related Subsequent Cutoff Date and any Excluded
Amounts;
(ii) the Financed Items related to such Contracts, including all proceeds
from any sale or other disposition of such Financed Items (but subject to the
exclusion and release herein of Excluded Amounts);
(iii) the Contract Files;
(iv) all payments made or to be made in the future with respect to such
Contracts or the Obligor thereunder under any Program Agreements and under any
guarantee or similar credit enhancement with respect to such Contracts;
(v) all Insurance Proceeds with respect to each such Contract;
(vi) all income from and proceeds of the foregoing; and
(vii) the security interest of the Seller or its affiliates in the
Equipment or other property securing such Contracts and the proceeds thereof.
It is the intention of the Seller and the Trust Depositor that the transfer
contemplated by this Agreement shall constitute a sale of the Subsequent
Contracts from the Seller to the Trust Depositor, conveying good title thereto
free and clear of any Liens, and that the Subsequent Contracts shall not be part
of the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy or similar law.
Section 4. Representations and Warranties of the Seller. (a) The Seller
hereby represents and warrants to the Trust Depositor that the representations
and warranties of Seller in Sections 3.02, 3.04 and, to the extent provided in
the third paragraph of Article III, 3.05, of the Sale and Servicing Agreement
are true and correct as of the Subsequent Transfer Date.
(b) The Seller hereby repeats and remakes with respect to the Subsequent
Contracts as of the Subsequent Transfer Date, the representations and warranties
set forth in the Sale and Servicing Agreement and deemed to be made with respect
to such Subsequent Contracts thereunder.
(c) The Seller hereby represents and warrants that (i) the ADCB of the
Subsequent Contracts listed on the Subsequent List of Contracts and conveyed to
the Trust Depositor pursuant to this Agreement is $________ as of the Subsequent
Cutoff Date, and (ii) the conditions set forth in Section 2.04(c) of the Sale
and Servicing Agreement have been satisfied as of the Subsequent Transfer Date.
L-2
<PAGE>
Section 5. Ratification of Agreement. As supplemented by this Agreement,
the Sale and Servicing Agreement is in all respects ratified and confirmed and,
as so supplemented by this Agreement, shall be read, taken and construed as one
and the same instrument.
Section 6. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
Section 7. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
[SIGNATURE PAGE FOLLOWS]
L-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
FIDELITY EQUIPMENT LEASE DEPOSITOR I, LLC
By: ___________________________________
Name:
Title:
FIDELITY LEASING, INC.
By: ___________________________________
Name:
Title:
L-4
<PAGE>
LEASE AGREEMENT
THIS AGREEMENT OF LEASE ("Lease"), made as of the _____ day of ______,
1998, by and between Bryn Mawr Mall Associates, a Pennsylvania limited
partnership ("Landlord")
A N D
Fidelity Leasing, Inc. ("Tenant").
Tenant and Landlord, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged and intending to be legally bound hereby, agree as follows:
1. Lease and Premises.
A. Subject to the provisions of this Lease, Landlord hereby
demises and leases to Tenant and Tenant hereby leases from Landlord that certain
property consisting of a minimum of 20,000 rentable square feet (as measured
consistent with BOMA standards) in Building II, Commons at Brandywine, Airport
Road and Wrights Lane, West Goshen Township, Chester County, Pennsylvania, as
more fully described or shown on Exhibit "A," attached hereto and incorporated
herein by reference, and further subject to the final space plan (the "Space
Plan") to be prepared by Tenant and approved by Landlord (the "Premises").
B. The Premises shall be occupied and used for office purposes
only and in accordance with all applicable laws, ordinances and regulations.
C. Landlord shall provide a "turnkey" project, with the Tenant
improvements to be performed by the Landlord in accordance with Tenant's space
plan to be attached hereto and incorporated herein by reference as Exhibit "B".
Specifications shall be building standard, as determined by Landlord (cost not
to exceed $20.00 per r.s.f.), unless otherwise noted on the Space Plan. Landlord
shall use best efforts to construct and complete the 20,000 square foot section
shown on the Space Plan prior to the "Lease Commencement Date" (as hereinafter
defined). In the event the Tenant improvements do not utilize the entire $20.00
per r.s.f. figures set forth above, Tenant may utilize any unused portion
thereof for telephone and computer cabling purposes.
2. Term.
A. The term of this Lease shall be for six (6) years and two
(2) months, commencing November 1, 1998 (the "Lease Commencement Date"). Subject
to the provisions of paragraph 28, the term of this Lease shall expire, without
the necessity of any notice from either party to the other, on December 31,
2004, provided, however, that Landlord shall give written notice of the
impending expiration of the Lease not more than twelve (12) months and not less
than ten (10) months prior to its expiration. Tenant shall, at the request of
Landlord, execute a "Lease Commencement Memorandum", setting forth the Lease
Commencement Date
<PAGE>
and such other provisions as reasonably required by Landlord and/or Landlord's
lender(s).
B. If Tenant remains in possession of the Premises after the
expiration of the term of this Lease without the written consent of Landlord,
such holding over shall, if rent is accepted by Landlord for any period after
the expiration of the term, create a tenancy from month to month with respect to
the Premises on all of the same terms and conditions as are in effect on the
last day of the preceding term, except that the monthly minimum rental shall be
increased to an amount equal to one and one-half times the minimum monthly
rental effective on the last day of the preceding term.
3. Base Minimum Rent.
A. The base minimum rent payable by Tenant to Landlord during
the six (6) year, two (2) month term shall be payable in monthly installments in
lawful money of the United States of America, in advance on or before the first
day of each month, with such base minimum rent payments to begin on the first
day of the third month following the Lease Commencement Date (with Tenant
enjoying free minimum monthly rent for the first two (2) full months following
the Lease Commencement Date) and to continue thereafter as follows:
Rent Minimum Minimum
Per Annual Monthly
Year Square Foot Rent Rent
---- ----------- ------- -------
1. 1/1/99 - 12/31/99 $17.50 $350,000.00 $29,166.67
2. 1/1/00 - 12/31/00 $18.00 360,000.00 30,000.00
3. 1/1/01 - 12/31/01 $18.50 370,000.00 30,833.33
4. 1/1/02 - 12/31/02 $19.00 380,000.00 31,166.67
5. 1/1/03 - 12/31/03 $19.50 390,000.00 32,500.00
6. 1/1/04 - 12/31/04 $20.00 400,000.00 33,333.33
In the event that the actual square footage, calculated
with reference to paragraph 1A, above, is greater than or less than 20,000
rentable square feet, the minimum annual rent and minimum monthly rent figures
set forth above shall be adjusted by multiplying the actual rentable square feet
by the rent per square foot figures set forth above. Such adjustment shall be
set forth in the Lease Commencement Memorandum referenced in paragraph 2A,
above.
B. In the event Landlord completes the Tenant improvements
(referenced in paragraph 1(C), above) prior to the Lease Commencement Date,
Tenant shall pay minimum monthly rent, prorated, based upon the number of days
such work is completed prior to the Lease Commencement Date. Conversely, in the
event such work is not completed until following the Lease Commencement Date,
Tenant's base minimum rent payment obligation shall abate for a
2
<PAGE>
like number of days as of December 1, 1998. In the event Tenant accesses the
Premises (or any other person or entity accesses the Premises with the express
or implicit consent of Tenant), all terms, conditions and provisions of this
Lease shall be in full force and effect, excepting only Tenant's obligation to
pay base minimum rent, which is addressed above. Tenant may terminate this Lease
and have all deposits and rents returned to it if the Tenant improvements
referenced in paragraph 1C are not completed within ninety (90) days from the
date of execution of this Lease, unless Landlord's inability to complete such
improvements is due to force majeure (which shall include, but shall not be
limited to, unavailability of building materials).
4. Additional Rent.
As additional rent hereunder, Tenant shall pay (either
directly to the third party provider or to Landlord, as hereinafter set forth)
the following at or before the times such payments are due, but in no event
later than ten (10) days following rendition by Landlord of a bill therefor (if
applicable):
A. All charges for electrical service, use and consumption
relating to the Premises, which shall be separately metered at Landlord's
expense.
B. Commencing January 1, 2000, Tenant shall pay to Landlord,
in monthly installments due and payable with the base minimum rental payments
hereunder, "Tenant's Proportionate Share" (as hereinafter defined) of the
"Operating Expenses" in excess of (or over) the "Base Year Operating Expenses"
(as both terms are hereafter defined), in accordance with the following:
(i) "Tenant's Proportionate Share" shall mean 48.3%
(20,000 square feet divided by 41,397 square feet). Provided, however, that the
"Tenant's Proportionate Share" number shall be recalculated in the event the
rentable square footage figure is revised due to the BOMA measurements
referenced in paragraph 1A, above.
(ii) "Operating Expenses" shall mean all costs and
expenses incurred by Landlord in connection with the ownership, operation and
management of the property of which the Premises is a part (the "Property"),
excluding only the Landlord's financing/debt service, ground rents, leasing
commissions and all federal, state and local income taxes levied upon Landlord's
income generally. Operating Expenses shall include, but shall not be limited to,
all taxes, assessments and charges of whatsoever nature levied upon or with
respect to the Property (except as set forth above); all premiums insuring the
Property from and against loss or damage by fire, vandalism and other casualty
which Landlord desires to insure against, as well as coverage insuring Landlord
against liability for bodily injury (including death) and property damage and
such other coverage as determined or required by Landlord and/or Landlord's
mortgagee; all costs and expenses of management (including management fees - and
the current management fee percentage (4%) shall not be increased in calculating
"Operating Expenses"), legal and accounting expenses (but excluding legal and
accounting expenses
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incurred in connection with an individual tenant or any matter involving fewer
than all tenants of the building of which the Premises is a part), maintenance,
repair and replacement with respect to the Property and all buildings and
improvements thereon, whether structural, non-structural or otherwise (but
excluding foundation, load-bearing walls, roof and, with respect to replacement
matters, plumbing and HVAC systems), and all snow removal, maintenance, repair,
replacement of pavement, parking, landscaping (including grass-cutting and
shrubbery trimming), all utilities and services which are not separately metered
for each tenant, and all other costs and expenses of maintenance, repair and
replacement affecting or relating to the Property. In the event an individual
component of "Operating Expenses" is for a capital expenditure with a useful
life of greater than one (1) year, Landlord shall amortize such component over
its useful life and the amortized portion thereof shall be included in
"Operating Expenses" (e.g., capital expenditure of $30,000.00, for an item with
a 10 year useful life, then $3,000.00 ($30,000.00 divided by 10) would be
included in "Operating Expenses" for that given year).
This paragraph shall apply to all years of the Lease including any extensions
pursuant to options or otherwise.
(iii) "Base Year Operating Expenses" shall mean the
Operating Expenses for calendar year 1999, grossed up with respect to non-fixed
operating expense components to reflect a 95 percent occupancy for the full
year.
(iv) On or about January 1, 2000, Landlord shall
advise Tenant of the Base Year Operating Expense figure and shall also provide
Tenant with: (a) an estimate of the Operating Expense figure for calendar year
2000 and (b) the monthly payment required of Tenant for calendar year 2000 to
satisfy Tenant's Proportionate Share of Operating Expenses over Base Year
Operating Expenses for the year 2000. Tenant shall thereafter pay (with the
monthly installments of base minimum rent) the monthly payment referenced above.
The foregoing procedure and calculation shall likewise be implemented on or
about January 1, 2001, January 1, 2002, January 1, 2003, and January 1, 2004,
and Tenant's monthly payment obligations for each such year shall be adjusted
accordingly as a result of such calculation.
(v) Within sixty (60) days of the end of each calendar
year, Landlord shall provide Tenant with a statement of actual Operating
Expenses for the calendar year just ended and a calculation of the precise
figure for Tenant's Proportionate Share of Operating Expenses for such year just
then ended. In the event Tenant's payments actually made during the preceding
calendar year are less than Tenant's actual obligations as calculated by
Landlord in accordance with the above, Tenant shall, within ten (10) days of
demand from Landlord, pay to Landlord the difference between the actual
calculated obligations and the amounts actually paid for such year just then
ended. In the event of a Tenant overpayment, Tenant shall receive a credit
against the next required payment obligation(s) of Tenant with respect to
Tenant's Proportionate Share of Operating Expenses.
(vi) All calculations and determinations referenced
above shall
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be made by Landlord in Landlord's reasonable business determination. Provided,
however, that at the reasonable request of Tenant Landlord shall provide Tenant
with photocopies of tax bills, insurance invoices and other documentation
reasonably requested by Tenant to verify Operating Expense figures.
C. All sums which may become due by reason of the failure of
Tenant to comply with any of the terms, covenants and conditions of this Lease,
to be kept and observed by Tenant, and any and all damages, costs and expenses
(including, without limitation thereto, attorneys' fees) which Landlord may
suffer or incur by reason of any such failure, failures, default or defaults of
Tenant, together with interest at a rate equal to two (2) percentage points
above the Wall Street Journal announced prime interest rate in effect at the
time of payment.
D. All charges for janitorial services to the Premises, which
Tenant shall pay directly to Landlord upon presentation of invoices therefor.
5. Utilities.
Under no circumstances shall Landlord be required to furnish
or be responsible for the furnishing of utilities or the failure of any utility
companies, public authorities or others to furnish any utilities or any other
service of any kind to the Premises or any part thereof.
6. Maintenance, Repairs and Replacements.
A. Following Landlord's completion of the Tenant improvements
referenced in paragraph 1C, above, Tenant shall be responsible for all
maintenance, repairs and non-structural (with structural being defined as
foundation, load-bearing walls, plumbing, HVAC systems and roof) replacements to
or for the benefit of the Premises which are not otherwise included in
"Operating Expenses" and, at Tenant's sole expense, shall make all maintenance,
repairs and non-structural (defined as above) replacements, ordinary and
extraordinary, foreseen and unforeseen, required to keep and maintain the
Premises and all systems, equipment and apparatus appurtenant thereto or used in
connection therewith in good order and condition, as determined by Landlord. At
the end of the Lease term, Tenant shall surrender the Premises to Landlord in
the same condition existing following completion of the Tenant improvements,
subject to any subsequent improvements or alterations approved by Landlord
(unless in connection with such approval Landlord requires that such
improvements or alterations be removed at the end of the Lease term) and further
subject to ordinary wear and tear.
B. Any repairs, maintenance and replacements and any labor
performed or materials furnished in, on or about the Premises shall be performed
and furnished by Tenant in strict compliance with all applicable laws,
regulations, ordinances and all requirements of all duly constituted municipal
authorities or other governmental bodies having jurisdiction over the Premises,
the requirements of any board of underwriters having jurisdiction thereof and
shall be performed in a quality manner
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C. Landlord or Landlord's management company may procure a
service contract for the entire building of which the Premises is a part (for
items such as the plumbing and HVAC components), and Tenant shall not be
required to directly enter into a service contract with a service contractor.
The costs of any such service contract obtained by Landlord (or Landlord's
management company) for the building of which the Premises is a part shall be,
notwithstanding paragraph 4B (ii), an "Operating Expense". In the event
Landlord's (or its management company's) service contract covers additional
buildings, the expense of such contract allocable to the building of which the
Premises is a part shall constitute an "Operating Expense".
7. Insurance.
A. Tenant shall provide and keep in force with an insurance
company having an A rating public liability insurance that might be required to
protect the Landlord and Tenant against any and all liability with minimum
limits of coverage with respect to bodily injury (including death) and property
damage in the amount of not less than two million dollars ($2,000,000.00), which
amount of coverage shall be reviewed periodically and increased periodically at
the request of Landlord. All premiums and charges for any of the aforesaid
policies shall be paid by Tenant.
B. Prior to the earlier of: (i) Tenant entering upon the
Premises, and (ii) the Lease Commencement Date, Tenant shall provide Landlord
with a certificate or certificates of the insurers with whom all insurance
herein is in force and effect. All policies of insurance and such certificates
shall have a clause to the effect that the Landlord shall be notified at least
thirty (30) days prior to any change in or cancellation of said policies of
insurance. At least thirty (30) days prior to the expiration of any such policy,
Tenant shall furnish Landlord with evidence satisfactory to Landlord that the
policy has been renewed or replaced.
C. Notwithstanding anything contained herein to the contrary,
Tenant shall be fully responsible for any increase in Landlord's insurance
premiums, if such increase is caused by any act or neglect of Tenant (and those
acting under or at the request of Tenant including, but not limited to, Tenant's
officers, directors, shareholders, employees, contractors and business
invitees), or if such increase is due to the nature of Tenant's business.
8. Destruction of Premises.
A. Total Destruction of Premises. If the Premises are, without
fault of Tenant, totally destroyed or so damaged by fire or other casualty that,
in Landlord's opinion, the same cannot be repaired and restored within ninety
(90) days from the happening of such occurrence, this Lease shall absolutely
cease and determine and the rent shall abate for the balance of the term.
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B. Partial Destruction of Premises. If the damage be less than
total and such that the Premises can be restored, in Landlord's opinion, to
approximately its former condition within ninety (90) days from the date of the
casualty loss, Landlord will use reasonable efforts to restore the same with
reasonable promptness. Rent shall be abated to the extent that Tenant is not
reasonably able to conduct its business upon the Premises. In the event of a
partial destruction during the last twelve (12) months of the Lease term,
Landlord may, in the event Landlord makes an economic determination that the
same would be prudent, elect not to will use its efforts to restore the
Premises, in which event this Lease shall absolutely cease and determine and the
rent shall abate for the balance of the term.
C. Non-Liability. Landlord shall not be liable for any damage,
compensation or claim by reason of the necessity of repairing any portion of the
Premises, the interruption of the use of the Premises, any inconvenience or
annoyance arising as a result of such repairs or interruption or the termination
of this Lease by reason of damage or destruction of the Premises or any part
thereof. Provided, however, that Landlord covenants that Landlord shall,
promptly upon becoming aware of the need for the same, commence and prosecute
with diligence toward completion, any repairs for which Landlord has
responsibility hereunder. Tenant further acknowledges that Landlord shall have
no obligation to rebuild if Landlord's mortgagee does not make insurance
proceeds available to Landlord in an amount to enable Landlord to rebuild (and,
in the event Landlord does not rebuild, the Lease shall terminate as set forth
in paragraph 8(A), above).
9. Condemnation.
A. Total Condemnation. In the event the entire Premises is
taken or condemned by any public or quasi-public authority exercising the right
of eminent domain, this Lease shall terminate as of the date the condemning
authority takes possession of the Premises, with the same force and effect as
though such date were the date fixed herein for expiration of the Lease term.
The entire amount of any award for such taking shall belong to the Landlord, and
Tenant hereby waives any other right it may have to any portion of such award.
Notwithstanding the foregoing, Tenant may make a separate, independent
condemnation claim for its relocation expenses and any other claim which does
not in any manner interfere with or diminish Landlord's claim.
B. Partial Condemnation. In the event that a portion of the
Premises, but less than the entire Premises, is taken or condemned for a public
or quasi-public use, the minimum annual rental herein shall abate equitably in
proportion to the area of the building on the Premises condemned as of the date
on which the condemning authority shall take possession of the condemned
property. Provided, however, that in the event the condemnation results in a
taking of more than 10% of Tenant's square footage, Tenant may, in the event
Tenant reasonably determines that Tenant's operations are materially and
adversely affected, effectuate a termination as if such condemnation were a
total condemnation pursuant to paragraph 9(A), above.
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10. Use and Compliance with Regulations.
Tenant hereby covenants and agrees that it will at no time use
the Premises for any other use or purpose than lawful purposes and shall further
only use the Premises for the uses set forth herein. Further, Tenant further
agrees that it will not at any time use the Premises in any manner which is in
violation of any municipal (including, but not limited to, township authorities,
regulatory agencies and water and sewer authorities), state or federal law,
rules, regulations or requirements. Tenant shall comply at its sole cost and
expense with any and all municipal, state and federal rules, regulations,
requirements or laws of any and every nature relating to the Premises and/or
Tenant's occupancy and/or additional installations or improvements which may be
required. Tenant shall, if required, obtain a certificate of occupancy for the
Premises. Tenant hereby agrees to protect, indemnify and save Landlord harmless
from and against any and all loss, damage, cost, expense (including attorneys'
fees), causes of action, suits, demands, judgments and claims of any nature
whatsoever arising as a result of Tenant's breach of the covenants contained in
this paragraph, in addition to any other indemnification provisions set forth in
this Lease. Tenant agrees that only sanitary waste shall be inserted into the
sanitary sewer system. Tenant shall not maintain or permit any "hazardous
materials" (as such term is defined by federal and/or state law), on or about
the Premises, except in accordance with all applicable laws and regulations, and
shall be solely responsible for compliance with RCRA, CERCLA, PAHSCA and all
other environmental laws, rules and regulations (federal, state and local) in
any manner relating to its use and occupancy of the Premises.
11. Indemnification.
Tenant shall keep, save and hold harmless Landlord from and
against any and all damages, liability, losses, costs and expenses (including
attorneys' fees) for anything and everything whatsoever arising from or out of
the occupancy and/or use of the Premises by or under Tenant, Tenant's agents,
servants, employees, contractors and/or business visitors, and from any loss or
damage arising from any failure on Tenant's part to comply with any of the
covenants, terms and conditions contained in this Lease. The indemnity
obligations of Tenant herein and elsewhere in this Lease together with all
accrued but unsatisfied obligations of Tenant herein shall survive the
termination of this Lease.
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12. Mechanics' Liens.
Tenant shall not permit any mechanics', materialmen's or
similar liens to be placed upon or remain upon the Premises for labor or
material furnished to, for or on behalf of Tenant or claimed to have been
furnished to, for or on behalf of Tenant in connection with work of any
character performed or claimed to have been performed on the Premises by or with
the consent of Tenant. Tenant may, however, contest the validity of any such
lien or claim, provided Tenant shall provide Landlord security satisfactory to
Landlord to ensure payment and to prevent any sale, foreclosure or forfeiture of
the Premises by reason of such non-payment. Upon final determination of the
validity of any such lien or claim, Tenant shall immediately pay any judgment or
decree rendered against Tenant, Landlord or the property of which the Premises
is a part, with all proper costs and charges and shall cause such lien to be
released of record without cost to Landlord. Prior to the commencement of any
work by or at the direction of Tenant, Tenant shall cause to be filed all
necessary mechanics' lien waivers to prevent the filing of a mechanics' lien
claim and shall provide Landlord and Landlord's counsel with a time-stamped copy
of such filed documents.
13. Subordination.
This Lease shall be subordinate in all respects to the lien of
any mortgage now or hereafter encumbering the Premises or any part thereof, with
the same force and effect as if such mortgage had been executed, acknowledged,
delivered and recorded prior to the execution of this Lease. The subordination
provisions contained in this Article are and shall be effective without the
necessity of any further act or writing by either party hereto, but Tenant
agrees that it will, within five (5) days of Landlord's request, deliver such
additional documents as any mortgagee may require to confirm such subordination.
Tenant shall, at the request of any mortgagee or anyone acquiring title to
Landlord's estate or the Premises by foreclosure, deed in lieu of foreclosure or
otherwise, attorn to the then owner and recognize such owner as Landlord for the
balance of the term of this Lease, subject to all of the terms and provisions
hereof. This Lease and Tenant's tenancy hereunder shall further be subject to
such easements and licenses now in existence or which may hereafter be created
or granted. Notwithstanding the foregoing, in the event Landlord (or any
mortgagee of Landlord) elects, Landlord (or such mortgagee or mortgages) may
subordinate one or more mortgages to this Lease. Landlord shall use best
business efforts to obtain from all mortgagees with an interest in the property
of which the Premises is a part a reasonable non-disturbance agreement (or
non-disturbance provisions in a subordination, non-disturbance and attornment
document).
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14. Estoppel Certificate.
Tenant agrees to execute and deliver to any mortgagee or
purchaser of the Premises within five (5) days of request an "Estoppel
Certificate", stating the amount of rent due from Tenant hereunder, that this
Lease remains in full force and effect without modification, that Tenant has no
setoffs against rent (or if this Lease has been modified, or if Tenant believes
Landlord is in breach hereunder, the exact nature of the modification or breach
and the precise reasons therefor), together with such other reasonable
representations and items requested by such mortgagee or purchaser.
15. Assignment and Subletting.
Tenant may not assign or sublet this Lease or the Premises in
whole or in part without the prior written consent of Landlord, which Landlord
will not unreasonably withhold or delay provided that all of the following
conditions are satisfied:
(i) The proposed assignee meets Landlord's
then-current standards (a proposed sublessee need not meet such standards);
(ii) Tenant remains jointly and severally liable with
such assignee or sublessee;
(iii) The assignment, subletting and other
transactions be documented in a manner acceptable to Landlord and Landlord's
counsel, with Tenant responsible for the legal fees incurred in connection
therewith.
16. Waiver of Subrogation.
Landlord and Tenant hereby agree that all insurance policies
which each of them shall carry to insure the Premises and all contents therein
against casualty and other loss, and all liability policies which they shall
carry pertaining to the use, occupancy of and operations at the Premises shall
contain mutually acceptable waivers of the right of subrogation against Landlord
and Tenant herein, their heirs, administrators, successors and assigns and each
shall provide the other with evidence of compliance with the provisions of this
paragraph prior to the Lease Commencement Date.
17. First Month's Rent and Security Deposit.
Tenant shall deposit with Landlord upon execution hereof, the
sum of Twenty Nine Thousand One Hundred Sixty Six Dollars and Sixty Seven Cents
($29,166.67), representing the first month's rent and the further sum of Fifty
Eight Thousand Three Hundred Thirty Three Dollars and Thirty Four Cents
($58,333.34), representing a one (1) month security deposit and an additional
month's rent (which shall be applied toward the last month's rent
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hereunder, provided that the same has not been utilized as a result of a prior
uncured default of Tenant). If Tenant fails to pay rent or any other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Landlord may use, apply or retain all or any portion of the sums held hereunder
for the payment of any rent or other charge in default or for the payment of
other sums to which Landlord may become obligated by reason of Tenant's default,
or to compensate Landlord for any loss or damage which Landlord may suffer
thereby. If Landlord uses or applies all or any part of such sums (and the Lease
has not been terminated), Tenant shall immediately deposit cash with Landlord in
an amount sufficient to restore the full amount hereinabove stated and Tenant's
failure to do so shall be a material breach of this Lease. If Tenant performs
all of Tenant's obligations hereunder, the sums hereunder that have not
theretofore been applied by Landlord shall be returned to Tenant within thirty
(30) days of the termination of the Lease, provided that Tenant has provided
Landlord with a forwarding address.
18. Inspection - Access.
Landlord may, at all reasonable times, by itself or its duly authorized agents,
go upon and inspect the Premises and every part thereof and/or at its option to
make repairs, alterations and replacements to the Premises or any part thereof
(provided, however, that the foregoing right shall not relieve Tenant of or from
any of its duties hereunder). Provided, however, that Landlord agrees that it
will not enter upon the Premises except during business hours, without the
consent of Tenant, unless required by an emergency condition.
19. Rights of Assignees.
All rights granted to Landlord hereunder may be exercised by
any assignee of Landlord's right, title and interest in this Lease in his, her
or their name, any statute, rule of court, custom or practice to the contrary
notwithstanding. In addition, upon such assignment, Landlord may pay over any
security deposit and any other sums held by Landlord hereunder to such assignee
and, upon such payment, all obligations of Landlord to Tenant pertaining to such
sums shall terminate. In addition, upon assignment of Landlord's interest herein
to an assignee, all obligations of Landlord shall cease and terminate and the
assignee alone shall be responsible therefor to Tenant.
20. Restrictions on Floor and Wall Loads.
Tenant shall not place a load on any floor or wall of the
building upon the Premises which is greater than the floor load per square foot
or wall load per square foot which such floor or wall was designed to bear
and/or which is permitted by law.
21. Signs.
Tenant shall be permitted to place its name on the entrance
door to the Premises with Landlord's prior written approval of Tenant's
proposal. Landlord represents that monument
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signage will be available for the tenants of the building in which the Premises
is located. Tenant shall be permitted 36.2% of all available signage on any such
monument. Tenant shall, at Tenant's request, be the first tenant listed on such
signage. Attached hereto as Exhibit "C" is ' 84-52 of West Goshen Township
captioned "Sign Regulations", which (at Table 1) indicates that one (1) fifty
(50) foot sign is permitted for the Property, subject to the other provisions of
' 84-52 including, but not limited to, the bonus signage provisions of ' 84 -
52(S). Landlord and the Manager of the Brandywine Business Park shall, however,
have aesthetic approval rights with regard to all such signage, which shall be
installed at Tenant's sole cost and expense.
22. Quiet Enjoyment.
Upon payment by Tenant of all minimum annual rent and
additional rent hereunder, as well as the satisfaction and performance by Tenant
of all terms, conditions, covenants and provisions hereunder on the part to be
observed and performed by Tenant, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereof without hindrance or interruption by
Landlord, subject, nevertheless, to the terms, conditions, covenants and
provisions of this Lease. As set forth in paragraph 13, above, Landlord shall
use best business efforts to obtain non-disturbance provisions from existing and
future mortgagees.
23. Events of Default - Remedies.
A. Specifically subject to paragraph L, below, the following
events or any one or more of them shall be events of default under this Lease:
(i) Tenant shall fail to pay any minimum annual rental,
additional rent or other sums payable hereunder when the same are due and
payable; or
(ii) Tenant shall fail to perform or comply with any of the
other terms, covenants, agreements or conditions hereof; or
(iii) Tenant shall make a general assignment for the
benefit of creditors or shall admit in writing its inability to pay its debts as
they become due, or shall file a petition in bankruptcy or shall be adjudged a
bankrupt or insolvent, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall file an
answer admitting or not contesting the material allegations of a petition
against it in any such proceeding, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver or liquidator of Tenant or any material
part of its property; or
(iv) If within thirty (30) days after commencement of any
proceedings against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation or dissolution or similar relief under any present or
future statute, law or regulation, such proceedings shall not have been
dismissed or if, within thirty (30) days after the appointment without the
consent or acquiescence of Tenant of any trustee,
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receiver or liquidator of Tenant or any material part of its properties, such
appointment shall not have been vacated.
B. In the event of any such event of default, Landlord at any
time thereafter may exercise any one or more of the following remedies:
(i) Exclusion. Landlord may (but only in the event of
Tenant's vacation of the Premises) change the locks on the Premises and/or any
buildings upon the Premises and exclude Tenant, its servants, employees and
others under it from the right to occupy the Premises and such action shall not
be deemed to constitute an eviction. Tenant hereby releases Landlord from any
liability for any damages sustained by Tenant or its property arising from the
changing of locks and exclusion from the Premises in accordance with the above
and Tenant hereby agrees to save Landlord harmless from any such liability.
(ii) Termination of Lease. Landlord may terminate this
Lease without any right by Tenant to reinstate its rights by conditions hereof.
Upon such termination, Tenant shall immediately surrender possession of the
Premises to Landlord and Landlord shall immediately become entitled to receive
from Tenant damages equal to the aggregate rentals reserved for the balance of
the term, less the fair rental value of the Premises for the duration of the
Lease Term (taking into account and deducting from such fair rental value all
costs and expenses resulting from Tenant's default including, but not limited to
the cost of refitting the Premises and costs of vacancy).
(iii) Reletting. With or without terminating this Lease, as
Landlord may elect, Landlord may re-enter and repossess the Premises or any part
thereof, and lease the Premises to any other person upon such terms as Landlord
shall deem reasonable for a term within or beyond the term of this Lease;
provided, however, that any such reletting prior to termination shall be for the
account of Tenant, and Tenant shall remain liable for:
(1) All minimum annual rent, additional rent and
other sums which would be payable under this Lease by Tenant in the absence of
such expiration, termination or repossession, less
(2) All net proceeds, if any, of any reletting
effective for the account of Tenant after deducting from such proceeds (without
limitation), all repossession costs, brokers' commissions attributable to or
allocable to the portion of Lease remaining following such default, attorneys'
commissions, attorneys' fees and expenses, employees' expenses, alteration and
refitting costs and the expenses of preparation for such reletting.
If the Premises are at the time of default sublet or
leased by Tenant to others (in strict accordance with the provisions of this
Lease), Landlord may, as Tenant's agent, collect rents due from any subtenant or
other tenant and apply such rents to the rent and other obligations due
hereunder without in any way affecting Tenant's obligations to Landlord
hereunder (provided that credit shall be given to Tenant for all net sums
collected by Landlord from any such subtenant). Such agency, being given to
Landlord for security, is hereby declared to be coupled with an interest and
irrevocable.
(iv) Acceleration of Rent. Landlord may declare minimum
annual rent and all items of additional rent for the entire balance of the then
current term immediately due and payable, together with all other charges,
payments, costs and expenses payable by Tenant as though such amounts were
payable in advance on the date of the event of default occurred.
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(v) Base Minimum Rent. Under no circumstances shall
Landlord be entitled, as a result of the election of one or more remedies set
forth above, to recover more than the aggregate base minimum rent set forth in
paragraph 3A (and, if applicable, paragraph 28, below).
C. No expiration or termination of this Lease term pursuant to
subparagraph (B)(ii) above or by operation of law or otherwise (except as
expressly provided herein), and no repossession of the Premises or any part
thereof or exclusion of Tenant from the Premises pursuant to subparagraph B,
above, or otherwise shall relieve Tenant of its liabilities and obligations
hereunder, all of which shall survive such exclusion, expiration, termination or
repossession and Landlord may, at its option, sue for and collect rent and other
charges due hereunder at any time and from time to time as and when such charges
accrue.
D. With respect to any portion of the Premises which has been
vacated by Tenant, Landlord may remove all property therefrom and store such
property in a public warehouse or elsewhere at the cost of Tenant, without
service of notice or resort to legal process and without being deemed guilty of
trespass or becoming liable for any loss or damage which may be occasioned
thereby.
E. Subject to B(v) above, no right or remedy herein conferred
upon or reserved to Landlord is intended to be exclusive of any other right or
remedy herein or by law provided, but each shall be cumulative and in addition
to every other right or remedy given herein or now or hereafter existing at law
or in equity or by statute. In the event of a breach or threatened breach by
Tenant of any provision of this Lease, Landlord shall have the further right of
injunction, as if all other remedies were not provided for herein.
F. If Tenant shall default in the performance of any covenant
or obligation required to be performed by it under this Lease, Landlord may
perform the same for the account and at the expense of Tenant, after first
giving notice to Tenant of its intention to do so. If Landlord at any time is
compelled to pay or elects to pay any sum of money or to do any act which will
require the payment of any sum of money by reason of the failure of Tenant to
comply with any provisions hereof, or if Landlord is compelled to incur any
expense, including counsel fees, in instituting, prosecuting or defending
against any action or proceeding instituted by reason of any default of Tenant
hereunder, the amount of such payments or expenses shall be paid by Tenant to
Landlord immediately upon demand.
G. No waiver by Landlord of any breach by Tenant of any of its
obligations, agreements or covenants hereunder shall be a waiver of any
subsequent breach or of any other obligation, agreement or covenant, nor shall
any forbearance by Landlord to seek a remedy for any breach by Tenant be a
waiver by Landlord of its rights and remedies with respect to such or any
subsequent breach.
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H. UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT, TENANT, WITH
UNDERSTANDING OF THE RELINQUISHMENT OF CERTAIN RIGHTS TO WHICH TENANT WOULD
OTHERWISE BE ENTITLED AS A MATTER OF LAW AND DUE PROCESS INCLUDING THE RIGHT TO
NOTICE AND JUDICIAL HEARING, HEREBY EMPOWERS ANY PROTHONOTARY OR ATTORNEY OF
COURT OF RECORD TO APPEAR FOR TENANT, WITH DECLARATION FILED, IN ANY AND ALL
ACTIONS WHICH MAY BE BROUGHT FOR RENT AND/OR THE CHARGES, PAYMENTS, COSTS AND
EXPENSES HEREIN RESERVED AS RENT, OR HEREIN AGREED TO BE PAID BY TENANT AND TO
SIGN FOR TENANT AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE
ACTION OR ACTIONS FOR THE RECOVERY OF SUCH RENT OR OTHER CHARGES, PAYMENTS,
COSTS AND EXPENSES, AND IN SAID SUITS OR IN SAID AMICABLE ACTION OR ACTIONS TO
CONFESS JUDGMENT AGAINST TENANT FOR ALL OR ANY PART OF THE RENT SPECIFIED IN
THIS LEASE, AND OTHER CHARGES, PAYMENTS, COSTS AND EXPENSES RESERVED AS RENT OR
AGREED TO BE PAID BY TENANT AND FOR INTEREST AND COSTS TOGETHER WITH AN
ATTORNEYS' COMMISSION OF TEN PERCENT (10%) OR FIVE THOUSAND DOLLARS ($5,000.00),
WHICHEVER SHALL BE GREATER. SUCH AUTHORITY SHALL NOT BE EXHAUSTED BY ONE
EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME
AS OFTEN AS ANY OF SAID RENT AND/OR CHARGES, PAYMENTS, COSTS AND EXPENSES
RESERVED AS RENT OR AGREED TO BE PAID BY TENANT SHALL FALL DUE OR BE IN ARREARS.
NOTWITHSTANDING THE ABOVE AND NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE
CONTRARY, LANDLORD AGREES THAT LANDLORD SHALL ONLY BE ENTITLED TO CONFESS
JUDGMENT FOR MONEY AGAINST TENANT FOR SUMS WHICH ARE DUE AND OWING AT THE TIME
OF SUCH CONFESSION (I.E., LANDLORD AGREES THAT LANDLORD SHALL NOT BE ENTITLED TO
CONFESS JUDGMENT AGAINST TENANT FOR ACCELERATED RENTALS COVERING PERIODS WHICH
HAVE NOT THEN OCCURRED). THE FOREGOING SHALL IN NO MANNER LIMIT LANDLORD'S
ABILITY TO CONFESS JUDGMENT FROM TIME TO TIME FOR SUMS THEN OUTSTANDING.
I. UPON THE EXPIRATION OF THE THEN CURRENT TERM OF THIS LEASE
OR THE EARLIER TERMINATION OR SURRENDER HEREOF AS PROVIDED IN THIS LEASE, TENANT
WITH UNDERSTANDING OF THE RELINQUISHMENT OF CERTAIN RIGHTS TO WHICH TENANT WOULD
OTHERWISE BE ENTITLED AS A MATTER OF LAW AND DUE PROCESS, INCLUDING THE RIGHT TO
NOTICE AND JUDICIAL HEARING, AGREES THAT IT SHALL BE LAWFUL FOR ANY ATTORNEY TO
APPEAR AS ATTORNEY FOR TENANT AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH OR
UNDER TENANT AND
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TO SIGN AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION IN
EJECTMENT AGAINST TENANT AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER TENANT
AND THEREIN CONFESS JUDGMENT FOR THE RECOVERY BY LANDLORD OF POSSESSION OF THE
PREMISES, FOR WHICH THIS LEASE SHALL BE ITS SUFFICIENT WARRANT, WHEREUPON IF
LANDLORD SO DESIRES, A WRIT OF POSSESSION OR OTHER APPROPRIATE WRIT UNDER THE
RULES OF CIVIL PROCEDURE THEN IN EFFECT MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR
WRIT OR PROCEEDINGS; PROVIDED, HOWEVER, IF FOR ANY REASON AFTER SUCH ACTION
SHALL HAVE BEEN COMMENCED, THE SAME SHALL BE DETERMINED AND THE POSSESSION OF
THE PREMISES REMAIN IN OR BE RESTORED TO TENANT, LANDLORD SHALL HAVE THE RIGHT
FOR THE SAME DEFAULT AND UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE
TERMINATION OF THIS LEASE UNDER ANY OF THE TERMS OF THIS LEASE, TO BRING ONE OR
MORE FURTHER AMICABLE ACTION OR ACTIONS AS HEREINBEFORE SET FORTH TO RECOVER
POSSESSION OF THE PREMISES AND CONFESS JUDGMENT FOR THE RECOVERY OF POSSESSION
OF THE PREMISES AS HEREINABOVE PROVIDED.
J. In any amicable action for ejectment and/or for recovery of
damages, Landlord shall first cause to be filed in such action an affidavit made
by it or someone acting for it, setting forth the facts necessary to authorize
the entry of judgment and if a true copy of this Lease (and such affidavit shall
be sufficient evidence of the truth of the copy) be filed in such action, it
shall not be necessary to file the original as warrant of attorney, any rule of
court, custom or practice to the contrary notwithstanding.
K. If proceedings shall be commenced by Landlord to recover
possession under the Acts of Assembly and Rules of Civil Procedure, either at
the end of the term or earlier termination of this Lease, or for nonpayment of
rent or any other reason, Tenant specifically waives the right to the three (3)
month notice and to the fifteen (15) or thirty (30) days' notice required by the
Landlord and Tenant Act of 1951, and agrees that no notice shall be required in
either or any such case.
L. Notwithstanding anything herein elsewhere contained to the
contrary, Landlord agrees that Landlord will not exercise any right or remedy
provided for in this Lease or allowed by law because of any default of Tenant,
unless Landlord shall first have given written notice thereof to Tenant, and
Tenant (i) within a period of ten (10) days thereafter shall have failed to pay
the sum or sums due if the default consists of a failure to pay money, or (ii)
if such default shall consist of anything other than the failure to pay a sum or
sums due hereunder, Tenant shall have failed within a period of thirty (30) days
after notice from Landlord to have commenced efforts toward the cure of such
default and/or shall have failed to diligently proceed in good faith to
effectuate such cure as expeditiously as possible; provided, however, that no
such notice from Landlord shall be required nor shall Landlord be required to
allow any part of the notice periods if such default by Tenant creates an
emergency condition or if Tenant shall have removed from or shall be in the
course of removing from the Premises, or Tenant shall have failed to provide the
insurance required by this Lease, or if a Petition in Bankruptcy or for
reorganization shall
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have been filed by or against the Tenant resulting in an order for relief in
bankruptcy, or for reorganization, or if a receiver or trustee is appointed for
Tenant, or if Tenant makes an assignment for the benefit of creditors; provided,
further, however that Landlord shall not be required to give any notice required
under this subparagraph L more than two (2) times within any twelve (12) month
period for non-monetary events of defaults and shall not be required to provide
any notice for monetary events of default in any calendar year during which
Tenant has already twice failed to pay monetary obligations within ten (10) days
of their due date.
24. Additional Provisions Relative to Alterations and Additions.
A. All proposed Tenant improvements shall be in accordance
with schedules, plans and specifications to be supplied to Landlord by Tenant,
all of which shall in all instances first be subject to Landlord's approval.
Tenant shall provide Landlord with evidence that each contractor performing work
on the Premises has adequate workmen's compensation insurance and general
liability insurance for bodily injury or death to any person or persons and
property damage, together with a certificate from the insurer (who shall be
reasonably satisfactory to Landlord), naming Landlord as an additional insured
and to the further effect that such insurance may not be cancelled or
substantially modified without at least thirty (30) days' prior written notice
to Landlord. The levels and amounts of insurances may be reviewed and increased
pursuant to the standards set forth elsewhere herein.
B. In making any approved improvements, Tenant shall comply
with any and all laws, statutes, ordinances, rules, regulations and requirements
of the municipal and other duly constituted governmental authorities and
insurance organizations.
25. Place of Payment of Rent and Notices.
All rent shall be payable without notice, demand, offset or
defalcation to Landlord at the address hereinafter set forth. No payment by
Tenant or receipt by Landlord of a lesser amount then the minimum rent or
additional rent stipulated herein shall be deemed to be other than on account of
the minimum annual rent or additional rent, nor shall any endorsement or
statement on any check or any letter accompanying any such check or payment be
deemed an accord and satisfaction, and Landlord may accept such check (and cash
such check) or payment without prejudice to Landlord's right to recover the
balance of such minimum annual rent or additional rent and to pursue any other
remedy set forth in this Lease. Any notice, demand, request, consent, approval
or communication that either party desires or is required to give to the other
party under this Lease shall be in writing and shall be sent by certified mail,
return receipt requested, and shall be deemed served upon receipt or refusal of
the articles so sent. Notices shall be sent to the addresses set forth below:
Landlord: Bryn Mawr Mall Associates
P.O. Box 385
Edgemont, PA 19028
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With a required copy to: Christopher R. Zentgraf, Esquire
Christopher R. Zentgraf, P.C.
920 North Broad Street, Suite 8
Lansdale, PA 19446
Tenant: Fidelity Leasing, Inc.
[Property Mailing Address to be Added]
With a required copy to: Richard J. Abt, Esquire
Ledgewood Law Firm, P.C.
1521 Locust Street - 8th Floor
Philadelphia, PA 19102
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26. Condition of Premises at Termination.
At the expiration of the term of the Lease, howsoever
terminated, Tenant shall surrender the Premises to Landlord in the same
condition as existed immediately following completion of the Tenant improvements
referenced in paragraph 1C, above. The Premises shall be returned in good order
and condition, broom clean, reasonable wear and tear alone excepted. Provided
Tenant is not in default hereunder, all furniture and non-fixture equipment
shall remain the property of Tenant and, provided Tenant is not in default
hereunder, Tenant shall have the right to remove all furniture and non-fixture
components.
27. Other Important Provisions.
A. Right of First Refusal; Right to Lease Vacant Space. Tenant
shall have a right of first refusal with respect to the leasing of space in
Building II, all strictly upon the terms and conditions more fully hereinafter
set forth. In the event Landlord desires to lease to any third party any space
within the building of which the Premises is a part, Landlord shall first
provide Tenant with a "term sheet" containing the relevant terms, conditions and
provisions of such proposed lease for the space. In the event Tenant desires to
lease all such space referenced in the term sheet, upon all of the terms and
conditions set forth in the term sheet, Tenant shall so advise Landlord, in
writing, within ten (10) days of Landlord's transmittal of the term sheet to
Tenant (and for the purposes of this paragraph only, Landlord may transmit such
term sheet by facsimile and Tenant may transmit its response by facsimile). In
the event Tenant so exercises Tenant's right of first refusal, Landlord shall
either submit to Tenant an addendum to this Lease relative to the additional
space or, alternatively, submit to Tenant a separate lease agreement for such
additional space, which lease agreement shall, as nearly as possible, be
identical in form and substance to this Lease (but shall contain all terms,
conditions and provisions set forth in the term sheet, even if the same conflict
with this Lease), except that the lease term for such space shall be coterminous
with the term of this Lease. Provided, however, that in the event there shall be
less than three (3) years under the then term of this Lease, Tenant may only
exercise the rights of first refusal hereunder in the event Tenant
simultaneously and validly exercises Tenant's First Option or Second Option.
Tenant shall have six (6) days within which to execute such addendum or separate
lease agreement. In the event Tenant affirmatively elects not to lease such
additional space or, alternatively, fails to notify Landlord, in writing, within
ten (10) days of Landlord's transmittal of the term sheet, or in the event
Tenant fails to timely execute the addendum or new lease agreement, Landlord
shall be permitted to lease the space to a third party under the terms and
conditions of the Term Sheet. In the event Landlord so enters into such a lease
with a third party, Tenant's rights of first refusal with respect to such
contiguous space shall automatically expire and the provisions of this paragraph
27A shall be of no further force or effect during the term of that tenant but
shall be reinstated thereafter. In the event Landlord does not enter into a
lease on the terms and conditions of the Term Sheet within ninety (90) days of
the date it was presented to Tenant, Tenant's right of first refusal with
respect to such space shall be reinstated.
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The above rights of first refusal shall only be available to
Tenant during the term of this Lease and shall only be available to Tenant so
long as Tenant is not in default under the terms and provisions of this Lease.
B. Personal Property. Tenant shall at all times be responsible
for and shall pay before delinquency all municipal, county, state and/or federal
taxes assessed against any leasehold interest or any personal property of any
kind owned, installed or used by Tenant.
C. Brokers. Landlord and Tenant each represent and warrant to
each other that they have not dealt with any brokers other than Smith Mack &
Company, Inc. and The Flynn Company. Landlord will be responsible for the
payment of the brokerage commission of Smith Mack & Co., Inc., and The Flynn
Company pursuant to a separate agreement between Landlord and Smith Mack & Co.,
Inc. In the event a party shall breach the representations and warranties above
relative to dealings with brokers, such breaching party shall indemnify, save
and hold harmless the other party of, from and against any claims for
commissions, broker's fees and similar fees arising therefrom.
D. Parties Bound. Specifically subject to the provisions of
this Lease regarding consent by Landlord, this Lease shall be binding upon the
parties hereto and shall be binding upon and inure to the benefit of and be
enforceable by their respective heirs, administrators, successors and assigns.
E. Waiver of Custom. Landlord shall have the right at all
times, any law, usage or custom notwithstanding, to enforce strictly the
provisions of this Lease, and the failure of Landlord at any time or times,
strictly to enforce any provision hereof shall not be construed as having
created a custom or waiver in any way contrary to the specific provisions of
this Lease or as having in any way or manner modified this Lease.
F. Number and Gender. For the purposes of this Lease, the
singular shall include the plural and the plural shall include the singular and
the masculine shall include the feminine and the neuter, as the context may
require. The word "Landlord" as used herein shall mean the owner from time to
time of the fee or equitable title to the Premises and upon transfer of fee or
equitable title, the person named herein as Landlord shall have no further
liability or obligation hereunder for all matters which occur or accrue
following such transfer of fee or equitable title.
G. Captions. The captions contained herein are for the
convenience of the parties only and shall not in any way modify, amplify, alter
or give full notice of the provisions hereof.
H. Amendments. This Lease may be changed, waived, discharged
or terminated only by an instrument in writing signed by the parties hereto.
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I. Partial Invalidity. If any clause or provision of this
Lease or the application thereof to any person or in any circumstance shall to
any extent be invalid or unenforceable, the remainder of this Lease, or the
application of such clause or provision to persons or in circumstances other
than those as to which it is valid or unenforceable, shall not be affected
thereby, and each clause and provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
J. Non-Recordability. Neither this Lease nor any memorandum
hereof shall be recorded, and any efforts by Tenant to do so shall constitute a
material default hereunder.
K. Landlord's Authority. Landlord covenants and represents
that Landlord is duly authorized to enter into this Lease and perform all of the
covenants, terms and conditions herein set forth.
L. Tenant's Authority. Tenant covenants and represents that
Tenant is duly authorized to enter into this Lease and perform all of the
covenants, terms and conditions herein set forth.
M. Limitation of Landlord's Liability. Landlord's
responsibility under this Lease shall be limited to Landlord's interest in the
Premises. Tenant agrees to look solely to Landlord's interest in the Premises
for the collection of any judgment or similar legally binding judicial award
and, in entering any such judgment or award, the person entering same shall
request the prothonotary to mark the judgment or award index accordingly. Tenant
acknowledges that, based upon Landlord's representations, Landlord is the
equitable owner of the Premises and the Property and that Landlord shall under
no circumstances be liable to Tenant for Landlord's inability to deliver
possession of the Premises in accordance with the provisions of this Lease for
reasons beyond Landlord's actual and direct control.
N. Time of the Essence. Time shall be deemed of the essence
with respect to the performance of all obligations hereunder.
O. Governing Law. This Lease shall be governed by the laws of
the Commonwealth of Pennsylvania.
P. Signage. Landlord shall have the right to display a "For
Sale" sign at any time, and at any time within six (6) months of the expiration
of this Lease a "For Rent" sign, or both "For Rent" and "For Sale" signs; and
all such signs shall be placed upon such part of the Premises as Landlord may
elect and may contain such information as Landlord may require. Prospective
purchasers or tenants, authorized by Landlord, may inspect the Premises at
reasonable hours at any time upon reasonable advance notice to Tenant so as to
minimize the effect of same upon Tenant's use and enjoyment of the Premises.
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Q. Entire Agreement. This Lease constitutes the entire
agreement between the parties hereto. Except as specifically set forth herein,
there are no promises, representations or understandings between the parties of
any kind or nature whatsoever. All negotiations, drafts, conversations and
written documents existing prior to the execution of this Lease shall be
disregarded in connection with the interpretation and construction of this Lease
and shall be deemed merged herein.
R. Effectiveness. The furnishing of the form of this Lease
shall not constitute an offer and this Lease shall become effective upon and
only upon its execution by and delivery to each party hereto.
S. Counterpart/Facsimile Execution. This Lease may be executed
in multiple counterparts, which together shall constitute one binding agreement.
Further, facsimile execution shall be binding and have the same force and effect
as execution by original ink signatures.
T. Canon of Construction. This Lease has been reviewed and
negotiated by the parties and their respective counsel. Accordingly, there shall
not be applied any canon of construction to the effect that documents are to be
construed against the drafting party and this Lease shall be interpreted fairly
without any such canon.
U. Rules and Regulations. Landlord reserves the right to
promulgate reasonable rules and regulations for the benefit of the Property and
the tenants of the Property including, but not limited to, matters relating to
parking, use and enjoyment of common amenities, aesthetics (e.g., window
treatments), etc. Once promulgated, Landlord will provide Tenant and (all other
tenants) with copies of such rules and regulations, which shall be binding upon
Tenant and all other tenants. Provided, however, that Landlord alone shall be
entitled to enforce such rules and regulations. Provided, further, that no such
rules and regulations shall in any manner materially and adversely affect the
rights, privileges and benefits provided Tenant hereunder.
V. Parking. Landlord represents that the Property will contain
205 parking spaces and that Tenant shall be permitted four (4) reserved parking
spaces located in close proximity to Tenant's entrance. Tenant may mark such
spaces as exclusive, but shall obtain Landlord's prior written consent as to the
aesthetics of any such markings. Provided, further, that Landlord shall not in
any manner be responsible for policing the exclusive parking spaces (and shall
not be required to become involved in disputes relative to others parking or
attempting to park within the exclusive areas).
28. Options to Renew.
A. First Option. Provided that Tenant is not in default under
this Lease beyond any applicable notice and cure period, either at the time of
exercise of Tenant's option or at the time the extended term commences, Tenant
will have the option (the "First Option") to
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extend the term of this Lease beyond the initial 6 year, 2 month term (the
"Initial Term") for an additional period of five (5) years (the "First Option
Period"), upon the same terms, covenants and conditions of this Lease, except
that the minimum monthly rent during the First Option Period will be determined
as hereinafter set forth. In the event Tenant desires to exercise Tenant's First
Option, Tenant shall, at least nine (9) months prior to the expiration of the
Initial Term, so advise Landlord by an unequivocal written notice of such
desire. Landlord shall, within thirty (30) days of receipt of such notice,
advise Tenant in writing of the minimum monthly rent Landlord desires to charge
for the First Option Period. Within thirty (30) days of Tenant's receipt of
Landlord's notification, Tenant shall advise Landlord, in writing, of Tenant's
election of one of the following: (i) Tenant's acceptance of Landlord's proposed
rental provisions for the First Option Period (in which case Landlord and Tenant
shall promptly enter into a Lease Extension Agreement incorporating Landlord's
minimum monthly rental determination), or (ii) Tenant's desire to exercise the
First Option, but with the minimum monthly rent for the First Option Period to
be determined pursuant to subparagraph (C), below. In the event Tenant fails to
notify Landlord of either option set forth in (i) and (ii), above, Tenant shall
be deemed to have not exercised the First Option, and the Lease shall terminate
at the expiration of the Initial Term. Unless otherwise agreed to by the parties
in writing, Tenant's exercise of Tenant's option rights hereunder shall only be
effective if it relates to all space being leased by Tenant at the time of such
exercise.
B. Second Option. Provided that Tenant properly exercised the
First Option and Tenant is not in default under this Lease beyond any applicable
notice and cure period, either at the time of exercise of Tenant's option or at
the time the second extended term commences, Tenant shall have a second option
(the "Second Option") to extend the term of this Lease beyond the First Option
Period for an additional period of five (5) years (the "Second Option Period"),
upon the same terms, covenants and conditions of this Lease, except that the
minimum monthly rent during the Second Option Period will be determined as
hereinafter set forth. In the event Tenant desires to exercise Tenant's Second
Option, Tenant shall, at least nine (9) months prior to the expiration of the
First Option Period, so advise Landlord by an unequivocal written notice of such
desire. Landlord shall, within thirty (30) days of receipt of such notice,
advise Tenant in writing of the minimum monthly rent Landlord desires to charge
for the Second Option Period. Within thirty (30) days of Tenant's receipt of
Landlord's notification, Tenant shall advise Landlord, in writing, of Tenant's
election of one of the following: (i) Tenant's acceptance of Landlord's proposed
rental provisions for the Second Option Period (in which case Landlord and
Tenant shall promptly enter into a Lease Extension Agreement incorporating
Landlord's minimum monthly rental determination), or (ii) Tenant's desire to
exercise the Second Option, but with the minimum monthly rent for the Second
Option Period to be determined pursuant to subparagraph (C), below. In the event
Tenant fails to notify Landlord of either option set forth in (i) and (ii),
above, Tenant shall be deemed to have not exercised the Second Option, and the
Lease shall terminate at the expiration of the First Option Term. Unless
otherwise agreed to by the parties in writing, Tenant's exercise of Tenant's
option rights hereunder shall only be effective if it relates to all space being
leased by Tenant at the time of such exercise.
C. Option Period Monthly Rent. In the event Tenant exercises
Tenant's option with respect to the First Option Period or Second Option Period
pursuant to
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subparagraphs (A)(i) or (B)(i), above, the minimum monthly rent shall be as
proposed by Landlord; in the event Tenant exercises Tenant's option pursuant to
subparagraphs (A)(ii) or (B)(ii), above, the minimum monthly rent for the First
Option Period (or Second Option Period, if applicable) shall be determined as
follows:
1. The minimum monthly rent for the First Option
Period (or Second Option Period, as applicable) shall be the then-fair market
rental value of the Premises, as determined in accordance with paragraph (C)
(2), below.
2. The "then-fair market rental value of the
Premises" shall be the minimum monthly rent for the First Option Period (or
Second Option Period, as applicable) (which may not necessarily result in level
rentals throughout the five (5) year term, but may provide for increased rentals
during the term). In no event shall the "then-fair market rental value of the
Premises" result in minimum monthly rent in an amount less than that in effect
immediately prior to the expiration of the First Option Period (or Second Option
Period, as applicable). To determine the "then-fair market rental value of the
Premises," Landlord and Tenant each shall select one MAI appraiser within thirty
(30) days of Tenant's notice to Landlord pursuant to subparagraph (A)(ii) or
(B)(ii) (and each MAI so selected must be an MAI who is not currently, nor has
ever been, engaged by either Landlord or Tenant). The two MAI appraisers so
chosen shall, within thirty (30) days of the expiration of the thirty (30) day
period set forth above, select a third MAI appraiser who shall, within thirty
(30) days of his/her appointment, alone determine the "then-fair market rental
value of the Premises", analyzing and utilizing all factors which impact upon
the "then-fair market rental value of the Premises", including giving effect to
normal commissions, rent abatements and Landlord contributions to Tenant
improvements for renewal tenants (with the proviso set forth above that base
minimum rent may not be less than that in effect at the end of the Initial Term
or First Option Period, as applicable). Said MAI's determination shall be final,
binding and unappealable by the parties, and the parties shall thereafter enter
into a Lease Extension Agreement prepared by Landlord and incorporating the fair
market rental figure so determined by the MAI.
D. Time of Essence. Time shall be deemed specifically of the
essence with respect to all provisions contained in this paragraph 28.
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IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed this Lease as of the day and year first above written.
Witness: Landlord:
Bryn Mawr Mall Associates, a
Pennsylvania Limited Partnership
________________________ By:________________________________(SEAL)
Carol J. McCloskey, General Partner
Tenant:
Fidelity Leasing, Inc.
Attest:
______________________(SEAL) By:_________________________________
, Secretary , President
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PREMISES SKETCH/PLAN
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EXHIBIT "A"
TENANT'S SPACE PLAN
[To be attached and agreed upon ]
27
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EXHIBIT "B"
WEST GOSHEN TOWNSHIP CODE - ' 84-52. SIGN REGULATIONS
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EXHIBIT "C"
<PAGE>
ADDENDUM TO LEASE AGREEMENT
Addendum to Lease Agreement ("Addendum") made and entered into as of
the 1st day of October, 1998, by and between Bryn Mawr Mall Associates, a
Pennsylvania limited partnership ("Landlord") and Fidelity Leasing, Inc.
("Tenant").
Basis of Addendum
A. Landlord and tenant have entered into a Lease Agreement (the
"Lease") dated even date herewith.
B. Landlord and tenant desire to amend the Lease upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, agree as follows:
1. Paragraph 1C - Paragraph 1C is hereby supplemented by the
addition of the following:
"Tenant may, at tenant's election, put the Tenant
improvement work shown on the Space Plan out to bid to one or more contractors
of Tenant's choosing. In the event Tenant elects to use one of its own
contractors, Tenant shall advise Landlord of such decision within seven (7) days
of the date of this Addendum. The contractor and contract shall be subject to
Landlord's reasonable approval. Tenant shall thereafter contract directly with
such approved contractor, and shall be responsible for ensuring the completion
of the Tenant improvements in accordance with the Space Plan and related
specifications. Landlord shall be responsible or the payment of the Tenant
improvements up to and including $20.00 per rentable square foot. In the event
the Tenant improvements do not utilize the entire $20.00 per rentable square
foot figure set forth above, tenant may utilize any unused portion thereof for
telephone and computer cabling purposes. In the event Tenant elects to utilize
one of its own contractors, the Lease Commencement date shall be as specified in
paragraph 2A (November 1, 1998), regardless of completion or incompletion of the
Tenant improvements".
2. Paragraph 21 - Paragraph 21 is hereby supplemented by the
addition of the following:
"The monument signage shall be constructed by Landlord.
Tenant shall only be responsible for the expense of adding Tenant's actual
signage to the monument. Tenant shall be permitted 48.3% of all signage on any
such monument".
<PAGE>
3. Other Important Provisions -
a. Restatement and Ratification - All other terms,
conditions and provisions of the Lease which are not specifically amended by
this Addendum are hereby restated and ratified as if set forth herein in full.
b. Binding Effect - This Addendum shall be binding upon and
enure to the benefit of the parties hereto and their respective heirs,
administrators and permitted assigns.
WITNESS: BRYN MAWR MALL ASSOCIATES, a
Pennsylvania Limited Partnership
________________________________ By:___________________________________
Carol J. McCloskey, General Partner
ATTEST: FIDELITY LEASING, INC.
________________________________(SEAL) By:___________________________________
, Secretary , President
-2-
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FIDELITY LEASING, INC.
1996-1 KEY EMPLOYEE STOCK OPTION PLAN
This is the 1996-1 Key Employee Stock Option Plan of Fidelity Leasing,
Inc., effective as of March 5, 1996.
Section 1. Definitions. As used in the Plan the following terms shall
have the following assigned meanings.
(a) Board of Directors. Board of Directors shall mean the Board of
Directors of the Company.
(b) Code. Code shall mean the Internal Revenue Code of 1986, as
amended.
(c) Company. Company shall mean Fidelity Leasing, Inc., its successors
and assigns and any corporation which (i) substitutes a new Option or Stock
Appreciation Right for an old Option or Stock Appreciation Right granted under
the Plan (ii) assumes an Option or Stock Appreciation Right under the Plan or
(iii) becomes a parent or subsidiary of the Company by reason of a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation within the meaning of ss.424(a) of the Code.
(d) Committee. Committee shall mean that subcommittee of the Board of
Directors known as the Compensation Committee which is duly authorized by the
Board of Directors to administer the Plan.
(e) Disability. Disability shall mean "permanent and total disability"
as defined in ss.22(e)(3) of the Code
(f) Eligible Employee. Eligible Employee shall mean Abraham Bernstein.
(g) Fair Market Value. As used herein, the "fair market value" of a
share of Stock shall be (i) if the Company is a public company whose Shares are
traded on a stock exchange, the closing price for the Shares on a given day or,
if there is no sale on such day, then the last sale price on the last previous
date on which a sale is reported or, if the Shares are traded other than on an
exchange, the arithmetic mean of the closing bid and ask sale prices for the
Shares reported by the NASDAQ on a given day or if there is no sale on such day,
then the arithmetic mean of such closing bid and ask sale prices on the last
previous date on which a sale is reported; (ii) if the Company is not a public
company, the greater of fully-diluted book value per share for the previous
fiscal year or ten times after-tax earning per share for the last fiscal year
prior to the date of determination.
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(h) Incentive Stock Option. Incentive Stock Option shall mean an Option
granted under the Plan which qualifies under ss.422 of the Code.
(i) Nonqualified Stock Option. Nonqualified Stock Option shall mean any
Option granted under the Plan which does not qualify as an Incentive Stock
Option and which is specifically designated at the time it is granted as an
Option which is not an Incentive Stock Option.
(j) Option. Option shall mean either an Incentive Stock Option or a
Nonqualified Stock Option granted under the Plan.
(k) Option Agreement. Option Agreement shall mean any definitive
written agreement between the Company and an Eligible Employee which complies
with the Plan and which pertains to the grant of an Option and/or Stock
Appreciation Right to an Eligible Employee under the Plan.
(l) Option Price. Option Price shall mean the purchase price which an
Optionee must pay to the Company to acquire Shares on the exercise of an Option.
(m) Optionee. Optionee shall mean an Eligible Employee to whom an
Option or Stock Appreciation Right is granted under the Plan.
(n) Plan. Plan shall mean the 1996-1 Key Employee Stock Option Plan of
the Company.
(o) Securities Acts. Securities Acts shall mean the Securities and
Exchange Act of 1933, as amended, and all applicable federal and state
securities law, or any successors thereto.
(p) Shares. Shares shall mean shares of the Company's common stock,
$0.01 par value, and (i) any stock or securities of the Company into which such
common stock is converted, (ii) any stock or securities of the Company which are
distributed with respect to such common stock and (iii) the stock and securities
of any other corporation into which such common stock is converted as a result
of the Company's engaging in any transaction described in ss.424(a) of the Code.
(q) Stock Appreciation Right. Stock Appreciation Right shall mean a
right granted to an Optionee which upon the surrender of an Option, entitles the
Optionee to receive payment from the Company in an amount equal to the excess of
the, aggregate Fair Market value of Shares subject to such Option, determined at
the time of such surrender, over the aggregate Option Price applicable to such
Shares.
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Section 2. Purpose of the Plan. The purpose of the Plan is to advance
the interests of the Company and its stockholders by providing a means through
which Eligible Employees may be given an opportunity to benefit from both the
purchase Shares under Options and the exercise of Stock Appreciation Rights so
that the Company may retain and attract personnel upon whose judgment,
initiative and efforts the successful conduct of the Company and its business
largely depends.
Section 3. Shares Subject to the Plan. Subject to the adjustments
provided for in Subsection 7(g), the aggregate number of Shares for which
Options or Stock Appreciation Rights may be granted under the Plan shall be
1,000,000; provided, however, that whatever number of Shares shall remain
reserved for issuance under the Plan at the time of any stock split, stock
dividend or other change in the Company's capitalization shall be appropriately
and proportionately adjusted to reflect such stock dividend, stock split or
change in capitalization. Any Shares which are subject to the Plan shall be made
available from the authorized but unissued or reacquired Shares of the Company.
Any Shares for which an Option is granted hereunder that are released from any
Option for any reason, other than the exercise of a Stock Appreciation Right
granted under the Plan, shall become available for other Options granted under
the Plan.
Section 4. Administration of the Plan. The Plan shall be administered
by the Committee. The Committee shall consist of at least two members of the
Board of Directors, none of whom shall be eligible to receive Options or Stock
Appreciation Rights under the Plan. The Board of Directors, acting as a body,
may from time to time,remove members from, or add members to the Committee. The
Committee shall elect one of its members as Chairman, and shall hold meetings at
such times and in such places as it shall deem advisable. All actions of the
Committee shall be taken by a majority vote of all of its members present at any
properly convened meeting of the Committee. Any action of the Committee may be
taken by written instrument signed by a majority of all of its members and any
actions so taken shall be fully effective as if they had been taken by a
majority vote of the members of the Committee at a duly convened meeting. The
Committee may appoint a secretary to take minutes of its meetings and the
Committee shall make such rules and regulations for the conduct of its business
as it shall deem advisable.
Subject to the provisions of the Plan, the Committee shall at its
discretion:
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(a) Determine who among the Eligible Employees shall be granted Options
and Stock Appreciation Rights and the number of Shares to be subject to such
Option or Stock Appreciation Right;
(b) Determine the time or times at which Options and Stock Appreciation
Rights shall be granted;
(c) Determine the Option Price of the Shares subject to each Option or
Stock Appreciation Right;
(d) Determine the time or times when each Option or Stock Appreciation
Right shall become exercisable and the term of such Option or Stock Appreciation
Right;
(e) Grant cash bonuses which are conditioned upon an Optionee's
exercise of Options granted under this Plan;
(f) Authorize payment of the Option Price in cash, Shares or a
combination of cash and Shares; and
(g) Interpret the provisions of the Plan or any Option or Stock
Appreciation Right granted under the Plan, including all attendant Option
Agreements, and any such interpretation shall be final, conclusive and binding
upon the Company and all Optionees.
Section 5. Granting of Options. The Committee may from time to time
designate the number of Shares which shall be subject to each Option and the
type of Option. The Committee shall direct an appropriate officer of the Company
to execute and deliver Option Agreements to such Eligible Employees reflecting
the grant of Options.
Section 6. Grant of Stock Appreciation Rights. The Committee may from
time to time designate who among the Eligible Employees are to be granted Stock
Appreciation Rights under the Plan, the number of Shares to which such Stock
Appreciation Rights shall be subject and the terms and conditions affecting such
Stock Appreciation Right. The Committee shall direct an appropriate officer of
the Company to execute and deliver Option Agreements to such Eligible Employees
reflecting the grant of the Stock Appreciation Rights. The Committee may
determine the form of the payment (i.e. Shares, cash or a combination of Shares
and cash) to be received by such Eligible Employee upon the exercise of a Stock
Appreciation Right. Shares which are the subject of any Option that is
surrendered in connection with the exercise of a Stock Appreciation Right shall
not be available for the grant of future Options under the Plan.
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Section 7. Terms and Conditions Common to All Option Agreements. Each
Option Agreement shall be evidenced by a written agreement executed by the
Optionee and the Company in such form as the Committee shall from time to time
approve. The Option Agreement shall contain such terms and conditions as the
Committee shall deem appropriate, subject to the following:
(a) Optionee's Employment. The Option Agreement may provide that the
Optionee agrees to remain an employee of, and render services to the Company for
a specified period of time as condition to his exercise of his Option or Stock
Appreciation Right. The Option Agreement shall not impose any obligation on the
Company to retain the Optionee as an employee for any period or adversely effect
the Optionee's "employment at will" status with the Company.
(b) Number of Shares. The Option Agreement shall, subject to Subsection
7(g), set forth the number of Shares which are subject to Options and/or Stock
Appreciation Rights granted to the Optionee under the Plan.
(c) No obligation to Exercise. The Option Agreement shall not obligate
the Optionee to exercise any Option or Stock Appreciation Right.
(d) Term of Options and Stock Appreciation Rights. The Option Agreement
shall establish the period during which each Option and Stock Appreciation Right
is exercisable; provided, however, no Option Agreement shall provide for the
exercise of any Option or Stock Appreciation Right after the expiration of the
ten (10) year period immediately following the date upon which such Option or
Stock Appreciation Right is granted.
(e) Exercise of Options and Stock Appreciation Rights. The Option
Agreement shall provide for (and may limit or restrict) the date or dates upon
which any Option or Stock Appreciation Right granted under the Plan may be
exercised. The Option Agreement may provide for the exercise of Options and
Stock Appreciation Rights in installments and upon such terms and conditions as
the Committee may determined.
(f) Transferability of Options and Stock Appreciation Rights. The
Option Agreement shall provide that during the lifetime of an Optionee, the
Options and Stock Appreciation Rights granted to him under the Plan shall be
exercisable only by him and shall not be assignable or transferable by him;
provided, however, that the Option Agreement may provide for transferability or
assignability of Options and Stock Appreciation Rights by will or under the
applicable laws of dissent and distribution.
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(g) Adjustments. The Option Agreement may contain
such provisions as Committee considers appropriate to adjust the number of
Shares subject to Options and Stock Appreciation Rights in the event of a stock
dividend, stock split, reorganization, recapitalization, combination of shares,
merger, consolidation or any other change in the corporate structure or Shares
of the Company or any other similar transaction to which the Company is a party.
If such adjustment is made, the number of Shares subject to the provisions of
the Plan thereupon shall be adjusted correspondingly. In the event that an
adjustment to the number of Shares subject to Options or Stock Appreciation
Rights has been made pursuant to the preceding two sentences, the Committee
shall make appropriate adjustments to the Option Price (per share) so that the
Optionee's economic benefit from the exercise of the remaining Options or Stock
Appreciation Rights shall be neither better nor worse than would have existed
prior to such adjustments. The foregoing adjustments shall be made by the
Committee as its members may determine, which determination shall be final,
binding and conclusive on the Company and the Optionees. The grant of an Option
or Stock Appreciation Right under the Plan shall not affect the right or power
of the Company to make adjustments, classifications, reorganizations or changes
in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
Section 8. Terms and Conditions Common to Options. An Option Agreement
which evidences the grant of an Option shall contain such terms and conditions
as the Committee shall deem appropriate, subject to Section 7 and the following:
(a) Payment of Option Price. The Option Agreement shall provide that
the Option Price shall be payable in full upon the exercise of an Option and
must be paid in cash, by check or by the surrender of Shares (if approved by the
Committee). No stock certificate representing Shares shall be issued until full
payment therefore has been received by the Company.
(b) Death or Disability of Optionee. The Option Agreement shall provide
that if an Optionee should die or suffer a Disability while an employee of the
Company or within a period of three (3) months immediately following the
termination of his employment with the Company, his Option privileges shall
cease; provided, however, that the Option Agreement may provide that the Option
privileges which were immediately exercisable by the Optionee at the time of his
death or Disability may be exercised by him or either his personal
representative or designated beneficiary, as the case may be, during a period
not exceeding (1) year following the date upon which the earlier of his
Disability or death occurred, but in no event after the total term of the Option
as set forth in the Option Agreement.
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(c) Registration. The Option Agreement may provide for the issuance of
Shares which are registered under the Securities Acts. The Plan shall not
obligate the Company to issue Shares which are registered under the Securities
Acts. The Option Agreement may provide that if the Shares are issued upon the
exercise of an Option, and such Shares are not registered under the Securities
Acts, that the Company may grant to the Optionee certain rights to cause such
Shares to be so registered and to require the Optionee to deliver to the Company
sufficient representations and investment letters as may be reasonably required
by the Company in order to assure that the Company's issuance of Shares to such
Optionee is either exempt from registration under the Securities Acts or does
not constitute a violation of the Securities Acts which determination shall be
made by counsel selected by the Committee.
Section 9. Terms and Conditions of Incentive Stock Options. Each Option
Agreement which evidences the grant of an Incentive Stock Option shall contain
such terms and conditions as the Committee shall deem appropriate, subject to
Sections 7 and 8, and the following:
(a) Option Price. The Option Agreement shall, subject to Subsection
7(g), set forth the Option Price (per share) as determined by the Committee,
which Option Price shall not be less than one hundred percent (100%) of the Fair
Market Value of the Shares on the date the Option is granted; provided, however,
any Incentive Stock Option that is granted to Eligible Employee who, at the time
such Incentive Stock Option is granted, is deemed for the purposes of ss.422 of
the Code to own Shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a parent or
subsidiary of the Company, shall be granted at an Option Price of at least one
hundred ten percent (110%) of the Fair Market value of such Shares.
(b) Term of Incentive Stock Options Granted Ten Percent Shareholders.
If an Incentive Stock Option is granted to an Eligible Employee who, at the time
such Incentive Stock Option is granted, is deemed for the purposes of ss.422 of
the Code to own Shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a parent or
subsidiary of the Company, then the term of such Incentive Stock Option shall be
limited to five (5) years.
(c) Other Termination of Employment. The Option Agreement may provide
that if an Optionee shall cease to be employed by the Company for any reason
other than his death or Disability his Option privileges shall cease; provided,
however, that the Option Agreement may provide that the Option privileges which
were immediately exercisable by the Optionee on the date of his termination of
employment with the Company may be exercised by him during a period not
exceeding three (3) months following the date of such termination, but in no
event after the total term of the Incentive Stock Option as set forth in the
Option Agreement.
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(d) Notice of Disqualifying Disposition. The Option Agreement may
provide that if an Optionee shall sell or otherwise dispose of Shares which were
acquired by him through the exercise of an Incentive Stock Option and such
disposition occurs within two years of the date upon which the Incentive Stock
Option was granted or within one year following the date the Shares were
transferred to him upon the exercise of such Incentive Stock Option, such
Optionee shall give written notice to the Company which notice shall contain
each of the following items:
(i) The number of Shares sold or otherwise disposed,
(ii) The date or dates of such sale or disposition,
(iii) The selling price for each Share sold or disposed, and
(iv) The Option Price applicable to each Share sold or disposed.
The written notice required by this Subsection 9(d) must be received
by the Company within fifteen (15) days of any disqualifying disposition.
(e) $100,000 Per Year Limitation. The Option Agreement shall provide
that aggregate Fair Market Value of Shares (determined as of the date such
Incentive Stock Options were granted) with respect to which Incentive Stock
Option are exercisable for the first time by any Optionee during any calendar
year (under the Plan and all other incentive stock option plans sponsored by the
Company) shall not exceed $100,000.
Section 10. Terms and Conditions of Nonqualified Stock Options. Each
Option Agreement which evidences the grant of a Nonqualified Stock Option shall
contain such terms and conditions as the Committee shall deem appropriate,
subject to Sections 7 and 8, and the following:
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(a) Designation as a Nonqualified Stock Option. The Option Agreement
shall provide, that under no circumstances shall the Nonqualified Stock Option
be deemed to qualify as an Incentive Stock Option.
(b) No Interference with Incentive Stock Options. The Option Agreement
shall contain no provisions which adversely effects the qualification of any
Option which is intended to be an Incentive Stock Option under ss.422 of the
Code.
(c) Withholding. The Option Agreement shall provide that there shall be
deducted from each distribution of Shares receivable by Optionee on the exercise
of a Nonqualified Stock Option, the amount of withholding or other taxes
required to be withheld by any governmental authority. Such withholding may be
accomplished by either (i) the Optionee's deposit of cash with the Company in an
amount equal to the required withholding amount (the "Deposit Method") or (ii)
the Optionee's surrender in the exercise of a Stock Appreciation Right, Options
covering a sufficient number of Shares so that the distribution of cash upon the
exercise of such Stock Appreciation Right will provide the Company with the
required withholding amount (the "SAR Method"). The selection between the
Deposit Method and the SAR Method shall be made by the Optionee and such
selection shall be contained in the Optionee's timely notice of exercise of his
Nonqualified Stock Option. If the Optionee fails to properly select between the
two withholding alternatives, the Company shall select which method to use.
(d) Option Price. The Option agreement shall, subject to Subsection
7(g), set forth the Option Price (per share) as determined by the Committee.
(e) Other Termination of Employment. The Option Agreement may provide
that if an Optionee shall cease to be employed by the Company for any reason
other than his death or Disability, his Option privileges shall cease; provided,
however, that the Option Agreement may provide that the Option privileges which
were immediately exercisable by the Optionee on the date of his termination of
employment with the Company may be exercised by him during a period not
exceeding one (1) year following the date of such termination, but in no event
after the total term of the Option is set forth in the Option Agreement.
Section 11. Terms and Conditions of Stock Appreciation Rights. Each
Option Agreement which evidences the grant of Stock Appreciation Rights shall
contain such terms and conditions as the Committee shall deem appropriate,
subject to Section 7 and the following:
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(a) No Interference with Incentive Stock Options. The Option Agreement
pursuant to which Stock Appreciation Rights are granted shall contain no
provision which adversely affects the qualification of any Option intended to be
an Incentive Stock Option under ss.422 of the Code. To that end, (i) any Stock
Appreciation Right which is exercised in connection with the cancellation or
surrender of an Incentive Stock Option may only be exercisable when the Fair
Market value of each Share which is the subject matter of the Incentive Stock
Option exceeds the Option Price, (ii) the Stock Appreciation Right may be
transferred only when the underlying Incentive Stock Option is otherwise
transferable and (iii) the exercise of the Stock Appreciation Right must have
the same economic and tax consequences to the Optionee as would arise as a
result of the exercise of the Incentive Stock Option followed immediately by a
sale of the acquired Shares.
(b) Withholding. The Option Agreement shall provide that there shall be
deducted from any distribution resulting from the exercise of a Stock
Appreciation Right that amount which equals the withholding or other taxes
required to be withheld by any governmental authority.
Section 12. Rights as a Shareholder. An Optionee or a transferee of an
Option shall have no rights as a shareholder of the Company with respect to any
Shares which are subject to an Option until the-issuance of the stock
certificates representing such Shares.
Section 13. Modification, Extension and Renewal of Options. Subject to
the terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding Options granted under the Plan or accept the surrender of
outstanding Options and authorize the granting of new Options in substitution
therefor. Shares which are the subject matter of lapsed Options, may be granted
in Options to other Eligible Employees at any time during the term of this Plan.
Notwithstanding the foregoing, no modification of an Option shall, without the
consent of the Optionee, alter or impair the rights or obligations of any
Optionee with respect to any Option granted under the Plan.
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Section 14. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as members of the Board of Directors,
members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys fees, actually and necessarily incurred
by them in connection with the defense of any action, suit or other proceeding
through which any of them may be a party as a result of any action or failure to
act under or in connection with the Plan, any Option Agreement or any Option
granted thereunder, and against all amounts paid in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid in satisfaction of a judgment in any such action, suit or other
proceeding; provided, however, that no member of the Committee shall be
indemnified for any such expenses or amounts relating to matters as to which it
is determined in such action, suit or other proceeding that such member of the
Committee is liable for gross negligence or wanton misconduct in the performance
of his duties.
Section 15. Amendment and Termination of the Plan. The Company by
action of the Board of Directors, reserves the right to amend, modify or
terminate this Plan at any time or by action of the Board of Directors, and with
the written consent of the effected Optionee, amend, modify or terminate any
outstanding Option Agreement, except that the Company may not, without further
shareholder approval, increase the total number of Shares for which Options may
be granted under the Plan (except for increases attributable to adjustments
authorized in the Plan), change the employees or class of employees who are
Eligible Employees or materially increase the benefits accruing to Optionees
under the Plan. Moreover, no action may be taken by the Company (without the
written consent of the effected Optionee) which will impair the validity of any
Option or Stock Appreciation Right then outstanding or which will prevent an
Incentive Stock Option from continuing to qualify under ss.422 of the Code.
Section 16. Effective Date of Plan. This Plan shall be effective upon
its adoption by the Board of Directors. The Plan shall be submitted to the
stockholders of the Company for approval within twelve (12) months after its
adoption by the Board of Directors and, if the Plan shall not be approved by the
shareholders within such twelve month period, the Plan shall be void and of no
effect. Any Options or Stock Appreciation Rights granted under the Plan prior to
the date of approval by the stockholders shall be void if such shareholders,
approval is not timely obtained.
Section 17. Expiration of Plan . Options may be granted under this Plan
at any time on or prior to the date which is ten (10) years immediately
following effective date of the Plan.
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (the "Agreement") made this 5th day of
March, 1996, by and between RESOURCE LEASING, INC. ("RLI"), a Delaware
corporation and ABRAHAM BERNSTEIN ("BERNSTEIN").
WHEREAS, Bernstein is experienced in the business of leasing equipment
the cost of which is generally under $50,000 ("Small Ticket Leasing").
WHEREAS, RLI and Bernstein desire to conduct all of their future
business in the Small Ticket Leasing field through a newly-formed corporation in
which RLI will own all of the initial equity and of which Bernstein initially
will be the chairman, chief executive officer and president and will own stock
options.
NOW, THEREFORE, the parties hereto intending to be legally bound hereby
agree as follows:
1. Formation of Newco. RLI will promptly form a new corporation
("Newco") under the laws of the Commonwealth of Pennsylvania or the State of
Delaware (depending on tax and name availability considerations), having
authorized capital stock consisting solely of 20,000,000 shares of Common Stock,
par value $.01 per share, and having Articles and Bylaws in the form attached
hereto as Exhibit A and Exhibit B, (which may be changed in a way not adverse to
Bernstein solely depending on the state of incorporation) respectively. RLI will
contribute to Newco the sum of Two Million Dollars ($2,000,000) in cash
(promptly as such cash may be required by the Company), and the right to use the
name of "Fidelity Leasing." In exchange, RLI will receive nine million
(9,000,000) shares of stock of Newco, which will be all of its initial
outstanding stock. RLI will cause FLC to change its name to F.L. Partnership
Management, Inc. or such other name as shall be selected by its Board of
Directors, and will advise FLC's limited partners, creditors and others that it
is operating under a new name. Newco will change its name to Fidelity Leasing,
Inc. or such other name as shall be selected by its Board of Directors. Promptly
upon the formation of Newco, the parties will execute an Employment Agreement in
the form of Exhibit F, hereto. Promptly upon the formation of Newco, Bernstein
will be elected to the Board of Directors of Newco, and RLI shall thereafter
vote in favor of his remaining as a Director until his Employment Agreement
terminates.
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2. Stock Options.
(a) Bernstein Plan. Newco will promptly adopt a 1996-1 Key
Employee Stock Option Plan (the "Bernstein Stock Option Plan") substantially in
the form of Exhibit C hereto. One million (1,000,000) shares will be authorized
by Newco and made subject to the Bernstein Stock Option Plan. Upon adoption of
the Bernstein Stock Option Plan, Newco will immediately grant to Bernstein an
option with respect to one million (1,000,000) shares of Newco stock at $.22 per
share pursuant to a Grant of Incentive Stock Options substantially in the form
of Exhibit D hereto ("the Bernstein Option Grant").
(b) Employee Plan. Within thirty (30) days of the date hereof,
Newco will adopt a 1996-2 Key Employee Stock Option Plan in a form similar to
that in Exhibit C hereto except that it may differ materially with respect to
Section 7(g) (the "Employee Stock Option Plan"). Five Hundred Thousand (500,000)
shares will be authorized by Newco and made subject to the Employee Stock Option
Plan. Grants under the Employee Stock Option Plan may contain such provisions as
the Board of Directors of Newco, through the Committee (as defined in the
Employee Stock Option Plan), may prescribe, but it is the intention of Newco
that such grants to employees other than Bernstein will not contain the
adjustment provisions set forth in Section 5 of Exhibit B.
(c) Anti-Dilution of Bernstein's Interest. In the case of any
sale or issuance of stock by Newco ("additional issuance") to anyone (including
any issuance pursuant to the exercise of conversion, exchange, option, warrant
or other rights) other than RLI (pursuant to Section 1) or Bernstein (pursuant
to Section 5 of the Bernstein Stock Option Grant), at any time prior to closing
an initial public offering of Newco common stock, Bernstein will be entitled to
additional stock options, which may be issued under the 1996-2 Key Employee
Stock Option Plan (or a different stock option plan adopted for this purpose) in
an amount calculated to allow him to maintain a ten percent (10%) ownership in
the total common stock equity in Newco (excluding from such 10% calculation any
shares or options issued pursuant to the 1996-2 Key Employee Stock Option Plan)
and shall be at an exercise price equal to the price paid or value received for
the stock in the additional issuance; provided, however, that if such price paid
or value received is below the "fair market value" of Newco stock as defined in
the 1996-2 Key Employee Stock Option Plan, Bernstein may elect to either (i)
receive the additional options as incentive stock options at "fair market
value," or (ii) receive the additional options as non-qualified options at the
price paid or value received for the stock to which the additional issuance
relates.
3. Bernstein's Right to Sell or Put RLI Shares.
(a) If Newco common stock is registered under the Securities
Exchange Act of 1934 ("publicly held"). At Closing, Newco and Bernstein will
enter into a Registration Rights Agreement substantially in the form of Exhibit
E hereto which will provide Bernstein certain registration rights, following the
fourth anniversary of this Agreement, to sell fully registered shares then owned
by Bernstein.
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(b) If Newco is not a public company.
(i) At any time during the fifth year after the date
hereof, if Newco is not then publicly held, Bernstein shall have the right,
following written notice as described hereinbelow, to require Newco to purchase,
and Newco shall purchase from Bernstein, for cash up to 25% of the number of
shares originally subject to (including any adjustments pursuant thereto) the
Bernstein Option Grant (the "Bernstein Option Shareholdings") at a price equal
to ten times the After Tax Earnings (as defined below) per share of Newco for
the last fiscal year ended prior to the giving of notice by Bernstein ("Per
Share Purchase Price"). After Tax Earnings shall mean the before tax earnings of
Newco determined by Newco's independent auditors in accordance with generally
acceptable accounting principles consistently applied adjusted for the taxes
that would be payable if Newco were a corporation that filed a separate tax
return;
(ii) At any time during the sixth year after the date
hereof if Newco is not then
publicly held, Bernstein shall have the right to require Newco to purchase, and
Newco shall purchase from Bernstein, for cash up to 50% of the Bernstein Option
Shareholdings less any amount already sold pursuant to Section 3(b)(i) hereof,
at the Per Share Purchase Price;
(iii) At any time during the seventh year after the date
hereof if Newco is not then publicly held, Bernstein shall have the right to
require Newco to purchase, and Newco shall purchase from Bernstein, for cash up
to 75% of the Bernstein Option Shareholdings less any amount already sold
pursuant to Sections 3(b)(i) and (ii) hereof at the Per Share Purchase Price;
(iv) At any time during the eighth year after the date
hereof if Newco is not then publicly held, Bernstein shall have the right to
require Newco to purchase, and Newco shall purchase from Bernstein for cash, any
or all of his Newco shares at the Per Share Purchase Price;
Provided, however, that
(A) all such purchase obligations under Sections 3(b)(i)-(iii),
above, shall be subordinated to those obligations of Newco to its outside
creditors outstanding prior to receipt by Newco of notice from Bernstein
exercising his rights hereunder;
(B) any of Newco's obligations due in each of the fifth, sixth
and seventh years under Sections 3(b)(i)-(iii), above, in excess of Five Hundred
Thousand Dollars ($500,000), may be deferred to the next following year,
provided that in no event shall the maximum amount payable in the sixth and
seventh year be more than Five Hundred Thousand Dollars ($500,000), and the
balance shall be due in the eighth year along with other amounts due in that
year under (iv), above;
(C) in no event shall any deferred amounts subject to Paragraph
(B), above, be forgiven or otherwise deemed not to be due and owing Bernstein as
a result of Newco's becoming publicly held after the date of original incurrence
of such obligation.
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<PAGE>
4. Agreement as to Inter-Company Expenses. RLI agrees that all
transactions between Newco and RLI, or any affiliate of RLI, shall be conducted
on terms reasonably compared to those that would prevail in the case of
commercial transactions between unrelated parties.
5. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given, made
and received only when delivered (personally, by courier service such as Federal
Express, when telecopied with acknowledgement of receipt (which may also be by
telecopy)) or when deposited in the United States mail, certified or registered
mail, return receipt requested, postage prepaid and addressed as set forth
below:
If to RLI:
Resource Leasing, Inc.
1521 Locust Street
Philadelphia, PA 19102
Attn: Freddie Kotek
If to Bernstein:
Abraham Bernstein
1830 Rittenhouse Square
Philadelphia, PA 19103
Facsimile: 215-569-8228
RESOURCE LEASING, INC.
By:___________________________
______________________________
Abraham Bernstein
<PAGE>
AMENDMENT TO CONTRIBUTION AGREEMENT
THIS AMENDMENT TO CONTRIBUTION AGREEMENT ("Amendment") is made this
30th day of June, 1999 by and among RESOURCE LEASING, INC. ("RLI"), a Delaware
corporation, ABRAHAM BERNSTEIN ("Bernstein") and, as provided hereinbelow,
FIDELITY LEASING, INC. ("Newco"), a Pennsylvania corporation.
WHEREAS, RLI and Bernstein entered into a Contribution Agreement
("Contribution Agreement") on March 5, 1996, and desire to make certain
amendments to such agreement; and
WHEREAS, Newco, having been formed pursuant to, and subsequent to the
date of execution of, the Contribution Agreement, is to be added, by this
Amendment, as a party to the Contribution Agreement and this Amendment;
NOW, THEREFORE, each of the signatories hereto, intending to be legally
bound by and to the Contribution Agreement and this Amendment, hereby and in
exchange for consideration mutually given, agree as follows:
1. The reference to Exhibit "B" in the last line of Paragraph 2(b) of
the Contribution Agreement is hereby corrected and amended to read Exhibit "D."
2. Paragraph 2(c) is amended by adding the following to the end:
"Notwithstanding the foregoing, Bernstein agrees to waive his
anti-dilution rights for one time in connection with the private
placement of stock of Newco on or prior to December 31, 1999 if the
company has not completed a public stock offering by that time
unless Bernstein determines that such private placement would be
materially adverse to the interests of Newco."
3. Subparagraph (B) under Paragraph 3(b), near the bottom of page 4 of
the Contribution Agreement is hereby amended and a new subparagraph (C) is added
to read as follows:
"(B) any of Newco's obligations due under Section 3(b)(i)-(iii),
above, in excess of Five Million Dollars ($5,000,000), may be
deferred to March 5 of the next following year, provided that
in no event shall the maximum amount payable either on March 5,
2002 and March 5, 2003 be more than Five Million Dollars
($5,000,000), and the balance shall be due on March 5, 2004
along with other amounts due in that year under (iv), above:"
<PAGE>
"(C) any of Newco's obligations due under Section 3(b)(i)-(iii),
above in excess of Five Hundred Thousand Dollars ($500,000) in
any year, may be deferred to March 5 of the next following year
if the Board of Directors of Newco determines that the payment
of such amount would be materially adverse to the interests of
Newco. Any amount so deferred will be payable on the following
March 5 subject to Subparagraph 3(B) and the application of
this Subparagraph 3(C). If Bernstein disagrees with the
determination of the Board of Directors, he shall be permitted
to submit the dispute to binding arbitration, which shall be
the exclusive forum for resolution of the dispute and which
will determine whether the Board, in making its determination,
acted reasonably. The arbitration shall be conducted before a
panel of three (3) arbitrators. One arbitrator shall be
selected by Bernstein, one by Newco and the third by the two
previously selected arbitrators. The arbitration proceeding
shall be held in Philadelphia, Pennsylvania."
4. Paragraph 5 of the Contribution Agreement is hereby amended to add
an additional addressee:
"If to Newco:
Abraham Bernstein, Chairman/CEO
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, PA 19380
Facsimile: 610-719-4515"
5. A new Paragraph 6 shall be added to the Contribution Agreement, as
follows:
"6. Right to Interest in Other Companies. RLI, Newco and Bernstein
each agree as follows:
All acquisitions available to any of them (whether through
purchase of stock or assets, merger, formation of new businesses or
otherwise) of entities (or interests therein) engaged in the
business of equipment leasing are to be made by Newco or its
wholly-owned subsidiaries.
6. Newco hereby agrees to be bound by and a part to (a) the
Contribution Agreement to the full extent referred to therein, and (b) this
Amendment to the full extent referred to herein, as if Newco had been in
existence at the time of execution of the Contribution Agreement.
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<PAGE>
Whereupon, this Agreement, having been duly authorized on behalf of
each signatory, has been agreed upon and executed on the date first hereinabove
written.
RESOURCE LEASING, INC.
By:
----------------------------------
------------------------------------
Abraham Bernstein
FIDELITY LEASING, INC.
By:
----------------------------------
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated March 5, 1996 (this
"Agreement"), is entered into by and between FIDELITY LEASING, INC., a
Pennsylvania corporation (the "Company"), a subsidiary of Resource Leasing, Inc.
("RLI") and ABRAHAM BERNSTEIN, an individual resident of Philadelphia, PA
("Bernstein").
WHEREAS, RLI and Bernstein entered into a Contribution Agreement dated
March 5, 1996 which provided for this Agreement to be entered into upon the
occurrence of certain events.
NOW, THEREFORE, for good and valuable consideration, the adequacy and
receipt of which is hereby acknowledged, the parties agree as follows:
1. Definitions. For purposes of this Agreement:
(a) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means (1) the Common
Stock of the Company, $.01 par, owned by Bernstein and (2) any other shares of
capital stock of the Company issued as a dividend or other distribution with
respect to, or in exchange for or in replacement of, such Common Stock,
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under this Agreement are not assigned;
(c) The term "Holder" means Bernstein.
2. Restrictive Legend. Each certificate representing Common Stock
shall, except as otherwise provided in this Section 2 or in Section 3, be
stamped or otherwise imprinted with a legend substantially in the following
form:
<PAGE>
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act and applicable state
securities laws.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
Common Stock (other than under the circumstances described in Section 4), the
holder thereof shall give written notice to the company of his intention to
effect such transfer. Each such notice shall describe the manner of the proposed
transfer and the name and address of the record purchaser and, if requested by
the Company, shall be accompanied by an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer may be effected without
registration under the Securities Act and applicable state securities laws,
whereupon the holder of such stock shall be entitled to transfer such stock in
accordance with the terms of its notice; provided, however, that no such opinion
of counsel shall be required for a transfer to one or more partners of the
transferor (in the case of a transferor that is a partnership) or to an
affiliated corporation (in the case of a transferor that is a corporation). Each
certificate for Common Stock transferred as above provided shall bear the legend
set forth in Section 2, except that such certificate shall not bear such legend
if (i) based upon the opinion of counsel referred to above, such transfer is in
accordance with the provisions of Rule 144 (or any other rule permitting public
sale without registration under the Securities Act) or (ii) the opinion of
counsel referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act and applicable state securities laws. The restrictions provided
for in this Section 3 shall not apply to securities which are not required to
bear the legend prescribed by Section 2 in accordance with the provisions of
that Section.
4. Piggyback Registration.
If the Company shall seek to register under the Securities Act
or qualify any of the securities holdings of the Company or any of its
stockholders (except in connection with any stock option plan, stock purchase
plan, savings or similar plan or an acquisition, merger or exchange of stock)
and if the form of registration statement proposed to be used may be used for
the registration of the Registrable Shares (as herein defined), then, on each
such occasion, the Company shall furnish Holder with at least 30 days prior
written notice thereof. At the written request of Holder, given within 20 days
after the receipt of such notice, the Company will use its best efforts to cause
2
<PAGE>
all of the Registrable Shares for which registration shall have been requested
by Holder to be included in such registration statement. In the event that the
proposed registration by the Company is, in whole or in part, an underwritten
public offering of securities of the Company, and the managing underwriter
determines and advises in writing that the inclusion of all Registrable Shares
proposed to be included in the underwritten public offering and other issued and
outstanding shares of Common Stock proposed to be included therein by persons
other than holders of Registrable Shares (the "Other Shares") would interfere
with the successful marketing (including pricing) of the securities, then the
number of shares of Registrable Shares and Other Shares to be included in such
underwritten public offering shall be reduced ("cutback") pro rata among the
holders of Registrable Shares and Other Shares, based upon the number of shares
requested by holders thereof to be registered in such underwritten public
offering; and lastly, if necessary, among the Company's shares requested by the
Company to be registered. In the event that the Company offers any of its
securities in an offering exempt from registration under the Securities Act
pursuant to Regulation A, the Company will provide to Holder rights comparable
to those provided herein. Notwithstanding anything to the contrary in this
Section 4, (a) in no event shall Holder be entitled to register more than twice
under this Section 4, (b) no less than 25% of Holder's then outstanding
Registrable Shares shall be included in any registration under this Section 4,
and (c) no cutback which reduces the requested number of Registrable Shares to
be included in a registration under this Section 4 by more than 50% shall count
as a registration under (a), above.
5. Demand Registration.
(a) If, at any time after the first anniversary of the date
the Company has become a public company, the Company shall receive a written
request from Holder of the Registrable Securities then outstanding that the
Company file a registration statement under the Act covering the registration of
at least twenty-five percent (25%) of the Registrable Securities then
outstanding (or a lesser percent if the anticipated aggregate offering price,
net of underwriting discounts and commissions, would exceed $500,000), then the
Company shall (i) subject to the limitations of Section 5(b), file with the SEC
within sixty (60) days of the receipt of such request a registration statement
on the appropriate form, and (ii) use its best efforts to cause as promptly as
practicable the registration under the Act of all Registrable Securities which
Holder requests to be registered. Neither the Company nor any person other than
Holder shall be entitled to include shares in the registrations made under this
Section 5 without the consent of the Holder.
3
<PAGE>
(b) If Holder intends to distribute the Registrable Securities
covered by his request by means of an underwriting, he shall so advise the
Company as a part of his request made pursuant to this Section 5. If Holder
proposes to distribute his securities through such an underwriting he shall
(together with the Company as provided in Section 6(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by Holder which underwriters shall include a
regional or national underwriting firm which is a member in good standing of the
National Association of Securities Dealers, Inc.
(c) The Company is obligated to effect only one such
registration pursuant to this Section 5, unless Form S-3 is available to the
Company in which latter event the Company shall register on two occasions.
6. Obligations of the Company. Whenever required under this Grant to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of Holder
of the Registrable Securities registered thereunder, keep such registration
statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as he may reasonably request in order to
facilitate the disposition of Registrable Securities owned by him.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of not more than twenty of such jurisdictions as shall be
reasonably requested by Holder, provided that the Company shall not be required
to qualify to do business or to file in general consent to service of process in
any such states or jurisdictions.
4
<PAGE>
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Holder shall
also enter into and perform its obligations under such an agreement.
(f) Notify Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) In the case of an underwritten public offering, furnish,
at the request of Holder, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Agreement, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.
7. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of Holder that such Holder shall furnish
to the Company such information regarding himself, the Registrable Securities
held by him, and the intended method of disposition of such securities as shall
be required to effect the registration of Holder's Registrable Securities.
8. Expenses of Registration. All expenses, including underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to this Agreement, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the fees and disbursements of
Holder shall be borne by Company except for any underwriters' or brokers'
commissions and fees and expenses of Holder's counsel.
5
<PAGE>
9. Delay of Registration. Holder shall have no right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended or the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Holder.
11. "Market Stand-off" Agreement. Holder agrees that in connection with
any underwritten public offering by the Company, if requested in writing by the
Company or an underwriter of such registered public offering, not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by Holder other than shares of Registrable Securities included in
the registration during a period of up to 180 days following the effective date
of any registration statement of the Company filed under the Act, provided that
all other persons selling securities in such underwritten public offering and
all officers and directors of the Company shall enter into similar agreements.
Such agreement shall be in writing in the form reasonably satisfactory to the
Company and such underwriter, and may be included in the underwriting agreement.
The Company may impose stop-transfer instructions with respect to the securities
subject to the foregoing restriction until the end of the required stand-off
period.
12. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Holder against any losses, claims, damages or liabilities to which the Holder
may become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement, or any amendment or
supplement thereto, in which Registrable Securities are included (together with
any preliminary prospectus or prospectus included as a part thereof, a
"Registration Statement"), or (ii) the omission or alleged omission to state
therein a material fact required to be stated in such a Registration Statement
or necessary to make the statements therein not misleading, and will reimburse
the Holder for any legal or other expenses reasonably incurred by him in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that the Company will 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 such Registration Statement
in reliance upon and in conformity with written information furnished to the
Company by the Holder specifically for us in the preparation thereof. This
indemnity will be in addition to any liability which the Company may otherwise
have.
6
<PAGE>
(b) The Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed a Registration
Statement and each person, if any, who controls the Company, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that the
Holder will be liable in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission has been made in such Registration Statement in reliance upon and in
conformity with written information furnished by the Holder, acting solely in
the role of Holder (as distinguished from his role as an officer or director of
the Company) specifically for use in the preparation thereof only to the extent
of net proceeds received by the Holder in the offering. This indemnity will be
in addition to any liability which the Holder may otherwise have. Nothing
contained in this Section 12(b) or in Section 12(d) shall limit the liability of
the Holder, if any, for his acts in his capacity as an officer or director of
the Company in connection with the Registration Statement.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 12, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 12(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 12(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
7
<PAGE>
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution under Section 12(d) hereof or otherwise
than on account of the provisions of Section 12(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
retain counsel reasonably satisfactory to the indemnified party to defend the
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. 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. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay as
incurred the fees and expenses of the counsel retained by the indemnified party
in the event of (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, (ii) the indemnifying party
has failed to assume the defense of such proceeding or shall have failed to
retain counsel reasonably satisfactory to the indemnified party, or (iii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel under applicable rules of professional conduct,
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm (and appropriate
local counsel) for all such indemnified parties. Such firm shall be designated
in writing by Holder in the case of parties indemnified pursuant to Section
12(a) and by the Company in the case of parties indemnified pursuant to Section
12(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 12 is
unavailable (other than by reason of the exception contained in the second
sentence of Section 12(c) hereof) to or insufficient to hold harmless an
indemnified party under Section 12(a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
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
Company on the one hand and the Holder on the other from the offering of the
Registrable Securities. 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 Section 12(c) above, 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 Company on the one hand and
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<PAGE>
the Holder, solely in his role as Holder not as an officer or director of the
Company, 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 Company on the one hand
and the Holder on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company bears to the total net proceeds from the offering, in each case as set
forth in the Registration Statement. 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 Company on the one hand or the Holder on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
further agrees that, in connection with any underwritten public offering, it
also will enter into customary contribution arrangements with the selling
holders of Registrable Securities and the underwriters or broker-dealers through
whom the Registrable Securities may be sold, with respect to situations in which
indemnification is potentially unavailable.
The Company and the Holder agree that it would not be just and
equitable if contributions pursuant to this Section 12(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 12(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 Section 12(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), 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.
(e) In any proceeding relating to the Registration Statement,
each party against whom contribution may sought under this Section 12 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that processing issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
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<PAGE>
13. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when mailed by registered or certified
mail, return receipt requested, as follows (provided that notice of change of
address shall be deemed given only when received): If to the Company, at 1521
Locust Street, Suite 800, Philadelphia, PA 19102, attention: Freddit Kotek; if
to Holder, at Holder's address appearing on the stock record books of the
Company from time to time; as such addresses may be changed by notice to the
Company in accordance with the provisions hereof
IN WITNESS WHEREOF, the parties hereof have caused this Registration
Rights Agreement to be executed on their behalf on the date first above written.
FIDELITY LEASING, INC.
By:____________________________
_______________________________
Abraham Bernstein
<PAGE>
GRANT OF INCENTIVE STOCK OPTION
PURSUANT TO FIDELITY LEASING, INC.
1996-1 KEY EMPLOYEE STOCK OPTION PLAN
THIS AGREEMENT, made as of this 5th day of March, 1996, ("Date
of Grant") by and between ABRAHAM BERNSTEIN, Grantee and FIDELITY LEASING, Inc.
(together with its successors or assigns hereinafter referred to as the
"Company").
WHEREAS, the Board of Directors of Fidelity Leasing, Inc. (the
"Board") previously adopted, with subsequent stockholder approval, the Fidelity
Leasing, Inc. 1996-1 Key Employee Stock Option Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock
options by a committee to be appointed by the Board (the "Committee") to
eligible employees of the Company to purchase, or to exercise certain rights
with respect to, shares of the Class A Common Stock of the Company, par value
$.01 per share (the "Stock"), in accordance with the terms and provisions
thereof; and
WHEREAS, the Committee considers the Grantee to be a person
who is eligible for a grant of incentive stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
incentive stock options on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
<PAGE>
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the
Company, with the approval and at the direction of the Committee, hereby grants
to the Grantee, an option to purchase up to 1,000,000 shares of Stock at a price
of $0.2222 per share. Such option is hereinafter referred to as the "Option" and
the shares of stock purchasable upon exercise of the Option are hereinafter
sometimes referred to as the "Option Shares." The Option is intended by the
parties hereto to be, and shall be treated as, an incentive stock option (as
such term is defined under Section 422 of the Internal Revenue Code of 1986).
2. Installment Exercise.
(a) Subject to such further limitations as are provided
herein, the Option shall become exercisable in four (4) installments, the
Grantee having the right hereunder to purchase from the Company the following
number of Option Shares upon exercise of the Option, on and after the following
dates, in cumulative fashion:
(i) on and after the first anniversary of the Date of
Grant, up to 25% (ignoring fractional shares) of the total number of Option
Shares;
(ii) on and after the second anniversary of the Date of
Grant, up to an additional 25% (ignoring fractional shares) of the total number
of Option Shares; and
(iii) on and after the third anniversary of the Date of
Grant, up to an additional 25% (ignoring fractional shares) of the total number
of Option Shares; and
(iv) on and after the fourth anniversary of the Date of
Grant, the remaining Option Shares.
(b) Subsection (a) notwithstanding, in the event of a "Change
in Control," all of the Option Shares granted hereunder may be exercised
immediately. For purposes of this Agreement, a "Change in Control" takes place
when Edward E. Cohen is neither an officer of Resource America, Inc. ("RAI") nor
an owner of at least five percent (5%) of the voting stock of RAI.
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<PAGE>
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto,
to the extent such rights shall not have been exercised, shall terminate and
become null and void after the expiration of ten years from the Date of Grant
(the "Option Term").
(b) If employment of Grantee by the Company pursuant to the
Employment Agreement dated March 5th, 1996 (the "Employment Agreement") is
terminated, or if certain covenants contained in the Employment Agreement are
breached, unexercisable or unexercised Options shall be terminated in accordance
with Paragraph 10 of the Employment Agreement.
Upon a termination of the Grantee's employment by reason of
disability or death, or after a Change in Control, the Option may be exercised
during the following periods, but only to the extent that the Option was
outstanding and exercisable on any such date of retirement, disability or death:
(i) the one-year period following the date of such termination of the Grantee's
employment in the case of a disability (within the meaning of Section 422(e)(3)
of the Code) or after a Change in Control, (ii) the one-year period following
the date of issuance of letters testamentary or letters of administration to the
executor or administrator of a deceased Grantee, and (iii) the one-year period
following the date of such termination in the case of retirement on or after
attainment of age 65, or in the case of disability other than as described in
(i) above. In no event, however, shall any such period extend beyond the Option
Term.
(c) In the event of the death of the Grantee, the Option may
be exercised by the Grantee's legal representative(s) (but only to the extent
that the Option would otherwise have been exercisable by the Grantee).
(d) A transfer of the Grantee's employment between Company and
any affiliate of Company, or between any subsidiaries of Company, shall not be
deemed to be a termination of the Grantee's employment.
(e) Notwithstanding any other provisions set forth herein or
in the Plan, if the Grantee shall (i) breach any covenant not to compete, or
materially breach any employment contract, with Company or any subsidiary of
Company, or (ii) engage in conduct that would warrant the Grantee's discharge
for Cause (as defined in the Employment Agreement) any unexercised portion of
the Option shall immediately terminate and be void.
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<PAGE>
4. Exercise of Options.
(a) The Grantee may exercise the Option with respect to all or
any part of the number of Option Shares then exercisable hereunder by giving the
Secretary of Company written notice of intent to exercise. The notice of
exercise shall specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof.
(b) Full payment (in U.S. dollars) by the Grantee of the
option price for the Option Shares purchased shall be made on or before the
exercise date specified in the notice of exercise in cash, or, with the prior
written consent of the Committee, in whole or in part through the surrender of
previously acquired shares of Stock at their Fair Market Value on the exercise
date.
On the exercise date specified in the Grantee's notice or as
soon thereafter as is practicable, Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as Company may
elect) upon full payment for such Option Shares. The obligation of Company to
deliver Stock shall, however, be subject to the condition that if at any time
the Committee shall determine in its discretion that the listing, registration
or qualification of the Option or the Option Shares upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the Option or the issuance or purchase of Stock thereunder, the
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee; provided, that
the Company and the Committee shall at all times be obligated to use their best
efforts to obtain such listing, registration, qualification, consent or approval
as soon as possible and without any conditions unacceptable to the Committee.
(c) The date specified in the Grantee's notice as the date of
exercise shall be deemed the date of exercise of the Option, provided that
payment in full for the Option Shares to be purchased upon such exercise shall
have been received by such date.
5. Adjustment of and Changes in Stock of Company.
In the event of a reorganization, recapitalization, change of
shares, stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of Company, the
Committee shall make such adjustment as it deems appropriate in the number and
kind of shares of Stock subject to the Option or in the option price so that
Grantee's economic benefit from the exercise of the option with respect to any
remaining shares or Stock Appreciation Rights shall be neither better nor worse
than would have existed prior to such adjustments.
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<PAGE>
6. Fair Market Value.
As used herein, the "Fair Market Value" of a share of Stock
shall be (i) if the Company is a public company whose Shares are traded on a
stock exchange, the closing price for the Shares on a given day or, if there is
no sale on such day, then the last sale price on the last previous date on which
a sale is reported or, if the Shares are traded other than on an exchange, the
arithmetic mean of the closing bid and ask sale prices for the Shares reported
by the NASDAQ on a given day or if there is no sale on such day, then the
arithmetic mean of such closing bid and ask sale prices on the last previous
date on which a sale is reported; (ii) if the Company is not a public company,
the greater of fully-diluted book value per share for the previous fiscal year
or ten times after-tax earning per share for the last fiscal year ended prior to
the date of determination.
7. No Rights of Stockholders.
Neither the Grantee nor any personal representative shall be,
or shall have any of the rights and privileges of, a stockholder of Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of exercise of the Option.
8. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in the case of the
death of the Grantee, by will or the laws of descent and distribution, nor shall
the Option be subject to attachment, execution or other similar process. In no
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, Company may terminate the Option by notice to the Grantee and
it shall thereupon become null and void.
9. Employment Not Affected.
The granting of the Option nor its exercise shall not be
construed as granting to the Grantee any right with respect to continuance of
employment of the Company. Except as may otherwise be limited by a written
agreement between the Company and the Grantee, the right of the Company to
terminate at will the Grantee's employment with it at any time (whether by
dismissal, discharge, retirement or otherwise) is specifically reserved by
Company, or the employing subsidiary (whichever the case may be), and
acknowledged by the Grantee.
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<PAGE>
10. Stock Appreciation Rights (SARs).
(a) In General. Subject to the terms and conditions of the
Plan and as set forth herein, the Grantee shall have the right to surrender this
Option to the Company, in whole or in part, and to receive in exchange therefor
a payment by the Company of an amount equal to the excess of the Fair Market
Value of the Option Shares covered by the portion of the Option being
surrendered as of the date the Option or portion thereof is surrendered over the
exercise price to acquire such Option Shares.
(b) SAR Exercise Rights. Grantee shall have the right to
surrender all or a portion of this Option in exchange for cash payments under
this Section 10 starting on the fourth anniversary of the Date of Grant. The
Grantee's rights under this Section 10 shall apply to that number of Option
Shares indicated in the schedule set forth below:
Surrender Date Option Shares
-------------- -------------
Fourth Anniversary 250,000
Fifth Anniversary 500,000
Sixth Anniversary 750,000
Seventh Anniversary 1,000,000
The Grantee's right to surrender any portion of this Option in exchange for a
cash payment under this Section 10 shall terminate as of the date of the
Company's receipt of the proceeds of the initial underwritten public offering of
the Company's Stock.
(c) Payment. The Grantee shall have the right to receive the
payment required to be made under this Section 10 either in cash or in shares of
Stock. If payment is made in shares of Stock, the amount of the payment shall be
divided by the Fair Market Value of a share of Stock on the surrender date of
the SARs. No fractional share of Stock shall be issued on exercise of a SAR, and
cash shall be paid by the Company to the Grantee in lieu of any such fractional
share. Any payment made under this Section 10 shall be subject to the
withholding requirements of Section 11(b) of the Plan.
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<PAGE>
(d) Limitation. Notwithstanding anything to the contrary
contained herein, the Company's obligation to make cash payments under this
Section 10 shall be limited to $444,444 during each of the annual periods
occurring between anniversaries of the Date of Grant, until the eighth
anniversary of the Date of Grant. Any amounts not paid on account of this
Section 10(d) shall be paid in the next following annual period following the
period for which this Section 10(d) has limited payment, subject to the
applicability of this Section 10(d) again for payments otherwise due during such
subsequent annual period. Any amounts not paid on account of this Section 10(d)
shall be deferred until after the eighth anniversary of the Date of Grant, at
which time all such amounts deferred shall be payable in full regardless of
whether the Company has become publicly held.
11. Amendment of Option.
The Option may be amended by the Board or the Committee at any
time (i) if the Board or the Committee determines, in its sole discretion, that
amendment is necessary or advisable in the light of any addition to or change in
the Internal Revenue Code of 1986 or in the regulations issued thereunder, or
any federal or state securities law or other law or regulation, which change
occurs after the Date of Grant and by its terms applies to the Option provided
that the Board or Committee, as the case may be, shall make any such necessary
or advisable changes (to the extent reasonably possible) in the manner that is
the least disadvantageous to Grantee and provided that no change that is
advisable but not necessary will be made if such change would prevent the Option
from being treated as an Incentive Stock Option; or (ii) other than in the
circumstances described in clause (i), with the written consent of the Grantee.
12. Notice.
Any notice to Company provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at 1521 Locust
Street, Suite 400, Philadelphia, Pennsylvania 19102, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
payroll records of the Employer. Any notice shall be deemed to be duly given if
and when properly addressed and posted by registered or certified mail, postage
prepaid.
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<PAGE>
13. Incorporation of Plan by Reference.
The Option is granted pursuant to the terms of the Plan, the
terms of which are incorporated herein by reference, and the Option shall in all
respects be interpreted in accordance with the Plan. The Committee shall
interpret and construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
14. Governing Law.
The validity, constructions, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the Commonwealth of Pennsylvania, except to the extent preempted by
federal law, which shall to the extent govern.
IN WITNESS WHEREOF, Company has caused its duly authorized
officers to execute and attest this Grant of Incentive Stock Option, and to
apply the corporate seal hereto, and the Grantee has placed his or her signature
hereon, effective as of the Date of Grant.
________________________________
By:________________________________
President
Attest:___________________________
Secretary
ACCEPTED AND AGREED TO:
By:________________________________
ABRAHAM BERNSTEIN, Grantee
<PAGE>
FIDELITY LEASING, INC.
1996-2 KEY EMPLOYEE STOCK OPTION PLAN
This is the 1996-2 Key Employee Stock Option Plan of Fidelity Leasing,
Inc., effective as of March 7, 1996.
Section 1. Definitions. As used in the Plan the following terms shall have
the following assigned meanings.
(a) Board of Directors. Board of Directors shall mean the Board of
Directors of the Company.
(b) Code. Code shall mean the Internal Revenue Code of 1986, as amended.
(c) Company. Company shall mean Fidelity Leasing, Inc., its successors and
assigns and any corporation which (i) substitutes a new Option or Stock
Appreciation Right for an old Option or Stock Appreciation Right granted under
the Plan (ii) assumes an Option or Stock Appreciation Right under the Plan or
(iii) becomes a parent or subsidiary of the Company by reason of a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation within the meaning of ss.424(a) of the Code.
(d) Committee. Committee shall mean that subcommittee of the Board of
Directors known as the Compensation Committee which is duly authorized by the
Board of Directors to administer the Plan.
(e) Disability. Disability shall mean "permanent and total disability" as
defined in ss.22(e)(3) of the Code.
(f) Eligible Employee. Eligible Employee shall mean a common law employee
of the Company whose initiative and effort have contributed or may in the future
contribute to the company's success.
(g) Fair Market Value. As used herein, the "fair market value" of a share
of Stock shall be (i) if the Company is a public company whose Shares are traded
on a stock exchange, the closing price for the Shares on a given day or, if
there is no sale on such day, then the last sale price on the last previous date
on which a sale is reported or, if the Shares are traded other than on an
exchange, the arithmetic mean of the closing bid and ask sale prices for the
Shares reported by the NASDAQ on a given day or if there is no sale on such day,
then the arithmetic mean of such closing bid and ask sale prices on the last
previous date on which a sale is reported; (ii) if the Company is not a public
company, the greater of fully-diluted book value per share for the previous
fiscal year (or, in the case of the Company's first fiscal year, $0.2222 per
share) or ten times after-tax earning per share for the last fiscal year prior
to the date of determination.
<PAGE>
(h) Incentive Stock Option. Incentive Stock Option shall mean an Option
granted under the Plan which qualifies under ss.422 of the Code.
(i) Nonqualified Stock Option. Nonqualified Stock Option shall mean any
Option granted under the Plan which does not qualify as an Incentive Stock
Option and which is specifically designated at the time it is granted as an
Option which is not an Incentive Stock Option.
(j) Option. Option shall mean either an Incentive Stock Option or a
Nonqualified Stock Option granted under the Plan.
(k) Option Agreement. Option Agreement shall mean any definitive written
agreement between the Company and an Eligible Employee which complies with the
Plan and which pertains to the grant of an Option and/or Stock Appreciation
Right to an Eligible Employee under the Plan.
(l) Option Price. Option Price shall mean the purchase price which an
Optionee must pay to the Company to acquire Shares on the exercise of an Option.
(m) Optionee. Optionee shall mean an Eligible Employee to whom an Option
or Stock Appreciation Right is granted under the Plan.
(n) Plan. Plan shall mean the 1996-2 Key Employee Stock Option Plan of the
Company.
(o) Securities Acts. Securities Acts shall mean the Securities and
Exchange Act of 1933, as amended, and all applicable federal and state
securities law, or any successors thereto.
(p) Shares. Shares shall mean shares of the Company's common stock, $0.01
par value, and (i) any stock or securities of the Company into which such common
stock is converted, (ii) any stock or securities of the Company which are
distributed with respect to such common stock and (iii) the stock and securities
of any other corporation into which such common stock is converted as a result
of the Company's engaging in any transaction described in ss.424(a) of the Code.
(q) Stock Appreciation Right. Stock Appreciation Right shall mean a right
granted to an Optionee which upon the surrender of an Option, entitles the
Optionee to receive payment from the Company in an amount equal to the excess of
the, aggregate Fair Market value of Shares subject to such Option, determined at
the time of such surrender, over the aggregate Option Price applicable to such
Shares.
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<PAGE>
Section 2. Purpose of the Plan. The purpose of the Plan is to advance the
interests of the Company and its stockholders by providing a means through which
Eligible Employees may be given an opportunity to benefit from both the purchase
Shares under Options and the exercise of Stock Appreciation Rights so that the
Company may retain and attract personnel upon whose judgment, initiative and
efforts the successful conduct of the Company and its business largely depends.
Section 3. Shares Subject to the Plan. The aggregate number of Shares for
which Options or Stock Appreciation Rights may be granted under the Plan shall
be 500,000; provided, however, that whatever number of Shares shall remain
reserved for issuance under the Plan at the time of any stock split, stock
dividend or other change in the Company's capitalization shall be appropriately
and proportionately adjusted to reflect such stock dividend, stock split or
change in capitalization. Any Shares which are subject to the Plan shall be made
available from the authorized but unissued or reacquired Shares of the Company.
Any Shares for which an Option is granted hereunder that are released from any
Option for any reason, other than the exercise of a Stock Appreciation Right
granted under the Plan, shall become available for other Options granted under
the Plan.
Section 4. Administration of the Plan. The Plan shall be administered by
the Committee. The Committee shall consist of at least two members of the Board
of Directors, none of whom shall be eligible to receive Options or Stock
Appreciation Rights under the Plan. The Board of Directors, acting as a body,
may from time to time, remove members from, or add members to the Committee. The
Committee shall elect one of its members as Chairman, and shall hold meetings at
such times and in such places as it shall deem advisable. All actions of the
Committee shall be taken by a majority vote of all of its members present at any
properly convened meeting of the Committee. Any action of the Committee may be
taken by written instrument signed by a majority of all of its members and any
actions so taken shall be fully effective as if they had been taken by a
majority vote of the members of the Committee at a duly convened meeting. The
Committee may appoint a secretary to take minutes of its meetings and the
Committee shall make such rules and regulations for the conduct of its business
as it shall deem advisable.
Subject to the provisions of the Plan, the Committee shall at its
discretion:
(a) Determine who among the Eligible Employees shall be granted Options
and Stock Appreciation Rights and the number of Shares to be subject to such
Option or Stock Appreciation Right;
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<PAGE>
(b) Determine the time or times at which Options and Stock Appreciation
Rights shall be granted;
(c) Determine the Option Price of the Shares subject to each Option or
Stock Appreciation Right;
(d) Determine the time or times when each Option or Stock Appreciation
Right shall become exercisable and the term of such Option or Stock Appreciation
Right;
(e) Grant cash bonuses which are conditioned upon an Optionee's exercise
of Options granted under this Plan;
(f) Authorize payment of the Option Price in cash, Shares or a combination
of cash and Shares; and
(g) Interpret the provisions of the Plan or any Option or Stock
Appreciation Right granted under the Plan, including all attendant Option
Agreements, and any such interpretation shall be final, conclusive and binding
upon the Company and all Optionees.
Section 5. Granting of Options. The Committee may from time to time
designate the number of Shares which shall be subject to each Option and the
type of Option. The Committee shall direct an appropriate officer of the Company
to execute and deliver Option Agreements to such Eligible Employees reflecting
the grant of Options.
Section 6. Grant of Stock Appreciation Rights. The Committee may from time
to time designate who among the Eligible Employees are to be granted Stock
Appreciation Rights under the Plan, the number of Shares to which such Stock
Appreciation Rights shall be subject and the terms and conditions affecting such
Stock Appreciation Right. The Committee shall direct an appropriate officer of
the Company to execute and deliver Option Agreements to such Eligible Employees
reflecting the grant of the Stock Appreciation Rights. The Committee may
determine the form of the payment (i.e. Shares, cash or a combination of Shares
and cash) to be received by such Eligible Employee upon the exercise of a Stock
Appreciation Right. Shares which are the subject of any Option that is
surrendered in connection with the exercise of a Stock Appreciation Right shall
not be available for the grant of future Options under the Plan.
Section 7. Terms and Conditions Common to All Option Agreements. Each
Option Agreement shall be evidenced by a written agreement executed by the
Optionee and the Company in such form as the Committee shall from time to time
approve. The Option Agreement shall contain such terms and conditions as the
Committee shall deem appropriate, subject to the following:
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<PAGE>
(a) Optionee's Employment. The Option Agreement may provide that the
Optionee agrees to remain an employee of, and render services to the Company for
a specified period of time as condition to his exercise of his Option or Stock
Appreciation Right. The Option Agreement shall not impose any obligation on the
Company to retain the Optionee as an employee for any period or adversely effect
the Optionee's "employment at will" status with the Company.
(b) Number of Shares. The Option Agreement shall set forth the number of
Shares which are subject to Options and/or Stock Appreciation Rights granted to
the Optionee under the Plan.
(c) No obligation to Exercise. The Option Agreement shall not obligate the
Optionee to exercise any Option or Stock Appreciation Right.
(d) Term of Options and Stock Appreciation Rights. The Option Agreement
shall establish the period during which each Option and Stock Appreciation Right
is exercisable; provided, however, no Option Agreement shall provide for the
exercise of any Option or Stock Appreciation Right after the expiration of the
ten (10) year period immediately following the date upon which such Option or
Stock Appreciation Right is granted.
(e) Exercise of Options and Stock Appreciation Rights. The Option
Agreement shall provide for (and may limit or restrict) the date or dates upon
which any Option or Stock Appreciation Right granted under the Plan may be
exercised. The Option Agreement may provide for the exercise of Options and
Stock Appreciation Rights in installments and upon such terms and conditions as
the Committee may determined. The Option Agreement shall also provide that
during a period of not less than twelve (12) months immediately following the
date upon which an optionee receives a "hardship withdrawal" from a retirement
plan qualifying under ?401(k) of the Code, that all rights of the Optionee to
exercise Options granted under the Plan shall be suspended.
(f) Transferability of Options and Stock Appreciation Rights. The Option
Agreement shall provide that during the lifetime of an Optionee, the Options and
Stock Appreciation Rights granted to him under the Plan shall be exercisable
only by him and shall not be assignable or transferable by him; provided,
however, that the Option Agreement may provide for transferability or
assignability of Options and Stock Appreciation Rights by will or under the
applicable laws of dissent and distribution.
(g) Adjustments. The grant of an Option or Stock Appreciation Right under
the Plan shall not affect the right or power of the Company to make adjustments,
classifications, reorganizations or changes in its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
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<PAGE>
Section 8. Terms and Conditions Common to Options. An Option Agreement
which evidences the grant of an Option shall contain such terms and conditions
as the Committee shall deem appropriate, subject to Section 7 and the following:
(a) Payment of Option Price. The Option Agreement shall provide that the
Option Price shall be payable in full upon the exercise of an Option and must be
paid in cash, by check or by the surrender of Shares (if approved by the
Committee); provided, however, that Shares may not be surrendered in payment of
the Option Price if such surrender of Shares will adversely affect the continued
qualification of any Incentive Stock Option (whether or not granted under the
Plan). No stock certificate representing Shares shall be issued until full
payment therefore has been received by the Company.
(b) Death or Disability of Optionee. The Option Agreement shall provide
that if an Optionee should die or suffer a Disability while an employee of the
Company or within a period of three (3) months immediately following the
termination of his employment with the Company, his Option privileges shall
cease; provided, however, that the Option Agreement may provide that the Option
privileges which were immediately exercisable by the Optionee at the time of his
death or Disability may be exercised by him or either his personal
representative or designated beneficiary, as the case may be, during a period
not exceeding (1) year following the date upon which the earlier of his
Disability or death occurred, but in no event after the total term of the Option
as set forth in the Option Agreement.
(c) Registration. The Option Agreement may provide for the issuance of
Shares which are registered under the Securities Acts. The Plan shall not
obligate the Company to issue Shares which are registered under the Securities
Acts. The Option Agreement may provide that if the Shares are issued upon the
exercise of an Option, and such Shares are not registered under the Securities
Acts, that the Company may grant to the Optionee certain rights to cause such
Shares to be so registered and to require the Optionee to deliver to the Company
sufficient representations and investment letters as may be reasonably required
by the Company in order to assure that the Company's issuance of Shares to such
Optionee is either exempt from registration under the Securities Acts or does
not constitute a violation of the Securities Acts which determination shall be
made by counsel selected by the Committee.
Section 9. Terms and Conditions of Incentive Stock Options. Each Option
Agreement which evidences the grant of an Incentive Stock Option shall contain
such terms and conditions as the Committee shall deem appropriate, subject to
Sections 7 and 8, and the following:
(a) Option Price. The Option Agreement shall set forth the Option Price
(per share) as determined by the Committee, which Option Price shall not be less
than one hundred percent (100%) of the Fair Market Value of the Shares on the
date the Option is granted; provided, however, any Incentive Stock Option that
is granted to Eligible Employee who, at the time such Incentive Stock Option is
granted, is deemed for the purposes of ss.422 of the Code to own Shares
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of a parent or subsidiary of the Company,
shall be granted at an Option Price of at least one hundred ten percent (110%)
of the Fair Market value of such Shares.
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(b) Term of Incentive Stock Options Granted Ten Percent Shareholders. If
an Incentive Stock Option is granted to an Eligible Employee who, at the time
such Incentive Stock Option is granted, is deemed for the purposes of ss.422 of
the Code to own Shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a parent or
subsidiary of the Company, then the term of such Incentive Stock Option shall be
limited to five (5) years.
(c) Other Termination of Employment. The Option Agreement may provide that
if an Optionee shall cease to be employed by the Company for any reason other
than his death or Disability his Option privileges shall cease; provided,
however, that the Option Agreement may provide that the Option privileges which
were immediately exercisable by the Optionee on the date of his termination of
employment with the Company may be exercised by him during a period not
exceeding three (3) months following the date of such termination, but in no
event after the total term of the Incentive Stock Option as set forth in the
Option Agreement.
(d) Notice of Disqualifying Disposition. The Option Agreement may provide
that if an Optionee shall sell or otherwise dispose of Shares which were
acquired by him through the exercise of an Incentive Stock Option and such
disposition occurs within two years of the date upon which the Incentive Stock
Option was granted or within one year following the date the Shares were
transferred to him upon the exercise of such Incentive Stock Option, such
Optionee shall give written notice to the Company which notice shall contain
each of the following items:
(i) The number of Shares sold or otherwise disposed,
(ii) The date or dates of such sale or disposition,
(iii) The selling price for each Share sold or disposed, and
(iv) The Option Price applicable to each Share sold or disposed.
The written notice required by this Subsection 9(d) must be received by
the Company within fifteen (15) days of any disqualifying disposition.
(e) $100,000 Per Year Limitation. The Option Agreement shall provide that
aggregate Fair Market Value of Shares (determined as of the date such Incentive
Stock Options were granted) with respect to which Incentive Stock Option are
exercisable for the first time by any Optionee during any calendar year (under
the Plan and all other incentive stock option plans sponsored by the Company)
shall not exceed $100,000.
7
<PAGE>
Section 10. Terms and Conditions of Nonqualified Stock Options. Each
Option Agreement which evidences the grant of a Nonqualified Stock Option shall
contain such terms and conditions as the Committee shall deem appropriate,
subject to Sections 7 and 8, and the following:
(a) Designation as a Nonqualified Stock Option. The Option Agreement shall
provide, that under no circumstances shall the Nonqualified Stock Option be
deemed to qualify as an Incentive Stock Option.
(b) No Interference with Incentive Stock Options. The Option Agreement
shall contain no provisions which adversely effects the qualification of any
Option which is intended to be an Incentive Stock Option under ss.422 of the
Code.
(c) Withholding. The Option Agreement shall provide that there shall be
deducted from each distribution of Shares receivable by Optionee on the exercise
of a Nonqualified Stock Option, the amount of withholding or other taxes
required to be withheld by any governmental authority. Such withholding may be
accomplished by either (i) the Optionee's deposit of cash with the Company in an
amount equal to the required withholding amount (the "Deposit Method") or (ii)
the Optionee's surrender in the exercise of a Stock Appreciation Right, Options
covering a sufficient number of Shares so that the distribution of cash upon the
exercise of such Stock Appreciation Right will provide the Company with the
required withholding amount (the "SAR Method"). The selection between the
Deposit Method and the SAR Method shall be made by the Optionee and such
selection shall be contained in the Optionee's timely notice of exercise of his
Nonqualified Stock Option. If the Optionee fails to properly select between the
two withholding alternatives, the Company shall select which method to use.
(d) Option Price. The Option agreement shall set forth the Option Price
(per share) as determined by the Committee.
(e) Other Termination of Employment. The Option Agreement may provide that
if an Optionee shall cease to be employed by the Company for any reason other
than his death or Disability, his Option privileges shall cease; provided,
however, that the Option Agreement may provide that the Option privileges which
were immediately exercisable by the Optionee on the date of his termination of
employment with the Company may be exercised by him during a period not
exceeding one (1) year following the date of such termination, but in no event
after the total term of the Option is set forth in the Option Agreement.
8
<PAGE>
Section 11. Terms and Conditions of Stock Appreciation Rights. Each Option
Agreement which evidences the grant of Stock Appreciation Rights shall contain
such terms and conditions as the Committee shall deem appropriate, subject to
Section 7 and the following:
(a) No Interference with Incentive Stock Options. The Option Agreement
pursuant to which Stock Appreciation Rights are granted shall contain no
provision which adversely affects the qualification of any Option intended to be
an Incentive Stock Option under ss.422 of the Code. To that end, (i) any Stock
Appreciation Right which is exercised in connection with the cancellation or
surrender of an Incentive Stock Option may only be exercisable when the Fair
Market value of each Share which is the subject matter of the Incentive Stock
Option exceeds the Option Price, (ii) the Stock Appreciation Right may be
transferred only when the underlying Incentive Stock Option is otherwise
transferable and (iii) the exercise of the Stock Appreciation Right must have
the same economic and tax consequences to the Optionee as would arise as a
result of the exercise of the Incentive Stock Option followed immediately by a
sale of the acquired Shares.
(b) Withholding. The Option Agreement shall provide that there shall be
deducted from any distribution resulting from the exercise of a Stock
Appreciation Right that amount which equals the withholding or other taxes
required to be withheld by any governmental authority.
Section 12. Rights as a Shareholder. An Optionee or a transferee of an
Option shall have no rights as a shareholder of the Company with respect to any
Shares which are subject to an Option until the-issuance of the stock
certificates representing such Shares.
Section 13. Modification, Extension and Renewal of Options. Subject to the
terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding Options granted under the Plan or accept the surrender of
outstanding Options and authorize the granting of new Options in substitution
therefor. Shares which are the subject matter of lapsed Options, may be granted
in Options to other Eligible Employees at any time during the term of this Plan.
Notwithstanding the foregoing, no modification of an Option shall, without the
consent of the Optionee, alter or impair the rights or obligations of any
Optionee with respect to any Option granted under the Plan.
Section 14. Indemnification of Committee. In addition to such other rights
of indemnification as they may have as members of the Board of Directors,
members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys fees, actually and necessarily incurred
by them in connection with the defense of any action, suit or other proceeding
through which any of them may be a party as a result of any action or failure to
act under or in connection with the Plan, any Option Agreement or any Option
granted thereunder, and against all amounts paid in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid in satisfaction of a judgment in any such action, suit or other
proceeding; provided, however, that no member of the Committee shall be
indemnified for any such expenses or amounts relating to matters as to which it
is determined in such action, suit or other proceeding that such member of the
Committee is liable for gross negligence or wanton misconduct in the performance
of his duties.
9
<PAGE>
Section 15. Amendment and Termination of the Plan. The Company by action
of the Board of Directors, reserves the right to amend, modify or terminate this
Plan at any time or by action of the Board of Directors, and with the written
consent of the effected Optionee, amend, modify or terminate any outstanding
Option Agreement, except that the Company may not, without further shareholder
approval, increase the total number of Shares for which Options may be granted
under the Plan, change the employees or class of employees who are Eligible
Employees or materially increase the benefits accruing to Optionees under the
Plan. Moreover, no action may be taken by the Company (without the written
consent of the effected Optionee) which will impair the validity of any Option
or Stock Appreciation Right then outstanding or which will prevent an Incentive
Stock Option from continuing to qualify under ?422 of the Code.
Section 16. Effective Date of Plan. This Plan shall be effective upon its
adoption by the Board of Directors. The Plan shall be submitted to the
stockholders of the Company for approval within twelve (12) months after its
adoption by the Board of Directors and, if the Plan shall not be approved by the
shareholders within such twelve month period, the Plan shall be void and of no
effect. Any Options or Stock Appreciation Rights granted under the Plan prior to
the date of approval by the stockholders shall be void if such shareholders,
approval is not timely obtained.
Section 17. Expiration of Plan. Options may be granted under this Plan at
any time on or prior to the date which is ten (10) years immediately following
effective date of the Plan.
<PAGE>
GRANT OF INCENTIVE STOCK OPTION
PURSUANT TO FIDELITY LEASING, INC.
1996-2 KEY EMPLOYEE STOCK OPTION PLAN
THIS AGREEMENT, made as of this 9th day of May, 1996, ("Date
of Grant") by and between CRIT DeMENT, Grantee and FIDELITY LEASING, INC.
(together with its successors or assigns hereinafter referred to as the
"Company").
WHEREAS, the Board of Directors of Fidelity Leasing, Inc. (the
"Board") previously adopted, with subsequent stockholder approval, the Fidelity
Leasing, Inc. 1996-2 Key Employee Stock Option Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock
options by a committee to be appointed by the Board (the "Committee") to
eligible employees of the Company to purchase, or to exercise certain rights
with respect to, shares of the Class A Common Stock of the Company, par value
$.01 per share (the "Stock"), in accordance with the terms and provisions
thereof; and
WHEREAS, the Committee considers the Grantee to be a person
who is eligible for a grant of incentive stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
incentive stock options on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Grant of Option.
<PAGE>
Subject to the terms and conditions hereinafter set
forth, the Company, with the approval and at the direction of the Committee,
hereby grants to the Grantee, an option to purchase up to 300,000 shares of
Stock at a price of $0.2222 per share. Such option is hereinafter referred to as
the "Option" and the shares of stock purchasable upon exercise of the Option are
hereinafter sometimes referred to as the "Option Shares." The Option is intended
by the parties hereto to be, and shall be treated as, an incentive stock option
(as such term is defined under Section 422 of the Internal Revenue Code of
1986).
2. Installment Exercise.
Subject to such further limitations as are provided
herein, the Option shall become exercisable in four (4) installments, the
Grantee having the right hereunder to purchase from the Company the following
number of Option Shares upon exercise of the Option, on and after the following
dates, in cumulative fashion:
(i) on and after the first anniversary of
the Date of Grant, up to 25% (ignoring fractional shares) of the total number of
Option Shares;
(ii) on and after the second anniversary of
the Date of Grant, up to an additional 25% (ignoring fractional shares) of the
total number of Option Shares; and
(iii) on and after the third anniversary of
the Date of Grant, up to an additional 25% (ignoring fractional shares) of the
total number of Option Shares; and
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<PAGE>
(iv) on and after the fourth anniversary of
the Date of Grant, the remaining Option Shares.
3. Termination of Option.
(a) The Option and all rights hereunder with respect
thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void after the expiration of ten years from the
Date of Grant (the "Option Term").
(b) If employment of the Grantee by the Company is
terminated, unexercisable Options shall be terminated. Upon a termination of the
Grantee's employment by reason of disability, death, or retirement, the Option
may be exercised during the following periods, but only to the extent that the
Option was outstanding and exercisable on any such date of disability, death or
retirement: (i) the one-year period following the date of such termination of
the Grantee's employment in the case of a disability (within the meaning of
Section 422(e)(3) of the Code), (ii) the one-year period following the date of
issuance of letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, and (iii) the one-year period following the
date of such termination in the case of retirement on or after attainment of age
65, or in the case of disability other than as described in (i) above. In no
event, however, shall any such period extend beyond the Option Term.
(c) In the event of the death of the Grantee, the
Option may be exercised by the Grantee's legal representative(s) (but only to
the extent that the Option would otherwise have been exercisable by the
Grantee).
-3-
<PAGE>
(d) A transfer of the Grantee's employment between
the Company and any affiliate of the Company, or between any subsidiaries of the
Company, shall not be deemed to be a termination of the Grantee's employment.
(e) All rights of Grantee to exercise the Options
shall be suspended for a period of twelve (12) months immediately following the
date upon which Grantee receives a "hardship withdrawal" from a retirement plan
qualifying under Section 401(k) of the Code.
(f) Notwithstanding any other provisions set forth
herein or in the Plan, if the Grantee shall (i) commit any act of malfeasance or
wrongdoing affecting the Company or any subsidiary of the Company, (ii) breach
any covenant not to compete, or employment contract, with the Company or any
subsidiary of the Company, or (iii) engage in conduct that would warrant the
Grantee's discharge for cause (excluding general dissatisfaction with the
performance of the Grantee's duties, but including any act of disloyalty or any
conduct clearly tending to bring discredit upon the Company or any subsidiary of
the Company), any unexercised portion of the Option shall immediately terminate
and be void.
4. Exercise of Options.
(a) The Grantee may exercise the Option with respect
to all or any part of the number of Option Shares then exercisable hereunder by
giving the Secretary of the Company written notice of intent to exercise. The
notice of exercise shall specify the number of Option Shares as to which the
Option is to be exercised and the date of exercise thereof.
-4-
<PAGE>
(b) Full payment (in U.S. dollars) by the Grantee of
the option price for the Option Shares purchased shall be made on or before the
exercise date specified in the notice of exercise in cash, or, with the prior
written consent of the Committee, in whole or in part through the surrender of
previously acquired shares of Stock at their Fair Market Value on the exercise
date.
On the exercise date specified in the Grantee's
notice or as soon thereafter as is practicable, the Company shall cause to be
delivered to the Grantee, a certificate or certificates for the Option Shares
then being purchased (out of theretofore unissued Stock or reacquired Stock, as
the Company may elect) upon full payment for such Option Shares. The obligation
of the Company to deliver Stock shall, however, be subject to the condition that
if at any time the Committee shall determine in its discretion that the listing,
registration or qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
-5-
<PAGE>
(c) If the Grantee fails to pay for any of the Option
Shares specified in such notice or fails to accept delivery thereof, the
Grantee's right to purchase such Option Shares may be terminated by the Company,
The date specified in the Grantee's notice as the date of exercise shall be
deemed the date of exercise of the Option, provided that payment in full for the
Option Shares to be purchased upon such exercise shall have been received by
such date.
5. Fair Market Value.
As used herein, the "Fair Market Value" of a share of Stock
shall be (i) if the Company is a public company whose Shares are traded on a
stock exchange, the closing price for the Shares on a given day or, if there is
no sale on such day, then the last sale price on the last previous date on which
a sale is reported or, if the Shares are traded other than on an exchange, the
arithmetic mean of the closing bid and ask sale prices for the Shares reported
by the NASDAQ on a given day or if there is no sale on such day, then the
arithmetic mean of such closing bid and ask sale prices on the last previous
date on which a sale is reported; (ii) if the Company is not a public company,
the greater of fully-diluted book value per share for the previous fiscal year
(or in the case of the Company's first fiscal year, $0.2222 per share) or ten
times after-tax earning per share for the last fiscal year ended prior to the
date of determination.
-6-
<PAGE>
6. No Rights of Stockholders.
Neither the Grantee nor any personal representative shall
be, or shall have any of the rights and privileges of, a stockholder of the
Company with respect to any shares of Stock purchasable or issuable upon the
exercise of the Option, in whole or in part, prior to the date of exercise of
the Option.
7. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall
be exercisable only by the Grantee or any guardian or legal representative of
the Grantee, and the Option shall not be transferable except, in the case of the
death of the Grantee, by will or the laws of descent and distribution, nor shall
the Option be subject to attachment, execution or other similar process. In no
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the Option by notice to the Grantee
and it shall thereupon become null and void.
8. Employment Not Affected.
The granting of the Option nor its exercise shall not be
construed as granting to the Grantee any right with respect to continuance of
employment of the Company. Except as may otherwise be limited by a written
agreement between the Company and the Grantee, the right of the Company to
terminate at will the Grantee's employment with it at any time (whether by
dismissal, discharge, retirement or otherwise) is specifically reserved by the
Company, or the employing subsidiary (whichever the case may be), and
acknowledged by the Grantee.
-7-
<PAGE>
9. Amendment of Option.
The Option may be amended by the Board or the Committee at
any time (i) if the Board or the Committee determines, in its sole discretion,
that amendment is necessary or advisable in the light of any addition to or
change in the Internal Revenue Code of 1986 or in the regulations issued
thereunder, or any federal or state securities law or other law or regulation,
which change occurs after the Date of Grant and by its terms applies to the
Option or (ii) other than in the circumstances described in clause (i), with the
written consent of the Grantee.
10. Notice.
Any notice to the Company provided for in this instrument
shall be addressed to it in care of its Secretary at its executive offices at
1521 Locust Street, Suite 400, Philadelphia, Pennsylvania 19102, and any notice
to the Grantee shall be addressed to the Grantee at the current address shown on
the payroll records of the Employer. Any notice shall be deemed to be duly given
if and when properly addressed and posted by registered or certified mail,
postage prepaid.
11. Incorporation of Plan by Reference.
The Option is granted pursuant to the terms of the Plan,
the terms of which are incorporated herein by reference, and the Option shall in
all respects be interpreted in accordance with the Plan. The Committee shall
interpret and construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
-8-
<PAGE>
12. Governing Law.
The validity, constructions, interpretation and effect of
this instrument shall exclusively be governed by and determined in accordance
with the law of the Commonwealth of Pennsylvania, except to the extent preempted
by federal law, which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized
officers to execute and attest this Grant of Incentive Stock Option, and to
apply the corporate seal hereto, and the Grantee has placed his or her signature
hereon, effective as of the Date of Grant.
FIDELITY LEASING, INC.
By:________________________________
President
Attest:____________________________
Secretary
ACCEPTED AND AGREED TO:
By:________________________________
Crit DeMent, Grantee
-9-
<PAGE>
GRANT OF INCENTIVE STOCK OPTION
PURSUANT TO FIDELITY LEASING, INC.
1996-2 KEY EMPLOYEE STOCK OPTION PLAN
THIS AGREEMENT, made as of this 9th day of May, 1996, ("Date of Grant") by
and between JOSEPH T. ELLIS, JR., Grantee and FIDELITY LEASING, INC. (together
with its successors or assigns hereinafter referred to as the "Company").
WHEREAS, the Board of Directors of Fidelity Leasing, Inc. (the "Board")
previously adopted, with subsequent stockholder approval, the Fidelity Leasing,
Inc. 1996-2 Key Employee Stock Option Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock options by
a committee to be appointed by the Board (the "Committee") to eligible employees
of the Company to purchase, or to exercise certain rights with respect to,
shares of the Class A Common Stock of the Company, par value $.01 per share (the
"Stock"), in accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers the Grantee to be a person who is
eligible for a grant of incentive stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
incentive stock options on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
<PAGE>
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the Company,
with the approval and at the direction of the Committee, hereby grants to the
Grantee, an option to purchase up to 60,000 shares of Stock at a price of
$0.2222 per share. Such option is hereinafter referred to as the "Option" and
the shares of stock purchasable upon exercise of the Option are hereinafter
sometimes referred to as the "Option Shares." The Option is intended by the
parties hereto to be, and shall be treated as, an incentive stock option (as
such term is defined under Section 422 of the Internal Revenue Code of 1986).
2. Installment Exercise.
Subject to such further limitations as are provided herein, the Option
shall become exercisable in four (4) installments, the Grantee having the right
hereunder to purchase from the Company the following number of Option Shares
upon exercise of the Option, on and after the following dates, in cumulative
fashion:
(i) on and after the first anniversary of the Date of Grant, up to 25%
(ignoring fractional shares) of the total number of Option Shares;
(ii) on and after the second anniversary of the Date of Grant, up to an
additional 25% (ignoring fractional shares) of the total number of Option
Shares; and
(iii) on and after the third anniversary of the Date of Grant, up to an
additional 25% (ignoring fractional shares) of the total number of Option
Shares; and
(iv) on and after the fourth anniversary of the Date of Grant, the
remaining Option Shares.
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<PAGE>
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten years from the Date of Grant (the
"Option Term").
(b) If employment of the Grantee by the Company is terminated,
unexercisable Options shall be terminated. Upon a termination of the Grantee's
employment by reason of disability, death, or retirement, the Option may be
exercised during the following periods, but only to the extent that the Option
was outstanding and exercisable on any such date of disability, death or
retirement: (i) the one-year period following the date of such termination of
the Grantee's employment in the case of a disability (within the meaning of
Section 422(e)(3) of the Code), (ii) the one-year period following the date of
issuance of letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, and (iii) the one-year period following the
date of such termination in the case of retirement on or after attainment of age
65, or in the case of disability other than as described in (i) above. In no
event, however, shall any such period extend beyond the Option Term.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative(s) (but only to the extent that
the Option would otherwise have been exercisable by the Grantee).
-3-
<PAGE>
(d) A transfer of the Grantee's employment between the Company and any
affiliate of the Company, or between any subsidiaries of the Company, shall not
be deemed to be a termination of the Grantee's employment.
(e) All rights of Grantee to exercise the Options shall be suspended
for a period of twelve (12) months immediately following the date upon which
Grantee receives a "hardship withdrawal" from a retirement plan qualifying under
Section 401(k) of the Code.
(f) Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing
affecting the Company or any subsidiary of the Company, (ii) breach any covenant
not to compete, or employment contract, with the Company or any subsidiary of
the Company, or (iii) engage in conduct that would warrant the Grantee's
discharge for cause (excluding general dissatisfaction with the performance of
the Grantee's duties, but including any act of disloyalty or any conduct clearly
tending to bring discredit upon the Company or any subsidiary of the Company),
any unexercised portion of the Option shall immediately terminate and be void.
4. Exercise of Options.
(a) The Grantee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof.
-4-
<PAGE>
(b) Full payment (in U.S. dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Committee, in whole or in part through the surrender of previously
acquired shares of Stock at their Fair Market Value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the Company
may elect) upon full payment for such Option Shares. The obligation of the
Company to deliver Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
-5-
<PAGE>
(c) If the Grantee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Grantee's right to
purchase such Option Shares may be terminated by the Company, The date specified
in the Grantee's notice as the date of exercise shall be deemed the date of
exercise of the Option, provided that payment in full for the Option Shares to
be purchased upon such exercise shall have been received by such date.
5. Fair Market Value.
As used herein, the "Fair Market Value" of a share of Stock shall be
(i) if the Company is a public company whose Shares are traded on a stock
exchange, the closing price for the Shares on a given day or, if there is no
sale on such day, then the last sale price on the last previous date on which a
sale is reported or, if the Shares are traded other than on an exchange, the
arithmetic mean of the closing bid and ask sale prices for the Shares reported
by the NASDAQ on a given day or if there is no sale on such day, then the
arithmetic mean of such closing bid and ask sale prices on the last previous
date on which a sale is reported; (ii) if the Company is not a public company,
the greater of fully-diluted book value per share for the previous fiscal year
(or in the case of the Company's first fiscal year, $0.2222 per share) or ten
times after-tax earning per share for the last fiscal year ended prior to the
date of determination.
-6-
<PAGE>
6. No Rights of Stockholders.
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of exercise of the Option.
7. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in the case of the
death of the Grantee, by will or the laws of descent and distribution, nor shall
the Option be subject to attachment, execution or other similar process. In no
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the Option by notice to the Grantee
and it shall thereupon become null and void.
8. Employment Not Affected.
The granting of the Option nor its exercise shall not be construed as
granting to the Grantee any right with respect to continuance of employment of
the Company. Except as may otherwise be limited by a written agreement between
the Company and the Grantee, the right of the Company to terminate at will the
Grantee's employment with it at any time (whether by dismissal, discharge,
retirement or otherwise) is specifically reserved by the Company, or the
employing subsidiary (whichever the case may be), and acknowledged by the
Grantee.
-7-
<PAGE>
9. Amendment of Option.
The Option may be amended by the Board or the Committee at any time (i)
if the Board or the Committee determines, in its sole discretion, that amendment
is necessary or advisable in the light of any addition to or change in the
Internal Revenue Code of 1986 or in the regulations issued thereunder, or any
federal or state securities law or other law or regulation, which change occurs
after the Date of Grant and by its terms applies to the Option or (ii) other
than in the circumstances described in clause (i), with the written consent of
the Grantee.
10. Notice.
Any notice to the Company provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at 1521 Locust
Street, Suite 400, Philadelphia, Pennsylvania 19102, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
payroll records of the Employer. Any notice shall be deemed to be duly given if
and when properly addressed and posted by registered or certified mail, postage
prepaid.
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<PAGE>
11. Incorporation of Plan by Reference.
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the Option shall in all respects
be interpreted in accordance with the Plan. The Committee shall interpret and
construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
12. Governing Law.
The validity, constructions, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the Commonwealth of Pennsylvania, except to the extent preempted by
federal law, which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute and attest this Grant of Incentive Stock Option, and to apply the
corporate seal hereto, and the Grantee has placed his or her signature hereon,
effective as of the Date of Grant.
FIDELITY LEASING, INC.
By:________________________________
President
Attest:____________________________
Secretary
ACCEPTED AND AGREED TO:
By:________________________________
Joseph T. Ellis, Jr., Grantee
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GRANT OF INCENTIVE STOCK OPTION
PURSUANT TO FIDELITY LEASING, INC.
1996-2 KEY EMPLOYEE STOCK OPTION PLAN
THIS AGREEMENT, made as of this 8th day of October, 1998, ("Date of
Grant") by and between Joseph T. Ellis, Jr., Grantee and FIDELITY LEASING, INC.
(together with its successors or assigns hereinafter referred to as the
"Company").
WHEREAS, the Board of Directors of Fidelity Leasing, Inc. (the "Board")
previously adopted, with subsequent stockholder approval, the Fidelity Leasing,
Inc. 1996-2 Key Employee Stock Option Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock options by
a committee to be appointed by the Board (the "Committee") to eligible employees
of the Company to purchase, or to exercise certain rights with respect to,
shares of the Class A Common Stock of the Company, par value $.01 per share (the
"Stock"), in accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers the Grantee to be a person who is
eligible for a grant of incentive stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
incentive stock options on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
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1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the Company,
with the approval and at the direction of the Committee, hereby grants to the
Grantee, an option to purchase up to ____________ shares of Stock at a price of
$0.2222 per share. Such option is hereinafter referred to as the "Option" and
the shares of stock purchasable upon exercise of the Option are hereinafter
sometimes referred to as the "Option Shares." The Option is intended by the
parties hereto to be, and shall be treated as, an incentive stock option (as
such term is defined under Section 422 of the Internal Revenue Code of 1986).
2. Installment Exercise.
Subject to such further limitations as are provided herein, the Option
shall become exercisable in four (4) installments, the Grantee having the right
hereunder to purchase from the Company the following number of Option Shares
upon exercise of the Option, on and after the following dates, in cumulative
fashion:
(i) on and after the first anniversary of the Date of Grant, up to 25%
(ignoring fractional shares) of the total number of Option Shares;
(ii) on and after the second anniversary of the Date of Grant, up to an
additional 25% (ignoring fractional shares) of the total number of Option
Shares; and
(iii) on and after the third anniversary of the Date of Grant, up to an
additional 25% (ignoring fractional shares) of the total number of Option
Shares; and
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(iv) on and after the fourth anniversary of the Date of Grant, the
remaining Option Shares.
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten years from the Date of Grant (the
"Option Term").
(b) If employment of the Grantee by the Company is terminated,
unexercisable Options shall be terminated. Upon a termination of the Grantee's
employment by reason of disability, death, or retirement, the Option may be
exercised during the following periods, but only to the extent that the Option
was outstanding and exercisable on any such date of disability, death or
retirement: (i) the one-year period following the date of such termination of
the Grantee's employment in the case of a disability (within the meaning of
Section 422(e)(3) of the Code), (ii) the one-year period following the date of
issuance of letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, and (iii) the one-year period following the
date of such termination in the case of retirement on or after attainment of age
65, or in the case of disability other than as described in (i) above. In no
event, however, shall any such period extend beyond the Option Term.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative(s) (but only to the extent that
the Option would otherwise have been exercisable by the Grantee).
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(d) A transfer of the Grantee's employment between the Company and any
affiliate of the Company, or between any subsidiaries of the Company, shall not
be deemed to be a termination of the Grantee's employment.
(e) All rights of Grantee to exercise the Options shall be suspended
for a period of twelve (12) months immediately following the date upon which
Grantee receives a "hardship withdrawal" from a retirement plan qualifying under
Section 401(k) of the Code.
(f) Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing
affecting the Company or any subsidiary of the Company, (ii) breach any covenant
not to compete, or employment contract, with the Company or any subsidiary of
the Company, or (iii) engage in conduct that would warrant the Grantee's
discharge for cause (excluding general dissatisfaction with the performance of
the Grantee's duties, but including any act of disloyalty or any conduct clearly
tending to bring discredit upon the Company or any subsidiary of the Company),
any unexercised portion of the Option shall immediately terminate and be void.
4. Exercise of Options.
(a) The Grantee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof.
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(b) Full payment (in U.S. dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Committee, in whole or in part through the surrender of previously
acquired shares of Stock at their Fair Market Value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the Company
may elect) upon full payment for such Option Shares. The obligation of the
Company to deliver Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
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(c) If the Grantee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Grantee's right to
purchase such Option Shares may be terminated by the Company, The date specified
in the Grantee's notice as the date of exercise shall be deemed the date of
exercise of the Option, provided that payment in full for the Option Shares to
be purchased upon such exercise shall have been received by such date.
5. Fair Market Value.
As used herein, the "Fair Market Value" of a share of Stock shall be
(i) if the Company is a public company whose Shares are traded on a stock
exchange, the closing price for the Shares on a given day or, if there is no
sale on such day, then the last sale price on the last previous date on which a
sale is reported or, if the Shares are traded other than on an exchange, the
arithmetic mean of the closing bid and ask sale prices for the Shares reported
by the NASDAQ on a given day or if there is no sale on such day, then the
arithmetic mean of such closing bid and ask sale prices on the last previous
date on which a sale is reported; (ii) if the Company is not a public company,
the greater of fully-diluted book value per share for the previous fiscal year
(or in the case of the Company's first fiscal year, $0.2222 per share) or ten
times after-tax earning per share for the last fiscal year ended prior to the
date of determination.
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6. No Rights of Stockholders.
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of exercise of the Option.
7. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in the case of the
death of the Grantee, by will or the laws of descent and distribution, nor shall
the Option be subject to attachment, execution or other similar process. In no
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the Option by notice to the Grantee
and it shall thereupon become null and void.
8. Employment Not Affected.
The granting of the Option nor its exercise shall not be construed as
granting to the Grantee any right with respect to continuance of employment of
the Company. Except as may otherwise be limited by a written agreement between
the Company and the Grantee, the right of the Company to terminate at will the
Grantee's employment with it at any time (whether by dismissal, discharge,
retirement or otherwise) is specifically reserved by the Company, or the
employing subsidiary (whichever the case may be), and acknowledged by the
Grantee.
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9. Amendment of Option.
The Option may be amended by the Board or the Committee at any time (i)
if the Board or the Committee determines, in its sole discretion, that amendment
is necessary or advisable in the light of any addition to or change in the
Internal Revenue Code of 1986 or in the regulations issued thereunder, or any
federal or state securities law or other law or regulation, which change occurs
after the Date of Grant and by its terms applies to the Option or (ii) other
than in the circumstances described in clause (i), with the written consent of
the Grantee.
10. Notice.
Any notice to the Company provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at 1521 Locust
Street, Suite 400, Philadelphia, Pennsylvania 19102, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
payroll records of the Employer. Any notice shall be deemed to be duly given if
and when properly addressed and posted by registered or certified mail, postage
prepaid.
11. Incorporation of Plan by Reference.
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the Option shall in all respects
be interpreted in accordance with the Plan. The Committee shall interpret and
construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
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12. Governing Law.
The validity, constructions, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the Commonwealth of Pennsylvania, except to the extent preempted by
federal law, which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute and attest this Grant of Incentive Stock Option, and to apply the
corporate seal hereto, and the Grantee has placed his or her signature hereon,
effective as of the Date of Grant.
FIDELITY LEASING, INC.
By:________________________________
President
Attest:____________________________
Secretary
ACCEPTED AND AGREED TO:
By:________________________________
, Grantee
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 5th day of
March, 1996 by and between FIDELITY LEASING, INC., a Pennsylvania corporation
(the "Company") and ABRAHAM BERNSTEIN (the "Executive").
WHEREAS, Executive has been offered employment by the Company as
Chairman, President and Chief Executive Officer (the "Office") and
WHEREAS, Executive wishes to be employed in the Office by the Company;
and
WHEREAS, the Company desires to assure itself of the availability of
Executive's services in the Office;
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the adequacy of which is hereby acknowledged, the Company and Executive
agree as follows:
1. Employment.
The Company hereby employs Executive in the Office and
Executive hereby accepts such employment, positions and responsibilities, and
agrees to serve the Company in such capacities upon the terms and conditions set
forth herein.
2. Services.
In carrying out his duties Executive shall report to and
accept direction from the Board of Directors of the Company; provided, however,
Executive's duties shall be limited to those normally associated with those of
Chairman, President and Chief Executive Officer of a company in the equipment
leasing industry.
Executive shall serve the Company diligently, competently, and
to the best of his abilities during the period of employment. Executive shall
devote substantially all of his time and attention to the business of the
Company. Executive's services shall be performed within a reasonable commuting
distance of Philadelphia except for reasonable travel.
Executive's duties shall include the development and the day
to day oversight of the Company's leasing business, and such other matters as
may be designated from time to time by the Company's Board of Directors and
which are appropriate to the Office.
<PAGE>
3. Term.
The term of employment of Executive under this Agreement shall
commence on the date hereof and unless sooner terminated pursuant to Section 6,
shall continue in full force and effect for a period of three (3) years
thereafter (such three (3) year period herein referred to as the "Contract
Period"). Such Contract Period shall be extended for additional one year terms
unless either Executive or Company shall have given notice to the contrary at
least two months before each termination date.
4. Compensation.
(a) Base Salary. During the period of employment, the Company
shall pay to Executive a Base Salary of One Hundred Fifty Thousand Dollars
($150,000) per annum, payable monthly. It is understood that Company will review
annually and may, in the discretion of the Board Directors, increase or decrease
(but not below $150,000) the Base Salary, as adjusted, in light of the
Executive's performance and other factors.
(b) Incentive Compensation Plan. During the period of
employment the Executive shall receive bonus payments equal to 2.75% of the
annual after tax earnings of the Company, but not more than 2.0% of the pre-tax
earnings of the Company. After Tax Earnings shall mean the before tax earnings
of Newco determined by Newco's independent auditors in accordance with generally
acceptable accounting principles consistently applied adjusted for the taxes
that would be payable if Newco were a corporation that filed a separate tax
return. Payment of such bonus shall be made within fifteen (15) days of the
receipt by the Company of its audited financial statement for the preceding
fiscal year, but in no event later than 105 days after the end of the preceding
fiscal year.
(c) Payments in Lieu of Dividends. In the case of any dividend
paid by the Company at a time during which Bernstein has unvested or unexercised
stock options to acquire Company stock, Bernstein shall receive, contemporaneous
with the payment of such dividend, an amount hereunder equal to that amount to
which he would have been entitled had he previously exercised his stock options.
5. Benefits.
During the period of employment, Executive shall be entitled
to receive the following additional benefits:
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(a) Participation in Benefit Plans. Executive will participate
on a substantially equal basis as all other employees of Resource in all
employee benefit plans and arrangements now in effect or which may hereafter be
established which are generally applicable to other employees of the Company or
any of its subsidiaries, except that, in lieu of any health care benefits,
Bernstein shall receive an allowance of Six Hundred Seventeen Dollars ($617) per
month for the purchase of health insurance.
(b) Car Allowance. The Company agrees to pay Executive a car
allowance not to exceed Five Hundred Dollars ($500) per month.
6. Termination.
Anything herein contained to the contrary notwithstanding,
Executive's employment hereunder shall terminate as a result of any of the
following events:
(a) Executive's death;
(b) Termination by the Company, for Cause. "Cause" shall
encompass the following: (i) Executive has committed any act of fraud or gross
negligence or engaged in any other material misconduct, neglect of duties or
failure to act which adversely affects the business or affairs of the Company
and/or any of its subsidiaries or affiliates; (ii) Executive has been convicted
of a felony or committed any act not approved in writing by the Board of
Directors of the Company involving any material conflict of interest or
self-dealing related to any aspect of the Company and/or any of its
subsidiaries; or (iii) Executive has failed to follow written directions of the
Board of Directors or the Chief Executive Officer of Resource Leasing, Inc.
("Resource Leasing") which are consistent with Executive's duties hereunder and
not in violation of applicable law; provided, however, Termination by the
Company for Cause shall be effective in the case of (i) (except for an act of
fraud) or (iii) only if such failure has not been cured within thirty (30) days
after notice of such failure has been given to the Executive by Company. If
notice has been given under the previous sentence for a failure by Executive,
Executive may be discharged without notice in the case of a similar failure;
(c) The Executive becomes disabled by reason of any physical
or mental disability whatsoever for more than ninety (90) days in the aggregate
during any 365-day period and the Board of Directors determines, in good faith
and in writing, that the Executive, by reason of such physical or mental
disability, is rendered unable to perform his duties and services hereunder (a
"Disability"); or
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(d) Termination by Executive for "Good Reason" upon forty-five
(45) days' prior written notice to the Company. "Good Reason" shall mean: (i)
without the written consent of Executive, a substantial change in the services
or duties (including relocation in contravention of Paragraph 2 of this
Agreement) required of the Executive hereunder or the imposition of any services
or duties substantially inconsistent with, or in diminution of Executive's
position, services or duties, or status with the Company; (ii) failure to
continue Executive's coverage under any Company benefit plan as required under
paragraph 5(a) except pursuant to a change to a benefit plan that applies to
senior executives of the Company generally or is required by law or regulation;
(iii) any material breach by the Company of any provision of this Agreement; or
(iv) Edward E. Cohen is neither an officer nor the owner directly or indirectly
(including ownership through Bryn Mawr Resources, Inc.) of at least five percent
(5%) of the Class A voting stock of Resource America, Inc. ("RAI"); provided,
however, that Termination by Executive for Good Reason shall be effective in the
case of (i)-(iii) only if such failure has not been cured within thirty (30)
days after notice of such failure has been given to the Company. If notice has
been given under the previous sentence for a failure of the Company, Executive
may terminate this Agreement for Good Reason without notice in the case of a
similar failure.
7. Consideration Payable to Executive Upon Termination or in the Event
of Disability.
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his full salary
at the rate then in effect for such period until his employment is terminated
pursuant to subparagraph 6(c) hereof (together with his bonus, so long as any
such disability is for less than sixty (60) days in the aggregate in any bonus
year), provided that payments so made to the Executive shall be reduced by the
sum of the amounts, if any, payable to the Executive at or prior to the time of
any such payment under disability benefits of Company and which were not
previously applied to reduce any such payment.
(b) If Executive's employment shall terminate pursuant to
subparagraph 6(a),(b) or (c), Executive shall receive his full Base Salary,
together with all benefits required pursuant to paragraph 5, through the date of
termination, but shall not be entitled to receive any additional payments,
benefits or compensation otherwise due subsequent to the date of termination.
(c) If Executive's employment by the Company under this
Agreement shall be terminated for "Good Reason" a specified under subparagraph
6(d), Company shall pay to Executive the Base Salary and benefits required
pursuant to paragraph 5, for the term of one (1) year plus bonus and payable at
the time when the same would have become due and payable if termination had not
occurred. Executive shall not be required to mitigate the amount of any payment
provided for in this subparagraph 7(c) by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for therein be reduced
by any compensation of any retirement benefit heretofore or hereafter earned by
Executive as the result of employment by any other person, firm or corporation.
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8. Confidential Information.
All confidential information or trade secrets which Executive
currently has or may obtain during the period of employment relating to the
business of the Company and its affiliates shall not be published, disclosed, or
made accessible by him to any other person, firm, or corporation except in the
business and for the benefits of the Company, Resource Leasing and its
affiliates. The provisions of this paragraph 8 shall survive the termination of
this Agreement, but shall not apply to any information which is or becomes
publicly available otherwise than by any breach of this paragraph 8.
9. Covenant Not to Compete.
Executive shall not, during the period of employment and for
the two years immediately following termination of employment, for whatever
reason, for himself, or on behalf of any other person, firm, partnership,
corporation, or other entity, directly or indirectly: (i) engage in the
equipment leasing business; or (ii) solicit or hire, or attempt to solicit or
hire, any employee of the Company or its affiliates away from the Company or its
affiliates or away from the Company's employ. For purposes of this clause (i) of
this paragraph, "to engage" shall include Executive's acting as an owner (of
more than 5%), employee, shareholder, consultant, director or officer, directly
or indirectly, of an entity so engaged. Notwithstanding the first sentence of
this Paragraph 9, if the termination occurs pursuant to subparagraph 6(d) or is
by mutual consent, Executive may engage in the equipment leasing business as an
independent consultant.
10. Remedies in Case of Breach of Certain Covenants or Termination.
The Company and Executive agree that the damages that may
result to the Company from misappropriation of confidential information or
competition as prohibited by paragraphs 8 and 9 could be estimated only by
conjecture and not by any accurate standard, and, therefore, any breach by
Executive of the provisions of such paragraphs, in addition to giving rise to
monetary damages, will be enjoined. In addition, if Executive breaches the
provisions of such paragraphs, or is terminated pursuant to subparagraphs 6(a)
or 6(c), Executive shall (solely for violation of Paragraph 8 or 9) forfeit any
right to receive the payments and benefits described under paragraph 7 and
Executive shall forfeit a portion of any stock options that have been or may be
granted pursuant to the Company's Key Executive Stock Option Plan or otherwise
in accordance with the following schedule:
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If Termination pursuant to a breach The following unvested stock
of Paragraphs 6(a) or 6(c) or stock options shall be
violation of Paragraphs 8 or 9 occurs: cancelled:
(i) On or prior to the first (i) All
anniversary of the date of
this Agreement
(ii) After the first but on or (ii) Stock options that vest
prior to the second in years three and four
anniversary of the date of
this Agreement
(iii) After the second but on or (iii) Stock options that vest in
prior to the third anni- year four
versary of the date of
this Agreement
(iv) After the third anniversary (iv) None
of the date of this Agreement
In the case of a termination pursuant to a breach of Paragraph 6(b), all
unvested or unexercised stock options shall be forfeited.
11. Representations and Warranties.
(a) Executive represents and warrants to the Company that he
is under no contractual or other restriction or obligation which would prevent
the performance of his duties hereunder, or which interfere with the rights of
the Company hereunder. Executive represents and agrees that he has no agreements
or arrangements with the Company or any of its affiliates providing for the
compensation of Executive in any respect other than as set forth in this
Agreement.
(b) The Company represents and warrants to Executive that it
has all requisite power and authority to execute, deliver, and perform this
Agreement and all necessary corporate proceedings of the Company have been duly
taken to authorize the execution, delivery, and performance of this Agreement by
the Company.
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12. Indemnification.
(a) If Executive is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (herein a "proceeding"), by reason of
the fact that he is or was an employee (which term includes officer, director,
agent and any other capacity) of the Company or is or was serving at the request
of the Company as an employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as an employee or agent or in any other
capacity while serving as an employee or agent, Executive shall be indemnified
and held harmless by RAI and the Company to the fullest extent authorized by the
Business Corporation Law of the Commonwealth of Pennsylvania, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits RAI and the Company to provide broader
indemnification rights than said law permitted RAI and the Company to provide
prior to such amendment), against all expense, liability and loss (including,
but not limited to, attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) incurred or suffered by
Executive in connection therewith and such indemnification shall continue as to
Executive after he has ceased to be a director, officer, employee or agent and
shall inure to the benefit of Executive's heir, executors, and administrators;
provided, however, that RAI and the Company shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by Executive (other than a proceeding to enforce this Section 12) only
if such proceeding (or part thereof) was authorized directly or indirectly by
the Board of RAI and the Company. The right to indemnification conferred in this
paragraph shall be a contract right and shall include the right to be promptly
upon request, paid by RAI and the Company the expenses incurred in defending any
such proceeding in advance of its final disposition; provided, however, that if
the Business Corporation Law of the Commonwealth of Pennsylvania requires the
payment of such expenses incurred by an employee in his capacity as an employee
(and not in any other capacity in which service was or is rendered by such
person while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
payment shall be made only upon delivery to RAI and the Company of an
undertaking, by or on behalf of Executive, to repay all amounts so advanced if
it shall ultimately be determined that such employee is not entitled to be
indemnified under this paragraph or otherwise.
(b) The indemnification provided by this paragraph shall not
be limited or exclude any rights, indemnities or limitations of liability to
which Executive may be entitled, whether as a matter of law, under the
Certificate of Incorporation, By-laws of RAI and the Company, by agreement, vote
of the stockholders or disinterested directors of RAI and the Company or
otherwise.
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(c) Bernstein, in seeking indemnification under this Agreement
(an "Indemnitee"), shall give the other party or parties (the "Indemnitor")
prompt written notice of any claim, suit or demand that the Indemnitee believes
will give rise to indemnification under this Agreement; provided, however, that
the failure to give such notice shall not affect the liability of the Indemnitor
under this Agreement unless the failure to give such notice materially and
adversely affects the ability of the Indemnitor to defend itself against or to
cure or mitigate the damages. Except as hereinafter provided, the Indemnitor
shall have the right (without prejudice to the right of the Indemnitee to
participate at its expense through counsel of its own choosing) to defend and to
direct the defense against any such claim, suit or demand, at the Indemnitor's
expense and with counsel chosen jointly by Indemnitor and Indemnitee, and the
right to settle or compromise any such claim, suit or demand; provided, however,
that the Indemnitor shall not, without the Indemnitee's written consent, which
shall not be unreasonably withheld, settle or compromise any claim or consent to
any entry of judgment. The Indemnitee shall, at the Indemnitor's expense,
cooperate in the defense of any such claim, suit or demand. If the Indemnitor,
within a reasonable time after notice of a claim fails to defend the Indemnitee,
the Indemnitee shall be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnitor.
(d) Executive will be covered during the entire term of this
Agreement by Officer and Director liability insurance in amounts and on terms
similar to that afforded to other executive of RAI or its affiliates, which such
insurance shall be paid by the Company.
13. Severability.
In case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal, or unenforceable in any
respect such validity, illegality or unenforceability shall not affect any other
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision(s) had never been contained herein,
provided that such invalid, illegal or unenforceable provision(s) shall first be
curtailed, limited or eliminated only to the extent necessary to remove such
invalidity, illegality or unenforceability with respect to the applicable law as
it shall then be applied.
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14. Modification Agreement.
This Agreement shall not be modified by any oral agreement,
either expressed or implied, and all modifications thereof shall be in writing
and signed by the parties hereto.
15. Waiver.
The waiver of any right under this Agreement by any of the
parties hereto shall not be construed as a waiver of the same right at a future
time or as a waiver of any other rights under this Agreement.
16. Governing Law.
This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania, without
giving affect to the principles of conflicts of laws.
17. Notices.
Any notice to be given pursuant to this Agreement shall be
sufficient if in writing and mailed by certified or registered mail,
postage-prepaid, to the addresses listed below:
If to Company:
Fidelity Leasing, Inc.
1521 Locust Street
Suite 400
Philadelphia, PA 19102
If to Executive:
Abraham Bernstein
1830 Rittenhouse Square
Philadelphia, PA 19103
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IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first written above.
FIDELITY LEASING, INC.
(the "Company")
By:_____________________________
_____________________________
(the "Executive")
Solely for the purpose of Paragraph 12 hereof
RESOURCE AMERICA, INC.
By:_____________________________
10
<PAGE>
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT ("Amendment") is made as
of the 5th day of March, 1999 by and between Fidelity Leasing, Inc., a
Pennsylvania corporation (the "Company") and ABRAHAM BERNSTEIN (the "Executive")
WHEREAS, Executive and the Company entered into an Employment Agreement
dated as of March 5, 1996 (the "Agreement); and
WHEREAS, Executive and the Company wish to extend and amend the
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises set forth in
the Agreement and this Amendment, the adequacy of which is hereby acknowledged,
intending to be legally bound, the Company and Executive agree as follows:
1. Amendment to Paragraph 3.
-------------------------
Paragraph 3 of the Agreement is amended to provide in full as
follows:
"The term of employment of Executive under the Agreement shall
commence as of the date hereof and unless sooner terminated pursuant
to Paragraph 6, shall continue in full force and effect until March
4, 2002 (such period referred to as the "Contract Period"). Such
Contract Period shall be extended for additional one-year terms
unless either Executive or Company shall have given notice to the
contrary at least two months before each termination date."
2. Amendments to Paragraph 4
-------------------------
(a) Subparagraph 4(a) of the Agreement is amended by adding the
following sentence:
"The Base Salary on and after March 5, 1999 shall be not less
than Three Hundred Thousand Dollars ($300,000)."
(b) Subparagraph 4(b) of the Agreement is amended to provide in full
as follows:
"(b) Incentive Compensation Plan. During the period of
employment the Executive shall receive bonus payments equal
to 2.75% of the net annual after-tax earnings of the
<PAGE>
Company, but not more than 2.0% of the pre-tax earnings of
the Company if, and only if, the after-tax earnings of the
Company equal or exceed 10% of the Shareholders' Equity at
the end of the last prior fiscal year, except as modified
below for quarters in which there are changes in
Shareholder's Equity. After tax earnings shall mean the
consolidated before-tax earnings of Newco determined by
Newco's independent auditors in accordance with generally
acceptable accounting principles consistently applied
adjusted for the taxes that would be payable if Newco were
a corporation that filed a separate tax return.
Shareholders' Equity shall mean the amount shown as such on
the Company's financial statements. In any year in which
Shareholders' Equity changes (by virtue of sales or
acquisitions of stock, retention of earnings or otherwise),
Shareholders' Equity shall mean the average of such amount
on the last day of each fiscal quarter. Payment of such
bonus shall be made within fifteen (15) days of the receipt
by the Company of its audited financial statement for the
preceding fiscal year, but in no event later than 105 days
after the end of the preceding fiscal year.
In addition to the above, if stock constituting control of
the Company is sold, or if substantially all of the assets
of the Company are sold, Executive shall be entitled to a
bonus payment equal to the lesser of (i) one percent (1%)
of the amount by which the net sales price of such stock or
assets exceeds the book value of the Company's assets, or
(ii) One Million Five Hundred Thousand Dollars
($1,500,000)."
3. Amendments to Paragraph 5.
--------------------------
(a) Subparagraph 5(a) of the Agreement is amended by substituting
"Seven Hundred Dollars ($700)" for "Six Hundred Seventeen
Dollars ($617)."
(b) Subparagraph 5(b) of the Agreement is amended by substituting
"Seven Hundred Fifty Dollars ($750)" for "Five Hundred Dollars
($500)."
2
<PAGE>
4. Amendment to Paragraph 6.
-------------------------
The following is added in subparagraph 6(e):
(e) Following the earlier of (i) the expiration of the Contract Term
(provided the Executive's employment has not been terminated
under subparagraph 6(a), 6(b) or 6(c)) or (ii) the termination
of this Agreement pursuant to subparagraph 6(d), Executive shall
be entitled to payments for consulting services at the rate of
One Hundred Thousand Dollars annually, payable monthly, for ten
years. Such payments shall terminate upon Executive's death or
upon his employment in any activity which, if it had occurred
within the period set forth in Paragraph 9, would constitute a
breach of the covenant not to compete set forth in said
Paragraph 9.
5. Amendment to Paragraph 10.
--------------------------
Delete the last sentence and substitute therefore the following:
"In the case of a termination pursuant to Paragraph 6(b), or in the
event Executive voluntarily terminates employment (other than
termination for Good Reason) hereunder prior to the end of the term
of this Agreement, as described in Paragraph 3, all unvested stock
options shall be forfeited. In the case of termination other than
(i) by operation of subparagraphs 6(a) or 6(c), or (ii) by the
Company pursuant to subparagraph 6(b), or (iii) by Executive
voluntarily (as described in the next preceding sentence), all
unvested options issued pursuant to the Fidelity Leasing, Inc.
1996-1 Key Employee Stock Option Plan shall immediately vest upon
such termination."
6. Amendment to Paragraph 17.
--------------------------
Delete the address for notice to the Company and substitute the
following therefore:
"If to Company:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, PA 19380
With a copy to:
Resource America, Inc.
1521 Locust Street
Suite 400
Philadelphia, PA 19102
Attn: Edward E. Cohen, Chairman"
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first written above.
FIDELITY LEASING, INC.
By:
---------------------------------
------------------------------
ABRAHAM BERNSTEIN
Resource America, Inc. hereby
acknowledges its continuing
obligation under Paragraph 12 of the
Agreement.
RESOURCE AMERICA, INC.
By:
---------------------------------
4
<PAGE>
EXHIBIT 10.36
June 30, 1999
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 30th day of
June, 1999 by and between FIDELITY LEASING, INC., a Pennsylvania corporation
(the "Company") and CRIT DEMENT (the "Executive").
WHEREAS, Company is in the business of leasing equipment to the small
business market ("Company Business"); and
WHEREAS, Company desires to have the benefit of Executive's knowledge
and experience in the affairs of Company; and
WHEREAS, Executive desires to be employed by Company upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the adequacy of which is hereby acknowledged, the Company and Executive
agree as follows:
1. Employment.
The Company hereby employs Executive as President and Chief Operating
Officer of the Company (the "Office") and Executive hereby accepts such
employment, positions and responsibilities, and agrees to serve the Company in
such capacities upon the terms and conditions set forth herein.
2. Services.
In carrying out his duties Executive shall report to and accept
direction from the Board of Directors and the Chief Executive Officer of the
Company.
Executive shall serve the Company diligently, competently, and to the
best of his abilities during the period of employment. Executive shall devote
substantially all of his time and attention to the business of the Company and
its affiliates, and shall not undertake any other duties which conflict with
these responsibilities.
Executive shall render such services as may reasonably be required of
him to accomplish the business purposes of the Company, which shall include
specific responsibility for planning for and day to day operation of the Company
Business, industrial relations (in conjunction with human resources), and
relationships with the Company, and such duties as the Company's Board of
Directors or the Chief Executive Officer may assign to him from time to time and
which are appropriate to the Office.
<PAGE>
3. Term.
The term of employment of Executive under this Agreement shall commence
on the date hereof and, unless sooner terminated pursuant to Paragraph 6, shall
continue in full force and effect for a period of three (3) years thereafter.
Such three (3) year period is hereafter referred to as the "Contract Period."
Such Contract Period shall be extended for additional one-year terms unless
either Executive or Company shall have given written notice to the contrary at
least two months before each termination date.
4. Compensation.
(a) Base Salary. The Executive's compensation during the Contract
Period shall be determined by the Board, subject to the next sentence and
Paragraph 4(b). During the Contract Period, the Executive shall receive an
annual base salary ("Annual Base Salary") of not less than his annual base
salary of Two Hundred Twenty Thousand Dollars ($220,000) as in effect
immediately before the Contract Date. The Annual Base Salary shall be payable in
accordance with the Company's regular payroll practice for its senior
executives, as in effect from time to time. During the Contract Period, the
Annual Base Salary may be reviewed for possible increase at least annually. Any
increase in the Annual Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary shall not
be reduced after any such increase, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as so increased.
(b) Incentive Compensation. During the Contract Period, the Executive
shall participate in such short-term incentive compensation plans and long-term
incentive compensation plans as shall be decided upon in the discretion of the
Board (the "Incentive Compensation").
(c) Special Incentive Compensation. If, during the Contract Period,
stock constituting control of the Company is sold, or if substantially all of
the assets of the Company are sold, Executive shall be entitled to a bonus
payment equal to the lesser of (i) one percent (1%) of the amount by which the
net sales price of such stock or assets exceeds the book value of the Company's
assets, or (ii) One Million Five Hundred Thousand Dollars ($1,500,000).
5. Benefits.
During the period of employment, Executive shall be entitled to receive
the following additional benefits:
(a) Participation in Benefit Plans. During the Contract Period and, to
the extent specifically provided for herein, thereafter : (A) the Executive
shall be entitled to participate in all applicable incentive, savings, and
retirement plans, practices, policies, and programs of the Company to the same
2
<PAGE>
extent as they are generally available to other senior officers, directors or
executives of the Company, and (B) the Executive and/or the Executive's family,
as the case may be, shall be eligible for participation in, and shall receive
all benefits under, all applicable welfare benefit plans, practices, policies,
and programs provided by the Company, including, without limitation, medical,
prescription, dental, disability, sickness benefits, employee life insurance,
accidental death, and travel insurance plans and programs, to the same extent as
other senior officers, directors or executives of the Company.
(b) Fringe Benefits. Without limitation of any benefits or compensation
to be otherwise provided under this Paragraph, Executive shall be entitled to
receive any and all fringe benefits which he received from Company immediately
prior to the execution of this Employment Agreement. Specifically, and without
limitation, Employee shall continue to receive: payment of country club dues; a
car allowance in the amount of Eight Hundred Dollars ($800) per month, which
allowance shall cover all leasing, insurance, maintenance and other costs
associated with Executive's use of an automobile, except for gasoline costs; a
mobile cellular telephone; and, payment of dues or membership expenses in
professional organizations.
(c) Expenses. Company shall reimburse Executive for all reasonable and
necessary expenses incurred by him in carrying out his duties under this
Agreement. Executive shall present to Company, from time to time, an itemized
account of such expenses in such form as may be required by the Company.
6. Termination.
Anything herein contained to the contrary notwithstanding, Executive's
employment hereunder shall terminate as a result of any of the following events:
(a) Executive's death;
(b) Termination by the Company, for Cause. "Cause" shall encompass the
following: (i) Executive has committed any act of fraud; (ii) illegal conduct or
gross misconduct by the Executive, in either case that is willful and results in
material and demonstrable damage to the business or reputation of the Company.
No act or failure on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act or failure to act that is based upon
authority given pursuant to a resolution duly adopted by the Board, or the
advice of counsel for the Company, shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company; (iii) Executive has been convicted of a felony; (iv) the willful
and continued failure of the Executive substantially to perform the Executive's
duties under this Agreement (other than as a result of physical or mental
illness or injury), after the Board of the Company delivers to the Executive a
written demand for substantial performance that specifically identifies, with
reasonable opportunity to cure, the manner in which the Board believes that the
3
<PAGE>
Executive has not substantially performed the Executive's duties; or (v)
Executive has failed to follow written directions of the Board of Directors
which are consistent with Executive's duties hereunder and not in violation of
applicable law, provided Executive shall have two business days after written
notice to cure such failure.
(c) Termination by the Company without Cause, upon forty-five (45) days
prior written notice to Executive;
(d) The Executive becomes disabled by reason of physical or mental
disability for more than one hundred eighty (180) days in the aggregate or a
period of ninety (90) consecutive days during any 365-day period and the Board
of Directors determines, in good faith and in writing, that the Executive, by
reason of such physical or mental disability, is rendered unable to perform his
duties and services hereunder (a "Disability"). A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective on the thirtieth (30th) day after
receipt of such notice by the Executive (the "Disability Effective Date"),
unless the Executive returns to full-time performance of the Executive's duties
before the Disability Effective Date.
(e) A termination of the Executive's employment for Cause shall be
effected in accordance with the following procedures. The Company shall give the
Executive written notice ("Notice of Termination for Cause") of its intention to
terminate the Executive's employment for Cause, setting forth in reasonable
detail the specific conduct of the Executive that it considers to constitute
Cause and the specific provision(s) of this Agreement on which it relies.
(f) Termination by Executive for "Good Reason" upon thirty)(30) days'
prior written notice to the Company. "Good Reason" shall mean: (i) the
assignment to the Executive of any duties inconsistent in any respect with
Paragraph 2 of this Agreement, or any other action by the Company that results
in a diminution in the Executive's position, authority, duties, or
responsibilities, other than an isolated, insubstantial, and inadvertent action
that is not taken in bad faith and is remedied by the Company promptly after
receipt of notice thereof from the Executive; (ii) any failure by the Company to
comply with any provision of Paragraph 2 of this Agreement, other than an
isolated, insubstantial, and inadvertent failure that is not taken in bad faith
and is remedied by the Company promptly after receipt of notice thereof from the
Executive; (iii) any purported termination of the Executive's employment by the
Company for a reason or in a manner not expressly permitted by this Agreement;
(iv) any failure by the Company to comply with Paragraph 18(c) of this
Agreement; or (v) any other substantial breach of this Agreement by the Company
that either is not taken in good faith or is not remedied by the Company
promptly after receipt of notice thereof from the Executive; provided, however,
that Termination by Executive for Good Reason shall be effective only if such
failure has not been cured within thirty (30) days after notice of such failure
has been given to the Company. A termination of employment by the Executive for
Good Reason shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination within two (2) months of the
4
<PAGE>
event constituting Good Reason, setting forth in reasonable detail the specific
conduct of the Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which the Executive relies.;
(g) Termination by Executive for any reason other than those set forth
in paragraph 6(f) (other than by such Executive's death or disability) upon
thirty (30) day's prior written notice to the Company.
(h) Termination at the end of the Contract Period by reason of
non-renewal. The giving as notice not to renew by the Company, as provided in
Paragraph 3, shall constitute a termination without cause, provided, however,
that the Company may elect to waive the covenant not to compete contained in
Paragraph 9 hereof, in which case no compensation for any period after the
Contract Period shall be required.
(i) The "Date of Termination" means the date of the Executive's death,
the Disability Effective Date, the date on which the termination of the
Executive's employment by the Company for Cause or without Cause or by the
Executive for Good Reason is effective, or the date on which the Executive gives
the Company notice of a termination of employment without Good Reason, as the
case may be.
7. Consideration Payable to Executive Upon Termination or in the Event
of Disability.
(a) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Contract Period, the Company shall pay to the
Executive's designated beneficiaries (or, if there is no such beneficiary, to
the Executive's estate or legal representative), in a lump sum in cash within
sixty (60) days after the Date of Termination, the sum of the following amounts
(the "Accrued Obligations"): (1) any portion of the Executive's Annual Base
Salary through the Date of Termination that has been earned but not yet been
paid; (2) an amount representing the Incentive Compensation for the period that
includes the Date of Termination, computed by assuming that the amount of all
such Incentive Compensation would be equal to the maximum amount of such
Incentive Compensation that the Executive earned the prior fiscal year, and
multiplying that amount by a fraction, the numerator of which is the number of
days worked in the current fiscal year through the Date of Termination, and the
denominator of which is the total number of work days in the relevant current
fiscal year; and (3) any accrued but unpaid Incentive Compensation and vacation
pay. Any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been paid will be paid in
accordance with the terms and conditions under which such amounts were initially
deferred. In the event of termination under this paragraph, all other benefits,
payments or compensation to be provided to Executive hereunder shall terminate
and the rights of Executive in any stock option or incentive plans shall be
governed solely by the terms of the applicable plan.
5
<PAGE>
(b) By the Company for Cause; By the Executive Other than for Good
Reason. If the Executive's employment is terminated by the Company for Cause
during the Contract Period, the Company shall pay the Executive the Annual Base
Salary through the Date of Termination to the extent earned but not yet paid. If
the Executive voluntarily terminates employment during the Contract Period,
other than for Good Reason, the Company shall pay the Executive the Annual Base
Salary through the Date of Termination to the extent earned but not yet paid.
The amount of any compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) will be paid under the terms and
conditions under which such amounts were initially deferred. In the event of
termination under this paragraph, all other benefits, payments or compensation
to be provided to Executive hereunder shall terminate and the rights of
Executive in any stock option or incentive plans shall be governed solely by the
terms of the applicable plan.
(c) By the Company Other than for Cause or Death; by the Executive for
Good Reason. If, during the Contract Period, the Company terminates the
Executive's employment, other than for Cause or Death, or the Executive
terminates employment for Good Reason, the Company shall pay to Executive,
amounts equal to compensation and benefits set forth in Paragraphs 4 and 5 as if
he had remained employed by the Company pursuant to this Agreement, through the
end of the Contract Period or for a period of one (1) year, whichever is longer,
all such sums to be payable at the time when the same would have become due and
payable if Termination had not occurred; provided, that the Incentive
Compensation portion shall be equal to the prorated Incentive Compensation paid
to the Executive in the fiscal year ending prior to termination; provided,
further, that Executive shall continue to receive for the period described above
benefits described in Paragraph 5(a) and, to the extent any benefits described
in Paragraph 5(a) cannot be provided pursuant to a plan or program maintained by
the Company for its executives, the Company shall provide such benefits outside
such plan or program at no additional cost (including without limitation tax
cost) to the Executive and his family; and provided, finally, that during any
period when the Executive is eligible to receive benefits of the type described
in clause (B) of Paragraph 5(a) under another employer-provided plan, the
benefits provided by the Company under this Paragraph 7(c) may be made secondary
to those provided under such other plan. In addition to the foregoing, any
restricted stock of Company, its parent company or affiliates outstanding on the
Date of Termination shall be fully vested as of the Date of Termination and all
options outstanding on the Date of Termination shall be fully vested and
exercisable and shall remain in effect and exercisable through the end of their
respective terms, without regard to the termination of the Executive's
employment. The payments and benefits provided pursuant to this Paragraph 7(c)
are intended as liquidated damages for a termination of the Executive's
employment by the Company other than for Cause or for the actions of the Company
leading to a termination of the Executive's employment by the Executive for Good
Reason, and shall be the sole and exclusive remedy therefor. If Executive is
terminated by reason of Disability, Executive shall assign to Company any
benefits received on account of Company provided disability insurance for the
period on which his severance payment is based (i.e., through the end of the
Contract Period of for a period of one (1) year, whichever is longer).Executive
shall not be required to mitigate the amount of any payment provided for in this
Paragraph 7(c) by seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for therein be reduced by any compensation of
any retirement benefit heretofore or hereafter earned by Executive as the result
of employment by any other person, firm or corporation.
6
<PAGE>
8. Confidential Information.
All confidential information or trade secrets which Executive may
obtain during the period of employment relating to the business of the Company
and its affiliates shall not be published, disclosed, or made accessible by him
to any other person, firm, or corporation except in the business and for the
benefits of the Company, and its affiliates. For purposes of this Agreement,
"confidential information" shall include (i) the identity of the Company's
advertisers, lessors and other vendors, and (ii) the Company's rates and billing
practices. The provisions of this paragraph 8 shall survive the termination of
this Agreement, but shall not apply to any information which is or becomes
publicly available otherwise than by any breach of this paragraph 8.
9. Covenant Not to Compete.
Executive shall not, during the period of employment and for the twelve
months, or a period equal to the balance of the Contract Period, whichever is
used to determine payment of consideration under paragraph 7(c)immediately
following termination of employment, for whatever reason, for himself, or on
behalf of any other person, firm, partnership, corporation, or other entity,
directly or indirectly: (i) in the Company Business; or (ii) solicit or hire, or
attempt to solicit or hire, any employee of the Company or its affiliates away
from the Company or its affiliates. Provided, however, for purposes of this
clause (i) of this paragraph, "to engage" shall include Executive's acting as an
owner (of more than 5%), employee, shareholder, director or officer of an entity
so engaged. In the event of Termination of Executive with Cause, the covenants
and restrictions of this Paragraph 9 shall be of no force or effect unless, at
the Company's election, the Company continues to pay amounts of Base Salary
under Paragraph 4(a) and Benefits under paragraphs 5(a) and 5(b) in which case
the covenant not to compete shall be in full force and effect for as long as
such payment continues, or one year, whichever is shorter.
10. Remedies in Case of Breach of Certain Covenants or Termination.
The Company and Executive agree that the damages that may result to the
Company from misappropriation of confidential information or competition as
prohibited by paragraphs 8 and 9 could be estimated only by conjecture and not
by any accurate standard, and, therefore, any breach by Executive of the
provisions of such paragraphs, in addition to giving rise to monetary damages,
will be enjoined.
11. Representations and Warranties.
(a) Executive represents and warrants to the Company that he is under
no contractual or other restriction or obligation which would prevent the
performance of his duties hereunder, or which interfere with the rights of the
Company hereunder. Executive represents and agrees that he has no agreements or
arrangements with the Company or any of its affiliates providing for the
compensation of Executive in any respect other than as set forth in this
Agreement.
7
<PAGE>
(b) The Company represents and warrants to Executive that it has all
requisite power and authority to execute, deliver, and perform this Agreement
and all necessary corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance of this Agreement by the
Company.
12. Attorneys' Fees.
The Company agrees to pay, as incurred, to the fullest extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (to the extent that the Executive is the prevailing party
with respect to such contest) by the Company, the Executive, or others of the
validity or enforceability of or liability under, or otherwise involving, any
provision of this Agreement. Executive shall be deemed to be the prevailing
party in the ratio that a judgment awarded to him (excluding interest and delay
damages) less any judgment awarded to Company, bears to the amount of damages
sought by Executive (less interest or delay damages) (the "Ratio"). Accordingly,
he shall be entitled to recover all legal fees and expenses reasonably incurred
multiplied by the Ratio.
13. Severability.
In case any one or more of the provisions contained herein shall, for
any reason, be held to be invalid, illegal, or unenforceable in any respect such
validity, illegality or unenforceability shall not affect any other provisions
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision(s) had never been contained herein, provided
that such invalid, illegal or unenforceable provision(s) shall first be
curtailed, limited or eliminated only to the extent necessary to remove such
invalidity, illegality or unenforceability with respect to the applicable law as
it shall then be applied.
14. Modification of Agreement.
This Agreement shall not be modified by any oral agreement, either
expressed or implied, and all modifications hereof shall be in writing and
signed by the parties hereto.
15. Waiver.
The waiver of any right under this Agreement by any of the parties
hereto shall not be construed as a waiver of the same right at a future time or
as a waiver of any other rights under this Agreement.
8
<PAGE>
16. Governing Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving affect to
the principles of conflicts of laws.
17. Successors.
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
18. Notices.
Any notice to be given pursuant to this Agreement shall be sufficient
if in writing and mailed by certified or registered mail, postage-prepaid, to
the addresses listed below:
If to Company:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, PA 19380
With a copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street
Philadelphia, PA 19202
Attn: Richard J. Abt, Esquire
9
<PAGE>
If to Executive:
Crit DeMent
1255 Wrights Lane
West Chester, PA 19380
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first written above.
FIDELITY LEASING, INC.
By:
--------------------------------
EXECUTIVE:
----------------------------------
Crit DeMent
10
<PAGE>
June 30, 1999
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of the 30th day of
June, 1999 by and between FIDELITY LEASING, INC., a Pennsylvania corporation
(the "Company") and JOSEPH T. ELLIS, JR. (the "Executive").
WHEREAS, Company is in the business of leasing to the small business
manufacturer programs ("Company Business"); and
WHEREAS, Company desires to have the benefit of Executive's knowledge
and experience in the affairs of Company; and
WHEREAS, Executive desires to be employed by Company upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the adequacy of which is hereby acknowledged, the Company and Executive
agree as follows:
1. Employment.
The Company hereby employs Executive as Senior Vice President for
Operations of the Company (the "Office") and Executive hereby accepts such
employment, positions and responsibilities, and agrees to serve the Company in
such capacities upon the terms and conditions set forth herein.
2. Services.
In carrying out his duties Executive shall report to and accept
direction from the President and the Chief Executive Officer of the Company.
Executive shall serve the Company diligently, competently, and to the
best of his abilities during the period of employment. Executive shall devote
substantially all of his time and attention to the business of the Company and
its affiliates, and shall not undertake any other duties which conflict with
these responsibilities.
Executive shall render such services as may reasonably be required of
him to accomplish the business purposes of the Company, which shall include
specific responsibility for planning for and day to day operation of the Company
Business, and such duties as the President or the Chief Executive Officer may
assign to him from time to time and which are appropriate to the Office.
<PAGE>
3. Term.
The term of employment of Executive under this Agreement shall commence
on the date hereof and, unless sooner terminated pursuant to Paragraph 6, shall
continue in full force and effect for a period of three (3) years thereafter.
Such three (3) year period is hereafter referred to as the "Contract Period."
Such Contract Period shall be extended for additional one-year terms unless
either Executive or Company shall have given written notice to the contrary at
least two months before each termination date.
4. Compensation.
(a) Base Salary. The Executive's compensation during the Contract
Period shall be determined by the Board, subject to the next sentence and
Paragraph 4(b). During the Contract Period, the Executive shall receive an
annual base salary ("Annual Base Salary") of not less than his annual base
salary of One Hundred and Eighty Thousand Dollars ($180,000) as in effect
immediately before the Contract Date. The Annual Base Salary shall be payable in
accordance with the Company's regular payroll practice for its senior
executives, as in effect from time to time. During the Contract Period, the
Annual Base Salary may be reviewed for possible increase at least annually. Any
increase in the Annual Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement. The Annual Base Salary shall not
be reduced after any such increase, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as so increased.
(b) Incentive Compensation. During the Contract Period, the Executive
shall participate in such short-term incentive compensation plans and long-term
incentive compensation plans as shall be decided upon in the discretion of the
Board (the "Incentive Compensation").
5. Benefits.
During the period of employment, Executive shall be entitled to receive
the following additional benefits:
(a) Participation in Benefit Plans. During the Contract Period and, to
the extent specifically provided for herein, thereafter: (A) the Executive shall
be entitled to participate in all applicable incentive, savings, and retirement
plans, practices, policies, and programs of the Company to the same extent as
they are generally available to other senior officers, directors or executives
of the Company, and (B) the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in, and shall receive all benefits
under, all applicable welfare benefit plans, practices, policies, and programs
provided by the Company, including, without limitation, medical, prescription,
dental, disability, sickness benefits, employee life insurance, accidental
death, and travel insurance plans and programs, to the same extent as other
senior officers, directors or executives of the Company.
2
<PAGE>
(b) Fringe Benefits. Without limitation of any benefits or compensation
to be otherwise provided under this Paragraph, Executive shall be entitled to
receive any and all fringe benefits which he received from Company immediately
prior to the execution of this Employment Agreement. Specifically, and without
limitation, Employee shall continue to receive: a car allowance in the amount of
Eight Hundred Dollars ($800) per month, which allowance shall cover all leasing,
insurance, maintenance and other costs associated with Executive's use of an
automobile, except for gasoline costs; a mobile cellular telephone; and, payment
of dues or membership expenses in professional organizations.
(c) Expenses. Company shall reimburse Executive for all reasonable and
necessary expenses incurred by him in carrying out his duties under this
Agreement. Executive shall present to Company, from time to time, an itemized
account of such expenses in such form as may be required by the Company.
6. Termination.
Anything herein contained to the contrary notwithstanding, Executive's
employment hereunder shall terminate as a result of any of the following events:
(a) Executive's death;
(b) Termination by the Company, for Cause. "Cause" shall encompass the
following: (i) Executive has committed any act of fraud; (ii) illegal conduct or
gross misconduct by the Executive, in either case that is willful and results in
material and demonstrable damage to the business or reputation of the Company.
No act or failure on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act or failure to act that is based upon
authority given pursuant to a resolution duly adopted by the Board, or the
advice of counsel for the Company, shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company; (iii) Executive has been convicted of a felony; (iv) the willful
and continued failure of the Executive substantially to perform the Executive's
duties under this Agreement (other than as a result of physical or mental
illness or injury), after the Board or the President or Chief Executive Officer
of the Company delivers to the Executive a written demand for substantial
performance that specifically identifies, with reasonable opportunity to cure,
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; or (v) Executive has failed to follow written
directions of the Board of Directors which are consistent with Executive's
duties hereunder and not in violation of applicable law, provided Executive
shall have two business days after written notice to cure such failure.
3
<PAGE>
(c) Termination by the Company without Cause, upon forty-five (45) days
prior written notice to Executive;
(d) The Executive becomes disabled by reason of physical or mental
disability for more than one hundred eighty (180) days in the aggregate or a
period of ninety (90) consecutive days during any 365-day period and the Board
of Directors determines, in good faith and in writing, that the Executive, by
reason of such physical or mental disability, is rendered unable to perform his
duties and services hereunder (a "Disability"). A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective on the thirtieth (30th) day after
receipt of such notice by the Executive (the "Disability Effective Date"),
unless the Executive returns to full-time performance of the Executive's duties
before the Disability Effective Date.
(e) A termination of the Executive's employment for Cause shall be
effected in accordance with the following procedures. The Company shall give the
Executive written notice ("Notice of Termination for Cause") of its intention to
terminate the Executive's employment for Cause, setting forth in reasonable
detail the specific conduct of the Executive that it considers to constitute
Cause and the specific provision(s) of this Agreement on which it relies.
(f) Termination by Executive for "Good Reason" upon thirty (30) days'
prior written notice to the Company. "Good Reason" shall mean: (i) the
assignment to the Executive of any duties inconsistent in any respect with
Paragraph 2 of this Agreement, or any other action by the Company that results
in a diminution in the Executive's position, authority, duties, or
responsibilities, other than an isolated, insubstantial, and inadvertent action
that is not taken in bad faith and is remedied by the Company promptly after
receipt of notice thereof from the Executive; (ii) any failure by the Company to
comply with any provision of Paragraph 2 of this Agreement, other than an
isolated, insubstantial, and inadvertent failure that is not taken in bad faith
and is remedied by the Company promptly after receipt of notice thereof from the
Executive; (iii) any purported termination of the Executive's employment by the
Company for a reason or in a manner not expressly permitted by this Agreement;
(iv) any failure by the Company to comply with Paragraph 18(c) of this
Agreement; or (v) any other substantial breach of this Agreement by the Company
that either is not taken in good faith or is not remedied by the Company
promptly after receipt of notice thereof from the Executive; provided, however,
that Termination by Executive for Good Reason shall be effective only if such
failure has not been cured within thirty (30) days after notice of such failure
has been given to the Company. A termination of employment by the Executive for
Good Reason shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination within two (2) months of the
event constituting Good Reason, setting forth in reasonable detail the specific
conduct of the Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which the Executive relies.;
4
<PAGE>
(g) Termination by Executive for any reason other than those set forth
in paragraph 6(f) (other than by such Executive's death or disability) upon
thirty (30) day's prior written notice to the Company.
(h) Termination at the end of the Contract Period by reason of
non-renewal. The giving of notice not to renew by the Company, as provided in
Paragraph 3, shall constitute a termination without cause, provided, however,
that the Company may elect to waive the covenant not to compete contained in
Paragraph 9 hereof, in which case no compensation for any period after the
Contract Period shall be required.
(i) The "Date of Termination" means the date of the Executive's death,
the Disability Effective Date, the date on which the termination of the
Executive's employment by the Company for Cause or without Cause or by the
Executive for Good Reason is effective, or the date on which the Executive gives
the Company notice of a termination of employment without Good Reason, as the
case may be.
7. Consideration Payable to Executive Upon Termination or in the Event
of Disability.
(a) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Contract Period, the Company shall pay to the
Executive's designated beneficiaries (or, if there is no such beneficiary, to
the Executive's estate or legal representative), in a lump sum in cash within
sixty (60) days after the Date of Termination, the sum of the following amounts
(the "Accrued Obligations"): (1) any portion of the Executive's Annual Base
Salary through the Date of Termination that has been earned but not yet been
paid; (2) an amount representing the Incentive Compensation for the period that
includes the Date of Termination, computed by assuming that the amount of all
such Incentive Compensation would be equal to the maximum amount of such
Incentive Compensation that the Executive earned the prior fiscal year, and
multiplying that amount by a fraction, the numerator of which is the number of
days worked in the current fiscal year through the Date of Termination, and the
denominator of which is the total number of work days in the relevant current
fiscal year; and (3) any accrued but unpaid Incentive Compensation and vacation
pay. Any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been paid will be paid in
accordance with the terms and conditions under which such amounts were initially
deferred. In the event of termination under this paragraph, all other benefits,
payments or compensation to be provided to Executive hereunder shall terminate
and the rights of Executive in any stock option or incentive plans shall be
governed solely by the terms of the applicable plan.
(b) By the Company for Cause; By the Executive Other than for Good
Reason. If the Executive's employment is terminated by the Company for Cause
during the Contract Period, the Company shall pay the Executive the Annual Base
Salary through the Date of Termination to the extent earned but not yet paid. If
the Executive voluntarily terminates employment during the Contract Period,
other than for Good
5
<PAGE>
Reason, the Company shall pay the Executive the Annual Base Salary through the
Date of Termination to the extent earned but not yet paid. The amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) will be paid under the terms and conditions under
which such amounts were initially deferred. In the event of termination under
this paragraph, all other benefits, payments or compensation to be provided to
Executive hereunder shall terminate and the rights of Executive in any stock
option or incentive plans shall be governed solely by the terms of the
applicable plan.
(c) By the Company Other than for Cause or Death; by the Executive for
Good Reason. If, during the Contract Period, the Company terminates the
Executive's employment, other than for Cause or Death, or the Executive
terminates employment for Good Reason, the Company shall pay to Executive,
amounts equal to compensation and benefits set forth in Paragraphs 4 and 5 as if
he had remained employed by the Company pursuant to this Agreement, through the
end of the Contract Period or for a period of one (1) year, whichever is longer,
all such sums to be payable at the time when the same would have become due and
payable if Termination had not occurred; provided, that the Incentive
Compensation portion shall be equal to the prorated Incentive Compensation paid
to the Executive in the fiscal year ending prior to termination; provided,
further, that Executive shall continue to receive for the period described above
benefits described in Paragraph 5(a) and, to the extent any benefits described
in Paragraph 5(a) cannot be provided pursuant to a plan or program maintained by
the Company for its executives, the Company shall provide such benefits outside
such plan or program at no additional cost (including without limitation tax
cost) to the Executive and his family; and provided, finally, that during any
period when the Executive is eligible to receive benefits of the type described
in clause (B) of Paragraph 5(a) under another employer-provided plan, the
benefits provided by the Company under this Paragraph 7(c) may be made secondary
to those provided under such other plan. In addition to the foregoing, any
restricted stock of Company, its parent company or affiliates outstanding on the
Date of Termination shall be fully vested as of the Date of Termination and all
options outstanding on the Date of Termination shall be fully vested and
exercisable and shall remain in effect and exercisable through the end of their
respective terms, without regard to the termination of the Executive's
employment. The payments and benefits provided pursuant to this Paragraph 7(c)
are intended as liquidated damages for a termination of the Executive's
employment by the Company other than for Cause or for the actions of the Company
leading to a termination of the Executive's employment by the Executive for Good
Reason, and shall be the sole and exclusive remedy therefor. If Executive is
terminated by reason of Disability, Executive shall assign to Company any
benefits received on account of Company provided disability insurance for the
period on which his severance payment is based (i.e., through the end of the
Contract Period of for a period of one (1) year, whichever is longer). Executive
shall not be required to mitigate the amount of any payment provided for in this
Paragraph 7(c) by seeking other employment or otherwise, nor shall the amount of
any payment or benefit provided for therein be reduced by any compensation of
any retirement benefit heretofore or hereafter earned by Executive as the result
of employment by any other person, firm or corporation.
6
<PAGE>
8. Confidential Information.
All confidential information or trade secrets which Executive may
obtain during the period of employment relating to the business of the Company
and its affiliates shall not be published, disclosed, or made accessible by him
to any other person, firm, or corporation except in the business and for the
benefits of the Company, and its affiliates. For purposes of this Agreement,
"confidential information" shall include (i) the identity of the Company's
advertisers, lessors and other vendors, and (ii) the Company's rates and billing
practices. The provisions of this paragraph 8 shall survive the termination of
this Agreement, but shall not apply to any information which is or becomes
publicly available otherwise than by any breach of this paragraph 8.
9. Covenant Not to Compete.
Executive shall not, during the period of employment and for the twelve
months, or a period equal to the balance of the Contract Period, whichever is
used to determine payment of consideration under paragraph 7(c) immediately
following termination of employment, for whatever reason, for himself, or on
behalf of any other person, firm, partnership, corporation, or other entity,
directly or indirectly: (i) in the Company Business; or (ii) solicit or hire, or
attempt to solicit or hire, any employee of the Company or its affiliates away
from the Company or its affiliates. Provided, however, for purposes of this
clause (i) of this paragraph, "to engage" shall include Executive's acting as an
owner (of more than 5%), employee, shareholder, director or officer of an entity
so engaged. In the event of Termination of Executive with Cause, the covenants
and restrictions of this Paragraph 9 shall be of no force or effect unless, at
the Company's election, the Company continues to pay amounts of Base Salary
under Paragraph 4(a) and Benefits under paragraphs 5(a) and 5(b) in which case
the covenant not to compete shall be in full force and effect for as long as
such payment continues, or one year, whichever is shorter.
10. Remedies in Case of Breach of Certain Covenants or Termination.
The Company and Executive agree that the damages that may result to the
Company from misappropriation of confidential information or competition as
prohibited by paragraphs 8 and 9 could be estimated only by conjecture and not
by any accurate standard, and, therefore, any breach by Executive of the
provisions of such paragraphs, in addition to giving rise to monetary damages,
will be enjoined.
11. Representations and Warranties.
(a) Executive represents and warrants to the Company that he is under
no contractual or other restriction or obligation which would prevent the
performance of his duties hereunder, or which interfere with the rights of the
Company hereunder. Executive represents and agrees that he has no agreements or
arrangements with the Company or any of its affiliates providing for the
compensation of Executive in any respect other than as set forth in this
Agreement.
7
<PAGE>
(b) The Company represents and warrants to Executive that it has all
requisite power and authority to execute, deliver, and perform this Agreement
and all necessary corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance of this Agreement by the
Company.
12. Attorneys' Fees.
The Company agrees to pay, as incurred, to the fullest extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (to the extent that the Executive is the prevailing party
with respect to such contest) by the Company, the Executive, or others of the
validity or enforceability of or liability under, or otherwise involving, any
provision of this Agreement. Executive shall be deemed to be the prevailing
party in the ratio that a judgment awarded to him (excluding interest and delay
damages) less any judgment awarded to Company, bears to the amount of damages
sought by Executive (less interest or delay damages) (the "Ratio"). Accordingly,
he shall be entitled to recover all legal fees and expenses reasonably incurred
multiplied by the Ratio.
13. Severability.
In case any one or more of the provisions contained herein shall, for
any reason, be held to be invalid, illegal, or unenforceable in any respect such
validity, illegality or unenforceability shall not affect any other provisions
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision(s) had never been contained herein, provided
that such invalid, illegal or unenforceable provision(s) shall first be
curtailed, limited or eliminated only to the extent necessary to remove such
invalidity, illegality or unenforceability with respect to the applicable law as
it shall then be applied.
14. Modification of Amement.
This Agreement shall not be modified by any oral agreement, either
expressed or implied, and all modifications hereof shall be in writing and
signed by the parties hereto.
15. Waiver.
The waiver of any right under this Agreement by any of the parties
hereto shall not be construed as a waiver of the same right at a future time or
as a waiver of any other rights under this Agreement.
16. Governing Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving affect to
the principles of conflicts of laws.
8
<PAGE>
17. Successors.
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
18. Notices.
Any notice to be given pursuant to this Agreement shall be sufficient
if in writing and mailed by certified or registered mail, postage-prepaid, to
the addresses listed below:
If to Company:
Fidelity Leasing, Inc.
1255 Wrights Lane
West Chester, PA 19380
With a copy to:
Ledgewood Law Firm, P.C.
1521 Locust Street
Philadelphia, PA 19202
Attn: Richard J. Abt, Esquire
If to Executive:
Joseph T. Ellis
1255 Wrights Lane
West Chester, PA 19380
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement as of the date first written above.
FIDELITY LEASING, INC.
By:
-----------------------------------
EXECUTIVE:
--------------------------------------
Joseph T. Ellis, Jr.
10
<PAGE>
Fidelity Leasing, Inc.
Statement of Computation of earnings per share
<TABLE>
<CAPTION>
Period from
March 4, 1996
(Inception)
through
September 30, Year Ended September 30, Six Months Ended March 31,
------------- ------------------------------ -----------------------------
1998 Pro 1999 Pro
1996 1997 1998 Forma 1998 1999 Forma
------------- ------------------------------ -----------------------------
(unaudited) (unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before cumulative effect of a change
in accounting principle (295) 960 2,406 6,326 1,031 1,347 2,688
------- ------ ------ ----- ------ ------ -----
Cumulative effect of a change
in accounting principle - - - - - (413) (413)
Net income (loss) (295) 960 2,406 6,326 1,031 934 2,275
======= ====== ====== ===== ====== ====== =====
Weighted average shares outstanding 6,293 6,293 6,293 6,293 6,293 6,293 6,293
======= ====== ====== ===== ====== ====== =====
Income (loss) per common share
before cumulative effect of a change
in accounting principle - basic $ (0.05) $ 0.15 $ 0.38 $ 1.01 $ 0.16 $ 0.21 $ 0.43
======= ====== ====== ====== ====== ====== ======
Net income (loss) per common share - basic $ (0.05) $ 0.15 $ 0.38 $ 1.01 $ 0.16 $ 0.15 $ 0.36
======= ====== ====== ====== ====== ====== ======
Weighted average shares 6,338 6,653 7,219 7,219 7,199 7,247 7,247
======= ====== ====== ====== ====== ====== ======
Income (loss) per common share
before cumulative effect of a change
in accounting principle - diluted $ (0.05) $ 0.14 $ 0.33 $ 0.88 $ 0.14 $ 0.19 $ 0.37
======= ====== ====== ====== ====== ====== ======
Net income (loss) per common share - diluted $ (0.05) $ 0.14 $ 0.33 $ 0.88 $ 0.14 $ 0.13 $ 0.31
======= ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
- - Fidelity Leasing, Inc.
- Fidelity Leasing Canada Inc.
- FL Canada Leasing Inc.
- FL Sales Canada Inc.
- FL Sales, Inc.
- Fidelity Leasing SPC I, Inc.
- Fidelity Leasing SPC II, Inc.
- Fidelity Leasing SPE III, LLC
- JLA Credit Corporation
- JLA Funding Corp.
- JLA Funding Corp. II
- JLA Funding Corp. III
<PAGE>
EXHIBIT 23.1
CONSENT OF GRANT THORNTON LLP
We have issued our report dated June 18, 1999 (except for Note 10, as to which
the date is June 25, 1999) accompanying the consolidated financial statements
of Fidelity Leasing, Inc. contained in the Registration Statement and
Prospectus. We consent to the use of the aforementioned reports in the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts".
Grant Thornton LLP
Cleveland, Ohio
July 1, 1999
<PAGE>
[LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
- ----------------------------
San Francisco, California
July 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997 SEP-30-1998 SEP-30-1998 SEP-30-1999
<PERIOD-START> MAR-04-1996 OCT-01-1996 OCT-01-1997 OCT-01-1997 OCT-01-1998
<PERIOD-END> SEP-30-1996 SEP-30-1997 SEP-30-1998 MAR-31-1998 MAR-31-1999
<CASH> 0 1,970 3,680 0 20,504
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 8,401 26,580 0 322,278
<ALLOWANCES> 0 248 1,602 0 9,610
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0 0
<PP&E> 0 985 1,783 0 4,023
<DEPRECIATION> 0 156 410 0 669
<TOTAL-ASSETS> 0 11,549 32,269 0 363,525
<CURRENT-LIABILITIES> 0 0 0 0 0
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 2,000 2,000 0 2,000
<OTHER-SE> 0 665 3,071 0 4,005
<TOTAL-LIABILITY-AND-EQUITY> 0 11,549 0 0 363,525
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 7 4,790 11,079 5,245 14,435
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 454 3,225 6,873 3,443 11,948
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 7 253 1,422 625 1,523
<INTEREST-EXPENSE> 0 690 1,689 738 4,760
<INCOME-PRETAX> (447) 1,565 4,206 1,802 2,487
<INCOME-TAX> (152) 605 1,800 771 1,140
<INCOME-CONTINUING> (295) 960 2,406 1,031 1,347
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 (413)
<NET-INCOME> (295) 960 2,406 1,031 934
<EPS-BASIC> (0.05) 0.15 0.38 0.16 0.15
<EPS-DILUTED> (0.05) 0.14 0.33 0.14 0.13
</TABLE>
