16
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, 1996
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 12, 1997 was 4,025,755.
<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, 1996 and 1995
(unaudited)
Condensed Consolidated Balance Sheets 6
December 31, 1996
and June 30, 1996
(unaudited)
Condensed Consolidated Statements of Cash Flows 7
Six-month periods ended
December 31, 1996 and 1995
(unaudited)
Notes to Condensed Consolidated Financial Statements 8
(unaudited)
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<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. and subsidiaries (the "Company") as
of December 31, 1996, and the related condensed consolidated statements
of operations for the three-month and six-month periods ended December
31, 1996 and 1995, and the condensed consolidated statements of cash
flows for the six-month periods ended December 31, 1996 and 1995. 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 of 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. and subsidiaries as of June 30, 1996, 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 6, 1996, 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, 1996 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 12, 1997
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended ended
December 31, December 31,
1996 1995 1996 1995
(In Thousands Except
Per Share Amounts)
REVENUES:
<S> <C> <C> <C> <C>
Finance lease income $ 8,446 $ 7,072 $16,595 $13,834
Operating lease income 629 316 1,193 599
Other 1,453 1,475 3,063 3,014
Total Revenues 10,528 8,863 20,851 17,447
EXPENSES:
Interest 4,407 3,866 8,571 7,543
General and administrative 3,984 3,107 7,599 5,859
Provision for uncollectible
accounts 1,311 1,311 2,680 2,557
Total Expenses 9,702 8,284 18,850 15,959
826 579 2,001 1,488
KEY-MAN LIFE INSURANCE INCOME 2,196 - 2,196 -
EARNINGS BEFORE INCOME TAXES 3,022 579 4,197 1,488
INCOME TAXES 308 222 766 570
NET EARNINGS $ 2,714 $ 357 $ 3,431 $ 918
EARNINGS PER COMMON SHARE $.68 $.09 $.85 $.22
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 4,016 4,098 4,029 4,148
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
(In Thousands Except Share Data)
ASSETS
<S> <C> <C> <C>
CASH $ 3,477 $ 4,528
RESTRICTED CASH 10,624 5,639
DIRECT FINANCE LEASES:
Future minimum lease payments 293,730 270,458
Estimated unguaranteed residual value 25,005 22,452
Total Direct Finance Lease Receivables 318,735 292,910
Less: Unearned lease income (49,511) (46,788)
Allowance for uncollectible accounts (10,578) ( 9,506)
Net investment in direct finance
leases 258,646 236,616
LEASE FINANCING RECEIVABLES, less allowance
for uncollectible accounts of $253 and 6,821 6,534
$238 respectively
EQUIPMENT UNDER OPERATING LEASES, net of
accumulated depreciation 9,821 7,709
FURNITURE, FIXTURES AND EQUIPMENT, net of
accumulated depreciation 1,967 1,811
INCOME TAXES RECOVERABLE 399 904
OTHER ASSETS 6,128 5,686
TOTAL ASSETS $297,883 $269,427
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 9,712 $ 9,183
NOTES PAYABLE TO FINANCIAL INSTITUTIONS 38,300 50,250
LEASE-BACKED OBLIGATIONS 197,473 159,567
SUBORDINATED OBLIGATIONS 19,620 20,730
DEFERRED INCOME TAXES 3,411 3,411
TOTAL LIABILITIES 268,516 243,141
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,
outstanding 4,015,755 and 4,045,375
respectively 48 48
Additional paid-in capital 9,879 9,879
Retained earnings 21,835 18,646
Less 782,745 and 753,125 treasury shares
respectively, at cost ( 2,395) ( 2,287)
TOTAL STOCKHOLDERS' EQUITY 29,367 26,286
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $297,883 $269,427
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
TRANS LEASING INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended December 31,
1996 1995
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Earnings $ 3,431 $ 918
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 3,730 3,622
Depreciation and amortization 1,465 784
Initial direct costs incurred ( 1,594) ( 1,287)
Changes in:
Accounts payable and accrued
expenses 529 1,402
Income taxes recoverable 505 430
Other assets ( 442) ( 1,423)
Other 64 ( 41)
Net cash provided by operating
activities 7,688 4,405
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on leases 47,035 39,437
Equipment purchased for leasing ( 74,434) ( 64,586)
Purchase of lease financing receivables ( 1,999) ( 1,827)
Purchase of property and equipment ( 3,983) ( 2,647)
Disposal of property and equipment 161 290
Net cash used in investing
activities ( 33,220) ( 29,333)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable to financial
institutions 37,250 60,400
Repayment of notes payable to financial
institutions ( 49,200) ( 74,925)
Issuance of lease-backed obligations 182,641 152,070
Repayment of lease-backed obligations (144,750) (110,714)
Repayment of subordinated obligations ( 1,110) -
Payment of dividends on common stock ( 242) ( 250)
Purchase of treasury stock ( 108) ( 523)
Net cash provided by financing
activities 24,481 26,058
NET INCREASE (DECREASE) IN CASH ( 1,051) 1,130
CASH, beginning of period 4,528 3,758
CASH, end of period $ 3,477 $ 4,888
</TABLE>
See notes to condensed consolidated financial statements.
<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. and subsidiaries (the "Company") as of December 31,
1996, and the condensed consolidated statements of operations for the
three-month and six-month periods ended December 31, 1996 and 1995, and
the condensed consolidated statements of cash flows for the six-month
periods ended December 31, 1996 and 1995, have been prepared by the
Company without audit. The condensed consolidated balance sheet as of
June 30, 1996, 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, 1996, 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, 1996, 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, 1996
annual report to stockholders.
Certain reclassifications have been made to prior years to conform
with the presentation used in fiscal 1997.
Note B - 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 the fourth quarter of fiscal 1997. Results of operations and
financial position will not be affected by the adoption of this
statement.
Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" (SFAS 125), provides new methods of accounting and
reporting for transfers and servicing of financial assets and
extinguishments of liabilities for transaction occurring after December
31, 1996. The effect of adopting SFAS 125 is not expected to have a
material effect on the Company's financial position or results of
operations.
Note C - Insurance Proceeds:
On October 7, 1996, Richard Grossman, the Company's principal
shareholder, passed away. Prior to that date, Mr. Grossman held the
positions of Chairman of the Board, Chief Executive Officer and
President.
The Company was beneficiary on two key-man life insurance policies,
which insured the life of Richard Grossman. The proceeds from these
policies amounted to approximately $2,500,000, resulting in recognition
of life insurance income of $2,196,000, in the second quarter of fiscal
1997.
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 and related fees exceed interest expense, general and
administrative expense and a provision for uncollectible accounts.
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 the cost of funds to finance the
leases from which such income is earned is generally referred to as the
"spread" in the portfolio.
Substantially all of the Company's lease receivables are written at
a fixed rate of interest for a fixed term. The Company's borrowings are
at both fixed and variable rates of interest. The Company borrows under
revolving credit facilities at variable interest rates (see "Liquidity
and Capital Resources") and periodically refinances that debt either
through a fixed-rate loan option in the revolving credit agreements,
securitization of lease receivables or the sale of debt in the public or
private markets. To the extent the Company refinances with fixed-rate
debt, the Company locks in the spread in its portfolio.
The Company has experienced growth in the total dollar amounts of
new lease receivables added to its portfolio during each of the last
five fiscal years, though there can be no assurances that this trend
will continue. 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.
Operating lease income is recognized as revenue when the rental
payments become due. Equipment under operating leases is recorded at
cost and depreciated on a straight-line basis over the estimated useful
life of the equipment, generally three to five years.
Initial direct costs incurred in consummating a lease, principally
commissions and a portion of salaries for personnel directly involved in
generating new lease receivables, 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 over the terms of the underlying leases as the leases are
determined to be uncollectible. See "Results of Operations" below for
further discussion.
The primary long-term funding method currently employed by the
Company is to securitize portions of its lease portfolio. This method
of funding is believed to afford the lowest cost long-term financing
available. These transactions are not reflected as sales of lease
receivables in the financial statements as the Company has an ongoing
economic interest in the securitized assets. As such, the leases remain
on the consolidated balance sheet and the income associated with such
leases is recognized over the respective lease terms.
Results of Operations
Finance lease income increased $2,761,000 (20.0%) in the first six
months of fiscal 1997 compared to the first six months of fiscal 1996,
and $1,374,000 (19.4%) in the second quarter of fiscal 1997 compared to
the same period of fiscal 1996. The increase was primarily due to a
20.8% increase in the net investment in direct finance leases from
December 31, 1995 to December 31, 1996.
Operating lease income increased $594,000 (99.2%) in the first six
months of fiscal 1997 compared to the first six months of fiscal 1996,
and $313,000 (99.1%) in the second quarter of fiscal 1997 compared to
the same period of fiscal 1996. The increase was primarily due to a
89.8% increase in the net cost of equipment under operating leases from
December 31, 1995 to December 31, 1996.
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, and the
introduction of new products by equipment manufacturers. Lease-related
fees, primarily delinquency charges and lease continuance fees, have
increased as a result of the growth in the size of the Company's lease
portfolio.
Interest expense increased $1,028,000 (13.6%) in the first six
months of fiscal 1997 and $541,000 (14.0%) in the second quarter of
fiscal 1997 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 42.9% and
42.1% for the three-month and six-month periods ended December 31, 1996,
respectively, from 45.4% and 44.9% for the comparable fiscal 1996
periods. Interest expense is reported net of the impact of interest rate
swaps used to fix the rate on floating rate financings, the effect of
which was to decrease interest expense by $39,000 and $16,000 for the
first six months and the second quarter of fiscal 1996, respectively.
The Company currently holds no interest rate swap contracts.
General and administrative expense increased $1,740,000 (29.7%) in
the first six months of fiscal 1997 compared to the first six months of
fiscal 1996, and $877,000 (28.2%) in the second quarter of fiscal 1997
compared to same period of fiscal 1996. General and administrative
expense as a percent of lease income increased to 38.8% and 37.3% for
the three-month and six-month periods ended December 31, 1996,
respectively, from 36.5% and 34.8% for the comparable fiscal 1996
periods. The increase is primarily attributable to two factors. The
increase in the number of employees to accommodate the Company's
continued growth, and the increase in depreciation of equipment under
operating leases.
The provision for uncollectible accounts increased $123,000 (4.8%)
in the first six months of fiscal 1997 compared to the first six months
of fiscal 1996, and remained unchanged in the second quarter compared to
the same period of fiscal 1996. The provision for uncollectible amounts
as a percent of lease income decreased to 12.8% and 13.2% for the three-
month and six-month periods ended December 31, 1996, respectively, from
15.4% and 15.2% for the comparable fiscal 1996 periods.
Earnings, before income taxes and key-man life insurance income,
for the first six months of fiscal 1997 increased 34.5% to $2,001,000
compared with $1,488,000 for the first six months of fiscal 1996, and
42.7% to $826,000 in the second quarter, compared with $579,000 for the
same quarter of fiscal 1996. The earnings per share amounts exclusive of
the key-man life insurance income were $.13 and $.31 for the quarter and
the six months ended December 31, 1996 respectively. The increases in
earnings are primarily due to the increase in lease income and the
decrease in interest expense as a percent of lease income, as discussed
above. The effect of key-man life insurance income of $2,196,000 was to
increase earnings per share for the quarter and the six months ended
December 31, 1996, by $.55 and $.54 respectively.
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 $33.2 million in
the first six months of fiscal 1997 and $29.3 million in the first
quarter of fiscal 1996, 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 agreement and issuances of debt and lease-backed
obligations over repayments of these debt instruments) was $24.5 million
in the first six months of fiscal 1997 and $26.1 million in the first
six months of fiscal 1996. The remaining funds used in investing
activities were provided by operating cash flows and cash on hand at the
beginning of the period. As of December 31, 1996, the Company had
outstanding commitments to purchase equipment, which it intended to
lease, with an aggregate purchase price of $4.6 million.
The Company borrows under its unsecured revolving credit agreement
(the "TLI Revolving Credit Facility") to fund its operations. The
maximum borrowing under the TLI Revolving Credit Facility is $30
million. At February 12, 1997, the outstanding loans under this
facility were $2.0 million and unused borrowing capacity was $28.0
million.
On November 26, 1996, the Company issued approximately $128 million
5.98% senior notes and approximately $13.5 million 6.64% subordinated
notes through a newly-formed limited-purpose business trust. The assets
of the trust securing such indebtedness include equipment leases and the
interest 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 approximately $108 million,
to repay borrowings under the Company's revolving credit agreement in
the amount of $29.5 million and the remainder for general corporate
purposes. Upon completion of this transaction, the TLFC IV securitized
revolving credit facility was terminated.
On December 20, 1996, a new securitized revolving credit facility
was executed for TLFC IV in the amount of $75 million with an expiration
date of June 30, 1997. As of February 12, 1997, outstanding loans under
the TLFC IV revolving credit facility were $27.5 million and unused
borrowing capacity was $47.5 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 as of December 31, 1996.
As the Company has approached full utilization under its revolving
credit facilities, 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 are issued either with
fixed interest rates or with floating interest rates combined with an
interest rate hedge 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 hedge agreement, in both the
institutional private placement and public markets to reduce its
exposure to floating interest rates associated with revolving credit
borrowings.
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.
As of December 31, 1996, 356,145 shares have been repurchased at a total
cost of $1,216,000 under this program. On November 7, 1996, the Board
terminated this stock repurchase program.
On February 3, 1997 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 26, 1997 to holders of record as of February
12, 1997.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE LITIGATION REFORM ACT OF 1995
Except for historical matters, the matters discussed in this Form 10-Q
are forward-looking statements that involve risks and uncertainties.
Forward-looking statements include, but are not limited to, statements
made under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Company wishes to caution readers that in addition to the
important factors described elsewhere in this Form 10-Q, the following
important factors, among others, sometimes have affected and in the
future could affect, the Company's actual results and could cause the
Company's actual results during the remainder of fiscal 1997 and beyond,
to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company:
Portfolio Risk
The principal assets of the Company are its portfolio of lease
receivables and the unguaranteed residual value of its equipment.
Investment risks inherent in a leasing company include the possibility
that lease receivables might not be fully collectible and that equipment
might be sold at lease expiration or termination for less than the
residual value recorded on the Company's balance sheet.
Receivables Risk: Although the allowance for uncollectible accounts
carried on the Company's books has historically been adequate to provide
for losses associated with its lease receivables, changes in the
reimbursement policies of government or third-party payors, obsolescence
of equipment under lease, changes in the local, regional or national
economies, changes in federal tax laws or other factors could
significantly impact the Company's future delinquency and loss
experience, which could in turn have a material adverse effect on the
Company's earnings.
Residual Risk: When the Company enters into a lease from which it
expects to derive value through the resale of equipment at lease
expiration, it records an estimate of the expected resale value on the
Company's balance sheet as a residual interest. The growth in the
Company's equipment lease portfolio in recent years has resulted in
increases in the aggregate amount of recorded residual values.
Realization of residual values depends on factors not within the
Company's control, such as equipment obsolescence, whether the lease
expires or is terminated for default, whether the equipment is in fact
returned to the Company at the end of the lease and the condition of the
equipment when it is returned. Although the Company has historically
received a very high percentage of recorded residual values for expired
leases, there can be no assurance this will continue in the future.
Failure to realize residual values could have a material adverse effect
on the Company's earnings.
Interest Rate Risk
The Company's leases are at fixed rates but its warehouse lines, which
represent a significant portion of its borrowings, bear interest at
variable rates. Consequently, if interest rates were to increase,
earnings would be adversely affected. In addition, the Company's
ability to increase its yield on new receivables would be limited by
competitive and economic factors.
Financing
The Company's profitability depends, among other factors, on the size
of its lease portfolio, which in turn depends on the Company's ability
to obtain external financing to supplement cash flows available from
operations. The Company's principal sources of external financing have
been borrowings under its revolving credit agreements and public
offerings and private placements of debt and lease-backed obligations.
Although the Company has been successful in arranging these types of
fundings in the past, there can be no assurance that it will be able to
obtain funding in the future in amounts or on terms it deems necessary
or acceptable. The Company's inability to obtain financing would have a
material adverse effect on its operations. Covenants in certain of the
Company's debt agreements limit its ability to incur additional debt
above certain levels.
Under substantially all of the Company's debt agreements, a reduction
(including, under most of these debt agreements, reductions caused by
death) in the principal shareholder's ownership of the Common Stock
below certain levels ranging from 30% to 35% would constitute an event
of default or require prepayment. A default or required prepayment
under any of these debt agreements may also result in defaults and
required prepayments under other debt agreements.
Third Party Reimbursement
The Company believes that, due to the growing national concern with
rising health care costs, the amount the government and other third
party payors reimburse for individual health care procedures could be
reduced. Changes in third party reimbursement policies, especially if
such changes limit reimbursement for outpatient services (the type of
services generally provided by the Company's medical lessees), could
adversely affect the Company.
Competition
The Company competes with finance affiliates of equipment
manufacturers which sell products leased by the Company, banks and other
leasing and finance companies. Many of these organizations have greater
financial and other resources than the Company and as a consequence may
be able to obtain funds on terms more favorable than those available to
the Company. Some of these competitors may provide financing which is
less expensive than leasing from the Company.
PART II OTHER INFORMATION
ITEM 4. Submission of matters to a Vote of Security Holders.
(a) The Annual meeting of shareholders was held on December 13, 1996.
(b) The following directors were elected at the meeting:
Larry S. Grossman, Michael J. Heyman, Larry Bier, Clifford V.
Brokaw, III, Mark Matthews, John W. Stodder.
(c) The matters voted upon and the results of the voting were as
follows:
1. The shareholders voted 3,549,670 shares for each of the director
nominees and 3,000 shares abstained from voting.
2. The shareholders voted 3,551,970 shares to ratify the appointment
of Deloitte & Touche LLP as the Company's independent auditors for
the fiscal year ending June 30, 1997 and 700 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:
10.32 Amendment and Restated Contribution and Sale Agreement,
dated as of November 26, 1996, between Registrant and TL
Lease Funding Corp. IV, incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K of TL
Lease Funding Corp. IV, dated November 26, 1996.
10.33 Pooling and Servicing Agreement, dated as of November 26,
1996, among Registrant, TL Lease Funding Corp. IV and
TLFC IV Equipment Lease Trust 1996-1, incorporated by
reference to Exhibit 4.2 to the Current Report on Form 8-
K of TL Lease Funding Corp. IV, dated November 26, 1996.
10.34 Indenture, dated as of November 26, 1996, between TLFC IV
Equipment Lease Trust 1996-1 and Manufacturers and
Traders Trust Company, incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K of TL Lease
Funding Corp. IV, dated November 26, 1996.
10.35 Trust Agreement, dated as of November 26, 1996, between
TL Lease Funding Corp. IV and Bankers Trust (Delaware),
incorporated by reference to Exhibit 4.3 to the Current
Report on Form 8-K of TL Lease Funding Corp. IV, dated
November 26, 1996.
10.36 Administration Agreement, dated as of November 26, 1996,
between TLFC IV Equipment Lease Trust 1996-1 and
Registrant, incorporated by reference to Exhibit 10.2 to
the Current Report on Form 8-K of TL Lease Funding Corp.
IV, dated November 26, 1996.
10.37 Amendment, dated as of December 30, 1996, to Credit
Agreement, dated as of January 31, 1996, among
Registrant, the Banks (as defined therein) and The First
National Bank of Chicago, as agent.
10.38 Amendment, dated as of December 30, 1996, to Amended and
Restated Note Agreement, dated as of November 30, 1994,
among Registrant and certain lenders named therein.
10.39 Amendment, dated as of December 30, 1996, to Amended and
Restated Note Agreement, dated as of November 30, 1994,
between Registrant and Massachusetts Mutual Life
Insurance Company.
10.40 Revolving Credit and Term Loan and Security Agreement,
dated as of December 20, 1996, between TL Lease Funding
Corp. IV and First Union National Bank of North Carolina.
10.41 Limited Recourse Agreement, dated as of January 21, 1997,
between Registrant and First Union National Bank of North
Carolina.
10.42 Contribution and Sale Agreement, dated as of January 21,
1997, between Registrant and TL Lease Funding Corp. IV.
10.43 Servicing Agreement, dated as of January 21, 1997, among
Registrant, TL Lease Funding Corp. IV and First Union
National Bank of North Carolina.
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, 1996.
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 12, 1997 /s/LARRY S. GROSSMAN
Larry S. Grossman
Chairman of the Board of Directors &
Chief Executive Officer
DATE: FEBRUARY 12, 1997 /s/MICHAEL J. HEYMAN
Michael J. Heyman
President & Chief Operating Officer
Exhibit Index
Exhibit No. Description of Exhibit Page No.
10.37 Amendment, dated as of December 30, 18
1996, to Credit Agreement, dated as of
January 31, 1996, among Registrant,
the Banks (as defined therein) and The
First National Bank of Chicago, as
agent.
10.38 Amendment, dated as of December 30, 21
1996, to Amended and Restated Note
Agreement, dated as of November 30,
1994, among Registrant and certain
lenders named therein
10.39 Amendment, dated as of December 30, 24
1996, to Amended and Restated Note
Agreement, dated as of November 30,
1994, between Registrant and
Massachusetts Mutual Life Insurance
Company
10.40 Revolving Credit and Term Loan and 26
Security Agreement, dated as of
December 20, 1996, between TL Lease
Funding Corp. IV and First Union
National Bank of North Carolina
10.41 Limited Recourse Agreement, dated as 36
of January 21, 1997, between
Registrant and First Union National
Bank of North Carolina
10.42 Contribution and Sale Agreement, dated 76
as of January 21, 1997, between
Registrant and TL Lease Funding Corp.
IV
10.43 Servicing Agreement, dated as of 110
January 21, 1997, among Registrant, TL
Lease Funding Corp. IV and First Union
National Bank of North Carolina
27 Financial Data Schedule 194
JSO\29833-10\160.1
- 20 -
AMENDMENT
This Amendment (AAmendment@) is entered into as of
December 30, 1996, by and among Trans Leasing International, Inc.
(the ACompany@), the undersigned Banks, and The First National
Bank of Chicago, as Agent.
WITNESSETH:
WHEREAS, The Company, the Banks and the Agent are
parties to that certain Credit Agreement dated as of January 31,
1996, as amended through the date hereof (the AAgreement@); and
WHEREAS, the Company and the undersigned Banks desire
to amend the Agreement in certain respects as more fully
described hereinafter;
NOW, THEREFORE, in consideration of the premises herein
contained, and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
SECT65535ON 1. Defined Terms. Capitalized terms used
herein and not otherwise defined herein shall have the meanings
attributed to such terms in the Agreement.
SECT65535ON 2. Amendment. The Agreement is hereby
amended by deleting Section 12.1(j) thereof and inserting the
following therefor:
A(j) Change of Ownership. The estate of Richard
Grossman, the beneficiaries of such estate, Larry S.
Grossman, his spouse and lineal descendants, and trusts
established for the benefit of such Persons and estates
of such Persons, in the aggregate, 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.@
SECT65535ON 3. Effective Date. This Amendment shall
become effective as of the date first above written (the
AEffective Date@) upon receipt by the Agent of counterparts of
this Amendment executed by the Company, the Agent, and the
Majority Banks.
SECT65535ON 4. Ratification. The Agreement, as amended
hereby, shall remain in full force and effect and is hereby
ratified, approved and confirmed in all respects.
SECT65535ON 5. Reference to Agreement. From and after
the Effective Date, each reference in the Agreement to Athis
Agreement,@ Ahereof@ or Ahereunder@ or words of like import, and
all references to the Agreement in any and all agreements,
instruments, documents, notes, certificates and other writings of
every kind and nature shall be deemed to mean the Agreement, as
amended by this Amendment.
SECT65535ON 6. CHOICE OF LAW. THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW
OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
SECT65535ON 7. Counterparts. This Amendment may be
executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the date first above written.
TRANS LEASING INTERNATIONAL,
INC.
By: /s/ Norman Smagley
Title: Vice President -
Finance
THE FIRST NATIONAL BANK OF
CHICAGO, Individually and as
Agent
By: /s/ William A. Artz
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ Carmel C. Albano
Title: Assistant Vice
President
THE BANK OF CALIFORNIA, N.A.
(Now Union Bank of California,
N.A.)
By: /s/ Alison A. Mason
Title: Vice President
JSO\29833-10\161.1
- 23 -
AMENDMENT
This Amendment (AAmendment@) is entered into as of
December 30, 1996, by and between Trans Leasing International,
Inc. (the ACompany@) and the Holders (as defined below).
WITNESSETH:
WHEREAS, The Company and the Purchasers named in
Schedule I thereto (the AHolders@) are parties to that certain
Amended and Restated Note Agreement dated as of November 30,
1994, Re: Note Agreement dated as of June 1, 1993 and $38,000,000
5.83 Senior Notes, Series A, Due March 31, 1998 and $4,000,000
6.82% Senior Notes, Series B, Due June 1, 1998 and $10,000,000
6.31% Senior Notes, Series C, Due September 30, 1998 (the
AAgreement@); and
WHEREAS, the Company and the Holders desire to amend
the Agreement in certain respects as more fully described
hereinafter;
NOW, THEREFORE, in consideration of the premises herein
contained, and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
SECT65535ON 1. Defined Terms. Capitalized terms used
herein and not otherwise defined herein shall have the meanings
attributed to such terms in the Agreement.
SECT65535ON 2. Amendments. (a) Section 2.3 of the
Agreement is hereby amended by deleting the definition of
AGrossman Group@ in its entirety and inserting the following
therefor:
A>Grossman Group= shall mean the estate of Richard
Grossman, the beneficiaries of such estate, Larry S.
Grossman, his spouse and lineal descendants, and trusts
established for the benefit of such Persons and estates
of such Persons.@
(b) Section 2.3 of the Agreement is hereby amended by
deleting the first paragraph of the definition of APut Event@ in
its entirety and inserting the following therefor:
A>Put Event= means any event by which the Grossman
Group shall fail to own legally and beneficially with
full voting power at least 30% of the Voting Stock of
the Company, unless 51% or more of the Voting Stock of
the Company is owned by a corporation having debt
obligations rated A or better by at least two
nationally recognized credit rating agencies, one of
which shall be either S&P or Moody=s.@
SECT65535ON 3. Effective Date. This Amendment shall
become effective as of the date first above written (the
AEffective Date@) upon receipt by the Company of counterparts of
this Amendment executed by the Company and the Holders.
SECT65535ON 4. Ratification. The Agreement, as amended
hereby, shall remain in full force and effect and is hereby
ratified, approved and confirmed in all respects.
SECT65535ON 5. Reference to Agreement. From and after
the Effective Date, each reference in the Agreement to Athis
Agreement,@ Ahereof@ or Ahereunder@ or words of like import, and
all references to the Agreement in any and all agreements,
instruments, documents, notes, certificates and other writings of
every kind and nature shall be deemed to mean the Agreement, as
amended by this Amendment.
SECT65535ON 6. Governing Law. This Amendment shall be
governed by and construed in accordance with Illinois law.
SECT65535ON 7. Counterparts. This Amendment may be
executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the date first above written.
TRANS LEASING INTERNATIONAL,
INC.
By: /s/ Norman Smagley
Title:Vice President - Finance
PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Jon C. Henry
Title: Counsel
By: /s/ Annette M. Masterson
Title: Director - Securities
Investment
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ John B. Joyce
Title: Managing Director
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
By: /s/ A. Zappetellen
Title: Senior Vice President
TMG LIFE INSURANCE COMPANY
By: /s/ Michael J. Carew
Title: Assistant Vice
President
CORE STATES BANK, N.A.
By: /s/ Carmel C. Albano
Title: Assistant Vice
President
JSO\29833-10\162.1
- -
AMENDMENT
This Amendment (AAmendment@) is entered into as of
December 30, 1996, by and between Trans Leasing International,
Inc. (the ACompany@) and Massachusetts Mutual Life Insurance
Company (the AHolder@).
WITNESSETH:
WHEREAS, The Company and the Holder are parties to that
certain Amended and Restated Note Agreement dated as of November
30, 1994, Re: Note Agreement dated as of June 15, 1992 and
$10,000,000 13.40% Subordinated Notes Due June 30, 1999 (the
AAgreement@); and
WHEREAS, the Company and the Holder desire to amend the
Agreement in certain respects as more fully described
hereinafter;
NOW, THEREFORE, in consideration of the premises herein
contained, and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
SECT65535ON 1. Defined Terms. Capitalized terms used
herein and not otherwise defined herein shall have the meanings
attributed to such terms in the Agreement.
SECT65535ON 2. Amendments. (a) Section 2.3 of the
Agreement is hereby amended by deleting the definition of
AGrossman Group@ in its entirety and inserting the following
therefor:
A>Grossman Group= shall mean the estate of Richard
Grossman, the beneficiaries of such estate, Larry S.
Grossman, his spouse and lineal descendants, and trusts
established for the benefit of such Persons and estates
of such Persons.@
(b) Section 2.3 of the Agreement is hereby amended by
deleting the first paragraph of the definition of APut Event@ in
its entirety and inserting the following therefor:
A>Put Event= means any event by which the Grossman
Group shall fail to own legally and beneficially with
full voting power at least 30% of the Voting Stock of
the Company, unless 51% or more of the Voting Stock of
the Company is owned by a corporation having debt
obligations rated A or better by at least two
nationally recognized credit rating agencies, one of
which shall be either S&P or Moody=s.@
SECT65535ON 3. Effective Date. This Amendment shall
become effective as of the date first above written (the
AEffective Date@) upon receipt by the Company of counterparts of
this Amendment executed by the Company and the Holder.
SECT65535ON 4. Ratification. The Agreement, as amended
hereby, shall remain in full force and effect and is hereby
ratified, approved and confirmed in all respects.
SECT65535ON 5. Reference to Agreement. From and after
the Effective Date, each reference in the Agreement to Athis
Agreement,@ Ahereof@ or Ahereunder@ or words of like import, and
all references to the Agreement in any and all agreements,
instruments, documents, notes, certificates and other writings of
every kind and nature shall be deemed to mean the Agreement, as
amended by this Amendment.
SECT65535ON 6. Governing Law. This Amendment shall be
governed by and construed in accordance with Illinois law.
SECT65535ON 7. Counterparts. This Amendment may be
executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the date first above written.
TRANS LEASING INTERNATIONAL,
INC.
By: /s/ Norman Smagley
Title: Vice President -
Finance
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ John B. Joyce
Title: Managing Director
- 34 -
JSO/29833-10/165.3
LIMITED RECOURSE AGREEMENT
This LIMITED RECOURSE AGREEMENT ("Limited Recourse
Agreement") dated as of January 21, 1997 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 December 20, 1996 (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 Borrower.
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 $3,750,000 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 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
$3,750,000 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 uncondi
tional, irrespective of the value, genuineness, regularity,
validity or enforceability of the Obligations or any other circum
stance 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 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 bank
ruptcy, 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 Authority 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, 1996 (audited) and September 30, 1996
(unaudited), 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 date
hereof 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:
(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.
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-6, 301 South College Street,
Charlotte, North Carolina 28288-0610, 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 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.
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 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;
(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.
* * * * *
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: /s/ Norman Smagley
Name: Norman Smagley
Title: Vice President - Finance
APPROVED AND ACCEPTED
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Bill A. Shirley
Name: Bill A. Shirley
Title: Vice President
36
JSO\29833-10\166.4
_________________________________________________________________
CONTRIBUTION AND SALE AGREEMENT
______________________
between
TRANS LEASING INTERNATIONAL, INC.
and
TL LEASE FUNDING CORP. IV
_______________________
Dated as of
January 21, 1997
_________________________________________________________________
TABLE OF CONTENTS
PAGE
ARTICLE IDEFINITIONS 1
1.01 Definitions 1
1.02 Other Definitional Provisions 6
ARTICLE IICONTRIBUTION OF CONTRIBUTED ASSETS; SALE OF PURCHASED
ASSETS; 7
2.01 [Reserved.] 7
2.02 Contribution of Contributed Assets and
Sale of Purchased Assets 7
2.03 Contribution or Sale of Additional Assets 8
2.04 Custody of Lease Files 10
ARTICLE IIIREPRESENTATIONS AND WARRANTIES 10
3.01 Representations and Warranties of
Trans Leasing 10
3.02 Representations and Warranties of TLFC 16
3.03 Purchase of Leases and Equipment by
Trans Leasing 18
3.04 Indemnification 18
ARTICLE IVCOVENANTS OF TRANS LEASING AND TLFC 19
4.01 Trans Leasing Covenants 19
4.02 TLFC Covenants 22
4.03 Grant of Security Interest 22
ARTICLE VCONDITIONS PRECEDENT 22
5.01 Conditions to TLFC's Obligations 22
5.02 Conditions to Trans Leasing's
Obligations 23
ARTICLE VITERMINATION 24
6.01 Termination 24
6.02 Effect of Termination 24
ARTICLE VIIMISCELLANEOUS PROVISIONS 24
7.01 Amendment 24
7.02 Governing Law 24
7.03 Notice 24
7.04 Severability of Provisions 26
7.05 Assignment 26
7.06 No Waiver; Cumulative Remedies 26
7.07 Counterparts 26
7.08 Binding Effect; Third-Party
Beneficiaries 26
7.09 Merger and Integration 26
7.10 Headings 27
7.11 Schedules and Exhibits 27
7.12 No Petition Covenants 27
EXHIBITS
Exhibit A Form of Assignment of Contributed Assets
Exhibit B Form of Assignment of Purchased Assets
Exhibit C Form of Assignment of Additional Assets
Exhibit D Forms of Lease
SCHEDULES
Contributed Lease Schedule
Purchased Lease Schedule
Lease Criteria Schedule
Specified Portfolio Characteristics Schedule
CONTRIBUTION AND SALE AGREEMENT
THIS CONTRIBUTION AND SALE AGREEMENT, dated as of
January 21, 1997 (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 and acquires 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
I.1 Definitions. Whenever used in this Agreement,
the following words and phrases will have the following meanings:
"Addition Date" has the meaning set forth in Section
2.03(a) of this Agreement.
"Additional Assets" means all right, title and interest
of Trans Leasing in, to, and under (i) the Additional Leases
(including all of 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 all of 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.
"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 January 21, 1997.
"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 all of Trans Leasing's obligations under the
Contributed Leases) and all monies due or to become due
thereunder after the Initial 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 all of 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 December 20, 1996, together with all amendments, restatements,
supplements and modifications thereof or thereto.
"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.
"Excluded Amounts" means any payments received from or
on behalf of 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.
"Filing Locations" means the States of Alabama,
Arizona, California, Delaware, Florida, Georgia, Illinois,
Indiana, Massachusetts, Michigan, New Jersey, New York, North
Carolina, Ohio, Pensylvania, Texas and Virgina.
"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.
"Initial Cut-Off Date" means January 17, 1997.
"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 (immediately
prior to the acquisition thereof by TLFC) 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 purchased by 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 purchased by TLFC
to Trans Leasing.
"Lender" means First Union National Bank of North
Carolina.
"Lessee" means, with respect to any Lease, the Person
or 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 all of Trans Leasing's obligations under the Purchased
Leases) and all monies due or to become due thereunder after the
Initial 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 all of 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.
"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 by the related Lessee under the terms of such Lease after
the Initial Cut-Off Date or the related Additional Cut-Off Date,
as applicable, in each case, after the effect of any adjustments
as a result of a portion of such Lease being terminated prior to
its scheduled expiration date (it being understood that Scheduled
Lease Payments do not include any Excluded Amounts).
"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 that 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.
I.2 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
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
CONTRIBUTION OF CONTRIBUTED ASSETS;
SALE OF PURCHASED ASSETS;
SALE OF ADDITIONAL ASSETS
II.1 [Reserved.]
II.2 Contribution of Contributed Assets and Sale of
Purchased Assets.
(a) Contribution. On the Closing Date, Trans
Leasing will make a 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 contribution of the Contributed
Assets will be without recourse to Trans Leasing, subject to
the obligations of Trans Leasing pursuant to Section 3.03.
(b) Sale. For a purchase price of $28,036,079
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
contribution of the Contributed Assets 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 contribution of the Contributed Assets
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.
II.3 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 agrees to sell any additional assets, the
purchase price thereof shall be an amount agreed to by Trans
Leasing and TLFC, which price shall represent reasonably
equivalent value therefor 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 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 assignment 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 with this Agreement, on or prior to the
applicable Addition Date.
II.4 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
III.1 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 purchasing the Purchased Assets and in
accepting the contribution of and purchasing 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;
(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) except as set forth in the provisos
of Sections 2.02(c) and 2.03(b), 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 and Liens contemplated
by the Credit Agreement);
(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;
(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 and any purchase
option at Lease termination may be contained in a separate
side letter; provided that any 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 Initial 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 Initial 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 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 with respect
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 (A) applicable
bankruptcy, insolvency, reorganization, moratorium 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);
(v) No Violation. The consummation of
the 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
investigations 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 contemplated 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;
(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;
(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; and
(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.
III.2 Representations and Warranties of TLFC. TLFC
makes the following representations and warranties on which Trans
Leasing relies in contributing the Contributed Assets, 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
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 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.
III.3 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 3.04 will constitute the only
remedies available to TLFC and the Secured Party in respect of
such untruth.
III.4 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
IV.1 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.
(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 (i) 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, (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 Lender
therein.
(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 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.
IV.2 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 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.
IV.3 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
V.1 Conditions to TLFC's Obligations. The
obligations of TLFC to accept the contribution of the Contributed
Assets 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 Initial 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 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.
V.2 Conditions to Trans Leasing's Obligations. The
obligations of Trans Leasing to contribute the Contributed Assets
and to 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
VI.1 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.
VI.2 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 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
VII.1 Amendment. This Agreement may be amended only by
written agreement of TLFC, Trans Leasing and the Secured Party.
VII.2 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.
VII.3 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
c/o The Corporation Trust Company
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:
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.
VII.4 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.
VII.5 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.
VII.6 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 and privileges provided by law.
VII.7 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.
VII.8 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.
VII.9 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.
VII.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.
VII.11 Schedules and Exhibits. The Schedules and
Exhibits constitute a part of this Agreement and are incorporated
into this Agreement for all purposes.
VII.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.
* * * * *
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: /s/ Norman Smagley
Name: Norman Smagley
Title: Vice President - Finance
TL LEASE FUNDING CORP. IV
By: /s/ Norman Smagley
Name: Norman Smagley
Title: Vice President - Finance
EXHIBIT A
FORM OF ASSIGNMENT OF CONTRIBUTED ASSETS
For value received, in accordance with the Contribution
and Sale Agreement dated as of _________________, 1997 (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 all of Trans
Leasing's obligations under the Contributed Leases) and all
monies due or to become due thereunder after _________________,
1997, (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 all of 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.
IN WITNESS WHEREOF, the undersigned has caused this
Assignment to be duly executed as of ________________, 1997.
TRANS LEASING INTERNATIONAL, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
EXHIBIT B
FORM OF ASSIGNMENT OF PURCHASED ASSETS
For value received, in accordance with the Contribution
and Sale Agreement dated as of _________________, 1997 (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 all of Trans Leasing's
obligations under the Purchased Leases) and all monies due or to
become due thereunder after __________________, 1997, (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 all of
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.
IN WITNESS WHEREOF, the undersigned has caused this
Assignment to be duly executed as of ____________________, 1997.
TRANS LEASING INTERNATIONAL, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
EXHIBIT C
FORM OF ASSIGNMENT OF ADDITIONAL ASSETS
For value received, in accordance with the Contribution
and Sale Agreement dated as of ________________, 1997 (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 all of 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 all of 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.
IN WITNESS WHEREOF, the undersigned has caused this
Assignment to be duly executed as of [____ __], 199[_].
TRANS LEASING INTERNATIONAL, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
EXHIBIT D
FORMS OF LEASE
See Attached.
CONTRIBUTED LEASE SCHEDULE
See Attached.
PURCHASED LEASE SCHEDULE
See Attached.
LEASE CRITERIA SCHEDULE
1. As of the Initial Cut-Off Date or the applicable
Additional Cut-Off Date, as the case may be, the remaining term
of each Lease is between 2 months and 66 months; provided that
there is no Lease with a term that extends beyond December 31,
2002.
2. As of the Initial Cut-Off Date or the applicable
Additional Cut-Off Date, as the case may be, no unpaid scheduled
lease payment pursuant to any Lease (other than a Skipped
Payment, as defined in the Servicing Agreement) 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.
3. As of the Initial Cut-Off Date or the applicable
Additional Cut-Off Date, as the case may be, no scheduled lease
payment on any Lease other than a Skipped Payment (as defined in
the Servicing Agreement) was more than 90 days delinquent during
the 12-month period prior to such date (other than due to
administrative delays, such as initial billings).
SPECIFIED PORTFOLIO CHARACTERISTICS SCHEDULE1
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 40% 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 Initial Cut-Off
Date does not exceed 5% of the Aggregate Discounted Lease Balance
as of the Initial Cut-Off Date.2
_______________________________
1 Capitalized terms used in this Schedule and not otherwise
defined shall have the respective meanings set forth in the
Credit Agreement.
2 Applies to the Initial Cut-Off Date only.
76
JSO/29833-10/167.4
_________________________________________________________________
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
January 21, 1997
_________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE IDEFINITIONS 1
1.1 Definitions 1
1.2 Other Definitional Provisions 4
ARTICLE IIADMINISTRATION AND SERVICING OF LEASES 5
2.1 Appointment and Acceptance; Duties 5
2.2 Collection of Payments 7
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 12
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 15
2.14 Annual Independent Public Accountants' Servicing
Reports 16
ARTICLE IIIACCOUNTS AND DEPOSITS 16
3.1 Establishment of Accounts 16
3.2 Investment of Accounts 16
3.3 Deposits 17
ARTICLE IVOTHER MATTERS RELATINGTO THE SERVICER 18
4.1 Liability of the Servicer and Others 18
4.2 Merger or Consolidation of Servicer; Assumption of
Servicer's Obligations 18
4.3 The Servicer Not to Resign 19
4.4 Access to Certain Documentation and Information
Regarding the Assets 19
ARTICLE VSERVICER DEFAULTS 20
5.1 Servicer Defaults 20
5.2 Lender to Act; Appointment of Successor 22
5.3 Notification to Lender 23
5.4 Waiver of Past Defaults 24
5.5 List of Leases 24
ARTICLE VIMISCELLANEOUS PROVISIONS 24
6.1 Termination 24
6.2 Amendment 24
6.3 Evidence of Filings 25
6.4 Governing Law 25
6.5 Notices 25
6.6 Severability of Provisions 27
6.7 Assignment 27
6.8 Schedules and Exhibits 27
6.9 No Waiver; Cumulative Remedies 27
6.10 Counterparts 27
6.11 Binding Effect; Third-Party Beneficiaries 27
6.12 Merger and Integration 27
6.13 Headings 28
6.14 Certificates and Opinions of Counsel 28
LIST OF EXHIBITS
Exhibit A Form of Monthly Statement
Exhibit B Form of Certificate
SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of January 21, 1997
(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 December 20, 1996. 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
I.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 December 20, 1996 between
TLFC and the Lender, together with all amendments, restatements,
supplements and modifications thereof or thereto.
"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 P-1 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 or on behalf of a Lessee in excess of the
Scheduled Lease Payment due to the delinquency of a Lease payment
on a Lease.
"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.
"Moody's" means Moody's Investor Service, a division of
Dun & Bradstreet Corporation, and its successors and assigns.
"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 Companies, Inc., and its successors and
assigns.
"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, 1997.
I.2 Other Definitional Provisions.
(a) Terms Defined in the Credit Agreement. For the
purposes of this Agreement, capitalized terms used but not
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).
ARTICLE II
ADMINISTRATION AND SERVICING OF LEASES
II.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 as provided in Section 2.3
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.
(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, subject to the
limitations in Section 10.4(e) of the Credit Agreement, 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 (or a portion thereof), 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, any Partial Early
Termination 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
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.
II.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. The Servicer may not grant extensions,
rebates, or adjustments on a Lease which will extend the original
due dates of any Scheduled Lease Payment, reduce the number of
Scheduled Lease Payments or reduce the amount of any Scheduled
Lease Payment; provided, however, that the Servicer may permit
Leases to become Partial Early Termination Leases as described in
Section 2.2(b), and, provided, further, that to the extent
consistent with the Servicer's past practices, the Servicer may,
on only one occasion with respect to any Lease, permit a
deferment of not more than three consecutive Scheduled Lease
Payments (collectively, a "Skipped Payment") under such Lease to
the end of the term of such Lease so long as (i) the sum of the
Discounted Lease Balances of all Leases with respect to which
there has been a Skipped Payment since the Cut-Off Date does not
exceed 5% of the Aggregate Discounted Lease Balance as of the
date of determination. 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 and Partial Early
Termination Leases. The Servicer may, in its sole discretion,
permit a Lease to become an Early Termination Lease or a Partial
Early Termination Lease (which shall not include a Lease that
becomes an Early Termination Lease or a Partial Early Termination
Lease due to a Casualty Loss), so long as, unless another Lease
is substituted for such Lease or the terminated portion thereof
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 (i) (A) in the case of an Early Termination Lease, the
Discounted Lease Balance of such Lease as of the Determination
Date related to the Collection Period in which such Lease became
an Early Termination Lease or (B) in the case of a Partial Early
Termination Lease, the reduction in the Discounted Lease Balance
of such Lease as of the Determination Date related to the
Collection Period in which such Lease became a Partial Early
Termination Lease, (ii) one month's interest on the amount
described in clause (i) at the Discount Rate as of the
Determination Date and (iii) the amount of any unreimbursed
Servicer Advances with respect to such Lease.
(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
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.
II.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.
II.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
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.
II.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.
II.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.
II.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.
II.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.
(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.
II.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
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.
(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.
II.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.
II.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
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.
II.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, 1997, 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").
II.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, 1997, 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).
II.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, 1997, 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 Statements for such Transaction Year were prepared
in compliance with this Agreement, except for such exceptions as
it believes to be immaterial and such other exceptions as will be
set forth in such firm's report.
ARTICLE III
ACCOUNTS AND DEPOSITS
III.1 Establishment of Accounts. The Servicer
shall establish the Collection Account as described in Section
10.2 of the Credit Agreement.
III.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.
III.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 Initial Cut-Off Date and prior to
the Closing Date.
(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 (including the portion of the Warranty
Purchase Price attributable to unreimbursed
Servicer Advances) 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 (other than the Repurchase Price) on
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
IV.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
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.
IV.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.
IV.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
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.
IV.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
V.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;
(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, marshaling 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, marshaling 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
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.
V.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
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 compensation permitted to be paid to the Servicer
pursuant to Section 2.10 of 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.
V.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.
V.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.
V.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
VI.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.
VI.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.
VI.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.
VI.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.
VI.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:
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-6
301 South College Street
Charlotte, NC 28288-0610
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.
VI.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.
VI.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.
VI.8 Schedules and Exhibits. The Schedules and
Exhibits constitute a part of this Agreement and are incorporated
into this Agreement for all purposes.
VI.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.
VI.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.
VI.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.
VI.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
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.
VI.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.
VI.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.
* * * * *
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: /s/ Norman Smagley
Name: Norman Smagley
Title: Vice President - Finance
TRANS LEASING INTERNATIONAL, INC.,
as Servicer
By: /s/ Norman Smagley
Name: Norman Smagley
Title: Vice President - Finance
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,
as Lender
By: /s/ Bill A. Shirley
Name: Bill A. Shirley
Title: Vice President
Exhibit A
Form of Monthly Statement
See Attached.
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 ______________, 1997 (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:_____________________________
110
JSO\29833-10\168.4
REVOLVING CREDIT AND TERM LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AND SECURITY
AGREEMENT is entered into as of December 20, 1996, 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 $75,000,000 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 of 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.
"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 December 20, 1996,
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.
"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 any Swap Agreement then in effect);
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" has the meaning set forth for such term
in the Contribution and Sale Agreement, which shall be the
first day TLFC acquires assets from TLI under the
Contribution and Sale Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended, the Treasury Regulations adopted thereunder and the
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 Initial Cut-Off Date and ending on the last day of
the month in which the Initial Cut-Off Date occurs. 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, Partial 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 June 30, 1997.
"Contribution and Sale Agreement" means the
Contribution and Sale Agreement between Borrower and Trans
Leasing entered into in connection with this Agreement, in
the form of Exhibit E hereto, 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, the Initial Cut-Off Date, 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 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 following 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, calculated 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 (other than Scheduled Lease
Payments to the extent there has been a Servicer Advance
with respect thereto); provided, however, that the
Discounted Lease Balance of any Defaulted Lease, Early
Termination Lease, Expired Lease or Lease purchased by Trans
Leasing or the Servicer, or replaced with a Substitute
Lease, 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:
(ii) all payments due in any Collection Period are due
on the last day of such Collection Period;
(iii) payments are discounted on a monthly basis using a
30-day month and a 360-day year;
(iv) 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 all 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, or replaced with a Substitute Lease, shall be
equal to zero.
"Discount Rate" means, as of any date of
determination, a per annum rate equal to
(a) with respect to any date of determination prior to
the Transition Date, (A) if at any such date there are no
Swap Agreements in effect which provide for payments to be
made on the next following Payment 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, (B) if at any such
date there is one or more Swap Agreements in effect which
provide for payments to be made on the next following
Payment Date and the aggregate notional amount of such Swap
Agreements is greater than or equal to the balance of the
Loan as of such date, the sum of (i) 75 basis points, (ii)
the weighted average fixed rate of interest to be paid by
Borrower under all such Swap Agreements and (iii) the
Servicing Fee Rate, and (C) if at any such date there is one
or more Swap Agreements in effect which provide for payments
to be made on the next following Payment Date and the
aggregate notional amount of such Swap Agreements is less
than the balance of the Loan as of such date, the weighted
average of the rates determined pursuant to clauses (A) and
(B), with the rate in clause (B) weighted by the aggregate
notional amount of such Swap Agreements and the rate in
clause (A) weighted by the amount the Loan as of such date
exceeds the aggregate notional amount of such Swap
Agreements, 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
required to be maintained under the first sentence of
Section 8.9(a), 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 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 in full 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 for any Equipment the
anticipated residual value of such Equipment upon the
expiration of the related 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 originated or
acquired by Trans Leasing in accordance with its normal
valuation procedures and not including any administrative
costs incurred in the realization of such residual value),
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 or
on behalf of 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.
"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" has the meaning set forth for such
term in the Contribution and Sale Agreement.
"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, 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).
"Initial Cut-Off Date" has the meaning set forth for
such term in the Contribution and Sale Agreement.
"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 (immediately
prior to the acquisition thereof by the Borrower) 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, a Lease is replaced with a
Substitute Lease pursuant to Section 10.4 or all Liquidation
Proceeds or other proceeds from the disposition of the
related Equipment upon expiration or termination of a Lease
have been deposited in the Collection Account, 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.
"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, on any date a Swap Agreement is in effect which
provides for payments to be made on the next following
Payment Date, if the interest rate to be used in determining
the amount of payments to be received by Borrower with
respect to such Payment Date under such 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 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 the Limited
Recourse Agreement executed by Trans Leasing in favor of
Lender in connection with this Agreement, in the form of
Exhibit G hereto, including all amendments, modifications
and supplements hereto, renewals, extensions or restatements
thereof.
"Liquidation Expenses" means, with respect to any Lease
and the related Equipment, 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 such Equipment upon or
after the expiration or earlier termination of such Lease
(or a portion thereof) 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
Initial 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
Initial Cut-Off Date, of all Original Leases identified by
Lease Number, original Equipment cost, Discounted Lease
Balance as of the Initial 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
Initial 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.
"Loan" means the Revolving Loans and the Term Loan.
"Loan Commitment Amount" means $75,000,000.
"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.
"Original Lease Transfer Agreements" means the
Assignment of Contributed Assets and the Assignment of
Purchased Assets, in the form of Exhibit A and B,
respectively, to the Contribution and Sale Agreement,
pursuant to which the Original Leases are transferred to
Borrower by Trans Leasing.
"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 in
the month next succeeding the month in which the Closing
Date occurs, 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 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.
"Partial Early Termination Lease" means any Lease
a portion of which relating to particular Equipment has been
terminated (including because of a Casualty Loss) prior to
its scheduled expiration date.
"Partial Early Termination Lease Proceeds" means
any and all cash proceeds or rents realized from the sale or
re-Lease of Equipment related to the terminated portion of a
Partial Early Termination Lease (net of Liquidation
Expenses).
"Permitted Liens" means:
(b) Liens granted in favor of Lender or any Swap
Counterparty under or in connection with this Agreement
(including as contemplated by Section 10.6);
(c) 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
(d) 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 or Partial 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, 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.
"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 or, with respect to any
Substitute Lease, after the applicable Substitution Cut-Off
Date, in each case after giving effect to any adjustments as
a result of a portion of such Lease being terminated prior
to its scheduled expiration date (it being understood that
Scheduled Lease Payments do not include any Excluded
Amounts)
.
"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 Advance" shall have the meaning set forth for
such term in the Servicing Agreement.
"Servicer Default" has the meaning specified in the
Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement
among Borrower, Trans Leasing, as Servicer, and Lender
entered into in connection with this Agreement, in the form
of Exhibit F hereto, 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 Lease and Residual Balance on the
related Determination Date.
"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 providing for
payment of the LIBO Rate to Borrower in 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 over the period the Swap Agreement is
effective anticipated on the date the Swap Agreement is
executed.
"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, and (iii) unless a
Substitute Lease was substituted therefor in accordance with
Section 10.4, an amount equal to (A) 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 and
(B) the Discounted Lease Balance of the terminated portion
of any Lease that became a Partial Early Termination Lease;
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.
"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, plus the amount of any
unreimbursed Servicer Advances with respect to such Lease,
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) Subject to the limitation set forth in Section
2.1, Borrower may request an initial Revolving Loan on any date
prior to the Commitment Expiration Date in an amount up to the
product of (i) the Advance Rate and (ii) the sum of the
Discounted Lease Balance of the Original Leases that are to
become part of the Collateral in accordance with Section 10.3 on
the Borrowing Date.
(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 up 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(a), (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 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 required to be maintained
under the first sentence of Section 8.9(a). 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 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.,
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 an interest in any or all of the
Collateral or 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;
(3) to the Swap Counterparty, if any, by wire transfer
to the Swap Counterparty Account, any amounts due to the
Swap Counterparty under any Swap Agreement then in effect;
(4) to Lender, any Interest Arrearage for such Payment
Date; and
(5) 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 Agreement, 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.
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;
(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 date hereof (other than those
contained in Section 7.12) 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 upon execution will 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
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,
the Amended and Restated Contribution and Sale Agreement, the
Pooling and Servicing Agreement and the Trust Agreement, each
dated as of October 6, 1995, and the Amended and Restated
Contribution and Sale Agreement, the Pooling and Servicing
Agreement and the Trust Agreement, each dated as of November 26,
1996, 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.
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
Initial Cut-Off Date is located (based on billing addresses of
the related Lessees)), (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 and (iii) for the
interest of any Swap Counterparty as set forth herein. 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 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.
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 the
Collateral 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 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.
Within 30 days of each six-month anniversary of the date of this
Agreement, Borrower shall obtain and deliver to Lender a copy of
UCC, judgment and tax lien searches, or updates since the date of
the last search supplied to Lender, with respect to each of
Borrower and Trans Leasing in the States of California, Delaware,
Florida, Illinois, New York, Pennsylvania and Texas.
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 Transition 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.
8.12 Filing Locations. Within 10 days after 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 any Swap Agreement, including any Swap Agreement
required to be maintained pursuant to Section 8.9 hereof, (d)
pursuant to the Pooling and Servicing Agreement, dated as of
October 6, 1995, or as permitted thereunder and (e) pursuant to
the Pooling and Servicing Agreement, dated as of November 26,
1996, 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
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, (d) all amounts due from and other
obligations of Borrower to the Swap Counterparty under any Swap
Agreement and (e) 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 (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 Leases as Collateral. Any Lease contributed to
Borrower pursuant to the Limited Recourse Agreement shall become
Collateral hereunder.
(b) Each Lease shall be an Eligible Lease as of the
related Cut-Off Date, and (1) with respect to Original Leases,
all of the Specified Portfolio Characteristics shall be true with
respect to the Original Leases as of the Initial Cut-Off Date,
and (2) with respect to Additional Leases, the addition of such
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) Concurrent with the addition of any Leases
(including the Original Leases) pursuant to this Section 10.3,
Lender shall receive the following:
(1) (A) with respect to Original Leases, the Original
Lease Transfer Agreements for the unconditional contribution
and sale of the Original Leases and the related Equipment to
Borrower and the initial List of Leases or (B) with respect
to Additional Leases, 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.
10.4 Substitution of Leases.
(a) Subject to the provisions of Section 10.4(b)
through (e), after the Transition Date Borrower may substitute a
Substitute Lease and the related Equipment for and replace (i) a
Lease (and the related Equipment) that has become a Defaulted
Lease or an Early Termination Lease, (ii) that portion of a
Partial Early Termination Lease (and the related Equipment) that
has been terminated prior to the scheduled expiration date of
such Lease or (iii) a Lease (and the related Equipment) that 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 the
substitutions pursuant to Section 10.4(a), made as of any
Substitution Date, considered as a whole, shall not cause any of
the Specified Portfolio Characteristic to be untrue as of the
related 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
Substitute Lease 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
Substitute Lease 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 Substitute Lease Cut-Off Date,
the Substitute Leases being substituted on such date have an
aggregate Discounted Lease Balance not less than the
aggregate Discounted Lease Balance of the Leases (or
portions thereof) 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 column of the Payment Schedule
labeled "Aggregate Scheduled Lease Payments" (a "Payment
Deficiency"), or increase the amount of such a Payment
Deficiency.
(e) The Borrower shall also have the right to
substitute Equipment under any Lease for comparable Equipment so
long as there is no change in the amount, number or timing of the
Scheduled Lease Payments with respect to such Lease and as of the
related date of substitution the Discounted Equipment Residual
Value of the substitute Equipment is not less than the Discounted
Equipment Residual Value of the original Equipment and provided
that, with respect to the substitute Equipment, the
representations and warranties set forth in subsections (i),
(vii) and (ix) of Section 3.01(a) of the Contribution and Sale
Agreement and Section 7.12 hereof are true as of the date of such
substitution.
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.
10.6 Swap Agreements. At any time and from time to
time prior to the Conversion Date, Borrower and Lender may agree
that Borrower shall maintain a Swap Agreement with a Swap
Counterparty reasonably acceptable to Lender. If Borrower elects
to obtain a Swap Agreement (including any Swap Agreement required
under Section 8.9) from a Swap Counterparty other than Lender,
Lender agrees to cooperate in good faith and execute such
documents (including any necessary intercreditor agreements) as
may be reasonably necessary so as to grant and provide to such
Swap Counterparty a security interest in the Collateral
equivalent to the security interest therein that the Lender would
have as Swap Counterparty by virtue of this Agreement.
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 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 all documents required under the provisions
of Section 10.3.
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 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.
(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 Initial Cut-Off Date.
13.10 Initial Additional Certificate. An Initial
Addition Certificate in the form of Exhibit K hereto signed by a
Responsible Officer (x) indicating the sum of the Discounted
Lease Balances of the Original Leases added to the Collateral in
accordance with Section 10.3 on initial Borrowing Date and (y)
certifying that the requirements of Section 10.3 have been
satisfied and that the conditions precedent set forth in Sections
12 and 13 have been satisfied.
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 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
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.
(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.
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 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 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.
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. 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, 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 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.
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 /s/ Norman Smagley
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: /s/ Bill A. Shirley,
Printed Name: Bill A. Shirley
Title: Vice President
Notice to be sent to:
First Union National Bank of North
Carolina
One First Union Center TW-6
301 South College Street
Charlotte, NC 28288-0610
Attention: Christopher R. Snyder
Vice President
Telephone: 704/374-3017
Facsimile: 704/374-3254
Exhibit A
REVOLVING CREDIT AND TERM LOAN NOTE
$75,000,000.00 Dated: December 20, 1996
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 Seventy-Five
Million Dollars ($75,000,000.00) 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 December 20,
1996 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:
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 December 20, 1996 (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 [(a)]/[(b)]/[(c)] of the
Agreement, this Notice of Borrowing in respect of the Revolving
Loans represents the request of the undersigned to borrow on
_____________, 199_ (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(a) NO ADDITIONAL PARAGRAPH IS
INSERTED.]
[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_.
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:________________________
____
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 December 20, 1996 (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: ___________________________
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 December 20, 1996 (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:
_______________________________
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%
Exhibit D
Form of Payment Schedule
Aggregate Payment due Schedule
Payment Scheduled Servicing to Swap Company Principal
Date Lease Fee Payment
Payments
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
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.
Exhibit J
Form of Addition 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 December 20, 1996 (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.
The undersigned hereby certifies that the requirements of
Sections 8.1(b) and (c) have been satisfied.
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:________________________
_______
Exhibit K
Form of Initial Addition 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 December 20, 1996 (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(A) of the Agreement, Borrower
hereby certifies that on _______________ it acquired Original
Leases from Trans Leasing with an aggregate Discounted Lease
Balance as of the Initial Cut-Off Date (calculated using the
Discount Rate for the Closing Date) equal to $___________
pursuant to the Initial Lease Transfer Agreements. The
undersigned hereby certifies that the requirements of Sections
8.1(b) and (c) and Section 10.3 of the Agreement have been
satisfied and all conditions precedent set forth in Sections 12
and 13 of the Agreement have been satisfied.
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:________________________
_______
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 December 20, 1996
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 1
1.1 Defined Terms 1
SECTION 2. COMMITMENT TO LEND 17
2.1 Revolving Loans 17
2.2 Term Loan 18
SECTION 3. BORROWING PROCEDURES; CERTAIN LOAN TERMS 18
3.1 Borrowing Procedures for Revolving Loans; Deemed
Requests for
Amounts Due on each Payment Date 18
3.2 Transition to Term Loan; Final Revolving Loan or
Draw on
Limited Recourse Agreement 19
3.3 Capital Adequacy 19
SECTION 4. INTEREST AND FEES 20
4.1 Revolving Loans 20
4.2 Term Loan 20
4.3 Method of Calculating Interest and Fees 20
SECTION 5. REPAYMENT OF PRINCIPAL 20
5.1 Revolving Loan Principal Payments 20
5.2 Term Loan Principal Payments 21
5.3 Prepayment of Loan upon Sale of Other Notes 21
SECTION 6. APPLICATION OF AMOUNTS ON DEPOSIT IN COLLECTION
ACCOUNT 21
6.1 Application of Amounts on Deposit in the Collection
Account 21
6.2 Taxes 23
SECTION 7. BORROWER'S REPRESENTATIONS AND WARRANTIES 24
7.1 Existence and Power 24
7.2 Loan Documents and Note Authorized; Binding
Obligations 24
7.3 No Conflict; Legal Compliance 24
7.4 Executive Offices 25
7.5 Litigation 25
7.6 Consents and Approvals 25
7.7 Other Agreements 25
7.8 Margin Regulations 25
7.9 Taxes 25
7.10 Solvency 26
7.11 Representations and Warranties 26
7.12 Good Title to the Collateral; First Priority
Security Interest 26
7.13 Investment Company Act 26
SECTION 8. BORROWER'S AFFIRMATIVE COVENANTS 26
8.1 Asset Base Certificates; Additional Access and
Information 26
8.2 Existence; Compliance with Law, Books and Records,
Commingling of Funds 27
8.3 Taxes and Other Liabilities 28
8.4 Notice of Liens 28
8.5 Obligations with Respect to Leases 28
8.6 Preservation of Security Interest 28
8.7 Consolidated Return 28
8.8 Taxable Income from the Leases 29
8.9 Maintenance of Swap Agreement 29
8.10 Contribution and Sale Agreement 29
8.11 Borrower's Identity 29
8.12 Filing Locations 29
SECTION 9. BORROWER'S NEGATIVE COVENANTS 29
9.1 Liens; Negative Pledges; and Encumbrances 29
9.2 Indebtedness and Guarantees 30
9.3 Amendments of Charter Documents; Conduct of
Business;
No Merger 30
9.4 No Use of Lender's Name 30
SECTION 10. GRANTS OF SECURITY INTEREST; THE COLLATERAL 30
10.1 Security Interest 30
10.2 Creation of Collection Account; Investments 31
10.3 Addition of Leases 32
10.4 Substitution of Leases 32
10.5 Release of Liens 34
10.6 Swap Agreements 34
SECTION 11. LIMITATION ON LIABILITY 34
SECTION 12. CONDITIONS PRECEDENT TO ALL REVOLVING LOANS 35
12.1 Notice 35
12.2 Default 35
12.3 Warranties 35
12.4 Additional Lease Transfer Agreements 35
SECTION 13. CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN 35
13.1 Note 35
13.2 Other Agreements and Financing Statements 35
13.3 Resolutions 36
13.4 Incumbency Certificate 36
13.5 By-Laws 36
13.6 Certificate of Incorporation 36
13.7 Good Standing 37
13.8 Opinion 37
13.9 Asset Base Certificate 37
13.10 Initial Additional Certificate 37
SECTION 14. EVENTS OF DEFAULT AND REMEDIES 37
14.1 Events of Default 37
14.2 Waiver of Default 38
14.3 Remedies 38
SECTION 15. EXPENSES AND INDEMNITEES 41
15.1 Expenses 41
15.2 Indemnification 41
(a) General Indemnity. 41
(b) Procedures for Suits 41
(c) Survival; Defense 41
SECTION 16. MISCELLANEOUS 42
16.1 Survival 42
16.2 No Waiver by Lender 42
16.3 Notices 42
16.4 Headings 42
16.5 Severability 42
16.6 Entire Agreement; Construction; Amendments and
Waivers 43
16.7 Reliance by Lender 43
16.8 Marshalling; Payments Set Aside 43
16.9 No Set-Offs by Borrower 43
16.10 Binding Effect, Assignment Transfer 43
16.11 Counterparts 44
16.12 Equitable Relief 44
16.13 Governing Law 44
16.14 Consent to Jurisdiction 45
16.15 Waiver of Jury Trial 45
16.16 General Interpretive Principles 45
16.17 Termination 46
16.18 No Petition Covenants 46
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
Exhibit K Form of Initial Addition Certificate
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