<PAGE>
___________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarter period ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the transition period from to
------------------- --------------
Commission file number 0-15167
TRANS LEASING INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2747735
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3000 Dundee Road, Northbrook, Illinois 60062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (847) 272-1000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock, Par Value $.01 Per Share, of the
Registrant outstanding as of February 9, 1996 was 4,045,375.
___________________________________________________________________________
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
---------------------------------
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1.Condensed Consolidated Financial Statements
Independent Accountants' Review Report 4
Condensed Consolidated Statements of Operations 5
Three-month and six-month
periods ended December 31, 1995
and 1994 (unaudited)
Condensed Consolidated Balance Sheets 6
December 31, 1995
and June 30, 1995
(unaudited)
Condensed Consolidated Statements
of Cash Flows 7
Six-month periods ended
December 31, 1995 and 1994
(unaudited)
Notes to Condensed Consolidated
Financial Statements 8
(unaudited)
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 4.Submission of Matters to a Vote of Security Holders 14
Item 6.Exhibits and Reports on Form 8-K 14
-2-
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
- --------------------------------------
To the Stockholders and Board of Directors
Trans Leasing International, Inc.
Northbrook, Illinois
We have reviewed the accompanying condensed consolidated balance sheet of
Trans Leasing International, Inc. (the "Company") as of December 31, 1995,
the related condensed consolidated statements of operations for the
three-month and six-month periods ended December 31, 1995 and 1994, and the
related condensed consolidated statements of cash flows for the six-month
periods ended December 31, 1995 and 1994. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Trans Leasing International,
Inc. as of June 30, 1995, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended
(not presented herein); and in our report dated September 1, 1995, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of June 30, 1995 is fairly stated,
in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
DELOITTE & TOUCHE LLP
Chicago, Illinois
February 9, 1996
-4-
<PAGE>
<TABLE>
TRANS LEASING INTERNATIONAL, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
<CAPTION>
Three months Six months
ended ended
December 31 December 31
----------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Lease income $ 8,517,000 $ 7,326,000 $ 16,818,000 $ 14,361,000
Other 346,000 212,000 629,000 377,000
--------- --------- ---------- ----------
Total Revenues 8,863,000 7,538,000 17,447,000 14,738,000
EXPENSES:
Interest 3,866,000 3,400,000 7,543,000 6,543,000
General and
administrative 3,107,000 2,484,000 5,859,000 4,811,000
Provision for uncol-
lectible accounts 1,311,000 1,086,000 2,557,000 2,106,000
--------- --------- ---------- ----------
Total Expenses 8,284,000 6,970,000 15,959,000 13,460,000
--------- --------- ---------- ----------
EARNINGS BEFORE
INCOME TAXES 579,000 568,000 1,488,000 1,278,000
INCOME TAXES 222,000 218,000 570,000 489,000
--------- --------- ---------- ----------
NET EARNINGS 357,000 350,000 918,000 789,000
========= ========= ========== ==========
EARNINGS PER COMMON SHARE $.09 $.08 $.22 $.18
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,097,800 4,353,700 4,147,800 4,362,800
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
-5-
<PAGE>
<TABLE>
TRANS LEASING INTERNATIONAL, INC.
---------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
<CAPTION>
December 31, June 30,
1995 1995
------------ ------------
<S> <C> <C>
ASSETS
------
CASH $ 4,888,000 $ 3,758,000
RESTRICTED CASH 16,275,000 12,988,000
NET INVESTMENT IN DIRECT FINANCE LEASES:
Future minimum lease payments 244,950,000 219,718,000
Estimated unguaranteed residual value 20,968,000 19,823,000
----------- -----------
265,918,000 239,541,000
Less: Unearned income (43,941,000) (39,965,000)
Allowance for uncollectible accounts ( 7,875,000) ( 6,482,000)
----------- -----------
214,102,000 193,094,000
LEASE FINANCING RECEIVABLES, less allowance for
uncollectible accounts of $178,000 and
$151,000, respectively 5,364,000 4,977,000
PROPERTY AND EQUIPMENT, net of
accumulated depreciation 7,033,000 5,423,000
INCOME TAXES RECOVERABLE 1,034,000 1,464,000
OTHER ASSETS 6,065,000 4,679,000
----------- -----------
TOTAL ASSETS $254,761,000 $226,383,000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 8,469,000 $ 7,067,000
NOTES PAYABLE TO FINANCIAL INSTITUTIONS 34,650,000 49,175,000
LEASE-BACKED OBLIGATIONS 161,144,000 119,788,000
SUBORDINATED OBLIGATIONS 21,840,000 21,840,000
DEFERRED INCOME TAXES 2,843,000 2,843,000
----------- -----------
TOTAL LIABILITIES 228,946,000 200,713,000
=========== ===========
<PAGE>
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00;
authorized 2,500,000 shares; none issued
Common stock, par value $.01; authorized
10,000,000 shares;issued 4,798,500 shares 48,000 48,000
Additional paid-in capital 9,879,000 9,879,000
Retained earnings 18,139,000 17,471,000
Less 743,125 and 586,525 shares
respectively,held in treasury, at cost ( 2,251,000) ( 1,728,000)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 25,815,000 25,670,000
TOTAL LIABILITIES & STOCKHOLDERS'EQUITY $254,761,000 $226,383,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
-6-
<PAGE>
<TABLE>
TRANS LEASING INTERNATIONAL, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<CAPTION>
Six months ended
December 31
-------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 918,000 $ 789,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Leasing costs, primarily provision for
uncollectible accounts and amortization
of initial direct costs 3,622,000 3,149,000
Depreciation and amortization 784,000 306,000
Initial direct costs incurred ( 1,287,000) (1,162,000)
Changes in:
Accounts payable and accrued expenses 1,402,000 967,000
Income taxes recoverable 430,000 1,107,000
Other assets ( 1,423,000) ( 745,000)
Other ( 41,000) ( 1,000)
---------- ----------
Net cash provided by operating activities 4,405,000 4,410,000
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on leases 39,437,000 34,839,000
Equipment purchased for leasing (64,586,000) (51,383,000)
Purchase of lease financing receivables ( 1,827,000) ( 329,000)
Purchase of property and equipment ( 2,647,000) ( 1,743,000)
Disposal of property and equipment 290,000 130,000
---------- ----------
Net cash used in investing activities (29,333,000) (18,486,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable to financial
institutions 60,400,000 69,545,000
Repayment of notes payable to financial
institutions (74,925,000) (46,857,000)
Issuance of lease-backed obligations 152,070,000 50,453,000
Repayment of lease-backed obligations (110,714,000) (59,222,000)
Payment of dividends on common stock ( 250,000) 0
Purchase of treasury stock ( 523,000) ( 356,000)
Net cash provided by financing activities 26,058,000 13,563,000
---------- ----------
NET INCREASE (DECREASE) IN CASH 1,130,000 ( 513,000)
<PAGE>
CASH, beginning of period 3,758,000 3,297,000
---------- ----------
CASH, end of period $ 4,888,000 $ 2,784,000
========== ==========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
-7-
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
Note A - Financial Statements:
- ------------------------------
The condensed consolidated balance sheet of Trans Leasing
International, Inc. (the "Company") as of December 31, 1995, the condensed
consolidated statements of operations for the three-month and six-month
periods ended December 31, 1995 and 1994, and the condensed consolidated
statements of cash flows for the six-month periods ended December 31, 1995
and 1994, have been prepared by the Company without audit. The condensed
consolidated balance sheet as of June 30, 1995, has been taken from the
audited financial statements of that date. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position at December 31, 1995, and the
results of operations and cash flows for the periods presented have been
made. The results of operations for the period ended December 31, 1995,
are not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's June 30, 1995 annual report to
stockholders.
Certain reclassifications have been made to amounts reported in prior
years to conform with the presentation used in the fiscal 1996 financial
statements.
Note B - Accounting for Interest Rate Collar Agreement:
- -------------------------------------------------------
The Company has an amortizing interest rate collar agreement which
effectively fixes the interest rate on its floating-rate lease-backed notes
issued in October, 1992 at 5.75%. The notional amount of the collar
declines over time to match the scheduled amortization of the related note
and, as of December 31, 1995, was $6,769,000.
Interest received from or paid to the counterparty under this
agreement is netted against or added to interest expense on the Company's
statement of operations. There is no market risk associated with this
agreement as it is used to hedge floating-rate debt. The Company is
exposed to potential non-performance by the counterparty to the interest
rate collar agreement, though the Company does not anticipate
non-performance due to the strong financial position of the counterparty.
Note C - Subsequent Events:
- ---------------------------
On January 24, 1996 the Board of Directors approved the payment of a
quarterly cash dividend in the amount of $.03 per share. The dividend will
be paid on February 20, 1996 to holders of record as of February 5, 1996.
-8-
<PAGE>
On January 31, 1996, the Company executed a new syndicated revolving
credit facility agented by a money center bank in the amount of $30 million
with an expiration date of January 30, 1997. The initial proceeds from
this new revolving credit facility were used to pay off the Company's
existing revolving credit agreement, to fund new leases, and for general
corporate purposes.
Note D - Commitments:
- ---------------------
As of December 31, 1995, the Company had outstanding commitments to
purchase equipment, which it intended to lease, with an aggregate purchase
price of $7.1 million.
Note E - Pending Accounting Standards:
- --------------------------------------
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation", which encourages entities to adopt a fair value
based method of accounting for the compensation cost of employee stock
compensation plans. The statement allows an entity to continue the
application of the accounting method prescribed by APB No. 25, "Accounting
for Stock Issued to Employees", however pro forma disclosures of net income
and earnings per share, as if the fair value based method of accounting
defined by this statement had been applied, are required. The disclosure
requirements of this statement will be adopted in fiscal 1997. Results of
operations and financial position will not be affected by the adoption of
this statement.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
- -------
The Company's operations are comprised almost exclusively of lease
financing. The Company realizes net earnings to the extent that lease
income, net of both a provision for uncollectible accounts and related
costs exceeds interest expense and general and administrative expense.
Interest expense is the single largest expense of the Company and is a
function of the amounts borrowed by the Company to finance its lease
portfolio and the interest rates associated with those borrowings. The
difference between lease income and interest expense is generally referred
to as the "spread" in the portfolio.
Substantially all of the Company's lease receivables are written at
a fixed rate for a fixed term. The Company's borrowings on the other hand
are at both fixed and variable rates of interest. The Company borrows
funds under two revolving credit facilities at variable interest rates (see
"Liquidity and Capital Resources"). The Company has periodically
refinanced its revolving credit loans through the issuance of debt and
lease-backed obligations in both the institutional private placement and
public markets. The refinancings have been executed by issuing either
fixed-rate debt or floating- rate debt converted to a fixed-rate through an
interest rate swap or collar agreement. To the extent the Company
refinances on a fixed-rate basis, the Company locks in the spread on that
portion of its portfolio.
The Company has experienced growth in the dollar amount of new
lease receivables added to its portfolio during each of the past five
fiscal years. In analyzing the Company's financial statements, it is
important to understand the impact of lease receivable growth during an
accounting period on lease income and net earnings.
For financial reporting purposes, substantially all of the
Company's leases are classified as direct finance leases and are accounted
for in accordance with Statement of Financial Accounting Standards ("SFAS")
No.13, "Accounting for Leases". The Company accounts for its investment in
direct finance leases by recording on the balance sheet the total minimum
lease payments receivable plus the estimated residual value of leased
equipment less the unearned lease income. Unearned lease income represents
the excess of the total minimum lease payments plus the estimated residual
value expected to be realized at the end of the lease term over the cost of
the related equipment. Unearned lease income is recognized as revenue over
the term of the lease by the effective interest method, i.e., application
of a constant periodic rate of return to the declining net investment in
each lease. As a result, during a period in which the Company realizes
growth in new lease receivables, lease income should also increase, but at
a lesser rate.
Initial direct costs incurred in consummating a lease, principally
commissions, are capitalized as part of the net investment in direct
finance leases and amortized over the lease term as a reduction in the
yield. An allowance for uncollectible accounts is provided for over the
terms of the underlying leases as the leases are determined to be
uncollectible.
-10-
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Lease income increased $2,457,000 (17.1%) in the first six months
of fiscal 1996 compared with the like period of fiscal 1995, and $1,191,000
(16.3%) in the second quarter of fiscal 1996 as compared with the second
quarter of fiscal 1995. The increase in lease income is due primarily to a
19.5% increase in the net investment in direct finance leases from December
31, 1994 to December 31, 1995 as well as increases in lease-related income
of $447,000 (40.9%) in the first six months of fiscal 1996 and $147,000
(24.4%) in the second quarter of fiscal 1996 as compared with the
comparable fiscal 1995 periods.
The growth in the Company's lease portfolio is the result of an
increase in the dollar amount of leases originated. The Company believes
that the dollar amount of leases originated has increased primarily as a
result of its increased marketing and selling activities, greater name
recognition of LeaseCard in the marketplace, the introduction of new
products by equipment manufacturers and reductions in lease rates which
have enabled the Company to attract additional new business. Lease-related
income, primarily operating lease rentals, has increased as a result of the
growth in the LeaseCard Auto Group.
Interest expense increased $1,000,000 (15.3%) in the first six
months of fiscal 1996 and $466,000 (13.7%) in the second quarter of fiscal
1996 versus the comparable prior year periods due to an increase in the
amounts borrowed to finance the growth in the lease portfolio. Interest
expense as a percent of lease income decreased to 45.4% and 44.9% for the
three-month and six-month periods ended December 31, 1995, respectively,
from 46.4% and 45.6% for the comparable fiscal 1995 periods. Interest
expense is reported net of the impact of the interest rate collar used to
fix the rate on the Company's floating-rate lease-backed notes, the effect
of which was to decrease interest expense by $39,000 for the first six
months of fiscal 1996 and to increase interest expense by $80,000 for the
first six months of 1995 and to decrease interest expense by $16,000 and
$4,000 for the second quarter of fiscal 1996 and 1995, respectively.
General and administrative expense increased $1,048,000 (21.8%) in
the six-month period ended December 31, 1995, compared with the like period
of the prior year, and $623,000 (25.1%) in the second quarter of fiscal
1996 compared with the second quarter of fiscal 1995. General and
administrative expense as a percent of lease income increased to 36.5% and
34.8% for the three- month and six-month periods ended December 31, 1995,
respectively, from 33.9% and 33.5% for the comparable fiscal 1995 periods.
The increase in general and administrative expense is primarily due to an
increase in the number of employees necessary to accommodate the Company's
continued growth.
The provision for uncollectible accounts increased $451,000 (21.4%)
in the six-month period ended December 31, 1995, compared with the like
period of the prior year, and by $225,000 (20.7%) in the second quarter of
fiscal 1996 as compared with the second quarter of fiscal 1995. This
increase resulted primarily from the increase in the size of the Company's
lease portfolio. The provision for uncollectible accounts as a percent of
lease income increased to 15.4% and 15.2% for the three-month and six-month
periods ended December 31, 1995, respectively, from 14.8% and 14.7% for the
comparable fiscal 1995 periods.
-11-
<PAGE>
Earnings before income taxes for the first six months of fiscal
1996 increased 16.4% to $1,488,000 compared with $1,278,000 for the like
period of the prior year, and increased 1.9% to $579,000 for the second
quarter of fiscal 1996 compared with $568,000 for the like quarter of the
prior year.
Net earnings for the first six months of fiscal 1996 increased
16.3% to $918,000, or $.22 per share, compared with $789,000, or $.18 per
share,for the like period of the prior year. For the second quarter of
fiscal 1996, net earnings increased 2% to $357,000, or $.09 per share,
compared with $350,000, or $.08 per share, for the like quarter of the
prior year.The increase in both earnings before income taxes and net
earnings are primarily due to the increase in lease income and the decrease
of interest expense as a percent of lease income, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has principally financed its operations, including the
growth of its lease portfolio, through borrowings under its revolving
credit agreements, issuance of debt and lease-backed obligations in both
the institutional private placement and public markets, principal
collections on leases and cash provided from operations.
Net cash used in investing activities, which was $29.3 million in
the first six months of fiscal 1996 and $18.5 million in the first six
months of fiscal 1995, generally represents the excess of equipment
purchased for leasing over principal collections on leases. Net cash
provided by financing activities (the excess of borrowings under the
revolving credit agreements and issuance of debt and lease-backed
obligations over repayments of these debt instruments) was $26.1 million in
the first six months of fiscal 1996 and $13.6 million in the first six
months of fiscal 1995; the remaining funds used in investing activities
were provided by operating cash flows. As of December 31, 1995, the
Company had outstanding commitments to purchase equipment, which it
intended to lease, with an aggregate purchase price of $7.1 million.
The Company borrows under its revolving credit agreements from time
to time to fund its operations. As the Company has approached full
utilization under these agreements, it has sold long-term debt and
lease-backed obligations in both the institutional private placement and
public markets and used the proceeds to reduce its revolving credit
borrowings. These long-term debt and lease-backed obligations have been
issued either with fixed interest rates or with floating interest rates
combined with interest rate swaps or collars to lock in a fixed rate. The
Company intends to continue to issue long-term debt and lease-backed
obligations, with either fixed interest rates or floating interest rates
converted to a fixed-rate through an interest rate swap or collar
agreement, in both the institutional private placement and public markets
to reduce its exposure to floating interest rates associated with revolving
credit borrowings.
On October 6, 1995, the Company issued approximately $90 million
6.40% senior notes and approximately $11 million 7.55% subordinated notes
through a newly-formed limited-purpose business trust. The assets of the
trust securing such indebtedness include equipment leases and the interest
-12-
<PAGE>
in the underlying equipment acquired from TL Lease Funding Corp. IV (a
special-purpose subsidiary of the Company, "TLFC IV") which in turn
acquired such assets from the Company at various times prior to the
issuance of the notes. This securitization transaction was afforded
financing accounting treatment and there will be no gain or loss recognized
on consolidated earnings. The Company continues to service the leases and
the trust makes monthly principal and interest payments to the note holders
from lease collections. Proceeds from the transaction were used to repay
borrowings under the TLFC IV securitized revolving credit facility in the
amount of $74 million, to repay borrowings under the Company's revolving
credit agreement in the amount of approximately $20 million and the
remainder for general corporate purposes. Upon completion of this
transaction, the TLFC IV securitized revolving credit facility was
terminated and the Company's revolving credit agreement was amended to
decrease the Company's borrowing capacity from $30 million to $15 million.
On November 28, 1995, a new securitized revolving credit facility
was executed for TLFC IV in the amount of $35 million with an expiration
date of March 31, 1996. The Company is currently negotiating an extension
of and an increase in the amount of this facility. As of February 9, 1996,
outstanding loans under the TLFC IV revolving credit facility were $32
million and unused borrowing capacity was $3 million.
On January 31, 1996, the Company executed a new syndicated
revolving credit facility agented by a money center bank in the amount of
$30 million with an expiration date of January 30, 1997. The initial
proceeds from this new revolving credit facility were used to pay off the
Company's existing revolving credit agreement, to fund new leases, and for
general corporate purposes. As of February 9, 1996, outstanding loans
under the Company's revolving credit agreement were $6 million and unused
borrowing capacity was $24 million.
The Company believes that the unused portions of the credit
facilities, increasing principal payments on leases and continued
placements of debt and lease-backed obligations in the public and/or
private markets will provide adequate capital resources and liquidity for
the Company to fund its operations and debt maturities. The Company was in
compliance with all of the provisions of its loan agreements and its
revolving credit facilities at December 31, 1995.
On November 16, 1994, the Board of Directors authorized the
repurchase by the Company of up to 1,000,000 shares of its common stock.
The Board determined that this stock repurchase program is in the best
interests of the Company and its shareholders given the significant
discount to book value at which the Company's common stock is currently
trading. As of December 31, 1995, 316,525 shares have been repurchased at
a total cost of $1,073,000 under this ongoing program.
On January 24, 1996 the Board of Directors approved the fourth
consecutive payment of a quarterly cash dividend in the amount of $.03 per
share. The dividend will be paid on February 20, 1996 to holders of record
as of February 5, 1996.
-13-
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of shareholders was held on November 16, 1995.
(b) The following directors were elected at the meeting:
Richard Grossman, Clifford V. Brokaw, III, Larry S. Grossman,
Michael J. Heyman,Mark C. Matthews, and John W. Stodder.
(c) The matters voted upon and the results of the voting were as
follows:
(1) The shareholders voted 3,895,896 shares for each of the
director nominees and 8,100 shares abstained from voting.
There were no votes cast against each of the nominees.
(2) The shareholders voted 3,901,996 shares to ratify the
appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending
June 30, 1996 and 2,000 shares abstained from voting.
There were no votes cast against this matter.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits Filed with Form 10-Q:
--------------------------------------
10.38 Revolving Credit and Term Loan and Security Agreement
dated as of November 28, 1995 between TL Lease Funding
Corp. IV and First Union National Bank of North Carolina.
10.39 Limited Recourse Agreement dated as of November 28, 1995
between the Registrant and First Union National Bank of
North Carolina.
10.40 Servicing Agreement dated as of November 28, 1995 among
the Registrant, TL Lease Funding Corp. IV and First Union
National Bank of North Carolina.
10.41 Contribution and Sale Agreement dated as of November 28,
1995 between the Registrant and TL Lease Funding Corp.IV.
10.42 Credit Agreement dated as of January 31, 1996 between the
Registrant, the Banks (as defined therein) and the First
National Bank of Chicago, as agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports were filed on Form 8-K during the fiscal quarter ended
December 31, 1995.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TRANS LEASING INTERNATIONAL, INC.
---------------------------------
(Registrant)
DATE: February 13, 1996 RICHARD GROSSMAN
----------------- ----------------
Richard Grossman
President, Chief Executive Officer,
Chairman of the Board of Directors
DATE: February 13, 1996 NORMAN SMAGLEY
----------------- --------------
Norman Smagley
Vice President, Finance, and
Chief Financial Officer
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 4888
<SECURITIES> 0
<RECEIVABLES> 274680
<ALLOWANCES> 7875
<INVENTORY> 0
<CURRENT-ASSETS> 241663
<PP&E> 8943
<DEPRECIATION> 1910
<TOTAL-ASSETS> 254761
<CURRENT-LIABILITIES> 8469
<BONDS> 217634
<COMMON> 48
0
0
<OTHER-SE> 25767
<TOTAL-LIABILITY-AND-EQUITY> 254761
<SALES> 17447
<TOTAL-REVENUES> 17447
<CGS> 0
<TOTAL-COSTS> 5859
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2557
<INTEREST-EXPENSE> 7543
<INCOME-PRETAX> 1488
<INCOME-TAX> 570
<INCOME-CONTINUING> 918
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 918
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
- ----------------------------------------------------------------------
REVOLVING CREDIT AND TERM LOAN AND SECURITY AGREEMENT
BETWEEN
TL LEASE FUNDING CORP. IV
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
DATED AS OF NOVEMBER 28,1995
- ----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . .1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . .1
SECTION 2. COMMITMENT TO LEND . . . . . . . . . . . . . . . . 16
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . 16
2.2 Term Loan. . . . . . . . . . . . . . . . . . . . . 16
SECTION 3. BORROWING PROCEDURES; CERTAIN LOAN TERMS . . . . . 17
3.1 Borrowing Procedures for Revolving Loans; Deemed
Requests for Amounts Due on each Payment Date. . . 17
3.2 Transition to Term Loan; Final Revolving Loan or
Draw on Limited Recourse Agreement . . . . . . . . 18
3.3 Capital Adequacy . . . . . . . . . . . . . . . . . 18
SECTION 4. INTEREST AND FEES. . . . . . . . . . . . . . . . . 19
4.1 Revolving Loans. . . . . . . . . . . . . . . . . . 19
4.2 Term Loan. . . . . . . . . . . . . . . . . . . . . 19
4.3 Method of Calculating Interest and Fees. . . . . . 19
SECTION 5. REPAYMENT OF PRINCIPAL . . . . . . . . . . . . . . 19
5.1 Revolving Loan Principal Payments. . . . . . . . . 19
5.2 Term Loan Principal Payments . . . . . . . . . . . 20
5.3 Prepayment of Loan upon Sale of Other Notes. . . . 20
SECTION 6. APPLICATION OF AMOUNTS ON DEPOSIT IN
COLLECTION ACCOUNT . . . . . . . . . . . . . . . 20
6.1 Application of Amounts on Deposit in the
Collection Account . . . . . . . . . . . . . . . . 20
6.2 Taxes. . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7. BORROWER'S REPRESENTATIONS AND WARRANTIES. . . . . 23
7.1 Existence and Power. . . . . . . . . . . . . . . . 23
7.2 Loan Documents and Note Authorized; Binding
Obligations . . . . . . . . . . . . . . . . . . . 23
7.3 No Conflict; Legal Compliance. . . . . . . . . . . 23
7.4 Executive Offices. . . . . . . . . . . . . . . . . 24
7.5 Litigation . . . . . . . . . . . . . . . . . . . . 24
7.6 Consents and Approvals . . . . . . . . . . . . . . 24
7.7 Other Agreements . . . . . . . . . . . . . . . . . 24
7.8 Margin Regulations . . . . . . . . . . . . . . . . 24
7.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . 24
7.10 Solvency . . . . . . . . . . . . . . . . . . . . . 25
7.11 Representations and Warranties . . . . . . . . . . 25
7.12 Good Title to the Collateral; First Priority
Security Interest . . . . . . . . . . . . . . . . 25
7.13 Investment Company Act . . . . . . . . . . . . . . 25
<PAGE>
SECTION 8. BORROWER'S AFFIRMATIVE COVENANTS . . . . . . . . . 25
8.1 Asset Base Certificates; Additional Access and
Information. . . . . . . . . . . . . . . . . . . . 25
8.2 Existence; Compliance with Law, Books and Records,
Commingling
of Funds . . . . . . . . . . . . . . . . . . . . 26
8.3 Taxes and Other Liabilities. . . . . . . . . . . . 27
8.4 Notice of Liens. . . . . . . . . . . . . . . . . . 27
8.5 Obligations with Respect to Leases . . . . . . . . 27
8.6 Preservation of Security Interest. . . . . . . . . 27
8.7 Consolidated Return. . . . . . . . . . . . . . . . 27
8.8 Taxable Income from the Leases . . . . . . . . . . 27
8.9 Maintenance of Swap Agreement. . . . . . . . . . . 28
8.10 Contribution and Sale Agreement. . . . . . . . . . 28
8.11 Borrower's Identity. . . . . . . . . . . . . . . . 28
8.12 Filing Locations . . . . . . . . . . . . . . . . . 28
SECTION 9. BORROWER'S NEGATIVE COVENANTS. . . . . . . . . . . 28
9.1 Liens; Negative Pledges; and Encumbrances. . . . . 28
9.2 Indebtedness and Guarantees. . . . . . . . . . . . 28
9.3 Amendments of Charter Documents; Conduct of
Business; No Merger . . . . . . . . . . . . . . . 29
9.4 No Use of Lender's Name. . . . . . . . . . . . . . 29
SECTION 10. GRANTS OF SECURITY INTEREST; THE COLLATERAL. . . . 29
10.1 Security Interest. . . . . . . . . . . . . . . . . 29
10.2 Creation of Collection Account; Investments. . . . 30
10.3 Addition of Leases . . . . . . . . . . . . . . . . 30
10.4 Substitution of Leases . . . . . . . . . . . . . . 31
10.5 Release of Liens . . . . . . . . . . . . . . . . . 32
SECTION 11. LIMITATION ON LIABILITY. . . . . . . . . . . . . . 32
SECTION 12. CONDITIONS PRECEDENT TO ALL REVOLVING LOANS. . . . 33
12.1 Notice . . . . . . . . . . . . . . . . . . . . . . 33
12.2 Default. . . . . . . . . . . . . . . . . . . . . . 33
12.3 Warranties . . . . . . . . . . . . . . . . . . . . 33
12.4 Additional Lease Transfer Agreements . . . . . . . 33
SECTION 13. CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN . . 33
13.1 Note . . . . . . . . . . . . . . . . . . . . . . . 33
13.2 Other Agreements and Financing Statements. . . . . 33
13.3 Resolutions. . . . . . . . . . . . . . . . . . . . 34
13.4 Incumbency Certificate . . . . . . . . . . . . . . 34
13.5 By-Laws. . . . . . . . . . . . . . . . . . . . . . 34
13.6 Certificate of Incorporation . . . . . . . . . . . 34
13.7 Good Standing. . . . . . . . . . . . . . . . . . . 35
13.8 Opinion. . . . . . . . . . . . . . . . . . . . . . 35
13.9 Asset Base Certificate . . . . . . . . . . . . . . 35
SECTION 14. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . 35
14.1 Events of Default. . . . . . . . . . . . . . . . . 35
14.2 Waiver of Default. . . . . . . . . . . . . . . . . 36
<PAGE>
14.3 Remedies . . . . . . . . . . . . . . . . . . . . . 36
SECTION 15. EXPENSES AND INDEMNITEES . . . . . . . . . . . . . 39
15.1 Expenses . . . . . . . . . . . . . . . . . . . . . 39
15.2 Indemnification. . . . . . . . . . . . . . . . . . 39
(a) General Indemnity.. . . . . . . . . . . . . . 39
(b) Procedures for Suits. . . . . . . . . . . . . 39
(c) Survival; Defense . . . . . . . . . . . . . . 39
SECTION 16. MISCELLANEOUS. . . . . . . . . . . . . . . . . . 40
16.1 Survival . . . . . . . . . . . . . . . . . . . . . 40
16.2 No Waiver by Lender. . . . . . . . . . . . . . . . 40
16.3 Notices. . . . . . . . . . . . . . . . . . . . . . 40
16.4 Headings . . . . . . . . . . . . . . . . . . . . . 40
16.5 Severability . . . . . . . . . . . . . . . . . . . 40
16.6 Entire Agreement; Construction; Amendments and
Waivers . . . . . . . . . . . . . . . . . . . . . 41
16.7 Reliance by Lender . . . . . . . . . . . . . . . . 41
16.8 Marshalling; Payments Set Aside. . . . . . . . . . 41
16.9 No Set-Offs by Borrower. . . . . . . . . . . . . . 41
16.10 Binding Effect, Assignment Transfer. . . . . . . . 42
16.11 Counterparts . . . . . . . . . . . . . . . . . . . 42
16.12 Equitable Relief . . . . . . . . . . . . . . . . . 42
16.13 Governing Law. . . . . . . . . . . . . . . . . . . 42
16.14 Consent to Jurisdiction. . . . . . . . . . . . . . 43
16.15 Waiver of Jury Trial . . . . . . . . . . . . . . . 43
16.16 General Interpretive Principles. . . . . . . . . . 43
16.17 Termination. . . . . . . . . . . . . . . . . . . . 44
16.18 No Petition Covenants. . . . . . . . . . . . . . . 44
<PAGE>
INDEX OF EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Request for Borrowing
Exhibit B-2 Form of Request for Conversion to Term Loan
Exhibit C Form of Asset Base Certificate
Exhibit D Form of Payment Schedule
Exhibit E Form of Contribution and Sale Agreement
Exhibit F Form of Servicing Agreement
Exhibit G Form of Limited Recourse Agreement
Exhibit H Form of K&E Opinion
Exhibit I Account Information
Exhibit J Form of Addition Certificate
<PAGE>
REVOLVING CREDIT AND TERM LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AND SECURITY AGREEMENT is
entered into as of November 28, 1995, by and between TL Lease Funding Corp.
IV, a Delaware special purpose corporation("Borrower"), and First Union
National Bank of North Carolina("Lender").
RECITALS
A. Borrower desires to enter into a revolving credit facility
with Lender in the principal amount of $35,000,000 for the period specified
herein, secured by, among other things, certain equipment leases and
interests in related equipment, all as more particularly described
below; and
B. Lender has agreed to make such facility available to
Borrower, but only upon the terms and subject to the conditions hereinafter
set forth and in reliance on the representations and warranties set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing
recitals and the mutual covenants hereinafter set forth, and intending
to be legally bound, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. As used herein, the following terms have the
following meanings:
"Additional Lease" means a Lease that is added to the
Collateral pursuant to Section 10.3.
"Additional Lease Cut-Off Date" means, with respect to an
Additional Lease, the close of business on the last day of the
month preceding the related Addition Date.
"Additional Lease Transfer Agreement" means an Assignment
for Additional Assets in the form of Exhibit C to the
Contribution and Sale Agreement pursuant to which Additional
Leases or Substitute Leases are transferred to Borrower by
Trans Leasing.
"Addition Date" means the date upon which an Additional
Lease is added to the Collateral pursuant to Section 10.3.
"Advance Payment" means, with respect to any Lease and
any Collection Period, any Scheduled Lease Payment (or portion
thereof) with respect to a subsequent Collection Period which
the Servicer has received and expressly permitted the related
Lessee to make in advance of its scheduled due date and which
will be applied to such Scheduled Lease Payment on such due date.
<PAGE>
"Advance Rate" means 93.0%.
"Affiliate" means, with respect to any Person, (a) each
Person that, directly or indirectly, through one or more
intermediaries, owns or controls, whether beneficially or as a
trustee, guardian or other fiduciary, five percent (5.0%) or
more of the stock having ordinary voting power in the election
of directors of such Person or of the ownership interests in
any partnership or joint venture, (b) each Person that
controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, or (c) each of such
Person's officers, directors, joint venturers and partners;
provided, however, that in no case shall Lender be deemed to be
an Affiliate of Borrower for purposes of this Agreement. For
the purpose of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies,
whether through the ownership of voting securities, by contract
or otherwise.
"Aggregate Discounted Lease and Residual Balance" means
at any time of determination, an amount equal to the sum of the
Discounted Lease and Residual Balances of the Eligible Leases.
"Aggregate Discounted Lease Balance" means at any time of
determination, an amount equal to the sum of the Discounted
Lease Balances of the Eligible Leases.
"Agreement" means this Revolving Credit and Term Loan and
Security Agreement dated as of November 28, 1995, including all
amendments, modifications and supplements hereto, renewals,
extensions or restatements hereof, and all appendices, exhibits
and schedules to any of the foregoing, and shall refer to the
Agreement as the same may be in effect from time to time.
"Anticipated Pay-off Date" means the first Payment Date
on which the aggregate Scheduled Principal Payments for such
Payment Date and all Payment Dates since the Transition Date
equal or exceed the outstanding principal balance of the Loan
on the Transition Date.
"Asset Base" means, as at and for any date of
determination, an amount equal to the sum of (a) the Advance
Rate multiplied by the Aggregate Discounted Lease Balance and
(b) any amounts on deposit in the Collection Account.
"Asset Base Certificate" means a certificate with
appropriate insertions setting forth the components of the
Asset Base as of the date of determination for which such
certificate is submitted, which certificate shall be
substantially in the form set forth in Exhibit C and executed
by a Responsible Officer of Borrower.
<PAGE>
"Available Amounts" means:
(A) For the Transition Date and any Payment Date
thereafter, all amounts on deposit in the Collection Account on
such Payment Date, other than any amounts (i) representing
Scheduled Lease Payments due in a Collection Period after the
Collection Period related to such Payment Date or (ii) that
were received by the Servicer after the last day of the related
Collection Period (other than any payments received under the
Swap Agreement); and
(B) For any date prior to the Conversion Date, all amounts
on deposit in the Collection Account on such date.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as
amended, as codified under Title 11 of the United States Code,
and the Bankruptcy Rules promulgated thereunder, as the case
may be in effect from time to time.
"Borrower" shall mean TL Lease Funding Corp. IV, a
Delaware corporation.
"Borrower's Account" shall mean the account specified in
Exhibit I hereto, or such other account as may be specified
from time to time by Borrower in writing.
"Business Day" means any day which is not a Saturday,
Sunday or a legal holiday under the laws of the State of
Illinois or North Carolina and is not a day on which banking
institutions located in the State of Illinois or North Carolina
are authorized or permitted by law or other governmental action
to close.
"Casualty Loss" means, with respect to any item of
Equipment, the loss, theft, damage beyond repair or
governmental condemnation or seizure of such item of Equipment.
"Casualty Payment" means any payment under a Lease in
connection with a Casualty Loss.
"Charges" means all federal, state, county, city,
municipal, local, foreign or other governmental taxes, levies,
assessments, charges or claims, in each case then due and
payable, upon or relating to (a) the Loan (but not Lender's
Income Taxes), (b) Borrower's employees, payroll, income or
gross receipts, (c) Borrower's ownership or use of any of its
Properties or (d) any other aspect of Borrower's business.
"Closing Date" means November 28, 1995.
"Code" means the Internal Revenue Code of 1986, as
amended, the Treasury Regulations adopted thereunder and the
<PAGE>
Treasury Regulations proposed thereunder (to the extent Lender,
in its sole discretion, reasonably determines that such
proposed regulations set forth the regulations that apply in
the circumstances), as the same may be in effect from time to time.
"Collateral" means the collateral described in Section 10.1.
"Collection Account" means the account established pursuant to
Section 10.2(a).
"Collection Period" means a calendar month, except that
the first Collection Period shall be the period commencing on
the Cut-Off Date and ending on November 30, 1995. A Collection
Period is deemed to be related to the Payment Date occurring in
the immediately following Collection Period.
"Collections" means all payments received on or with
respect to the Leases or the related Equipment, including,
without limitation, Scheduled Lease Payments, Advance Payments,
Servicer Advances, Liquidation Proceeds, Warranty Purchase
Prices, Insurance Proceeds, Early Termination Lease Proceeds,
Expired Lease Proceeds and Prepayments, all as related to
amounts attributable to the Equipment and the Leases, but
excluding any Excluded Amounts.
"Commitment Expiration Date" means March 31, 1996.
"Contribution and Sale Agreement" shall mean the
Contribution and Sale Agreement dated as of November 28, 1995
between Borrower and Trans Leasing, as the same may from time
to time be amended, modified, supplemented or renewed.
"Conversion Date" means the earlier of (1) the last day
of the Collection Period in which the Commitment Expiration
Date occurs, (2) the last day of the Collection Period in which
an Early Amortization Event occurs, or (3) the date specified
by Borrower in a request for conversion to the Term Loan
pursuant to Section 3.2.
"Cut-Off Date" means, with respect to each Original
Lease, November 26, 1995, with respect to each Additional
Lease, the related Additional Lease Cut-Off Date, and with
respect to each Substitute Lease, the related Substitute Lease
Cut-Off Date
"Daily Interest" means, for any day, an amount equal to
the product of (i) the Interest Rate for such day divided by
360 times (ii) the balance of the Loan for such day.
"Defaulted Lease" means a Lease as to which (i) the
Servicer has determined in its sole discretion, in accordance
with its customary servicing procedures, that such Lease is not
<PAGE>
collectible, or (ii) all or part of a Scheduled Lease Payment
thereunder (other than a Skipped Payment, as defined in the
Servicing Agreement) is more than 180 days delinquent.
"Determination Date" means, with respect to a Collection
Period, the close of business on the last day of such
Collection Period.
"Discounted Equipment Residual Value" means, with respect
to any Equipment, at any time of determination, the present
value of the Equipment Residual Value of such Equipment,
calculated at the Discount Rate in the manner described below:
In connection with all calculations required to be made
pursuant to this Agreement with respect to the determination of
Discounted Equipment Residual Values, for any date of
determination the "Discounted Equipment Residual Value" for
such Equipment shall be calculated assuming:
(i) all amounts are received on the last day of the
Collection Period in which the related Lease expires in
accordance with its terms;
(ii) amounts are discounted on a monthly basis using a
30-day month and a 360-day year;
(iii) payments are discounted to the last day of the
Collection Period in which the date of determination falls.
"Discounted Lease Balance" means, with respect to any
Lease, at any time of determination, the sum of (i) the present
value of all of the remaining Scheduled Lease Payments becoming
due under such Lease after such date of determination, discounted
monthly at the Discount Rate in the manner described below and
(ii) the aggregate amount of all Scheduled Lease Payments (due
after the Cut-Off Date) then due and payable under such Lease
which have not been received by the Servicer; provided, however,
that the Discounted Lease Balance of any Defaulted Lease, Early
Termination Lease or Expired Lease or Lease purchased by Trans
Leasing or the Servicer shall be equal to zero.
In connection with all calculations required to be made
pursuant to this Agreement with respect to the determination of
Discounted Lease Balances, for any date of determination the
"Discounted Lease Balance" for each Lease shall be calculated
assuming:
(i) all payments due in any Collection Period are due
on the last day of such Collection Period;
(ii) payments are discounted on a monthly basis using a
30-day month and a 360-day year;
<PAGE>
(iii) payments are discounted to the last day of the
Collection Period in which the date of determination falls.
"Discounted Lease and Residual Balance" means, with respect
to any Lease, at any time of determination, the sum of (i) the
Discounted Lease Balance plus (ii) the Discounted Equipment
Residual Value for the related Equipment; provided, however, that
the Discounted Lease and Residual Balance of any Defaulted Lease,
Early Termination Lease or Expired Lease or Lease purchased by
Trans Leasing or the Servicer shall be equal to zero.
"Discount Rate" means, as of any date of determination, a
per annum rate equal to
(a) With respect to the Cut-Off Date and the Closing Date,
8.0% per annum, and for any other date of determination prior to
the Transition Date, the sum of (i) the average of the effective
yield on United States Treasury obligations with a remaining
maturity closest to the remaining average life of the Leases on
such date of determination for the days from the first day of the
Collection Period in which such date of determination occurs
through (x) the Business Day immediately prior to such date of
determination, or (y) if such date of determination is a
Determination Date, such Determination Date, (ii) 150 basis
points, and (iii) the Servicing Fee Rate, and
(b) On and after the Transition Date, the fixed rate of
interest determined as of the Transition Date equal to the sum of
(i) 100 basis points, (ii) the fixed rate of interest to be paid
by Borrower under the Swap Agreement, plus (iii) the Servicing
Fee Rate.
"Early Amortization Event" means the occurrence of any of
the following as of any date prior to the Conversion Date:
(1) Any Servicer Default has occurred under the
Servicing Agreement;
(2) The principal balance of the Loan as of any
Determination Date exceeds the Asset Base, as reflected on
the Asset Base Certificate prepared as of such Determination
Date; provided, that if Borrower cures such condition on or
prior to the immediately following Payment Date by the
addition of Leases pursuant to Section 10.3 or the
prepayment of principal (from funds other than Collections)
and submits to Lender a revised Asset Base Certificate as of
such Determination Date giving effect to such additions
and/or prepayments, no Early Amortization Event shall be
deemed to have occurred;
(3) The average of the sum of the Discounted Lease
Balances of Leases that are more than 90 days delinquent as
<PAGE>
of the six (6) preceding Determination Dates exceeds two
percent (2%) of the average of the Aggregate Discounted
Lease Balance as of such six (6) preceding Determination
Dates, as reflected on the most recent Monthly Statement
delivered pursuant to the Servicing Agreement; or
(4) Two (2) times the sum of the Discounted Lease
Balances of Leases that became Defaulted Leases in the six
(6) preceding Collection Periods exceeds five percent (5%)
of the average of the Aggregate Discounted Lease Balances as
of the Determination Dates related to such six (6) preceding
Collection Periods, as reflected on the most recent Monthly
Statement delivered pursuant to the Servicing Agreement.
"Early Termination Lease" means any Lease that has
terminated prior to its scheduled expiration date (including
because of a Casualty Loss), other than a Defaulted Lease.
"Early Termination Lease Proceeds" means any and all cash
proceeds or rents realized from the sale or release of Equipment
under an Early Termination Lease (net of Liquidation Expenses).
"Eligible Investment" has the meaning set forth in the
Servicing Agreement.
"Eligible Lease" shall mean any Lease that is not a
Defaulted Lease and with respect to which all of the
representations and warranties set forth in Section 3.01(a) of
the Contribution and Sale Agreement were true as of the date
made.
"Equipment" means the assets leased to a Lessee pursuant to
a Lease.
"Equipment Residual Value" means the anticipated residual
value of the Equipment related to a Lease upon the expiration of
such Lease in accordance with its terms (as such residual value
is estimated by Trans Leasing on or about the date on which such
Lease was created in accordance with its normal valuation
procedures), but not in excess of any purchase option price with
respect thereto.
"Event of Default" means any of the events set forth in
Section 14.1.
"Excluded Amounts" means any payments received from a Lessee
in connection with any late fees, any taxes, fees or other charges
imposed by any Governmental Authority, any insurance premiums or fees,
any indemnity payments made by a Lessee for the benefit of the lessor
under the related Lease or any payments collected from a Lessee
relating to servicing and/or maintenance payments pursuant to the
related Lease or maintenance agreement,as applicable.
<PAGE>
"Expired Lease" means any Lease that has terminated on its
scheduled expiration date.
"Expired Lease Proceeds" means any and all cash proceeds or
rents realized from the sale or release of Equipment under an
Expired Lease (net of Liquidation Expenses).
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System and any successor thereto.
"Filing Locations" means the States of Alabama, Arizona,
California, Delaware, Florida, Georgia, Illinois, Indiana,
Maryland, Massachusetts, New Jersey, New York, North Carolina,
Ohio, Pennsylvania, Texas and Virginia.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other
statements by the Securities and Exchange Commission as may be in
general use by significant segments of the U.S. accounting
profession, which are applicable to the circumstances as of the
date of determination.
"Government Action" has the meaning set forth in Section
14.1(f).
"Governmental Authority" means (a) any federal, state,
county, municipal or foreign government, or political subdivision
thereof, (b) any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality
or public body, (c) any court or administrative tribunal or (d)
with respect to any Person, any arbitration tribunal or other
non-governmental authority to the jurisdiction of which such
Person has consented.
"Income Taxes" means any federal, state, local or foreign
taxes based upon, measured by, or imposed upon gross or net
income, gross or net receipts, capital, net worth, or the
privilege of doing business, including but not limited to the
Michigan single business tax, the Massachusetts excise tax, and
the Kentucky license tax, and any minimum taxes or withholding
taxes based upon any of the foregoing, including any penalties,
interest or additions to tax imposed with respect thereto.
"Indebtedness" means, as to any Person, (a) all indebtedness
of such Person for borrowed money, (b) all leases of equipment of
such Person as lessee, (c) to the extent not included in clause
(b), above, all capital leases of such Person as lessee, and (d)
all other obligations to make any payment of any kind, whether or
not such obligation is contingent upon any event or condition,
<PAGE>
other than trade payables incurred in the ordinary course of its
business.
"Indemnified Liability" has the meaning set forth in Section
15.2(a).
"Indemnified Person" has the meaning set forth in Section
15.2(a).
"Insurance Policy" means with respect to any Lease, an
insurance policy covering physical damage to or loss of the
related Equipment.
"Insurance Proceeds" means, depending on the context, any
amounts payable or any payments made, to the Servicer under an
Insurance Policy.
"Interest Arrearage" means, with respect to any Payment
Date, any Monthly Interest and Interest Arrearage due on the
immediately preceding Payment Date, but remaining unpaid as of
such Payment Date, together with interest thereon at the Interest
Rate for such current Payment Date.
"Interest Rate" means:
(A) for any day on and prior to the Transition Date,
the LIBO Rate for such day plus 75 basis points, and
(B) for any day after the Transition Date, the LIBO
Rate for such day plus 100 basis points.
"Investment Company Act" means the Investment Company Act of
1940, as amended (15 U.S.C. 80a-1 et seq.), as the same may be in
effect from time to time, or any successor statute thereto.
"IRS" means the Internal Revenue Service and any successor
thereto.
"Lease" means each agreement, including, as applicable,
schedules, subschedules, summary schedules, supplements and
amendments to a master lease, pursuant to which Trans Leasing, as
lessor, leases specified assets to a Lessee at a specified
monthly or quarterly rental, and which is identified in the List
of Leases, including all Original Leases, Additional Leases and
Substitute Leases; provided, that, from and after the date on
which a Lease is purchased by Trans Leasing pursuant to Section
3.03 of the Contribution and Sale Agreement or a Lease is
replaced with a Substitute Lease pursuant to Section 10.4, such
Lease shall no longer be a Lease for purposes of this Agreement.
"Lease File" shall have the meaning set forth in the
Servicing Agreement.
<PAGE>
"Lessee" means with respect to any Lease, the Person or
Persons obligated to make payments with respect to such Lease,
including any guarantor thereof.
"LIBO Rate" means, for any date, the rate per annum for
deposits in U.S. Dollars for a period of one month (adjusted for
reserves) which appears on the Dow Jones Telerate Service Page
3750 as of 11:00 a.m., London time, on such date. If such rate
does not appear on such page (or such other page as may replace
that page on that service, or if such service is no longer
offered, such other service for displaying LIBOR or comparable
rates as may be selected by Lender after consultation with
Borrower), the rate shall be the Reference Bank Rate. The
"Reference Bank Rate" shall be determined on the basis of the
rates at which deposits in U.S. Dollars are offered by the
reference banks (which shall be four major banks that are engaged
in transactions in the London interbank market, selected by
Lender after consultation with Borrower) as of 11:00 a.m., London
time, on such date for a period of one month (adjusted for
reserves) in amounts of not less than U.S.$1,000,000 that are
representative for single transactions in such market at such
time. Lender shall request the principal London office of each
of such reference banks to provide a quotation of its rate. If
at least two such quotations are provided, the rate shall be the
arithmetic mean of the quotations, rounded upwards to the nearest
one-sixteenth of one percent. If on any such day fewer than two
quotations are provided as requested, the rate shall be the
arithmetic mean, rounded upwards to the nearest one-sixteenth of
one percent, of the rates quoted by one or more major banks in
New York City, selected by Lender after consultation with
Borrower, as of 11:00 a.m., New York City time, on such day to
leading European banks for United States dollar deposits for a
period of one month (adjusted for reserves) in amounts of not
less than U.S.$1,000,000 that are representative for single
transactions in such market at such time. If no such quotations
can be obtained, the rate shall be the LIBO Rate for the
immediately preceding date. Notwithstanding the foregoing, if,
for any date after the Transition Date, the interest rate used in
determining the amount of payments to be received by Borrower
under the then existing Swap Agreement is not equal to the LIBO
Rate determined as described above, the LIBO Rate shall be equal
to such interest rate as used in such Swap Agreement.
"LIBOR Business Day" means any day other than a Saturday,
Sunday or any other day on which banks in London are required or
authorized to be closed.
"Lien" means any mortgage, pledge, hypothecation, assignment
for security, security interest, encumbrance, levy, lien or
charge of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, affecting any Property, including
any agreement to grant any of the foregoing, any conditional sale
<PAGE>
or other title retention agreement, any lease in the nature of a
security interest, and the filing of or agreement to file or
deliver any financing statement (other than a precautionary
financing statement with respect to a lease that is not in the
nature of a security interest) under the UCC or comparable law of
any jurisdiction.
"Limited Recourse Agreement" means that certain Limited
Recourse Agreement dated as of the date hereof, in the form of
Exhibit G hereto, executed by Trans Leasing in favor of Lender,
including all amendments, modifications and supplements hereto,
renewals, extensions or restatements thereof.
"Liquidation Expenses" means, with respect to any Lease, the
aggregate amount of out-of-pocket expenses incurred by the
Servicer (including amounts paid to any subservicer) 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 Lease 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 Lease if it is a
Defaulted Lease.
"Liquidation Proceeds" means with respect to a Defaulted
Lease, proceeds from the sale or release of the Equipment,
proceeds of the related Insurance Policy and any other recoveries
with respect to such Defaulted Lease and the related Equipment,
net of Liquidation Expenses and amounts so received that are
required to be refunded to the Lessee on such Lease.
"List of Leases" means a list, prepared as of the Cut-Off
Date, of the Original Leases delivered to Lender by Borrower and
certified by a Responsible Officer of Borrower which includes a
true and complete list as of the Cut-Off Date, of all Leases
identified by Lease Number, original Equipment cost, Discounted
Lease Balance as of the Cut-Off Date, effective date and the
original Lease term, in the form attached hereto as Schedule 1
and which shall have attached to it a list (in printed,
microfiche or computer tape form) showing the Scheduled Lease
Payments for each Original Lease as of the Cut-Off Date. The
List of Leases shall be deemed supplemented and amended to
incorporate therein the amendments delivered in connection with
the Additional Leases pursuant to Section 10.3 and Substitute
Leases pursuant to Section 10.4 and the deletion of Leases that
are repurchased by Trans Leasing pursuant to Section 3.03 of the
Contribution and Sale Agreement or replaced pursuant to Section
10.4 or with respect to which all Liquidation Proceeds or other
proceeds from the disposition of the related Equipment upon
expiration or termination thereof have been deposited in the
Collection Account.
<PAGE>
"Loan" means the Revolving Loans and the Term Loan.
"Loan Commitment Amount" means $35,000,000.
"Loan Document" when used in the singular and "Loan
Documents" when used in the plural means any and all of this
Agreement, the Note, the Contribution and Sale Agreement, the
Servicing Agreement and the Limited Recourse Agreement, as the
same may from time to time be amended, modified, supplemented or
renewed.
"Material Adverse Effect" means any set of circumstances or
events which, individually or in the aggregate, (a) has or would
reasonably be expected to have any material adverse effect upon
the validity or enforceability of any Loan Document, (b) is or
would reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of
Borrower, or (c) materially impairs or would reasonably be
expected to materially impair the ability of Lender to enforce
any of its legal remedies pursuant to the Loan Documents.
"Maturity Date" means the Payment Date following the final
date on which a Scheduled Lease Payment is due under any Lease
that is included in the Collateral at the close of business on
the Transition Date.
"Monthly Interest" means, for any Payment Date, an amount
equal to the sum of the Daily Interest for each day in the
related Collection Period.
"Monthly Statement" shall have the meaning set forth in the
Servicing Agreement.
"Note" means Borrower's note in the form of Exhibit A
hereto, and any and all replacements, extensions, substitutions
and renewals thereof.
"Obligations" has the meaning set forth in Section 10.1.
"Original Lease" means a Lease that is included in the
Collateral on the Closing Date.
"Other Taxes" has the meaning set forth in Section 6.2(b).
"Payment Date" means (i) the 18th day of each calendar month
(other than the month following the month in which the Conversion
Date occurs) or if such day is not a Business Day, the
immediately following Business Day, commencing on January 18,
1996, and (ii) for the month following the month in which the
Conversion Date occurs, the Transition Date.
"Payment Schedule" means a schedule, substantially in the
<PAGE>
form of Exhibit D hereto, setting forth, for each Payment Date
occurring after the Transition Date, the Scheduled Principal
Payment for such Payment Date, calculated as (a) the sum of all
Scheduled Lease Payments on the Leases becoming due in the
related Collection Period, after giving effect to the application
of any prepayment thereof prior to the Conversion Date, less (b)
the Servicing Fee for such Payment Date, less (c) the payment
(calculated based on a fixed rate of interest applied to the
anticipated balance of the Loan) that will be due to the Swap
Counterparty under the Swap Agreement on such Payment Date, less
(d) one twelfth of 1.00% of the anticipated balance of the Loan
for the last day of the related Collection Period, all calculated
assuming no defaults or prepayments under the Leases or on the
Term Loan.
"Permitted Liens" means:
(a) Liens granted in favor of Lender under this Agreement;
(b) Liens for Charges if payment shall not at the time be
required to be made in accordance with Section 8.3 and for which
Borrower has set aside adequate reserves on its books; and
(c) Liens constituting the rights of Lessees under Leases.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit
corporation, inn, joint stock company, estate, entity or
Governmental Authority.
"Potential Event of Default" means a condition or event
which, after notice or lapse of time or both, will constitute an
Event of Default.
"Prepayment" means with respect to each Lease, any one or
more Scheduled Lease Payments which are received in advance of
their scheduled due date from the Lessee (including early
termination payments under any Early Termination Lease), any
Liquidation Proceeds, Casualty Payments or Insurance Proceeds or
otherwise, other than Advance Payments.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, whether tangible or
intangible.
"Regulations G, T, U and X" means, collectively, Regulations
G, T, U and X adopted by the Federal Reserve Board (12 C.F.R.
Parts 207, 220, 221 and 224, respectively) and any other
regulation in substance substituted therefor.
"Responsible Officer" of any Person means any of the
President, Executive Vice President, Vice President-Finance,
<PAGE>
Chief Financial Officer, Treasurer or Corporate Controller of
such Person.
"Restricting Event" shall be deemed to exist on any Payment
Date on which any of the following conditions has occurred and is
continuing: (1) a Servicer Default under the Servicing Agreement,
(2) the average of the sum of the Discounted Lease Balances of
Leases that are more than 90 days delinquent as of the six (6)
preceding Determination Dates exceeds three percent (3%) of the
average of the Aggregate Discounted Lease Balances as of such six
(6) preceding Determination Dates, as reflected on the most
recent Monthly Statement delivered pursuant to the Servicing
Agreement, or (3) two (2) times the sum of the Discounted Lease
Balances of Leases that became Defaulted Leases in the six (6)
preceding Collection Periods exceeds seven and one-half percent
(7.5%) of the average of the Aggregate Discounted Lease Balances
as of the Determination Dates related to such six (6) preceding
Collection Periods, as reflected on the most recent Monthly
Statement delivered pursuant to the Servicing Agreement.
"Revolving Loan" has the meaning set forth in Section 2.1.
"S&P" means Standard & Poor's Ratings Services, a division
of McGraw Hill Inc.
"Scheduled Lease Payments" means with respect to any Lease,
the monthly or quarterly rent payments scheduled to be made by
the related Lessee under the terms of such Lease after the
related Cut-Off Date.
"Scheduled Principal Payment" shall mean, for each Payment
Date, the amount set forth on the Payment Schedule for such
Payment Date.
"SEC" means the Securities and Exchange Commission and any
successor thereto.
"Servicer" means Trans Leasing, in its capacity as the
Servicer under the Servicing Agreement, or any successor servicer
under the Servicing Agreement.
"Servicer Default" has the meaning specified in the
Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement, dated
the date hereof, among Borrower, Trans Leasing, as Servicer and
Lender, as the same may from time to time be amended, modified,
supplemented or renewed.
"Servicing Fee" means, for any Payment Date, the monthly
servicing fee payable to the Servicer for its services under the
Servicing Agreement, which shall be equal to one-twelfth of the
product of the Servicing Fee Rate and the Aggregate Discounted
<PAGE>
Lease and Residual Balance on the first day of the related
Collection Period.
"Servicing Fee Arrearage" means, for any Payment Date, any
Servicing Fee payable to the Servicer on a prior Payment Date,
but remaining unpaid as of such Payment Date.
"Servicing Fee Rate" means 1.00% per annum.
"Servicer's Account" shall mean the account specified in
Exhibit I hereto, or such other account as may be specified from
time to time by the Servicer in writing.
"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
business or action, for which such Person's property would
constitute unreasonably small capital.
"Specified Portfolio Characteristics" means the
representations and warranties set forth in Section 3.01(a)(xxi)
of the Contribution and Sale Agreement
"Substitute Lease" means a Lease that is added to the
Collateral pursuant to Section 10.4.
"Substitute Lease Cut-Off Date" means, with respect to an
Substitute Lease, the close of business on the last day of the
month preceding the related Substitution Date.
"Substitution Date" means the date on which a Substitute
Lease is added to the Collateral pursuant to Section 10.4.
"Swap Agreement" means an interest rate swap agreement or a
combination of other derivatives which have the net effect of
creating a synthetic interest rate swap agreement between
Borrower and a Swap Counterparty reasonably satisfactory to
Lender, providing for payment of the LIBO Rate to Borrower in
<PAGE>
return for a fixed rate of interest by Borrower, in each case, on
a notional amount based on the anticipated outstanding principal
balance of the Loan, on terms reasonably satisfactory to Lender.
"Swap Breakage Costs" means the payment, if any, necessary
in order to induce the Swap Counterparty to decrease the notional
amount of the Swap Agreement or to enter into a revised Swap
Agreement in order to provide for an effective notional amount
equal to the outstanding principal balance of the Loan.
"Swap Breakage Event" has the meaning set forth in Section
8.9.
"Swap Counterparty" means the counterparty on the Swap
Agreement.
"Swap Counterparty Account" shall mean the account specified
in the Swap Agreement for payments to the Swap Counterparty.
"Term Loan" has the meaning set forth in Section 2.2.
"Term Loan Monthly Principal" means, with respect to a
Payment Date, the sum of (i) the Scheduled Principal Payment for
such Payment Date, (ii) the Term Loan Principal Payment Arrearage
for such Payment Date, (iii) unless a Substitute Lease was
substituted therefor in accordance with Section 10.4, an amount
equal to the Discounted Lease Balance of any Lease that (a)
became a Defaulted Lease during the preceding Collection Period,
(b) became an Early Termination Lease prior to its scheduled
expiration for any other reason (including a Casualty Loss)
during the related Collection Period, or (c) was required to be
repurchased by Trans Leasing pursuant to Section 3.03 of the
Contribution and Sale Agreement during the related Collection
Period; provided, that the Term Loan Monthly Principal shall
equal the entire outstanding principal balance of the Term Loan
on the Maturity Date; and provided, that the Term Loan Monthly
Principal shall never exceed the outstanding principal balance of
the Note.
After the Transition Date, in the event that Borrower shall
have failed to deliver all of the documents required by Section
3.2, the Term Loan Monthly Principal shall equal all Available
Amounts remaining on deposit in the Collection Account after
payment of the amounts set forth in clauses (1) through (6) of
Section 6.1(b) until such documents are delivered to Lender
provided, that the Term Loan Monthly Principal shall never exceed
the outstanding principal balance of the Note.
"Term Loan Monthly Principal Arrearage" means, for any
Payment Date, that portion of the Term Loan Monthly Payment that
was due on the immediately preceding Payment Date, that was not
paid on such immediately preceding Payment Date.
<PAGE>
"Transition Date" means the fifth day of the month following
the month in which the Conversion Date occurs, or if such day is
not a Business Day, the immediately following Business Day.
"Trans Leasing" means Trans Leasing International, Inc., a
Delaware corporation.
"UCC" means the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Illinois
provided, however, in the event that, by reason of mandatory
provisions of law, any and all of the attachment, perfection or
priority of the Lien of Lender in and to the Collateral is
governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Illinois the term "UCC"
shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of
definitions related to such provisions.
"Warranty Event" has the meaning provided in the
Contribution and Sale Agreement.
"Warranty Purchase Price" means, with respect to a Lease and
date of determination, an amount equal to the Discounted Lease
Balance as of the preceding Determination Date, plus one month's
interest thereon at the Interest Rate for the preceding Payment
Date, but in no event greater than the Discounted Lease Balance
of such Lease as of the related Cut-Off Date.
SECTION 2. COMMITMENT TO LEND. Subject to the terms and
conditions of this Agreement and in reliance upon the representations
and warranties of Borrower set forth herein, Lender agrees:
2.1 Revolving Loans. To make loans from time to time as
provided in Section 3.1 (a), Section 3.1(b), Section 3.1(c), Section
3.1(f) and Section 3.2(b) on or prior to the Transition Date
(collectively called the "Revolving Loans" and individually called a
"Revolving Loan") to Borrower, which Revolving Loans Borrower may from
time to time repay and reborrow during the period from the date hereof
to and including the Transition Date, but not exceeding in the
aggregate at any one time outstanding the Loan Commitment Amount.
2.2 Term Loan. On the Transition Date, the Revolving Loans
shall convert to a term loan (the "Term Loan").
SECTION 3. BORROWING PROCEDURES; CERTAIN LOAN TERMS.
3.1 Borrowing Procedures for Revolving Loans; Deemed
Requests for Amounts Due on each Payment Date.
(a) On the Closing Date, the Lender shall make a Revolving
Loan in the amount of $16,035,208, which shall not exceed the Advance
<PAGE>
Rate multiplied by the Aggregate Discounted Lease Balance as of the
Cut-Off Date. Lender shall make such funds available to Borrower by
wire transfer to Borrower's Account.
(b) Subject to the limitation set forth in Section 2.1,
Borrower may request Revolving Loans on any date prior to the
Conversion Date in an amount equal to the product of (i) the Advance
Rate and (ii) the sum of the Discounted Lease Balances of Additional
Leases that are added to the Collateral in accordance with Section
10.3 on the day of such request (calculated using the Discount Rate
for such date). Each such request shall be accompanied by an Addition
Certificate in the form of Exhibit J hereto signed by a Responsible
Officer (x) indicating the sum of the Discounted Lease Balances of
Additional Leases that are added to the Collateral in accordance with
Section 10.3 on the day of such request and (y) certifying that the
requirements of Section 10.3 have been satisfied and that the
conditions precedent set forth in Section 12 have been satisfied.
(c) Subject to the limitation set forth in Section 2.1,
prior to the Conversion Date, on any date during any Collection Period
Borrower may request a Revolving Loan in an amount equal to the
amount, if any, by which the Asset Base reflected on the Asset Base
Certificate delivered pursuant to Section 8.1(a) as of the preceding
Determination Date, exceeds the outstanding principal balance of the
Loan as of such Determination Date.
(d) Borrower shall give Lender prior written notice or
telephonic notice followed within one day by written notice of each
requested Revolving Loan under Section 3.1(b) or (c). Each such
notice shall be in the form of Exhibit B-1 hereto and shall specify
(i) the borrowing date (which shall be a Business Day), and (ii) the
amount of the Revolving Loan. Each request for a Revolving Loan shall
be received by Lender not later than 11:00 a.m., Charlotte time, two
(2) Business Days prior to the borrowing date with respect to such
requested Revolving Loan. Each Revolving Loan shall be in a minimum
aggregate amount of $100,000. Each such written notice shall be
irrevocable.
(e) On or before 11:00 a.m., Charlotte time, on the
borrowing date specified for a requested Revolving Loan, provided that
all conditions precedent set forth herein to the making of such
requested Revolving Loan have been satisfied (unless waived in
accordance with the provisions of this Agreement) Lender shall make
funds available in the amount of such requested Revolving Loan to
Borrower by wire transfer to Borrower's Account.
(f) On each Payment Date through and including the
Transition Date, Borrower, without any action, shall be deemed to have
irrevocably requested a Revolving Loan in an amount equal to the sum
of (i) the Servicing Fee and any Servicing Fee Arrearage for such
Payment Date and (ii) the Monthly Interest due on such Payment Date
and any Monthly Interest Arrearage for such Payment Date, to the
<PAGE>
extent that such amounts have not previously been paid and funds are
not available therefor as described in Section 6.1(a). Lender shall
remit the proceeds of such Revolving Loan on such Payment Date in the
manner set forth in Section 6.1(a).
3.2 Transition to Term Loan; Final Revolving Loan or Draw
on Limited Recourse Agreement.
(a) Borrower may, at its option, give Lender a written
request ("Request") to convert the Revolving Loans to the Term Loan.
The Request shall be in the form of Exhibit B-2 hereto and shall
specify (i) the Conversion Date (which shall be the last day of a
Collection Period) and (ii) Borrower's estimate of the fixed rate of
interest that will be payable to the Swap Counterparty under the Swap
Agreement. The Request shall be received by Lender not later than
11:00 a.m., Charlotte time, two (2) Business Days prior to the
Conversion Date. The Request shall be irrevocable.
(b) No later than 11:00 a.m., Charlotte time, on the
Transition Date, Borrower shall deliver a completed Asset Base
Certificate to Lender reflecting the Asset Base as of the Conversion
Date (calculated using the Discount Rate for the Transition Date). On
the Transition Date, Lender shall make a final Revolving Loan in the
amount equal to the amount, if any, by which (i) the lesser of (A) the
Asset Base reflected on such Asset Base Certificate and (B) the Loan
Commitment Amount, exceeds (ii) the outstanding principal balance of
the Loan, taking into account the Revolving Loan made on the
Transition Date pursuant to Section 3.1(f). Alternatively, on the
Transition Date, Lender shall require Trans Leasing to make a
contribution to Borrower in the amount, if any, required under the
Limited Recourse Agreement.
(c) On or prior to the Transition Date, Borrower shall
arrange for and enter into the Swap Agreement with the Swap
Counterparty. Borrower shall deliver to Lender evidence that it has
entered into the Swap Agreement no later than the second Business Day
following the Transition Date. Borrower shall deliver to Lender the
Payment Schedule no later than the fifth Business Day after the
Transition Date. Borrower shall deliver to Lender a copy of the
executed Swap Agreement as soon as practicable, but in no event later
than the thirtieth day following the Transition Date.
3.3 Capital Adequacy. On or prior to the Transition Date,
if Lender shall reasonably determine that the application or adoption
of any law, rule, regulation, directive, interpretation, treaty or
guideline regarding capital adequacy, or any change therein or in the
interpretation or administration thereof, whether or not having the
force of law (including, without limitation, application of changes to
Regulation H and Regulation Y of the Federal Reserve Board issued by
the Federal Reserve Board on January 19, 1989 and regulations of the
Comptroller of the Currency, Department of the Treasury, 12 CFR Part
3, Appendix A, issued by the Comptroller of the Currency on January
<PAGE>
27, 1989) increases the amount of capital required or expected to be
maintained by Lender or any Person controlling Lender, and such
increase is based upon the existence of Lender's obligations hereunder
to make the Revolving Loans and other commitments of this type, then
from time to time, within 10 days after demand from Lender accompanied
by the certificate described in the second following sentence,
Borrower shall pay to Lender such amount or amounts as will reasonably
compensate Lender or such controlling Person, as the case may be, for
such increased capital requirement. The determination of any amount
to be paid by Borrower under this Section 3.3 shall take into
consideration the policies of Lender or any Person controlling Lender
with respect to capital adequacy and shall be based upon reasonable
averaging, attribution and allocation methods. A certificate of
Lender setting forth the calculation of the amount or amounts as shall
be necessary to reasonably compensate Lender as specified in this
Section 3.3 shall be delivered to Borrower and shall be conclusive in
the absence of manifest error.
SECTION 4. INTEREST AND FEES.
4.1 Revolving Loans. The Monthly Interest Amount and any
Interest Arrearage for any Payment Date through and including the
Transition Date shall be due and payable on such Payment Date as
described in Section 6.1(a).
4.2 Term Loan. The Monthly Interest and any Interest
Arrearage for each Payment Date after the Transition Date shall be due
and payable on such Payment Date after the Transition Date as
described in Section 6.1(b).
4.3 Method of Calculating Interest and Fees. Interest
shall be computed on the basis of a year consisting of 360 days and
paid for actual days elapsed.
SECTION 5. REPAYMENT OF PRINCIPAL.
5.1 Revolving Loan Principal Payments.
(a) Mandatory Prepayments. There shall be no mandatory
payments of principal on the Revolving Loans, except for an
acceleration of the Revolving Loans pursuant to Section 14.3.
(b) Optional Prepayments.
(i) Prior to the Transition Date, Borrower may from
time to time, in an amount not less than $100,000 upon prior written
or telephonic notice received by Lender on or prior to the date of
such prepayment, prepay the principal of the Revolving Loans in
whole or in part, without penalty.
(ii) On and prior to the Conversion Date, any Available
Amounts on deposit in the Collection Account at 2:00 p.m.,
<PAGE>
Charlotte time, on any Business Day shall be withdrawn by Lender
and applied as a principal payment, unless Borrower shall have
instructed Lender in writing or by telephone, followed within one
Business Day by written confirmation, not to apply such amount as
a principal payment.
5.2 Term Loan Principal Payments.
(a) Mandatory Scheduled Prepayments and Arrearages. The Term
Loan Monthly Principal Amount shall be payable on each Payment Date
after the Transition Date; provided that the entire outstanding
principal balance of the Term Loan shall be due and payable on the
Maturity Date.
(b) Optional Prepayments. On the Transition Date and on any
Payment Date thereafter, Borrower may in an amount not less than
$100,000 upon at least one Business Day's prior written or telephonic
notice received by Lender, prepay the principal of the Term Loan in
whole or in part; provided that (i) such prepayment shall be made
after payment of the amounts described in clauses (1) through (7) of
Section 6.1(b) for such Payment Date, and (ii) Borrower shall have
paid any Swap Breakage Costs incurred in connection with any
corresponding reduction in the notional balance on the Swap Agreement.
Optional prepayments of principal under this Section 5.2(b) shall not
be deemed to include any amounts included in the definition of Term
Loan Monthly Principal.
5.3 Prepayment of Loan upon Sale of Other Notes. The
outstanding principal balance of the Loan, together with all accrued
and unpaid principal, interest, fees and other amounts then due and
owing hereunder shall be due and payable upon the sale to third
parties of notes secured by (or other instruments representing
interests in) any or all of the Collateral. In connection therewith,
Lender shall release its security interest in the Collateral and
execute all documents reasonably requested by Borrower in connection
therewith, including UCC-3 termination statements.
SECTION 6.APPLICATION OF AMOUNTS ON DEPOSIT IN COLLECTION ACCOUNT.
6.1 Application of Amounts on Deposit in the Collection Account.
(a) On each Payment Date prior to the Conversion Date and on
the Transition Date, Lender shall apply Available Amounts on deposit
in the Collection Account and proceeds of the Revolving Loan made on
such Payment Date under Section 3.1(f) to pay the following amounts in
the following priority:
(1) to the Servicer by wire transfer to the Servicer's
Account, any Servicing Fee Arrearage;
(2) to the Servicer by wire transfer to the Servicer's
Account, any other accrued and unpaid Servicing Fee;
<PAGE>
(3) to Lender, any Interest Arrearage for such Payment Date;
and
(4) to Lender, the Monthly Interest for such Payment Date.
(b) On each Payment Date after the Transition Date, Lender
shall apply Available Amounts on deposit in the Collection Account to
pay the following amounts in the following priority:
(1) to the Servicer by wire transfer to the Servicer Account,
the amount of any unreimbursed Servicer Advances and advances for
Swap Breakage Costs that are reimbursable pursuant to the Servicing
Agreement;
(2) to the Servicer by wire transfer to the Servicer Account
any Servicer Fee Arrearage for such Payment Date;
(3) to the Servicer by wire transfer to the Servicer Account
the Servicing Fee for such Payment Date;
(4) to the Swap Counterparty by wire transfer to the Swap
Counterparty Account, (A) any amounts due to the Swap Counterparty
under the Swap Contract, and (B) any Swap Breakage Costs not
advanced by the Servicer pursuant to Section 2.9(h) of the
Servicing Agreement or paid by Borrower pursuant to Section 5.2(b);
(5) to Lender, any Interest Arrearage for such Payment Date;
(6) to Lender, the Monthly Interest for such Payment Date;
and
(7) to Lender, the Term Loan Monthly Principal for such
Payment Date.
(c) On each Payment Date after the Transition Date, any
Available Amounts remaining in the Collection Account after all
payments are made in full pursuant to Section 6.1(b) shall be applied
as follows:
(1) if a Restricting Event then exists, such amounts shall
remain on deposit in the Collection Account; and
(2) if no Restricting Event then exists, such amounts shall
be released to Borrower by wire transfer to the Borrower's Account.
(d) After the Conversion Date, all amounts in the Collection
Account constituting Advance Payments shall be held in the Collection
Account until such time as they constitute Available Amounts.
(e) Nothing herein shall in any way limit Lender's rights
with respect to the Collection Account or any other Collateral upon an
Event of Default as set forth in Section 14.3.
<PAGE>
6.2 Taxes.
(a) Any and all payments by Borrower to Lender under this
Agreement shall be made free and clear of, and without deduction or
withholding for, any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto (all such taxes, excluding any Income Taxes of Lender
("Taxes")).
(b) In addition, Borrower shall pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges or similar levies (other than Income Taxes of Lender) which
arise from any payment made hereunder or from the execution, delivery
of, or otherwise with respect to, this Agreement or any other Loan
Documents (hereinafter referred to as "Other Taxes"); except for any
Other Taxes that may be paid without penalty and are being contested
in good faith by appropriate proceedings and for which an adequate
reserve has been established and is maintained in accordance with
GAAP.
(c) Borrower shall indemnify and hold harmless Lender for the
full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this
Section 6.2) paid by Lender and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted; provided, that Lender shall pay and
seek indemnification hereunder only if it reasonably believes such
amounts are due. Payment under this indemnification shall be made
within thirty (30) days from the date Lender makes written demand
therefor and provides written evidence of payment thereof or a copy of
any invoice therefor showing such payment is due (or if later, the
date such payment is due), in each case reasonably satisfactory to
Borrower and together with any related information that Borrower may
reasonably request. The determination of any amount to be paid by
Borrower under this Section 6.2(c) shall be based upon reasonable
attribution and allocation methods. A certificate of Lender setting
forth the calculation of the amount or amounts as shall be necessary
to reasonably indemnify Lender as specified in this Section 6.2(c)
shall be delivered to Borrower and shall be conclusive in the absence
of manifest error.
(d) If Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum
payable hereunder to Lender then:
(i+) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this Section 6.2)
Lender, shall receive an amount equal to the sum it would have
received had no such deductions been made;
<PAGE>
(ii) Borrower shall make such deductions, and
(iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
(e) The obligations in this Section 6.2 shall survive the
termination of the Loan Documents and payment of all other Obligations.
SECTION 7. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower hereby makes the following representations and
warranties to Lender, as of the Closing Date and as of the date of
each Revolving Loan:
7.1 Existence and Power. Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and licensed as a foreign
corporation and authorized to do business in each jurisdiction within
the United States where its ownership of Property and assets or
conduct of business requires such qualification, except where failure
to be so qualified and licensed would not have a Material Adverse
Effect. Borrower has the corporate power and authority, rights and
franchises to own its Property and to carry on its business as now
conducted. Borrower has the corporate power and authority to execute,
deliver and perform the terms of the Loan Documents (to the extent it
is a party thereto) and all other instruments and documents
contemplated hereby or thereby
7.2 Loan Documents and Note Authorized; Binding
Obligations. The execution, delivery and performance of this
Agreement and each of the other Loan Documents to which Borrower is a
party and payment of the Note have been duly authorized by all
necessary corporate action on the part of Borrower. The Loan
Documents constitute legally valid and binding obligations of
Borrower, enforceable against Borrower, to the extent Borrower is a
party thereto, in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether enforceability is at law or in equity.
7.3 No Conflict; Legal Compliance. The execution, delivery
and performance of this Agreement, and each of the other Loan
Documents to which it is a party will not: (a) contravene any
provision of Borrower's certificate of incorporation or bylaws; (b)
contravene, conflict with or violate any applicable law or regulation,
or any order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority, which contravention, conflict or
violation, in the aggregate, would have a Material Adverse Effect; or
(c) violate or result in the breach of, or constitute a default under
any indenture or other loan or credit agreement, or other agreement or
instrument to which Borrower is a party or by which Borrower, or its
<PAGE>
Property is bound or affected, which violation, breach or default
would have a Material Adverse Effect. Borrower is not in violation or
breach of or default under any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any contract,
agreement, lease, license, indenture or other instrument to which it
is a party, the non-compliance with, the violation or breach of or the
default under which would have a Material Adverse Effect.
7.4 Executive Offices. Borrower's only places of business
are located in Northbrook, Illinois and Wilmington, Delaware and its
only mailing addresses are 3000 Dundee Road, Northbrook, Illinois
60062 and 1209 Orange Street, Wilmington, Delaware 19801.
7.5 Litigation. To the best of Borrower's knowledge, there
are no claims, actions, suits, proceedings or other litigation pending
or threatened against Borrower, at law or in equity before any
Governmental Authority or, to the best of Borrower's knowledge, any
investigation by any Governmental Authority of Borrower's Properties.
7.6 Consents and Approvals. No approval, authorization or
consent of any trustee or holder of any indebtedness or obligation of
Borrower or of any other Person under any material agreement,
contract, lease or license or similar document or instrument to which
Borrower is a party or by which Borrower is bound, that has not been
obtained prior to the date hereof, is required to be obtained by
Borrower in order to make or consummate the transactions contemplated
under the Loan Documents. All consents and approvals of, filings and
registrations with, and other actions in respect of, all Governmental
Authorities required to be obtained by Borrower in order to make or
consummate the transactions contemplated under the Loan Documents have
been, or prior to the time when required will have been, obtained,
given, filed or taken.
7.7 Other Agreements. Borrower is not a party to any
material agreements other than such agreements as are contemplated by
this Agreement, the Note, the Contribution and Sale Agreement, the
Servicing Agreement and the Swap Agreement and the Amended and
Restated Contribution and Sale Agreement, the Pooling and Servicing
Agreement and the Trust Agreement, each dated as of October 6, 1995,
or as otherwise expressly provided for by any such agreement.
7.8 Margin Regulations. The proceeds of the Revolving
Loans under this Agreement will be used only to purchase Leases from
Trans Leasing under the Contribution and Sale Agreement, to pay
dividends to Trans Leasing and for other matters as contemplated
hereunder. None of the Loan will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin security, for the
purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other
purpose which would cause the Loan to be considered a "purpose credit"
within the meaning of Regulations G, T, U and X.
<PAGE>
7.9 Taxes. All federal, state, local and foreign tax
returns, reports and statements required to be filed by Borrower have
been filed with the appropriate Governmental Authorities, except where
the failure to file is reasonably likely to have a Material Adverse
Effect, and all material Charges and other impositions shown thereon
to be due and payable by Borrower have been paid prior to the date on
which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof, or any such fine, penalty, interest, late
charge or loss has been paid. Borrower has paid when due and payable
all material Charges upon the books of Borrower and no Government
Authority has asserted any Lien against Borrower with respect to
unpaid Charges. All material amounts have been withheld by Borrower
from its employees for all periods in compliance with the tax, social
security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities.
7.10 Solvency. Borrower is Solvent.
7.11 Representations and Warranties. To the knowledge of
Borrower, each of the representations and warranties made by the Trans
Leasing in Section 3.01(a) of the Contribution and Sale Agreement are
true as of the date such representations and warranties speak.
Borrower has taken no action to cause such representations and
warranties not to be true as of the date made.
7.12 Good Title to the Collateral; First Priority Security
Interest. Borrower owns the Collateral free and clear of any Lien
(including any Lien of any vendor of Equipment), except for Permitted
Liens. This Agreement creates in favor of Lender a valid security
interest in Borrower's interest in the Collateral. Such security
interest is and will be a first priority security interest, except (i)
with respect to any Equipment not located in the Filing Locations
(which constitute the States in which Equipment under Original Leases
constituting at least 75% of the Aggregate Discounted Lease Balance as
of the original Cut-Off Date is located (based on billing addresses of
the related Lessees)) and (ii) with respect to any Equipment located
in the Filing Locations, after all filings have been made in
accordance with Section 8.12, and, with respect to any vehicles
included in the Collateral, subject to the effects of any applicable
state vehicle titling statutes. Pursuant to the Servicing Agreement,
Trans Leasing shall retain possession of the Lease Files in its
capacity as Servicer.
7.13 Investment Company Act. Borrower is not required to be
registered as an investment company for purposes of the Investment
Company Act.
SECTION 8. BORROWER'S AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until full complete and
indefeasible payment and performance of the Obligations, unless Lender
<PAGE>
shall otherwise consent in writing, Borrower covenants and agrees as
follows:
8.1 Asset Base Certificates; Additional Access and
Information.
(a) Not later than the second Business Day preceding each
Payment Date prior to the Conversion Date, Borrower shall deliver to
Lender an Asset Base Certificate reflecting the Asset Base as of the
preceding Determination Date, duly executed by Borrower and signed by
a Responsible Officer of Borrower, with appropriate insertions.
(b) Promptly upon request by Lender, Borrower will furnish
(or cause the Servicer to furnish) to Lender any information which is
in Borrower's (or the Servicer's) possession reasonably relating to
the Collateral which Lender reasonably requests, including information
which is reasonably necessary in order for Lender to enforce its
rights under this Agreement. In addition Borrower will (or shall
cause the Servicer to) provide Lender with access to the Lease Files
and any documentation regarding the Collateral which is in Borrower's
(or the Servicer's) possession in order to permit Lender to obtain any
such information. Such access will be afforded without charge, but
only (i) upon reasonable request and with reasonable notice, (ii)
during normal business hours, (iii) subject to Borrower's normal
security and confidentiality procedures and (iv) at offices designated
by Borrower. Nothing in this Section 8.1(b) will derogate from any
obligation under this Agreement or obligation of Borrower, Lender or
the Servicer to observe any applicable law or agreement prohibiting
disclosure of information regarding the Lessees, and the failure of
Borrower or the Servicer to provide information or access as provided
in this Section 8.1(b) by reason of any such obligation will not
constitute a breach of this Section 8.1(b); provided that it has
provided Lender a written explanation of the reason such disclosure
may not be made indicating the applicable law or agreement.
(c) Promptly upon any Responsible Officer of Borrower
obtaining knowledge (i) of any condition or event which constitutes an
Event of Default or Potential Event of Default under this Agreement,
(ii) that any Person has given any notice to Borrower or taken any
other action with respect to a claimed default or event or condition
of the type referred to in Section 14.1(b) or (c), (iii) of the
institution of any litigation or of the receipt of written notice from
any Governmental Authority as to the commencement of any formal
investigation involving an alleged or asserted liability of Borrower
of any amount or any adverse judgment in any litigation involving a
potential liability of Borrower of any amount, Borrower shall deliver
to Lender a certificate of Borrower signed by a Responsible Officer of
Borrower, specifying the notice given or action taken by such Person
and the name of such claimed default, Event of Default, Potential
Event of Default, event or condition and what action Borrower has
taken, is taking and proposes to take with respect thereto.
<PAGE>
8.2 Existence; Compliance with Law, Books and Records,
Commingling of Funds. Borrower shall (a) keep in full effect its
existence, rights and franchises as a corporation under the laws of
the State of Delaware and all of its licenses, permits, governmental
approvals, rights, privileges and franchises necessary in the normal
conduct of its business as now conducted or presently proposed to be
conducted; (b) 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
the rights of Lender under this Agreement; (c) comply with (i) the
provisions of its certificate of incorporation and bylaws and (ii) the
requirements of all applicable laws, rules, regulations or orders of
any Governmental Authority, except to the extent that the failure to
comply therewith would not, in the aggregate, have a Material Adverse
Effect, (d) maintain its books and records separate from the books and
records of any other entity and (e) maintain separate bank accounts
and, except as contemplated by this Agreement and the Servicing
Agreement, not permit funds of Borrower to be commingled with funds of
any other entity.
8.3 Taxes and Other Liabilities. Promptly pay and
discharge all material Charges when due and payable, except (i) such
as may be paid thereafter without penalty or (ii) such as are being
contested in good faith by appropriate proceedings and for which an
adequate reserve has been established and is maintained in accordance
with GAAP. Borrower shall promptly notify Lender of any material
challenge, contest or proceeding pending by or against Borrower before
any taxing authority.
8.4 Notice of Liens. Borrower will notify Lender of the
existence of any Lien (except Permitted Liens) on any of its Property
immediately upon discovery thereof and Borrower shall defend the
security interest of Lender in the Collateral granted hereby (now
existing or hereafter created) against all claims of third parties
claiming through or under Borrower.
8.5 Obligations with Respect to Leases. Borrower will duly
fulfill all obligations on its part to be fulfilled under or in
connection with each Lease and will do nothing to impair the rights of
Lender in the Leases. As long as there is no event of default of any
of the provisions of the applicable Lease, Borrower will not disturb
the Lessee's quiet and peaceful possession of the related Equipment
and the Lessee's unrestricted use thereof for its intended purpose.
8.6 Preservation of Security Interest. Borrower shall
execute and file (or cause the Servicer to file) such continuation
statements and any other documents and take such other actions which
may be required by law to fully preserve and protect the security
interest of Lender in the Collateral granted hereby; provided that
Borrower shall not be required to file financing statements or any
related agreements or documentation with respect to any Equipment not
located in the Filing Locations, the financing statements to be filed
<PAGE>
in the Filing Locations other than the States of Delaware and Illinois
will not be filed until after the Closing Date (and the Borrower
agrees to make such filings within 5 Business Days of the Closing
Date) and Borrower shall not be required to cause the title to any
Equipment consisting of motor vehicles to be marked to indicate the
transfer from Trans Leasing to Borrower under the Contribution and
Sale Agreement or the security interest of Lender granted hereby, and
the Servicer may retain possession of the Lease Files in accordance
with the Servicing Agreement.
8.7 Consolidated Return. Borrower and Trans Leasing are
members of an affiliated group within the meaning of section 1504 of
the Code which has filed, and will continue to file, a consolidated
return for federal income tax purposes at all times until the
termination of this Agreement and satisfaction in full of all
Obligations of Borrower hereunder.
8.8 Taxable Income from the Leases. Borrower shall treat
the Leases as owned by it for federal income tax purposes. The
affiliated group of which Borrower is a member, within the meaning of
section 1504 of the Code, shall treat the Leases as owned by Borrower
for federal income tax purposes, shall report and include in gross
income for Income Tax purposes in its consolidated, combined or
unitary return the rental and other income from the Leases and the
Equipment and shall deduct the interest paid or accrued, in accordance
with its applicable method of accounting for federal income tax
purposes, with respect to the Note.
8.9 Maintenance of Swap Agreement. After the Conversion
Date, Borrower shall maintain a Swap Agreement with a notional amount
based on the outstanding principal balance of the Loan with a Swap
Counterparty reasonably acceptable to Lender. If on any Payment Date,
after the payments set forth in Section 6.1(b) are made, the notional
amount of the Swap Agreement on which payments for the next succeeding
Payment Date are to be made exceeds the outstanding principal balance
of the Loan by more than $500,000 (a "Swap Breakage Event"), Borrower
shall, within two (2) Business Days, enter into a revised Swap
Agreement or an offsetting swap agreement, and within 30 days, deliver
to Lender a copy of the revised Swap Agreement. Any Swap Breakage
Costs associated therewith shall be reimbursed or paid in accordance
with Section 6.1(b).
8.10 Contribution and Sale Agreement. Borrower shall, on
its own behalf and on behalf of Lender, enforce all of its rights
under the Contribution and Sale Agreement.
8.11 Borrower's Identity. Borrower shall use its best
efforts to avoid the appearance of conducting business on behalf of
Trans Leasing or any Affiliate of Trans Leasing (other than Borrower).
Borrower shall conduct its business solely in its own name so as not
to mislead others as to the identity of the Person with which such
others are concerned.
<PAGE>
8.12 Filing Locations. Within 10 days of the Closing Date,
Borrower shall have delivered to Lender acknowledgment copies (or
other evidence of filing satisfactory to Lender) of financing
statements filed with the appropriate offices in the Filing Locations
naming Borrower as debtor, Lender as secured party and the Equipment
under Leases included in the Asset Base as Collateral on the Closing
Date (or other evidence satisfactory to Lender).
SECTION 9. BORROWER'S NEGATIVE COVENANTS.
Except as contemplated by this Agreement, the Servicing
Agreement or the Contribution and Sale Agreement, until full, complete
and indefeasible payment and performance of the Obligations, unless
Lender shall otherwise consent in writing, Borrower covenants and
agrees as follows:
9.1 Liens; Negative Pledges; and Encumbrances. Borrower
shall not create, incur, assume or suffer to exist any Lien of any
nature upon or with respect to any of the Collateral, whether now or
hereafter owned, leased or acquired, except for Permitted Liens.
9.2 Indebtedness and Guarantees. Borrower shall not
create, incur, assume or suffer to exist any Indebtedness, and shall
not guarantee (directly or indirectly), endorse or otherwise become
contingently liable (directly or indirectly) for the obligations of
any other Person, other than (a) trade payables and expense accruals
in connection with its operations in the normal course of business,
(b) Obligations to Lender arising under this Agreement and the other
Loan Documents, (c) in connection with the Swap Agreement and (d)
pursuant to the Pooling and Servicing Agreement, dated as of October
6, 1995, or as permitted thereunder. Borrower shall not guarantee
(directly or indirectly), endorse or otherwise become contingently
liable (directly or indirectly) for the obligations of any other
Person.
9.3 Amendments of Charter Documents; Conduct of Business;
No Merger. Borrower shall not amend its certificate of incorporation
or bylaws and shall conduct its business within the limitations set
forth in its certificate of incorporation. Borrower shall not merge,
consolidate or transfer substantially all of its assets to any Person.
9.4 No Use of Lender's Name. Borrower shall not use or
authorize others to use Lender's name or marks in any publication or
medium, including, without limitation, any prospectus, without
Lender's advance written authorization.
SECTION 10. GRANTS OF SECURITY INTEREST; THE COLLATERAL.
10.1 Security Interest.
As collateral security for the prompt, complete and
indefeasible payment and performance of (a) the entire principal
<PAGE>
amount of and interest accrued on the Loan, (b) all fees payable to
Lender hereunder, including, without limitation, any and all
commitment fees, agent fees and attorneys' fees and any and all other
fees, expenses, costs or other sums chargeable to Borrower under any
of the Loan Documents, (c) all other amounts and other obligations of
Borrower to Lender arising under this Agreement or any other Loan
Documents and (d) all covenants and duties regarding such amounts, of
any kind or nature, arising under any of the Loan Documents
(collectively, the "Obligations"), Borrower hereby assigns, pledges
and grants to Lender a lien on and security interest in all of
Borrower's right, title and interest in and to (but none of its
obligations under) the following property, whether now existing or
owned or hereafter arising or acquired by Borrower (collectively, the
"Collateral"):
(1) the Leases and all amounts due or to become due
thereunder after the related Cut-Off Date and all Collections;
(2) the related Equipment (other than any licensed products
that may accompany any of the Equipment);
(3) the related Lease Files;
(4) the Collection Account, all amounts on deposit therein
from time to time, and any investments thereof and earnings
thereon;
(5) the Contribution and Sale Agreement, including, but not
limited to, the obligation of Trans Leasing to repurchase Leases
under certain circumstances, but excluding the right to purchase
or receive contributions of additional leases;
(6) the Servicing Agreement;
(7) the Swap Agreement, and all payments thereunder;
(8) the Insurance Policies and any Insurance Proceeds
related to the Leases; and
(9) all income or proceeds of the foregoing or relating
thereto.
The assignment under this Section 10.1 does not constitute
and is not intended to result in a creation or an assumption by Lender
of any obligation of Borrower, or any other Person in connection with
the Collateral or under any agreement or instrument relating thereto.
Anything herein to the contrary notwithstanding, (a) Borrower shall
remain liable under the Leases to the extent set forth therein to
perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by
Lender of any of its rights in the Collateral shall not release
Borrower from any of its duties or obligations under the Leases and
<PAGE>
(c) Lender shall not have any obligations or liability under the
Leases by reason of this Agreement, nor shall Lender be obligated to
perform any of the obligations or duties of Borrower thereunder or to
take any action to collect or enforce any claim for payment assigned
hereunder.
10.2 Creation of Collection Account; Investments.
(a) Prior to the Closing Date, Borrower shall, or shall
cause the Servicer to (or if Borrower and the Servicer fail to do so,
Lender may) establish with Lender a segregated account with the
following designation: "First Union National Bank of North Carolina -
TL Lease Funding Corp. IV Collection Account."
(b) All amounts on deposit in the Collection Account shall,
upon the direction of the Servicer in accordance with Section 3.2 of
the Servicing Agreement, be invested in accordance with Section 3.2 of
the Servicing Agreement.
(c) The Collection Account shall be the property of Borrower and
shall be so treated for Income Tax purposes. All earnings on amounts on
deposit in the Collection Account shall be for the account of Borrower and
Borrower agrees that it shall include such earnings in its income for
Income Tax purposes and shall be liable for any taxes thereon.
10.3 Addition of Leases.
(a) Borrower may from time to time, prior to or on the
Transition Date, give Lender prior written notice of its intent to provide
Additional Leases as Collateral. Any Lease contributed to Borrower
pursuant to the Limited Recourse Agreement shall become Collateral
hereunder.
(b) Each Additional Lease shall be an Eligible Lease as of
the related Additional Lease Cut-Off Date, and the addition of
Additional Leases shall not cause any of the Specified Portfolio
Characteristics to be untrue as of such Additional Lease Cut-Off Date
or, if any of the Specified Portfolio Characteristics is untrue as of
immediately prior to such Additional Lease Cut-Off Date, increase the
amount by which any Specified Portfolio Characteristic is untrue.
(c) Prior to any addition of Leases pursuant to this
Section 10.3, Lender shall have received the following:
(1) an Additional Lease Transfer Agreement providing for
the unconditional contribution and sale of the Additional Leases
and related Equipment to Borrower and an amended List of Leases
reflecting the addition of the Additional Leases; and
(2) a certificate of a Responsible Officer of Borrower to
the effect that the requirements set forth in Sections 8.1(b) and
(c) have been satisfied.
<PAGE>
10.4 Substitution of Leases.
(a) Subject to the provisions of Section 10.4(b) through
(d), after the Transition Date Borrower may substitute a Substitute
Lease for a Lease that (i) becomes a Defaulted Lease or an Early
Termination Lease, or (ii) is the subject of a Warranty Event.
(b) Each Substitute Lease shall be an Eligible Lease as of
the related Substitute Lease Cut-Off Date, and no substitution
pursuant to Section 10.4(a) shall cause any of the Specified Portfolio
Characteristic to be untrue as of such Substitute Lease Cut-Off Date
or, if any of the Specified Portfolio Characteristics is untrue as of
immediately prior to such Substitute Lease Cut-Off Date, increase the
amount by which any Specified Portfolio Characteristic is untrue.
(c) Prior to any substitution pursuant to Section 10.4(a),
Lender shall have the received the following:
(1) an Additional Lease Transfer Agreement providing for
the unconditional contribution or sale of the Substitute Leases
and related Equipment to Borrower and an amended List of Leases
reflecting the substitution; and
(2) a certificate of a Responsible Officer of Borrower to
the effect that the requirements set forth in Section 10.4 have
been satisfied.
(d) No substitutions under Section 10.4(a) shall occur on
any Substitution Date if:
(1) on a cumulative basis from the Transition Date, the sum
of the Discounted Lease Balances (as of the related Substitution
Cut-Off Date) of Leases substituted for Defaulted Leases would
exceed ten percent (10%) of the Aggregate Discounted Lease
Balance as of the Transition Date;
(2) on a cumulative basis from the Transition Date, the sum
of the Discounted Lease Balances (as of the related Substitution
Cut-Off Date) of Leases substituted for Leases that are the
subject of a Warranty Event would exceed (5%) of the Aggregate
Discounted Lease Balance as of the Transition Date;
(3) as of the related Substitution Cut-Off Date, each
Substitute Lease and the related Equipment has a Discounted Lease
Balance not less than the Discounted Lease Balance of the Lease
being replaced; and
(4) as a result of all substitutions to be made on such
Substitution Date, the sum of the Scheduled Lease Payments on all
Leases due in any Collection Period prior to the Collection
Period in which the Anticipated Payoff Date occurs would be less
than the amount set forth for the related Payment Date in the
<PAGE>
column of the Payment Schedule labelled "Aggregate Scheduled
Lease Payments" (a "Payment Deficiency"), or increase the amount
of such a Payment Deficiency.
10.5 Release of Liens. Lender's lien and security interest
in any Lease and the related Equipment shall be released upon (i) any
disposition of such Equipment in accordance with the Servicing
Agreement (including any sale to a Lessee exercising a purchase
option), and deposit of the proceeds of such sale in the Collection
Account as required pursuant to Section 3.3 of the Servicing
Agreement, or (ii) any purchase of such Lease and related Equipment by
Trans Leasing pursuant to the Contribution and Sale Agreement or the
Servicer pursuant to the Servicing Agreement, (iii) the substitution
of a Substitute Lease therefor as contemplated by Section 10.4, (iv)
the substitution or replacement of any unit of Equipment as
contemplated in Section 2.1(c) of the Servicing Agreement, or (v)
termination of this Agreement. In connection with any such
disposition, purchase, substitution, replacement or termination,
Lender 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 to in order to effect such release.
SECTION 11. LIMITATION ON LIABILITY. The principal and
interest on the Loan and other Obligations (including the payment of
expenses, amounts due under Section 3.3 and indemnification pursuant
to Sections 6.2 or 15) shall be limited to and payable only out of the
Collateral, and Lender (and any assignee or transferee of Lender)
shall have no recourse against Borrower for any deficiency in the
payment of such principal or interest or other Obligations and Lender
(and any assignee or transferee of Lender) shall look solely to the
Collateral for the payment of all principal and accrued interest and
other Obligations due and to become due hereunder and shall not look
to any other Property of Borrower in respect of the Obligations and
the Obligations shall not constitute a claim against Borrower in the
event the Collateral is insufficient to pay the Obligations in full;
provided, however, that nothing contained in this paragraph shall (x)
impair the validity of the indebtedness evidenced by the Note, (y) in
any way affect or impair the interest of Lender in any Collateral or
the right of Lender to exercise its rights and remedies with respect
to the Collateral pursuant to Section 14.2 and (z) in any way affect
or impair the rights of Lender under the Limited Recourse Agreement.
No provision of this Agreement shall relieve Borrower from or cause
Lender to be liable for the obligations of Borrower under any Lease.
It is further understood that a repurchase of a Lease as described in
Section 3.03 of the Servicing Agreement shall be the sole remedy for a
breach of a representation or warranty with respect to any Lease as
provided in such Section 3.03.
SECTION 12. CONDITIONS PRECEDENT TO ALL REVOLVING LOANS.
The obligation of Lender to make any Revolving Loan (other
than a Revolving Loan under Section 3.1(f) or 3.2(b)), is subject to
<PAGE>
the satisfaction of each of the following conditions precedent, and
each request for such Revolving Loan shall be deemed a certification
to Lender that such conditions have been satisfied:
12.1 Notice. Lender shall have received timely notice of
such Revolving Loan and such other documents required by Section 3.1
or 3.2.
12.2 Default. Before and after giving effect to such
Revolving Loan, no Event of Default, Potential Event of Default or
Early Amortization Event shall have occurred and be continuing.
12.3 Warranties. Before and after giving effect to such
Revolving Loan, the representations and warranties in Section 7 shall
be true and correct in all material respects as though made on the
date of such Revolving Loan, and the Asset Base Certificate or
Addition Certificate related to such request for such Revolving Loan
shall be properly prepared and accurate.
12.4 Additional Lease Transfer Agreements. Lender shall
have received any previously undelivered amendments to the List of
Leases reflecting the addition of Eligible Leases to the Collateral in
accordance with the provisions of Section 10.3, and the Additional
Lease Transfer Agreements pursuant to which such amendment was made.
SECTION 13. CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN.
The obligation of Lender to make its initial Revolving Loan
hereunder is subject to the satisfaction of the condition precedent,
in addition to the applicable conditions precedent set forth in
Section 12 above, that Borrower shall have delivered to Lender all of
the following, each duly executed and dated the date of the initial
Revolving Loan, in form and substance reasonably satisfactory to
Lender:
13.1 Note. The Note.
13.2 Other Agreements and Financing Statements. (a) The
Contribution and Sale Agreement in the form of Exhibit E hereto, the
Servicing Agreement in the form of Exhibit F hereto and the Limited
Recourse Agreement of Trans Leasing in the form of Exhibit G hereto,
and (b) acknowledgment copies (or other evidence of filing
satisfactory to Lender) of financing statements (i) filed with the
Secretary of State of Illinois naming Trans Leasing as debtor,
Borrower as secured party, Lender as assignee and the Leases as
Collateral and (ii) filed with the Secretary of States of Illinois and
Delaware naming Borrower as debtor, Lender as secured party and the
Leases as Collateral.
13.3 Resolutions.
(a) A copy, duly certified by the secretary or an assistant
<PAGE>
secretary of Borrower, of (i) the resolutions of Borrower's Board of
Directors authorizing or ratifying the execution and delivery of this
Agreement, the Note and the other Loan Documents to which it is a
party and authorizing the borrowings hereunder, (ii) all documents
evidencing other necessary corporate action, and (iii) all approvals
or consents, if any, required with respect to thereto.
(b) A copy, duly certified by the secretary or an assistant
secretary of Trans Leasing, of (i) the resolutions of the Trans
Leasing's Board of Directors authorizing or ratifying the execution
and delivery of the Contribution and Sale Agreement, the Servicing
Agreement and the Limited Recourse Agreement and authorizing the
borrowings hereunder, (ii) all documents evidencing other necessary
corporate action, and (iii) all approvals or consents, if any, with
respect to this Agreement, the Note and the other Loan Documents.
13.4 Incumbency Certificate.
(a) A certificate of the secretary or an assistant
secretary of Trans Leasing certifying the names of Trans Leasing's
officers authorized to sign the Limited Recourse Agreement and the
other Loan Documents to which it is a party, together with the true
signatures of such officers.
(b) A certificate of the secretary or an assistant secretary of
Borrower certifying the names of Borrower's officers authorized to sign
this Agreement, the Note and the other Loan Documents to which it is a
party, together with the true signatures of such officers.
13.5 By-Laws.
(a) A copy, certified as true and correct by the secretary
or an assistant secretary of Borrower, of Borrower's By-Laws.
(b) A copy, certified as true and correct by the secretary
or an assistant secretary of Trans Leasing, of Trans Leasing's By-Laws.
13.6 Certificate of Incorporation.
(a) A copy, certified by the Secretary of State of
Delaware, of Borrower's Certificate of Incorporation, together with
all amendments thereto.
(b) A copy, certified by the Secretary of State of
Delaware, of Trans Leasing's Certificate of Incorporation, together
with all amendments thereto.
13.7 Good Standing.
(a) A current Good Standing Certificate issued by the
Secretary of State of Delaware and each other state where Borrower is
qualified to do business.
<PAGE>
(b) A current Good Standing Certificate issued by the
Secretary of State of Delaware and each other state where Trans
Leasing is qualified to do business.
13.8 Opinion. Opinions of Kirkland & Ellis, counsel to
Borrower, addressed to Lender in substantially the form of Exhibit F-1, F-2
and F-3 hereto, together with copies of any officer's
certificate or legal opinion of other counsel or law firm specifically
identified and expressly relied upon by such counsel.
13.9 Asset Base Certificate. A duly executed Asset Base
Certificate, prepared as of the Cut-Off Date.
SECTION 14. EVENTS OF DEFAULT AND REMEDIES.
14.1 Events of Default. The occurrence of any one or more
of the following shall constitute an Event of Default:
(a) Failure to Deliver Term Loan Documentation. Borrower
fails to deliver to Lender any of the documents required pursuant to
Section 3.2 at or prior to the time such delivery is required pursuant
to Section 3.2;
(b) Failure to Perform. Borrower fails or neglects to
perform, keep or observe in any material respect any of the covenants
contained in this Agreement or in any other Loan Document within
thirty (30) calendar days after the earlier of (i) the date on which
written demand that such failure be remedied is given to Borrower by
Lender or (ii) the date on which a Responsible Officer of Borrower
becomes aware of such failure or neglect;
(c) Warranty. Any warranty made by Borrower herein is
untrue in any material respect when made or deemed made; or any
schedule, statement, report, notice or certificate specifically
required herein to be furnished by Borrower to Lender is untrue in any
material respect on the date as of which the facts set forth therein
are stated or certified; or any certification made or deemed made by
Borrower to Lender herein is untrue in any material respect on or as
of the date made or deemed made;
(d) Insolvency. Borrower becomes insolvent, or generally
fails to pay, or admits in writing its inability to pay, its debts as
they mature, or applies for, consents to, or acquiesces in, the
appointment of a trustee, receiver or other custodian for Borrower or
for a substantial part of the property of Borrower, or makes a general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Borrower or for a substantial part of the
property of Borrower and is not discharged within 90 days; or any
bankruptcy, reorganization, debt arrangement or other proceeding under
any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against Borrower and, if instituted
<PAGE>
against Borrower, is consented to or acquiesced in by Borrower or
remains for 90 days undismissed; or any warrant of attachment or
similar legal process is issued against any substantial part of the
property of Borrower which is not released within 90 days of service;
or
(e) Failure to Repay upon Sale of Other Notes. Borrower
fails to repay the outstanding principal balance of the Loan, together
with all accrued and unpaid principal, interest, fees and other
amounts then due and owing hereunder upon the sale to third parties of
notes secured by (or other instruments representing interests in) any
or all of the Collateral.
14.2 Waiver of Default. An Event of Default may be waived
only with the written consent of Lender. Any Event of Default so
waived shall be deemed to have been cured and not to be continuing;
but no such waiver shall be deemed a continuing waiver or shall extend
to or affect any subsequent like default or impair any rights arising
from any such subsequent like default.
14.3 Remedies.
(a) Upon the occurrence and continuance of any Event of
Default, Lender shall have no further obligation to make any Revolving
Loans hereunder.
(b) If an Event of Default has occurred and is continuing,
Lender may, at its option, subject to Section 16.18, do any one or
more of the following:
(i) Declare all or any of the Obligations of Borrower
to be immediately due and payable, and upon such declaration such
obligations so declared due and payable shall immediately become
due and payable; provided, that if such Event of Default is under
clause (d) of Section 14.1, then all of the Obligations shall
become immediately due and payable forthwith without the
requirement of any notice or other action by Lender;
(ii) In lieu of or in addition to exercising any other
power hereby granted, may upon notice to Borrower, proceed by an
action or actions in equity or at law for the seizure and sale of the
Collateral or any part thereof, for the specific performance of
any covenant or agreement herein contained or in aid of the
execution of any power herein granted, for the foreclosure or
sale of the Collateral or any part thereof under the judgment or
decree of any court of competent jurisdiction, for the
appointment of a receiver pending any foreclosure hereunder or
the sale of the Collateral or any part thereof or for the
enforcement of any other appropriate equitable or legal remedy;
and upon the commencement of judicial proceedings by Lender to
enforce any right under this Agreement, Lender shall be entitled
as a matter of right against Borrower to such appointment of a
<PAGE>
receiver, without regard to the adequacy of the security by
virtue of this Agreement or any other collateral or to the
solvency of Borrower; or
(iii) Subject to the rights of the Lessees under the
Leases,exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default
under the UCC, whether or not the UCC applies to the affected
Collateral, and also may (i) require Borrower to, and Borrower
hereby agrees that at its expense and upon request of Lender it
shall forthwith, assemble all or part of the Lease Files and
Equipment (related to any Early Termination Lease, Expired Lease
or Defaulted Lease) that is in possession of Borrower or its
agent as directed by Lender and make it available to Lender at
such places reasonably convenient to all parties as Lender may
designate and (ii) without notice except as specified below, sell
the Collateral or any part thereof in one or more sales at public
or private sales, at any of Lender's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Lender may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' notice to
Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. Lender shall not be obligated to make
any sale of Collateral regardless of notice of sale having been
given. Lender may adjourn any public or private sale from time
to time by public announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at
the tune and place to be which it was so adjourned.
(c) All cash proceeds received by Lender in respect of any
sale of, collection from or other realization upon all or any part of
the Collateral shall be applied as follows:
(i) First, to the payment of all costs and expenses
incident to the enforcement of this Agreement or the protection
of the Collateral, including but not limited to reasonable
compensation to the agents, contractors and attorneys of Lender;
(ii) Second, to the payment of all other Obligations,
first to interest (including interest on overdue amounts) and then to
principal; and
(iii) Third, the remainder, if any, to Borrower or to
whomever may be lawfully entitled to receive such remainder.
(d) Lender shall have the right to become the purchaser at
any public sale made pursuant to the provisions of this Section 14.3 and
shall have the right to credit against the amount of the bid made therefor
the amount payable to Lender out of the net proceeds of such sale.
<PAGE>
(e) Any sale of the Collateral or any part thereof pursuant
to the provisions of this Section 14.3 shall operate to divest all
right, title, interest, claim and demand of Borrower in and to the
Property sold and shall be a perpetual bar against Borrower.
Nevertheless, if requested by Lender so to do, Borrower shall join in
the execution, acknowledgement and delivery of all proper conveyances,
assignments and transfers of the Property so sold. It shall not be
necessary for Lender to have physically present or constructively in
its possession any of the Collateral at any such sale, and Borrower
shall deliver all of the Lease Files and Equipment (related to any
Early Termination Lease, Expired Lease or Defaulted Lease) that is in
possession of Borrower or its agent to the purchaser at such sale on
the date of sale and, if it should be impossible or unpracticable then
to take actual delivery of the Lease Files and Equipment (related to
any Early Termination Lease, Expired Lease or Defaulted Lease) that is
in possession of Borrower or its agent, the title and right of
possession to all of the Collateral shall pass to the purchaser at
such sale as completely as if the same had been actually present and
delivered. Borrower agrees that if Borrower retains possession of the
Property or any part thereof subsequent to such sale, Borrower shall
be considered a tenant at sufferance of the purchaser and shall, if
Borrower remains in possession after demand to remove, be guilty of
forceful detainer and be subject to eviction and removal, forcible or
otherwise.
(f) Subject to any requirements of applicable law, Borrower
agrees that neither Borrower nor any of its Affiliates under its
control shall at any time have or assert any right, under any law
pertaining to the marshalling of assets, the sale of Property in the
inverse order of alienation, the administration of estates of
decedents, appraisement, valuation, stay, extension or redemption now
or hereafter in force in order to prevent or hinder the rights of
Lender or any purchaser of the Collateral or any part thereof under
this Agreement, and Borrower, to the extent permitted by applicable
law, hereby waives the benefit of all such laws.
(g) Upon any sale made under the powers of sale herein
granted and conferred, the receipt of Lender shall be sufficient
discharge to the purchaser or purchasers at any sale for the purchase
money, and such purchaser or purchasers and the heirs, devisees,
personal representatives, successors and assigns thereof shall not,
after paying such purchase money and receiving such receipt of Lender,
be obliged to see to the application thereof or be in any wise
answerable for any loss, misapplication or nonapplication thereof.
(h) If Borrower fails to perform any agreement contained
herein or under any Loan Document, then Lender may perform, or cause
performance of, such agreement, and the expenses of Lender incurred in
connection therewith shall constitute additional Obligations and shall
be payable by Borrower under Section 15.
<PAGE>
14.4 Rights and Remedies Cumulative. The enumeration of the
rights and remedies of Lender set forth in this Agreement is not
intended to be exhaustive and the exercise by Lender of any right or
remedy shall not preclude the exercise of any other rights or
remedies, all of which shall be cumulative, and shall be in addition
to any other right or remedy given hereunder or under the Loan
Documents or that may now or hereafter exist in law or in equity or by
suit or otherwise. No delay or failure to take action on the part of
Lender in exercising any right, power or privilege shall operate as a
waiver hereof, nor shall any single or partial exercise of any such
right, power or privilege preclude other or further exercise thereof
or the exercise of any other right, power or privilege or shall be
construed to be a waiver of any Event of Default of Potential Event of
Default. No course of dealing between Borrower and Lender or their
respective agents or employees. shall be effective to change, modify
or discharge any provision of this Agreement or any of the Loan
Documents or to constitute a waiver of any Event of Default or
Potential Event of Default.
SECTION 15. EXPENSES AND INDEMNITEES.
15.1 Expenses. Borrower shall upon demand and presentment
of a statement therefor reasonably satisfactory to Borrower, pay to
Lender the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and any experts and
agents, which Lender may reasonably incur in connection with (i) the
preparation, execution and delivery of this Agreement and the other
Loan Documents, (ii) the administration of this Agreement, (iii) the
custody, preservation, use or operation of, sale of, collection from
or other realization upon any of the Collateral, (iv) the exercise or
enforcement of any of the rights of Lender hereunder or any Loan
Document or (v) the failure by Borrower to perform or observe any of
the provisions hereof.
15.2 Indemnification. (a) General Indemnity. Borrower
shall pay, indemnify, and hold Lender and its employees (each, an
"Indemnified Person") harmless from and against any and all
liabilities, obligations, losses and damages (including reasonable
attorney's fees) arising directly from any investigation, litigation
or proceeding (including any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the
Loan, whether or not any Indemnified Person is a party hereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided,
that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross
negligence, willful misconduct or violation of the Loan Documents by
any Indemnified Person.
(b) Procedures for Suits. If a claim is made for which a
party seeks indemnification hereunder, the indemnified party and any
<PAGE>
counsel retained by it shall consult with the indemnifying party on
all material issues and matters with respect thereto and the
indemnifying party will have no liability hereunder with respect to
any claim if the indemnifying party has not consented (which consent
shall not be unreasonably withheld) to the resolution or handling of
any such matter or issue, including, without limitation, any settlement
made without the indemnifying party's prior written consent.
(c) Survival; Defense. The obligations in this Section
15.2 shall survive the termination of the Loan Documents and payment
of all other Obligations. At the election of Borrower, Borrower shall
defend such Indemnified Person using legal counsel satisfactory to
such Indemnified Person in such Person's sole discretion, at the sole
cost and expense of Borrower. All amounts owing under this Section
15.2 shall be paid within thirty (30) days after written demand
therefor, including information as to the calculation thereof
reasonably satisfactory to Borrower.
SECTION 16. MISCELLANEOUS.
16.1 Survival. All covenants, agreements,
representations and warranties made herein shall survive the execution
and delivery of the Documents and the making of the Loan hereunder.
16.2 No Waiver by Lender. No failure or delay on the part
of Lender in the exercise of any power, right or privilege under this
Agreement, the Note or any of the other Loan Documents shall impair
such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.
16.3 Notices. Except as otherwise provided in this
Agreement, any notice or other communication herein required or
permitted to be given shall be in writing and may be delivered in
person, with receipt acknowledged, or sent by telecopy or by United
States mail, registered or certified, return receipt requested, or by
Federal Express or other nationally recognized overnight courier
service, postage prepaid and confirmation of receipt requested, and
addressed as set forth on the signature pages to this Agreement or at
such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived
in writing by the party entitled to receive such notice. Every
notice, demand, request, consent, approval, declaration or other
communication hereunder shall be deemed to have been duly given or
served on the date on which the same shall have been personally
delivered, with receipt acknowledged, or sent by telecopy, three (3)
Business Days after the same shall have been deposited in the United
States mail or on the next succeeding Business Day if the same has
been sent by Federal Express or other nationally recognized overnight
courier service. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication
<PAGE>
to the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
16.4 Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or
be given any substantive effect.
16.5 Severability. Whenever possible, each provision of
this Agreement, the Note and each of the other Loan Documents shall be
interpreted in such a manner as to be valid, legal and enforceable
under the applicable law of any jurisdiction. Without limiting the
generality of the foregoing sentence, in case any provision of this
Agreement, the Note or any of the other Loan Documents shall be
invalid, illegal or unenforceable under the applicable law of any
jurisdiction, the validity, legality and enforceability of the
remaining provisions, or of such provision in any other jurisdiction,
shall not in any way be affected or impaired thereby.
16.6 Entire Agreement; Construction; Amendments and Waivers.
(a) This Agreement, the Note and each of the other Loan
Documents dated as of the date hereof, taken together, constitute and
contain the entire agreement between Borrower and Lender and supersede
any and all prior agreements, negotiations, correspondence,
understandings and communications between the parties, whether written
or oral, respecting the subject matter hereof.
(b) This Agreement is the result of negotiations between
and has been reviewed by each of Borrower, Lender and their respective
counsel; accordingly, this Agreement shall be deemed to be the product
of the parties hereto, and no ambiguity shall be construed in favor of
or against Borrower or Lender. Borrower and Lender agree that they
intend the literal words of this Agreement and the other Loan
Documents and that no parol evidence shall be necessary or appropriate
to establish Borrower's or Lender's actual intentions.
(c) Any and all amendments, modifications, discharges or
waivers of, or consents to any departures from any provision of this
Agreement or of any of the other Loan Documents shall not be effective
unless set forth in a writing signed by Borrower and Lender. Any
waiver or consent with respect to any provision of the Loan Documents
shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Borrower in
any case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances.
16.7 Reliance by Lender. All covenants, agreements,
representations and warranties made herein by Borrower shall,
notwithstanding any investigation by Lender be deemed to have been
relied upon by Lender.
<PAGE>
16.8 Marshalling; Payments Set Aside. Lender shall be under
no obligation to marshall any assets in favor of Borrower or any other
person or against or in payment of any or all of the Obligations. To
the extent that Borrower makes a payment or payments to Lender, or
Lender enforces its rights in the Collateral and such payment or
payments or the proceeds of such enforcement or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other
party under Title 11 of the United States Code or under any other
similar federal or state law, common law or equitable cause, then to
the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or
set-off had not occurred.
16.9 No Set-Offs by Borrower. All sums payable by Borrower
pursuant to this Agreement, the Note or any of the other Loan
Documents shall be payable without notice or demand and shall be
payable in United States Dollars without set-off or reduction of any
manner whatsoever.
16.10 Binding Effect, Assignment Transfer. This
Agreement, the Note and the other Loan Documents shall be binding upon
and shall inure to the benefit of the parties hereto and thereto and
their respective successors and assigns, except that Borrower may not
assign its rights hereunder or thereunder or any interest herein or
therein without the prior written consent of Lender and Lender may not
assign its rights hereunder prior to the Transition Date. After the
Transition Date, Lender shall (i) have the right to sell and assign to
any Person all or any portion of its interest under this Agreement,
the Note and the other Loan Documents and (ii) to grant any
participation or other interest herein or therein; provided, however,
that no such sale, assignment or participation grant shall result in
requiring registration under the Securities Act of 1933, as amended,
or qualification under any state securities law; and provided,
further, that after any such sale, assignment or participation, Lender
shall have the right, without the consent of any purchaser, assignee
or participant, to grant any consent, approval or waiver or take any
other action hereunder, or agree to any amendment hereof. Lender
shall not disclose to any Person (other than its directors, officers,
employees, auditors, legal counsel and other agents engaged in
connection with the transactions contemplated hereby, in each case to
the extent reasonably required to be disclosed to such Person in the
conduct of such Person's business) any information contained in the
List of Leases, the Lease Files or the Lease Management System or any
information furnished to it or obtained by it pursuant to this
Agreement; provided, that Lender may disclose such information (i)
which is or has become public (other than by reason of a breach of
this Section 16.10), (ii) as may be required under any applicable law
or regulation or (iii) in connection with any bona fide proposed sale,
assignment or participation to any Person permitted hereunder if such
Person has agreed in writing to be bound by this Section 16.10.
<PAGE>
Lender (and each such other Person) will take such actions and abide
by such measures as are reasonably necessary to protect and maintain
the security and confidentiality of such information and, upon
reasonable request, will (to the extent permitted by law) inform the
Servicer and Borrower as to the identity and nature of all Persons to
whom any such information has been disclosed, the nature and substance
of the information so disclosed and the circumstances surrounding such
disclosure.
16.11 Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number
of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
16.12 Equitable Relief. Borrower recognizes that, in
the event Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, the Note or any of
the other Loan Documents, any remedy at law may prove to be inadequate
relief to Lender; therefore, Borrower agrees that Lender shall be
entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
16.13 Governing Law. Except as otherwise expressly
provided in any of the Loan Documents, in all respects, including all
matters of construction, validity and performance, this Agreement and
the Obligations arising hereunder shall be governed by, and construed
and enforced in accordance with, the laws of the State of Illinois
applicable to contracts made and performed in such state, without
regard to the principles thereof regarding conflict of laws, and any
applicable laws of the United States of America.
16.14 Consent to Jurisdiction. Borrower and Lender each
hereby irrevocably consents to the personal jurisdiction of the state
and federal courts located in Mecklenburg County, North Carolina, and
in Cook County, Illinois, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, the Note
and the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations.
Borrower and Lender each hereby irrevocably consents to the service of
a summons and complaint and other process in any action, claim or
proceeding brought by Lender or Lender in connection with this
Agreement or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and
obligations, on behalf of itself or its Property by registered mail or
personal delivery to the address described in Section 16.3.
16.15 Waiver of Jury Trial. LENDER AND BORROWER HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS,
<PAGE>
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS.
16.16 General Interpretive Principles. For purposes of
this Agreement except as otherwise expressly provided or unless the
context otherwise requires:
(a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well
as the singular, and the use of any gender herein shall be deemed
to include the other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles as in effect on the date hereof;
(c) references herein to "Articles", "Sections",
"Subsections", "paragraphs", and other subdivisions without
reference to a document are to designated Articles, Sections,
Subsections, paragraphs and other subdivisions of this Agreement;
(d) a reference to a Subsection without further reference
to a Section is a reference to such Subsection as contained in
the same Section in which the reference appears, and this rule
shall also apply to paragraphs and other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other
words of similar import refer to this Agreement as a whole and
not to any particular provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration.
(g) With respect to any Payment Date, the "related
Determination Date" and the "related Collection Period" will mean
the Determination preceding such Payment Date, and the
relationships among Determination Dates and Collection Periods
will be correlative of the foregoing relationships.
16.17 Termination. This Agreement shall terminate upon
the earlier of (i) the satisfaction and discharge of the Obligations
in full and (ii) the later of (a) the maturity of all Leases or (b)
the other liquidation of all Leases and Equipment.
16.18 No Petition Covenants. Notwithstanding any prior
termination of this Agreement or any other provision of this
Agreement, Lender shall not, prior to the date which is one year and
one day after the final distribution with respect to all notes,
certificates and other securities issued by the Borrower or any trust
formed by the Borrower which have been rated by any nationally
recognized statistical rating organization, acquiesce, petition or
otherwise invoke or cause the Borrower to invoke the process of any
<PAGE>
court or government authority for the purpose of commencing or
sustaining a case against the Borrower under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Borrower or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of
the Borrower.
<PAGE>
WITNESS the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written
above.
TL LEASE FUNDING CORP. IV,
as Borrower
By___________________________
Printed Name: Norman Smagley
Title: Vice President-Finance
Notice to be sent to:
TL Lease Funding Corp. IV
c/o The Corporation Trust Company
Wilmington, Delaware 19801
With a copy to:
Trans Leasing International, Inc.
3000 Dundee Road
Northbrook, Illinois 60062
Attention: Chief Financial Officer
Telephone: (708) 291-7110
Facsimile: (708) 291-7318
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Lender
By:___________________________
Printed Name: Bill A. Shirley, Jr.
Title: Vice President
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center TW-19
301 South College Street
Charlotte, NC 28288-0735
Attention: Christopher R. Snyder
Vice President
Telephone: 704/374-3017
Facsimile: 704/374-3254
<PAGE>
Exhibit A
REVOLVING CREDIT AND TERM LOAN NOTE
$35,000,000.00 Dated: November 28, 1995
FOR VALUE RECEIVED, TL Lease Funding Corp. IV ("Borrower"),
hereby promises to pay to First Union National Bank of North Carolina
("Lender"), the principal sum of Thirty-Five Million Dollars
($35,000,000.00) to the extent funds have been advanced by Lender to
Borrower pursuant to the Revolving Credit and Term Loan and Security
Agreement dated as of November 28, 1995 between Borrower and Lender
(the "Agreement") and remain outstanding. Any capitalized terms used
herein and not otherwise defined shall have the meanings set forth in
the Agreement. Principal and interest shall be due and payable on
this Note in accordance with the Agreement.
All payments under this Note shall be made by Borrower in
lawful money of the United States of America in immediately available
funds delivered to Lender as provided in the Agreement.
This Note is secured as provided in the Agreement, to which
reference is made as to the nature and extent of the security
("Collateral") for this Note, the rights of Lender, Borrower and any
holder of this Note with respect to the Collateral and the
acceleration of the maturity of this Note. To the extent provided in
the Agreement, the principal and interest payable on the Note and all
other Obligations under the Agreement are limited to, and payable only
out of, the Collateral. Borrower may prepay this Note, in whole or in
part, in the manner, to the extent, under the circumstances, and
subject to any additional payments provided for in the Agreement, and
not otherwise.
Except as expressly provided in the Agreement, Borrower
hereby waives diligence, presentment, demand, protest and notice of
any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.
This Note is the Note referred to in the Agreement. This
Note shall be construed in accordance with and governed by the laws of
the State of Illinois.
TL LEASE FUNDING CORP. IV
By: _________________________________
Title:
<PAGE>
Exhibit B-1
Form of Notice of Borrowing
[Company's Letterhead]
________________, 199_
First Union Capital Markets Group
One First Union Center TW-19
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Hannah Carmody, Asset-Backed Structured Finance
Ladies/Gentlemen:
Reference is made to the Revolving Credit and Term Loan and
Security Agreement dated as of November 28, 1995 (as the same may be
amended, supplemented or otherwise modified, the "Agreement") between
TL Lease Funding Corp. IV and First Union National Bank of North
Carolina. All terms used herein which are defined in the Agreement
shall have the same meaning herein as therein.
Pursuant to Section 3.1 [(b)]/[(c)] of the Agreement, this
Notice of Borrowing in respect of the Revolving Loans represents the
request of the undersigned to borrow on _____________, 1995 (the
"Borrowing Date") a Revolving Loan in an aggregate principal amount of
$___________. The proceeds of such Revolving Loan are to be deposited
on the Borrowing Date in the Borrower's Account in immediately
available funds.
[FOR DRAWS UNDER 3.1(b) USE THE FOLLOWING PARAGRAPH]
Attached hereto is an Addition Certificate indicating that Additional
Leases with an aggregate Lease Discounted Balance of $______ were
added to the Collateral on 199_ in accordance with Section 10.3 of the
Agreement. The undersigned hereby certifies that all of the
requirements of Section 10.3 of the Agreement and all of the
conditions precedent set forth in Section 12 of the Agreement have
been satisfied.
[FOR DRAWS UNDER 3.1(c) USE THE FOLLOWING PARAGRAPH] The
undersigned hereby certifies that as of the Borrowing Date (i) all of
the conditions precedent contained in Section 12 of the Agreement have
been satisfied and (ii) the aggregate amount of the outstanding
Revolving Loans (after giving effect to the Revolving Loan requested
hereunder) does not exceed the Asset Base as set forth in the attached
Asset Base Certificate dated as of _____________, 199_.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and
delivered this Notice of Borrowing as of this __ day of
______________, 199_.
TL LEASE FUNDING CORP. IV
By:_____________________________
Title:____________________________
<PAGE>
Exhibit B-2
Form of Notice to Convert the Revolving Loans to the Term Loan
("Notice of Conversion")
[Company's Letterhead]
________________, 199_
First Union Capital Markets Group
One First Union Center TW-19
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Hannah Carmody, Asset-Backed Structured Finance
Ladies/Gentlemen:
Reference is made to the Revolving Credit and Term Loan and
Security Agreement dated as of November 28, 1995 (as the same may be
amended, supplemented or otherwise modified, the "Agreement) between
TL Lease Funding Corp. IV and First Union National Bank of North
Carolina. All terms used herein which are defined in the Agreement
shall have the same meaning herein as therein.
Pursuant to Section 3.2 of the Agreement, this Notice of Conversion
represents the request of the undersigned to fix ____________, 199_
as the "Conversion Date" for purposes of the Agreement. The estimated
fixed rate of interest that will be payable by the Borrower under the
Swap Agreement is ____% per annum.
IN WITNESS WHEREOF, the undersigned has executed and
delivered this Notice of Conversion as of this ____ day of ________,
199_.
TL LEASE FUNDING CORP. IV
By:_______________________________
Title: ___________________________
<PAGE>
Exhibit C
Form of Asset Base Certificate
[Company's Letterhead]
_______________, 199_
First Union Capital Markets Group
One First Union Center TW-19
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Hannah Carmody, Asset-Backed Structured Finance
Ladies/Gentlemen:
Reference is made to the Revolving Credit and Term Loan and
Security Agreement dated as of November 28, 1995 (as the same may be
amended, supplemented or otherwise modified, the "Agreement") between
TL Lease Funding Corp. IV and First Union National Bank of North
Carolina. All terms used herein which are defined in the Agreement
shall have the same meaning herein as therein.
Pursuant to Section 3 and Section 8.1(a) of the Agreement,
the undersigned hereby certifies that the aggregate outstanding
principal balance of the Revolving Loans as of ____________, 199_ (the
"Determination Date") did not exceed the Asset Base. The related
calculations are set forth in Schedule 1 hereto.
IN WITNESS WHEREOF, the undersigned has executed and
delivered this Asset Base Certificate as of this _____ day
of_________, 199_.
TL LEASE FUNDING CORP. IV
By: ________________________________
Title: _______________________________
<PAGE>
Exhibit C (cont'd)
Form of Schedule 1 to Asset Base Certificate
Schedule 1
to
Asset Base Certificate
dated __________, 199_
A. Aggregate Discounted Lease Balance
(i) Total remaining Scheduled Lease
Payments of Eligible Leases $_________________
(ii) Discount Rate _________________%
(iii) Present value of Item (i) using
the Discount Rate in Item (ii)
("Aggregate Discounted Lease
Balance") $_________________
B. Collection Account Balance $_________________
C. Asset Base (sum of (1) Item A (iii)
multiplied by the Advance Rate and (2)
Item B) $_________________
D. Outstanding Principal Balance of the
Loans $_________________
E. Excess Asset Base (Shortfall)
(i) Borrowing Availability (excess of
Item C over Item D) $_________________
(ii) Asset Base Shortfall (excess of Item
D over Item C) $_________________
F. Advance Rate
(i) Effective Advance Rate (Item D minus
Item B divided by Item A (iii)) _________________%
(ii) Maximum Advance Rate 93.0%
<PAGE>
Exhibit D
Form of Payment Schedule
Aggregate
Scheduled Servicing Payment due Schedule
Payment Date Lease Payments Fee to Swap Company PrincipalPayment
- ------------ -------------- --------- --------------- ----------------
<PAGE>
Exhibit E
Form of Contribution and Sale Agreement
<PAGE>
Exhibit F
Form of Servicing Agreement
<PAGE>
Exhibit G
Form of Limited Recourse Agreement
<PAGE>
Exhibit H
Form of K&E Opinion
<PAGE>
Exhibit I
Account Information
Servicer's Account: Bank of America, Illinois
231 South LaSalle Street
Chicago, Illinois 60617
ABA No.: 071000039
Account No.: 7804563
Borrower's Account: Borrower directs that all amounts payable to
Borrower's Account shall be paid by depositing such amount in the
Servicer's Account for application as directed by Borrower to the
Servicer.
<PAGE>
Exhibit J
Form of Addition Notice
[Company's Letterhead]
_____________, 199_
First Union Capital Markets Group
One First Union Center TW-19
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Hannah Carmody, Asset-Backed Structured Finance
Ladies/Gentlemen:
Reference is made to the Revolving Credit and Term Loan and
Security Agreement dated as of November 28, 1995 (as the same may be
amended, supplemented or otherwise modified, the "Agreement") between
TL Lease Funding Corp. IV and First Union National Bank of North
Carolina. All terms used herein which are defined in the Agreement
shall have the same meaning herein as therein.
Pursuant to Section 3.1(b) of the Agreement, Borrower hereby
certifies that on ______________ it acquired Additional Leases from
Trans Leasing with an aggregate Discounted Lease Balance as of the
related Cut-Off Date (calculated using the Discount Rate for the
related Addition Date) equal to $___________ pursuant to an Additional
Lease Transfer Agreement.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Notice of Borrowing as of this ___, day of ___________ 199_.
TL LEASE FUNDING CORP. IV
By:________________________________
Title:_____________________________
LIMITED RECOURSE AGREEMENT
This LIMITED RECOURSE AGREEMENT ("Limited Recourse
Agreement") dated as of November 28, 1995 is made by TRANS LEASING
INTERNATIONAL, INC., a Delaware corporation ("Trans Leasing"), in
favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("Lender").
RECITALS
A. Lender has entered into a Revolving Credit and Term Loan
and Security Agreement dated as of the date hereof (as the same may
from time to time be amended, modified, supplemented or restated, the
"Credit Agreement") with TL Lease Funding Corp. IV, a Delaware
corporation ("Borrower"), pursuant to which Lender shall, from time to
time, make loans (the "Loan") to the Borrower. The Loan will
initially be made on a revolving basis, and on or prior to the
Transition Date, will convert to a term loan.
B. Trans Leasing is the sole shareholder of Transferor.
Trans Leasing will obtain substantial direct and indirect benefit from
the making of the Loan.
C. In consideration of the agreement of Lender to make the
Loan to Borrower, Trans Leasing is willing to agree, under
circumstances set forth herein, to contribute to Borrower either
Eligible Leases or cash; provided that in no event shall Trans Leasing
be required to contribute an aggregate amount in excess of $1,750,000
hereunder, all as further set forth herein.
D. Capitalized terms used but not otherwise defined herein
shall have the meaning given to them in the Credit Agreement.
AGREEMENT
NOW, THEREFORE, In consideration of the foregoing Recitals
and other good consideration, the receipt and adequacy is hereby
acknowledged, and intending to be legally bound, the parties hereto do
hereby agree as follows:
Section 1. Acknowledgment. Trans Leasing hereby consents
to Borrower's issuance of the Note and entry into the Credit
Agreement. Trans Leasing acknowledges that Lender has agreed to make
the Loan at the request of, and as an accommodation to, Borrower.
Section 2. Agreement. Trans Leasing hereby
unconditionally, absolutely and irrevocably agrees, on the Transition
Date, to contribute to Borrower Additional Leases and/or immediately
available funds, such that the sum of (i) the Discounted Lease
Balances of the Additional Leases contributed hereunder, plus (ii) the
amount of any such immediately available funds shall equal any
<PAGE>
Transition Date Covered Asset Base Shortfall (as defined below);
provided, that Trans Leasing shall not be required to pay or
contribute an aggregate amount under this Limited Recourse Agreement
of more than the lesser of $1,750,000 or five percent (5%) of the
outstanding principal amount of the Loan as of the Transition Date,
taking into account the Revolving Loan made pursuant to Section 3.1(f)
of the Credit Agreement, together with, without limitation, the prompt
payment of all expenses, including, without limitation, reasonable
attorneys' fees and legal expenses, incidental to the collection of
such amounts. Such amounts and all other obligations and covenants to
be performed by Trans Leasing under this Limited Recourse Agreement
shall hereinafter from time to time be collectively referred to as the
"Limited Recourse Obligations".
For purposes of this Limited Recourse Agreement:
"Transition Date Covered Asset Base Shortfall" means the amount
calculated as (i) the amount by which (A) the outstanding principal
amount of the Loan as of the Transition Date, taking into account the
Revolving Loan made on the Transition Date pursuant to Section 3.1(f)
of the Credit Agreement, exceeds (B) the Asset Base reflected on the
Asset Base Certificate delivered pursuant to Section 3.2(b) of the
Credit Agreement, minus (ii) the Discounted Lease Balance of any
Leases that became a Defaulted Lease after (x) if the Conversion Date
has occurred as a result of the occurrence of an Early Amortization
Event pursuant to clause (2) of the definition thereof, the second
Determination Date preceding the Conversion Date or (y) in all other
cases, the Determination Date immediately preceding the Conversion Date.
Section 3. Agreement Unconditional. The obligations of
Trans Leasing hereunder are irrevocable, absolute and unconditional,
irrespective of the value, genuineness, regularity, validity or
enforceability of the Obligations or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense
of a surety or guarantor.
Section 4. Contribution of Additional Leases; Payments.
Any contribution of Additional Leases pursuant to Section 2 shall be
made pursuant to an Assignment for Additional Leases substantially in
the form of Exhibit C to the Contribution and Sale Agreement. All
payments of cash to be made by Trans Leasing hereunder shall be made
by deposit into the Collection Account.
Section 5. Representations and Warranties. Trans Leasing
hereby represents and warrants to Lender that:
(a) Trans Leasing is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good
standing in every jurisdiction where the nature of its business
requires it to be so qualified (except where the failure to so
qualify would not have a material adverse effect on Trans
Leasing's condition, financial or otherwise), and has the
requisite power and authority to execute and deliver this Limited
<PAGE>
Recourse Agreement and to perform its obligations (including,
without limitation, payment of the Limited Recourse Obligations)
hereunder.
(b) The execution, delivery and performance by Trans
Leasing of this Limited Recourse Agreement (i) are within Trans
Leasing's corporate powers and have been duly authorized by all
necessary corporate action; (ii) do not contravene Trans
Leasing's charter documents or any law or any contractual
restriction binding on or affecting Trans Leasing or by which
Trans Leasing's Property may be affected, (iii) do not require
any authorization or approval or other action by, or any notice
to or filing, registration or recording with, any Governmental
Authority or any other Person, except such as have already been
obtained or made and (iv) do not, except as contemplated by the
Credit Agreement or this Limited Recourse Agreement, result in the
imposition or creation of any Lien on any Property of Trans Leasing.
(c) This Limited Recourse Agreement constitutes the legal,
valid and binding obligation of Trans Leasing, enforceable in
accordance with its terms, except as the enforceability thereof
may be subject to or limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors and by general
principles of equity.
(d) To the best of Trans Leasing's knowledge, there is no
action, suit or proceeding affecting Trans Leasing pending or
threatened before any court, arbitrator or Governmental Agency
which is reasonably likely to materially adversely affect the
ability of Trans Leasing to perform its obligations under this
Limited Recourse Agreement.
(e) The financial statements of Trans Leasing dated as of
June 30, 1995 (audited) copies of which have been furnished to
Lender, fairly present the financial position and results of
operations for Trans Leasing for the dates and periods purported
to be covered thereby, all in accordance with GAAP.
(f) Trans Leasing is not insolvent as of the Closing Date
and the incurrence of Trans Leasing's obligations under this
Limited Recourse Agreement will not cause Trans Leasing: (i) to
become insolvent; (ii) to be left with unreasonably small capital
for any business or transaction in which Trans Leasing is
presently engaged or plans to be engaged; or (iii) to be unable
to pay its debts as such debts mature.
Section 6. Consents. Trans Leasing hereby agrees that any
or all of the following actions may be taken or things done without
notice to Trans Leasing and without affecting the liability of Trans
Leasing under this Limited Recourse Agreement:
<PAGE>
(a) The time for Borrower's performance of or compliance
with any of the Obligations may be accelerated or extended or
such performance or compliance may be waived by Lender
(including, without limitation, the renewal, extension,
acceleration or other change in the time of payment, or other
terms of, the indebtedness, such as an increase or decrease in
the rate of interest thereon);
(b) Any of the acts referred to in the terms of the Loan
Documents may be performed, upon default thereunder, by or on
behalf of Lender; and
(c) The terms of any of the Obligations or any term or
condition in the Loan Documents may be amended as provided for
therein by Borrower, or Lender, as the case may be, for the
purpose of adding any provisions thereto or changing in any
manner the rights or obligations of Borrower, or Lender
thereunder.
Section 7. Due Diligence. Trans Leasing acknowledges that
it has, independently of and without reliance on Lender, made its own
credit analysis of Borrower and the Collateral and performed its own
legal review of this Limited Recourse Agreement, the Loan Documents
and all related filings, and Trans Leasing is not relying on Lender
with respect to any of the aforesaid items. Trans Leasing further
agrees that Lender shall have no obligation to disclose to Trans
Leasing information or material with respect to Borrower acquired in
the course of Lender's relationship with Borrower.
Section 8. Waiver. Trans Leasing hereby expressly waives
discharge due to any disability of Borrower, any defenses of Borrower
to its obligations under the Loan Documents not arising under the
express terms of the Loan Documents or from a material breach thereof
by Lender which under the law has the effect of discharging Borrower
from any of the Obligations, the benefit of any act or omission by
Lender which directly or indirectly results in or aids the discharge
of Borrower from any of the Obligations by operation of law or
otherwise, and any requirement that Lender exhaust any right, power or
remedy or proceed against Borrower or any other Person liable for, any
of the Obligations, or any portion thereof. Trans Leasing
specifically agrees that it will not be necessary or required, and
Trans Leasing shall not be entitled to require, that Lender file suit
or proceed to assert or obtain a claim for personal judgment against
Borrower for the Obligations or to make any effort at collection or
enforcement of the Obligations from Borrower or file suit or proceed
to obtain or assert a claim for personal judgment against Borrower or
make any effort at collection of the Obligations from Borrower or
exercise or assert any other right or remedy to which Lender is or may
be entitled in connection with the Obligations or assert or file any
claim against the assets of Borrower, before or as a condition of enforcing
the liability of Trans Leasing under this Limited Recourse Agreement.
<PAGE>
Section 9. Certain Rights. Lender may pursue its rights
and remedies under this Limited Recourse Agreement against Trans
Leasing notwithstanding (a) any action taken by Lender to enforce any
rights or remedies under the Credit Agreement or (b) unless all
Obligations have been paid in full, any payment received under the
Credit Agreement. In pursuing its rights under this Limited Recourse
Agreement, Lender need not join Trans Leasing in any suit against
Borrower or join Borrower in any suit against Trans Leasing.
Section 10. Notice. Lender shall provide Trans Leasing
with a copy of any notice of default to Borrower as provided under the
Credit Agreement, provided, however, the failure of Lender to provide
such notice to Trans Leasing will not exonerate Trans Leasing of any
obligations under this Limited Recourse Agreement. Any notice or
other communication herein required or permitted to be given shall be
in writing and may be delivered in person, with receipt acknowledged,
or sent by telecopy or by United States mail, registered or certified,
return receipt requested, or by Federal Express or other nationally
recognized overnight courier service, postage prepaid and confirmation
of receipt requested: if to Trans Leasing, at its address at 3000
Dundee Road, Northbrook, Illinois 60062, Attention: Chief Financial
Officer; and if to Lender, at its address at One First Union Center
TW-19, 301 South College Street, Charlotte, North Carolina 28288-0735,
Attention: Christopher R. Snyder, Asset Securitization Division
(Facsimile No. (704) 374-3254) or, as to each party, at such other
address as shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this
Section 10. Every notice, demand, request, consent, approval,
declaration or other communication hereunder shall be deemed to have
been duly given or served on the date on which the same shall have
been personally delivered, with receipt acknowledged, or sent by
telecopy, three (3) Business Days after the same shall have been
deposited in the United States mail or on the next succeeding Business
Day if the same has been sent by Federal Express or other nationally
recognized overnight courier service. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration
or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other
communication.
Section 11. Reinstatement. Notwithstanding any provision
in any Loan Document to the contrary, the liability of Trans Leasing
hereunder shall be reinstated and revived and the rights of Lender
shall continue if and to the extent that for any reason any payment by
or on behalf of Borrower is rescinded or must be otherwise restored by
Lender, which rescission or required restoration results in the
occurrence of a Transition Date Covered Asset Base Shortfall as of the
Transition Date, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, all as though such amount had not been
paid. The determination as to whether any such payment must be
rescinded or restored shall be made by Lender in its sole discretion;
provided, however, that if Lender chooses to contest any such matter
<PAGE>
at the request of Trans Leasing, Trans Leasing agrees to indemnify and
hold harmless Lender from all costs and expenses (including, without
limitation, reasonable attorneys' fees) reasonably related to such request.
Section 12. No Waiver, Amendments, Etc. No failure on the
part of Lender to exercise, no delay in exercising and no course of
dealing with respect to, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. This
Limited Recourse Agreement may not be amended or modified except by
written agreement, executed in accordance with the provisions of the
Credit Agreement and no consent or waiver hereunder shall be valid
unless in writing and executed in accordance with the provisions of
the Credit Agreement.
Section 13. Compromise and Settlement. No compromise,
settlement, release, renewal, extension, indulgence, change in, waiver
or modification of any of the Obligations or the release or discharge
of Borrower from the performance of any of the Obligations (other than
payment in full of all Obligations) shall release or discharge Trans
Leasing from this Limited Recourse Agreement.
Section 14. Insolvency. The voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or
substantially all the assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, or other proceeding affecting Borrower or the
disaffirmance of any of the Loan Documents shall not release or
discharge Trans Leasing from this Limited Recourse Agreement.
Section 15. Expenses. In addition to its Limited Recourse
Obligations, Trans Leasing hereby agrees to pay all reasonable costs
and expenses, including, without limitation, reasonable attorneys'
fees, reasonably paid or incurred by Lender in collecting or enforcing
any or all of the Limited Recourse Obligations or in connection with
the enforcement of this Limited Recourse Agreement and in which Lender
is the prevailing party.
Section 16. Entire Agreement. This Limited Recourse
Agreement and all documents mentioned or contemplated herein constitute and
contain the entire agreement of the parties and supersede any and all prior
and contemporaneous agreements, negotiations, correspondence,
understandings and communications between the parties, whether written or
oral, respecting the subject matter hereof.
Section 17. Severability. If any provision of this Limited
Recourse Agreement is held to be unenforceable for any reason, it
shall be adjusted, if possible, rather than voided in order to achieve
the intent of the parties to the extent possible. In any event, all
other provisions of this Limited Recourse Agreement shall be deemed
valid and enforceable to the full extent possible.
<PAGE>
Section 18. Assignment; Governing Law. Neither Trans
Leasing nor the Lender shall have the right to assign its rights
hereunder or any interest herein. This Limited Recourse Agreement
shall be governed by, and construed in accordance with, the laws of
the State of Illinois as applied to contracts made and performed
entirely within the State of Illinois by residents of such State.
Section 19. Actions by Lender. Lender shall have the power
to enforce this Limited Recourse Agreement against Trans Leasing to
the full extent of Trans Leasing's obligations hereunder.
Section 20. Consent to Jurisdiction. Trans Leasing and Lender
each hereby irrevocably consents to the personal jurisdiction of the state
and federal courts located in Mecklenburg County, North Carolina, and in
Cook County, Illinois, in any action, claim or other proceeding arising out
of any dispute in connection with this Limited Recourse Agreement. Trans
Leasing and Lender each hereby irrevocably consents to the service of a
summons and complaint and other process in any action, claim or proceeding
brought by Trans Leasing or Lender in connection with this Limited Recourse
Agreement, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations, on behalf of itself or its
Property by registered mail or personal delivery to the address set forth
in Section 10.
Section 21. Waiver of Jury Trial. TRANS LEASING AND LENDER
HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH
RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS LIMITED RECOURSE AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OF THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS.
SECTION 22. General Interpretive Principles. For purposes
of this Limited Recourse Agreement except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Limited Recourse Agreement
have the meanings assigned to them in this Limited Recourse Agreement
and include the plural as well as the singular, and the use of any
gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles as in effect on the date hereof;
(c) references herein to "Articles", "Sections",
"Subsections", "paragraphs", and other subdivisions without reference
to a document are to designated Articles, Sections, Subsections,
paragraphs and other subdivisions of this Limited Recourse Agreement;
<PAGE>
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section
in which the reference appears, and this rule shall also apply to
paragraphs and other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other
words of similar import refer to this Limited Recourse Agreement as a
whole and not to any particular provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration.
Section 23. Termination. Subject to Section 11, this Limited
Recourse Agreement shall terminate (a) if there is no Transition Date
Asset Base Shortfall on the Transition Date, on the Transition Date,
and (b) if there is a Transition Date Asset Base Shortfall on the
Transition Date, upon the payment and contribution of the amount
required under Section 2.
<PAGE>
IN WITNESS WHEREOF, Trans Leasing has executed and delivered
this Limited Recourse Agreement as of the date first written above.
TRANS LEASING INTERNATIONAL, INC.
By:_____________________________
Name: Norman Smagley
Title: Vice President-Finance
APPROVED AND ACCEPTED
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:____________________________
Name: Bill A. Shirley, Jr.
Title: Vice President
SERVICING AGREEMENT
among
TL LEASE FUNDING CORP. IV
TRANS LEASING INTERNATIONAL, INC.,
as initial Servicer
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Lender
Dated as of
November 28, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . .1
1.2 Other Definitional Provisions . . . . . . . . . . . . .4
ARTICLE II
ADMINISTRATION AND SERVICING OF LEASES . . . . . . . . . . . .5
2.1 Appointment and Acceptance; Duties. . . . . . . . . . .5
2.2 Collection of Payments. . . . . . . . . . . . . . . . .8
2.3 Servicer Advances . . . . . . . . . . . . . . . . . . .9
2.4 Realization Upon Defaulted Leases . . . . . . . . . . .9
2.5 Maintenance of Insurance Policies . . . . . . . . . . 10
2.6 Recording and Filings . . . . . . . . . . . . . . . . 10
2.7 Marking of Lease Management System. . . . . . . . . . 11
2.8 Representations and Warranties of Servicer. . . . . . 11
2.9 Covenants of Servicer . . . . . . . . . . . . . . . . 13
2.10 Servicer Compensation . . . . . . . . . . . . . . . . 15
2.11 Payment of Certain Expenses by Servicer . . . . . . . 15
2.12 Monthly Statement; Annual Statement . . . . . . . . . 15
2.13 Annual Report as to Compliance. . . . . . . . . . . . 16
2.14 Annual Independent Public Accountants' Servicing
Reports . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
ACCOUNTS AND DEPOSITS . . . . . . . . . . . . . . . . . . . 16
3.1 Establishment of Accounts . . . . . . . . . . . . . . 17
3.2 Investment of Accounts. . . . . . . . . . . . . . . . 17
3.3 Deposits. . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV
OTHER MATTERS RELATING TO THE SERVICER . . . . . . . . . . . 19
4.1 Liability of the Servicer and Others. . . . . . . . . 19
4.2 Merger or Consolidation of Servicer; Assumption of
Servicer's Obligations. . . . . . . . . . . . . . . . 19
4.3 The Servicer Not to Resign. . . . . . . . . . . . . . 20
4.4 Access to Certain Documentation and Information
Regarding the Assets. . . . . . . . . . . . . . . . . 20
ARTICLE V
SERVICER DEFAULTS . . . . . . . . . . . . . . . . . . . . . 21
5.1 Servicer Defaults . . . . . . . . . . . . . . . . . . 21
5.2 Lender to Act; Appointment of Successor . . . . . . . 23
5.3 Notification to Lender. . . . . . . . . . . . . . . . 25
5.4 Waiver of Past Defaults . . . . . . . . . . . . . . . 25
5.5 List of Leases. . . . . . . . . . . . . . . . . . . . 25
<PAGE>
ARTICLE VI
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 26
6.1 Termination . . . . . . . . . . . . . . . . . . . . . 26
6.2 Amendment . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Evidence of Filings . . . . . . . . . . . . . . . . . 26
6.4 Governing Law . . . . . . . . . . . . . . . . . . . . 26
6.5 Notices . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Severability of Provisions. . . . . . . . . . . . . . 28
6.7 Assignment. . . . . . . . . . . . . . . . . . . . . . 28
6.8 Schedules and Exhibits. . . . . . . . . . . . . . . . 28
6.9 No Waiver; Cumulative Remedies. . . . . . . . . . . . 28
6.10 Counterparts. . . . . . . . . . . . . . . . . . . . . 29
6.11 Binding Effect; Third-Party Beneficiaries . . . . . . 29
6.12 Merger and Integration. . . . . . . . . . . . . . . . 29
6.13 Headings. . . . . . . . . . . . . . . . . . . . . . . 29
6.14 Certificates and Opinions of Counsel. . . . . . . . . 29
LIST OF EXHIBITS
Exhibit A Form of Monthly Statement
Exhibit B Form of Certificate
<PAGE>
SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of November 28, 1995
(this "Agreement"), among TL Lease Funding Corp. IV, a Delaware
corporation ("TLFC"), Trans Leasing International, Inc., a
Delaware corporation (referred to herein as "Trans Leasing" or
the "Servicer"), and First Union National Bank of North Carolina
(the "Lender"). Other capitalized terms used in this Agreement
are defined in Article I.
TLFC and Trans Leasing have entered into a Contribution
and Sale Agreement providing for, among other things, the
contribution and sale by Trans Leasing to TLFC of Leases and the
related Equipment.
TLFC and the Lender have entered into a Credit
Agreement dated as of the date hereof. Under the Credit
Agreement, the Lender has agreed, subject to the satisfaction of
certain conditions, to make loans to TLFC, and TLFC has granted
to the Lender a security interest in TLFC's rights under the
Leases, the related Equipment and this Agreement.
Trans Leasing intends to continue administering and
servicing the Leases and the Equipment in its capacity as
Servicer pursuant to this Agreement.
The execution and delivery of this Agreement is a
condition to the obligation of Lender to make the initial loan
under the Credit Agreement.
In consideration of the mutual agreements contained in
this Agreement, each party agrees as follows for the benefit of
the other parties:
ARTICLE I
DEFINITIONS
1.1 Definitions. Whenever used in this Agreement, the
following words and phrases have the following respective
meanings:
"Contribution and Sale Agreement" means the
Contribution and Sale Agreement dated as of the date hereof
between the Originator and TLFC, together with all amendments,
restatements, supplements and modifications thereof or thereto.
"Credit Agreement" means the Revolving Credit and Term
Loan and Security Agreement dated as of the date hereof between
TLFC and the Lender, together with all amendments, restatements,
supplements and modifications thereof or thereto.
<PAGE>
"Eligible Investments" means any of the following, in
each case as determined at the time of the investment or
contractual commitment to invest therein:
(a) investments in commercial paper maturing in 270
days or less from the date of issuance which is accorded the
highest rating by S&P or Moody's or another nationally recognized
credit rating agency of similar standing;
(b) investments in direct obligations of the United
States of America, or any agency thereof, or obligations
guaranteed by the full faith and credit of the United States of
America, provided that all such obligations mature in twelve
months or less from the date of acquisition thereof;
(c) investments in certificates of deposit maturing
within one year from the date of origin, rated A-1 or better by
S&P or A or better by Moody's or a comparable rating by another
nationally recognized rating agency of similar standing, issued
by a bank or trust company organized under the laws of the United
States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000;
(d) investments in debt obligations of corporations
organized and existing under the laws of the United States, any
state or the District of Columbia maturing in 12 months or less
from the date of acquisition thereof, and rated AA or better by
S&P or Aa or better by Moody's or a comparable rating by another
nationally recognized rating agency of similar standing;
(e) money market funds sponsored by insurance
companies, investment banking firms or commercial banking
institutions which are members of the Federal Reserve System,
provided such fund (i) has assets of not less than $100,000,000,
(ii) invests solely in investments permitted under subparagraphs
(a), (b) and (c) above and (iii) are rated AA or better by S&P or
Aa or better by Moody's or a comparable rating by another
nationally recognized rating agency of similar standing; and
(f) any other investment reasonably acceptable to the
Lender.
"Late Fees" means any amounts assessed by the
Originator and paid by a Lessee in excess of the Scheduled Lease
Payment due to the delinquency of a Lease payment.
"Lease File" means, with respect to each Lease, the
Lease and all other documents relating to such Lease held by the
Servicer pursuant to this Agreement.
"Lease Management System" means the computerized
electronic lease management system maintained by the Servicer for
all Leases and other agreements similar to the Leases.
<PAGE>
"Moody's" means Moody's Investor Service, Inc.
"Monthly Statement" has the meaning set forth in
Section 2.12(a).
"Officer's Certificate" of any Person means a
certificate signed by any Responsible Officer of such Person.
"Opinion of Counsel" means a written opinion of legal
counsel, who may be counsel to Trans Leasing or other counsel
acceptable to the Lender.
"Originator" means Trans Leasing, in its capacity as
the transferor of Leases, Equipment and other assets pursuant to
the Contribution and Sale Agreement.
"Repurchased Lease" means, at any time, any Lease which
has been repurchased by Trans Leasing pursuant to the
Contribution and Sale Agreement as the result of the occurrence
of a Warranty Event.
"S&P" means Standard & Poor's Ratings Services, a
division of McGraw Hill, Inc.
"Servicer" means initially Trans Leasing and thereafter
any Person appointed as a Successor Servicer pursuant to this
Agreement, in each case, in such Person's capacity as the
Servicer pursuant to this Agreement.
"Servicer Advance" means an advance of Scheduled Lease
Payments made by the Servicer pursuant to Section 2.3.
"Servicer Default" has the meaning set forth in
Section 5.1(a).
"Skipped Payment" has the meaning set forth in Section
2.2(a).
"Successor Servicer" means any Person appointed as a
successor to the Servicer pursuant to Section 4.3 or 5.2.
"Termination Notice" has the meaning set forth in
Section 5.1(b).
"Transaction Year" means the twelve-month period ending
on June 30 each year; provided that the initial Transaction Year
will be the period commencing on the Closing Date and ending on
June 30, 1996.
1.2 Other Definitional Provisions.
(a) Terms Defined in the Credit Agreement. For the
purposes of this Agreement, capitalized terms used but not
<PAGE>
otherwise defined in this Agreement have the respective meanings
assigned to such terms in the Credit Agreement.
(b) Terms used in Related Documents. Each term
defined in this Agreement will have the meaning assigned to such
term in this Agreement when used in any certificate or other
document made or delivered pursuant to this Agreement, unless
such term is otherwise defined therein.
(c) Accounting Terms. As used in this Agreement,
accounting terms which are not defined in Section 1.1 have the
respective meanings given to them under generally accepted
accounting principles, as in effect on the date of this
Agreement. To the extent that the definitions of accounting
terms in this Agreement are inconsistent with the meanings of
such terms under generally accepted accounting principles, the
definitions contained in this Agreement will control.
(d) "Hereof," etc. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any
particular provision of this Agreement; and Section, Schedule and
Exhibit references contained in this Agreement are references to
Sections, Schedules and Exhibits in or to this Agreement, unless
otherwise specified.
(e) Reference to Payment Date. With respect to any Payment Date,
the "related Determination Date" and the "related Collection Period," will
mean the Determination Date and Collection Period, respectively,
immediately preceding such Payment Date, and the relationships among
Determination Dates and Collection Periods will be correlative to the
foregoing relationships.
(f) Number and Gender. Each defined term used in this
Agreement has a comparable meaning when used in its plural or singular
form. Each gender-specific term used in this Agreement has a comparable
meaning whether used in a masculine, feminine or gender-neutral form.
(g) Including. Whenever the term "including" (whether
or not that term is followed by the phrase "but not limited to"
or "without limitation" or words of similar effect) is used in
this Agreement in connection with a listing of items within a
particular classification, that listing will be interpreted to be
illustrative only and will not be interpreted as a limitation on,
or exclusive listing of, the items within that classification.
(h) "Receipt" of Funds. For purposes of this
Agreement, funds constituting Collections and payments under any
Swap Agreement will be deemed to be "received" by the Servicer
when such funds have been deposited in a lock-box account
maintained by the Servicer or on its behalf (or, if earlier, when
such funds come into the Servicer's actual possession).
<PAGE>
ARTICLE II
ADMINISTRATION AND SERVICING OF LEASES
2.1 Appointment and Acceptance; Duties.
(a) Appointment of Initial Servicer. Trans Leasing is
hereby appointed as Servicer pursuant to this Agreement. Trans
Leasing accepts the appointment and agrees to act as the Servicer
pursuant to this Agreement. The Servicer acknowledges and agrees
that the rights, duties and obligations of the Servicer hereunder
include the rights, duties and obligations set forth for the
Servicer in the Credit Agreement.
(b) General Duties. The Servicer will service,
administer and enforce the Leases on behalf of TLFC 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. The Servicer will manage, service, administer, and
make collections on the Leases with reasonable care, using that
degree of skill and attention that the Servicer exercises with
respect to all comparable equipment leases that it services for
itself or others. The Servicer's duties will include collection
and posting of all payments, responding to inquiries of Lessees
regarding the Leases, investigating delinquencies, accounting for
collections, furnishing monthly and annual statements with
respect to collections and distributions in accordance with
Section 2.12, making Servicer Advances in its discretion and
using its best efforts to maintain the perfected first priority
security interest of the Lender in the Leases and the related
Equipment (subject to the provisos contained in Section 2.6).
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 Lease pursuant to Section 2.4 or commences or
participates in a legal proceeding (including a bankruptcy
proceeding) relating to or involving a Lease, TLFC will be deemed
to have automatically assigned such Lease 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 TLFC, pursuant to this Section 2.1(b), to execute and deliver,
on behalf of itself and the Lender, 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 Lease on the ground that it is not a real party in interest or
a holder entitled to enforce the Lease, then TLFC will, at the
Servicer's expense and direction, take steps to enforce the
Lease, including bringing suit in its name.
<PAGE>
(c) Consent to Assignment or Replacement. At the
request of a Lessee, the Servicer may in its sole discretion
consent to the assignment of the related Lease or the sublease of
a unit of the Equipment relating to a Lease, so long as such
Lessee remains liable for all of its obligations under such
Lease. Upon the request of any Lessee, the Servicer may, in its
sole discretion, provide for the substitution or replacement of
any unit of Equipment for a substantially similar unit of
equipment.
(d) Disposition Upon Termination of Lease. Upon the
expiration or termination of a Lease, 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 selling such
Equipment to Trans Leasing for a purchase price equal to the fair
market value thereof. The Servicer will deposit any Early
Termination Lease Proceeds and any Expired Lease Proceeds of any
such disposition in accordance with Section 3.3.
(e) Subservicers. The Servicer may enter into
servicing agreements with one or more subservicers (including
Nuvotron, Inc. or any other Affiliate of any Servicer) to perform
all or a portion of the servicing functions on behalf of the
Servicer; provided that the Servicer will remain obligated and be
liable to the Lender for servicing and administering the Leases
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 the Leases. The fees and expenses of the
subservicer (if any) will be as agreed between the Servicer and
its subservicer and neither TLFC nor the Lender 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.
(f) Further Assurances. The Lender will furnish the
Servicer, and the Servicer will furnish any subservicer, with any
powers of attorney and other documents necessary or appropriate
to enable the Servicer or a subservicer, as applicable, to carry
out its servicing and administrative duties under this Agreement
or the Credit Agreement.
(g) Notice to Lessees. The Servicer will not be re-
quired to notify any Lessee that such Lessee's Lease or related
Equipment has been sold, transferred, assigned or conveyed to
TLFC pursuant to the Contribution and Sale Agreement or to the
Lender pursuant to the Credit Agreement; provided that, in the
event that any Servicer resigns or is replaced, then if the place
for payment pursuant to any Lease is changed, the Successor
Servicer shall prior to such change give each related Lessee
<PAGE>
prompt written notice of the appointment of the Successor
Servicer and the place to which such Lessee should make payments
pursuant to each such Lease, and the Servicer that resigned or
has otherwise been replaced shall promptly transfer to the
Successor Servicer any payments it receives after such
resignation or replacement.
(h) Notice to Parties to the Swap Agreement. The
Servicer will be responsible for notifying TLFC and each Swap
Counterparty within two Business Days of the occurrence of a Swap
Breakage Event.
2.2 Collection of Payments.
(a) Collection Efforts. The Servicer will make
reasonable efforts to collect all payments called for under the
terms and provisions of the Leases as and when the same become
due and will follow those collection procedures which it follows
with respect to all comparable equipment leases that it services
for itself or others. To the extent consistent with the
Originator's past practices, the Servicer may grant extensions,
rebates, or adjustments on a Lease which will not extend the
original due dates or the number of Scheduled Lease Payments or
reduce the amount of any Scheduled Lease Payment; provided that,
on only one occasion with respect to any Lease, not more than
three consecutive Scheduled Lease Payments (collectively, a
"Skipped Payment") under such Lease may be deferred to the end of
the term of such Lease so long as the sum of the Discounted Lease
Balances of all Leases with respect to which there has been a
Skipped Payment as of a Determination Date does not exceed 5% of
the Aggregate Discounted Lease Balance as of the Transition Date.
No Skipped Payment shall be considered delinquent for purposes of
this Agreement or the Credit Agreement, and no Servicer Advance
will be required with respect thereto. 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 Lease.
(b) Early Termination Leases. The Servicer may, in
its sole discretion, permit a Lease to become an Early
Termination Lease (which shall not include a Lease that becomes
an Early Termination Lease due to a Casualty Loss), so long as,
unless another Lease is substituted therefor as described in
Section 10.4 of the Credit Agreement, the Servicer deposits in
the Collection Account, not later than the second Business Day
after receipt thereof by the Servicer, the sum of (y) the
Discounted Lease Balance of such Lease as of the Determination
Date in the month prior to the month in which such Lease becomes
an Early Termination Lease and (z) interest thereon at the
Discount Rate as of such Determination Date.
(c) Acceleration. The Servicer, in its sole
discretion, may accelerate (or elect not to accelerate) the
maturity of all or any Scheduled Lease Payments under any Lease
<PAGE>
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 Lease Payments due under any Lease (and take other
action in accordance with the Servicer's past practice, including
repossessing or otherwise converting the related Equipment, to
realize upon the value of such Lease and the related Equipment)
to the fullest extent permitted by the terms of such Lease,
promptly after such Lease becomes a Defaulted Lease.
(d) Taxes and Other Amounts. To the extent provided
for in any Lease, the Servicer will make reasonable efforts to
collect all payments with respect to amounts due for taxes,
assessments and insurance premiums relating to the Leases or the
related Equipment and remit such amounts to the appropriate
Governmental Authority or insurer on or prior to the date such
payments are due.
2.3 Servicer Advances. For each Collection Period
commencing after the Conversion Date, if the Servicer determines
that any Scheduled Lease Payment (or portion thereof) which was
due and payable pursuant to a Lease during such Collection Period
was not received prior to the end of such Collection Period, the
Servicer shall make a Servicer Advance in an amount up to the
amount of such delinquent Scheduled Lease 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 Lease, and such Servicer Advance shall be deemed to
be a payment of such Scheduled Lease Payment (or portion thereof)
for purposes of calculating the Discounted Lease Balance with
respect to such Lease. The Servicer will deposit any Servicer
Advances into the Collection Account on or prior to 10:00 a.m.
(Chicago time) on the related Payment Date, in immediately
available funds. The Servicer will be entitled to be reimbursed
for Servicer Advances pursuant to Sections 3.3(c) and as
described in the Credit Agreement.
2.4 Realization Upon Defaulted Leases. The Servicer
will use its best efforts consistent with its customary and usual
practices and procedures in its servicing of equipment leases to
repossess or otherwise comparably convert the ownership of any
Equipment relating to a Defaulted Lease 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 equipment leases 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 Lessees 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 Trans Leasing for a purchase price equal to the fair
<PAGE>
market value thereof. In any case in which any such Equipment
has suffered damage, the Servicer will not expend funds in
connection with any repair or towards the repossession of such
Equipment 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 Equipment
relating to a Defaulted Lease in accordance with Section 3.3.
2.5 Maintenance of Insurance Policies. The Servicer
will use its best efforts to ensure that each Lessee maintains an
Insurance Policy with respect to the related Equipment in an
amount at least equal to the sum of the Discounted Lease Balance
of the related Lease plus the present value of the estimated fair
value of the related Equipment as of the expiration of the Lease
(calculated in a manner similar to the calculation of Discounted
Lease Balance); provided that the Servicer, in accordance with
its customary servicing procedures, may allow Lessees to self-insure.
Additionally, the Servicer will require that each Lessee
maintain property damage liability insurance during the term of
each Lease in amounts and against risks customarily insured
against by the Lessee on equipment owned by it. If a Lessee
fails to maintain property damage insurance, the Servicer may
purchase and maintain such insurance on behalf of, and at the
expense of, the Lessee. In connection with its activities as
Servicer of the Leases, the Servicer agrees to present, on behalf
of itself, TLFC and the Lender, 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 Lease.
2.6 Recording and Filings. On or prior to the Closing
Date the Servicer will record and file, on behalf of TLFC and at
the Servicer's expense, financing statements and continuation
statements with respect to the Collateral meeting the
requirements of the UCC in such manner and in such jurisdictions
as are necessary to perfect and maintain the perfection of the
Lender's security interest in the Collateral as described in the
Credit Agreement. Notwithstanding the foregoing, the parties
hereto acknowledge and agree that (i) financing statements will
not be recorded or filed with respect to the Equipment other than
in the Filing Locations, (ii) the Lease Files will not be
physically delivered to the Lender but instead will be held by
the Servicer in its custodial capacity as described herein, (iii)
the financing statements to be filed in the Filing Locations
other than the States of Delaware and Illinois will not be filed
until after the Closing Date (and the Servicer agrees to make
such filings within 5 Business Days of the Closing Date) and (iv)
the certificate of title or other title document to any Equipment
consisting of motor vehicles will not be marked to indicate the
transfer from Trans Leasing to TLFC or the security interest of
the Lender therein.
<PAGE>
2.7 Marking of Lease Management System. The Servicer
will mark the Lease Management System, on behalf of TLFC at the
Servicer's expense, on or prior to the Closing Date in a manner
which indicates that the Leases have been contributed and sold to
TLFC and that TLFC has granted a security interest in the Leases
to the Lender.
2.8 Representations and Warranties of Servicer. The
Servicer represents and warrants to TLFC and the Lender 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 the State of Delaware, 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 foreign corporation, is in good standing, and
has obtained all licenses and approvals as required under the
laws of, all states in which the ownership or lease of its
property, the performance of its obligations pursuant to this
Agreement or the other conduct of its business 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, in the aggregate,
materially and adversely affect the ability of the Servicer to
comply with this Agreement.
(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.
(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 certificate of incorporation or by-laws of the
Servicer, or any term of any indenture, agreement, mortgage, deed
of trust or other instrument to which the Servicer is a party or
by which it 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 legal requirement applicable to
the Servicer or any of its properties in any manner, which conflict,
breach, default, lien or violation would have a material and adverse effect
on the ability of the Servicer to comply with this Agreement.
<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 or assets is required to be
obtained by or with respect to the Servicer in connection with
the execution, delivery and performance by the Servicer of this
Agreement and the consummation of the transactions contemplated
herein.
(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 bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect affecting the enforcement of creditors'
rights generally and (ii) general principles of equity (whether
considered in a suit at law or in equity).
(g) No Proceedings. To the best of the Servicer's
knowledge, 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) Location of Lease Files. The Lease Files for all
Leases are located at the Servicer's office at 3000 Dundee Road,
Northbrook, Illinois, and the Lease Files have not been located
at any other address during the four-month period prior to the
date hereof. No Person other than TLFC, the Lender and the
Servicer has possession of, or any Lien upon, any Lease Files.
2.9 Covenants of Servicer. The Servicer covenants
that:
(a) Lease Files. The Servicer will, at its own cost
and expense, maintain all Lease Files, as custodian for the
Lender. Without limiting the generality of the preceding
sentence, the Servicer (i) will not dispose of any documents
constituting the Lease Files in any manner which is inconsistent
with the performance of its obligations as the Servicer pursuant
to this Agreement and will not dispose of any original Lease
except as expressly contemplated by this Agreement or the Credit
Agreement, (ii) will maintain the Lease Files in a manner which,
with the assistance of the information set forth in the List of
Leases, will permit the Lease Files to be identified and
segregated from other documents in the Servicer's possession
which relate to leases or other contracts or property which are
not Leases or Equipment and (iii) will not permit any Person
<PAGE>
other than the Lender and the Servicer to maintain possession of,
or any Lien (other than a Permitted Lien) upon, any Lease Files
(other than any Lease Files which relate solely to an Early
Termination Lease, an Expired Lease or a Repurchased Lease and/or
the related Equipment).
(b) Indemnification.
(i) In connection with any suit, proceeding or
action brought by the Servicer or the Lender for any sum owing in
respect of a Lease, the Servicer will save, indemnify and keep
the Lender harmless from and against all expense, loss or damage
suffered by the Lender by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of
the Lessee under the related Lease which arises out of a breach
by the Servicer of any obligation under such Lease or arising out
of any other agreement, indebtedness or liability at any time
owing by the Servicer to or in favor of such Lessee or its
successor.
(ii) The Servicer will defend and indemnify the
Lender against all costs, expenses, claims and liabilities
incurred by the Lender in respect of any action taken by the
Servicer, relative to any Lease or arising out of any proven
failure of compliance of any Lease with the provisions of any law
or regulation of any Governmental Authority.
(c) 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 Leases
and related Equipment and Lease 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 Lender, with respect
to) the Collateral.
(d) Preservation of Security Interest. The Servicer
will execute and file such financing and continuation statements
and any other documents reasonably requested by TLFC or the
Lender to be filed or which may be required by any law or
regulation of any Governmental Authority to preserve and protect
fully the interest of the Lender in, to and under the Collateral;
provided that the Servicer will not be required (i) to file any
financing or continuation statements with respect to the
Equipment in any jurisdiction other than in the Filing Locations,
(ii) except as provided in Article V, to deliver physical
possession of the Lease Files to the Lender (and may permit the
Lease Files to remain in the possession of Trans Leasing, in its
capacity as the Servicer, or any other Servicer) or (iii) to
cause the certificate of title or other title document to any
Equipment consisting of motor vehicles to be marked to indicate
the transfer from Trans Leasing to TLFC or the security interest
of the Lender therein.
<PAGE>
(e) Obligations with Respect to Leases. The Servicer
will duly fulfill and comply with, in all material respects, all
obligations on the part of the "lessor" to be fulfilled or
complied with under or in connection with each Lease and will do
nothing to impair the rights of the Lender in, to and under the
Collateral. The Servicer will perform such obligations under the
Leases and will not change or modify the Leases, except as
otherwise provided herein and except insofar as any such failure
to perform, change or modification would not materially and
adversely affect the value of (or the rights of the Lender with
respect to) the Leases or the Equipment.
(f) Location of Lease Files. The Servicer will not
change the location of any material portion of the Lease Files
(other than any Lease Files which relate solely to an Early
Termination Lease, an Expired Lease or a Repurchased Lease and/or
related Equipment) unless the Servicer gives the Lender notice of
such change not less than ten days prior to such change; provided
that at all times the Lease Files shall remain under the care,
custody and control of the Servicer.
(g) No Bankruptcy Petition Against TLFC. The Servicer
agrees that, prior to the date that is one year and one day after
the final distribution with respect to all notes, certificates
and other securities issued by TLFC or any trust formed by TLFC
which have been rated by any nationally recognized statistical
rating organization, it will not institute against TLFC, or join
any other Person in instituting against TLFC, 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
2.09(g) will survive the termination of this Agreement.
(h) Swap Breakage Costs. In the event of a Swap
Breakage Event, the Servicer shall pay the related Swap Breakage
Costs. Servicer shall be reimbursed therefor on each Payment
Date thereafter as provided in Section 6.1(b)(l) of the Credit
Agreement.
2.10 Servicer Compensation. The Servicer will be
entitled to receive the Servicing Fee to the extent, in the
amounts and at the times provided in the Credit Agreement. The
Servicer will also be entitled to retain all late payment
charges, extension fees, and other incidental charges and other
Late Fees (from whatever source) collected with respect to the
Leases.
2.11 Payment of Certain Expenses by Servicer. The
Servicer shall 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 distributions and
reports pursuant to this Agreement, and all other fees and
<PAGE>
expenses not expressly stated under this Agreement for the
account of TLFC, but excluding Liquidation Expenses incurred as a
result of activities contemplated by Section 2.1(d). The
Servicer shall pay all reasonable fees and expenses owing to the
Lender in connection with the maintenance of the Collection
Account.
2.12 Monthly Statement; Annual Statement.
(a) Monthly Statement. With respect to each Payment
Date and the related Collection Period, the Servicer will provide
to the Lender and TLFC, not less than two Business Days prior to
such Payment Date, a monthly statement (a "Monthly Statement"),
signed by a Responsible Officer of the Servicer and substantially
in the form of Exhibit A.
(b) Annual Statement. The Servicer will provide to
the Lender and TLFC on or prior to September 30 of each year,
commencing September 30, 1996, a cumulative summary of the
information required to be included in the Monthly Statements for
the Collection Periods ending during the immediately preceding
Transaction Year (an "Annual Statement").
2.13 Annual Report as to Compliance. The Servicer will
provide to the Lender and TLFC on or prior to September 30 of
each year, commencing September 30, 1996, an annual report signed
by a Responsible Officer of the Servicer stating 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 Transaction Year has
been made under such Person's supervision and (b) to the best of
such Person's knowledge, based on such review, the Servicer has
performed or has caused to be performed in all material respects
all of its obligations under this Agreement throughout such
Transaction 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 Transaction Year and no
notice thereof has been given to Lender, specifying such Servicer
Default and the steps taken to remedy such event).
2.14 Annual Independent Public Accountants' 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 Lender and TLFC, on
or prior to September 30 of each year, commencing September 30,
1996, a report relating to the previous Transaction Year to the
effect that (a) such firm has reviewed certain documents and
records relating to the servicing of the Leases, and (b) based on
such examination, such firm is of the opinion that Monthly State-
ments for such Transaction Year were prepared in compliance with
this Agreement, except for such exceptions as it believes to be
<PAGE>
immaterial and such other exceptions as will be set forth in such
firm's report.
ARTICLE III
ACCOUNTS AND DEPOSITS
3.1 Establishment of Accounts. The Servicer shall
establish the Collection Account as described in Section 10.2 of
the Credit Agreement.
3.2 Investment of Accounts. Funds on deposit in the
Collection Account will be invested in Eligible Investments;
provided that all related funds will be available for withdrawal
without loss of principal or interest on the succeeding Payment
Date (except with respect to the Collections received by the
Servicer after the end of the immediately preceding Collection
Period, the proceeds of investments of which need not be
available until the next succeeding Payment Date). Subject to
the restrictions set forth below, the Servicer will have the
authority to instruct the Lender in writing with respect to the
investment of funds on deposit in the Collection Account.
Receipt of such written instructions by the Lender will be a
condition precedent to any investment pursuant to this Section
3.2. Such instructions will relate to specified investments
which constitute Eligible Investments. None of TLFC, the Lender
or the Servicer will be liable for any loss incurred in
connection with any investment made pursuant to this Section 3.2
except with respect to any investment issued or guaranteed by the
Lender in its individual capacity. The Lender may make any
investments pursuant to this Section 3.2 through its own
investment department, in accordance with any such instructions
received from the Servicer. For purposes of determining the
availability of funds in the Collection Account for any reason
under this Agreement or the Credit Agreement, all investment
earnings (net of losses and investment expenses) available to be
withdrawn from the Collection Account will be deemed to be
available from or on deposit in the Collection Account. All
Eligible Investments which have a specified maturity date will be
held to maturity. All Eligible Investments shall be held by and
in the name of the Lender and the Lender will maintain possession
of all instruments or securities evidencing the Eligible
Investments from the time of purchase thereof until the time of
sale or maturity.
3.3 Deposits.
(a) Initial Deposit. Not later than the second Business Day
after the Closing Date, the Servicer will deposit (in immediately available
funds) into the Collection Account all Collections received after the
Cut-Off Date and prior to the Closing Date.
<PAGE>
(b) Deposits. From time to time after the Closing
Date, the Servicer will deposit (in immediately available funds)
all Collections and payments under any Swap Agreement in the
Collection Account, as promptly as possible after the date upon
which such Collections or payments are received (but in no event
later than the second Business Day after such date).
(c) Amounts Exempt from Deposit. Notwithstanding
Sections 3.3(a) and 3.3(b), the following Collections (or
portions thereof) are not required to be deposited into the
Collection Account, and if any such amounts are deposited in the
Collection Account, such amounts may be withdrawn and paid to the
Servicer:
(i) Collections on any Leases on which (and to the
extent that) the Servicer has previously made a
Servicer Advance which has not been reimbursed
pursuant to this Section 3.3(c)(i) or the Credit
Agreement, which amounts the Servicer may retain
(as a reimbursement of such Servicer Advance); and
(ii) Collections from any Repurchased Lease or any
Lease for which a Lease has been substituted as
described in Section 10.4 of the Credit Agreement,
which amounts the Servicer may retain to the
extent necessary to reimburse the Servicer for any
related Servicer Advance which has not been
reimbursed pursuant to this Section 3.3(c)(i) or
the Credit Agreement, and the remainder of which
amounts the Servicer will pay to the Originator or
TLFC, as the case may be.
ARTICLE IV
OTHER MATTERS RELATING
TO THE SERVICER
4.1 Liability of the Servicer and Others. The
Servicer will be liable in accordance with this Agreement only to
the extent of the obligations specifically undertaken by the
Servicer in such capacity. Except as provided in Section 4.2,
the Servicer will not be under any liability to TLFC, the Lender
or any other Person for any action taken or for refraining from
the taking of any action in its capacity as Servicer pursuant to
this Agreement whether arising from express or implied duties
under this Agreement; provided, that this provision will not
protect the Servicer against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement. The
Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any other Person
<PAGE>
respecting any matters arising hereunder. The Servicer will not
be under any obligation to appear in, prosecute or defend any
legal action which is not related to its duties to service the
Leases in accordance with this Agreement which in its reasonable
opinion may involve it in any expense or liability. No director,
officer, employee or agent of the Servicer will be under any
liability to the Lender, TLFC or any other Person pursuant to
this Agreement or pursuant to any document delivered hereunder.
It is expressly understood that all such liability is expressly
waived and released as a condition of, and as consideration for,
the execution of this Agreement.
4.2 Merger or Consolidation of Servicer; Assumption of
Servicer's Obligations. The Servicer will not consolidate with
or merge into, convey or transfer all or substantially all of its
Properties to any Person (which shall not include the
contributions and sales pursuant to the Contribution and Sale
Agreement in the Servicer's capacity as the Originator) unless
(i) the Person formed by such consolidation, merger or which
acquires by conveyance or transfer all or substantially all of
the Properties of the Servicer is organized and existing under
the laws of the United States of America or any state thereof or
the District of Columbia, (ii) such Person expressly assumes (by
an agreement, executed and delivered to the Lender, which
supplements this Agreement and is in a form reasonably
satisfactory to the Lender) the performance of every covenant and
obligation of the Servicer pursuant to this Agreement, and (iii)
the Servicer has delivered to the Lender an Officer's Certificate
and an Opinion of Counsel, each to the effect that such
consolidation, merger, conveyance or transfer and such
supplemental agreements comply with this Section 4.2 and that all
conditions precedent relating to such transaction pursuant to
this Agreement have been met.
4.3 The Servicer Not to Resign. The Servicer will not
resign from the obligations and duties imposed on it pursuant to
this Agreement except upon a determination that (i) the
performance of its duties pursuant to this Agreement is
impermissible under applicable law and (ii) there is no
reasonable action which the Servicer could take to make the
performance of its duties pursuant to this Agreement permissible
under applicable law. Any determination pursuant to clause (i)
above will be evidenced by an Opinion of Counsel to such effect
and any determination pursuant to clause (ii) above will be
evidenced by an Officer's Certificate, in each case delivered to
the Lender. No Servicer resignation will become effective until
the Lender or a Successor Servicer has assumed the
responsibilities and obligations of the Servicer in accordance
with Section 5.2. If within 120 days of the date of any
determination described in this Section 4.3, the Lender is unable
to appoint a Successor Servicer, the Lender will without further
action be appointed a Successor Servicer. The provisions of
Section 5.1 with respect to the duties of the Servicer in
<PAGE>
effecting the termination of its servicing responsibilities and
the transfer of such responsibilities to a Successor Servicer
will apply to any resignation pursuant to this Section 4.3.
4.4 Access to Certain Documentation and Information
Regarding the Assets. Promptly upon request, the Servicer will
furnish to TLFC or the Lender access to the Lease Files and any
information described in Section 8.1(b) of the Credit Agreement
which is in the Servicer's possession. Such access will be
afforded without charge, but only (i) upon reasonable request and
with reasonable notice, (ii) during the Servicer's normal
business hours, (iii) subject to the Servicer's normal security
and confidentiality procedures and (iv) at offices designated by
the Servicer. Nothing in this Section 4.4 will derogate from any
obligation under this Agreement or obligation of TLFC or the
Servicer to observe any applicable law or agreement prohibiting
disclosure of information regarding the Lessees, and any failure
of the Servicer to provide information or access as provided in
this Section 4.4 by reason of any such obligation will not
constitute a breach of this Section 4.4.
ARTICLE V
SERVICER DEFAULTS
5.1 Servicer Defaults.
(a) Definition. Any of the following events will constitute a
"Servicer Default" pursuant to this Agreement:
(i) any failure by the Servicer to make any payment,
transfer or deposit or deliver any Monthly
Statement or Annual Statement which continues
beyond the second Business Day after the date upon
which such payment, transfer, deposit or delivery
is required to be made pursuant to this Agreement;
(ii) any failure by the Servicer to observe or perform
in any material respect any other covenant or
agreement of the Servicer pursuant to this
Agreement, if such failure materially and
adversely affects the rights of the Lender and
continues unremedied for a period of thirty days
after the earlier of (a) the date on which written
demand that such failure be remedied is given to
the Servicer by the Lender or (b) the date on
which a Responsible Officer of the Servicer
becomes aware of such failure;
(iii) any delegation of the Servicer's duties pursuant
to this Agreement, except as permitted pursuant to
Section 6.7;
<PAGE>
(iv) any representation, warranty or certification made
by the Servicer in this Agreement or in any
certificate delivered pursuant to this Agreement
proves to have been incorrect in any material
respect when made and such incorrect statement has
a material and adverse effect on the rights of the
Lender and continues to be incorrect in any
material respect for a period of thirty days after
the earlier of (a) the date on which written
demand that such incorrect statement be remedied
is given to the Servicer by the Lender or (b) the
date on which a Responsible Officer of the
Servicer becomes aware of such incorrect
statement; or
(v) (A) the Servicer consents to the appointment of a
conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceeding of or
relating to the Servicer or all or substantially
all of its Property, (B) a decree or order of a
court or agency or supervisory authority having
proper jurisdiction for the appointment of a
conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceeding, or
for the winding-up or liquidation of the
Servicer's affairs, is entered against the
Servicer and such decree or order remains in force
undischarged or unstayed for a period of 90 days,
or (C) the Servicer admits in writing its
inability to pay, or fails to pay, its debts
generally as they become due, files a petition or
commences any case or proceeding to take advantage
of any applicable bankruptcy, insolvency or
reorganization statute, makes any assignment for
the benefit of its creditors or voluntarily
suspends payment of its obligations.
(b) Consequences of Servicer Default. If any Servicer
Default occurs, then, so long as such Servicer Default is
continuing, the Lender, by written notice (a "Termination
Notice") to the Servicer, may terminate all of the rights and
obligations of the Servicer pursuant to this Agreement and in, to
and under the Collateral. After the Servicer receives a
Termination Notice, and on the date that a Successor Servicer is
appointed pursuant to Section 5.2, all authority and power of the
Servicer pursuant to this Agreement will pass to and be vested in
the Successor Servicer. The Lender is hereby authorized and
empowered (upon the failure of the Servicer to cooperate) 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, which are necessary or
<PAGE>
appropriate to effect the transfer of the servicing function
pursuant to this Agreement. The Servicer agrees to cooperate
with the Lender and such Successor Servicer in effecting the
termination of the Servicer's responsibilities and rights
pursuant to this Agreement. The Servicer will promptly transfer
the information contained in the Lease Management System relating
to the Leases to the Successor Servicer in such form as the
Successor Servicer may reasonably request, and will promptly
transfer to the Successor Servicer possession of the Lease Files
and all other records, correspondence and documents necessary for
the continued servicing of the Leases in the manner and at such
times as the Successor Servicer will reasonably request. To the
extent that compliance with this Section 5.1(b) requires the
Servicer to disclose to the Successor Servicer information of any
kind which the Servicer reasonably deems to be confidential, the
Servicer may require the Successor Servicer to enter into such
customary licensing and confidentiality agreements as the
Servicer reasonably deems necessary to protect its interests.
(c) Actions Beyond Servicer's Control.
Notwithstanding the foregoing, any delay in or failure of
performance referred to in Section 5.1(a)(i) for a period not in
excess of five Business Days or under Section 5.1(a)(ii), (iii)
or (iv) for a period not in excess of sixty Business Days (in
each case, without giving effect to any grace period described in
such Section) will not constitute a Servicer Default 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 the public enemy, acts of declared
or undeclared war, public disorder, rebellion or sabotage,
epidemics, landslides, lightning, fire, hurricanes, earthquakes,
floods or similar causes. The preceding sentence will not
relieve the Servicer of the obligation to use its best efforts to
perform its obligations in a timely manner in accordance with the
terms of this Agreement, and the Servicer will provide the Lender
and TLFC with an Officer's Certificate giving prompt notice of
such failure or delay by it, together with a description of its
efforts to perform its obligations.
5.2 Lender to Act; Appointment of Successor.
(a) Servicer's Continued Performance. On and after
the Servicer's receipt of a Termination Notice pursuant to
Section 5.1(b), the Servicer will continue to perform all
servicing functions pursuant to this Agreement until the date
specified by the Lender in such Termination Notice or, if no such
date is specified, until a date mutually agreed upon by the
Servicer and the Lender.
(b) Appointment; Inability to Appoint. As promptly as
possible after delivery of a Termination Notice the Lender will
appoint a successor to the Servicer. No Person shall act as the
Successor Servicer until such Person accepts its appointment by a
<PAGE>
written assumption in a form reasonably acceptable to the Lender.
If no Successor Servicer has been appointed and accepted its
appointment at the time when the Servicer ceases to act as
Servicer, the Lender, without further action, will automatically
be appointed the Successor Servicer, unless the Lender is legally
unable so to act, in which case the Lender will petition a court
of competent jurisdiction to appoint an established servicing
entity having a net worth of not less than $25,000,000 and whose
regular business includes the servicing of leases of equipment
which is of a type or types similar to the Equipment.
(c) Successor's Rights, Duties and Liabilities. Upon
its appointment, the Successor Servicer will be the successor
with respect to servicing functions pursuant to this Agreement
and will be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms
and provisions of this Agreement, and all references in this
Agreement to the Servicer will be deemed to refer to the
Successor Servicer.
(d) Compensation. In connection with such appointment
and assumption, the Lender will be entitled to such compensation,
or may make such arrangements for the compensation of the
Successor Servicer out of collections, as it and such Successor
Servicer agree; provided that no such compensation will be in
excess of the Servicing Fee permitted to be paid to the Servicer
pursuant to this Agreement.
(e) Cessation of Successor's Authority. All authority
and power granted to a Successor Servicer pursuant to this
Agreement will automatically cease and terminate upon termination
of this Agreement pursuant to Section 6.1 and will pass to and be
vested in TLFC, and TLFC is hereby authorized and empowered to
execute and deliver, on behalf of such Successor Servicer, as
attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things,
which are necessary or appropriate to effect the purposes of such
transfer of the servicing function pursuant to this Agreement.
The Successor Servicer agrees to cooperate with TLFC in effecting
the termination of such Successor Servicer's responsibilities and
rights. The Successor Servicer will transfer its electronic
records relating to the Leases to TLFC in such electronic form as
TLFC may reasonably request and will transfer all other records,
correspondence and documents to TLFC in the manner and at such
times as TLFC will reasonably request. To the extent that
compliance with this Section 5.2(e) requires the Successor
Servicer to disclose to TLFC information of any kind which the
Successor Servicer reasonably deems to be confidential, the
Successor Servicer may require TLFC to enter into such customary
licensing and confidentiality agreements as the Successor
Servicer deems necessary to protect the Successor Servicer's
interests.
<PAGE>
5.3 Notification to Lender. Promptly upon the
occurrence of any Servicer Default (and, in any event, within two
Business Days after the Servicer becomes aware thereof), the
Servicer will give the Lender and TLFC written notice of such
Servicer Default. The Lender will promptly give written notice
of any termination or appointment of a Successor Servicer
pursuant to this Article V to TLFC and Trans Leasing.
5.4 Waiver of Past Defaults. The Lender may waive any
default by the Servicer or TLFC in the performance of their
respective obligations under this Agreement and the consequences
of any such default. Upon any such waiver of a past default,
such default will cease to exist, and any default arising from or
relating to such default will be deemed to have been remedied and
cured for all purposes under this Agreement. No such waiver will
extend to any subsequent or other default or impair any right
upon any such subsequent default except to the extent expressly
so waived.
5.5 List of Leases. The Servicer will maintain true,
correct and complete copies of the List of Leases and the Lease
Schedule (as defined in the Contribution and Sale Agreement).
Each time such List of Leases or Lease Schedule is amended as
contemplated by the Credit Agreement or the Contribution and Sale
Agreement, Servicer shall promptly forward to the Lender such
List of Leases or Lease Schedule as so amended (or an amendment
to be attached to the previous List of Leases or Lease Schedule
so delivered to Lender), together with a certificate
substantially in one of the forms attached hereto as Exhibit B.
First Union shall maintain at its offices at One First Union
Center in Charlotte, North Carolina such List of Leases and Lease
Schedule as so amended (or previous List of Leases and Lease
Schedule together with all amendments), which shall constitute
the List of Leases and Lease Schedule, respectively, referred to
in the UCC financing statements filed pursuant to the Credit
Agreement and the Contribution and Sale Agreement, respectively,
upon the earlier to occur of (i) return of such certificate
acknowledged by the Lender or (ii) five Business Days after such
certificate is delivered by the Servicer. First Union shall
provide access to such List of Leases and Lease Schedule, without
charge, to any Person.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Termination. The respective obligations and responsibilities
of the parties hereto created by this Agreement will terminate upon the
last to occur of (i) the maturity or other liquidation of the last Lease
and the disposition of any amounts received upon disposition of any
Defaulted Leases; (ii) payment of all amounts due to the Lender pursuant to
the Credit Agreement; and (iii) the termination of the Credit Agreement.
<PAGE>
6.2 Amendment. This Agreement may be amended from
time to time by the unanimous written consent of each of TLFC,
Trans Leasing and the Lender.
6.3 Evidence of Filings. The Servicer will cause this
Agreement, all amendments to this Agreement, and all financing
statements and continuation statements and any other necessary
documents relating to the Lender's right, title and interest to
the Collateral, 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 to
preserve and protect fully the right, title and interest of the
Lender to all property comprising the Collateral, all as provided
in, and subject to, Sections 2.6 and 2.9(d). The Servicer will
deliver to the Lender a file-stamped copy of, or filing receipt
for, any document recorded or filed as provided in Section 2.6 or
2.9(d) promptly after such copy or receipt becomes available. TLFC will
cooperate fully with the Servicer in connection with the performance of
such Sections and will execute any and all documents reasonably required to
fulfill the intent of such Sections.
6.4 Governing Law. All matters arising under or
pursuant to this Agreement will be governed by and construed in
accordance with the domestic laws of the State of Illinois,
without giving effect to any choice of law or conflict provision
or rule (whether of the State of Illinois or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of Illinois. In furtherance of the foregoing, the internal law of
the State of Illinois will control the interpretation and construction of
this Agreement, even in the event that under such jurisdiction's choice of
law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.
6.5 Notices. Except as otherwise provided in this
Agreement, any notice or other communication herein required or
permitted to be given shall be in writing and may be delivered in
person, with receipt acknowledged, or sent by United States mail,
registered or certified, postage prepaid and return receipt
requested, or by Federal Express or other nationally recognized
overnight courier service, postage prepaid and confirmation of
receipt requested, and addressed as follows (or at such other
address as may be substituted by notice given as herein provided):
If to TLFC:
TL Lease Funding Corp. IV
c/o The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
with a copy (which copy will
not constitute notice to
TLFC) to each of:
<PAGE>
Trans Leasing International, Inc.
3000 Dundee Road
Northbrook, IL 60062
Attention: Chief Financial Officer
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jill L. Sugar
If to the Servicer:
Trans Leasing International, Inc.
3000 Dundee Road
Northbrook, IL 60062
Attention: Chief Financial Officer
with a copy (which copy will not constitute
notice to the Servicer) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jill L. Sugar
If to the Lender:
First Union National Bank of North Carolina
One First Union Center, TW-19
301 South College Street
Charlotte, NC 28288-0735
Attention: Christopher R. Snyder
Vice President
Every notice, demand, request, consent, approval, declaration or
other communication hereunder shall be deemed to have been duly
given or served on the date on which the same shall have been
personally delivered, with receipt acknowledged, three (3)
Business Days after the same shall have been deposited in the
United States mail or on the next succeeding Business Day if the
same has been sent by Federal Express or other nationally recognized
overnight courier service. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other
communication to the Persons designated above to receive copies shall in no
way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
6.6 Severability of Provisions. If any covenant,agreement,
provision or term of this Agreement is held invalid for any reason
whatsoever, then such covenant, agreement,provision or term will be deemed
severable from the remaining covenants, agreements, provisions and terms of
this Agreement and will in no way affect the validity or enforceability of
the other provisions of this Agreement.
<PAGE>
6.7 Assignment. This Agreement may not be assigned by
the Servicer, except as provided in Sections 2.1(e), 4.2, 4.3 or
5.2, without the prior consent of the Lender.
6.8 Schedules and Exhibits. The Schedules and
Exhibits constitute a part of this Agreement and are incorporated
into this Agreement for all purposes.
6.9 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Lender,
any right, remedy, power or privilege under this Agreement, will
operate as a waiver of such right, remedy, power or privilege;
nor will any single or partial exercise of any right, remedy,
power or privilege under this Agreement preclude any other or
further exercise of such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided under this
Agreement are cumulative and not exhaustive of any other rights,
remedies, powers and privileges which may be provided by law.
6.10 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which will be an original, but all of
which together will constitute one and the same instrument.
6.11 Binding Effect; Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted
assigns. Except as otherwise provided in this Agreement, no
other Person will have any right or obligation pursuant to this
Agreement.
6.12 Merger and Integration. Except as specifically
stated otherwise in this Agreement, this Agreement sets forth the
entire understanding of the Parties relating to the subject
<PAGE>
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 expressly
provided in this Agreement.
6.13 Headings. The headings used in this Agreement are
for the purpose of reference only and will not otherwise affect
the meaning or interpretation of any provision of this Agreement.
6.14 Certificates and Opinions of Counsel.
(a) Basis for Reliance. Any certificate delivered by
any Person in connection with this Agreement or the transactions
contemplated hereby may be based, insofar as it relates to legal
matters, upon an Opinion of Counsel, unless the Person delivering
such certificate knows, or in the exercise of reasonable care
should know, that such Opinion of Counsel is erroneous. Any
Opinion of Counsel or certificate delivered under this Agreement
may be based, insofar as it relates to factual matters, upon a
certificate of, or representations by, a Responsible Officer or
Responsible Officers of the Servicer or the Originator, as the
case may be, stating that the information with respect to such
factual matters is in the possession of the Servicer or the
Originator, as the case may be, unless the Person delivering such
Opinion of Counsel or certificate knows, or in the exercise of
reasonable care should know, that such certificate, opinion or
representations with respect to such matters are erroneous. Any
such Opinion of Counsel or certificate may be based, insofar as
it relates to accounting matters, upon a certificate or opinion
of or representations by an independent public accountant or firm
of accountants, unless such counsel or the Person delivering such
Opinion of Counsel or certificate knows, or in the exercise of
reasonable care should know, that the certificate, opinion or
representations with respect to the accounting matters are
erroneous.
(b) Consolidation. Where any Person is required to
make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments
pursuant to this Agreement, such Person may, but need not,
consolidate the same and form one instrument.
* * * *
<PAGE>
IN WITNESS WHEREOF, TLFC, the Servicer and the Lender
have caused this Servicing Agreement to be duly executed by their
respective officers as of the day and year written above.
TL LEASE FUNDING CORP. IV
By:________________________________
Name: Norman Smagley
Title: Vice President-Finance
TRANS LEASING INTERNATIONAL, INC.,
as Servicer
By:________________________________
Name: Norman Smagley
Title: Vice President-Finance
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,
as Lender
By:________________________________
Name: Bill A. Shirley, Jr.
Title: Vice President
<PAGE>
Exhibit A
Form of Monthly Statement
See Attached.
<PAGE>
Exhibit B
FORM OF CERTIFICATE
____________ ___, 199_
First Union National Bank
of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attached is the true, correct and complete copy of [the List of
Leases] [an amendment to the List of Leases delivered as of
____________, 199_] as contemplated by Section 5.5 of the Servicing
Agreement dated as of November 28, 1995 (the "Servicing Agreement")
among TL Lease Funding Corp. IV, Trans Leasing International, Inc., as
initial Servicer (the "Servicer"), and First Union National Bank of
North Carolina, as Lender. All capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to
such terms in the Servicing Agreement.
Such List of Leases [together with the List of Leases delivered
as of ____________, 199_] constitutes the List of Leases referred to in
the UCC financing statements filed pursuant to the Contribution and
Sale Agreement [and replaces all prior lists].
Please sign and return a copy hereof to the Servicer to
acknowledge the receipt of this [amendment to the] List of Leases [and
the replacement of all prior lists].
TRANS LEASING INTERNATIONAL, INC.
By:______________________________
Name:____________________________
Title:___________________________
Acknowledged as of __________, 199_
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:________________________________
Name:______________________________
Title:_____________________________
___________________________________________________________________________
CONTRIBUTION AND SALE AGREEMENT
_____________________________
between
TRANS LEASING INTERNATIONAL, INC.
and
TL LEASE FUNDING CORP. IV
_______________________
Dated as of
November 28, 1995
___________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.01 Definitions. . . . . . . . . . . . . . . . . . . . . .1
1.02 Other Definitional Provisions. . . . . . . . . . . . .6
ARTICLE II
ISSUANCE OF STOCK BY TLFC; CONTRIBUTION
OF CONTRIBUTED ASSETS; SALE OF PURCHASED ASSETS;
SALE OF ADDITIONAL ASSETS . . . . . . . . . . . . . . . . . . . . . .7
2.01 [Reserved.]. . . . . . . . . . . . . . . . . . . . . .7
2.02 Required Capital Contribution and Sale
of Purchased Assets. . . . . . . . . . . . . . . . .7
2.03 Contribution or Sale of Additional Assets. . . . . . .8
2.04 Custody of Lease Files . . . . . . . . . . . . . . . .9
ARTICLE III
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 10
3.01 Representations and Warranties of
Trans Leasing. . . . . . . . . . . . . . . . . . . 10
3.02 Representations and Warranties of TLFC . . . . . . . 15
3.03 Purchase of Leases and Equipment by
Trans Leasing. . . . . . . . . . . . . . . . . . . 17
3.04 Indemnification. . . . . . . . . . . . . . . . . . . 18
ARTICLE IV
COVENANTS OF TRANS LEASING AND TLFC . . . . . . . . . . . . . . . . 18
4.01 Trans Leasing Covenants. . . . . . . . . . . . . . . 18
4.02 TLFC Covenants . . . . . . . . . . . . . . . . . . . 21
4.03 Grant of Security Interest . . . . . . . . . . . . . 21
ARTICLE V
CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . 22
5.01 Conditions to TLFC's Obligations . . . . . . . . . . 22
5.02 Conditions to Trans Leasing's
Obligations. . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.01 Termination. . . . . . . . . . . . . . . . . . . . . 23
6.02 Effect of Termination. . . . . . . . . . . . . . . . 23
ARTICLE VII
<PAGE>
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 24
7.01 Amendment. . . . . . . . . . . . . . . . . . . . . . 24
7.02 Governing Law. . . . . . . . . . . . . . . . . . . . 24
7.03 Notice . . . . . . . . . . . . . . . . . . . . . . . 24
7.04 Severability of Provisions . . . . . . . . . . . . . 25
7.05 Assignment . . . . . . . . . . . . . . . . . . . . . 25
7.06 No Waiver; Cumulative Remedies . . . . . . . . . . . 25
7.07 Counterparts . . . . . . . . . . . . . . . . . . . . 26
7.08 Binding Effect; Third-Party
Beneficiaries. . . . . . . . . . . . . . . . . . . 26
7.09 Merger and Integration . . . . . . . . . . . . . . . 26
7.10 Headings . . . . . . . . . . . . . . . . . . . . . . 26
7.11 Schedules and Exhibits . . . . . . . . . . . . . . . 26
7.12 No Petition Covenants. . . . . . . . . . . . . . . . 26
EXHIBITS
Exhibit A Form of Assignment for the Required Capital
Contribution
Exhibit B Form of Assignment for Purchased Assets
Exhibit C Form of Assignment for Additional Assets
Exhibit D Forms of Lease
SCHEDULES
Contributed Lease Schedule
Purchased Lease Schedule
Lease Criteria Schedule
Specified Portfolio Characteristics Schedule
<PAGE>
CONTRIBUTION AND SALE AGREEMENT
THIS CONTRIBUTION AND SALE AGREEMENT, dated as of
November 28, 1995 (this "Agreement"), is entered into between Trans
Leasing International, Inc. ("Trans Leasing"), a Delaware corporation,
and TL Lease Funding Corp. IV ("TLFC"), a Delaware corporation.
Trans Leasing in the ordinary course of its business
originates equipment and other leases in the United States.
Trans Leasing desires, on the date hereof, to transfer
the Purchased Leases, the Contributed Leases, its interests in the
related Equipment and other assets (as such capitalized terms are
defined pursuant to Article I below) to TLFC upon the terms and
conditions set forth in this Agreement.
It is contemplated that, from time to time after the date
hereof, Trans Leasing and TLFC may agree that Trans Leasing will
transfer additional Leases, its interests in the related Equipment and
other assets to TLFC upon the terms and conditions set forth in this
Agreement.
It is contemplated that, following such transfers, Trans
Leasing, in its capacity as Servicer pursuant to the Servicing
Agreement, will continue to administer and service the Leases and
Equipment transferred to TLFC.
In consideration of the mutual covenants set forth in
this Agreement, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, Trans Leasing
and TLFC agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. Whenever used in this Agreement, the
following words and phrases will have the following meanings:
"Additional Assets" means all right, title and interest
of Trans Leasing in, to, and under (i) the Additional Leases
(including Trans Leasing's obligations under the Additional Leases)
and all monies due or to become due thereunder after the related
Additional Cut-Off Date, (ii) the related Equipment (other than any
licensed products that may accompany any of such Equipment),(iii) the
Lease Files for the Additional Leases, (iv) any Insurance Policies
(including Trans Leasing's obligations thereunder) and the related
Insurance Proceeds with respect to the Additional Leases and (v) all
income and proceeds relating to the foregoing.
"Addition Date" has the meaning set forth in Section
2.03(a) of this Agreement.
<PAGE>
"Additional Lease Schedule" has the meaning set forth in
Section 2.03(a) of this Agreement.
"Additional Cut-Off Date" means, with respect to an
Additional Lease, the close of business on the last day of the
month preceding the related Addition Date.
"Additional Leases" means the Leases listed on any
Additional Lease Schedule delivered by Trans Leasing to TLFC
pursuant to Section 2.03(a).
"Assets" means the Purchased Assets, the Contributed
Assets and any Additional Assets.
"Business Day" means any day which is not a Saturday,
Sunday or a legal holiday under the laws of the State of Illinois
or North Carolina and is not a day on which banking institutions
located in the State of Illinois or North Carolina are authorized
or permitted by law or other governmental action to close.
"Closing Date" means November 28, 1995.
"Common Stock" means 1,000 shares of the common stock of
TLFC, par value $0.01 per share, constituting all of its authorized
capital stock.
"Contributed Assets" means all right, title and interest
of Trans Leasing in, to, and under (i) the Contributed Leases
(including Trans Leasing's obligations under the Contributed
Leases) and all monies due or to become due thereunder after the
Cut-Off Date, (ii) the related Equipment (other than any licensed
products that may accompany any of such Equipment), (iii) the Lease
Files for the Contributed Leases, (iv) any Insurance Policies
(including Trans Leasing's obligations thereunder) and the related
Insurance Proceeds with respect to the Contributed Leases and
(v) all income and proceeds relating to the foregoing.
"Contributed Leases" means the Leases listed on the
Contributed Lease Schedule attached hereto.
"Credit Agreement" means the Revolving Credit and Term
Loan and Security Agreement between TLFC and the Lender, dated as
of the date hereof, together with all amendments, restatements,
supplements and modifications thereof or thereto.
"Cut-Off Date" means November 26, 1995.
"Debt Agreement" means, at any time, any then existing agreement
pursuant to which TLFC has borrowed money, pledged its interest in the
Assets and assigned its rights hereunder (as such agreement is then in
effect), and shall initially refer to the Credit Agreement.
"Equipment" means the assets leased to a Lessee pursuant to any Lease.
<PAGE>
"Filing Locations" means the States of Alabama, Arizona,
California, Delaware, Florida, Georgia, Illinois, Indiana,
Maryland, Massachusetts, New Jersey, New York, North Carolina,
Ohio, Pennsylvania, Texas and Virginia.
"Governmental Authority" means (a) any federal, state,
county, municipal or foreign government, or political subdivision
thereof, (b) any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality
or public body, (c) any court or administrative tribunal or (d)
with respect to any Person, any arbitration tribunal or other non-
governmental authority to the jurisdiction of which such Person has
consented.
"Insurance Policy" means with respect to any Lease, an
insurance policy covering physical damage to or loss of the related
Equipment.
"Insurance Proceeds" means, depending on the context, any
amounts payable or any payments made, to the Servicer under an
Insurance Policy.
"Lease" means each agreement, including, as applicable,
schedules, subschedules, summary schedules, supplements and
amendments to a master lease, pursuant to which Trans Leasing, as
lessor, leases specified assets to a Lessee at a specified monthly
or quarterly rental, and which is identified in the Lease Schedule,
including all Contributed Leases, Purchased Leases and Additional
Leases; provided, that, from and after the date on which a Lease is
purchased by Trans Leasing pursuant to Section 3.03 of this
Agreement or a Lease is otherwise transferred to Trans Leasing,
such Lease shall no longer be a Lease for purposes of this
Agreement.
"Lease File" means, with respect to any Lease, the Lease
and all other documents relating to such Lease in the possession of
Trans Leasing or held by the Servicer under the Servicing
Agreement, as the context requires.
"Lease Management System" means the computerized
electronic lease management system maintained by Trans Leasing for
all Leases and other agreements similar to the Leases.
"Lease Schedule" means the Contributed Lease Schedule,
the Purchased Lease Schedule and all Additional Lease Schedules, as
amended to show the deletion of Leases purchased by Trans Leasing
pursuant to Section 3.03 or otherwise transferred by TLFC to Trans
Leasing.
"Lender" means First Union National Bank of North
Carolina.
"Lessee" means with respect to any Lease, the Person or
<PAGE>
Persons obligated to make payments with respect to such Lease,
including any guarantor thereof.
"Lien" means any mortgage, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien
or charge of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, affecting any Property, including
any agreement to grant any of the foregoing, any conditional sale
or other title retention agreement, any lease in the nature of a
security interest, and the filing of or agreement to file or
deliver any financing statement (other than a precautionary
financing statement with respect to a lease that is not in the
nature of a security interest) under the UCC or comparable law of
any jurisdiction.
"Opinion of Counsel" means a written opinion of counsel,
who may be counsel to Trans Leasing or other counsel, acceptable to
TLFC.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or Governmental
Authority.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, whether tangible or
intangible.
"Purchased Assets" means all right, title and interest of
Trans Leasing in, to, and under (i) the Purchased Leases (including
Trans Leasing's obligations under the Purchased Leases) and all
monies due or to become due thereunder after the Cut-Off Date, (ii)
the related Equipment (other than any licensed products that may
accompany any of such Equipment), (iii) the Lease Files for the
Purchased Leases, (iv) any Insurance Policies (including Trans
Leasing's obligations thereunder) and the related Insurance
Proceeds with respect to the Purchased Leases and (v) all income
and proceeds relating to the foregoing.
"Purchased Leases" means the Leases listed on the
Purchased Lease Schedule attached hereto.
"Required Capital Contribution" has the meaning set
forth in Section 2.02(a).
"Responsible Officer" of any Person means any of the
President, Executive Vice President, Vice President, Chief
Financial Officer, Treasurer or Corporate Controller of such
Person.
"Scheduled Lease Payments" means with respect to any
Lease, the monthly or quarterly rent payments scheduled to be made
<PAGE>
by the related Lessee under the terms of such Lease after the Cut-
Off Date or the related Additional Cut-Off Date, as applicable.
"Secured Party" means, at any time, any Person that is
granted the rights of a secured party under any then existing Debt
Agreement and to which TLFC's rights under this Agreement have been
assigned, and shall initially refer to the Lender.
"Servicer" means, at any time, any Person then acting as
servicer under a Servicing Agreement, and shall initially refer to
Trans Leasing in its capacity as the initial servicer under the
initial Servicing Agreement.
"Servicing Agreement" means, at any time, any agreement
then in effect pursuant to which any Person has agreed to service
the Assets (as such agreement is then in effect), and shall
initially refer to the Servicing Agreement dated as of the date
hereof among TLFC, the Lender and Trans Leasing, as servicer.
"UCC" means the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Illinois provided,
however, in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of the
Lien of the Secured Party in and to the Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Illinois, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to
such provisions.
"Warranty Event" means, with respect to any Lease, that
Trans Leasing is obligated to purchase such Lease pursuant to
Section 3.03 hereof.
"Warranty Purchase Price" means, with respect to any
Lease and the related Equipment to be purchased by Trans Leasing,
(a) the amount set forth as such in any then applicable Debt
Agreement, or (b) if no such amount is set forth or no Debt
Agreement is then in effect, an amount agreed to by Trans Leasing
and TLFC as reflecting the fair market value therefor, determined
on the same basis as the purchase price for sales of Purchased
Leases and Additional Leases has been determined hereunder,
provided, the Warranty Purchase Price for any such Lease and
related Equipment determined pursuant to this clause (b) shall not
exceed the value ascribed thereto at the time of the contribution
or sale thereof by Trans Leasing to TLFC as described herein.
1.02 Other Definitional Provisions.
(a) Terms used in Related Documents. Each term
defined in this Agreement will have the meaning assigned to
such term in this Agreement when used in any certificate or
<PAGE>
other document made or delivered pursuant to this Agreement,
unless such term is otherwise defined therein.
(b) Accounting Terms. As used in this Agreement,
accounting terms which are not defined in Section 1.01 have
the respective meanings given to them under generally accepted
accounting principles as in effect on the date of this
Agreement. To the extent that the definitions of accounting
terms in this Agreement are inconsistent with the meanings of
such terms under generally accepted accounting principles, the
definitions contained in this Agreement will control.
(c) "Hereof," etc. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to
any particular provision of this Agreement; and Section,
Schedule and Exhibit references contained in this Agreement
are references to Sections, Schedules and Exhibits in or to
this Agreement, unless otherwise specified.
(d) Number and Gender. Each defined term used in
this Agreement has a comparable meaning when used in its
plural or singular form. Each gender-specific term used in
this Agreement has a comparable meaning whether used in a
masculine, feminine or gender-neutral form.
(e) Including. Whenever the term "including"
(whether or not that term is followed by the phrase "but not
limited to" or "without limitation" or words of similar
effect) is used in this Agreement in connection with a listing
of items within a particular classification, that list will be
interpreted to be illustrative only and will not be
interpreted as a limitation on, or an exclusive list of, the
items within that classification.
ARTICLE II
ISSUANCE OF STOCK BY TLFC; CONTRIBUTION
OF CONTRIBUTED ASSETS; SALE OF PURCHASED ASSETS;
SALE OF ADDITIONAL ASSETS
2.01 [Reserved.]
2.02 Required Capital Contribution and Sale of Purchased
Assets.
(a) Contribution. On the Closing Date, Trans
Leasing will make a capital contribution (the "Required
Capital Contribution") to TLFC of the Contributed Assets, and
Trans Leasing will deliver to TLFC an executed assignment
substantially in the form of Exhibit A attached hereto. The
Required Capital Contribution will be without recourse to
Trans Leasing, subject to the obligations of Trans Leasing
<PAGE>
pursuant to Section 3.03.
(b) Sale. For a purchase price of $16,035,208 in
cash, on the Closing Date, Trans Leasing will sell to TLFC the
Purchased Assets and will deliver to TLFC an executed
assignment substantially in the form of Exhibit B attached
hereto. Except for the obligations of Trans Leasing pursuant
to Section 3.03, the sale of the Purchased Assets will be
without recourse to Trans Leasing.
(c) Recordation. In connection with the Required
Capital Contribution and sale of the Purchased Assets, Trans
Leasing agrees to record and file at its own expense financing
statements and continuation statements with respect to the
Leases meeting the requirements of applicable state law, in
such manner and in such jurisdictions as are necessary to
perfect and to maintain the perfection of the contributions
and sales of the Leases and Trans Leasing's interests in the
related Equipment contributed or sold by Trans Leasing to TLFC
as described in this Section 2.02, and to deliver a file-
stamped copy of such financing statements or other evidence of
such filings to TLFC (and copies to the Lender) promptly after
the Closing Date, provided, however, that (i) the Lease Files
for the Leases will not be physically delivered to TLFC but
instead will be held by the Servicer pursuant to the Servicing
Agreement, (ii) Trans Leasing will not be required to file any
financing or continuation statements with respect to the
Equipment in any jurisdiction other than the Filing Locations,
(iii) the financing statements to be filed in the Filing
Locations other than the States of Delaware and Illinois will
not be filed until after the Closing Date (and Trans Leasing
agrees to make such filings within 5 Business Days of the
Closing Date) and (iv) Trans Leasing will not be required to
cause the certificate of title or other title document to any
Equipment consisting of motor vehicles to be marked to
indicate the transfer from Trans Leasing to TLFC or the
security interest of the Secured Party therein.
(d) Marking of Lease Management System. In
connection with the Required Capital Contribution and sale of
the Purchased Assets, Trans Leasing will, for the benefit of
TLFC and any Secured Party, at its own expense, cause the
Lease Management System to be marked to show that the
Contributed Assets and the Purchased Assets have been
contributed and sold to TLFC in accordance with this Agreement
and pledged to Lender under the Credit Agreement, on or prior
to the Closing Date.
2.03 Contribution or Sale of Additional Assets.
(a) Additional Sales and Contributions. From time
to time after the date hereof, TLFC may request to purchase
additional assets from Trans Leasing. If Trans Leasing so
<PAGE>
agrees to sell any additional assets, the purchase price
thereof shall be an amount agreed to by Trans Leasing and TLFC
and shall be no less than the fair market value of such assets
as then determined, including consideration of then current
interest rates. From time to time after the date hereof, in
connection with a sale of Additional Assets or otherwise,
Trans Leasing may contribute to TLFC as an additional
contribution to the equity of TLFC, Additional Assets. The
date on which any such sale or contribution of any Additional
Assets to be purchased by TLFC takes place is herein referred
to as an "Addition Date". The purchase price for any
Additional Assets to be purchased by TLFC will be payable by
TLFC on the related Addition Date in cash. On each Addition
Date, Trans Leasing will deliver to TLFC an executed assign-
ment substantially in the form of Exhibit C attached hereto
together with a schedule identifying each Additional Lease
included in the Additional Assets (an "Additional Lease
Schedule"). Except for the obligations of Trans Leasing
pursuant to Section 3.03, the sale and contribution of the
Additional Assets will be without recourse to Trans Leasing.
(b) Recordation. In connection with any
contribution or sale of Additional Assets, Trans Leasing
agrees to record and file at its own expense financing
statements and continuation statements with respect to the
related Additional Leases meeting the requirements of
applicable state law, in such manner and in such jurisdictions
as are necessary to perfect and to maintain the perfection of
the contributions and sales of the Additional Leases by Trans
Leasing to TLFC and Trans Leasing's interests in the related
Equipment contributed or sold by Trans Leasing to TLFC as
described in this Section 2.03, and to deliver a file-stamped
copy of such financing statements or other evidence of such
filings to TLFC (and copies to the Secured Party) promptly
after the applicable Addition Date, provided, however, that
(i) the Lease Files for such Additional Leases will not be
physically delivered to TLFC but instead will be held by the
Servicer pursuant to the Servicing Agreement, (ii) Trans
Leasing will not be required to file any financing or
continuation statements with respect to the Equipment in any
jurisdiction other than the Filing Locations and (iii) Trans
Leasing will not be required to cause the certificate of title
or other title document to any Equipment consisting of motor
vehicles to be marked to indicate the transfer from Trans
Leasing to TLFC or the security interest of the Secured Party
therein.
(c) Marking of Lease Management System. In
connection with any contribution or sale of Additional Assets,
Trans Leasing will, at its own expense, cause the Lease
Management System to be marked to show that such Additional
Assets have been contributed or sold to TLFC in accordance
<PAGE>
with this Agreement, on or prior to the applicable Addition
Date.
2.04 Custody of Lease Files. In connection with the
contribution and sale of the Assets, Trans Leasing, in its capacity
as the Servicer pursuant to the Servicing Agreement, will retain
custody of the Lease Files and any related evidence of Insurance
Policies, Insurance Proceeds and other payments.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Trans Leasing.
Trans Leasing makes the following representations and warranties
for the benefit of TLFC and any Secured Party, on which TLFC relies
and will rely in accepting the contribution of the Contributed
Assets and any Additional Assets and purchasing the Purchased
Assets and any Additional Assets. Unless otherwise indicated, such
representations and warranties, with respect to the Contributed
Assets and the Purchased Assets, speak as of the Closing Date and,
with respect to any Additional Assets, as of the related Addition
Date, but in each case will survive the contribution and sale of
the Assets to TLFC, and the grant of a security interest therein to
any Secured Party.
(a) Representations and Warranties with respect
to the Assets. As to the Assets:
(i) the information with respect to the Leases
and the Equipment in the Contributed Lease Schedule, the
Purchased Lease Schedule or any Additional Lease Schedule, as
the case may be, is true and correct in all material respects;
(ii) no provision of any Lease has been waived,
altered or modified in any respect, except by an instrument or
document contained in the related Lease File and except with
respect to a Skipped Payment (as defined in the Servicing
Agreement);
(iii) each Lease is a valid and binding payment
obligation of the related Lessee and is enforceable in
accordance with its terms, except as such enforceability may
be limited by (A) applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws now or
hereafter in effect affecting the enforcement of creditors'
rights generally and (B) general principles of equity (whether
considered in a suit at law or in equity);
(iv) the Leases are not and will not be subject
to rights of rescission, setoff, counterclaim or defense;
<PAGE>
(v) the Leases, at the time they were made,
did not violate applicable state or federal laws;
(vi) each Lease contains provisions requiring
the Lessee to assume all risk of loss or malfunction of the
related Equipment;
(vii) all action will have been taken by Trans
Leasing to transfer all its right, title and interest in, to
and under the Leases and the related Equipment to TLFC;
(viii) each party to a Lease had the authority
and legal capacity to execute such Lease at the time that it
did so;
(ix) no Asset has been sold, transferred,
assigned or pledged by Trans Leasing to any Person (other than
TLFC), and immediately prior to contributing or selling such
Asset to TLFC, Trans Leasing is the sole owner of, and holder
of title to, the Leases, the Equipment (or a security interest
therein) and the other Assets free and clear of any Liens
(except for the interests of Lessees under the Leases), and
immediately following the transfer by Trans Leasing to TLFC of
the Assets, the Assets will be free and clear of all Liens
(except for the interests of Lessees under the Leases);
(x) no Lease requires the substitution,
addition or exchange of any item of Equipment which would
result in any reduction of the Scheduled Lease Payments
pursuant to such Lease;
(xi) there is only one secured party's original
of each Lease that constitutes "chattel paper" for purposes of
the UCC and such original has not been delivered to any Person
other than the Secured Party or the Servicer pursuant to the
Servicing Agreement;
(xii) Trans Leasing has duly fulfilled in all
material respects all obligations on its part in connection
with the Leases and has done nothing to materially impair the
rights of TLFC and the Secured Party in the Leases or the
proceeds with respect thereto;
(xiii) to the best of Trans Leasing's knowledge,
no proceedings or investigations are pending or have been
threatened asserting the invalidity of any Lease or seeking
any determination or ruling that might adversely and
materially affect the validity or enforceability of any Lease;
(xiv) all filings necessary to evidence the
contribution and sale of the Leases to TLFC have been made in
all appropriate jurisdictions;
<PAGE>
(xv) none of the Lessees are, to Trans
Leasing's knowledge, the subject of bankruptcy or other
insolvency proceedings;
(xvi) each Lessee's billing address is in the
United States;
(xvii) all payments under the Leases are required
to be made in United States dollars;
(xviii) the substance of each Lease is
substantially similar to one of the forms of Lease in
Exhibit D attached hereto, except that any guaranty provision
may have been varied or deleted; provided that any such
variation or deletion will not cause any representation herein
with respect to such Lease to be untrue and will not
reasonably be expected to adversely affect the transactions
contemplated by this Agreement and the Credit Agreement;
(xix) each of the Leases satisfies the criteria
set forth on the Lease Criteria Schedule attached hereto (as
such schedule may be amended by Trans Leasing and TLFC from
time to time to reflect the criteria required by any then
applicable Debt Agreement);
(xx) the Contributed Lease Schedule is a true
and complete list of all Contributed Leases, the Purchased
Lease Schedule is a true and complete list of all Purchased
Leases and each Additional Lease Schedule will be a true and
complete list of all Additional Leases to be transferred on
the related Addition Date, in each case identified by, among
other things, its Lease Number, its original Equipment cost,
the effective date of such Lease, the original term of such
Lease, and the amount of Scheduled Lease Payments pursuant to
such Lease, in each case as of the Cut-Off Date or the related
Additional Cut-Off Date, as appropriate; and
(xxi) (A) as of the Closing Date, the Purchased
Leases and the Contributed Leases satisfy, as of the Cut-Off
Date, the criteria set forth on the Specified Portfolio
Characteristics Schedule attached hereto, (B) as of any
Addition Date, the addition of the related Additional Leases
does not cause any of the criteria set forth on the attached
Specified Portfolio Characteristics Schedule attached hereto
(as such schedule may be amended by Trans Leasing and TLFC
from time to time to reflect the criteria required by any then
applicable Debt Agreement) not to be satisfied as of the
related Additional Cut-Off Date or, if any of such criteria
are not satisfied as of the first day of the month in which
the related Addition Date occurs (without giving effect to the
addition of such Additional Leases), such addition does not
increase the amount by which such criteria are not satisfied
(in each case, based on the characteristics of such Additional
<PAGE>
Leases as of the related Additional Cut-Off Date) and (C) if
so agreed by Trans Leasing and TLFC at such time, as of any
Addition Date (or other specified date), the Leases, as of the
related Additional Cut-Off Date (or other specified date),
satisfy such criteria.
(b) Representations and Warranties as to Trans
Leasing. As to Trans Leasing:
(i) Organization and Good Standing. Trans
Leasing is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with
all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted;
(ii) Due Qualification. Trans Leasing is
qualified to do business as a foreign corporation, is in good
standing, and has obtained all licenses and approvals required
under the laws of, all states in which the ownership or lease
of its property, the performance of its obligations pursuant
to this Agreement or the conduct of its business 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, in the aggregate,
materially and adversely affect the ability of Trans Leasing
to comply with this Agreement;
(iii) Power and Authority. Trans Leasing has
the corporate power and authority to execute and deliver this
Agreement and to carry out its terms; and Trans Leasing has
duly authorized the execution, delivery, and performance of
this Agreement by all requisite corporate action;
(iv) Valid Contribution and Sale; Binding
Obligations. The contribution and sale of the Contributed
Assets and the Purchased Assets constitute, and each
contribution and sale of any Additional Assets, will
constitute, a legal and valid contribution, assignment,
transfer and conveyance to TLFC of all right, title, and
interest of Trans Leasing in, to and under such Assets, and
such Assets will be held by TLFC free and clear of any Lien of
any Person claiming through or under Trans Leasing, except for
Liens permitted under, or to be created by, any Debt
Agreement; and this Agreement constitutes a legal, valid, and
binding obligation of Trans Leasing, enforceable against Trans
Leasing in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of
creditors' rights generally and (ii) general principles of
equity (whether considered in a suit at law or in equity);
(v) No Violation. The consummation of the
<PAGE>
transactions contemplated by, and the performance of the terms
of, this Agreement by Trans Leasing (with or without the
giving of any notice or the lapse of time) will not (after
giving effect to all consents and waivers received on or prior
to the date hereof or the Addition Date, as the case may be);
(A) conflict with, result in any breach of any of the
terms or provisions of, or constitute a default
under, the certificate of incorporation or by-laws
of Trans Leasing, or any term of any indenture,
agreement, mortgage, deed of trust, or other
instrument to which Trans Leasing is a party or by
which it is bound;
(B) 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 (other than this
Agreement); or
(C) violate any legal requirement applicable to Trans
Leasing or any of its properties in any manner;
which conflict, breach, default, Lien or violation would have
a material and adverse effect on the ability of Trans Leasing
to comply with this Agreement;
(vi) No Consent. No consent, approval,
authorization, order, registration, filing, qualification,
license or permit of or with any Governmental Authority having
jurisdiction over Trans Leasing or any of its properties or
assets is required to be obtained by or with respect to Trans
Leasing in connection with the execution, delivery and
performance by Trans Leasing of this Agreement and the
consummation of the transactions contemplated herein;
(vii) No Proceedings. To the best of Trans
Leasing's knowledge, there are no proceedings or investiga-
tions pending or threatened before any Governmental Authority
(A) asserting the invalidity of this Agreement, (B) seeking to
prevent the consummation of any of the transactions contem-
plated by this Agreement, or (C) seeking any determination or
ruling that might (in the reasonable judgment of Trans
Leasing) materially and adversely affect the performance by
Trans Leasing of its obligations under, or the validity or
enforceability of, this Agreement;
(viii) Insolvency. Trans Leasing is not
insolvent and will not be rendered insolvent by the consum-
mation of the transactions contemplated by this Agreement;
<PAGE>
(ix) Principal Place of Business. Trans
Leasing's principal place of business and chief executive
office are in the State of Illinois, County of Cook;
(x) Ability to Perform. At the date hereof,
Trans Leasing does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and
every covenant contained in this Agreement;
(xi) Fair Consideration. The consideration
received by Trans Leasing in exchange for the contribution and
sale of the Assets to be contributed and sold on the date
hereof and on each Addition Date is fair consideration having
value equivalent to or in excess of the value of the Assets
transferred on each such date;
(xii) Bulk Transfer Provisions. The sale,
transfer, assignment and conveyance of the Leases and its
interests in the related Equipment by Trans Leasing described
in this Agreement is not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable
jurisdiction; and
(xiii) Transfer Taxes. The sale, transfer,
assignment and conveyance of the Assets by Trans Leasing
described in this Agreement will not result in the imposition
of any tax Lien or any liability of TLFC for any tax on such
sale, transfer, assignment and conveyance.
(xiv) Common Stock. Trans Leasing owns all of
the Common Stock free and clear of all mortgages, assignments,
pledges, security interests, warrants, options and rights to
purchase.
3.02 Representations and Warranties of TLFC. TLFC makes
the following representations and warranties on which Trans Leasing
relies in making the Required Capital Contribution, selling the
Purchased Assets and contributing and selling any Additional
Assets. Such representations and warranties speak as of the
Closing Date and each Addition Date, but will survive the
contribution and sale of the Assets to TLFC.
(a) Organization and Good Standing. TLFC is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, 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 under this Agreement;
(b) Due Qualification. TLFC is qualified to do
business as a foreign corporation, is in good standing, and
has obtained all licenses and approvals required under the
laws of, all states in which the ownership or lease of its
<PAGE>
property or the conduct of its business 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, in the aggregate,
materially and adversely affect the ability of TLFC to perform
its obligations under this Agreement;
(c) Power and Authority. TLFC has the corporate
power and authority to execute and deliver this Agreement and
to carry out its terms; and TLFC has duly authorized the
execution, delivery, and performance of this Agreement by all
requisite corporate action;
(d) Binding Obligations. This Agreement
constitutes a legal, valid, and binding obligation of TLFC,
enforceable in accordance with its terms, except as such
enforcement may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance
or other laws now or hereafter in effect affecting the
enforcement of creditors' rights generally and (ii) general
principles of equity (whether considered in a suit at law or
in equity);
(e) No Violation. The consummation of the
transactions contemplated by, and the fulfillment of the terms
of this Agreement, by TLFC (with or without the giving of any
notice or the lapse of time) will not
(i) conflict with, result in any breach of any
of the terms and provisions of, or constitute a default under,
the certificate of incorporation or by-laws of TLFC, or any
term of any indenture, agreement, mortgage, deed of trust, or
other instrument to which TLFC is a party or by which it 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 (other than this Agreement); or
(iii) violate any legal requirement applicable
to TLFC or any of its properties in any manner;
which conflict, breach, default, Lien or violation would have a
material and adverse effect on the ability of TLFC to comply with
this Agreement;
(f) No Proceedings. To the best of TLFC's
knowledge, there are no proceedings or investigations pending
or threatened before any Governmental Authority having
jurisdiction over TLFC or its properties against TLFC or its
properties (i) asserting the invalidity of this Agreement,
(ii) seeking to prevent the consummation of any of the
<PAGE>
transactions contemplated by this Agreement, or (iii) seeking
any determination or ruling that might materially and
adversely affect the performance by TLFC of its obligations
under, or the validity or enforceability of, this Agreement;
(g) Insolvency. TLFC is not insolvent and will
not be rendered insolvent by the consummation of the
transactions contemplated by this Agreement and has an
adequate amount of capital to conduct its business in the
ordinary course and to carry out its obligations under this
Agreement;
(h) Ability to Perform. As of the date hereof,
TLFC does not believe, nor does it have any reasonable cause
to believe, that it cannot perform each and every covenant
contained in this Agreement;
(i) Common Stock. Trans Leasing is the registered
owner of all the issued and outstanding capital stock of TLFC,
and the Common Stock is validly issued, fully paid and
nonassessable and owned of record by Trans Leasing, free and
clear of all mortgages, assignments, pledges, security
interests, warrants, options and rights to purchase; and
(j) Places of Business. TLFC's sole places of
business and offices are located in Northbrook, Illinois and
Wilmington, Delaware.
3.03 Purchase of Leases and Equipment by Trans Leasing.
In the event of discovery at any time that a representation or
warranty set forth in Section 3.01 is untrue in any respect, the
Secured Party or TLFC may by written notice direct Trans Leasing to
purchase each Lease materially and adversely affected by such
untruth, and all related Equipment, on or prior to the thirtieth
day after such notice is received by Trans Leasing (or such later
date as the Secured Party may specify), and Trans Leasing will
purchase each such Lease and the related Equipment, for the
Warranty Purchase Price, on or prior to such thirtieth (or later)
day; provided that Trans Leasing will not be required to purchase
any such Lease (or the related Equipment) if prior to such
thirtieth (or later) day (i) such untruth has been cured with
respect to such Lease in all material respects and (ii) Trans
Leasing delivers to the Secured Party and TLFC a certificate of a
Responsible Officer to that effect. In consideration for the
purchase of any such Lease and the related Equipment, Trans Leasing
will remit the Warranty Purchase Price to the Servicer for
allocation of such Warranty Purchase Price pursuant to the terms of
the Debt Agreement or, if not required to be so remitted by any
Debt Agreement, will remit the Warranty Purchase Price to TLFC. It
is understood and agreed that in the event that any representation
or warranty set forth in Section 3.01 is untrue, the purchase of
any affected Lease and Equipment subject to such Lease as provided
in this Section 3.03 and the indemnification provided in Section
<PAGE>
3.04 will constitute the only remedies available to TLFC and the
Secured Party in respect of such untruth.
3.04 Indemnification. In addition to any remedy
pursuant to Section 3.03, Trans Leasing agrees to indemnify, defend
and hold TLFC harmless from and against any out of pocket expense
(including interest, penalties, reasonable attorneys' fees and
amounts paid in settlement) to which TLFC may become subject
insofar as such expense arises solely out of or is based solely
upon the untruth of any representation or warranty of Trans Leasing
set forth in Section 3.01. The obligations of Trans Leasing under
this Section 3.04 will be considered to have been relied upon by
TLFC and will survive the execution, delivery, and performance of
this Agreement regardless of any investigation made by TLFC or on
its behalf.
ARTICLE IV
COVENANTS OF TRANS LEASING AND TLFC
4.01 Trans Leasing Covenants. Trans Leasing covenants
and agrees with TLFC as follows for the benefit of TLFC and any
Secured Party:
(a) Merger, Consolidation or Assumption of the
Obligations of Trans Leasing. Any Person (i) into which Trans
Leasing may be merged or consolidated, (ii) resulting from any
merger, conversion, or consolidation to which Trans Leasing is
a party, or (iii) succeeding to the business of Trans Leasing
substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every
obligation of Trans Leasing under this Agreement, will be the
successor to Trans Leasing under this Agreement, without the
execution or filing of any document or any further act on the
part of Trans Leasing, TLFC or such Person, anything in this
Agreement to the contrary notwithstanding; provided, however,
that (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 3.01
will have been breached, (y) Trans Leasing will have delivered
to TLFC a certificate of a Responsible Officer and an Opinion
of Counsel each stating that such consolidation, merger, or
succession and such agreement of assumption comply with this
Section 4.01(a) and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction
have been complied with and (z) Trans Leasing will have
delivered an Opinion of Counsel either (1) stating that, in
the opinion of such counsel, all financing statements and
continuation statements and amendments thereto that are
necessary fully to preserve and protect the interests of TLFC
in the Leases have been executed and filed or (2) stating
that, in the opinion of such counsel, no such action is
necessary to preserve and protect such interest.
<PAGE>
(b) Limitation of Liability of Trans Leasing and
Others. Trans Leasing and any director, officer, employee or
agent of Trans Leasing may rely in good faith on any document
of any kind submitted by any Person respecting any matters
arising under this Agreement as being prima facie properly
executed. Other than in its capacity as the Servicer pursuant
to the Servicing Agreement and except as provided in Sections
3.04, 4.01(e) and 4.01(i), Trans Leasing will not be under any
obligation to appear in, prosecute, or defend any legal action
in any way relating to the Assets that is not incidental to
its obligations as the contributor and seller of the Assets
under this Agreement and that in its opinion may cause it to
incur any expense or liability.
(c) Preservation of Security Interest. Trans
Leasing will execute and file such continuation statements and
any other documents requested by TLFC to be filed or which may
be required to be filed by any legal requirement to preserve
fully and protect the interest of TLFC in, to and under the
Assets; provided, however, that Trans Leasing will not be
required to deliver physical possession of the Lease Files to
TLFC and may retain possession of the Lease Files in its
capacity as the Servicer.
(d) Preservation of Name and Office. Unless Trans
Leasing provides not less than thirty days prior written
notice to TLFC and files such amendments to any previously
filed financing or continuation statements as TLFC may
require, Trans Leasing will not (i) change the location of its
principal executive office, (ii) change its name, identity or
corporate structure in any manner which would make any
financing statement or continuation statement filed by Trans
Leasing in accordance with this Agreement seriously misleading
within the meaning of Article 9-402(7) of the UCC or
(iii) delete or otherwise modify the marking of the Lease
Management System referred to in Section 2.02(d) or Section
2.03(c) of this Agreement or the Servicing Agreement.
(e) Obligations with Respect to Leases; Defense
of Assets. Trans Leasing will do nothing to impair the rights
of TLFC in the Leases or the Equipment except as it is
expressly permitted to do so in its capacity as the Servicer
in accordance with the terms of the Servicing Agreement, and
Trans Leasing will defend the interests of TLFC in the Assets
contributed and sold hereby against all claims of third
parties claiming through or under Trans Leasing.
(f) Compliance with Law. Trans Leasing will
comply, in all material respects, with all legal requirements
applicable to Trans Leasing with respect to the Assets;
provided, however, that Trans Leasing may contest any such
legal requirement in any reasonable manner which will not
materially and adversely affect the rights of TLFC or the
<PAGE>
Secured Party in the Assets or the value thereof.
(g) Notification of Breach. Trans Leasing will
advise TLFC, the Servicer (if Trans Leasing is not the
Servicer) and the Secured Party, in reasonable detail, of the
occurrence of any breach by Trans Leasing of any of its
representations, warranties and covenants contained herein,
promptly after it becomes aware of any such breach.
(h) Servicing Agreement. On or before the Closing
Date, Trans Leasing will enter into the servicing agreement,
to be dated as of the date hereof with TLFC and the Lender.
(i) Further Assurances. Trans Leasing will make,
execute or endorse, acknowledge and file or deliver to TLFC
from time to time such schedules, confirmatory assignments,
conveyances, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and
take such further steps relating to the Assets and other
rights covered by this Agreement as TLFC may request and
reasonably require.
(j) Indemnification. Trans Leasing agrees to
indemnify, defend and hold TLFC harmless from and against any
and all loss, liability, damage, judgment, claim, deficiency,
or expense (including interest, penalties, reasonable
attorneys' fees and amounts paid in settlement) to which TLFC
may become subject insofar as such loss, liability, damage,
judgment, claim, deficiency, or expense arises out of or is
based upon a breach by Trans Leasing of its covenants
contained in this Section 4.01. The obligations of Trans
Leasing under this Section 4.01(j) will be considered to have
been relied upon by TLFC and will survive the execution,
delivery, and performance of this Agreement regardless of any
investigation made by TLFC or on its behalf.
(k) Insurance Premiums. With respect to any
Lease on which the related Lessee pays insurance premiums
directly to Trans Leasing (or such premiums are otherwise
included in the Scheduled Lease Payments under such Lease),
until such Lease expires, otherwise terminates, is purchased
under Section 3.03 hereof or is charged-off as uncollectible
by Trans Leasing, Trans Leasing shall pay the insurance
premiums required to maintain the insurance on the related
Equipment required by such Lease.
4.02 TLFC Covenants. TLFC covenants and agrees with
Trans Leasing not to disclose to any Person (except the Secured
Party and the holders of any indebtedness issued under any Debt
Agreement) any of the information contained in the Lease Management
System, the Lease Files, the Contributed Lease Schedule, the
Purchased Lease Schedule or any Additional Lease Schedule, except
as required upon the appointment of a successor Servicer pursuant
<PAGE>
to the Servicing Agreement or by any legal requirement. TLFC
agrees to take such measures as Trans Leasing reasonably requests
to protect and maintain the security and confidentiality of such
information and, in connection therewith, will allow Trans Leasing
to inspect the applicable security and confidentiality arrangements
during normal business hours. TLFC will provide Trans Leasing
written notice not less than five Business Days prior to any
disclosure which TLFC proposes to make in accordance with this
Section 4.02.
4.03 Grant of Security Interest. Trans Leasing
understands that TLFC intends to grant a security interest in the
Assets to the Lender pursuant to the Credit Agreement and may from
time to time hereafter grant a security interest therein to another
Secured Party under another Debt Agreement. Trans Leasing consents
to the assignment of all or any portion of this Agreement by TLFC
to the Lender and any such Secured Party. Trans Leasing agrees that
the Lender or any such Secured Party (or, in each case, the
Servicer on its behalf) may exercise the rights of TLFC hereunder
and will be entitled to all of the benefits of TLFC hereunder to
the extent provided in the Credit Agreement or the related Debt
Agreement, as applicable.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to TLFC's Obligations. The obligations
of TLFC to accept the Required Capital Contribution and to purchase
the Purchased Assets on the Closing Date and to accept and/or
purchase, as the case may be, any Additional Assets on the related
Addition Date are subject to the satisfaction or waiver of the
following conditions as of such Closing Date or Addition Date, as
applicable:
(a) Representations and Warranties. All
representations and warranties of Trans Leasing contained in
this Agreement will be true and correct in all material
respects as of the Closing Date and such Addition Date (except
as otherwise specified herein), as if each such representation
or warranty were made as of the Closing Date or such Addition
Date;
(b) Other Information. All information concerning
the Assets provided to TLFC will be true and correct as of the
Cut-Off Date or the related Additional Cut-Off Date, as
applicable, in all material respects;
(c) Obligations. Trans Leasing will have
performed in all material respects all obligations required to
be performed by Trans Leasing on or prior to the Closing Date
or the related Addition Date, as applicable, pursuant to the
<PAGE>
provisions of this Agreement; and
(d) Corporate Proceedings. All corporate and
legal proceedings and all instruments in connection with the
transactions contemplated by this Agreement will be satisfac-
tory in form and substance to TLFC, and TLFC will have
received from Trans Leasing such copies of documents
(including records of corporate proceedings) relevant to the
transactions herein contemplated as TLFC may reasonably have
requested.
5.02 Conditions to Trans Leasing's Obligations. The
obligations of Trans Leasing to make the Required Capital
Contribution and sell the Purchased Assets on the Closing Date, and
to contribute or sell any Additional Assets as of any Addition
Date, will be subject to the satisfaction or waiver of the
following conditions as of the Closing Date or such Addition Date,
as applicable:
(a) Representations and Warranties. All
representations and warranties of TLFC contained in this
Agreement will be true and correct in all material respects as
of the Closing Date or such Addition Date (except as otherwise
specified herein), as if each such representation or warranty
were made as of the Closing Date or such Addition Date; and
(b) Corporate Proceedings. All corporate and
legal proceedings and all instruments in connection with the
transactions contemplated by this Agreement will be
satisfactory in form and substance to Trans Leasing, and Trans
Leasing will have received from TLFC such copies of documents
(including records of corporate proceedings) relevant to the
transactions herein contemplated as Trans Leasing may
reasonably have requested.
ARTICLE VI
TERMINATION
6.01 Termination. The respective obligations and
responsibilities of Trans Leasing and TLFC created by this
Agreement will terminate upon the last to occur of (i) the maturity
or other liquidation of all Leases and (ii) the termination of all
Debt Agreements.
6.02 Effect of Termination. No termination, rejection
or failure to assume the executory obligations of this Agreement in
the bankruptcy of Trans Leasing or TLFC will be deemed to impair or
affect the obligations pertaining to any executed contribution,
executed sale or executed obligations, including breaches of
representations and warranties by Trans Leasing or TLFC prior to
<PAGE>
termination. Without limiting the foregoing, prior to termination,
the failure of Trans Leasing to pay a Warranty Purchase Price will
not render such contribution, sale or obligations executory and the
continued respective duties of Trans Leasing and TLFC pursuant to
Article IV will not render an executed sale or contribution
executory.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01 Amendment. This Agreement may be amended only by
written agreement of TLFC, Trans Leasing and the Secured Party.
7.02 Governing Law. This Agreement will be governed by
and construed in accordance with the domestic laws of the State of
Illinois, without giving effect to any choice of law or conflict
provision or rule (whether of the State of Illinois or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois. In furtherance of
the foregoing, the internal law of the State of Illinois will
control the interpretation and construction of this Agreement, even
in the event that under such jurisdiction's choice of law or
conflict of law analysis the substantive law of some other
jurisdiction would ordinarily apply.
7.03 Notice. Except as otherwise provided in this
Agreement, any notice or other communication herein required or
permitted to be given will be in writing and may be delivered in
person, with receipt acknowledged, or sent by United States mail,
registered or certified, return receipt requested, or by Federal
Express or other nationally recognized overnight courier service,
postage prepaid and confirmation of receipt requested, and
addressed as follows (or at such other address as may be
substituted by notice given as herein provided):
If to TLFC:
TL Lease Funding Corp. IV
1209 Orange Street
Wilmington, Delaware 19801
with a copy (which copy will
not constitute notice to
TLFC) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jill L. Sugar
If to Trans Leasing:
<PAGE>
Trans Leasing International, Inc.
3000 Dundee Road
Northbrook, IL 60062
Attention: Chief Financial Officer
with a copy (which copy will not constitute
notice to Trans Leasing) to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jill L. Sugar
Every notice, demand, request, consent, approval, declaration or
other communication hereunder will be deemed to have been duly
given or served on the date on which the same will have been
personally delivered, with receipt acknowledged, three (3) Business
Days after the same will have been deposited in the United States
mail or on the next succeeding Business Day if the same has been
sent by Federal Express or other nationally recognized overnight
courier service. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies
will in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other
communication.
7.04 Severability of Provisions. If any covenant,
agreement, provision, or term of this Agreement is held invalid for
any reason whatsoever, then such covenant, agreement, provision, or
term will be deemed severable from the remaining covenants,
agreements, provisions, and terms of this Agreement and will in no
way affect the validity or enforceability of the other provisions
of this Agreement.
7.05 Assignment. This Agreement may not be assigned by
Trans Leasing, except as provided in Section 4.01(a) above, without
the prior written consent of TLFC and the Secured Party; and TLFC
may collaterally assign its rights under this Agreement to the
Lender pursuant to the Credit Agreement and to the Secured Party
under any related Debt Agreement, but, in all other cases this
Agreement may not be assigned by TLFC without the prior written
consent of Trans Leasing and the Secured Party.
7.06 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of TLFC or Trans
Leasing, any right, remedy, power or privilege under this Agreement
will operate as a waiver of such right, remedy, power or privilege;
nor will any single or partial exercise of any right, remedy, power
or privilege under this Agreement preclude any other or further
exercise of such right, remedy, power or privilege. The rights,
remedies, powers and privileges provided under this Agreement are
cumulative and not exhaustive of any other rights, remedies, powers
<PAGE>
and privileges provided by law.
7.07 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which will be an original, but all of which
will constitute one and the same instrument.
7.08 Binding Effect; Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon Trans
Leasing, TLFC, their respective successors and permitted assigns
and will also, to the extent expressly provided in Section 4.03 or
elsewhere in this Agreement, inure to the benefit of the Servicer
and the Secured Party. Except as otherwise provided in this
Agreement, no other Person will have any right or obligation
pursuant to this Agreement.
7.09 Merger and Integration. Except as specifically
stated otherwise in this Agreement, 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.
7.10 Headings. The headings used in this Agreement are
for purposes of reference only and will not otherwise affect the
meaning or interpretation of any provision of this Agreement.
7.11 Schedules and Exhibits. The Schedules and Exhibits
constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.
7.12 No Petition Covenants. Notwithstanding any prior
termination of this Agreement, Trans Leasing shall not, prior to
the date which is one year and one day after the final distribution
with respect to the notes, certificates and other securities issued
by TLFC or any trust formed by TLFC which have been rated by any
nationally recognized statistical rating organization, acquiesce,
petition or otherwise invoke or cause TLFC to invoke the process of
any court or government authority for the purpose of commencing or
sustaining a case against TLFC under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other
similar official of TLFC or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of TLFC.
* * * * *
<PAGE>
<PAGE>
Trans Leasing and TLFC have caused this Contribution and
Sale Agreement to be duly executed by their respective officers as
of the day and year written above.
TRANS LEASING INTERNATIONAL, INC.
By: ______________________________
Name: Norman Smagley
Title: Vice President-Finance
TL LEASE FUNDING CORP. IV
By: ______________________________
Name: Norman Smagley
Title: Vice President-Finance<PAGE>
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT FOR REQUIRED CAPITAL CONTRIBUTION
For value received, in accordance with the Contribution
and Sale Agreement dated as of November 28, 1995 (the "Sale
Agreement"), between Trans Leasing International, Inc., a Delaware
corporation ("Trans Leasing"), and TL Lease Funding Corp. IV, a
Delaware corporation ("TLFC"), Trans Leasing does hereby sell,
assign, transfer and otherwise convey unto TLFC, without recourse,
all of its right, title and interest in, to and under (i) the
Contributed Leases (including its obligations under the Contributed
Leases) and all monies due or to become due thereunder after
November 26, 1995, (ii) the related Equipment (other than any
licensed products that may accompany such Equipment), (iii) the
Lease Files for the Contributed Leases, (iv) any Insurance Policies
(including Trans Leasing's obligations thereunder) and the related
Insurance Proceeds with respect to the Contributed Leases and (v)
all income and proceeds relating to the foregoing.
It is the intention of Trans Leasing and TLFC that the
sales, transfers, assignments and conveyances contemplated by this
Assignment constitute a contribution of the property described
herein and in the Sale Agreement from Trans Leasing to TLFC and the
beneficial interest in and title to such property will not be part
of Trans Leasing's estate in the event of the filing of a
bankruptcy petition by or against Trans Leasing under any
bankruptcy law.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of the
undersigned contained in the Sale Agreement and is to be governed
by the Sale Agreement.
Capitalized terms used herein and not otherwise defined
will have the meanings assigned to them in the Sale Agreement.<PAGE>
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
Assignment to be duly executed as of November 28, 1995.
TRANS LEASING INTERNATIONAL, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
<PAGE>
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT FOR PURCHASED ASSETS
For value received, in accordance with the Contribution
and Sale Agreement dated as of November 28, 1995 (the "Sale
Agreement"), between Trans Leasing International, Inc., a Delaware
corporation ("Trans Leasing"), and TL Lease Funding Corp. IV, a
Delaware corporation ("TLFC"), Trans Leasing does hereby sell,
assign, transfer and otherwise convey unto TLFC, without recourse,
all of its right, title and interest in, to and under (i) the
Purchased Leases (including its obligations under the Purchased
Leases) and all monies due or to become due thereunder after
November 26, 1995, (ii) the related Equipment (other than any
licensed products that may accompany such Equipment), (iii) the
Lease Files for the Purchased Leases, (iv) any Insurance Policies
(including Trans Leasing's obligations thereunder) and the related
Insurance Proceeds with respect to the Purchased Leases and (v) all
income and proceeds relating to the foregoing.
It is the intention of Trans Leasing and TLFC that the
sales, transfers, assignments and conveyances contemplated by this
Assignment constitute a sale of the property described herein and
in the Sale Agreement from Trans Leasing to TLFC and the beneficial
interest in and title to such property will not be part of Trans
Leasing's estate in the event of the filing of a bankruptcy
petition by or against Trans Leasing under any bankruptcy law.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of the
undersigned contained in the Sale Agreement and is to be governed
by the Sale Agreement.
Capitalized terms used herein and not otherwise defined
will have the meanings assigned to them in the Sale Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
Assignment to be duly executed as of November 28, 1995.
TRANS LEASING INTERNATIONAL, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
<PAGE>
<PAGE>
EXHIBIT C
FORM OF ASSIGNMENT FOR ADDITIONAL ASSETS
For value received, in accordance with the Contribution
and Sale Agreement dated as of November 28, 1995 (the "Sale
Agreement"), between Trans Leasing International, Inc., a Delaware
corporation ("Trans Leasing"), and TL Lease Funding Corp. IV, a
Delaware corporation ("TLFC"), Trans Leasing does hereby sell,
assign, transfer and otherwise convey unto TLFC, without recourse,
(i) the Additional Assets listed on the Additional Lease Schedule
attached hereto (including Trans Leasing's obligations under the
Additional Leases) and all monies due or to become due thereunder
after [__________], (ii) the related Equipment (other than any
licensed products that may accompany any of such Equipment), (iii)
the Lease Files for such Leases, (iv) any Insurance Policies
(including Trans Leasing's obligations thereunder) and the related
Insurance Proceeds with respect to such Leases and (v) all income
and proceeds relating to the foregoing (collectively, the
"Additional Assets").
It is the intention of Trans Leasing and TLFC that the
sales, transfers, assignments and conveyances contemplated by this
Assignment constitute a contribution and/or sale of the property
described herein and in the Sale Agreement from Trans Leasing to
TLFC and the beneficial interest in and title to such property will
not be part of Trans Leasing's estate in the event of the filing of
a bankruptcy petition by or against Trans Leasing under any
bankruptcy law.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of the
undersigned contained in the Sale Agreement and is to be governed
by the Sale Agreement.
Capitalized terms used herein and not otherwise defined
will have the meanings assigned to them in the Sale Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this
Assignment to be duly executed as of [____ __], 199[_].
TRANS LEASING INTERNATIONAL, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
<PAGE>
<PAGE>
EXHIBIT D
FORMS OF LEASE
See Attached.
<PAGE>
CONTRIBUTED LEASE SCHEDULE
See Attached.
<PAGE>
PURCHASED LEASE SCHEDULE
See Attached.
<PAGE>
LEASE CRITERIA SCHEDULE
1. As of the Cut-Off Date or the applicable Additional Cut-
Off Date, as the case may be, the remaining term of each Lease is
between 6 months and 60 months; provided that there is no Lease
with a term that extends beyond November 30, 2000.
2. As of the Cut-Off Date or the applicable Additional Cut-
Off Date, as the case may be, no unpaid Scheduled Lease Payment
pursuant to any Lease has been due and payable for more than 30
days (other than due to administrative delays, such as initial
billings) and Trans Leasing has received at least one Scheduled
Lease Payment on each Lease.
<PAGE>
<PAGE>
SPECIFIED PORTFOLIO CHARACTERISTICS SCHEDULE
1. With respect to any Lessee, the aggregate Discounted Lease
Balance of all Leases of such Lessee does not exceed 1.5% (2.10% if
the Aggregate Discounted Lease Balance is less than $25,000,000) of
the Aggregate Discounted Lease Balance.
2. The sum of the Discounted Lease Balances of the 25 Leases
with the greatest Discounted Lease Balance does not exceed 16% (23%
if the Aggregate Discounted Lease Balance is less than $25,000,000)
of the Aggregate Discounted Lease Balance.
3. The sum of the Discounted Lease Balances of all Leases
with respect to which the related Equipment was purchased from one
Person (as determined by Trans Leasing in accordance with its
customary procedures) does not exceed 10% of the Aggregate
Discounted Lease Balance.
4. The sum of the Discounted Lease Balances of all Leases
with respect to which the related Lessees operate in the same
industry (as determined by Trans Leasing in accordance with its
customary procedures) does not exceed 30% of the Aggregate
Discounted Lease Balance.
5. The sum of the Discounted Lease Balances of all Leases
with respect to which the billing address of the related Lessees
are located in the same state does not exceed 30% of the Aggregate
Discounted Lease Balance.
6. The sum of the Discounted Lease Balances of all Leases
with respect to which the related Equipment is of the same type (as
determined by Trans Leasing in accordance with its customary
procedures) does not exceed 45% of the Aggregate Discounted Lease
Balance.
7. The average original acquisition cost of the Equipment (as
capitalized in accordance with GAAP) does not exceed $20,000.
8. The sum of the Discounted Lease Balances of all Leases
with respect to which the related Lessee is a governmental agency
does not exceed 5% of the Aggregate Discounted Lease Balance.
9. The sum of the Discounted Lease Balances of all Leases
with respect to which there has been a Skipped Payment (as defined
in the Servicing Agreement) prior to the Cut-Off Date does not
exceed 5% of the Aggregate Discounted Lease Balance as of the Cut-
Off Date.
CREDIT AGREEMENT
DATED AS OF JANUARY 31, 1996
BETWEEN
TRANS LEASING INTERNATIONAL, INC.
AND
THE FIRST NATIONAL BANK OF CHICAGO
INDIVIDUALLY AND AS AGENT
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of January 31, 1996,
between TRANS LEASING INTERNATIONAL, INC., a Delaware corporation
(the "Company"), the Banks and The First National Bank of
Chicago), ("Agent"), individually and as Agent.
WHEREAS, the Company, the Banks and the Agent desire to
enter into this Credit Agreement pursuant to which the Banks will
make certain loans to the Company as more fully described herein;
NOW, THEREFORE, in consideration of the foregoing premises
and the agreements hereinafter set forth, and for other good and
valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE
WITH FINANCIAL RESTRICTIONS.
1.1 Definitions. In addition to the terms defined
elsewhere in this Agreement, the following terms shall have
the meanings indicated for purposes of this Agreement (such
meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Account" has the meaning ascribed to such term in
Section 3.2(c).
"Agent" means The First National Bank of Chicago in its
capacity as Agent for the Banks hereunder pursuant to
Article 13 and not in its individual capacity as a Bank, and
any Person subsequently appointed as the successor Agent
pursuant to Section 13.11.
"Agreement" means this Credit Agreement, as it may be
amended, modified or supplemented from time to time.
"Article" means an article of this Agreement, unless a
different document is specifically referenced.
"Average Original Equipment Cost Per Lease" has the
meaning ascribed to such term in Section 9.24.
"Bank" shall include First Chicago and any Person which
becomes a "Bank" hereunder pursuant to Section 15.3 and
their respective successors and assigns.
"Banking Day" means any day on which banks are open for
business in Chicago, Illinois and, with respect to
Eurodollar Loans, on which dealings in foreign currencies
and exchange may be carried on by the Banks in the interbank
eurodollar market.
<PAGE>
"Borrowing" means Loans of the same type and, in the
case of Eurodollar Loans, having the same Interest Period,
and made by all Banks on the same Banking Day and pursuant
to the same request in accordance with Section 3.2 or 3.3.
"Borrowing Base" means the excess of (a) the sum of (i)
85% of the present value of Eligible Lease Receivables
(determined, for each Lease, on the basis of the Receivable
Discount Rate), plus (ii) 85% of the present value of
Eligible Vendor Note Receivables (determined, for each
Vendor Note, on the basis of the Receivable Discount Rate),
plus (iii) 85% of the book value of Eligible Customer Note
Receivables, provided that the portion thereof in excess of
$5,000,000 shall be excluded from the computation of the
Borrowing Base, (iv) 25% of the lesser of (X) 11% of the
aggregate original acquisition cost of the property leased
under Eligible Leases and (Y) the present value (determined
on the basis of the Receivable Discount Rate) of the
aggregate Residuals with respect to Eligible Leases, plus
(v) 100% of Unrestricted Cash of the Company and its
consolidated Subsidiaries over (b) the Consolidated Total
Liabilities other than the outstanding principal balance of
the Loans; provided, that to the extent the aggregate
Eligible Lease Receivables due from any one Person exceeds
$1,000,000, or $3,000,000 in the case of Hanjin Shipping and
all of its subsidiaries, including Korean Airlines, and
$2,200,000 in the case of Aluminio Conesa/Hyundai Precision
America and all of their subsidiaries, as of such time of
determination, the portion thereof in excess of such amount
shall be excluded from the computation of the Borrowing
Base.
"Borrowing Base Certificate" has the meaning ascribed
to such term in Section 9.1(a).
"Capitalized Lease" means any lease which is or should
be capitalized on the balance sheet of the lessee in
accordance with GAAP.
"Code" means the Internal Revenue Code of 1986 and any
successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time
to time. References to sections of the Code shall be
construed to also refer to any successor sections.
"Commitment" means, as the context may require, a
Bank's Revolving Loan Commitment or Term Loan Commitment.
"Commitment Amount" means, as the context may require,
the Revolving Loan Commitment Amount or Term Loan Commitment
Amount.
"Company" means Trans Leasing International, Inc., a
<PAGE>
Delaware corporation and its successors and assigns.
"Compliance Certificate" has the meaning ascribed to
such term in Section 9.1(d).
"Confirmation" has the meaning ascribed to such term in
Section 3.2(a).
"Consolidated Tangible Net Worth" means, at any time,
the total of (a) shareholders' equity (including capital
stock, additional paid-in capital and retained earnings
after deducting treasury stock) of the Company and its
consolidated Subsidiaries calculated in accordance with
GAAP, plus (b) Subordinated Debt of the Company and its
consolidated Subsidiaries (other than that portion thereof
which is due within twelve (12) months of such time), minus
(c) the sum of (i) the total amount of any intangible assets
of the Company and its consolidated Subsidiaries plus (ii)
Restricted Cash of the Company and its consolidated
Subsidiaries (not including any Restricted Cash of a
Securitization Subsidiary) plus (iii) the Company's
aggregate Net Assets of Securitization Subsidiaries.
Intangible assets shall include, without limitation,
unamortized debt discount and expense, unamortized deferred
charges and goodwill.
"Consolidated Total Liabilities" means, at any date of
determination, the sum of (a) the total liabilities of the
Company and its consolidated Subsidiaries which, in
accordance with GAAP, would be included in determining
liabilities as shown on the liability side of the Company's
consolidated balance sheet, plus (b) the contingent
obligations or liabilities of the Company and its
consolidated Subsidiaries (excluding those as to which a
dollar amount is not ascertainable), minus (c) that portion
of deferred taxes of the Company and its consolidated
Subsidiaries which does not exceed eight percent (8%) of the
consolidated total assets (as determined in accordance with
GAAP) of the Company and its consolidated Subsidiaries, and
minus (d) Subordinated Debt other than that portion thereof
which is due within twelve (12) months of such date of
determination. Notwithstanding the foregoing, a
Securitization Subsidiary shall not be considered a
Subsidiary for purposes of this definition.
"Conversion Date" means January 30, 1997 (or any later
date to which the Conversion Date may be extended pursuant
to Section 6.8), or such earlier date (which shall be a
Banking Day) as may be fixed by the Company on at least five
(5) Banking Days' written or telephonic notice received by
the Agent.
"Credit" means the aggregate Commitments of the Banks
<PAGE>
to make Revolving Loans and the Term Loans under the terms
of this Agreement.
"Customer Note" means any promissory note (a) which is
payable to or to the order of the Company and (b) which
evidences a loan made by the Company to the maker of such
note.
"Dollars" and the symbol "$" means lawful money of the
United States of America.
"Eligible Customer Note" means a Customer Note which
satisfies all of the following requirements: (i) it is the
valid and enforceable obligation of the maker thereof; (ii)
it is a negotiable instrument and maker thereof has waived
all defenses as against any assignee of the Company or
subsequent holder thereof; (iii) no payment with respect
thereto is more than 60 days past due and there exists no
other material defaults by the maker thereof of any of its
obligations thereunder or under any assignment, security
agreement or other document executed by the maker thereof in
connection therewith; and (iv) there exists no setoffs,
counterclaims or defenses of or disputes with the maker with
respect thereto. A Customer Note shall be an Eligible
Customer Note only if and so long as it satisfies all of the
above requirements, and if at anytime a Customer Note fails
to satisfy any of the above requirements it shall not, so
long as it fails any of the above requirements, be an
Eligible Customer Note.
"Eligible Customer Note Receivable" with respect to a
Customer Note means, at any date of determination, without
duplication, principal amounts due or to become due to the
Company under such Eligible Customer Note.
"Eligible Lease" means a Lease (i) under which the
Company is the lessor or, by reason of the Company's
purchase thereof, is the successor in interest of the
lessor, (ii) which is either a "sales type lease," a "direct
financing lease" or an "operating lease" (as such terms are
defined in FASB Statement No. 13, as in effect from time to
time), and (iii) which satisfies all of the following
requirements; no payment due from the lessee thereunder is
more than 60 days past due, and there exists no other
material default by the lessee of any of its obligations
thereunder or by any other obligor of its obligations with
respect thereto; it arises from a bona fide lease or sale of
the property covered thereby and is the valid and
enforceable obligation of the lessee thereunder; it provides
that it is noncancellable during its initial term and that
the lessee will pay all amounts due thereunder without
setoff, counterclaim, defense or abatement; there exist no
<PAGE>
setoffs, counterclaims or defenses of or disputes with the
lessee with respect thereto; the Lease, the payments due or
to become due thereunder and the property leased thereunder
(unless the Company holds a security interest rather than
title) are not subject to any Lien except Liens permitted
under this Agreement (other than Liens described in Section
9.20(h), which shall not be permitted to apply to an
Eligible Lease) and the interests of the lessee; and the
Company holds title to the Lease and all payments due or to
become due thereunder and holds title to or has a security
interest (which if the original equipment cost is more that
$10,000, is first and perfected) in, all property covered
thereby. A Lease which initially was an Eligible Lease, but
which subsequently fails to satisfy any of the above
requirements, shall cease to be an Eligible Lease.
"Eligible Lease Receivable" means a Lease Receivable
under an Eligible Lease.
"Eligible Receivable" means an Eligible Lease
Receivable, an Eligible Customer Note Receivable or an
Eligible Vendor Note Receivable.
"Eligible Vendor Note" means a Vendor Note which
satisfies all of the following requirements: (i) it is the
valid and enforceable obligation of the maker thereof; (ii)
it is a negotiable instrument and the maker thereof has
waived all defenses as against any assignee of the Company
or subsequent holder thereof; (iii) the collateral security
therefor is subject to a first and prior perfected Lien in
favor of the Company and is not subject to any other Lien;
(iv) each Lease securing payment or performance thereof
meets all of the requirements of an Eligible Lease except
that the maker of the Vendor Note is the lessor under such
Lease and the owner thereof; (v) no payment with respect
thereto is more than 60 days past due, and there exists no
other material default by the maker thereof of any of its
obligations thereunder or under any assignment, security
agreement or other document executed by the maker thereof in
connection therewith; and (vi) there exist no setoffs,
counterclaims or defenses of or disputes with the maker with
respect thereto. A Vendor Note which initially was an
Eligible Vendor Note, but subsequently fails to satisfy any
of the above requirements, shall cease to be an Eligible
Vendor Note.
"Eligible Vendor Note Receivable" means a Vendor Note
Receivable under an Eligible Vendor Note; provided, however,
that the maximum dollar amount of Vendor Note Receivables
which shall be considered as Eligible Vendor Note
Receivables shall be limited to not more than 50% of the
Company's Consolidated Tangible Net Worth in the case of any
one maker of Vendor Notes in each case as set forth in the
<PAGE>
most recent Compliance Certificate delivered pursuant to
Section 9.1(d).
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of
similar import, together with the regulations thereunder, in
each case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" means any corporation, partnership,
or other trade or business (whether or not incorporated)
that is, along with the Company, a member of a controlled
group of corporations or a controlled group of trades or
businesses, as described in Sections 414(b) and 414(c),
respectively, of the Code or Section 4001 of ERISA, or a
member of the same affiliated service group within the
meaning of Section 414(m) of the Code.
"Eurocurrency Reserve Requirement" means, with respect
to any Eurodollar Loan for any Interest Period, the maximum
aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed
under Regulation D on Eurocurrency liabilities. For
purposes of this Agreement, any Eurodollar Loans hereunder
shall be deemed to be "Eurocurrency liabilities," as defined
in Regulation D, and, as such, shall be deemed to be subject
to such reserve requirements without the benefit of, or
credit for, proration, exceptions or offsets which may be
available to the Bank from time to time under Regulation D.
"Eurodollar Loan" means any Loan which bears interest
at a rate determined with reference to the Interbank Rate
(Reserve Adjusted).
"Eurodollar Revolving Loan" means any Revolving Loan
which bears interest at a rate determined with reference to
the Interbank Rate (Reserve Adjusted).
"Eurodollar Term Loans" means the Term Loans which at
any time bear interest at a rate determined with reference
to the Interbank Rate (Reserve Adjusted).
"Event of Default" means any of the events described in
Section 12.1.
"Federal Funds Funding Rate" means, with respect to any
Loan bearing interest at the Floating Rate for any day, the
rate per annum (rounded upward to the next highest 1/8 of 1%
if not already an integral multiple of 1/8 of 1%) equal to
the consensus (or if no consensus exists, the arithmetic
average) of the rates at which reserves are offered by
first-class banks to other first-class banks at
<PAGE>
approximately 10:00 a.m. (Chicago time) on such day (or if
such day is not a Business Day, on the immediately preceding
Business Day) on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal
funds brokers, received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent
in its sole discretion.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System or any successor thereto.
"First Chicago" means The First National Bank of
Chicago in its individual capacity and its successors.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of 12 consecutive
calendar months ending on the 30th day of June. References
to a Fiscal Year with a number corresponding to any calendar
year (e.g. "Fiscal Year 1995") refer to the Fiscal Year
ending on the 30th day of June occurring during such
calendar year.
"Floating Rate" means, for any day, a fluctuating
rate per annum equal to the lesser of (i) the Reference Rate
in effect on such day or (ii) a rate per annum equal to the
Federal Funds Funding Rate in effect on such day plus .70%
per annum. If for any reason the Agent shall have
determined (which determination shall be conclusive in the
absence of manifest error) that it is unable (after
reasonable effort) to ascertain the Federal Funds Funding
Rate for any reason (including, without limitation, the
inability of the Agent to obtain sufficient bids or
publications in accordance with the terms hereof), the
Floating Rate shall be a fluctuating rate per annum equal to
the Reference Rate in effect from time to time until the
circumstances giving rise to such inability no longer exist.
"Floating Rate Loan" means any Loan which bears
interest at a rate determined with reference to the Floating
Rate.
"Floating Rate Revolving Loan" means any Revolving Loan
which bears interest at a rate determined with reference to
the Floating Rate.
"Floating Rate Term Loan" means the Term Loans when
they bear interest at a rate determined with reference to
the Floating Rate.
"GAAP" means United States generally accepted
accounting principles.
<PAGE>
"Indebtedness" of any Person means, without
duplication, (i) any obligation of such Person for borrowed
money, including, without limitation, (a) any obligation of
such Person evidenced by bonds, debentures, notes or other
similar debt instruments, and (b) any obligation for
borrowed money which is non-recourse to the credit of such
Person but which is secured by a lien on any asset of such
Person, (ii) any obligation of such Person on account of
deposits or advances, (iii) any obligation of such Person
for the deferred purchase price of any property or services,
except Trade Accounts Payable, (iv) any obligation of such
Person as lessee under a Capitalized Lease, (v) any
Indebtedness of another Person secured by a Lien on any
asset of such first Person, whether or not such Indebtedness
is assumed by such first Person, and (vi) net liabilities
under interest rate swap, exchange or cap agreements which
are not associated with specific debt instruments. For all
purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint
venture in which such Person is a general partner or a joint
venturer.
"Interbank Rate (Reserve Adjusted)" means, for any
Interest Period, the rate per annum for deposits in U.S.
Dollars for the number of days comprising such Interest
Period, adjusted for reserves, which appears on the Dow
Jones Telerate Service Page 3750 as of 11:00 a.m., London
time, two Banking Days prior to the first day of such
Interest Period (or such day two Banking Days before the day
a Revolving Loan is made). If such rate does not appear on
such page (or such other page as may replace that page on
that service, or if such service is no longer offered, such
other service for displaying LIBOR or comparable rates as
may be selected by Agent after consultation with the
Company), the rate shall be the Reference Bank Rate. The
"Reference Bank Rate" shall be determined on the basis of
the rates at which deposits in U.S. Dollars are offered by
First Chicago as of 11:00 a.m., London time, two Banking
Days prior to the first day of such interest period (or two
Banking Days before the day a Revolving Loan is made),
adjusted for reserves, in the approximate amount of First
Chicago's Eurodollar Loan and having a maturity
approximately equal to such Interest Period.
"Interest Period" means, with respect to any Eurodollar
Loan, the period commencing on the borrowing date of such
Eurodollar Loan, or the date a Floating Rate Loan is
converted into such Eurodollar Loan, or the last day of the
prior Interest Period for such Eurodollar Loan, as the case
may be, and ending on the numerically corresponding day one,
two, three or six months thereafter, as selected by the
Company pursuant to Section 3.2 or Section 3.3; provided
that:
<PAGE>
(a) any Interest Period which would otherwise end on a
day which is not a Banking Day shall end on the next
succeeding Banking Day unless such next succeeding Banking
Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Banking Day;
(b) any Interest Period which begins on the last
Banking Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Banking Day of the calendar month at the end of such
Interest Period;
(c) no Interest Period for a Eurodollar Revolving Loan
shall extend beyond the Conversion Date; and
(d) if any Interest Period includes a date on which a
principal repayment is to be made on the Term Loans, (x) the
principal amount of the Term Loans to be repaid on such date
shall have an Interest Period ending on such date, and (y)
the remainder of the Term Loans, if any, shall have an
Interest Period as set forth above.
"Investment" means any investment, made in cash or by
delivery of any kind of property or asset, in any Person,
whether by acquisition of shares of stock or similar
interest, Indebtedness or other obligation or security, or
by loan, advance or capital contribution, or otherwise, but
shall not include the purchase by the Company of property
for lease or sale in the ordinary course of its business.
"Lease" means any contract or agreement for the leasing
of personal property.
"Lease Receivable" with respect to a Lease means, at
any time of determination, without duplication, amounts due
or to become due to the Company under such Lease.
"Lending Installation" means, with respect to a Bank,
any office, branch, subsidiary or affiliate of such Bank.
"Liabilities" means all of the liabilities, obligations
and indebtedness of the Company to the Agent or any Bank of
any kind or nature under or in connection with this
Agreement and the other Loan Documents, however created,
arising or evidenced, whether direct or indirect, absolute
or contingent, now or hereafter existing or due or to become
due.
"Lien" means any mortgage, pledge, hypothecation,
judgment lien or similar legal process, title retention
lien, or other lien or security interest, including, without
<PAGE>
limitation, the interest of a vendor under any conditional
sale or other title retention agreement and the interest of
a lessor under any Capitalized Lease.
"Loan Document" means this Agreement, the Notes and
each other document, instrument or agreement executed and/or
delivered pursuant hereto or in connection herewith, as any
thereof may be amended, modified, restated or replaced from
time to time.
"Loans" means the Revolving Loans made pursuant to
Section 2.1, and the Term Loans made pursuant to Section
2.2. Each Loan shall be a Floating Rate Loan or a Eurodollar
Loan (each of which shall be a "type" of Loan).
"Majority Banks" means those Banks whose share in the
aggregate Loans outstanding constitutes (or, if no Loans are
outstanding, those whose aggregate Percentages constitutes)
at least sixty-six and two-thirds percent (66 2/3%).
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a) (3) of ERISA which is maintained
for employees of the Company or any ERISA Affiliate.
"Net Assets of Securitization Subsidiaries" means, as
of any date of determination, the difference (but not below
zero) between (i) the total cash and net Lease Receivables
of all Securitization Subsidiaries determined in accordance
with GAAP as shown on the consolidated balance sheet of the
Company (after eliminating intercompany items) at such date
of determination, minus (ii) the total lease-backed
obligations and liquidity or similar loan obligations of all
Securitization Subsidiaries determined in accordance with
GAAP as shown on the consolidated balance sheet of the
Company (after eliminating intercompany items) at such date
of determination.
"Non-Recourse Debt" means Indebtedness of the Company
or any Securitization Subsidiary for which the Company or
such Securitization Subsidiary is not personally liable and
which is incurred for the express purpose of purchasing or
financing one or more leases or items of property, wherein
repayment of such Indebtedness may be satisfied only out of
the value of said lease or property (including residuals)
and the income and proceeds thereof or there from, and not
against the Company or such Securitization Subsidiary
personally or any of its other property or assets (other
than Restricted Cash).
"Notes" mean the Revolving Notes referred to in Section
4.1, and the Term Notes referred to in Section 4.2.
"Notice of Assignment" has the meaning assigned to such
<PAGE>
term in Section 15.3.
"OEC Inflation Index" shall have the meaning ascribed
to such term in Section 9.24.
"Original Equipment Cost" shall have the meaning
ascribed to such term in Section 9.24.
"Participant" has the meaning ascribed to such term in
Section 15.2.
"Payment Date" means (a) as to any Eurodollar Loan, the
last day of each Interest Period with respect thereto and,
if such Interest Period is in excess of three months, the
day three months after the commencement of such Interest
Period, (b) as to any Floating Rate Loan, the last day of
each March, June, September and December, commencing on the
first of such days to occur after such Floating Rate Loan is
made or a Eurodollar Loan is converted to a Floating Rate
Loan, and (c) as to any fees, the last day of each March,
June, September and December, commencing on the first such
date to occur after the date hereof.
"PBGC" means the Pension Benefit Guaranty Corporation
and any entity succeeding to any or all of its functions
under ERISA.
"Pension Plan" means a "pension plan", as such term is
defined in section 3(2) of ERISA, which is subject to Title
IV of ERISA (other than a Multiemployer Plan), and to which
the Company or any ERISA Affiliate, may have liability,
including any liability by reason of having been a
substantial employer within the meaning of section 4063 of
ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under
section 4069 of ERISA.
"Percentage" means as to any Bank, the percentage of
such Bank of the Credit, as set forth opposite such Bank's
signature hereto or in an Assignment and Acceptance
Agreement executed by such Bank, as adjusted from time to
time pursuant to Section 15.3.
"Permitted Investment" means any of the following
maintained by the Company or any Subsidiary, or any Bank on
behalf of the Company or any Subsidiary, with such Bank:
(a) any evidence of indebtedness issued or guaranteed
by the government of the United States of America,
maturing not more than one year from the date of
measurement;
(b) commercial paper, maturing not more than one year
<PAGE>
after date of issue and rated P-1 or P-2 by Moody's
Investors Service, Inc. or A-I or A-2 by Standard &
Poor's Corporation, issued by a corporation organized
under the laws of any State of the United States of
America;
(c) any certificate of deposit or acceptance, maturing
not more than one year from the date of measurement,
issued by any Bank or a commercial banking institution
which is a member of the Federal Reserve System and
which has a combined capital and surplus and undivided
profits of not less than $100,000,000; and
(d) money market funds sponsored by insurance
companies, investment banking firms or commercial
banking institutions which are members of the Federal
Reserve System, provided such fund has assets of not
less than $100,000,000.
"Person" means an individual, partnership, corporation,
trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or
political subdivision thereof, or other entity.
"Plan" means any Pension Plan or Welfare Plan.
"Prior Credit Agreement" means that certain Amended and
Restated Credit Agreement, dated as of December 9, 1994, as
amended, among the Company, First Union National Bank of
North Carolina and the other Banks (as defined therein).
"Purchaser" has the meaning ascribed to such term in
Section 15.3.
"Receivable Discount Rate" for any Lease or Vendor Note
at any date of determination means the greater of (a) the
sum of (i) the rate per annum at which Dollar deposits in
immediately available funds are offered to First Chicago in
the interbank eurodollar market at or about 11:00 a.m.,
Chicago time on such date of determination, for delivery on
such date, for a period of twenty-four (24) months and in an
amount of $1,000,000, plus (ii) one and one-half percentage
points (1.5%) and (b) the Floating Rate.
"Reference Rate" means, at any time, the rate of
interest then most recently announced by First Chicago at
Chicago, Illinois as its corporate base rate, which may not
necessarily be its lowest lending rate. For purposes of
this Agreement and the Notes, each change in the Floating
Rate due to a change in the Reference Rate shall take effect
on the effective date of the change in the Reference Rate.
<PAGE>
"Related Party" means, for purposes of Section 9.28
only, any Person (other than the Company or a Subsidiary)
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with, the Company, (ii) which beneficially
owns or holds 5% or more of the equity interest of the
Company, or (iii) 5% or more of the equity interest of
which-is beneficially owned or held by the Company or a
Subsidiary. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person,
whether through the ownership of voting securities, by
contract or otherwise.
"Reportable Event" has the meaning given to such term
in ERISA.
"Residual" means, with respect to a Lease, the amount
determined by the Company at the commencement of the Lease
term (as thereafter reduced or increased, as appropriate, as
the result of appropriate changes in circumstances) as the
estimated amount to be realized by the Company with respect
to the sale or other disposition of the property subject to
the Lease as of the expiration of the primary Lease term.
Any determination by the Company to increase the amount of
Residual with respect to a Lease in a material amount after
the initial determination thereof shall be supported by such
evidence as shall be reasonably acceptable to the Agent and
the Majority Banks.
"Restricted Cash" means, with respect to the Company or
any Subsidiary (including a Securitization Subsidiary), the
aggregate amount required to be maintained by the Company or
such Subsidiary in reserve, spread or cash collateral
accounts established and maintained pursuant to agreements
entered into by the Company or such Subsidiary for the
borrowing of money or the financing of Leases or other
chattel paper.
"Revolving Loan Commitment" means, relative to any
Bank, such Bank's obligation to make Revolving Loans
pursuant to Section 2.1 in an amount equal to its Percentage
of each Borrowing of Revolving Loans, up to a maximum of its
Percentage of the Revolving Loan Commitment Amount.
"Revolving Loan Commitment Amount" means, on any date
of determination, the lesser of (a) the Borrowing Base and
(b) $30,000,000 (as such amount may be reduced from time to
time pursuant to Section 6.5).
"Revolving Loans" means the Loans described in Section
2.1 and shall be Floating Rate Revolving Loans or Eurodollar
Revolving Loans.
<PAGE>
"Revolving Note" means a promissory note of the
Company, in the form set forth as Exhibit A, with
appropriate insertions, as such promissory note may be
amended, modified or supplemented from time to time, and the
term "Revolving Note" shall include any substitutions for,
or renewals of, such promissory note.
"Securitization Subsidiary" means any wholly-owned
Subsidiary exclusively engaged in financing, and activities
related to financing, leases or installment purchase
contracts (and the rights thereunder) entered into or owned
by the Company or a wholly-owned Subsidiary, as the case may
be, the Company's or a wholly-owned Subsidiaries interest in
any equipment or other assets which are the subject of any
such lease or contract, all monies due or to become due with
respect to any of the foregoing, all rights and interests in
insurance policies with respect to any of the foregoing and
cash in an amount up to the aggregate reserve or credit
enhancement requirements, if any, which the Company or such
Subsidiary, as the case may be, is obligated to fund under
the documents governing the securitization of such assets by
such Subsidiary.
"Subordinated Debt" means Indebtedness of the Company
or any Subsidiary which is subordinated to payment of the
Notes; provided, however, Non-Recourse Debt shall not be
considered Subordinated Debt.
"Subsidiary" means any Person of which or in which the
Company and its other Subsidiaries own directly or
indirectly 50% or more of (i) the combined voting power of
all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of
directors of such Person, if it is a corporation, (ii) the
capital interest, profits interest or membership interest of
such Person, if it is a partnership, limited liability
company, joint venture or similar entity, or (iii) the
beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
"Taxes" with respect to any Person means taxes,
assessments or other governmental charges or levies imposed
upon such Person, its income or any of its properties,
franchises or assets.
"Term Loan Commitment" means, relative to any Bank,
such Bank's obligation to make a Term Loan pursuant to
Section 2.2.
"Term Loan Commitment Amount" means the outstanding
principal balance of the Revolving Loans on the Conversion
Date, but in any event not more than the Revolving Loan
Commitment Amount.
<PAGE>
"Term Loans" means the Loans described in Section 2.2
and shall be Floating Rate Term Loans or Eurodollar Term
Loans.
"Term Note" means a promissory note of the Company, in
the form set forth as Exhibit B, with appropriate
insertions, as such promissory note may be amended, modified
or supplemented from time to time, and the term "Term Note"
shall include any substitutions for, or renewals of, such
promissory note.
"Trade Accounts Payable" of any Person means trade
accounts payable of such Person incurred in the ordinary
course of such Person's business.
"Transferee" has the meaning ascribed to such term in
Section 15.4.
"Unmatured Event of Default" means an event or
condition which with the lapse of time or giving of notice
to the Company, or both, would constitute an Event of
Default.
"Unrestricted Cash" means cash other than Restricted
Cash.
"Vendor Note" means
(a) any promissory note (i) which is made payable
to the order of the Company by a lessor or seller of
personal property, (ii) which evidences a loan made by
the Company to, or was purchased by the Company from,
such lessor or seller, and (iii) the payment of which
is secured, pursuant to the terms thereof or of one or
more separate assignments or security agreements
executed by the maker of such promissory note, by one
or more Leases, purchase money notes, installment sale
contracts or other chattel paper owned by such lessor
or seller, and by the property which is the subject of
such Lease(s), purchase money notes, installment sale
contract(s) or other chattel paper;
(b) any promissory note (i) which is made payable
to a seller of personal property (which may be the
Company), (ii) which, if it is made payable to a seller
of personal property other than the Company, was
purchased by the Company from such seller or its
assignee, and (iii) the payment of which is secured
pursuant to the terms thereof or of one or more
separate assignments or security agreements executed by
the maker of such promissory note, by the property
which is sold (in whole or in part) in consideration
for such promissory note; and
<PAGE>
(c) any installment sale contract or other chattel
paper (i) pursuant to which any payment is to be made
to a seller of personal property (which may be the
Company), (ii) as to which the right to the payments to
such seller, if it is not the Company, was purchased by
the Company from such seller or its assignee, and (iii)
payments under which are secured pursuant to the terms
thereof or of one or more separate assignments or
security agreements executed by the obligor under such
installment sale contract or other chattel paper, by
the property which is sold (in whole or in part)
pursuant to such installment sale contract or other
chattel paper.
"Vendor Note Receivable" with respect to a Vendor Note
means, at any time of determination, without duplication,
amounts due or to become due to the Company under such
Vendor Note.
"Welfare Plan" means a "welfare plan", as such term is
defined in section 3(1) of ERISA.
1.2 Other Definitional Provisions. Unless otherwise
defined or the context otherwise requires, all financial and
accounting terms used herein or in any certificate or other
document made or delivered pursuant hereto shall be defined in
accordance with GAAP. Unless otherwise defined therein, all
terms defined in this Agreement shall have the defined meanings
when used in any Note or in any certificate or other document
made or delivered pursuant hereto.
1.3 Interpretation of Agreement. A Section or an
Exhibit or a Schedule is, unless otherwise stated, a reference to
a section hereof or an exhibit or schedule hereto, as the case
may be. Section captions used in this Agreement are for
convenience only, and shall not affect the construction of this
Agreement. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar purport when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
1.4 Compliance with Financial Restrictions. 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, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles
are inconsistent with the specific provisions of this Agreement.
For purposes of this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited
financial statements referred to in Section 8.6. In the event
that any Accounting Changes (as defined below) shall occur and
<PAGE>
such change results in a change in the method of calculation of
financial covenants, standards or terms in this Agreement, then
the Company and the Banks agree to enter into negotiations in
order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result
that the criteria for evaluating the financial condition of the
Company and its consolidated Subsidiaries shall be the same after
such Accounting Changes as if such Accounting Changes had not
been made. Until such time as such an amendment shall have been
executed and delivered by the parties thereto, all financial
covenants, standards and terms in this Agreement shall continue
to be calculated or construed as if such Accounting Changes had
not occurred. "Accounting Changes" means: changes in accounting
principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants
or, if applicable, the Securities and Exchange Commission (or
successors thereto or agencies with similar functions).
2. COMMITMENT OF THE BANKS
Subject to the terms and conditions of this Agreement
and in reliance upon the warranties of the Company herein set
forth, each Bank, severally for itself alone, and not jointly,
agrees:
2.1 Revolving Loans. To make loans (collectively
called the "Revolving Loans" and individually called a "Revolving
Loan") to the Company, which Revolving Loans the Company may
repay and reborrow during the period from the date hereof to, but
not including, the Conversion Date, in an amount equal to its
Percentage of each Borrowing of Revolving Loans as the Company
may from time to time request, but not exceeding in the aggregate
at any one time outstanding, such Bank's Revolving Loan
Commitment.
2.2 Term Loan. To make a loan (the "Term Loan") on
the Conversion Date in an amount equal to its Percentage of the
Borrowing of Term Loans as the Company may request, but not
exceeding such Bank's Term Loan Commitment; provided, however,
that the proceeds of each Bank's Term Loan shall be applied to
the extent necessary to the concurrent payment in full of the
aggregate principal amount of the Revolving Loans from such Bank
outstanding on the Conversion Date plus accrued interest thereon.
3. LOAN OPTIONS; BORROWING PROCEDURES;
CONTINUATION/CONVERSION OF LOANS; CERTAIN LOAN TERMS
3.1 Loan Options. Each Loan shall be a Floating Rate
Loan or a Eurodollar Loan, as shall be selected by the Company,
except as otherwise provided herein. If the Company fails to
make any such selection, such Loan shall be a Floating Rate Loan.
Before the Conversion Date, any combination of types of Revolving
<PAGE>
Loans may be outstanding at the same time. After the Conversion
Date, the Term Loan shall be denominated as either a Floating
Rate Term Loan or a Eurodollar Term Loan, except as otherwise
provided herein.
3.2 Borrowing Procedures.
(a) The Company shall give the Agent prior written or
telephonic notice of each requested Borrowing, which shall
be of the same type of Loan. Each such notice shall be
irrevocable and, in addition to the information required
pursuant to Section 3.2(b), shall specify (i) the borrowing
date (which shall be a Banking Day), (ii) the amount and
type of Loan, and (iii) if the Borrowing is to be of
Eurodollar Loans, the initial Interest Period for such
Loans. Each notice of a Borrowing of Floating Rate Loans
shall be received by the Agent not later than 11:00 a.m.,
Chicago time on the borrowing date with respect to such
requested Borrowing and each notice of Borrowing of
Eurodollar Loans shall be received by the Agent not later
than 11:30 a.m., Chicago time at least three Banking Days
prior to the borrowing date with respect to such requested
Borrowing. Each Borrowing of Floating Rate Revolving Loans
and of Eurodollar Revolving Loans shall be in a minimum
aggregate amount of $100,000 or an integral multiple of
$50,000 in excess thereof. The Company shall promptly
confirm any telephonic notice of a request for a Borrowing
of Revolving Loans or Term Loans in writing not later than
the next following Banking Day by delivering to the Agent a
confirmation (the "Confirmation") in the form of Exhibit C
hereto, it being understood, however, that the Company's
failure to confirm any telephonic notice or otherwise comply
with the provisions of this Section 3.2 shall not affect the
obligation of the Company to repay each Loan in accordance
with the terms of this Agreement and the applicable Note.
(b) On or before 2:00 p.m. Chicago time on the Banking
Day of a requested Borrowing, each Bank shall deposit with
the Agent same day funds in an amount equal to such Bank's
Percentage of the requested Borrowing. Such deposit will be
made to an account which the Agent shall specify from time
to time by notice to the Banks. To the extent funds are
received from the Banks, and provided all the conditions
precedent to the making of the requested Loans have been
satisfied (unless waived in accordance with the provisions
of this Agreement), subject to the terms of Section 2.2 the
Agent shall make a wire transfer to account number 7804563
maintained by the Company with Bank of America (#071-000039)
or otherwise at the Company's direction. No Bank's
obligation to make any Loan shall be affected by any other
Bank's failure to make any Loan.
3.3 Continuation and/or Conversion of Loans. The
<PAGE>
Company may irrevocably elect to (i) continue any outstanding
Eurodollar Loan from the current Interest Period for such Loan
into a subsequent Interest Period to begin on the last day of
such current Interest Period, or (ii) convert any outstanding
Floating Rate Loan into a Eurodollar Loan, or (iii) convert any
outstanding Eurodollar Loan into a Floating Rate Loan on the last
day of the current Interest Period for such Eurodollar Loan, by
giving the Agent prior written or telephonic notice of such
continuation or conversion; provided, however, that each such
conversion or continuation shall be prorated among the applicable
outstanding Loans of all Banks. Each notice of a conversion into
a Floating Rate Loan shall be received by the Agent not later
than 11:00 a.m. (Chicago time) on the effective date of such
conversion and each notice of a conversion into, or continuation
of, a Eurodollar Loan shall be received by the Agent not later
than 11:30 a.m. (Chicago time) at least three Banking Days prior
to the effective date of such continuation or conversion. Each
such notice shall specify (a) the effective date of continuation
or conversion (which shall be a Banking Day), (b) the type of
Loan the Loan is to be continued as or converted into and the
amount of such Loan, and (c) the Interest Period for such Loan,
if applicable. The Company shall promptly confirm each such
telephonic notice in writing. Absent timely notice of
continuation or conversion, each Eurodollar Loan shall, on the
last day of the current Interest Period for such Loan unless paid
in full on such last day, convert into a Floating Rate Loan. No
Loan shall be converted into a Eurodollar Loan and no Eurodollar
Loan shall be continued at any time that an Event of Default or
an Unmatured Event of Default shall exist.
3.4 Funding Losses. The Company will indemnify each
Bank upon demand against any loss or expense which such Bank may
sustain or incur (including, without limitation, any loss or
expense sustained or incurred in obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or
maintain any Loan) as a consequence of (i) any failure of the
Company to make any payment when due (including after giving
notice of prepayment) of any amount due hereunder or under any
Note, (ii) any failure of the Company to borrow, continue or
convert a Loan on a date specified therefor or in a notice
thereof, or (iii) any payment (including, without limitation, any
payment pursuant to Section 7.3 or Section 12.2), prepayment or
conversion of any Eurodollar Loan on a date other than the last
day of the Interest Period for such Loan. A certificate of such
Bank setting forth the calculations and the amount or amounts as
shall be necessary to indemnify such Bank as specified in this
Section 3.4 shall be delivered to the Company and shall be
conclusive in the absence of manifest error.
3.5 Capital Adequacy. If any Bank shall reasonably
determine that the application or adoption of any law, rule,
regulation, directive, interpretation, treaty or guideline
regarding capital adequacy, or any change therein or in the
<PAGE>
interpretation or administration thereof, whether or not having
the force of law (including, without limitation, application of
changes to Regulation H and Regulation Y of the Federal Reserve
Board issued by the Federal Reserve Board on January 19, 1989 and
regulations of the Comptroller of the Currency, Department of the
Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of
the Currency on January 27, 1989 and any corresponding capital
regulations promulgated by regulatory authorities outside the
United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices
Entitled "International Convergence of Capital Measurements and
Capital Standards") increases the amount of capital required or
expected to be maintained by such Bank or any Person controlling
such Bank, and such increase is based upon the existence of such
Bank's obligations hereunder and other commitments of this type,
then from time to time, within 10 days after demand from such
Bank, the Company shall pay to such Bank such amount or amounts
as will compensate such Bank or such controlling Person, as the
case may be, for such increased capital requirement. The
determination of any amount to be paid by the Company under this
Section 3.5 shall take into consideration the policies of such
Bank or any Person controlling such Bank with respect to capital
adequacy and shall be based upon any reasonable averaging,
attribution and allocation methods. A certificate of such Bank
setting forth the calculations and amount or amounts as shall be
necessary to compensate such Bank as specified in this Section
3.5 shall be delivered to the Company and shall be conclusive in
the absence of manifest error.
4. NOTES EVIDENCING BORROWINGS.
4.1 Notes Evidencing Revolving Loans. Each
Bank's Revolving Loans shall be evidenced by a Revolving Note,
which shall be made payable to the order of such Bank, dated the
date of this Agreement, and shall mature on the Conversion Date.
All Revolving Loans made by each Bank to the Company pursuant to
this Agreement and all payments of principal shall be evidenced
by such Bank in its records or, at its option, on the schedule
(or any continuation thereof) attached to its respective
Revolving Note, which records or schedule shall be rebuttable
presumptive evidence of the subject matter thereof.
4.2 Notes Evidencing Term Loans. Each Bank's
Term Loan shall be evidenced by a separate Term Note, which shall
be made payable to the order of such Bank, dated the Conversion
Date, and shall be payable in eight (8) consecutive, equal
quarterly installments payable on the last day of each March,
June, September and December, commencing with the first of such
dates to occur after the date of such Bank's Term Loan.
5. INTEREST AND FEES.
5.1 Interest - Revolving Loans. The unpaid
<PAGE>
principal amount of the Floating Rate Revolving Loans shall bear
interest to maturity at a rate per annum equal to the Floating
Rate in effect from time to time and shall be payable on each
Payment Date and at maturity. The unpaid principal amount of the
Eurodollar Revolving Loans shall bear interest to maturity at a
rate per annum equal to the Interbank Rate (Reserve Adjusted) in
effect for each Interest Period with respect to such Eurodollar
Revolving Loan plus .75%. Accrued interest on Eurodollar
Revolving Loans shall be payable on the last day of its
applicable Interest Period, on any date when such Loan is paid
(by acceleration or otherwise) and at maturity.
5.2 Interest - Term Loans.
(a) Floating Rate Term Loans. The unpaid
principal of the Floating Rate Term Loans shall bear
interest to maturity at a rate per annum equal to the
Floating Rate in effect from time to time plus one-quarter
of one percentage point (1/4%). Accrued interest on the
Floating Rate Term Loans shall be payable on each Payment
Date and at maturity.
(b) Eurodollar Term Loans. The unpaid principal
of the Eurodollar Term Loans shall bear interest to maturity
at a rate per annum equal to the Interbank Rate (Reserve
Adjusted) in effect for each Interest Period with respect to
such Eurodollar Term Loan plus one percentage point (1%).
Accrued interest on Eurodollar Term Loans shall be payable
on the last day of its applicable Interest Period, on any
date when such Loan is paid, (whether by acceleration or
otherwise) and at maturity.
5.3 Interest after Maturity. The Company shall
pay to the Banks interest on any amount of principal of any Loan
which is not paid when due, whether at stated maturity, by
acceleration or otherwise, accruing from and including the date
such amount shall have become due to (but not including) the date
of payment thereof in full at the rate per annum which is equal
to the greater of (i) two percentage points (2%) in excess of the
rate applicable to the unpaid amount immediately before it became
due, or (ii) two and one-half percentage points (2 1/2%) in
excess of the Floating Rate from time to time in effect.
Interest after maturity shall be payable on demand.
5.4 Commitment Fee. The Company agrees to pay to
the Banks, ratably in accordance with their respective
Percentages, a commitment fee of one-quarter of one percentage
point (1/4%) per annum on the daily average of the excess of (a)
the Revolving Loan Commitment Amount over (b) the aggregate
outstanding Loans, during the period commencing on the date of
this Agreement and ending on the Conversion Date, or, if earlier,
the termination of the Credit. Such commitment fee shall be
payable on each Payment Date and on the Conversion Date or the
<PAGE>
date the Credit and the Commitments terminate for any period then
ending for which such commitment fee shall not have been
theretofore paid.
5.5 Method of Calculating Interest and Fees.
Interest and any fees shall be computed on the basis of a year
consisting of 360 days and paid for actual days elapsed. For
each Eurodollar Loan interest shall accrue during each Interest
Period from and including the first day thereof to but excluding
the last day thereof.
6. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF THE
CREDIT, EXTENSION OF REVOLVING LOAN COMMITMENTS,
SETOFF.
6.1 Place of Payment. All payments hereunder
(including payments with respect to the Notes) shall be made
without setoff or counterclaim and shall be made to the Agent for
the account of the Banks, ratably in accordance with their
Percentages, in immediately available funds prior to 12:00 noon
(local time), on the date due at the Agent's office at One First
National Plaza, Chicago, Illinois 60670 or at such other place or
for such other account as may be designated by the Agent to the
Company in writing. The Agent shall promptly remit in
immediately available funds to each Bank its share of all such
payments received by the Agent for the account of such Bank. Any
payments received after such time shall be deemed received on the
next Banking Day. Subject to the definition of the term
"Interest Period," whenever any payment to be made hereunder or
under any Note shall be stated to be due on a date other than a
Banking Day, such payment may be made on the next succeeding
Banking Day, and such extension of time shall be included in the
calculation of interest or any fees.
6.2 Mandatory Prepayments. If at any time the
outstanding principal amount of the Loans exceeds the Borrowing
Base, the Company shall immediately make a prepayment to the
Agent, for the account of the Banks, of the principal amount of
the Loans in the amount necessary to eliminate such excess. If a
prepayment is required prior to the Conversion Date pursuant to
this Section 6.2, the prepayment shall be applied first to
reduction of the Floating Rate Revolving Loans and then to the
Eurodollar Revolving Loans, until the Revolving Loans are repaid
in full. If a payment is required under this Section 6.2 after
the Conversion Date, the prepayment shall be applied to the
unpaid installments of the Term Note in the inverse order of
their maturities. Any repayment of principal of any Note
pursuant to this Section 6.2 shall include accrued interest to
the date of payment on the principal amount being prepaid. Any
repayment of Loans shall be made pro rata among Loans of the same
type and, if applicable, the same Interest Period or maturity
date, of all of the Banks.
<PAGE>
6.3 Optional Prepayments - Revolving Loans.
(a) The Company may from time to time, upon prior
written or telephonic notice received by the Agent (which shall
promptly advise each Bank thereof) no later than 11:00 a.m.
Chicago Time on a Banking Day, prepay the principal of the
Floating Rate Revolving Loans in whole or in part, as
contemplated by Section 2.1; provided, however, that (a) any
partial prepayment of principal shall be in a minimum amount of
$100,000 and in an integral multiple of $50,000 and (b) any such
prepayment shall be made pro rata among Loans of the same type.
(b) The Company may from time to time, upon at
least one Banking Day's prior written or telephonic notice
received by the Agent (which shall promptly advise each Bank
thereof) not later than 11:00 a.m. Chicago time, prepay the
principal of the Eurodollar Revolving Loans in whole or in part,
as contemplated by Section 2.1; provided, however, that (a) any
partial prepayment of principal shall be in a minimum amount of
$100,000 and in an integral multiple of $50,000 and (b) any such
prepayment shall be made pro rata among Loans of the same type
and, if applicable, having the same Interest Period of all Banks;
and provided, further, that prepayment of principal of a
Eurodollar Revolving Loan on a day other than the last day of the
Interest Period with respect thereto shall be subject to the
indemnification provisions of Section 3.4, but shall otherwise be
without any premium or penalty. The Company shall promptly
confirm any telephonic notice of prepayment in writing.
6.4 Optional Prepayments - Term Loan. The
Company may from time to time, upon at least one Banking Days'
prior written or telephonic notice received by the Agent (which
shall promptly advise each Bank thereof), prepay the principal of
the Term Loans in whole or in part; provided, however, that (a)
any partial prepayment of principal shall be in a minimum amount
of $100,000 and in an integral multiple of $50,000 and shall be
applied to the unpaid installments of the Term Loans in the
inverse order of their maturities and (b) any such prepayment
shall be made pro rata among Loans of the same type and, if
applicable, having the same Interest Period, of all Banks; and
provided, further, that prepayment of principal of a Eurodollar
Term Loan on a day other than the last day of the Interest Period
with respect thereto shall be subject to the indemnification
provisions of Section 3.4, but shall otherwise be without any
premium or penalty. The Company shall promptly confirm any
telephonic notice of prepayment in writing. Any prepayment of
the principal of the Term Loans shall include accrued interest to
the date of prepayment on the principal amount being prepaid.
6.5 Reduction or Termination of the Credit. The
Company may from time to time, upon at least five (5) Banking
Days' prior written or telephonic notice received by the Agent
(which shall promptly advise the Banks), irrevocably elect to
<PAGE>
permanently reduce the amount of the Credit and the Commitment
Amounts (such reduction to be made among the Banks according to
their respective Percentages), but only upon payment to the
Agent, for the account of the Banks, of the unpaid principal
amount of the Revolving Loans, if any, in excess of the then
reduced amount of the Revolving Credit Commitment Amount, plus
(i) accrued interest to the date of such payment on the principal
amount being repaid and (ii) any amount required to indemnify
each of the Banks pursuant to Section 3.4 in respect of such
payment. Any such reduction shall be in a minimum amount of
$1,000,000 and in an integral multiple of $500,000. The Company
may at any time on like notice irrevocably elect to terminate the
Credit and the Commitments upon payment in full of (a) the
Revolving Loans (or the Term Loans, if applicable), (b) unpaid
accrued interest on Loans to the date of such payment, (c) any
amount required to indemnify any Bank pursuant to Section 3.4 in
respect of such payment, and (d) any other Liabilities of the
Company. The Company shall promptly confirm any telephonic
notice of reduction or termination of the Credit in writing.
6.6 Setoff. In addition to and not in limitation
of all other rights and remedies (including other rights of
setoff) that any Bank or other holder of any Note may have, any
Bank or such other holder shall, upon the occurrence of any Event
of Default described in Section 12.1 or any Unmatured Event of
Default described in Section 12.1(e), have the right to
appropriate and apply to the payment of any and all Loans and
other liabilities of the Company hereunder (whether or not then
due), in such order of application as such Bank or such other
holder may elect, any and all balances, credits, deposits
(general or special, time or demand, provisional or final),
accounts or moneys of the Company then or thereafter with such
Bank or such other holder other than any lock box account and any
other operating account. Any Bank shall promptly advise the
Agent and the Company of any such setoff and application but
failure to do so shall not affect the validity of such setoff and
application. To secure the payment of such Loans and other
liabilities, the Company hereby grants the Agent, for the benefit
of the Banks, the Agent and each such other holder a continuing
security interest in such balances, credits, deposits, accounts
or moneys, and each Bank is hereby appointed and accepts
appointment as the agent of the Agent for purposes of maintaining
and retaining possession of such property. Notwithstanding the
foregoing, each Bank hereby agrees that, if a Person other than
the Company establishes to the reasonable satisfaction of such
Bank and the Agent that any balances, credits or deposits
appropriated and applied by such Bank are properly traceable
proceeds of property owned by such other Person and not by the
Company, and such other Person has a legally enforceable prior
claim to such proceeds under applicable law, such Bank shall,
upon receipt of evidence reasonably satisfactory to such Bank and
the Agent establishing such legally enforceable prior claim of
such other Person, turn over such amounts to the Company or as
<PAGE>
otherwise instructed by such other Person.
6.7 Proration of Payments. If any Bank or other
holder of a Note shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of offset or
otherwise) on account of principal of or interest on any Note in
excess of its pro rata share of payments and other recoveries
obtained by all Banks or other holders on account of principal of
and interest on Notes then held by them, such Bank or other
holder shall purchase from the other Banks or holders such
participation in the Notes held by them as shall be necessary to
cause such purchasing Bank or other holder to share the excess
payment or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing
holder, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
The Company agrees that the Bank so purchasing a participation
from the other Banks under this Section 6.7 may exercise all its
rights of payment, including the right of set-off, with respect
to such participation as fully as if such Bank were the direct
creditor of the Company in the amount of such participation.
6.8 Extension of Conversion Date. Upon the
Company's request and subject to the terms set forth herein, the
Conversion Date may be extended for successive periods of time so
long as each such extension does not extend the Conversion Date
to a date that is more than one year from the first date on which
the Agent has received notices from all of the Banks that each
such Bank has agreed to so extend the Conversion Date. The
Company shall promptly confirm any telephonic notice in writing.
If the Company desires to extend a scheduled Conversion Date, the
Company shall so notify the Agent (which shall promptly notify
each of the Banks) in writing at least ninety (90) days prior to
such scheduled Conversion Date. Each Bank will, at least sixty
(60) days prior to the then scheduled Conversion Date, notify the
Agent (which shall promptly notify the Company) in writing of
such Bank's decision; provided, however, that failure of a Bank
to so notify the Agent shall not constitute such Bank's agreement
to extend the Conversion Date or otherwise obligate such Bank to
do so. Once the Agent receives notices from all of the Banks that
they have agreed to extend the Conversion Date, the Conversion
Date shall be extended to the earlier of (i) the date requested
by the Company and (ii) the date one year from the date on which
the Agent receives notices from all the Banks of their respective
agreements to the extension.
7. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR
LOANS.
7.1 Increased Cost. If, as a result of any law,
rule, regulation, treaty or directive, or any change therein or
<PAGE>
in the interpretation or administration thereof, or compliance by
any Bank with any request or directive (whether or not having the
force of law) from any court, central bank, governmental
authority, agency or instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to
any Eurodollar Loan, any Note or such Bank's obligation to
make Eurodollar Loans is imposed, modified or deemed
applicable, or the basis of taxation of payments to such
Bank of the principal of, or interest on, any Eurodollar
Loan (other than taxes imposed on the overall net income of
such Bank by the jurisdiction in which such Bank has its
principal office) is changed;
(b) any reserve, special deposit, special
assessment or similar requirement against assets of,
deposits with or for the account of, or credit extended by,
such Bank is imposed, modified or deemed applicable; or
(c) any other condition affecting this Agreement
or any Eurodollar Loan is imposed on such Bank or the
relevant market;
and such Bank determines that, by reason thereof, the cost to
such Bank of making or maintaining any of the Eurodollar Loans is
increased, or the amount of any sum receivable by such Bank
hereunder or under any Note in respect of any of the Eurodollar
Loans is reduced;
then, (i) the Company shall pay to any such affected Bank upon
demand (which demand shall be accompanied by a statement setting
forth the basis for the calculation thereof but only to the
extent not theretofore provided to the Company) such additional
amount or amounts as will compensate such Bank for such
additional cost or reduction (provided such amount has not been
compensated for in the calculation of the Eurocurrency Reserve
Requirement), and (ii) provided the Agent has not yet determined
the Interbank Rate (Reserve Adjusted) with respect to new
Eurodollar Loans requested by the Company but not yet borrowed,
at the Company's option by notice to the Agent such request shall
be deemed a request to make Floating Rate Loans. Determinations
by such Bank for purposes of this section of the additional
amounts required to compensate such Bank in respect of the
foregoing shall be conclusive, absent manifest error. In
determining such amounts, such Bank may use any reasonable
averaging, attribution and allocation methods.
7.2 Eurodollar Deposits Unavailable or Interest
Rate Unascertainable. If the Company has any Eurodollar Loan
outstanding, or has notified the Agent of its intention to borrow
a Eurodollar Loan as provided herein, then in the event that
prior to any Interest Period any Bank shall have determined
(which determination shall be conclusive and binding on the
<PAGE>
parties hereto) that:
(a) deposits of the necessary amount for the
relevant Interest Period are not available to such Bank in
the interbank eurodollar market or that, by reason of
circumstances affecting such market, adequate and reasonable
means do not exist for ascertaining the Interbank Rate
(Reserve Adjusted) applicable to such Interest Period; or
(b) the making or funding of Eurodollar Loans has
become impracticable as a result of any event occurring
after the date of this Agreement which, in the opinion of
such Bank, materially and adversely affects such Eurodollar
Loans or the Bank's obligation to make such Eurodollar
Loans, or the relevant market;
the affected Bank shall promptly give notice of such
determination to the Company, the Agent and the other Banks, and
(i) any notice of new Eurodollar Loans previously given by the
Company and not yet borrowed or converted shall be deemed a
notice to make an Floating Rate Loan to the extent of the
affected Bank's ratable share of the proposed Borrowing of
Eurodollar Loans, and (ii) the Company shall, at its option, be
obligated either to convert any such Loans to Floating Rate Loans
or prepay in full without premium or penalty, but subject to the
indemnification provisions of Section 3.4, all Borrowings related
to such Loans, on the last day of the then current Interest
Period with respect to such Loans.
7.3 Changes in Law Rendering Eurodollar Loans
Unlawful. If at any time due to the adoption of any law, rule,
regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof by any court, central
bank, governmental authority, agency or instrumentality, or
comparable agency charged with the interpretation or
administration thereof, or for any other reason arising
subsequent to the date hereof, it shall become unlawful or
impossible for any Bank to make or fund any Eurodollar Loan which
it is committed to make hereunder, the obligation of such Bank to
provide such Eurodollar Loans shall, upon the happening of such
event, forthwith be suspended for the duration of such illegality
or impossibility. If any such event shall make it unlawful or
impossible for any Bank to continue any Eurodollar Loans
previously made by it hereunder, such Bank shall, upon the
happening of such event, notify the Company, the Agent and the
other Banks thereof in writing, and the Company shall, on the
earlier of (i) the last day of the then current Interest Period
with respect thereto or (ii) if required by such law, rule,
regulation, treaty, directive or interpretation, on such date as
shall be specified in such notice, either convert each such
unlawful Loan to a Floating Rate Loan or prepay in full the
Borrowing with respect to the unlawful Loan without premium or
penalty, but subject to the indemnification provisions of Section 3.4.
<PAGE>
7.4 Funding.
(a) Discretion of each Bank as to Manner of
Funding. Notwithstanding any provision of this Agreement to
the contrary, each Bank shall be entitled to fund and
maintain its funding of all or any part of the Loans in any
manner it sees fit; it being understood, however, that for
purposes of this Agreement, all determinations hereunder
shall be made as if each Bank had actually funded and
maintained each Eurodollar Loan during the Interest Period
for such Loan through the purchase of deposits having a term
corresponding to such Interest Period and bearing an
interest rate equal, in the case of a Eurodollar Loan, to
the Interbank Rate (Reserve Adjusted) for such Interest
Period (whether or not such Bank shall have granted any
participations in such Loan).
(b) Funding Through the Sale of Participations.
Notwithstanding any provision of this Agreement to the
contrary, the Company acknowledges that any Bank may fund
all or any part of the Loans by it hereunder by sales of
participations to various participants, and agrees that such
Bank may, in invoking its rights under this Section 7 or
under Section 3.4, demand and receive payment for costs and
other amounts incurred by, or allocable to, any such
participant, or take other action arising from circumstances
applicable to any such participant, to the same extent that
such participant could demand and receive payments, or take
other action, under this Section 7 or under Section 3.4 if
such participant were a Bank under this Agreement.
(c) Lending Installations. Each Bank may book its
Loans at any Lending Installation selected by such Bank and
may change its Lending Installation from time to time, so
long as such change does not increase the cost of such Loans
to the Company. All terms of this Agreement shall apply to
any such Lending Installation and the Notes shall be deemed
held by each Bank for the benefit of such Lending
Installation. Each Bank may, by written or telex notice to
the Agent and the Company, designate a Lending Installation
through which Loans will be made by it and for whose account
Loan payments are to be made.
(d) Non-Receipt of Funds by the Agent. Unless the
Company or a Bank, as the case may be, notifies the Agent
prior to the date on which it is scheduled to make payment
to the Agent of (i) in the case of a Bank, the proceeds of a
Loan or (ii) in the case of the Company, a payment of
principal, interest or fees to the Agent for the account of
the Bank, that it does not intend to make such payment, the
Agent may assume that such payment has been made. The Agent
may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon
<PAGE>
such assumption. If such Bank or the Company, as the case
may be, has not in fact made such payment to the Agent, the
recipient of such payment shall, on demand by the Agent if
the recipient is a Bank and five days after demand if the
recipient is the Company, repay to the Agent the amount so
made available together with interest thereon in respect of
each day during the period commencing on the date such
amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum equal to (i)
in the case of payment by a Bank, the Federal Funds Funding
Rate for such day or (ii) in the case of payment by the
Company, the interest rate applicable to the relevant Loan.
7.5 Mitigation. With respect to any obligation
of the Company to make any payment to any Bank pursuant to
Section 7.1 or Section 7.4, the suspension of such Bank's
obligation to provide Eurodollar Loans pursuant to Section 7.3,
or the Company's obligation to convert or prepay Eurodollar Loans
pursuant to Section 7.3, upon the occurrence of any event giving
rise to any such obligation or suspension, such affected Bank
will (a) use its best efforts to change its lending office for
Eurodollar Loans if such change will avoid the need for, or
reduce the amount of, any such payment or prepayment obligation,
or will avoid the need for any such suspension, and if such
change will not, in the reasonable judgment of such Bank, be
otherwise disadvantageous to such Bank, and (b) use all
reasonable efforts to minimize any such payment obligation of the
Company.
(a) Withholding Tax Exemption. Prior to becoming
a Bank party to this Agreement, including pursuant to an
assignment pursuant to Section 15.3, each Bank that is not
incorporated under the laws of the United States of America,
or a state thereof, agrees that it will deliver to each of
the Company and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to
receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income
taxes. Each Lender which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Company and the
Agent two additional copies of such form (or a successor
form) on or before the date that such form expires
(currently, three successive calendar years for Form 1001
and one calendar year for Form 4224) or becomes obsolete or
after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be
reasonably requested by the Company or the Agent, in each
case certifying that such Lender is entitled to receive
payments under this Agreement and the Notes without
deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any
<PAGE>
change in treaty, law or regulation) has occurred prior to
the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which
would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender
advises the Company and the Agent that it is not capable of
receiving payments without any deduction or withholding of
United States federal income tax.
8. WARRANTIES. To induce the Banks to grant the
Credit and to make the Loans, the Company warrants that:
8.1 Existence. The Company and all of its
corporate Subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the states of
their respective incorporation. All of the Company's other
Subsidiaries, if any are entities duly organized, validly
existing and in good standing under the laws of the jurisdictions
of their respective organization. The Company and all of its
Subsidiaries are in good standing and are duly qualified to do
business in each state where, because of the nature of their
respective activities or properties, such qualification is
required.
8.2 Authorization. The Company is duly
authorized to execute and deliver this Agreement and the Notes
and is and will continue to be duly authorized to borrow monies
hereunder and to perform its obligations under this Agreement and
the Notes. The execution, delivery and performance by the
Company of this Agreement and the Notes and the borrowings
hereunder do not and will not require any consent or approval of
any governmental agency or authority.
8.3 No Conflicts. The execution, delivery and
performance by the Company of this Agreement and the Notes do not
and will not conflict with (i) any provision of law, (ii) the
charter or by-laws of the Company, (iii) any agreement binding
upon the Company, or (iv) any court or administrative order or
decree applicable to the Company, and do not and will not
require, or result in, the creation or imposition of any Lien on
any asset of the Company or any of its Subsidiaries.
8.4 Validity and Binding Effect. This Agreement
is, and the Notes when duly executed and delivered will be,
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency
or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of
equity limiting the availability of equitable remedies.
8.5 No Default. Neither the Company nor any of
its Subsidiaries is in default under any agreement or instrument
<PAGE>
to which the Company or any Subsidiary is a party or by which any
of their respective properties or assets is bound or affected,
which default might materially and adversely affect the financial
condition or operations of the Company and its Subsidiaries taken
as a whole. No Event of Default or Unmatured Event of Default
has occurred and is continuing.
8.6 Financial Statements. The Company's audited
consolidated and consolidating financial statement as of June 30,
1995 and the Company's unaudited consolidated and consolidating
financial statement as of September 30, 1995, copies of which
have been furnished to the Agent and the Banks, have been
prepared in conformity with generally accepted accounting
principles applied on a basis consistent with that of the
preceding Fiscal Year and period and present fairly the financial
condition of the Company and its Subsidiaries as of such dates
and the results of their operations for the periods then ended,
subject (in the case of the interim financial statement) to year-end audit
adjustments. Since such dates, there has been no
material adverse change in the financial condition of the Company
and its Subsidiaries taken as a whole.
8.7 Insurance. The certificate signed by the
chief financial officer of the Company that attests to the
property and casualty insurance program carried by the Company
and its Subsidiaries (Schedule 8.7 attached hereto) is complete
and accurate as of the date of this Agreement.
8.8 Litigation. No claims, litigation,
arbitration proceedings or governmental proceedings are pending
or threatened against or are affecting the Company or any of its
Subsidiaries, the results of which might materially and adversely
affect the financial condition or operations of the Company and
its Subsidiaries taken as a whole, except those referred to in a
schedule furnished to the Bank contemporaneously herewith and
attached hereto as Schedule 8.8. Other than any liability
incident to such claims litigation or proceedings or provided for
or disclosed in the financial statements referred to in Section
8.6 or listed on Schedule 8.14, neither the Company nor any of
its Subsidiaries has any contingent liabilities which are
material to the Company and its Subsidiaries taken as a whole.
8.9 Liens. None of the property, revenues or
assets of the Company or any of its Subsidiaries is subject to
any Lien, except:
(a) Liens for current Taxes not delinquent or Taxes
being contested in good faith and by appropriate proceedings
and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained;
(b) carriers', warehousemen's, mechanics',
materialmen's and other like statutory Liens arising in the
<PAGE>
ordinary course of business securing obligations which are
not overdue for a period of more than 30 days or which are
being contested in good faith and by appropriate proceedings
and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social
security legislation;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, and other
obligations of a like nature incurred in the ordinary course
of business;
(e) Liens disclosed in the financial statements
referred to in Section 8.6; and
(f) Liens listed on Schedule 8.9.
8.10 Subsidiaries. The Company has no
Subsidiaries except as listed on Schedule 8.10. The Company and
its Subsidiaries own the percentage of its Subsidiaries as set
forth on Schedule 8.10.
8.11 Partnerships. Neither the Company nor any of
its Subsidiaries is a partner or joint venturer in any
partnership or joint venture other than the partnerships and
joint ventures listed on Schedule 8.11.
8.12 Regulation U. The Company is not engaged in
the business of purchasing or selling "margin stock," as such
term is defined in Regulation U of the Federal Reserve Board, or
extending credit to others for the purpose of purchasing or
carrying margin stock, and no part of the proceeds of any Loan
will be used to purchase or carry any margin stock or for any
other purpose which would violate any of the margin regulations
of the Federal Reserve Board.
8.13 Compliance. Neither the Company nor any of
its Subsidiaries has failed to comply with any statute or
governmental rule or regulation applicable to it where the effect
of such failure would materially and adversely affect the
Company's or any Subsidiary's financial condition or operations.
8.14 Pension and Welfare Plans. Each Plan
complies in all material respects with all applicable statutes
and governmental rules and regulations; no Reportable Event has
occurred and is continuing with respect to any Pension Plan;
neither the Company nor any ERISA Affiliate has withdrawn from
any Multiemployer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Section 4203 or 4205 of ERISA,
respectively, or instituted steps to do so; no steps have been
<PAGE>
instituted to terminate any Pension Plan; no contribution failure
has occurred with respect to any Pension Plan sufficient to give
rise to a Lien under Section 302(f) of ERISA; no condition exists
or event or transaction has occurred in connection with any
Pension Plan or Multiemployer Plan which could result in the
incurrence by the Company or any ERISA Affiliate of any material
liability, fine or penalty; and neither the Company nor any ERISA
Affiliate is a "contributing sponsor" as defined in Section
4001(a) (13) of ERISA of a "single-employer" plan as defined in
Section 4001(a) (15) of ERISA which has two or more contributing
sponsors at least two of which are not under common control.
Neither the Company nor any ERISA Affiliate is a member of, or
contributes to, any multiple employer Plan as described in
section 4064 of ERISA. Neither the Company nor any of its
Subsidiaries has any contingent liability with respect to any
post-retirement "welfare benefit plans," as such term is defined
in ERISA, except as listed on Schedule 8.14, other than liability
for continuation coverage described in Part 6 of Title I of
ERISA.
8.15 Taxes. Each of the Company and its
Subsidiaries has filed all tax returns which are required to have
been filed and has paid, or made adequate provisions for the
payment of, all of its Taxes which are due and payable, except
such Taxes, if any, as are being contested in good faith and by
appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP have been
maintained. The federal income tax liability of the Company and
its Subsidiaries has been audited by the Internal Revenue Service
and has been finally determined and satisfied (or the time for
audit has expired) for all tax years up to and including the tax
year ended June 30, 1990. The Company is not aware of any
proposed assessment against the Company or any of its
Subsidiaries for additional Taxes (or any basis for any such
assessment) which might be material to the Company and its
Subsidiaries taken as a whole, other than any such assessments
being contested in good faith and by appropriate proceedings and
as to which such reserves or other appropriate provisions as may
be required by GAAP are being maintained.
8.16 Investment Company Act Representation. The
Company is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
8.17 Public Utility Holding Company Act
Representation. The Company is not a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of
a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
9. COMPANY'S COVENANTS. From the date of this Agreement
and thereafter until the expiration or termination of the Credit
<PAGE>
and until the Notes and other liabilities of the Company
hereunder are paid in full, the Company agrees that, unless
otherwise consented to by the Majority Banks (or the Agent acting
at the direction of the Majority Banks), it will:
9.1 Financial Statements and Other Reports. Furnish
to the Agent in sufficient number of original copies to provide
one to each Bank:
(a) Borrowing Base Certificate. Within 30 days after
the end of each month: (i) a certificate substantially in
the form of Exhibit E ("Borrowing Base Certificate") signed
by the president or chief financial officer of the Company
containing a computation of the Borrowing Base, and showing
compliance with the requirements of Section 6.2 or the
amount of any prepayment required thereunder, and (ii) an
aging of the Company's accounts receivable in form and
content satisfactory to the Agent and the Majority Banks.
(b) Annual Audit Report. Within ninety (90) days
after each Fiscal Year of the Company, a copy of the annual
audit report of the Company and its Subsidiaries prepared on
a consolidated basis and in conformity with GAAP and
certified by an independent certified public accountant who
shall be reasonably satisfactory to the Agent and the
Majority Banks, together with a certificate from such
accountant to the effect that, in making the examination
necessary for the signing of such annual audit report, such
accountant has not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is
continuing, or, if such accountant has become aware of any
such event, describing it;
(c) Quarterly Financial Statement. Within forty-five
(45) days after each Fiscal Quarter (except the last Fiscal
Quarter) of each Fiscal Year of the Company, a copy of the
unaudited financial statement of the Company and its
Subsidiaries prepared in the same manner as the audit report
referred to in preceding clause (b), signed by the Company's
chief financial officer and consisting of at least a balance
sheet as of the close of such Fiscal Quarter and statements
of earnings for such Fiscal Quarter and statements of
earnings and cash flows for the period from the beginning of
such Fiscal Year to the close of such Fiscal Quarter;
(d) Officer's Certificate. Together with the
financial statements burnished by the Company under
preceding clauses (b) and (c), a certificate of the
Company's president or chief financial officer in the form
of Exhibit D (a "Compliance Certificate"), dated the date of
such annual audit report or such quarterly financial
statement as the case may be, to the effect that no Event of
Default or Unmatured Event of Default has occurred and is
<PAGE>
continuing, or, if there is any such event, describing it
and the steps, if any, being taken to cure it, and
containing a computation of, and showing compliance with,
each of the financial ratios and restrictions contained in
this section 9;
(e) SEC and Other Reports. Copies of each filing and
report made by the Company or any Subsidiary with or to any
securities exchange or the Securities and Exchange
Commission and of each communication from the Company or any
Subsidiary to shareholders generally, promptly upon the
filing or making thereof;
(f) Report of Change in Subsidiaries or Partnerships.
Promptly from time to time, a written report of any change
in the list of the Company' s subsidiaries set forth on
Schedule 8.10 or in the list of partnerships and joint
ventures set forth on Schedule 8.11; and
(g) Requested Information. Promptly from time to
time, such other reports or information as the Agent or any
Bank (any such request of a Bank to be made through the
Agent) may reasonably request.
9.2 Notices. Notify the Agent and each Bank in
writing of any of the following immediately upon learning of the
occurrence thereof, describing the same and, if applicable the
steps being taken by the Person(s) affected with respect thereto:
(a) Default. The occurrence of an Event of Default or
an Unmatured Event of Default;
(b) Litigation. The institution of any litigation,
arbitration proceeding or governmental proceeding which is
material to the Company and its Subsidiaries taken as a
whole;
(c) Judgment. The entry of any judgment or decree
against the Company or any Subsidiary if the aggregate
amount of all judgments and decrees then outstanding against
the Company and all Subsidiaries exceeds $100,000 after
deducting (i) the amount with respect to which the Company
or any Subsidiary is insured and with respect to which the
insurer has assumed responsibility in writing, and (ii) the
amount for which the Company or any Subsidiary is otherwise
indemnified if the terms of such indemnification and the
Person providing such indemnification are satisfactory to
the Agent;
(d) Pension and Welfare Plans. The occurrence of a
Reportable Event with respect to any Plan; the institution
of any steps by the Company, any ERISA Affiliate, the PBGC
or any other Person to terminate any Plan; the institution
<PAGE>
of any steps by the Company or any ERISA Affiliate to
withdraw from any Plan with respect to which it is a
substantial employer within the meaning of Section 4063 of
ERISA; or the incurrence of any material increase in the
contingent liability of the Company or any Subsidiary with
respect to any post-retirement welfare benefits;
(e) Material Adverse Change. The occurrence of a
material adverse change in the business, operations or
financial condition of the Company and its Subsidiaries
taken as a whole; or
(f) Other Events. The occurrence of such other events
as the Agent or any Bank may from time to time reasonably
specify (any such specification by a Bank to be made through
the Agent).
9.3 Existence. Maintain and preserve, and cause each
Subsidiary to maintain and preserve, its respective existence as
a corporation or other form of business organization, as the case
may be, and all rights, privileges, licenses, patents, patent
rights, copyrights, trademarks, trade names, franchises and other
authority to the extent material and necessary for the conduct of
its respective business in the ordinary course as conducted from
time to time.
9.4 Nature of Business. Engage, and cause each
Subsidiary to engage, in the leasing of property under "sales
type," "direct financing" or "operating" leases, the sale of
property on conditional sales contracts, the financing of lease
receivables, installment sale contract receivables and revolving
credit receivables, or in other activities reasonably related to
such leasing, sales or financing activity.
9.5 Books, Records and Access. Maintain, and cause
each Subsidiary to maintain, complete and accurate books and
records in which full and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its
respective business and activities; permit, and cause each
Subsidiary to permit, upon reasonable notice access by the Agent
and the Banks to the books and records of the Company and such
Subsidiary during normal business hours at such time and place as
the Company shall reasonably direct; and permit, and cause each
Subsidiary to permit, the Agent or any Bank to make copies of
such books and records.
9.6 Insurance. Maintain, and cause each Subsidiary to
maintain, insurance to such extent and against such hazards and
liabilities as is commonly maintained by companies similarly
situated or as the Agent or the Majority Banks may reasonably
request (any such request of the Majority Banks to be made
through the Agent) from time to time.
<PAGE>
9.7 Insurance Reports. Provide to the Agent at least
annually within 90 days of the end of the Company's Fiscal Year,
and in a sufficient number of copies to provide one to each Bank,
a certificate signed by its chief financial officer that attests
to the property and casualty insurance program carried by the
Company and its Subsidiaries. The Company shall also notify the
Agent and each Bank in writing at least twenty (20) days prior to
any cancellation of, or material change in, any such insurance by
the Company or any Subsidiary or within five (5) business days
after receipt of any notice (whether formal or informal) of
cancellation or change by any of its insurers. Annually the
Agent or any Bank shall have the right to request the Company to
have a risk management survey completed by a recognized
independent risk management consultant acceptable to the Company
and the Agent and the Majority Banks which will identify,
quantify and assess any catastrophic uninsured, underinsured or
self-insured exposures faced by the Company and all Subsidiaries.
The cost of such survey shall be borne solely by the Banks. A
sufficient number of copies of the results of each such survey to
provide one to each Bank shall be promptly delivered by the
Company to the Agent.
9.8 Repair. Maintain, preserve and keep, and cause
each Subsidiary to maintain, preserve and keep, its properties in
good repair, working order and condition; and from time to time
make, and cause each Subsidiary to make, all necessary and proper
repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof
shall be fully preserved and maintained.
9.9 Taxes. Pay, and cause each Subsidiary to pay,
when due, all of its Taxes, unless and only to the extent that
the Company or such Subsidiary, as the case may be, is contesting
such Taxes in good faith and by appropriate proceedings and the
Company or such Subsidiary has set aside on its books such
reserves or other appropriate provisions therefor as may be
required by GAAP.
9.10 Compliance. Comply, and cause each Subsidiary to
comply, with all statutes and governmental rules and regulations
applicable to it.
9.11 Pension Plans. Not permit, and not permit any
Subsidiary to permit, any condition to exist in connection with
any Plan (other than a Multi-employer Plan) which might
constitute grounds for the PBGC to institute proceedings to have
such Plan terminated or a trustee appointed to administer such
Plan; not fail, and not permit any Subsidiary to fail, to make a
required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under Section 302(f) of ERISA;
and not engage in, or permit to exist or occur, or permit any of
its Subsidiaries to engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Plan
<PAGE>
which could result in the incurrence by the Company or any of its
Subsidiaries of any material liability, fine or penalty.
9.12 Merger, Purchase and Sale. Not, and not permit
any Subsidiary to:
(a) be a party to any merger or consolidation;
(b) except in the normal course of its business,
sell, transfer, convey, lease or otherwise dispose of all or
any substantial part of the assets of the Company and its
Subsidiaries taken as a whole, or sell or assign, with or
without recourse, any accounts receivable or chattel paper;
or
(c) purchase or otherwise acquire all or
substantially all the assets of any Person.
Notwithstanding the foregoing
(x) any wholly-owned Subsidiary may merge into
the Company or into or with any other wholly-owned
Subsidiary;
(y) any wholly-owned Subsidiary may consolidate
with any other wholly-owned Subsidiary so long as
immediately thereafter 100% of the voting stock or other
ownership interest of the resulting Person is owned by the
Company or another wholly-owned Subsidiary; and
(z) the Company or any wholly-owned Subsidiary
may sell, transfer, convey, lease or assign all or a
substantial part of its assets to the Company or a wholly-owned
Subsidiary;
provided in each of the cases described in preceding clauses
(x), (y) and (z), that immediately thereafter and after giving
effect thereto, no Event of Default or Unmatured of Default shall
have occurred and be continued.
For purposes of this Section 9.12 only, a sale,
transfer, conveyance, lease or other disposition of assets shall
be deemed to be a "substantial part" of the assets of the Company
and its Subsidiaries only if the value of such assets, when added
to the value of all other assets sold, transferred, conveyed,
leased or otherwise disposed of by the Company and its
Subsidiaries (other than in the normal course of business) during
the same Fiscal Year, exceeds 10% of the Company's consolidated
total assets determined as of the end of the immediately
preceding Fiscal Year. As used in the preceding sentence, the
term "value" shall mean, with respect to any asset disposed of,
the greater of such asset's book or fair market value as of the
date of disposition, with "book value" being the value of such
<PAGE>
asset as would appear immediately prior to such disposition on a
balance sheet of the owner of such asset prepared in accordance
with GAAP.
9.13 Liabilities to Net Worth Ratio. Not permit
the ratio of the Company's Consolidated Total Liabilities to the
Company's Consolidated Tangible Net Worth to exceed 4.00 to 1.00.
9.14 Tangible Net Worth. Not at any time permit
the sum of (a) the Company's Consolidated Tangible Net Worth at
such time, plus (b) the Company's aggregate Net Assets of
Securitization Subsidiaries at such time, minus (c) the amount of
any Subordinated Debt included in the computation of the
Company's Consolidated Tangible Net Worth at such time; plus (d)
the aggregate amount paid by the Company to redeem its stock
during the period commencing on December 31, 1992 to and
including such time, to be less than the sum of (x) $17,000,000
plus (y) 50% of the Company's consolidated cumulative net income
for the period commencing January 1, 1993 to and including such
time (but not less than zero); provided, however, that, for
purposes of determining compliance with this Section 9.14, (i)
the amount included in clause (d) hereof shall not exceed
$5,000,000 and (ii) amounts paid by the Company to redeem its
stock shall only be included in clause (d) hereof to the extent
such stock is retained by the Company as treasury stock.
9.15 Capital Expenditures. Not, and not permit
any Subsidiary to, purchase or otherwise acquire (including,
without limitation, acquisition by way of Capitalized Lease), or
commit to purchase or otherwise acquire, any fixed asset (which
shall not include any property leased by the Company or any
Subsidiary as lessor under a Lease) if, after giving effect to
such purchase or other acquisition, the aggregate cost of all
fixed assets purchased or otherwise acquired by the Company and
its Subsidiaries on a consolidated basis in any one Fiscal Year
would exceed $800,000.
9.16 Interest Coverage. Not permit the ratio of
(a) the Company's consolidated net earnings before interest
expense and provision for Taxes for any period of four
consecutive Fiscal Quarters ending on the last day of any Fiscal
Quarter of the Company to (b) the Company's consolidated interest
expense for such period to be less than 1.15 to 1.00.
For purposes of this Section 9.16, (i) net earnings shall
not include any material gains on the sale or other disposition
of Investments or fixed assets or any material extraordinary or
nonrecurring items of income to the extent that the aggregate of
all such gains and extraordinary or nonrecurring items of income
exceeds the aggregate of losses on such sale or other disposition
and extraordinary or nonrecurring charges, and (ii) interest
expense shall include, without limitation, implicit interest
expense on Capitalized Leases. As used in this paragraph, a gain
<PAGE>
on the sale or disposition of Investments or fixed assets, or an
extraordinary or nonrecurring item of income, shall be "material"
if such gain or item of income, when aggregated with all other
such gains or items of income, exceeds $50,000 in the aggregate
in any Fiscal Year.
9.17 Restricted Payments. Not purchase or redeem
any shares of its stock, declare or pay any dividend thereon
(other than stock dividends), make any distribution to
stockholders or set aside any funds for any such purchase, and
not prepay, purchase or redeem, and not permit any Subsidiary to
purchase, any subordinated indebtedness of the Company or any
Subsidiary (other than to the extent of the net proceeds to the
Company or any Subsidiary from the issue after December 31, 1992
of other subordinated debt) (collectively, "Restricted
Payments"), if after giving effect thereto the aggregate amount
of Restricted Payments made during the period from and after
December 31, 1992 to and including the date of the making of the
Restricted Payment in question, would exceed the sum of (a)
$2,000,000, (b) 50% of the Company's consolidated net income for
such period (or if net income is a deficit figure, then minus
100% of such deficit) and (c) the net proceeds to the Company
from the issue or sale after December 31, 1992 of shares of
capital stock of the Company or warrants, rights or options to
purchase or acquire any shares of the capital stock of the
Company.
9.18 Company and Subsidiaries' Stock. Not permit
any Subsidiary to purchase or otherwise acquire any shares of the
stock of the Company; and not take any action, or permit any
Subsidiary to take any action, which will result in a decrease in
the Company's or any Subsidiary's ownership interest in any
Subsidiary.
9.19 Indebtedness. Not, and not permit any
Subsidiary to, incur or permit to exist any Indebtedness, except:
(a) Indebtedness under the terms of this
Agreement;
(b) other Indebtedness approved in writing by the
Majority Banks (or the Agent acting on the direction of the
Majority Banks);
(c) Indebtedness hereafter incurred in connection
with the Liens permitted by Section 9.20(a);
(d) Non-Recourse Debt; and
(e) other Indebtedness outstanding on the date
hereof and listed on Schedule 9.19.
9.20 Liens. Not, and not permit any Subsidiary
<PAGE>
to, create or permit to exist any Lien with respect to any
property, revenues or assets now owned or hereafter acquired,
except:
(a) Liens in connection with the acquisition of
property after the date hereof by way of purchase money
mortgage, conditional sale or other title retention
agreement, Capitalized Lease or other deferred payment
contract, and attaching only to the property being acquired,
if the Indebtedness secured thereby does not exceed 80%
(100% in the case of a Capitalized Lease) of the fair market
value of such property at the time of acquisition thereof
nor $500,000 in the aggregate for the Company and all
Subsidiaries at any one time outstanding.
(b) Liens for current Taxes not delinquent or
Taxes being contested in good faith and by appropriate
proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP are being
maintained;
(c) carriers', warehousemen's, mechanics',
materialmen's, repairmen's, and other like statutory Liens
arising in the ordinary course of business securing obligations
which are not overdue for a period of more than 30 days or which
are being contested in good faith and by appropriate proceedings
and as to which such reserves or other appropriate provisions as
may be required by GAAP are being maintained;
(d) pledges or deposits in connection with
workers' compensation, unemployment insurance and other
social security legislation;
(e) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations and other
obligations of a like nature incurred in the ordinary course
of business;
(f) the Lien provided for in Section 6.6 and
other Liens in favor of the Agent for the benefit of the
Banks;
(g) Liens referred to in Section 8.9;
(h) Liens on Leases and related personal property
covered by thereby securing Non-Recourse Debt, if such
Indebtedness does not exceed, for the Leases securing such
Indebtedness, 100% of the present value (using the interest
rate applicable to such Indebtedness) of the Lease
Receivables with respect to such Leases; and
(i) Restricted Cash, provided, however, that the
Company shall satisfy all Restricted Cash requirements from
<PAGE>
the proceeds of the funds borrowed or otherwise received
from the financing of Leases and other chattel paper.
9.21 Guaranties. Not, and not permit any
Subsidiary to, become or be a guarantor or surety of, or
otherwise become or be responsible in any manner (whether by
agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or
services, or otherwise) with respect to, any undertaking of any
other Person, except for: (a) the endorsement, in the ordinary
course of collection, of instruments payable to it or its order,
(b) with the prior written approval of the Majority Banks,
guaranties by the Company or a Subsidiary of obligations of the
Company or another Subsidiary, and (c) guaranties, limited
recourse agreements or similar obligations of the Company or a
Subsidiary, in connection with any Non-Recourse Debt, provided
the aggregate amount of such obligation does not exceed 10% of
the amount of the Non-Recourse Debt.
9.22 Investments. Not, and not permit any
Subsidiary to, make or permit to exist any Investment in any
Person, except for:
(a) advances not to exceed, in the aggregate for
the Company and all Subsidiaries, $25,000 at any one time
outstanding to officers and employees;
(b) Permitted Investments;
(c) Investments evidenced by Vendor Notes;
(d) Investments in wholly-owned Subsidiaries;
(e) Investments (other than Investments in the
nature of loans or advances) outstanding on the date hereof
in Subsidiaries by the Company and other Subsidiaries; and
(f) other Investments outstanding on the date
hereof and listed on Schedule 9.22.
9.23 Leases. Not enter into or permit to exist,
or permit any of its Subsidiaries to enter into or permit to
exist, any arrangements for the leasing by the Company or any of
its Subsidiaries, as lessee, of any real or personal property (or
any interest therein) under leases (other than Capitalized
Leases) which require the payment by the Company and its
Subsidiaries on a consolidated basis of rental amounts in the
aggregate in excess of (i)$500,000 in any one Fiscal Year or (ii)
$2,000,000 during the full remaining terms of such leases.
9.24 Lease Portfolio. Not permit the Average
Original Equipment Cost Per Lease to exceed $25,000 multiplied by
<PAGE>
the OEC Inflation Index.
"Average Original Equipment Cost Per Lease" shall mean, as
of any date of determination, the aggregate Original Equipment
Cost of all items of property owned by the Company or a
Subsidiary and leased to other Persons under Leases, divided by
the total number of "sales type," "direct financing" or
"operating" leases by the Company to other Persons reflected on
the Company's books and records.
"Original Equipment Cost" shall mean, with respect to an
item of personal property owned by the Company or a Subsidiary
for lease to another Person, the acquisition cost thereof
capitalizable in accordance with GAAP and used to determine the
amount recorded on the Company's balance sheet with respect
thereto.
"OEC Inflation Index" shall mean, as of the date of any
determination thereof, a fraction, the numerator of which is the
monthly Consumer Price Index for All Urban Consumers, All Items,
U.S. City Average (1982-84 = 100) (unadjusted) published by the
U.S. Bureau of Labor Statistics (the "CPI-U"), for the most
recent month for which the CPI-U shall have been published, and
the denominator of which is 135 (being the CPI-U for March,
1991); provided, that if the CPI-U is no longer published, there
shall be substituted in both the numerator and the denominator
the most nearly comparable index published by Federal authorities
that reflects inflationary or deflationary changes, which
substituted index shall be determined by the Agent by notice to
the Company and be conclusive in the absence of bad faith or
manifest error. In the event that the Company determines that
the OEC Inflation Index does not accurately reflect the changes
to the cost of items of equipment to be adjusted by such OEC
Inflation Index, then another index which in the judgment of the
Company more accurately reflects such changes, and which is
acceptable to the Majority Banks, shall be substituted for the
OEC Inflation Index.
9.25 Unconditional Purchase Obligation. Not, and
not permit any Subsidiary to, enter into or be a party to any
contract for the purchase or lease of materials, supplies or
other property or services if such contract requires that payment
be made by it regardless of whether or not delivery is ever made
of such materials, supplies or other property or services.
9.26 Other Agreements. Not, and not permit any
Subsidiary to, enter into any agreement containing any provision
which would be violated or breached by the Company's performance
of its obligations hereunder or under any instrument or document
delivered or to be delivered by the Company hereunder or in
connection herewith.
9.27 Use of Proceeds. Not permit any proceeds of
<PAGE>
the Loans to be used for any purpose other than to repay all
amounts owing under the Prior Credit Agreement and to finance
Leases, Vendor Notes, Customer Notes and working capital and not
permit any proceeds of the Loans to be used either directly or
indirectly, for the purpose, whether immediate, incidental or
ultimate, of "purchasing or carrying any margin stock" within the
meaning of Regulation U of the Federal Reserve Board, as amended
from time to time; and furnish to the Agent, upon its request, a
statement in conformity with the requirements of Federal Reserve
Form U-l referred to in Regulation U.
9.28 Transactions with Related Parties. Not, and
not permit any Subsidiary to, enter into or be a party to any
transaction or arrangement, including, without limitation, the
purchase, sale, lease or exchange of property or the rendering of
any service, with any Related Party, except in the ordinary
course of and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not a Related Party.
9.29 Subsidiaries: Partnerships. Not create or
permit to exist, or become a partner or joint venturer in, and
not permit any Subsidiary to create or permit to exist or become
a partner or joint venturer in, any Subsidiary, partnership or
joint venture, as applicable, other than Securitization
Subsidiaries, Subsidiaries used in the business of providing
revolving credit and any set forth on Schedule 8.10 or Schedule
8.11, as applicable.
10. CONDITIONS PRECEDENT TO ALL REVOLVING LOANS AND THE
TERM LOANS. The obligation of any Bank to make any Revolving
Loan or to make its Term Loan, is subject to the satisfaction of
each of the following conditions precedent:
10.1 Notice. In the case of a Revolving Loan, the
Agent and such Bank shall have received timely notice of such
Revolving Loan in accordance with Section 3.2.
10.2 Default. Before and after giving effect to
such Loan, no Event of Default or Unmatured Event of Default
shall have occurred and be continuing.
10.3 Insurance. There shall have been no material
change, or notice of prospective material change (whether such
notice is formal or informal):
(a) in the nature, extent, scope or cost of the
insurance policies of the Company or any Subsidiary listed
on Schedule 8.7; or
(b) to the Company's knowledge, which reduces the
<PAGE>
policyholder's or financial size ratings of the Company's or
any Subsidiary's insurance carriers as established by Best's
Insurance Reports,
which change would have a material adverse effect on the
financial condition of the Company and its Subsidiaries taken as
a whole or would significantly adversely affect the Company's
ability to perform its obligations under this Agreement or any
Note.
10.4 Warranties. Before and after giving effect
to such Loan, the warranties in Section 8 shall be true and
correct as though made on the date of such Loan, except for such
changes as are specifically permitted hereunder.
10.5 Certification. Each request for a Borrowing
of Revolving Loans and the request for the Borrowing of the Term
Loans shall be deemed to be a certification to the Agent and each
Bank that the conditions precedent set out in Sections 10.2, 10.3
and 10.4 have been satisfied.
10.6 Term Notes. In the case of the Term Loans,
the Company shall have delivered to the Agent, for the account of
the Banks, a duly executed Term Note, payable to the order of
each Bank in the amount of its respective Term Loan.
11. CONDITION PRECEDENT TO INITIAL REVOLVING LOANS.
The obligation of each Bank to make its initial Revolving Loan
hereunder is subject to the satisfaction of the condition
precedent, in addition to the applicable conditions precedent set
forth in Section 10 above, that the Company shall have delivered
to the Agent all of the following, each duly executed and dated
the date of the initial Revolving Loan (or such other date as is
satisfactory to the Agent and all of the Banks), in form and
substance satisfactory to the Agent and all of the Banks, and in
sufficient number of counterpart originals to provide one to each
Bank:
11.1 Revolving Note. Its Revolving Note.
11.2 Resolutions. A copy, duly certified by the
secretary or an assistant secretary of the Company, of (i) the
resolutions of the Company's Board of Directors authorizing or
ratifying the execution and delivery of this Agreement and the
Notes and authorizing the borrowings hereunder, (ii) all
documents evidencing other necessary corporate action, and (iii)
all approvals or consents, if any, with respect to this Agreement
and the Notes.
11.3 Incumbency Certificate. A certificate of the
secretary or an assistant secretary of the Company certifying the
names of the Company's officers authorized to sign this
Agreement, the Notes and all other documents or certificates to
<PAGE>
be delivered hereunder, together with the true signatures of such
officers.
11.4 By-Laws. A copy, certified as true and correct by
the secretary or an assistant secretary of the Company, of the
Company's By-Laws.
11.5 Certificate of Incorporation. A copy, certified
by the Secretary of State of Delaware, of the Company's
Certificate of Incorporation, together with all amendments
thereto.
11.6 Good Standing. A current Good Standing
Certificate issued by the Secretary of State (or similar officer)
of Delaware, Illinois, Florida, and California.
11.7 Opinion. An opinion of Kirkland & Ellis, counsel
to the Company, addressed to the Agent and the Banks in
substantially the form of Exhibit F.
11.8 Exhibits; Schedules. Completed Exhibits and
Schedules, and the information disclosed therein shall be
acceptable to all of the Banks.
11.9 Borrowing Base Certificate. A duly executed
Borrowing Base Certificate.
11.10 Evidence satisfactory to the Agent that the
Prior Credit Agreement has been terminated and all amounts owing
thereunder have been paid in full.
12. EVENTS OF DEFAULT AND REMEDIES.
12.1 Events of Default. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Non-Payment. Default, and the continuance thereof
for five (5) days, in the payment, when due, of any
principal of, or interest on, any Loan or any fee hereunder.
(b) Non-Payment of Other Indebtedness. Default in the
payment when due, whether by acceleration or otherwise
(subject to any applicable grace period), of any
Indebtedness in an aggregate principal amount of $100,000 or
more of, or guaranteed by, the Company or any Subsidiary
(other than (i) any Indebtedness of any Subsidiary to the
Company or to any other Subsidiary, (ii) Non-Recourse Debt
and (iii) the Indebtedness evidenced by the Notes).
(c) Acceleration of Other Indebtedness. Any event or
condition shall occur which results in the acceleration of
the maturity of any Indebtedness in an aggregate principal
amount of $100,000 or more of, or guaranteed by, the Company
<PAGE>
or any Subsidiary (other than (i) any Indebtedness of any
Subsidiary to the Company or to any other Subsidiary, (ii)
Non-Recourse Debt and (iii) the Indebtedness evidenced by
the Notes) or enables the holder or holders of such other
Indebtedness or any trustee or agent for such holders (any
required notice of default having been given and any
applicable grace period having expired) to accelerate the
maturity of such other Indebtedness.
(d) Other Material Obligations. Default in the
payment when due, whether by acceleration or otherwise, or
in the performance or observance (subject to any applicable
grace period) of: (i) any obligation or agreement of the
Company or any Subsidiary to or with the Agent or any Bank
(other than any obligation or agreement of the Company
hereunder or under any Note), or (ii) any material
obligation or agreement of the Company or any Subsidiary
other than a Securitization Subsidiary to or with any other
Person with respect to any material purchase or lease of
goods or services (other than (x) any such material
obligation or agreement constituting or related to
Indebtedness, (y) Trade Accounts Payable, and (z) any
material obligation or agreement of any Subsidiary to the
Company or to any other Subsidiary), except only to the
extent that the existence of any such default is being
contested by the Company or such Subsidiary, as the case may
be, in good faith and by appropriate proceedings and the
Company or such Subsidiary shall have set aside on its books
such reserves or other appropriate provisions therefor as
may be required by GAAP.
(e) Insolvency. The Company or any of its
Subsidiaries other than a Securitization Subsidiary becomes
insolvent, or generally fails to pay, or admits in writing
its inability to pay, its debts as they mature, or applies
for, consents to, or acquiesces in, the appointment of a
trustee, receiver or other custodian for the Company or such
Subsidiary or for a substantial part of the property of the
Company or such Subsidiary, or makes a general assignment
for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any of its
Subsidiaries other than a Securitization Subsidiary or for a
substantial part of the property of the Company or any of
its Subsidiaries other than a Securitization Subsidiary and
is not discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement or other proceeding under
any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against the
Company or any of its Subsidiaries other than a
Securitization Subsidiary and, if instituted against the
Company or any of its Subsidiaries other than a
Securitization Subsidiary, is consented to or acquiesced in
<PAGE>
by the Company or such Subsidiary or remains for 60 days
undismissed; or any warrant of attachment or similar legal
process is issued against any substantial part of the
property of the Company or any of its Subsidiaries other
than a Securitization Subsidiary which is not released
within 60 days of service.
(f) Pension Plans. The institution by the Company or
any ERISA Affiliate of steps to terminate any Plan if, in
order to effectuate such termination, (i) the Company or any
ERISA Affiliate would be required to make a contribution to
such Plan or would incur a liability or obligation to such
Plan and (ii) immediately after giving effect to the payment
or satisfaction of such contribution, liability or
obligation (if made or undertaken by the Company or any
Subsidiary) an Event of Default or Unmatured Event of
Default would exist and be continuing; or the institution by
the PBGC of steps to terminate any Plan.
(g) Agreements. Default in the performance of any of
the Company's agreements herein set forth (and not
constituting an Event of Default under any of the other
subsections of this Section 12.1) and continuance of such
default for 30 days after notice thereof to the Company from
the Agent.
(h) Warranty. Any warranty made by the Company herein
is untrue or misleading in any material respect when made or
deemed made; or any schedule, statement, report, notice,
certificate or other writing furnished by the Company to the
Agent or any Bank is untrue or misleading in any material
respect on the date as of which the facts set forth therein
are stated or certified; or any certification made or deemed
made by the Company to the Agent or any Bank is untrue or
misleading in any material respect on or as of the date made
or deemed made.
(i) Litigation. There shall be entered against the
Company or any Subsidiary other than a Securitization
Subsidiary one or more judgments or decrees in excess of
$100,000 in the aggregate at any one time outstanding for
the Company and all Subsidiaries other than a Securitization
Subsidiary, excluding those judgments or decrees (i) that
shall have been outstanding less than 60 calendar days from
the entry thereof or (ii) for and to the extent which the
Company or any Subsidiary is fully insured (other than a
deductible portion not to exceed $100,000) and with respect
to which the insurer has assumed responsibility in writing
or for and to the extent which the Company or any Subsidiary
is otherwise indemnified if the terms of such
indemnification and the Person providing such
indemnification are satisfactory to the Agent and the
Majority Banks.
<PAGE>
(j) Change of Ownership. Richard Grossman shall cease
to own at least 35% of the issued and outstanding stock of
the Company which, under ordinary circumstances, has the
power to elect a majority of the Company's Board of
Directors.
12.2 Remedies. If any Event of Default described in
Section 12.1 shall have occurred and be continuing, the Agent,
upon the request of the Majority Banks, may declare the
Commitments and the Credit to be terminated and all or a portion
of the Loans to be due and payable, whereupon the Commitments and
Credit shall immediately terminate and the outstanding Loans
shall become immediately due and payable to the extent so
declared, all without notice of any kind (except that if an event
described in Section 12.1(e) occurs, the Commitments and the
Credit shall immediately terminate and all outstanding Loans
shall become immediately due and payable without declaration or
notice of any kind). The Agent shall promptly advise the Company
of any such declaration, but failure to do so shall not impair
the effect of such declaration.
13. THE AGENT.
13.1. Appointment. The First National Bank of
Chicago is hereby appointed Agent hereunder and under each other
Loan Document, and each of the Banks irrevocably authorizes the
Agent to act as the agent of such Bank. The Agent agrees to act
as such upon the express conditions contained in this Section 13.
The Agent shall not have a fiduciary relationship in respect of
the Company or any Bank by reason of this Agreement.
13.2. Powers. The Agent shall have and may
exercise such powers under the Loan Documents as are specifically
delegated to the Agent by the terms of each thereof, together
with such powers as are reasonably incidental thereto. The Agent
shall have no implied duties to the Banks, or any obligation to
the Banks to take any action thereunder except any action
specifically provided by the Loan Documents to be taken by the
Agent.
13.3. General Immunity. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable
to the Company, the Banks or any Bank for any action taken or
omitted to be taken by it or them, as Agent, hereunder or under
any other Loan Document or in connection herewith or therewith
except for its or their own gross negligence or willful
misconduct.
13.4. No Responsibility for Loans, Recitals, etc.
Neither the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain,
inquire into, or verify (i) any statement, warranty or
<PAGE>
representation made in connection with any Loan Document or any
borrowing hereunder; (ii) the performance or observance of any of
the covenants or agreements of any obligor under any Loan
Document, including, without limitation, any agreement by an
obligor to furnish information directly to each Bank; (iii) the
satisfaction of any condition specified in Section 10, except
receipt of items required to be delivered to the Agent; (iv) the
validity, effectiveness or genuineness of any Loan Document or
any other instrument or writing furnished in connection
therewith; or (v) the value, sufficiency, creation, perfection or
priority of any interest in any collateral security. The Agent
shall have no duty to disclose to the Banks information that is
not required to be furnished by the Company to the Agent at such
time, but is voluntarily furnished by the Company to the Agent
(either in its capacity as Agent or in its individual capacity).
13.5. Action on Instructions of Banks. The Agent
shall in all cases be fully protected in acting, or in refraining
from acting, hereunder and under any other Loan Document in
accordance with written instructions signed by the Majority
Banks, and such instructions and any action taken or failure to
act pursuant thereto shall be binding on all of the Banks and on
all holders of Notes. The Agent shall be fully justified in
failing or refusing to take any action hereunder and under any
other Loan Document unless it shall first be indemnified to its
satisfaction by the Banks pro rata against any and all liability,
cost and expense that it may incur by reason of taking or
continuing to take any such action.
13.6. Employment of Agents and Counsel. The Agent
may execute any of its duties as Agent hereunder and under any
other Loan Document by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Banks,
except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Agent
shall be entitled to advice of counsel concerning all matters
pertaining to the agency hereby created and its duties hereunder
and under any other Loan Document.
13.7. Reliance on Documents; Counsel. The Agent
shall be entitled to rely upon any Note, notice, consent,
certificate, affidavit, letter, telegram, statement, paper or
document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons, and, in
respect to legal matters, upon the opinion of counsel selected by
the Agent, which counsel may be employees of the Agent.
13.8. Agent's Reimbursement and Indemnification.
The Banks agree to reimburse and indemnify the Agent ratably in
proportion to their respective Commitments (i) for any amounts
not reimbursed by the Company for which the Agent is entitled to
reimbursement by the Company under the Loan Documents, (ii) for
<PAGE>
any other expenses incurred by the Agent on behalf of the Banks,
in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii)
for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind and nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered
in connection therewith or the transactions contemplated thereby,
or the enforcement of any of the terms thereof or of any such
other documents, provided that no Bank shall be liable for any of
the foregoing to the extent they arise from the gross negligence
or willful misconduct of the Agent. The obligations of the Banks
under this Section 13.8 shall survive payment of the Liabilities
and termination of this Agreement.
13.9. Rights as a Bank. In the event the Agent is
a Bank, the Agent shall have the same rights and powers hereunder
and under any other Loan Document as any Bank and may exercise
the same as though it were not the Agent, and the term "Bank" or
"Banks" shall, at any time when the Agent is a Bank, unless the
context otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other
transaction, in addition to those contemplated by this Agreement
or any other Loan Document, with the Company or any of its
Subsidiaries in which the Company or such Subsidiary is not
restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a
Bank.
13.10. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or
any other Bank and based on the financial statements prepared by
the Company and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to
enter into this Agreement and the other Loan Documents. Each
Bank also acknowledges that it will, independently and without
reliance upon the Agent or any other Bank 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 and the other Loan Documents.
13.11. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Banks and the
Company, such resignation to be effective upon the appointment of
a successor Agent or, if no successor Agent has been appointed,
forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with
or without cause by written notice received by the Agent from the
Required Banks, such removal to be effective on the date
specified by the Required Banks. Upon any such resignation or
removal, the Required Banks shall have the right to appoint, with
<PAGE>
the consent of the Company (not to be unreasonably withheld), on
behalf of the Company and the Banks, a successor Agent. If no
successor Agent shall have been so appointed by the Required
Banks within thirty days after the resigning Agent's giving
notice of its intention to resign, then the resigning Agent may
appoint, with the consent of the Company (which will not be
unreasonably withheld), on behalf of the Company and the Banks, a
successor Agent. If the Agent has resigned or been removed and
no successor Agent has been appointed, the Banks may perform all
the duties of the Agent hereunder and the Company shall make all
payments in respect of the Liabilities to the applicable Bank and
for all other purposes shall deal directly with the Banks. No
successor Agent shall be deemed to be appointed hereunder until
such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and
retained earnings of at least $100,000,000. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the resigning or
removed Agent. Upon the effectiveness of the resignation or
removal of the Agent, the resigning or removed Agent shall be
discharged from its duties and obligations hereunder and under
the Loan Documents. After the effectiveness of the resignation
or removal of an Agent, the provisions of this Section 13 shall
continue in effect for the benefit of such Agent in respect of
any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder and under the other Loan Documents.
13.12. Agent's Fee. The Company agrees to pay to
the Agent, for its own account, the fees agreed to by the Company
and the Agent pursuant to that certain letter agreement dated
January 31, 1996, or as otherwise agreed from time to time.
14. GENERAL.
14.1 No Waiver by the Agent or Banks. No failure or
delay on the part of the Agent or any Bank in the exercise of any
power or right, and no course of dealing between the Company and
the Agent or any Bank, shall operate as a waiver of such power or
right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof or the exercise
of any other power or right. The remedies provided for in this
Agreement and the other Loan Documents are cumulative and not
exclusive of any remedies which may be available to the Agent or
any Bank at law or in equity. No notice to or demand on the
Company not required hereunder shall in any event entitle the
Company to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the right of the
Agent or any Bank to any other or further action in any
circumstances without notice or demand.
14.2 Amendments. No amendment, modification or waiver
of, or consent with respect to, any provision of this Agreement
<PAGE>
shall in any event be effective unless the same shall be in
writing and signed and delivered by the Borrower, the Agent and
Banks having an aggregate Percentage of not less than the
aggregate Percentage expressly designated herein with respect
thereto or, in the absence of such designation, by the Majority
Banks, and then any such amendment, modification, waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given. No amendment,
modification, waiver or consent shall, unless in writing and
signed by all the Banks, do any of the following: (i) waive any
of the conditions specified in Section 10 or Section 11, (ii)
increase the amount or extend the term of the Commitment of any
Bank or subject the Banks to any additional obligations, (iii)
reduce the principal of, or interest on any of the Loans under or
evidenced by this Agreement or any Note, or reduce or waive the
amount of any fee payable to or for the account of the Banks
under this Agreement, (iv) postpone or extend any date fixed for
any payment of principal of, or interest on, any of the Loans
under or evidenced by this Agreement or any Note, or any
reimbursement obligation, (v) change the definition of Majority
Banks or otherwise reduce the aggregate Percentage required to
effect an amendment, modification, waiver or consent, (vi) change
the definition of Borrowing Base, or change the definition of any
of the defined terms referred to in the definition of Borrowing
Base or (vii) change any provision of this Section 14.2.
Further, no amendment, modification, waiver or consent shall
extend the maturity or reduce the principal amount of, or rate of
interest on, any Loan without the consent of the holder of such
Loan. No provision of Section 13 shall be amended, modified or
waived, nor shall the amount of the Agent's fee referred to in
Section 13.12 be amended, without the consent of the Agent.
14.3 Notices. Except as otherwise expressly provided
herein, any notice hereunder to the Company, the Agent or any
Bank shall be in writing (including telegraphic, telex, or
facsimile communication) and shall be given to the Company, the
Agent or such Bank at its address, telex number or facsimile
number set forth on the signature pages hereof or at such other
address, telex number or facsimile number as such party may, by
written notice, designate as its address, telex number or
facsimile number for purposes of notices hereunder. All such
notices shall be deemed to be given when transmitted by telex and
the appropriate answerback is received, transmitted by facsimile,
delivered to the telegraph office, delivered by courier,
personally delivered or, in the case of notice by mail, three (3)
Banking Days following deposit in the United States mail,
properly addressed as herein provided, with proper postage
prepaid; provided, however, that notices to the Agent with
respect to the Conversion Date, or under Sections 3.2, 3.3, 6.2,
6.3, 6.4,, or 6.5 shall not be effective until actually received
by the Agent.
14.4 Expenses; Attorney's Fees. The Company agrees,
<PAGE>
whether or not any Loan is made hereunder, to pay upon demand all
reasonable out-of-pocket expenses (including the reasonable fees,
disbursements and other charges of attorneys) incurred by the
Agent or any Bank, and the reasonable charges for and expenses of
attorneys who may be employees of the Agent or a Bank, in
connection with (a) in the case of the Agent, (i) the
preparation, negotiation and execution of this Agreement and any
other Loan Documents, (ii) the preparation of any and all
amendments to this Agreement or any other Loan Document, and
(iii) the performance of periodic collateral field examinations
and/or audits; and (b) in the case of the Agent and each Bank,
(i) the collection or enforcement of the Company's obligations
hereunder or under any other Loan Document and (ii) the
collection or enforcement of any rights of the Agent or any Bank
in or to any property at any time securing payment or performance
of the Company's Liabilities. The Company also agrees (x) to
indemnify and hold the Agent and each Bank harmless from any loss
or expense which may arise or be created by the Agent's
acceptance of telephonic or other instructions for making Loans
and (y) to pay, and save the Agent and each Bank harmless from
all liability for, any stamp or other taxes which may be payable
with respect to the execution or delivery of this Agreement, any
Note or any other Loan Document, or the issuance of any Note or
of any other Loan Documents. The Company further agrees to
indemnify the Agent and each Bank, its directors, officers and
employees against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor
whether or not the Agent or any Bank is a party thereto) which
any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder
(except to the extent that they have resulted from the gross
negligence or wilful misconduct of, or breach of this Agreement
by, the party seeking indemnification.) The Company's foregoing
obligations shall survive any termination of this Agreement
14.5 Severability. Any provision of this Agreement
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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
14.6 Successors. This Agreement shall be binding upon
the Company, the Agent and the Banks and their respective
successors and permitted assigns, and shall inure to the benefit
of the Company, the Agent and the Banks and the successors and
permitted assigns of the Agent and the Banks. The Company shall
not assign its rights or duties hereunder without the consent of
the Agent and all the Banks.
<PAGE>
14.7 Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties on
separate counterparts, and each such counterpart shall be deemed
to be an original, but all such counterparts shall together
constitute but one and the same Agreement. When counterparts
executed by all of the parties shall have been lodged with the
Agent (or, in the case of any Bank as to which an executed
counterpart shall not have been so lodged, the Agent shall have
received telegraphic, telex or other written confirmation from
such Bank of the execution of a counterpart hereof by such
Lender), this Agreement shall become effective as of the date
hereof, and at such time the Agent shall notify the Company and
each Bank.
14.8 Governing Law. This Agreement, the Notes and the
other Loan Documents shall be contracts made under and governed
by the internal laws of the State of Illinois.
14.9 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE
AGENT AND EACH BANK WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
14.10 Each Bank agrees and shall cause each Person
to whom it discloses any confidential information to agree to
hold any confidential information which it may receive in
confidence from the Company pursuant to this Agreement, except
for disclosure (i) to its affiliates and the other Banks and
their respective affiliates, (ii) to legal counsel, accountants,
and other professional advisors to that Bank, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as
required by law, regulation, or legal process, and (v) permitted
by Section 15.4.
15. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
15.1. Successors and Assigns. The terms and
provisions of the Loan Documents shall be binding upon and inure
to the benefit of the Company and the Banks and their respective
successors and assigns, except that (i) the Company shall not
have the right to assign its rights or obligations under the Loan
Documents and (ii) any assignment by any Bank must be made in
compliance with Section 15.3. Notwithstanding clause (ii) of
this Section, any Bank may at anytime, without the consent of the
Company or the Agent, assign all or any portion of its rights
under this Agreement and its Notes to a Federal Reserve Bank;
provided, however, that no such assignment shall release the
transferor Bank from its obligations hereunder. The Agent may
<PAGE>
treat the payee of any Note as the owner thereof for all purposes
hereof unless and until such payee complies with Section 15.3 in
the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the
Agent. Any assignee or transferee of a Note agrees by acceptance
thereof to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who
at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and
binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
15.2. Participations.
15.2(a) Permitted Participants; Effect. Any Bank may,
in the ordinary course of its business and in accordance
with applicable law, at any time sell to one or more banks
or other entities ("Participants") participating interests
in any Loan owing to such Bank, any Note held by such Bank,
any Commitment of such Bank or any other interest of such
Bank under the Loan Documents. In the event of any such
sale by a Bank of participating interests to a Participant,
such Bank's obligations under the Loan Documents shall
remain unchanged, such Bank shall remain solely responsible
to the other parties hereto for the performance of such
obligations, such Bank shall remain the holder of any such
Note for all purposes under the Loan Documents, all amounts
payable by the Company under this Agreement shall be
determined as if such Bank had not sold such participating
interests, and the Company and the Agent shall continue to
deal solely and directly with such Bank in connection with
such Bank's rights and obligations under the Loan Documents.
15.2(b) Voting Rights. Each Bank shall retain the
sole right to approve, without the consent of any
Participant, any amendment, modification or waiver of any
provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which
forgives principal, interest or fees or reduces the interest
rate or fees payable with respect to any such Loan or
Commitment, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or
fees on, any such Loan or Commitment, releases any guarantor
of any such Loan or releases any substantial portion of
collateral, if any, securing any such Loan.
15.3. Assignments.
15.3(a) Permitted Assignments. Any Bank may, in the
ordinary course of its business and in accordance with
applicable law, at any time assign to one or more banks or
other entities ("Purchasers") all or any part of its rights
<PAGE>
and obligations under the Loan Documents. Such assignment
shall be substantially in the form of Exhibit "G" hereto or
in such other form as may be agreed to by the parties
thereto. The consent of the Company and the Agent shall be
required prior to an assignment becoming effective with
respect to a Purchaser which is not a Bank or an affiliate
thereof; provided, however, that if a Default has occurred
and is continuing and the Commitments have been terminated,
the consent of the Company shall not be required. Such
consent shall not be unreasonably withheld or delayed. Each
such assignment shall be in an amount not less than the
lesser of (i) $7,500,000 or (ii) the remaining amount of the
assigning Bank's Commitment (calculated as at the date of
such assignment). In addition, First Chicago shall at all
times maintain for its own account a Commitment at least
equal to the lesser of (i) $10,000,000 or (ii) the remaining
amount of its Commitment.
15.3(b) Effect; Effective Date. Upon (i) delivery to
the Agent of a notice of assignment, substantially in the
form attached as Exhibit "I" to Exhibit "G" hereto (a
"Notice of Assignment"), together with any consents required
by Section 15.3.1, and (ii) payment of a $3,000 fee to the
Agent for processing such assignment, such assignment shall
become effective on the effective date specified in such
Notice of Assignment. The Notice of Assignment shall
contain a representation by the Purchaser to the effect that
none of the consideration used to make the purchase of the
Commitment and Loans under the applicable assignment
agreement are "plan assets" as defined under ERISA and that
the rights and interests of the Purchaser in and under the
Loan Documents will not be "plan assets" under ERISA. On
and after the effective date of such assignment, such
Purchaser shall for all purposes be a Bank party to this
Agreement and any other Loan Document executed by the Banks
and shall have all the rights and obligations of a Bank
under the Loan Documents, to the same extent as if it were
an original party hereto, and no further consent or action
by the Company, the Banks or the Agent shall be required to
release the transferor Bank with respect to the percentage
of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 15.3.2, the transferor
Bank, the Agent and the Company shall make appropriate
arrangements so that replacement Notes are issued to such
transferor Bank and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each
case in principal amounts reflecting their Commitment, as
adjusted pursuant to such assignment.
15.4. Dissemination of Information. The Company
authorizes each Bank to disclose to any Participant or Purchaser
or any other Person acquiring an interest in the Loan Documents
<PAGE>
by operation of law (each a "Transferee") and any prospective
Transferee any and all information in such Bank's possession
concerning the creditworthiness of the Company and its
Subsidiaries; provided that each Transferee and prospective
Transferee agrees to be bound by Section 14.10 of this Agreement.
15.5. Tax Treatment. If any interest in any Loan
Document is transferred to any Transferee which is organized
under the laws of any jurisdiction other than the United States
or any State thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such transfer,
to comply with the provisions of Section 7.6.
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.
TRANS LEASING INTERNATIONAL, INC.
By:
Title:
Address: 3000 Dundee Road
Northbrook, IL 60062
Attention: Norman Smagley
Facsimile number:708/291-7318
<PAGE>
Amount
of
Commitment
$15,000,000 THE FIRST NATIONAL BANK OF CHICAGO
individually and as Agent
By:
Title:
Address: One First National Plaza,
Suite 0084
Chicago, IL 60670
Attention: Mr. William Artz
Telex number:
(Answerback: )
Facsimile number: (312) 732-6222
<PAGE>
Amount
of
Commitment
$7,500,000 CORESTATES BANK N.A.
By:
Title:
Address: 1339 Chestnut Street
Philadelphia, PA 19107
Attention: Mr. William Hieb
Telex number:
(Answerback: )
Facsimile number: (215) 786-7704
<PAGE>
Amount
of
Commitment
$7,500,000 THE BANK OF CALIFORNIA, N.A.
By:
Title:
Address: 400 California Street,
17th Floor
San Francisco, CA 94104
Attention: Ms. Alison A. Mason
Telex number:
(Answerback: )
Facsimile number: (415) 765-3146
<PAGE>
EXHIBIT A
REVOLVING NOTE
$_____________ Northbrook, Illinois: _________, 1996
Due: On the Conversion Date
ON OR BEFORE the Conversion Date (as defined in the Credit
Agreement hereinafter referred to), the undersigned, TRANS
LEASING INTERNATIONAL, INC. (the "Company") for value received,
hereby promises to pay to the order of
___________________________________ (the "Bank"), the principal
sum of ________________________________ DOLLARS ($_____________)
or, if less, the aggregate unpaid principal amount of all
Floating Rate Revolving Loans and Eurodollar Revolving Loans (as
such terms are defined in the Credit Agreement hereinafter
referred to), as may be borrowed by the Company under the Credit
Agreement. Capitalized terms used but not otherwise defined
herein are as defined in the Credit Agreement.
The Company further promises to pay interest on the unpaid
principal amount of the Revolving Loans from time to time
outstanding from the date hereof until payment in full at the
rates per annum which shall be determined in accordance with the
provisions of the Credit Agreement hereinafter referred to. Said
interest shall be payable on each date provided for in the Credit
Agreement; provided, however, that interest on any principal
portion which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time
representing Floating Rate Revolving Loans or Eurodollar
Revolving Loans, and payments of principal or interest thereof,
shall be recorded by the holder in its records or, at its option,
shall be noted on the grid schedule attached hereto.
All payments of principal and interest under this Note shall
be made in immediately available funds at the office of the Agent
at One First National Plaza, Chicago, Illinois 60670, or at such
other place as the Agent shall notify the Company in writing.
This Note is one of the Notes referred to in, evidences
indebtedness incurred under, and is subject to the terms and
provisions of that certain Credit Agreement (the "Credit
Agreement") dated as of _________, 1996 (and, if amended, all
amendments thereto) between the Company and The First National
Bank of Chicago ("First Chicago"), individually and as Agent, to
which Credit Agreement reference is hereby made for a statement
of said terms and provisions, including those under which this
Note may be paid prior to its due date or its due date
accelerated.
In addition to and not in limitation of the foregoing and
the provisions of the Credit Agreement, the Company further
<PAGE>
agrees, subject only to any limitation imposed by applicable law,
to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
This Note is made under and governed by the internal laws of
the State of Illinois.
TRANS LEASING INTERNATIONAL, INC.
By______________________________
Title___________________________
Address:
3000 Dundee Road
Northbrook, Illinois 60062
<PAGE>
Schedule attached to Note dated __________, 19__ of TRANS LEASING
INTERNATIONAL INC., payable to the order of ____________________.
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
Amount of Princi- Unpaid Princi-
Amount of Loan pal Paid/Prepaid pal Balance
---------------- ---------------- --------------
Float- Euro- Float- Euro- Float- Euro- Notation
Date ing Rate dollar ing Rate dollar ing Rate dollar Total Made By
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
- ---- -------- ------ -------- ------ -------- ------ ----- --------
The aggregate unpaid principal amount shown on this schedule
shall be rebuttable presumptive evidence of the principal amount
owing and unpaid on this Note. The failure to record the date
and amount of any loan on this schedule shall not, however, limit
or otherwise affect the Company's obligations under the Credit
Agreement or under this Note to repay the principal amount of the
loans together with all interest accruing thereon.
<PAGE>
EXHIBIT B
TERM NOTE
$___________________ Due:___________19,__
Northbrook, Illinois, __________, 19__
The undersigned, TRANS LEASING INTERNATIONAL, INC. (the
"Company") for value received, promises to pay to the order of
______________________ (the "Bank"), the principal sum of
__________________________ DOLLARS in eight (8) consecutive equal
installments payable on the last day of each March, June,
September and December, commencing with the first such date to
occur after the date of this Note. Capitalized terms not defined
in this Note shall have the meanings provided in the Credit
Agreement hereinafter referred to.
The Company promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof
until payment in full at the rates per annum which shall be
determined in accordance with the provisions of the Credit
Agreement hereinafter referred to. Said interest shall be payable
on each date provided for in the Credit Agreement; provided,
however, that interest on any principal portion which is not paid
when due shall be payable on demand.
The portions of the principal sum hereof from time to time
denominated as Floating Rate Loans or Eurodollar Loans, and
payments of principal or interest thereof, shall be noted by the
holder of this Note in its records, or at its option, on the grid
schedule attached hereto.
All payments of principal and interest under this Note shall
be made in immediately available funds at the office of the Agent
at One First National Plaza, Chicago, Illinois 60670, or at such
other address as the Agent shall notify the Company in writing.
This Note is one of the Notes referred to in, evidences
indebtedness incurred under, and is subject to the terms and
provisions of that certain Credit Agreement (the "Credit
Agreement"), dated as of _________, 1996 (and, if amended, all
amendments thereto) between the Company and The First National
Bank of Chicago ("First Chicago"), individually and as Agent, to
which Credit Agreement reference is hereby made for a statement
of said terms and provisions, including those under which this
Note may be paid prior to its due date or its due date
accelerated.
In addition to and not in limitation of the foregoing and
the provisions of the Credit Agreement, the Company further
agrees, subject only to any limitation imposed by applicable law,
<PAGE>
to pay all expenses, including reasonable attorneys' fees and
legal expenses, incurred by the holder of this Note in
endeavoring to collect any amounts payable hereunder which are
not paid when due, whether by acceleration or otherwise.
This Note is made under and governed by the internal laws of
the State of Illinois.
TRANS LEASING INTERNATIONAL, INC.
By______________________________
ADDRESS: Title:__________________________
3000 Dundee Road
Northbrook, Illinois 60062
<PAGE>
Schedule attached to Note dated ____________________, 19__ of
TRANS LEASING INTERNATIONAL, INC., payable to the order of
_______________________________.
LOANS
-----
Amount of Loan
----------------------------
Notation
Date Floating Rate Eurodollar Total Made By
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
---- -------------- ----------- ------- ----------
<PAGE>
EXHIBIT C
[Company's Letterhead]
_______________, 19__
The First National Bank
of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: _____________
Ladies/Gentlemen:
Reference is made to the Credit Agreement dated as of
____________,
1996 (as the same may be amended, supplemented or otherwise modified, the
"Agreement") between us and The First National Bank of Chicago ("First
Chicago"), individually and as Agent. All terms used herein which are
defined in the Agreement shall have the same meaning herein as therein.
Pursuant to the terms of the Agreement, we hereby confirm the
following:
1. A Borrowing of [Floating Rate Revolving] [Eurodollar
Revolving][Floating Rate Term] [Eurodollar Term] Loans in the aggregate
amount of $_____________ was requested on __________, 19__.
2. a prepayment of principal of the [Revolving] [Term] Loans in
the aggregate amount of $____________ was requested on __________, 19__.
[Complete number 1 or 2 above, whichever is applicable.]
3. As of the date hereof, the aggregate unpaid principal
balance of the [Revolving] [Term] Loans (after giving effect to the above
borrowing or prepayment) is $__________.
Very truly yours,
TRANS LEASING INTERNATIONAL,INC.
By:_____________________________
Title:__________________________
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
The First National Bank
of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: _____________
Re: Credit Agreement, dated as of ___________, 1996 (herein,
together with any amendments from time to time made thereto,
called the "Credit Agreement"), between Trans Leasing
International, Inc. (the "Company") and The First National
Bank of Chicago ("First Chicago"), individually and as
Agent.
As used herein, the term "Computation Period" shall
mean the immediately preceding fiscal year (or
quarter, if indicated), and the term "Computation
Date" shall mean the last day of such period.
Capitalized terms not otherwise defined herein shall
be as defined in the Credit Agreement.
Ladies/Gentlemen:
ITEM A. Liabilities to Net Worth Ratio. On the Computation
Date, the Consolidated Tangible Net Worth was $___________, and the ratio of its
Consolidated Total Liabilities to Consolidated Tangible Net Worth was
approximately (and in any event not more than) __ to 1.00, in each case as
computed on Attachment 1.
ITEM B. Tangible Net Worth. On the Computation Date, the
Consolidated Tangible Net Worth for purposes of Section 9.14 of the Credit
Agreement was $_____________ as computed on Attachment 2.
ITEM C. Capital Expenditures. During the Computation Period,
the aggregate amount of fixed assets purchased or otherwise acquired by the
Company was approximately (and in any event not greater than)
$________________.
ITEM D. Interest Coverage. The Company's consolidated net
income for the four consecutive Fiscal Quarters ending on the Computation Date
was $______________, the Company's consolidated interest expense for such
period was approximately $_____________, the Company's consolidated tax
expense for such period was $____________ and the ratio of its consolidated
net income before interest expense and tax expense to its consolidated
interest expense for such period was approximately (and in any event not
less than) __ to 1.00.
<PAGE>
ITEM E. Restricted Payments. [No Restricted Payments were made
during the Fiscal Quarter ending on the Computation Date.] [As of the
Computation Date, an aggregate of $______ of Restricted Payments have been
made since December 31, 1992, which did not exceed the maximum permitted
Restricted Payments as of such date as computed on Attachment 3.]
ITEM F. Leases. The aggregate rental amounts paid by the
Company as lessee under leases of real or personal property during the period
commencing at the beginning of the fiscal year in which the Computation
Date falls and ending on the Computation Date was approximately (and in any
event not greater than) $_________. The aggregate rental payments due or to
become due from the Company as lessee under leases of real or personal
property during the full remaining terms thereof is approximately (and in
any event not greater than) $_______________.
ITEM G. Lease Portfolio. On the Computation Date, the
Company's Average Original Equipment Cost of Assets for purposes of Section
9.24 of the Credit Agreement was ____________.
ITEM H. Certification. The Company hereby certifies that:
l. all of the information set forth in this Certificate (and
in the Attachments hereto) is true and correct in all material
respects; and
2. except as stated on Attachment 4 hereto, no Default had
occurred and was continuing at the Computation Date.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its President or Authorized Officer this
_______________ day of ____________________, 19__.
TRANS LEASING INTERNATIONAL, INC.
By______________________________
[President/Vice President, Finance and Chief
Financial Officer]
<PAGE>
ATTACHMENT 1
(to / / Compliance
Certificate)
CONSOLIDATED TOTAL LIABILITIES TO TANGIBLE
NET WORTH RATIO ON _________________, 19__
COMPUTATION DATE
1 Shareholder's equity (including capital
stock, additional paid-in capital and
retained earnings after deducting
treasury stock) of the Company and its
consolidated Subsidiaries. . . . . . . . . . . . . . . . . $
2 Subordinated Debt of the Company and its
consolidated Subsidiaries (other than
that portion thereof which is due within
twelve (12) months). . . . . . . . . . . . . . . . . . . . $
3 Aggregate amount of intangible assets of
the Company and its consolidated
Subsidiaries (goodwill, unamortized debt
discount and expense, unamortized
deferred charges). . . . . . . . . . . . . . . . . . . . . $
4 Aggregate amount of Restricted Cash of
the Company and the consolidated
Subsidiaries (other than Securitization
Subsidiaries). . . . . . . . . . . . . . . . . . . . . . . $
5 Net Assets of Securitization
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . $
6 Consolidated Tangible Net Worth (Sum of
Item 1 and Item 2 minus sum of Item 3,
Item 4 and Item 5) . . . . . . . . . . . . . . . . . . . . $
<PAGE>
7 Total liabilities of the Company and its
consolidated Subsidiaries. . . . . . . . . . . . . . . . . $
8 Contingent obligations or liabilities of
the Company and its consolidated
Subsidiaries (excluding those as to
which a dollar amount is not
ascertainable) . . . . . . . . . . . . . . . . . . . . . . $
9 Deferred taxes of the Company and its
consolidated Subsidiaries. . . . . . . . . . . . . . . . . $
10 Company's and its consolidated
Subsidiaries' consolidated total assets. . . . . . . . . . $
11 8% of Item 10. . . . . . . . . . . . . . . . . . . . . . . $
12 Lesser of Item 9 and Item 11 . . . . . . . . . . . . . . . $
13 Company's Consolidated Total Liabilities
(Sum of Item 7 and Item 8 minus sum of
Item 2 and Item 12 . . . . . . . . . . . . . . . . . . . . $
14 Company's Consolidated Total Liabilities
to Consolidated Tangible Net Worth
(Ratio of Item 13 to Item 6) . . . . . . . . . . . . . . . ____ to ____
[Items 7-13 exclude Securitization Subsidiaries]
<PAGE>
ATTACHMENT 2
(to / / Compliance
Certificate)
TANGIBLE NET WORTH
ON _________________, 19__
COMPUTATION DATE
1. Consolidated Tangible Net Worth. . . . . . . . . . $
2. Net Assets of Securitization
Subsidiaries . . . . . . . . . . . . . . . . . . . $
3. Amounts paid since December 31, 1992 to
redeem stock currently retained as
treasury stock . . . . . . . . . . . . . . . . . . $
4. Lesser of Item 3 and $5,000,000. . . . . . . . . . $
5. Subordinated Debt included in Item 1 . . . . . . . $
6. Consolidated cumulative net income since
January 1, 1993. . . . . . . . . . . . . . . . . . $
7. 50% of Item 6 (not less than zero) . . . . . . . . $
8. Required Minimum Tangible Net Worth (Sum
of $17,000,000 plus Item 7). . . . . . . . . . . . $
9. Tangible Net Worth
(Sum of Item 1, Item 2 and Item 4 minus
Item 5). . . . . . . . . . . . . . . . . . . . . . S
<PAGE>
ATTACHMENT 3
(To / / Compliance Certificate)
Restricted Payments on ___________, 199___
Computation Date
1. Amounts paid since December 31, 1992 to redeem or purchase stock
$
2. Non-stock dividends paid since December 31, 1992. . . . $
3. Amounts paid since December 31, 1992 to purchase, redeem
or prepay subordinated indebtedness (other than to the
extent of the net proceeds to the Company or any
Subsidiary from the issue after December 31, 1992 of other
subordinated debt). . . . . . . . . . . . . . . . . . . $
4. Consolidated cumulative net income (loss) since January 1, 1993
$
5. 50% of Item 4 (100% if loss). . . . . . . . . . . . . . $
6. Net proceeds from sale or issue of Company's capital stock
or warrants, rights or options to acquire capital stock since
December 31, 1992 . . . . . . . . . . . . . . . . . . . $
7. Maximum Restricted Payments(sum of $2,000,000,Item 5 and Item 6)
$
8. Restricted Payments (sum of Item 1, Item 2 and Item 3). $
<PAGE>
ATTACHMENT 4
(To / / Compliance Certificate)
Notice by Company of the occurrence of an Event of Default or Unmatured
Event of Default and steps being taken to cure it.
<PAGE> EXHIBIT E
BORROWING BASE CERTIFICATE
The First National Bank
of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: _____________
Re: Credit Agreement, dated as of ___________, 1996 (herein,
together with any amendments from time to time made thereto,
called the "Credit Agreement"), between Trans Leasing
International, Inc. (the "Company") and The First National
Bank of Chicago ("First Chicago"), individually and as Agent
(in such capacity, the "Agent").
Ladies/Gentlemen:
Terms to which meanings are ascribed in the Credit Agreement are
used in this Borrowing Base Certificate with such meanings.
The Company hereby certifies that the outstanding principal
balance of the Loans on ________________________ did not exceed the Borrowing
Base. The related computations are set forth in Schedule 1 hereto.
IN WITNESS WHEREOF, the Company has caused this Borrowing Base
Certificate to be executed and delivered by the undersigned representative
hereunto duly authorized on the ___ day of __________, 19__.
TRANS LEASING INTERNATIONAL, INC.
By______________________________
Title___________________________
[President/Vice President,
Finance and Chief Financial
Officer]
<PAGE>
Schedule 1 to
Borrowing Base Certificate
Dated ________________
1 Eligible Receivables
--------------------
(a) Total Eligible Lease Receivables. . . . . . . . . $__________
(b) Total Eligible Vendor Note Receivables. . . . . . $__________
(c) Total Eligible Customer Note
Receivables (not to exceed $5,900,000). . . . . . $__________
(d) Present Value of Item 1(a) (using
Receivable Discount Rate) . . . . . . . . . . . . $__________
(e) Present Value of Item 1(b) (using
Receivable Discount Rate) . . . . . . . . . . . . $__________
(f) 85% of sum of Item 1(c), 1(d) and 1(e). . . . . . $__________
(g) Total Unrestricted Cash . . . . . . . . . . . . . $__________
(h) Total Residuals under Eligible Leases . . . . . . $__________
(i) Present Value of Item 1(h) (using
Receivable Discount Rate) . . . . . . . . . . . . $__________
(j) Aggregate acquisition cost of property
leased under Eligible Leases. . . . . . . . . . . $__________
(k) 11% of Item 1(j). . . . . . . . . . . . . . . . . $__________
(l) 25% of the LESSER of Item 1(i) and
Item 1(k) . . . . . . . . . . . . . . . . . . . . $__________
(m) Sum of Items 1(f), 1(g) and 1(l). . . . . . . . . $__________
<PAGE>
2 Consolidated Total Liabilities
------------------------------
(a) Consolidated total liabilities (other
than Loans under the Agreement) . . . . . . . . . $__________
(b) Contingent obligations or liabilities
of Company and its Subsidiaries on
consolidated basis. . . . . . . . . . . . . . . . $__________
(c) Deferred taxes. . . . . . . . . . . . . . . . . . $__________
(d) Consolidated total assets . . . . . . . . . . . . $__________
(e) 8% of Item 2(d) . . . . . . . . . . . . . . . . . $__________
(f) Lesser of Item 2(c) and Item 2(e) . . . . . . . . $__________
(g) Subordinated Debt (other than due
within 12 months) . . . . . . . . . . . . . . . . $__________
(h) Sum of Items 2(a) and 2(b), minus sum
of Items 2(f) and 2(g) . . . . . . . . . . . . . $__________
3 Borrowing Base(Excess of Item 1(m)over Item 2(h)) $__________
--------------
4 Total Loans Outstanding. . . . . . . . . . . . . .$__________
-----------------------
(a) Revolving Loans $__________
(b) Term Loans $__________
5 Borrowing Availability(Excess of Item 3 over Item 4)
---------------------- $__________
6 Mandatory Prepayment Required (Excess of Item 4 over Item 3)
-----------------------------
$__________
