<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 0-21370
LEASING SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0116801
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 ALMADEN BOULEVARD, SUITE 1500, SAN JOSE, CALIFORNIA 95113
(Address of principal executive offices) (Zip Code)
(408) 995-6565
(Registrant's telephone number, including area code)
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 Registrant's common stock outstanding at March 31, 1996
was 8,065,180 shares.
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
Page
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
March 31, 1996 and December 31, 1995 2
Consolidated Condensed Income Statements
Three month period ended March 31, 1996 and 1995 3
Consolidated Condensed Statements of Cash Flows
Three month period ended March 31, 1996 and 1995 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information 10
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 11
1
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Share Amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- -----------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents............... $ 10,441 $ 8,423
Accounts receivable..................... 5,545 4,068
Investment in direct finance leases -
net.................................... 20,470 18,461
Investment in operating leases - net.... 207,868 190,022
Property and equipment - net............ 1,717 1,527
Other assets............................ 1,376 1,601
-------- --------
TOTAL ASSETS......................... $247,417 $224,102
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable -- equipment purchases. $ 2,179 $ 19,376
Accrued and other liabilities........... 6,220 5,709
Income taxes payable.................... 89 553
Recourse debt........................... 56,350 71,681
Non-recourse debt....................... 123,908 93,354
Capital lease obligations............... 131 143
Deferred income taxes................... 3,358 2,374
-------- --------
TOTAL LIABILITIES 192,235 193,190
-------- --------
SHAREHOLDERS' EQUITY
Common stock, authorized 10,000,000
shares; issued and outstanding:
8,065,180 and 6,263,930 shares...... 37,154 14,661
Retained earnings....................... 18,028 16,251
-------- --------
TOTAL SHAREHOLDERS' EQUITY........... 55,182 30,912
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' $247,417 $224,102
EQUITY.............................. ======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
2
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED INCOME STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1996 AND 1995 (Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
<S> <C> <C>
1996 1995
------- -------
REVENUES
Operating lease revenue.............. $25,916 $16,086
Earned lease income.................. 563 815
Gain on sale of equipment............ 40 92
Interest income...................... 115 120
Other................................ 3 2
------- -------
TOTAL REVENUES................... 26,637 17,115
------- -------
COSTS AND EXPENSES
Depreciation - operating leases...... 17,303 10,874
Selling, general and administrative.. 2,444 1,921
Interest............................. 3,666 2,104
Other................................ 262 131
------- -------
TOTAL COSTS AND EXPENSES......... 23,675 15,030
------- -------
INCOME BEFORE INCOME TAXES.............. 2,962 2,085
PROVISION FOR INCOME TAXES.............. 1,185 834
------- -------
NET INCOME.............................. $ 1,777 $ 1,251
======= =======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE.............. $.25 $.20
======= =======
COMMON AND COMMON
EQUIVALENT SHARES.................... 7,214 6,278
======= =======
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
3
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTH PERIOD ENDED MARCH 31, 1996 AND 1995 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING $ 1,836 $ 2,756
ACTIVITIES............................. -------- --------
INVESTING ACTIVITIES:
Cost of equipment acquired for lease... (41,699) (15,547)
Cash received over revenue recognized
on leases............................. 4,531 2,957
Property and equipment purchases....... (354) (94)
-------- --------
Net cash used for investing activities. (37,522) (12,684)
-------- --------
FINANCING ACTIVITIES:
Borrowings:
Non-recourse......................... 45,525 22,592
Recourse............................. 54,625 17,350
Repayments:
Non-recourse......................... (14,971) (15,726)
Recourse............................. (69,956) (9,016)
Issuance of common stock............... 22,493 110
Repayment of capital lease obligations. (12) (13)
-------- --------
Net cash provided by financing 37,704 15,297
activities............................ -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS... 2,018 5,369
CASH AND CASH EQUIVALENTS:
Beginning of period.................... 8,423 11,706
-------- --------
End of period.......................... $ 10,441 $ 17,075
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
and the rules and regulations of the Securities and Exchange Commission for
interim financial statements. Accordingly, the interim statements do not
include all of the information and disclosures required for annual financial
statements. In the opinion of the Company's management, all adjustments
(consisting solely of adjustments of a normal recurring nature) necessary
for a fair presentation of these interim results have been included.
Intercompany accounts and transactions have been eliminated. These financial
statements and related notes should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. The balance sheet
at December 31, 1995 has been derived from the audited financial statements
included in the Annual Report on Form 10-K. The results for the three months
ended March 31, 1996 are not necessarily indicative of the results to be
expected for the entire year.
2. PUBLIC OFFERING OF COMMON STOCK
-------------------------------
On February 28, 1996, the Company closed a public stock offering of
1,800,000 shares of its Common Stock. The Company received net proceeds of
$22,493,000 from the offering.
3. CASH AND CASH EQUIVALENTS
-------------------------
Cash equivalents are comprised of highly liquid debt instruments with
maturities of three months or less. At March 31, 1996, $7,042,000 of such
amount was restricted solely for repayment of the debt securities of Leasing
Solutions Receivables, Inc., the Company's wholly-owned subsidiary, issued
in public offerings in 1994 and as collateral therefor, and was not
available to other creditors or for other uses.
4. INVESTMENT IN LEASES
--------------------
The components of the net investment in direct finance leases and in
operating leases as of March 31, 1996 and December 31, 1995 are shown below
(in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Direct finance leases:
Minimum lease payments receivable $ 22,033 $ 19,832
Estimated unguaranteed residual values 1,360 1,372
Initial direct costs - net 49 73
Unearned lease income (2,972) (2,816)
--------- ---------
Investment in direct finance leases - net $ 20,470 $ 18,461
========= =========
Operating leases:
Equipment under operating leases $ 335,118 $ 301,255
Initial direct costs - net 1,823 1,664
Accumulated depreciation (128,951) (112,784)
Allowance for doubtful accounts (122) (113)
--------- ---------
Investment in operating leases - net $ 207,868 $ 190,022
========= =========
</TABLE>
A substantial portion of the increase in investments in leases was financed
with non-recourse and recourse debt.
5
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1996.
RESULTS OF OPERATIONS
Total revenues increased 56% to $26,637,000, for the three month period ended
March 31, 1996, compared with the corresponding prior year period. Operating
lease revenue increased 61% to $25,916,000, for the three month period ended
March 31, 1996, compared with the corresponding prior year period. The increase
in operating lease revenue reflects a higher average investment in operating
leases, resulting from increases in operating leases originated and acquired
by the Company over the past year and an increase in interim rents received in
the first quarter of 1996 compared to the first quarter of 1995.
Earned lease income decreased 31% to $563,000, for the three month period ended
March 31, 1996, compared with the corresponding prior year period. The decrease
is a result of outstanding direct finance leases being paid down and the
Company continuing to focus its leasing activity in 1996 on operating leases.
Depreciation expense for operating leases increased 59% to $17,303,000, for the
three month period ended March 31, 1996, compared with the corresponding prior
year period. The increase is due to the increase in the operating lease base,
resulting from increases in operating leases originated and acquired by the
Company over the past year.
Selling, general and administrative expenses increased 27% to $2,444,000, for
the three month period ended March 31, 1996, compared with the corresponding
prior year period. The increase is primarily attributable to increased
compensation and benefit costs as a result of an increase in the number of
employees and benefit costs.
Interest expense increased 74% to $3,666,000, for the three month period ended
March 31, 1996, compared with the corresponding prior year period. The increase
is due to higher average recourse and non-recourse debt outstanding, which
resulted from additional borrowings to fund the growth in the Company's lease
portfolio.
The provision for income taxes was 40% for the quarter ended March 31, 1996, and
40% for the corresponding prior year period.
Net income increased 42% to $1,777,000, for the three month period ended March
31, 1996, compared with the corresponding prior year period. Earnings per share
increased 25% to $.25 for the three month period. Net income increased faster
than earnings per share principally due to the effect of the issuance of
additional shares of Common Stock in the Company's public offering in February
1996.
6
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash flow from operations of $1,836,000 during the
quarter, compared to net income of $1,777,000 for the same period. Cash flow
from operations was higher than net income primarily as a result of non-cash
expenses such as depreciation and amortization of $17,467,000, offset by uses of
cash in operations, including resulting changes in accounts payable, income
taxes payable, and other assets and liabilities, totalling $17,408,000.
Investing activities, which are primarily related to investments in equipment
for lease, used $37,522,000 during the quarter. Financing activities in the
quarter generated $37,704,000 from the Company's new borrowings of recourse and
non-recourse debt ($100,150,000) and the Company's stock offering on February
28, 1996 ($22,493,000), aggregating $122,643,000, offset by repayment of
recourse and non-recourse borrowings aggregating $84,927,000. The net result of
the above activity for the quarter was an increase in cash and cash equivalents
of $2,018,000.
The financing necessary to support the Company's leasing activities has
principally been provided from non-recourse and recourse borrowings.
Historically, the Company has obtained recourse and non-recourse borrowings from
money center banks, regional banks, insurance companies, finance companies and
financial intermediaries. In 1994, the Company, through its wholly-owned
subsidiary, Leasing Solutions Receivables, Inc. (the "Subsidiary"), began
obtaining long-term financing for a substantial portion of its leasing activity
through the public issuance of secured, non-recourse debt securities (a
"securitization"). Borrowings under the securitizations are secured by lease
receivables and the underlying equipment financed under such arrangements.
Prior to the permanent financing of its leases, interim financing has been
obtained through short-term, secured, recourse facilities. The Company's
available credit under these short-term, recourse facilities currently totals
$116.5 million. A brief description of each of those facilities presently in
place follows.
1) a $92,500,000 facility syndicated with nine banks, expiring September
13, 1996. Borrowings under the facility bear an interest rate, at the
Company's option, of the agent bank's prime rate or LIBOR plus 150
basis points.
2) a $10,000,000 facility with one bank, with borrowing available through
June 30,1996, and repayments due 240 days after borrowing. Borrowings
under the facility bear interest at the federal funds rate plus 240
basis points.
3) a $3,000,000 revolving facility with one bank, expiring July 26, 1996.
Borrowings under the facility bear interest at the bank's prime rate
plus 75 basis points. In addition to interim financing of lease
transactions, proceeds borrowed under this facility are available for
general corporate purposes.
4) an $11,000,000 revolving facility with one bank, expiring September 20,
1996. Borrowings under the facility bear interest at the bank's prime
rate plus 100 basis points. In addition to interim financing of lease
transactions, proceeds under this facility are available for general
corporate purposes.
7
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
In addition, the Company has a $100 million non-recourse Lease Receivables
Purchase Facility with Citicorp Securities that it entered into in March 1996.
This is a revolving facility, with a term of one year, and borrowings under the
facility will bear interest at a rate of 125 basis points over average life
treasuries at the time of borrowing. On that same date, the Company refinanced
approximately $40,000,000 of borrowings under its other short-term facilities
through this new facility, at an interest rate of 6.77%. The Company intends to
refinance, from time to time, under this new facility, additional borrowings
under its other short-term facilities in order to fix the interest rate for
these borrowings. The Company expects to refinance, on a long-term basis, leases
financed under this new facility under a new securitization facility, also with
Citicorp Securities, at the same interest rate provided by this new facility.
However, the Company can give no assurances that such securitization facility
will be put in place.
Borrowings under the above-described lines of credit are generally secured by
lease receivables and the underlying equipment financed under the facility.
Payments under the Company's borrowings and the maturities of its long-term
borrowings are typically structured to match the payments due under the leases
securing the borrowings. At March 31, 1996, the aggregate outstanding balance
under these lines of credit was $92,288,000, with a weighted average interest
rate of 7.9% per annum. The agreements for the lines of credit contain covenants
regarding leverage (a recourse liabilities to equity ratio of not more than 4.5
to 1), interest coverage, minimum net worth and profitability and a limitation
on the payment of dividends. At March 31, 1996, the Company had a recourse
liabilities to equity ratio of 1.2 to 1.
Occasionally, the Company will obtain long-term, non-recourse financing for
individual significant lease transactions at the time it purchases the related
equipment. The Company borrowed an aggregate of $43,807,000 in 1995, and
$18,421,000 in the first quarter, under such arrangements. An aggregate of
$47,493,000, with a weighted average interest rate of 8.1% per annum, remained
outstanding under all such arrangements as of March 31, 1996.
The Company's non-recourse debt financing activities typically provide
approximately 80% to 90% of the purchase price of the equipment purchased by the
Company for lease to its customers. The 10% to 20% balance of the purchase price
(the Company's equity investment in equipment) must generally be financed by
cash flow from its operations, the proceeds of subordinated debt, or its
equivalent, recourse debt, or common stock sold by the Company. On February 28,
1996, the Company closed a public stock offering of 1,800,000 shares of its
common stock, under which the Company received net proceeds of $22,493,000.
Financing for the Company's equity investment is not readily available in the
marketplace and normally requires an interest rate materially higher than is
required by the Company's conventional debt financing. Although the Company
believes that the credit quality of its lessees and its residual return history
will continue to allow it to obtain such debt financing, no assurances can be
given that such financing will be available, at acceptable terms or at all .
The Company's current lines of credit, if renewed or replaced, its expected
access to the public and private securities markets, both debt and equity,
anticipated new lines of credit (both short-term and long-term and recourse and
non-recourse), anticipated long-term financing of individual significant lease
transactions, and its estimated cash flow from operations are anticipated to
provide adequate capital to fund the Company's operations, including
acquisitions and financings under its vendor programs, for the next twelve
months. Although no assurances can be given, the Company expects to be able to
renew or timely replace its existing lines of credit, to continue to have access
to the public and private securities markets, both debt and equity, and to be
able to enter into anticipated new lines of credit and individual financing
transactions as required.
8
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's future quarterly operating results and the market price of its
stock may fluctuate. In the event the Company's revenues or earnings for any
quarter are less than the level expected by securities analysts or the market in
general, such shortfall could have an immediate and significant adverse impact
on the market price of the Company's stock. Any such adverse impact could be
greater if any such shortfall occurs near the time of any material decrease in
any widely followed stock index or in the market price of the stock of one or
more public equipment leasing companies or major customers or vendors of the
Company.
The Company's quarterly results of operations are susceptible to fluctuations
for a number of reasons, including, without limitation, as a result of sales by
the Company of equipment it leases to its customers. Such sales of equipment,
which are an ordinary but not predictable part of the Company's business, will
have the effect of increasing revenues, and, to the extent sales proceeds exceed
net book value, net income, during the quarter in which the sale occurs.
Furthermore, any such sale may result in the reduction of revenue, and net
income, otherwise expected in subsequent quarters, as the Company will not
receive lease revenue from the sold equipment in those quarters.
Given the possibility of such fluctuations, the Company believes that
comparisons of the results of its operations for immediately succeeding quarters
are not necessarily meaningful and that such results for one quarter should not
be relied upon as an indication of future performance.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The Company issued and sold 1,800,000 shares of its Common Stock, in February
1996, in a public offering subject to its Registration Statement, dated January
29, 1996, as amended. That Registration Statement and the Prospectus, dated
February 22, 1996, which is a part of it (the "Prospectus"), include a section
entitled "Risk Factors," which describes certain factors that may affect future
operating results of the Company. That section is hereby incorporated by
reference in this Report. Those factors should be considered carefully in
evaluating an investment in the Company's Common Stock. If you do not have a
copy of the Prospectus, you may obtain one by requesting it from the Company's
Investor Relations Department by phone, at (408) 995-6565, or by mail at Leasing
Solutions, Inc., 10 Almaden Boulevard, Suite 1500, San Jose, California 95113.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The statements contained in this Report which are not historical facts may be
deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties, including, without
limitation, demand and competition for the Company's lease financing services
and the products to be leased by the Company, the continued availability to the
Company of adequate financing, risks and uncertainties of doing business in
Europe, and other risks or uncertainties detailed in the Company's Securities
and Exchange Commission filings, including the Prospectus.
9
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Under Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit No. Document
----------- --------
10.68 Lease Receivables Purchase Agreement, dated as of March
27, 1996, among CXC Incorporated, as Purchaser,
Citicorp North America, Inc., as Agent, and Leasing
Solutions, Inc., as Seller and the Collection Agent.
27 Financial Data Schedule
10
<PAGE>
LEASING SOLUTIONS, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LEASING SOLUTIONS, INC.
By: /s/ Hal J Krauter
-----------------
Hal J Krauter
President and Chief Executive Officer
By: /s/ Robert J. Kearns, III
-------------------------
Robert J. Kearns, III
Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)
DATE: May 14, 1996
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,441
<SECURITIES> 0
<RECEIVABLES> 5,545
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,717
<DEPRECIATION> 0
<TOTAL-ASSETS> 247,417
<CURRENT-LIABILITIES> 8,488
<BONDS> 180,258
0
0
<COMMON> 37,154
<OTHER-SE> 18,028
<TOTAL-LIABILITY-AND-EQUITY> 247,417
<SALES> 0
<TOTAL-REVENUES> 26,637
<CGS> 0
<TOTAL-COSTS> 23,675
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,962
<INCOME-TAX> 1,185
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,777
<EPS-PRIMARY> 0
<EPS-DILUTED> .25
</TABLE>
<PAGE>
EXHIBIT 10.68
Execution Copy
LEASE RECEIVABLES PURCHASE AGREEMENT
dated as of March 29, 1996
Among
CXC INCORPORATED,
as the Purchaser
CITICORP NORTH AMERICA, INC.,
as the Agent
and
LEASING SOLUTIONS, INC.,
as the Seller and the Collection Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS..................................................... 1
-----------
2. PURCHASE........................................................ 8
--------
(a) Discretionary Purchase Facility.................. 8
-------------------------------
(b) Fees............................................. 9
----
(c) Condition Precedent to Effectiveness............. 9
------------------------------------
3. ASSIGNMENT OF PURCHASED ASSETS.................................. 9
------------------------------
(a) Assignment; No Assumption of Obligations......... 9
----------------------------------------
(b) Other Deliveries; Notice of Assignment........... 9
--------------------------------------
(c) Audits......................................... 10
------
(d) UCC Rights..................................... 10
----------
4. ELIGIBILITY REQUIREMENTS...................................... 10
------------------------
5. REPRESENTATION AND WARRANTIES................................. 14
-----------------------------
(a) Due Organization and Good Standing............. 14
----------------------------------
(b) Due Authorization.............................. 14
-----------------
(c) Due Execution and No Conflict.................. 14
-----------------------------
(d) Financial Statements........................... 14
--------------------
(e) Other Information.............................. 14
-----------------
(f) Litigation..................................... 15
----------
(g) Ownership of Purchased Assets and Equipment
-------------------------------------------
or Computer Software; Power to Sell............ 15
-----------------------------------
(h) Consummation of Purchase....................... 15
------------------------
(i) Location of Chief Executive Office............. 15
----------------------------------
(j) Marking of Leases.............................. 15
-----------------
(k) Lockbox Account Information.................... 15
---------------------------
(l) Solvency....................................... 15
--------
6. COVENANTS..................................................... 16
---------
(a) Reporting Covenants............................ 16
-------------------
(1) Financial Statements...................... 16
--------------------
(2) Performance Reporting..................... 16
---------------------
(3) Settlement Date Summaries; Monthly
----------------------------------
Reports................................... 16
-------
(4) Reporting on Lease Receivables and Other
----------------------------------------
Matters................................... 17
-------
(5) Obligor Information....................... 17
-------------------
(b) Affirmative Covenants.......................... 17
---------------------
(1) Access to Books and Records............... 17
---------------------------
(2) Compliance with Legal Obligations......... 17
---------------------------------
(3) Payment of Taxes.......................... 18
----------------
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C>
(4) Preservation of Corporate Existence....... 18
-----------------------------------
(5) Collections............................... 18
-----------
(6) Obligor Perfection Requirement............ 18
------------------------------
(7) Further Assurances........................ 18
------------------
(8) Change in Business or Credit and
--------------------------------
Collection Policy......................... 18
-----------------
(9) Change in Corporation Name................ 18
--------------------------
(10) Change of Chief Executive Office.......... 19
--------------------------------
(11) Sales, Liens, Etc. Against Lease
--------------------------------
Receivables or Equipment.................. 19
------------------------
(12) Extension or Amendment of Lease
-------------------------------
Receivables............................... 19
-----------
(13) Change in Payment Instructions to
---------------------------------
Obligors.................................. 19
--------
(14) Enforcement of Leases..................... 19
---------------------
(15) Impairment of the Purchaser's Rights...... 19
------------------------------------
(16) Terminate or Reject Leases................ 19
--------------------------
(17) Acceleration of Leases.................... 20
----------------------
(18) Purchase Option; Early Termination
----------------------------------
Option; Insurance Proceeds................ 20
--------------------------
7. AGREEMENT TO INDEMNIFY........................................ 20
----------------------
8. AGREEMENT REGARDING COLLECTIONS AND ADMINISTRATIONS........... 21
---------------------------------------------------
(a) Designation of the Collection Agent............ 21
-----------------------------------
(b) Duties of the Collection Agent................. 22
------------------------------
(c) Rights of the Agent............................ 22
-------------------
(d) Cooperation by the Seller...................... 23
-------------------------
(e) Power of Attorney.............................. 24
-----------------
(f) Responsibilities of the Seller................. 24
------------------------------
(g) Application of Payments........................ 24
-----------------------
(h) Remittance of Collections...................... 24
-------------------------
(i) Payments and Computations, Etc................. 25
-------------------------------
(j) Reimbursement of Collection Expenses........... 25
------------------------------------
(k) Collection Agent Replacement Events............ 26
-----------------------------------
9. REPURCHASE OF LEASE RECEIVABLES............................... 28
-------------------------------
(a) Lack of Eligibility............................ 28
-------------------
(d) Optional Repurchases or Substitutions of
----------------------------------------
Receivables.................................... 29
-----------
(e) Calculation of Repurchase Price................ 30
-------------------------------
(f) Retransfer without Recourse.................... 30
---------------------------
10. LOCKBOX ACCOUNT............................................... 31
---------------
11. TERMINATION................................................... 31
-----------
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C> <C>
12. SECURITY INTEREST............................................. 31
-----------------
(a) Grant of Security Interest..................... 31
--------------------------
(b) Further Assurances............................. 32
------------------
(c) The Seller Collateral Information.............. 32
---------------------------------
(d) Remedies....................................... 32
--------
13. THE AGENT..................................................... 33
---------
(a) Authorization and Action....................... 33
------------------------
(b) Agent's Reliance, Etc.......................... 33
----------------------
(c) Agent and Affiliates........................... 34
--------------------
14. MISCELLANEOUS................................................. 34
-------------
(a) Costs and Expenses............................. 34
------------------
(b) Notices........................................ 34
-------
(c) Governing Law.................................. 35
-------------
(d) Binding Effect; Assignability.................. 35
-----------------------------
(e) No Waiver...................................... 35
---------
(f) Severability................................... 35
------------
(g) No Proceedings................................. 35
--------------
(h) No Recourse.................................... 36
-----------
(i) Counterparts................................... 36
------------
</TABLE>
Exhibit A Credit and Collection Policy
Exhibit B List of Closing Documents
Exhibit C Form of Assignment
Exhibit D Form of Notice of Assignment
- iii -
<PAGE>
LEASE RECEIVABLES PURCHASE AGREEMENT
THIS LEASE RECEIVABLES PURCHASE AGREEMENT ("Agreement") is made as of
---------
March 29, 1996 by and among CXC INCORPORATED, a Delaware corporation (the
"Purchaser"), having its principal office and place of business at 450
- - ----------
Mamaroneck Avenue, Harrison, New York 10528, CITICORP NORTH AMERICA, INC., a
Delaware corporation ("CNA"), having its principal office and place of business
---
at 450 Mamaroneck Avenue, Harrison, New York 10528, as agent for the Purchaser
(the "Agent"), and LEASING SOLUTIONS, INC., a California corporation having its
-----
principal office and place of business at 10 Almaden Boulevard, Suite 1500, San
Jose, California 95113, as the "Seller" and "Collection Agent" (each as defined
------ ----------------
below).
WHEREAS, the Seller is in the business of procuring, acquiring,
trading in, leasing, re-leasing, distributing, financing, selling, remarketing
and otherwise dealing with, and providing associated services with respect to,
Equipment and Computer Software;
WHEREAS, the Seller wishes from time to time to offer to sell to the
Purchaser receivables arising under leases, installment sale contracts and other
chattel paper generated from such business; and
WHEREAS, the Purchaser desires to purchase from the Seller such
receivables;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. DEFINITIONS.
-----------
The following terms, wherever used in this Agreement, shall have the
meanings ascribed to them in this paragraph:
"Adverse Claim" means a lien, security interest, charge, encumbrance
-------------
or other right or claim of any Person, other than the rights of the lessee under
a Lease or a payor under a Computer Software Term Note.
"Affiliate" means , with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by,
- 1 -
<PAGE>
or under common control with, such specified Person; provided, however, that
-------- -------
neither the Agent nor the Purchaser shall be deemed to be an Affiliate of the
Seller. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract, or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent's Account" means account number 4050 2339, maintained with
---------------
Citibank, N.A., ABA number 021-000-89, Attn: Karen Sandola.
"Assignment" has the meaning assigned to that term in paragraph 3.
---------- -----------
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
---------------
Section 101 et seq.), as amended from time to time, or any successor statute.
-- ---
"Business Day" means any day of the year other than a Saturday, Sunday
------------
or a public or bank holiday in New York or California.
"CNA" has the meaning assigned to that term in the first paragraph
---
hereof.
"Collection Agent" means at any time the Person(s) then authorized
----------------
pursuant to paragraph 8 to service, administer, bill and collect Purchased Lease
-----------
Receivables.
"Collection Agent Replacement Event" has the meaning assigned such
----------------------------------
term in paragraph 8(k).
--------------
"Collections" means, with respect to any Purchased Lease Receivable,
-----------
all cash collections and other cash proceeds of such Purchased Lease Receivable,
including, without limitation, all cash proceeds with respect to Scheduled
Payments included in the calculation of the Purchase Price for such Purchased
Lease Receivable, all charges for late payment, all cash proceeds of Related
Security with respect to such Purchased Lease Receivable, and any Repurchase
Price of such Purchased Lease Receivable received hereunder, excluding any
collections with respect to maintenance costs or sales, use or other taxes
associated with such Purchased Lease Receivable.
- 2 -
<PAGE>
"Computer Software" means any computer program, in whatever medium it
-----------------
exists or is delivered (including, without limitation, by means of electronic
transmission), which contains sets of statements or instructions to be used
directly or indirectly in a computer in order to bring about a certain result
(or any computer program defined as such under The Copyright Act, 17 U.S.C.A.
(S)101 (West 1991)).
"Computer Software Term Note" means any promissory note or other
---------------------------
agreement evidencing the payor's obligation to make payments to the payee in
connection with the financing of Computer Software.
"Credit and Collection Policy" means those credit and collection
----------------------------
policies and practices relating to Leases, Lease Receivables and Obligors, as
described in Exhibit A.
---------
"Delinquent Lease Receivable" means any Purchased Lease Receivable as
---------------------------
to which any Payment remains unpaid for more than ninety (90) days from the rent
due date for such Payment (without giving effect to any "Seller Remittance").
"Discount Rate" for any Purchased Lease Receivable means the rate
-------------
equal to the sum of the "T-Note Proxy Rate" (as defined below) at the time of
the related Purchase or Repurchase, as applicable, plus the Spread; "T-Note
---- ------
Proxy Rate" means the yield to maturity as published in The Wall Street Journal
- - ----------
for a specific treasury note ("T-Note"). The selected T-Note will have been
------
recently issued (within the last fifteen (15) years and non-callable) having a
maturity equal to the average remaining life tenor of the Lease Receivable
purchased or to be repurchased. If there is no T-Note with a maturity equal to
a particular remaining average life tenor, then the one maturing closest to the
average remaining life tenor will be selected. The date for determining the T-
Note Proxy Rate for Lease Receivables to be purchased or repurchased will be the
Purchase Date or Repurchase Date for such Lease Receivables.
"Eligible Lease Receivable" means a Lease Receivable which meets all
-------------------------
of the requirements set forth in paragraph 4 below on the applicable Purchase
-----------
Date.
"Equipment" means business use equipment, including but not limited to
---------
equipment sold or leased by the Seller under a
- 3 -
<PAGE>
Lease, together with all additions, replacements, substitutions, parts, repairs,
accessories, accessions or attachments thereto.
"Gross Balance of Payments" means, with respect to a Lease Receivable,
-------------------------
the sum of the Scheduled Payments due and to become due under the related Lease.
"Indebtedness" of any Person means (i) indebtedness of such Person for
------------
borrowed money, (ii) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) obligations of such Person to pay the
deferred purchase price of property or services, (iv) obligations of such Person
as payor under notes, or lessee under leases which shall have been or should be,
in accordance with generally accepted accounting principles, recorded as capital
leases, (v) obligations secured by any Adverse Claim or other charge upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (vi) obligations of such
Person in connection with any letter of credit issued for the account of such
Person and (vii) obligations of such Person under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vi) above, but excluding, in any event, all non-recourse debt.
"Ineligible Purchased Lease Receivable" has the meaning assigned such
-------------------------------------
term in paragraph 9(a).
--------------
"Interest Rate Hedges" means interest rate swap agreements entered
--------------------
into in connection herewith by the Purchaser with a financial institution whose
long-term unsecured and unguaranteed debt is rated at least AA by Standard &
Poor's Ratings Service, a division of the McGraw-Hill Companies, Inc. Group, or
an equivalent rating by Moody's Investors Service, Inc.
"LSI" means Leasing Solutions, Inc., a California corporation.
---
"Lease" means a (i) lease agreement arising out of a lease of
-----
Equipment, (ii) installment sales contract or other chattel paper arising out of
a sale of Equipment or (iii) Computer Software Term Note.
- 4 -
<PAGE>
"Lease Receivable" means, with respect to any Lease at any time, all
----------------
Scheduled Payments then or thereafter payable by the Obligor under such Lease,
together with all supplemental or additional Payments required by the terms of
such Lease with respect to insurance and other specific charges, excluding any
such payments or charges which constitute sales, use, property or other taxes.
"lessee" means the party under a lease or other chattel paper leasing
------
Equipment from another party.
"lessor" means the party under a lease or other chattel paper leasing
------
Equipment to another party.
"Lockbox Account" means an account maintained at the Lockbox Bank for
---------------
the purpose of receiving Collections.
"Lockbox Bank" means Wells Fargo Bank, National Association.
------------
"Material Adverse Effect" has the meaning assigned to that term in
-----------------------
paragraph 5(a) hereof.
- - --------------
"Notice of Assignment" has the meaning assigned to that term in
--------------------
paragraph 3.
- - -----------
"Obligor" means any party obligated in respect of a Lease Receivable
------
pursuant to a Lease other than the lessor, payee or vendor of the Equipment or
Computer Software covered thereby.
"Obligor Default" means, with respect to any Obligor, (i) failure of
---------------
such Obligor under a Lease to make a Payment, other than a Scheduled Payment not
included in the calculation of the Purchase Price of the related Purchased Lease
Receivable, (A) within thirty (30) days of receipt by such Obligor of the first
invoice with respect to such Lease indicating that such Payment is due or (B)
within ten (10) days after the due date of such Payment other than a Payment
included in the first invoice, (ii) any other default by such Obligor under a
Lease which default continues uncured for more than the period of grace, if any,
specified in such Lease, or (iii) a default under an Obligor Guaranty, which
default continues uncured for more than the period of grace, if any, specified
in such Obligor Guaranty.
"Obligor Guaranty" means any guaranty given to the Seller (or under
----------------
which the Seller has rights) by any Person
- 5 -
<PAGE>
guaranteeing the payment and/or performance of a Lease Receivable.
"Obligor Perfection Requirement" means, with respect to any Purchased
------------------------------
Lease Receivable (other than a Purchased Lease Receivable arising from a
Computer Software Term Note), that the Seller has obtained appropriate UCC
financing statements or other applicable filings, which financing statements or
filings have been filed in all applicable jurisdictions, so that if a court or
other Person were to determine that such Lease transferred an ownership (rather
than a leasehold) interest in the Equipment subject thereto to the Obligor, the
Seller would have a perfected security interest in such Equipment, free and
clear of any Adverse Claim.
"Payment" means any payment, whether or not earned by performance,
-------
receivable by the payee, vendor or lessor on account of a Lease.
"payee" means a party entitled to receive payments under any Computer
-----
Software Term Note.
"payor" means a party obligated to make payments under any Computer
-----
Software Term Note.
"Person" means an individual, partnership, corporation (including a
------
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Present Value" means the present day value of a future stream of
-------------
Scheduled Payments discounted using the applicable Discount Rate and based upon
monthly compounding.
"Purchase" means a purchase by the Purchaser of Purchased Assets from
--------
the Seller pursuant to paragraph 2.
-----------
"Purchase Date" means the date a Purchase is made by the Purchaser
-------------
hereunder.
"Purchase Price" of a Lease Receivable means the Present Value as of
--------------
the Purchase Date of the Scheduled Payments then due and to become due under the
related Lease and purchased by Purchaser.
- 6 -
<PAGE>
"Purchased Assets" means, at any time, all then out standing Purchased
----------------
Lease Receivables and Collections with respect to, and other proceeds of, such
Purchased Lease Receivables.
"Purchased Lease Receivable" means any Lease Receivable, or portion
--------------------------
thereof, which is offered for sale by the Seller and purchased by the Purchaser
pursuant to paragraph 2. Once a Lease Receivable is purchased by the Purchaser
-----------
it shall remain a Purchased Lease Receivable; provided, however, that with
-------- -------
respect to any Lease Receivable that is repurchased by the Seller pursuant to
paragraph 9, following the Agent's receipt of the Repurchase Price for such
- - -----------
Lease Receivable, "Purchased Lease Receivable" shall not include the Lease
--------------------------
Receivable so repurchased. "Purchased Lease Receivable" shall include any
--------------------------
Scheduled Payment included in the calculation of the Purchase Price for such
Purchased Lease Receivable, whether such Scheduled Payment(s) are directly
payable by the Obligor, are paid by disposition of the related Equipment or
otherwise.
"Records" means all Leases and other documents, books, records and
-------
other information (including, without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and rights)
maintained with respect to Leases and the related Obligors.
"Related Security" means with respect to any Purchased Lease
----------------
Receivable and the related Lease:
(i) all security interests or liens and property subject thereto from
time to time purporting to secure payment of the Lease Receivable arising
under such Lease, whether pursuant to such Lease or otherwise;
(ii) the assignment to the Agent, for the benefit of the Purchaser,
of all UCC financing statements or other filings covering any collateral
securing payment of the Lease Receivable arising under such Lease;
(iii) all Obligor Guaranties, warranties, letters of credit,
insurance policies and proceeds and premium refunds thereof and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of the Lease Receivable arising under such
Lease, whether pursuant to such Lease or otherwise;
- 7 -
<PAGE>
(iv) all of the Seller's right, title and interest in and to any
proceeds of (A) the sale or lease of Equipment that was repossessed from an
Obligor of a Purchased Lease Receivable that was the subject of such Lease,
to the extent that the Purchase Price with respect to such Purchased Lease
Receivable has not been recovered by the Purchaser, or (B) to the extent
Seller has such rights, the remarketing of Computer Software subject to
such Lease where such Lease was terminated due to an Obligor Default,
including, without limitation, subsequent Computer Software Term Notes, to
the extent that the Purchase Price with respect to such Purchased Lease
Receivable has not been recovered by the Purchaser;
(v) all Records related to such Lease; and
(vi) all proceeds of the foregoing.
"Remittance Date" has the meaning assigned such term in paragraph
--------------- ---------
8(h).
"Repurchase" means a repurchase by the Seller of Purchased Assets from
----------
the Purchaser pursuant to paragraph 9.
-----------
"Repurchase Date" means the date a Repurchase is made by the Seller
---------------
hereunder.
"Repurchase Price" of a Purchased Lease Receivable means, at any time,
----------------
the Present Value of the Scheduled Payments due and to become due under the
related Lease at that time, discounted to the day of repayment using the
Discount Rate for such Purchased Lease Receivable that was used to calculate the
Purchase Price of such Purchased Lease Receivable plus if the Market Rate, as
----
defined below, is less than the Discount Rate, an amount equal to the difference
between (i) the Present Value of the remaining Scheduled Payments due and to
become due under the related Lease, discounted at the Market Rate to the day
prior to repayment, and (ii) the Present Value of the remaining Scheduled
Payments due and to become due under the related Lease, discounted at the
Discount Rate to the day of repayment. For purposes hereof (other than for the
purposes set forth in paragraph 9(e)), the term Market Rate shall mean the T-
--------------
Note Proxy Rate at such time plus the Spread (determined on the Purchase Date
----
for the related Purchased Lease Receivable). For purposes of paragraph 9(e)
--------------
hereof, the term Market Rate shall mean the T-Note Proxy Rate at such time plus
----
the Spread (determined on the
- 8 -
<PAGE>
Purchase Date for the related Purchased Lease Receivable) minus .50%.
-----
"Scheduled Payments" means, with respect to a Lease Receivable, the
------------------
remaining rent installments (exclusive of any amounts in respect of insurance or
taxes) payable by the Obligor under the related Lease.
"Secondary Servicers" has the meaning assigned to that term in
-------------------
paragraph 8(a).
- - --------------
"Securitization Facility" means the lease receivables purchase
-----------------------
facility which may be entered into among a special purpose subsidiary of the
Seller, as seller, LSI, as servicer, Corporate Receivables Corporation, a
Delaware corporation (or another receivables purchase entity managed by the
Agent), as purchaser, and the Agent.
"Seller Collateral" has the meaning assigned to that term in paragraph
----------------- ---------
12.
- - --
"Seller Obligations" has the meaning assigned to that term in
------------------
paragraph 12.
- - ------------
"Seller Remittance" has the meaning assigned to that term in paragraph
----------------- ---------
8(h)(i).
- - -------
"Settlement Date" means the fifteenth (15th) day of each month;
---------------
provided, that if in any month such day is not a Business Day, the "Settlement
- - -------- ----------
Date" for such month shall be the first Business Day to occur after such
- - ----
fifteenth (15th) day.
"Spread" means, with respect to a Lease Receivable, 1.25%.
------
"Tangible Net Worth" means, with respect to a Person, such Person's
------------------
total assets (exclusive of any indebtedness owed to such Person by any Affiliate
of such Person) minus the sum of (i) such Person's total liabilities (exclusive
of any indebtedness owed by such Person to any Affiliate of such Person), (ii)
the amount, if any, of such Person's assets, including, without limitation,
general intangibles which would be treated as an intangible under generally
accepted accounting principles presently in effect, (iii) any write-up in the
book value of any fixed asset resulting from a revaluation thereof, and (iv) the
amount, if any, at which any shares of stock of such Person
- 9 -
<PAGE>
appear as an asset on such Person's balance sheet, determined on a consolidated
basis.
"T-Note Proxy Rate" has the meaning assigned to that term in the
-----------------
definition of Discount Rate.
"UCC" means the Uniform Commercial Code as from time to time in effect
---
in the specified jurisdiction.
"vendee" means the purchaser under an installment sale contract or
------
other chattel paper arising out of a sale of Equipment or the licensee of
Computer Software.
"vendor" means the seller under an installment sale contract or other
------
chattel paper arising out of a sale of Equipment or the licensor of Computer
Software.
2. PURCHASE.
--------
(a) Discretionary Purchase Facility. On the terms and conditions
-------------------------------
contained herein, the Purchaser may, in its sole discretion and from time to
time during the period commencing on the date hereof and ending on March 28,
1997 (and extended thereafter on an annual basis upon mutual consent of all the
parties hereto), purchase Lease Receivables that the Seller offers for sale to
the Purchaser. The initial Purchase hereunder shall include Lease Receivables
having an aggregate Purchase Price of not less than $30,000,000. Any subsequent
offer to sell Lease Receivables to the Purchaser shall be made by written notice
to the Agent at least fifteen (15) Business Days prior to the proposed Purchase
Date and shall be accompanied by such information concerning such Lease
Receivables as requested by the Agent. The aggregate Purchase Price for Lease
Receivables offered by the Seller hereunder to the Purchaser on any Purchase
Date other than the initial Purchase Date will not be less than $10,000,000
unless otherwise agreed to by the Agent in its sole discretion. Under no
circumstances shall the Purchaser acquire any Lease Receivables hereunder if,
after giving effect to such purchase, the sum of the aggregate Purchase Price
payments made by the Purchaser to the Seller hereunder minus the aggregate
-----
amounts received by the Purchaser hereunder as recoveries of the Purchaser's
investment represented by such Purchase Price payments would exceed
$100,000,000. If the Purchaser elects to purchase any Lease Receivable, the
Purchase Price for such Lease Receivable shall be computed as of the applicable
Purchase Date using the then applicable Discount Rate which the Agent shall
- 10 -
<PAGE>
calculate prior to the proposed Purchase Date and which Discount Rate shall be
set forth in the Assignment. The Purchase Price for Lease Receivables to be
purchased hereunder shall be remitted to The First National Bank of Boston, 100
Federal Street, Boston, MA 02110, ABA no. 011-000-390, Account Number 540-99647
under the name of Leasing Solutions CLN044-2531, Attn: HT & ENV SVCS. ADM 50,60,
or such other account(s) designated by the Seller from time to time. The
purchase of a Lease Receivable hereunder shall also constitute a purchase of the
Collections related thereto and an assignment of the Related Security, and shall
be effective on the date that the Purchaser remits the Purchase Price therefor
as described in the preceding sentence. Nothing in this Agreement shall be
deemed to be or construed as a commitment by the Purchaser to purchase Lease
Receivables at any time.
(b) Fees. On each Purchase Date, the Seller shall pay to the Agent
----
an amount (a "Fee") equal to the product of (i) .0015 and (ii) the aggregate
Purchase Price payable with respect to the Lease Receivables purchased on such
Purchase Date. To the extent that Purchased Lease Receivables hereunder become
subject to the Securitization Facility, a portion of Fees paid pursuant to this
paragraph 2(b) will be refunded to the Seller, such refunded amount to be equal
- - --------------
to the product of (i) the total Fees paid as of the Purchase Date for any such
Lease Receivables transferred to the Securitization Facility and (ii) one (1.00)
minus a fraction (A) the numerator of which equals the interest earned on a
- - -----
simple interest contract having an original average life equal to the dollar
weighted original average life of each such Lease Receivable funded by the
Securitization Facility, amortized over the number of months from its Purchase
Date until the funding of the Securitization Facility, and (B) the denominator
of which equals the interest earned on a simple interest contract having an
original average life equal to the dollar weighted original average life of each
such Lease Receivable funded by the Securitization Facility amortized over the
number of months from its Purchase Date until the expiration of its term.
(c) Condition Precedent to Effectiveness. The effectiveness of this
------------------------------------
Agreement is subject to the condition precedent that the Agent shall have
received the documents set forth on part A of the List of Closing Documents
attached as Exhibit B hereto, each in form and substance satisfactory to the
---------
Agent. Prior to each Purchase hereunder the Agent shall receive the documents
set forth on part B of the List of Closing Documents attached as Exhibit B
---------
hereto.
- 11 -
<PAGE>
3. Assignment of Purchased Assets.
------------------------------
(a) Assignment; No Assumption of Obligations. On each Purchase Date,
----------------------------------------
the Seller will sell, assign and transfer to the Purchaser all of the Seller's
right, title and interest in, to and under the Purchased Assets being sold on
such Purchase Date and the Related Security being assigned on such Purchase
Date, by executing an assignment (an "Assignment") in the form of Exhibit C
---------- ---------
hereto or as shall otherwise be acceptable to the Purchaser. Neither the
Purchaser nor the Agent shall be deemed by reason of any assignment to the
Purchaser of Purchased Assets or Related Security to have assumed any of the
Seller's, or any lessor's, payee's or vendor's, obligations under any related
Lease.
(b) Other Deliveries; Notice of Assignment. Concurrently with the
--------------------------------------
payment of the Purchase Price for any Purchased Assets, the Seller shall deliver
to the Agent the following with respect to such Purchased Assets:
(i) all required items with respect to such Purchased Assets as set
forth on part B of Exhibit B,
---------
(ii) all originals of instruments, Obligor Guaranties, debt or lien
subordination agreements, letters of credit, copies of financing statements
filed or obtained in favor of the Seller, and copies of any other documents
relating to the Leases underlying such Purchased Assets,
(iii) an original notice (a "Notice of Assignment") in the form of
--------------------
Exhibit D hereto for each Obligor under such Leases, which Notices of
---------
Assignment shall be (A) issued on the Seller's letterhead and executed by
the Seller's duly authorized officer, together with sufficient information
with respect to such Purchase (either in writing or in electronically
readable form) necessary to complete such Notices of Assignment, including,
without limitation, the names, current addresses of, and names of the
contact persons for each such Obligor, and (B) held by the Agent for use in
accordance with paragraph 8(c)(ii)(B), and
---------------------
(iv) such other documents and instruments as the Agent may reasonably
request, duly executed by the Seller, to further implement and effectuate
the purposes of this Agreement.
- 12 -
<PAGE>
(c) Audits. The Seller agrees that upon the request of the Agent it
------
shall provide any audit reports prepared by banks, auditors, investors, lenders
or consultants for or on behalf of the Seller.
(d) UCC Rights. The Purchaser shall have all of the rights and
----------
remedies of a secured party under the UCC of the applicable jurisdiction. All
rights and remedies of the Purchaser under this Agreement or any applicable law
shall be cumulative.
4. ELIGIBILITY REQUIREMENTS.
------------------------
LSI (both in its capacity as Seller and as Collection Agent)
represents and warrants that each Lease Receivable offered for sale by the
Seller to the Purchaser hereunder shall be an Eligible Lease Receivable on the
Purchase Date for such Lease Receivable. An "Eligible Lease Receivable" means,
-------------------------
at any time, a Lease Receivable:
(a) which is fully assignable by the Seller without the consent of
any Person or which consent has been obtained, if required, except, that, any
------ ----
consent required in connection with a Lease Receivable purchased on the initial
Purchase Date shall be acceptable so long as it is obtained by June 30, 1996;
(b) which arises under a Lease which provides that the Obligor's
obligation to make Payments is absolute and unconditional and not subject to any
abatement, reduction, set-off, defense, counterclaim or recoupment due or
alleged to be due to or by reason of any past, present or future claims against
the lessor, payee, vendor or any other Person (a "hell or high water"
obligation);
(c) which has been generated in accordance, in all material respects,
with the Credit and Collection Policy;
(d) (i) which arises from a bona fide lease or sale of the Equipment
described in the related Lease, and such Equipment is in all respects in accord
with the requirements of such Lease, has been delivered to and unqualifiedly
accepted by the lessee or vendee thereunder (or an Affiliate of such lessee or
vendee), is in possession of the Obligor thereof (or any of its Affiliates), is
not being subleased by such Obligor to any other Person (other than to its
Affiliates), and if delivery or possession is taken by an Affiliate of the
Obligor, or the Obligor has subleased the
- 13 -
<PAGE>
Equipment to an Affiliate, the Obligor remains liable under the original lease
or sale of such Equipment, or (ii) which arises from a financing of Computer
Software with respect to which the Computer Software has been delivered to and
unqualifiedly accepted by the payee (or an Affiliate thereof), is in possession
of the payee (or an Affiliate thereof) under the Computer Software Term Note,
the Agent has been provided with a certified copy of such Computer Software Term
Note; and if delivery or possession is taken by an Affiliate of the payee, the
payee remains liable under the Computer Software Term Note;
(e) which, together with the related Lease and Equipment or Computer
Software, comply with all applicable laws and regulations (including, without
limitation, interest/usury laws);
(f) which arises under a Lease that is a non-cancelable,
unconditional, hell or high water agreement and is genuine, valid and
enforceable in accordance with its terms (except as limited by applicable
bankruptcy, insolvency and similar laws affecting the rights of creditors
generally and general principles of equity, whether considered in a proceeding
at equity or at law), that accurately describes the Scheduled Payments due under
the Lease and, in each material respect, the related Equipment or Computer
Software and with respect to which the Seller has informed the Agent in writing
of all agreements entered into in connection therewith;
(g) which, together with the related Purchased Assets, Equipment or
Computer Software and Related Security and all proceeds thereof, are not subject
to any Adverse Claim of the lessee, the payor or the vendee of the Equipment or
Computer Software or any other Person;
(h) each Obligor of which has all the legal capacity, power and right
required for it to enter into the related Lease and any supplemental agreements
and to perform its obligations thereunder;
(i) which has a Gross Balance of Payments of at least $100,000,
provided, that, if, on a Purchase Date, a Receivable is related to a Lease
- - -------- ----
supplement or Computer Software Term Note the Obligor of which is obligated on
Leases totaling more than $250,000 of the total Purchase Price on that date, the
Gross Balance of Payments of any particular Lease supplement or
- 14 -
<PAGE>
Computer Software Term Note of that Obligor may be $50,000 or more;
(j) which, if included as a Purchased Lease Receivable, would not
cause the average original Gross Balance of Payments (determined as of the
applicable Purchase Dates therefor) of all Lease Receivables Purchased hereunder
to be less than $250,000;
(k) with respect to which no material Obligor Default exists at the
time of the Purchaser's Purchase of the Lease Receivable or existed at any time
during the twelve (12) months prior to such Purchase, and the Seller has no
knowledge of any fact that may impair the related Lease's or Obligor Guaranty's
validity;
(l) with respect to which no set-offs, counterclaims or defenses
exist on the part of any Obligor under the related Lease or any Obligor Guaranty
to any claims against or obligations of any Obligor thereunder and no suit or
legal action or proceeding (administrative, judicial or otherwise) has been
brought or threatened, in a writing to or from the Seller, by or against the
Seller in connection therewith;
(m) with respect to which the Seller has not done anything that might
impair the collectibility of such Lease Receivable or other related Purchased
Assets or any of the Purchaser's rights under the Purchased Assets or Related
Security or with respect to the Equipment or Computer Software covered by the
related Lease;
(n) which, if arising under a Lease of Equipment, such Lease requires
the Obligor to maintain the Equipment in good and workable order and provides
that, in the event of any loss, damage or destruction of the Equipment covered
by or the subject of such Lease, the Obligor will replace such Equipment with
same-or-better model Equipment in same-or-better configuration or the Purchaser
will receive from an insurer or from the Obligor as self-insurer, an amount not
less than the Repurchase Price of the Lease Receivable (subject to paragraph
---------
6(b)(18) hereof);
- - --------
(o) with respect to which, together with the related Purchased
Assets, Equipment or Computer Software and other Related Security, all taxes,
assessments, fines, fees and other liabilities have been paid when due, and all
filings in respect of any such taxes, assessments, fines, fees and other
liabilities
- 15 -
<PAGE>
have been timely made (or if such taxes, fines, fees and other liabilities have
not been paid when due, or such filings have not been timely filed, all
penalties or other similar payments related thereto have been paid);
(p) with respect to which the Seller is not in default of any of its
obligations arising by contract or imposed by applicable law, rule or
regulations in connection with the related Lease and Equipment or Computer
Software;
(q) with respect to which the Seller (i) is the owner of, or has a
first priority perfected security interest in, each item of Equipment subject to
the related Lease, free and clear of any Adverse Claim and (ii) has granted a
first priority perfected security interest in such Equipment to the Agent;
(r) which, together with any related Obligor Guaranty, has not been
altered, modified, changed or amended after the Agent's review of the terms
thereof in connection with the Agent's decision about whether to purchase such
Lease Receivable hereunder, without the Agent's prior written consent;
(s) which arises under a Lease under which no amounts have been paid
in advance of their due date except advance Payments which are required by the
terms of the Lease and Payments made in advance of their respective due date
which have not been included in the Scheduled Payments included in the
calculation of the Purchase Price paid in connection with the Lease Receivable;
(t) if a purchase option or early termination option exists with
respect to the related Lease, the payment required in connection with the
exercise of such purchase option or early termination option is in an amount
sufficient to recover the Repurchase Price (subject to paragraph 6(b)(18)
------------------
hereof);
(u) which arises under a Lease that is the only Lease with respect to
the Equipment or Computer Software described therein, and that has a remaining
term (during which all Payments under such Lease by the Obligor must be paid by
the Obligor) of at least six (6) months and not in excess of sixty (60) months
after the Purchase Date for such Lease Receivable (unless otherwise approved by
the Agent); provided, that, on a Purchase Date, Leases having a remaining term
-------- ----
of twenty-four (24) months or less on a Purchase Date shall not constitute more
than 20% of
- 16 -
<PAGE>
the aggregate Purchase Price paid by the Seller on such Purchase Date;
(v) which arises under a Lease that provides that all Scheduled
Payments are payable in monthly, quarterly, semi-annual or annual installments;
(w) which is denominated and payable only in United States dollars in
the United States, the related Equipment or Computer Software of which is
located in the United States and the Obligor of which is a United States
resident, provided, that, with respect to any Lease Receivable, the aggregate
--------
original purchase price paid by the Seller for any Equipment permanently located
outside the United States shall not exceed 3.5% of the total original purchase
price paid for all Equipment associated with such Obligor;
(x) which satisfies the Obligor Perfection Requirement;
(y) which arises under a Lease which is "chattel paper" within the
meaning of the UCC of all applicable jurisdictions; and
(z) which arises under a Lease, no portion of which has been, or is
subject to, rejection, extension or modification for credit reasons, or non-
assumption, prior to the original term of such Lease, except pursuant to
bankruptcy or similar applicable law.
5. REPRESENTATION AND WARRANTIES.
-----------------------------
The Seller hereby represents and warrants (each representation and
warranty shall be considered as having been made concurrently with any Purchase
as an inducement to the Purchaser to make such Purchase) that:
(a) Due Organization and Good Standing. The Seller is a corporation
----------------------------------
duly organized and validly existing under the laws of the State of California,
and the Seller is duly qualified and authorized to do business in each state or
jurisdiction where the failure to be so qualified (i) would have a material
adverse effect upon the Seller's business, (ii) would materially adversely
affect the Seller's rights to incur or perform its obligations under this
Agreement, any Assignment, or any Purchased Asset or Related Security, or (iii)
would adversely
- 17 -
<PAGE>
affect the collectibility of any Purchased Lease Receivable (collectively, a
"Material Adverse Effect").
-----------------------
(b) Due Authorization. The Seller is duly authorized to execute and
-----------------
deliver this Agreement and is and will continue to be, duly authorized to
perform all of its obligations under this Agreement and under each instrument
and document delivered in connection with this Agreement.
(c) Due Execution and No Conflict. This Agreement has been duly
-----------------------------
executed and delivered on behalf of the Seller, and such execution and delivery
of this Agreement by the Seller do not, and the performance of the Seller's
obligations under this Agreement will not, conflict with any provisions of law,
rule or regulation or the Seller's Certificate of Incorporation, By-Laws, or
other organizational documents or of any agreement or court or administrative
order, judgment or decree binding upon the Seller except where such conflict
would not have a Material Adverse Effect. This Agreement constitutes the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights generally,
and general principles of equity, whether considered in a proceeding at equity
or at law.
(d) Financial Statements. The Seller has delivered to the Agent
--------------------
copies of the Seller's consolidated financial statements, as of the end of the
most recently concluded fiscal year, including a balance sheet of the Seller and
its subsidiaries on a consolidated basis as of the end of such fiscal year, and
related statements of net earnings and cash flows for such fiscal year, all in
reasonable detail and prepared and certified by independent public accountants
of nationally recognized standing selected by the Seller, and stating in
comparative form the respective figures for the end of and for the previous
fiscal year. As of the date of any such financial statement and since such
date, there has been no material adverse change in the financial condition of
the Seller.
(e) Other Information. No written information, financial statement,
-----------------
document, book, record or report furnished or to be furnished by the Seller to
the Agent or the Purchaser in connection with this Agreement is or shall be
inaccurate in any material respect as of the date it is or shall be dated or
(except as otherwise disclosed to the Agent or the Purchaser, as the case may
be, at such time) as of the date so furnished, or
- 18 -
<PAGE>
contains or shall contain any material misstatement of fact or omits or shall
omit to state a material fact or any fact necessary to make the statements
contained therein not materially misleading. The Seller's tax identification
number is 77-0116801.
(f) Litigation. Except as disclosed to the Agent in writing, no
----------
litigation or governmental proceedings, the outcome of which could have a
Material Adverse Effect, are pending or, to the knowledge of the Seller,
threatened against the Seller. The Seller does not have any contingent
liabilities not provided for or disclosed in the financial statements referred
to in paragraph 5(d), other than as incurred in the ordinary course of its
--------------
business since December 31, 1995.
(g) Ownership of Purchased Assets and Equipment or Computer Software;
-----------------------------------------------------------------
Power to Sell. On each Purchase Date, the Seller has (i) good title to the
- - -------------
Purchased Assets to be purchased on such Purchase Date or the Related Security
to be assigned on such Purchase Date, free and clear of any Adverse Claim; (ii)
good title to the related Equipment (if the related Lease is a true lease),
(iii) a first priority perfected security interest in the Equipment to secure
the applicable Lease Receivable; and (iv) all legal power, right and authority
to sell such Purchased Assets to the Purchaser and to assign the Related
Security to the Purchaser.
(h) Consummation of Purchase. Upon each Purchase hereunder, good
------------------------
title to the Purchased Assets purchased on such Purchase Date, free and clear of
any Adverse Claim, shall be vested in the Purchaser by the Assignment executed
by the Seller relating to such Purchased Assets.
(i) Location of Chief Executive Office. The Seller's chief executive
----------------------------------
office and principal place of business is located at the address set forth on
the first page of this Agreement.
(j) Marking of Leases. Each supplement to a Lease relating to a
-----------------
Purchased Lease Receivable has been clearly marked to indicate that such
supplement is a lessor supplement and is the "Lessor Original", and the Seller's
electronic records relating to such Purchased Lease Receivable shall indicate
that such Purchased Lease Receivable has been assigned and/or sold to the
Purchaser hereunder.
- 19 -
<PAGE>
(k) Lockbox Account Information. The name and address of the Lockbox
---------------------------
Bank, together with the account number of the Lockbox Account of the Seller at
such Lockbox Bank, have been disclosed to the Agent in writing and all action
required by paragraph 10 has been taken and completed.
------------
(l) Solvency. The Seller is not insolvent and will not be rendered
--------
insolvent by the transactions contemplated by this Agreement.
6. COVENANTS.
---------
(A) REPORTING COVENANTS
-------------------
Until the termination of this Agreement pursuant to paragraph 11, the
------------
Seller agrees that it will:
(1) Financial Statements. Furnish to the Agent or cause to be
--------------------
furnished to the Agent: (i) promptly after being publicly disclosed, and in any
event within forty-five (45) days after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Seller, copies of the
consolidated financial statements of Seller and its subsidiaries, including a
balance sheet of Seller and its subsidiaries on a consolidated basis as of the
end of such quarterly accounting period and related statements of net earnings
and cash flows for the portion of such fiscal year ended with the last day of
such quarterly accounting period, all in reasonable detail, (ii) promptly after
being publicly disclosed, and in any event within one hundred twenty (120) days
after the end of each fiscal year of the Seller, copies of the consolidated
financial statements of Seller and its subsidiaries, including a balance sheet
of Seller and its subsidiaries on a consolidated basis as of the end of such
fiscal year and related statements of net earnings and cash flows for such
fiscal year, all in reasonable detail and prepared and certified by independent
public accountants of nationally recognized standing selected by the Seller, and
stating in comparative form the respective figures for the end of and for the
previous fiscal year, (iii) as soon as available, and in any event within ten
(10) days after filing thereof, a copy of any filing made by the Seller with the
Securities and Exchange Commission, including, without limitation, forms 10-Q
and 10-K, or with any national securities exchange and (iv) from time to time
any other information concerning the Seller, the Purchased Assets or the Related
Security as the Purchaser may reasonably request.
- 20 -
<PAGE>
(2) Performance Reporting. Furnish to the Agent or cause to be
---------------------
furnished to the Agent, together with the financial statements furnished by the
Seller under clauses (i) and (ii) of paragraph 6(a), a copy of those reports
--------------
(delinquency, default and remarketing) relating to the performance of the
Seller's entire Lease portfolio as of the end of such quarterly accounting
period or fiscal year, as applicable, in substantially the same form as the
reports provided to the Agent prior to the date hereof.
(3) Settlement Date Summaries; Monthly Reports. Maintain books and
------------------------------------------
records pertaining to all Purchased Lease Receivables for which LSI is acting as
the Collection Agent and provide the Agent on each Settlement Date with, in a
form and with a content reasonably acceptable to the Agent, (A) detailed lease-
by-lease cash applications of all Scheduled Payments and Collections received by
the Agent during the immediately preceding month, (B) summaries of the status of
each Purchased Lease Receivable, whether serviced by LSI as Collection Agent or
by any Secondary Servicer, including the Collections and agings, and, upon
request, other source information, as is reasonably available, from which the
aforementioned summaries are prepared, (C) summaries of billings to the related
Obligor, if requested by the Agent, and (D) updated payment histories, if
requested by the Agent, for each Purchased Lease Receivable.
(4) Reporting on Lease Receivables and Other Matters. Notify the
------------------------------------------------
Agent promptly and in no event more than five (5) Business Days after the
occurrence of the following: (i) the Seller's determination not to make a Seller
Remittance with respect to a Scheduled Payment due to the Seller's determination
that such Scheduled Payment will not be made by the Obligor for credit reasons
(which determination shall not be binding upon the Agent), and of any default
under any such related Lease which constitutes the basis for such determination,
(ii) the Seller's obtaining actual knowledge (through any of its officers) of
any change in the name of the Obligor of any Purchased Lease Receivable, (iii)
the Seller's obtaining actual knowledge (through any of its officers) of the
default or violation of any provision of the Lease related to any Purchased
Lease Receivable or other related documents by the Obligor thereof, and (iv) the
Seller's obtaining actual knowledge (through any of its officers) of any and all
litigation or any other matters or events concerning the Seller or any Obligor
which might affect adversely the Seller's or such Obligor's ability to perform
its obligations with respect to the Purchased Lease Receivables or any of the
Purchaser's rights under this Agreement.
- 21 -
<PAGE>
(5) Obligor Information. Provide to the Agent, on or prior to each
-------------------
Settlement Date, written or electronically readable information, stating any
changes in the names and current addresses of, and, to the extent known by the
Seller, the names of the contact persons, for each Obligor under any Purchased
Lease Receivable and, if requested by the Agent, additional executed Notices of
Assignment to permit the Agent to reflect any changed information.
(6) Substitutions and Repurchases. Provide to the Agent, on the date
-----------------------------
of each substitution or repurchase hereunder, a report, in form and content
reasonably satisfactory to the Agent, describing the average outstanding balance
for all Purchased Lease Receivables for the preceding 12 month period,
substitutions and/or repurchases occurring on such date and the aggregate
substitutions and repurchases by the Seller over the preceding 12 month period.
(B) AFFIRMATIVE COVENANTS
---------------------
Until the termination of this Agreement pursuant to paragraph 11, the
------------
Seller agrees that it will:
(1) Access to Books and Records. Permit the Agent and its agents or
---------------------------
representatives, during normal business hours and upon reasonable advance notice
to the Seller, to have access to all records, files, books of account, data
bases and information pertaining to all Purchased Lease Receivables, related
Leases, related Equipment and Computer Software and Related Security, and, on
an annual basis, permit such Persons to inspect, audit, and to make extracts
therefrom at Seller's expense; provided, that, the Seller shall permit the Agent
-------- ----
and its agents or representatives to inspect, audit and make extracts from the
Seller's records more frequently than annually (up to once per quarter) so long
as the Seller is required to pay the expenses of only one audit per year.
(2) Compliance with Legal Obligations. Perform all of the Seller's
---------------------------------
obligations arising by contract or imposed by applicable law, rule or regulation
with respect to the Purchased Assets, the related Equipment or Computer Software
and the Related Security.
(3) Payment of Taxes. Pay and discharge or cause the Obligor to pay
----------------
and discharge before the same shall become
- 22 -
<PAGE>
delinquent all taxes, assessments, fines, fees or other liabilities (including,
without limitation, those relating to the Purchased Assets, the related
Equipment or Computer Software or the Related Security), and file or cause the
Obligor to file all filings and returns with respect thereto in a timely manner,
except to the extent the Seller or the Obligor is contesting the same in good
faith by appropriate proceedings and, with respect to unpaid taxes, assessments,
fines, fees and other liabilities, has set aside adequate reserves in accordance
with generally accepted accounting principles for the payment thereof.
(4) Preservation of Corporate Existence. Preserve and maintain its
-----------------------------------
corporate existence, rights, franchise and qualifications to do business.
(5) Collections. Instruct all Obligors and Secondary Servicers to
-----------
cause all Collections to be deposited directly to the Lockbox Account, and, if
the Seller shall receive any Collections, the Seller shall have up to two (2)
Business Days following the Seller's receipt thereof to remit such Collections
to the Lockbox Account.
(6) Obligor Perfection Requirement. Comply with the Obligor
------------------------------
Perfection Requirement.
(7) Further Assurances. From time to time execute and deliver such
------------------
further documents, and perform such further acts, as the Agent may reasonably
request, at the Seller's expense, in order to fully effect the purposes of this
Agreement and to perfect, protect or more fully evidence the Purchaser's
ownership interest in the Purchased Assets and the Purchaser's security interest
in the Equipment (including, without limitation, in order to ensure compliance
with the Obligor Perfection Requirement) and Related Security, or to enable the
Purchaser or the Agent to exercise or enforce any of their respective rights
hereunder or under any Assignment, including, without limitation, executing and
filing such financing or continuation statements or amendments thereto.
(8) Change in Business or Credit and Collection Policy. Not make any
--------------------------------------------------
change, without the prior written consent of the Agent (which consent shall not
be unreasonably withheld or delayed), in the character of its business or in the
Credit and Collection Policy, which change would, in either case, impair the
collectibility of any Purchased Lease Receivable.
- 23 -
<PAGE>
(9) Change in Corporation Name. Not make any change to its
--------------------------
corporation name, unless prior to the effective date of any such name change,
the Seller delivers to the Agent such Financing Statements (Form UCC-1 and UCC-
3) executed by the Seller which the Agent may reasonably request to reflect such
name change, together with such other documents and instruments that the Agent
may request in connection therewith.
(10) Change of Chief Executive Office. Notify the Agent prior to the
--------------------------------
Seller's changing the location of the Seller's principal place of business or
chief executive office.
(11) Sales, Liens, Etc. Against Lease Receivables or Equipment.
---------------------------------------------------------
Except as otherwise provided herein or as otherwise consented to by the Agent
and the Purchaser in writing (which consent may be conditioned upon the delivery
to the Agent of appropriate documentation in form and substance satisfactory to
the Agent), not (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist, any Adverse Claim upon or with respect
to, any Purchased Asset, any related Lease or any Related Security, or assign
any right to receive income in respect of such Purchased Assets, Leases or
Related Security, or (ii) create, or suffer to exist, any Adverse Claim upon or
with respect to any Equipment related to a Purchased Lease Receivable.
(12) Extension or Amendment of Lease Receivables. Not extend, amend
-------------------------------------------
or otherwise modify the terms of any Purchased Lease Receivable, or amend,
modify or waive any term or condition of any Lease related thereto, unless such
Purchased Lease Receivable is repurchased by the Seller, or another Lease
Receivable is substituted therefor in accordance with paragraph 9, or unless the
-----------
Agent consents to such amendment, modification or waiver in writing.
(13) Change in Payment Instructions to Obligors. Not terminate the
------------------------------------------
lockbox arrangements with the Lockbox Bank and not make any change in its
instructions to Obligors regarding Payments to be made to the Lockbox Account.
(14) Enforcement of Leases. Not, so long as any Purchased Lease
---------------------
Receivable for which any Scheduled Payment is due or is to become due, without
the prior written consent of the Agent, take any action, permit any Person
claiming by or through the Seller to take any action or attempt to require any
Person to take action to enforce any rights and/or remedies under the
- 24 -
<PAGE>
related Lease or against any Equipment or Computer Software covered under such
Lease; it being understood that neither the Purchaser nor the Agent has any
obligation under any circumstance to enforce or take any action to enforce any
rights or remedies under any such Lease.
(15) Impairment of the Purchaser's Rights. Not do anything to impair
------------------------------------
the value of the Purchaser's rights in the Purchased Assets or the Related
Security, including the termination of or any amendment to any financing
statement filed by the Seller against any Obligor, without the prior consent of
the Agent (which consent shall not be unreasonably withheld or delayed).
(16) Terminate or Reject Leases. Not terminate or reject any Lease
--------------------------
under which a Purchased Lease Receivable has arisen prior to the term of such
Lease, whether such rejection or early termination is made pursuant to an
equitable cause, statute, regulation, judicial proceeding or other applicable
law (including, without limitation, Section 365 of the Bankruptcy Code) unless
prior to any such termination or rejection, the Seller has paid to the Agent,
for the benefit of the Purchaser, an amount equal to the Repurchase Price with
respect thereto (such Repurchase Price to be calculated assuming that the Lease
is in effect for its full term) or another Lease Receivable has been substituted
therefor in accordance with paragraph 9.
-----------
(17) Acceleration of Leases. If the Seller or the Purchaser, to the
----------------------
extent permitted under this Agreement, shall accelerate a Purchased Lease
Receivable, the Seller shall remit all funds received from the Obligor under
such Purchased Lease Receivable to the Lockbox Account and such funds shall be
Collections of such Purchased Lease Receivable. To the extent that the Lease
associated with an accelerated Purchased Lease Receivable specifies an amount to
be paid upon acceleration which is less than the Repurchase Price for such
Purchased Lease Receivable at that time, then the Seller shall deposit
additional funds to the Lockbox Account in an amount equal to the difference
between the Repurchase Price and the accelerated payment amount specified in
such Lease, and such amounts shall constitute Collections hereunder.
(18) Purchase Option; Early Termination Option; Insurance Proceeds.
-------------------------------------------------------------
(A) If the Obligor under any Purchased Lease Receivable shall exercise any
purchase option or early termination option contained in the Lease associated
therewith,
- 25 -
<PAGE>
the Seller shall remit all funds received from the Obligor under such Purchased
Lease Receivable to the Lockbox Account (up to an amount equal to the Repurchase
Price) and such funds shall be deemed Collections of such Purchased Lease
Receivable. To the extent that the Lease associated with such Purchased Lease
Receivable specifies a payment amount upon exercise of a purchase option or upon
early termination which is less than the Repurchase Price for such Purchased
Lease Receivable at that time, then the Seller shall deposit additional funds to
the Lockbox Account in an amount equal to the difference between the Repurchase
Price and the payment amount specified in such Lease, and such amounts shall
constitute Collections hereunder.
(B) If a Purchased Lease Receivable arises under a Lease of
Equipment, and such Equipment is lost, damaged or destroyed, any insurance
proceeds paid with respect to such Equipment and any Payments from the Obligor
thereunder made by the Obligor as a result of such Equipment being lost, damaged
or destroyed shall be remitted to the Lockbox Account (up to an amount equal to
the Repurchase Price) and such funds shall be deemed Collections of such
Purchased Lease Receivable. To the extent that the amount required to be paid
by the Obligor, pursuant to the terms of the related Lease, with respect to such
lost, damaged or destroyed Equipment, whether or not funded by proceeds of
insurance, is less than the Repurchase Price for the related Purchased Lease
Receivable at that time, then the Seller shall deposit additional funds to the
Lockbox Account in an amount equal to the difference between the Repurchase
Price and such amount required by such Lease.
7. AGREEMENT TO INDEMNIFY.
----------------------
(a) Neither the Agent nor the Purchaser assumes any obligation or
liability to the lessee, payor or vendee under any Lease and no assignment of
any Purchased Assets or Related Security shall impose any such obligation or
liability on either the Agent or the Purchaser. The Seller agrees to indemnify
and save the Agent, the Purchaser, their respective successors and assigns,
their respective affiliates and the officers, directors and agents of any of the
foregoing (individually, an "Indemnitee") harmless of, from and against any
----------
losses, damages, penalties, forfeitures, claims, costs, expenses (including
court costs and reasonable attorney's fees) or liabilities (collectively, the
"Claims"), excluding, however, those arising solely out of any action or failure
------
to act by any Collection Agent other than LSI, any of LSI's Affiliates or the
Secondary
- 26 -
<PAGE>
Servicers, such Indemnitee's gross negligence or willful misconduct and
excluding recourse for uncollectible Purchased Lease Receivables and the costs
of attempting to collect or enforce such Purchased Lease Receivables against an
Obligor and any Claims related to such collection efforts, which may at any time
be brought, incurred, assessed or adjudged against such Indemnitee, related to
or arising from the Purchased Assets, the related Equipment or Computer Software
or the Related Security, and, including, without limitation, those arising or
resulting from: any alleged failure of any Purchased Asset, the related
Equipment or Computer Software or the Related Security to comply with any
applicable law, rule, regulation or contractual specification; any failure (or
alleged failure if the Claim related thereto arises from any action brought or
demand made by an Indemnitee other than the Agent or Purchaser) on the Seller's
part to keep or perform any of the Seller's obligations under a Lease or related
agreement with respect to any Purchased Asset, the related Equipment or Computer
Software or the Related Security; any alleged failure on LSI's part to keep or
perform any of its obligations hereunder as Collection Agent, whether express or
implied, with respect to any Purchased Asset, the related Equipment or Computer
Software or the Related Security or any inaccuracy in any information provided
to an Indemnitee by LSI as Collection Agent; any alleged injury to persons or
property or any violation or invasion of any patent or invention rights; any
governmental fees, charges, taxes (including any sales tax) or penalties levied
or imposed in respect to any Purchased Asset, any related Equipment or Computer
Software or the Related Security; the termination, rejection or non-assumption
by the Seller (including, without limitation, its successor in interest,
including a trustee appointed under the Bankruptcy Code) of any Lease related to
a Purchased Lease Receivable prior to the expiration of the original term of
such Lease, whether such termination, rejection, or non-assumption is made
pursuant to an equitable cause, statute, regulation, judicial proceeding or
other applicable law (including, without limitation, the Bankruptcy Code); any
breach by the Seller of any of the Seller's representations, warranties,
covenants or other obligations or agreements contained in this Agreement, in any
Lease related to a Purchased Lease Receivable or in any agreement related hereto
or thereto; or any inaccuracy in any information provided to an Indemnitee by
the Seller. The Seller agrees to pay all amounts due hereunder promptly on
notice thereof from an Indemnitee (which notice shall state the basis, in
reasonable detail, for the claim being asserted under this paragraph 7(a))
--------------
- 27 -
<PAGE>
and in no event later than ten (10) Business Days after such notice.
(b) All of the indemnities and agreements contained in this
paragraph shall survive and continue in full force and effect notwithstanding
termination of this Agreement or of any Lease related to a Purchased Lease
Receivable.
8. AGREEMENT REGARDING COLLECTIONS AND ADMINISTRATIONS.
---------------------------------------------------
(a) Designation of the Collection Agent. The servicing,
-----------------------------------
administering, billing and collecting of Purchased Lease Receivables shall be
conducted by the Person (the "Collection Agent") so designated from time to
-----------------
time in accordance with this paragraph 8. LSI is hereby designated as, and
-----------
hereby agrees to perform the duties and obligations of, the Collection Agent
pursuant to the terms hereof and may not be removed from such capacity except as
provided in paragraph 8(k) hereof. As Collection Agent, LSI agrees to
--------------
administer the Purchased Lease Receivables portfolio with the same care, and in
the same manner, as LSI administers its own receivables portfolio. The Agent
hereby consents to the Collection Agent's appointment of Storagetek Financial
Services Corporation (whether or not owned by Storage Technology Corporation),
Memorex Telex Corporation and Electronic Data Systems Corporation as secondary
servicers (the "Secondary Servicers") of the Purchased Lease Receivables,
-------------------
provided that (i) LSI as Collection Agent designates those Purchased Lease
Receivables to be serviced by each Secondary Servicer, and (ii) LSI as
Collection Agent shall remain liable for the performance of the duties and
obligations of the Collection Agent pursuant to the terms hereof.
(b) Duties of the Collection Agent. The Collection Agent shall take
------------------------------
or cause to be taken all such actions as may be necessary or advisable to
collect each Purchased Lease Receivable from time to time, all in accordance
with applicable laws, rules and regulations, with reasonable care and diligence,
and in accordance with the Credit and Collection Policy, including, without
limitation, billing each Obligor with respect to each Scheduled Payment not less
than thirty (30) days in advance of the due date of such Scheduled Payment in
accordance with the Collection Agent's standard billing procedures. The
Collection Agent shall remit all Collections received by the Collection Agent
into the Lockbox Account within two (2) Business Days' of receipt thereof. Each
of the Seller, the Purchaser and the Agent hereby appoints as its agent the
Collection Agent to enforce its
- 28 -
<PAGE>
respective rights and interests in and under the Purchased Assets, the Related
Security and the related Leases; provided, that, notwithstanding the foregoing,
-------- ----
the Seller and the Collection Agent shall comply with paragraph 6(b)(15) hereof.
------------------
Notwithstanding any statement or implication to the contrary, the Collection
Agent may agree, with the prior written consent of the Purchaser, with any
Obligor as to any modification, alteration, release, compromise, extension,
waiver, consent, or other similar or dissimilar indulgence of or with respect to
any Purchased Lease Receivable.
In no event shall the Collection Agent be entitled to make the Agent
or the Purchaser a party to any litigation without the Agent's express prior
written consent. Notwithstanding anything to the contrary contained herein, the
Agent shall have the absolute and unlimited right to direct the Collection Agent
(whether the Collection Agent is the Seller or otherwise) to commence or settle
any legal action to enforce collection of any Purchased Lease Receivable or to
foreclose upon or repossess any Related Security. The two immediately preceding
sentences shall not be applicable with respect to any Purchased Lease Receivable
which the Seller has repurchased pursuant to paragraph 9 hereof.
-----------
(c) Rights of the Agent. (i) The Collection Agent shall be required
-------------------
to remit all Collections of Purchased Lease Receivables deposited in the Lockbox
Account to the Agent's Account in the amounts and at the times specified in
paragraph 8(h).
- - --------------
(ii) At any time following the designation of a Collection Agent
other than LSI pursuant to paragraph 8(k) (it being understood that the Agent
--------------
will not take any of the following actions prior to such replacement of LSI as
Collection Agent subject to the last paragraph of paragraph 8(k)):
--------------
(A) The Agent may notify the Obligors and the Secondary Servicers of
Purchased Lease Receivables, or any of them, of the Purchaser's interest in
Purchased Assets and Related Security and direct such Obligors and
Secondary Servicers, or any of them, that payment of all amounts payable
under any Purchased Lease Receivable be made directly to the Agent or its
designee.
(B) The Agent may in connection with the Agent's notification of
Obligors as provided in paragraph
---------
- 29 -
<PAGE>
8(c)(ii)(A), complete and deliver the original Notice of Assignment to any
-----------
Obligor of the Purchased Lease Receivables.
(C) The Seller shall, at the Agent's request, (1) assemble all
Records which the Agent reasonably believes are necessary or appropriate
for the administration and enforcement of the Purchased Lease Receivables,
and shall make the same available to the Agent at a place selected by the
Agent or its designee, and (2) segregate all cash, checks and other
instruments received by it from time to time constituting Collections of
Purchased Lease Receivables in a manner acceptable to the Agent and shall,
within two (2) Business Days following receipt thereof, remit all such
cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
(D) Both the Seller and the Purchaser hereby authorize the Agent to
take any and all steps in the Seller's name and on behalf of the Seller and
the Purchaser required, in the reasonable determination of the Agent (after
consulting counsel), to collect all amounts due under any and all Purchased
Lease Receivables, including, without limitation, endorsing the Seller's
name on checks and other instruments representing Collections and enforcing
such Lease Receivables and the related Leases, so long as such enforcement
is in accordance with applicable laws, rules and regulations; provided,
--------
that the Agent shall not make the Seller a party to any litigation except
as required by applicable law in order to collect amounts due under any and
all Purchased Lease Receivables.
(d) Cooperation by the Seller. If the Agent designates a Person
-------------------------
other than LSI as the Collection Agent pursuant to paragraph 8(k) (for either
--------------
individual Delinquent Lease Receivables or for all Purchased Leased
Receivables), the Seller shall not initiate communication in any way with the
related Obligors concerning the billing and collection of such Purchased Lease
Receivables, nor shall the Seller interfere or attempt to interfere with the
issuance of Notices of Assignments with respect to, or the billing and
collection of sums due under such Purchased Lease Receivables or with funds held
in the Lockbox Account or the Agent's Account. Furthermore, the Seller
- 30 -
<PAGE>
shall, upon the request of the Agent, cooperate and assist the Collection Agent
in efforts with respect to billing and collection of such Purchased Lease
Receivables as the Collection Agent may reasonably request, the transfer of
funds in the Lockbox Account constituting payment of Purchased Lease Receivables
to the Agent's Account as the Collection Agent may reasonably request, and the
communication with and exercise of rights with respect to the Secondary
Servicers. The Agent's and the Collection Agent's (as applicable) right to send
Notices of Assignment and bill and collect Purchased Lease Receivables, and to
direct the payment of funds held in the Lockbox Account constituting payment of
Purchased Lease Receivables to the Agent's Account as provided in this paragraph
shall be specifically enforceable by such Persons. In addition, the Seller will
use its best efforts, in accordance with its standard operating procedures, to
assist the Agent (at Agent's request and on a non-exclusive basis) in
repossessing Equipment and remarketing any repossessed Equipment which is Seller
Collateral. Except as specifically required or prohibited in this subparagraph,
nothing shall limit Seller's rights to contact any Obligor or do business with
any Obligor, including, without limitation, collecting from such Obligor any
receivables not constituting Purchased Lease Receivables.
(e) Power of Attorney. The Seller hereby irrevocably constitutes and
-----------------
appoints the Agent (or any assignee or designee of the Agent) as the Seller's
true and lawful attorney, which power of attorney is coupled with an interest,
with full authority of the Seller and full power of substitution for the Seller,
and in its name, place and stead, to ask, demand, collect, receive, receipt for,
sue for, compound and give acquittance for any and all Purchased Assets and the
Related Security, and to endorse, in writing or by stamp, the Seller's name on
all checks, collections, receipts or instruments given in payment or part
payment thereof; provided, however, the Agent agrees it will not exercise such
-------- -------
power of attorney until after a Collection Agent Replacement Event has occurred
under this Agreement and has not been cured in accordance with paragraph 8(k)
--------------
below. The power of attorney granted pursuant to this subparagraph is subject
to the limits specified in subparagraph (8)(c)(ii)(D).
--------------------------
(f) Responsibilities of the Seller. Anything herein to the contrary
------------------------------
notwithstanding, the Seller shall perform all of its obligations under the
Leases related to the Purchased Lease Receivables to the same extent as if
Purchased Assets and Related
- 31 -
<PAGE>
Security had not been transferred hereunder and the exercise by the Agent of its
rights hereunder shall not relieve the Seller from such obligations.
(g) Application of Payments. To the extent the Collection Agent
-----------------------
receives a payment from an Obligor of a Purchased Lease Receivable with respect
to which the Obligor has not identified the Lease Receivable to which such
payment should be applied, the Collection Agent shall use its best efforts to
contact such Obligor to confirm the Lease Receivable to which such Obligor
intended that such payment be applied.
(h) Remittance of Collections.
-------------------------
(i) On the last Business day of each week, the Seller shall remit, or
shall cause to be remitted, all Collections in the Lockbox Account to the
Agent's Account.
(ii) On or before the 15th day of each month, or, if not a Business
Day, the last Business Day prior to the 15th day of each month (the
"Remittance Date"), the Seller shall deposit, or shall cause to be
----------------
deposited, to the Agent's Account for the benefit of the Purchaser, an
amount, including Collections, equal to the Scheduled Payments due in such
month not already remitted ("Seller Remittances") less the amount of any
------------------ ----
specific Scheduled Payment which the Seller in good faith believes will not
be collectible in such month for reasons related to the credit quality of
the related Obligor.
(iii) If an Obligor pays a Scheduled Payment with respect to which
(i) the Seller has made Seller Remittances and (ii) such Obligor has no
past-due Scheduled Payments that the Seller has not made a Seller
Remittance with respect thereto at such time, such Scheduled Payment(s)
shall be for the Seller's account and shall not be remitted to the Agent's
Account (or, if deposited, shall be promptly returned to the Seller).
(iv) With respect to Collections held in the Agent's Account pending
application on the Remittance Date, Seller will be paid interest on all
funds received by the Agent since the last Remittance Date. Interest will
be due monthly in arrears based upon the average daily balance of funds
received. The interest rate will be the average three month Treasury Bill
yield as published weekly in the H.15
- 32 -
<PAGE>
bulletin of the Federal Reserve Board for the period minus .25%. The
amount of interest earned by the Seller shall be forwarded to the Seller on
or before the last day of such month.
(i) Payments and Computations, Etc. All amounts to be paid or
-------------------------------
deposited by the Seller or the Collection Agent hereunder shall be paid or
deposited in accordance with the terms hereof no later than 1:00 P.M. (New York
---------
City time) on the day when due in lawful money of the United States of America
in immediately available funds to an account specified by the Agent in writing.
The Seller shall, to the extent permitted by law, pay to the Agent interest on
all amounts not paid or deposited by the Seller when due hereunder (whether
owing individually or as the Collection Agent) at the greater of (i) the "Base
Rate" (hereinafter defined), plus 2.0%, or (ii) the effective Discount Rate for
----
the Lease Receivable to which the expected payment relates, plus 2.0%. "Base
----
Rate" shall mean the rate of interest announced publicly by Citibank, N.A. in
New York, New York, from time to time as its base rate, payable on demand;
provided, however, that such interest rate shall not at any time exceed the
- - -------- -------
maximum rate permitted by applicable law. Such interest shall be retained by
the Agent except to the extent that such failure to make a timely payment or
deposit has continued beyond the date for distribution by the Agent of such
overdue amount to the Purchaser, in which case such interest accruing after such
date shall be for the account of, and distributed by the Agent to, the
Purchaser. All computations of interest and other fees hereunder shall be made
on the basis of a year of 360 days for the actual number of days (including the
first but excluding the last day) elapsed.
(j) Reimbursement of Collection Expenses. So long as LSI is acting
------------------------------------
as the Collection Agent it will act at its own sole cost and expense. In the
event that the Agent has designated a Person other than LSI as the Collection
Agent for all Purchased Lease Receivables pursuant to paragraph 8(k), LSI agrees
--------------
to reimburse the Collection Agent, within ten (10) days after the Collection
Agent's request therefor, for all out-of-pocket expenses and costs which have
been reasonably incurred by the Collection Agent in connection with performing
its duties as the Collection Agent hereunder and to reimburse the Agent or the
Purchaser for any reasonable fee paid by it to such Collection Agent in
consideration of the performance of such duties; provided, that LSI shall not be
-------- ----
obligated to reimburse the Agent or the Purchaser for fees, expenses and costs
arising out of the
- 33 -
<PAGE>
repossession of the Equipment related to a Purchased Lease Receivable or the
institution of legal proceedings in connection with the foregoing.
(k) Collection Agent Replacement Events. The Agent may at any time,
-----------------------------------
following the occurrence of any of the following events (each a "Collection
----------
Agent Replacement Event"), send written notice to the LSI of the occurrence of a
- - -----------------------
Collection Agent Replacement Event and designate any other Person to succeed LSI
or any successor Collection Agent, on the condition in each case that any such
Person so designated shall agree to perform the duties and obligations of the
Collection Agent pursuant to the terms hereof:
(i) the Seller shall fail to repurchase any Ineligible Purchased
Lease Receivables as provided in paragraph 9 below; or
-----------
(ii) the Seller (individually or as the Collection Agent) defaults in
any other payment obligations hereunder, and such default shall have
continued for a period of two (2) Business Days after notice thereof to the
Seller from the Agent, or the Seller (individually or as the Collection
Agent) defaults in the performance or observance of any other duty,
covenant, agreement, warranty, representation, or provision contained in
this Agreement, and such default shall have continued for a period of
twenty (20) days after notice thereof to the Seller from the Agent; or
(iii) the Tangible Net Worth of LSI and its consolidated
subsidiaries shall be less than seventy-five percent (75%) of the highest
Tangible Net Worth of LSI and its consolidated subsidiaries previously
reported in any quarterly financial statements of LSI and its consolidated
subsidiaries, beginning December 31, 1995; or
(iv) the Seller has an operating loss or negative net income on a
consolidated basis in any two (2) consecutive fiscal quarters and the
aggregate amount of such loss or negative net income for such two-quarter
period equals or exceeds $750,000; or
(v) the Seller has an operating loss or negative net income on a
consolidated basis in any fiscal year of $750,000 or more; or
- 34 -
<PAGE>
(vi) the Seller defaults in the payment of any Indebtedness in excess
of $1,000,000 or the Seller otherwise defaults under any agreement or
instrument under or pursuant to which any such Indebtedness may have been
issued, created, assumed or guaranteed by the Seller and the effect of
which default is to cause an acceleration thereunder or to permit
acceleration thereunder and the default is not waived by the obligee or
cured, in either case, within ten (10) Business Days of the date of such
default; or
(vii) the Seller shall cease to do business as a going concern or
shall admit in writing its inability to pay its debts generally as they
become due or shall make an assignment for the benefit of its creditors or
shall commence a proceeding for the appointment of a receiver, trustee,
liquidator or conservator of itself or of the whole or any substantial part
of its property; or a complaint or petition or answer seeking
reorganization or arrangement or any similar relief under the Bankruptcy
Code or any other applicable law or statute of the United States of America
or any state is filed by or against the Seller; or a court of competent
jurisdiction shall enter an order, judgment or decree appointing a
receiver, trustee, liquidator or conservator (or shall otherwise assume
custody or control) of the Seller or of the whole or of any substantial
part of its assets; or
(viii) any representation and warranty contained in subparagraph
------------
5(a) through subparagraph 5(f) or subparagraph 5(i), 5(k) or 5(l) is
---- ----------------- ----------------- ---- ----
determined by the Agent to be false or misleading in any material respect;
or
(ix) any representation and warranty contained in subparagraphs 5(g),
------------------
5(h) or 5(j) is determined by the Agent to be false or misleading in any
---- ----
material respect (in which case, such representation and warranty shall be
considered to have been breached) and the breach of such representation
and warranty is not cured, or the Purchased Lease Receivable related to
such breach has not been repurchased by the Seller or another Lease
Receivable has not been substituted therefor, within ten (10) Business Days
of the Seller's receipt of written notice, in reasonable detail, of such
breach; or
(x) except to the extent permitted by the terms hereof or caused by
any act or failure to act by the Agent or the
- 35 -
<PAGE>
Purchaser, Purchaser shall cease to have a valid and perfected first
priority interest in each Purchased Lease Receivable and the Related
Security and Collections with respect thereto or any Assignment delivered
hereunder shall, for any reason, cease to evidence the transfer to the
Purchaser of a valid and perfected first priority interest in Purchased
Lease Receivables, the Related Security and Collections evidenced by such
Assignment; provided, however, if any such failure relates to a Lease
-------- -------
Receivable which is repurchased, or a substitution is made therefor, by the
Seller pursuant to paragraph 9 hereof, then such failure shall not give
-----------
rise to a Collection Agent Replacement Event under this clause (x); or
(xi) the aggregate remaining Scheduled Payments of Purchased Lease
Receivables delinquent beyond 60 days exceeds 5% of the aggregate remaining
Scheduled Payments for all Purchased Lease Receivables; or
(xii) the Seller dissolves, merges or consolidates with or into
any Person (other than a wholly-owned subsidiary for the purpose of
reincorporating the Seller, where the subsidiary assumes all of Seller's
obligations under this Agreement and the documents executed in connection
herewith), unless LSI is the surviving corporation, or disposes of all or
substantially all of its assets.
Notwithstanding the foregoing, the Agent may at any time designate a
Person other than LSI to act as collection agent with respect to either (1) any
Delinquent Lease Receivable not Repurchased by the Seller or with respect to
which Seller has not substituted another Lease Receivable or (2) any Purchased
Lease Receivable with respect to which (A) a Scheduled Payment is past-due, (B)
the Seller has failed to make a Seller Remittance on the Remittance Date
therefor and (C) Seller has not Repurchased such Purchased Lease Receivable or
substituted another Lease Receivable therefor (a "Past-Due Receivable"). Such
Person designated by the Agent shall have the rights and powers of the
Collection Agent with respect to the servicing, administering, billing and
collecting of such Delinquent Lease Receivables and/or such Past-Due
Receivables, as the case may be, on the condition in each case that any such
Person so designated shall agree to perform the duties and obligations of the
Collection Agent with respect to such Delinquent Lease Receivables and/or Past-
Due Receivables pursuant to the terms hereof. The Agent
- 36 -
<PAGE>
shall notify LSI in writing (specifying the basis therefor) if the Agent has
designated a Person other than LSI as Collection Agent hereunder pursuant to its
rights in this paragraph (k). Any Person (other than LSI) designated as
-------------
Collection Agent hereunder for all of the Purchased Lease Receivables remaining
outstanding due to a Collection Agent Replacement Event shall be reimbursed
monthly by LSI for the costs and expenses of such Person in performing its
duties hereunder at an amount equal to .35% of the average outstanding balance
of the Purchased Lease Receivables, but in any event not less than $2,000 per
month.
(l) Return of Payments. The Collection Agent shall notify the Agent
------------------
of the Payments (or portions thereof) that do not constitute Purchased Assets
hereunder. The Agent shall promptly remit to the Seller any Payments received
by it or the Purchaser that do not constitute Purchased Assets hereunder,
including, without limitation, funds deposited into the Agent's Account that
represent payments on account of property, sales, use or other taxes or
maintenance.
9. REPURCHASE OF LEASE RECEIVABLES.
-------------------------------
(a) Lack of Eligibility. In the event any Purchased Lease Receivable
-------------------
shall not have been an Eligible Lease Receivable on the Purchase Date thereof,
or, if such Purchased Lease Receivable was purchased on the initial Purchase
Date and any Person required to consent to the assignment of a Lease Receivable
shall refuse to consent or shall not have consented on or before June 30, 1996,
or the Seller shall have breached any representation or warranty made hereunder
with respect to such Lease Receivable including, without limitation, any of the
representations and warranties contained in paragraph 5(g), (h) or (j) (any
-------------- --- ---
such Purchased Lease Receivable being referred to as an "Ineligible Purchased
--------------------
Lease Receivable"), the Seller shall on the next succeeding Settlement Date,
- - ----------------
upon the Agent's demand, at the Seller's option either substitute for such
Ineligible Purchased Lease Receivable a new Lease Receivable in the manner
specified in paragraph 9(b) or repurchase such Ineligible Purchased Lease
--------------
Receivable for the Repurchase Price specified in paragraph 9(e).
--------------
(b) Substitution. The Seller shall have the right, at the Seller's
------------
option, to substitute a Purchased Lease Receivable on any Settlement Date,
subject to the limitations in this Agreement. If the Seller substitutes a new
Lease Receivable for a Purchased Lease Receivable pursuant to this paragraph 9,
-----------
such
- 37 -
<PAGE>
new Lease Receivable shall (i) on the date of substitution, be an Eligible Lease
Receivable, and shall be certified as such by the Seller, (ii) have an Obligor
with the same or better credit quality as the Obligor on the Purchased Lease
Receivable for which it is being substituted, (iii) have the same payment
frequency as the Purchased Lease Receivable for which it is being substituted,
(iv) have Scheduled Payments in the same or a greater amount than the Scheduled
Payments under the Purchased Lease Receivable for which it is being substituted,
and (v) have a remaining term that is equal to or greater than the remaining
term of the Purchased Lease Receivable for which it is being substituted. On
the date of such substitution, such new Eligible Lease Receivable shall become a
Purchased Lease Receivable and the Purchased Lease Receivable so replaced shall
cease to be a Purchased Lease Receivable. Notwithstanding anything herein to
the contrary, the Seller shall not be permitted to substitute Lease Receivables
for Purchased Lease Receivables if, after such substitution, the aggregate
balance of the Purchased Lease Receivables substituted by the Seller during the
12 months prior to and including such substitution exceed an amount equal to 10%
of the average outstanding balance of all Purchased Lease Receivables for the
same 12 month period.
(c) Repurchase of Purchased Lease Receivables Pursuant to
-----------------------------------------------------
Securitization Facility. If the Seller shall enter into the Securitization
- - -----------------------
Facility, and the Seller shall have notified the Agent of its intention to
repurchase all or a portion of the Purchased Lease Receivables, the Seller
shall, with the proceeds of the Securitization Facility, repurchase all or a
portion of Purchased Lease Receivables on such date, subject to the terms and
conditions of the Securitization Facility. The Repurchase Price will be
calculated by using, at the Seller's option, either the Market Rate described in
the second sentence of the definition of "Repurchase Price", or a rate equal to
the Discount Rate in effect on the Purchase Date for each such Purchased Lease
Receivable. If the Repurchase Price paid by the Seller shall be based upon the
Discount Rate, then the Seller shall assume all of the Purchaser's rights and
obligations under Interest Rate Hedges then in effect hereunder with respect to
the repurchased Purchased Lease Receivables, which Interest Rate Hedges shall
thereafter be for the benefit of the Securitization Facility.
(d) Optional Repurchases or Substitutions of Receivables. In
----------------------------------------------------
addition to its rights in paragraph 9(c), the Seller shall have the right, at
--------------
the Seller's option, to repurchase a Purchased Lease Receivable on any
Settlement Date,
- 38 -
<PAGE>
subject to the limitations contained in this paragraph 9(d). All repurchases
--------------
hereunder (other than as described in paragraph 9(a) or those repurchases
--------------
occurring after June 30, 1996, if the Securitization Facility has not been
entered into be that date) shall arise out of the rewriting and/or restructuring
of the related Lease as an accommodation to the Obligor thereunder, and the
Seller agrees that if it repurchases a Purchased Lease Receivable, it will offer
to the Purchaser the repurchased Lease Receivable on the next Purchase Date
hereunder. Other than as provided in paragraph 9(e) hereof, the Seller shall
--------------
not repurchase Purchased Lease Receivables pursuant to this paragraph 9(d) if,
--------------
after such repurchase, the aggregate Purchased Lease Receivables repurchased by
the Seller during the 12 months prior to and including such repurchase exceed an
amount equal to 15% of the average outstanding balance of all Purchased Lease
Receivables for the same 12 month period.
If, after June 30, 1996, the Securitization Facility has not been
entered into, (i) the Seller shall not repurchase Purchased Lease Receivables
if, after such repurchase, the aggregate remaining Purchased Lease Receivables
outstanding is less than $30,000,000, and (ii) the Repurchase Price with respect
to any Purchased Lease Receivable repurchased by the Seller shall be calculated
using the Market Rate described in the second sentence of the definition of
"Repurchase Price".
If the Seller exercises its right under this paragraph 9(d) to
--------------
repurchase or substitute Lease Receivables, the Seller shall, on the next
Settlement Date, either substitute for such Lease Receivable a new Lease
Receivable in the manner specified in paragraph 9(b) or repurchase such
--------------
Purchased Lease Receivable by paying to the Purchaser cash in an amount equal to
the Repurchase Price of such Purchased Lease Receivable. The proceeds of any
such repurchase shall be deemed to be Collections of such Lease Receivable
received by the Seller.
(e) Calculation of Repurchase Price. The "Repurchase Price" for
-------------------------------
purposes of paragraph 9(d) and paragraph 9(a) shall be calculated using the
-------------- --------------
Market Rate described in the second sentence of the definition of "Repurchase
Price". If the Seller shall repurchase Purchased Lease Receivables and, after
such repurchase, the aggregate Purchased Lease Receivables repurchased by the
Seller during the 12 months prior to and including such repurchase exceed an
amount equal to 15% of the average outstanding balance of all Purchased Lease
Receivables for the same 12 month period, the "Repurchase Price" with respect to
such
- 39 -
<PAGE>
repurchase shall be calculated using the Market Rate described in the last
sentence of the definition of "Repurchase Price".
(f) Retransfer without Recourse. Any such retransfer to the Seller
---------------------------
of a Purchased Lease Receivable pursuant to this paragraph 9 shall be made
-----------
without recourse to, and without representation and warranty by the Agent or the
Purchaser of any kind whatsoever other than with respect to the release of any
lien created or permitted by the Agent or the Purchaser with respect to such
Purchased Lease Receivable or the Related Security.
(g) Administration of Substitutions and Repurchases. The Seller shall
-----------------------------------------------
keep records of all substitutions and repurchases, and shall provide the Agent
with reports and information as required in paragraph 6(a)(6) hereof.
-----------------
- 40 -
<PAGE>
10. LOCKBOX ACCOUNT.
---------------
The Seller shall direct each Obligor to remit payments directly to the
Lockbox Account; provided, that the Secondary Servicers shall be permitted to
--------
direct payments to the Collection Agent or the Lockbox Account or receive
payments directly from Obligors if (i) the Secondary Servicer has made advances
of the payment directly to the Collection Agent or the Lockbox Account, and (ii)
the payments are related solely to those Lease Receivables invoiced by such
Secondary Servicers. Pursuant to paragraph 8(h), any Collections received by
--------------
the Seller or the Collection Agent shall be remitted directly to the Lockbox
Account within two (2) Business Days after the Seller's or Collection Agent's
receipt of same.
The Collection Agent shall direct the transfer of Collections in the
Lockbox Account. From and after the occurrence of a Collection Agent
Replacement Event, Seller agrees that:
a. the Collection Agent shall provide, if requested, a daily report
of the allocation of funds in the Lockbox Account;
b. Seller shall permit the Agent and its agents or representatives,
at the Seller's expense, to audit the Lockbox Account and the books and records
with respect to Collections, provided, that the Seller shall be liable for the
--------
costs and expenses of only one audit per month;
c. Seller shall, upon the request of the Agent, cooperate with and
assist the Agent in accordance with paragraph 8(d) hereof.
--------------
11. TERMINATION.
-----------
This Agreement shall continue in effect until the payment in full of
all amounts owing by any Obligor under any Purchased Lease Receivable, and the
payment in full of all amounts owed by the Seller hereunder; provided, however,
-------- -------
that the indemnities and agreements contained in paragraph 7 shall survive such
-----------
termination.
- 41 -
<PAGE>
12. SECURITY INTEREST.
-----------------
(a) Grant of Security Interest. As security for the payment and
--------------------------
performance of all recourse obligations of the Seller hereunder (the "Seller
------
Obligations"), including, without limitation, the obligations of the Seller
- - -----------
pursuant to paragraph 7, paragraph 9(a) and paragraph 14, the Seller hereby
----------- -------------- ------------
grants to the Agent, for the benefit of the Purchaser, a first priority
perfected security interest in all of the Seller's right, title and interest in
and to the following, whether now owned or hereafter acquired and whether now
existing or hereafter arising (the "Seller Collateral"):
-----------------
(i) all Purchased Assets;
(ii) All Equipment which is the subject of any Lease relating to a
Purchased Lease Receivable and products and proceeds thereof, including,
without limitation, all payments under insurance, or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to such Equipment;
(iii) All documents, books, records and other information (including,
without limitation, computer programs, tapes, discs, punch cards, data
processing software and related property and rights) maintained with
respect to the Purchased Assets, Equipment or Computer Software; and
(iv) All Related Security;
provided, however, that, following the payment in full of all amounts owing by
- - -------- -------
any Obligor under a Purchased Lease Receivable or such Purchased Lease
Receivable being repurchased or substituted for pursuant to paragraph 9, the
-----------
security interest granted to the Purchaser in the Seller Collateral related to
such Purchased Lease Receivable shall automatically be released without the
necessity of any further action on the part of the Purchaser. The Purchaser
agrees to execute UCC termination statements or such other release documentation
as may be reasonably requested by the Seller to evidence such release, provided
that the Seller prepares such UCC termination statements and other release
documentation at its own expense.
(b) Further Assurances. The Seller hereby authorizes the Agent to
------------------
file one or more financing or continuation state
- 42 -
<PAGE>
ments, and amendments thereto and assignments thereof, relative to all or any of
the Seller Collateral, the Purchased Lease Receivables and the Purchased Assets
now existing or hereafter arising, without the signature of the Seller where
permitted by law. A carbon, photographic or other reproduction of this Agreement
or any financing statement covering the Purchased Assets, the Seller Collateral
or any part thereof, shall be sufficient as a financing statement. If the Seller
fails to perform any of its agreements or obligations under this Agreement, the
Agent may (but shall not be required to) itself perform, or cause performance
of, such agreement or obligation, and the reasonable expenses of the Agent
incurred in connection therewith shall be payable by the Seller within ten (10)
Business Days of Seller's receipt of written evidence, in reasonable detail, of
such expense; provided, however, prior to taking any such action, the Agent
-------- -------
shall give notice of such intention to the Seller and provide the Seller with a
reasonable opportunity to take such action itself.
(c) The Seller Collateral Information. The Seller will furnish to
---------------------------------
the Agent from time to time statements and schedules further identifying and
describing the Seller Collateral, and such other reports in connection with the
Seller Collateral as the Agent may reasonably request, all in reasonable detail.
(d) Remedies. Following the occurrence of a default with respect to
--------
any of the Seller Obligations and Seller's failure to cure such default within
ten (10) Business Days of receiving written notice, in reasonable detail, of
such default, the Agent shall have the following rights and remedies (subject to
the rights of quiet enjoyment specified in the applicable Lease):
(i) the right to enter upon Seller's premises or any other place
where any of the Seller Collateral is kept and remove the Seller Collateral
therefrom to the premises of the Agent;
(ii) the right to require the Seller to assemble the Seller
Collateral and make it available to the Agent at a place to be designated
by the Agent in its sole discretion; and
(iii) all of the rights and remedies of a secured party under the
Uniform Commercial Code or other applicable
- 43 -
<PAGE>
law, all of which rights and remedies shall be cumulative and nonexclusive,
to the extent permitted by law.
13. THE AGENT.
---------
(a) Authorization and Action. The Purchaser hereby appoints and
------------------------
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto,
including, without limitation, the power and authority to hold and to perfect
any ownership interest or security interest created pursuant hereto or in
connection herewith on behalf of the Purchaser.
(b) Agent's Reliance, Etc. Neither the Agent nor any of its
----------------------
directors, officers, agents or employees shall be liable to the Purchaser (or
any of Purchaser's successors, assigns or participants) for any action taken or
omitted to be taken by it or them as the Agent under or in connection with this
Agreement (including, without limitation, any action taken or omitted to be
taken by it or them if the Agent is designated as the Collection Agent pursuant
to paragraph 8) or any other agreement executed pursuant hereto, except for its
-----------
or their own gross negligence or willful misconduct. Without limiting the
foregoing, the Agent: (i) may consult with legal counsel (including counsel for
the Seller), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts (other
than as provided above); (ii) makes no warranty or representation to the
Purchaser and shall not be responsible to the Purchaser for any statements,
warranties or representations made in or in connection with this Agreement or in
connection with any of the other agreements executed pursuant hereto; (iii)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the
part of the Seller or to inspect the property (including the books and records)
of the Seller; (iv) shall not be responsible to the Purchaser for the due
execution, legality, validity, enforceability, genuineness or sufficiency of
value of this Agreement, the Assignments or any other agreement, instrument or
document furnished pursuant hereto; and (v) shall incur no liability under or in
respect of this Agreement or any other agreement executed pursuant hereto, by
acting upon any notice (including notice by telephone), consent, certificate or
other instrument or writing (which may be by telex or facsimile)
- 44 -
<PAGE>
believed by it to be genuine and signed or sent by the proper party or parties.
(c) Agent and Affiliates. With respect to any Purchased Assets or
--------------------
Related Security which may be assigned by the Purchaser to CNA pursuant to
paragraph 14(d), CNA shall have the same rights and powers under this Agreement
- - ---------------
as would the Purchaser if it were holding such Purchased Assets or Related
Security and may exercise the same as though it were not the Agent. CNA and its
affiliates may generally engage in any kind of business with the Seller or any
Obligor, any of their respective affiliates and any Person who may do business
with or own securities of the Seller or any Obligor or any of their respective
affiliates, all as if CNA were not the Agent and without any duty to account
therefor to the Purchaser, except to the extent any such business or the
activities with respect thereto constitute a violation of applicable law.
14. MISCELLANEOUS.
-------------
(a) Costs and Expenses. The Seller agrees to pay (i) all reasonable
------------------
costs and expenses incurred by Agent in connection with the preparation,
execution and delivery (including any requested amendments, waivers or consents)
of this Agreement, the Assignments, and the other documents to be delivered
hereunder or in connection with any Purchase hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel
representing both the Agent and the Purchaser and the costs of preparation and
filing financing statements and other costs incurred in perfecting the
Purchaser's rights in the Purchased Assets, Related Security and related
Equipment, and (ii) all reasonable costs and expenses, including reasonable
attorneys' fees, expenses and court costs incurred by the Agent in enforcing any
of the provisions of this Agreement or in enforcing any obligations of the
Seller contained in any Assignment (and excluding costs and expenses incurred by
the Agent and the Purchaser arising out of the enforcement of rights relating to
an Obligor's payment and performance obligations, or the repossession of the
Equipment related to a Purchased Lease Receivable or the institution of legal
proceedings in connection with the foregoing); provided, that the costs and
-------- ----
expenses in connection with the preparation of this Agreement and the other
documents to be delivered hereunder or in connection herewith shall not exceed
$30,000 without Seller's consent.
- 45 -
<PAGE>
(b) Notices. Any notice under this Agreement shall be in writing and
-------
shall be delivered in person, by telegram, by courier, by United States first
class mail, postage prepaid, and addressed as follows, or by telecopy as
follows:
(i) if to the Seller, at the Seller's address set forth on the first
page of this Agreement, or to telecopy no. (408) 297-5072,
attention: Executive Vice President - Finance and General
Counsel;
(ii) if to the Agent or the Purchaser, at the Purchaser's address set
forth on the first page of this Agreement, or telecopy no. (914)
899-7484, attention: Capital Markets - Vern Weiner; and
(iii) to any party at any other address or telecopy number as such
party may, by notice as herein provided to the other
parties, designate as its address and telecopy number for
all notices under this Agreement.
(c) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
(d) Binding Effect; Assignability. This Agreement shall be binding
-----------------------------
on, and inure to the benefit of, the Agent, the Purchaser, the Seller, the
Collection Agent and the Agent's and the Purchaser's respective successors and
assigns, and contains the Agent's, the Purchaser's, the Seller's and the
Collection Agent's entire understanding and agreement with respect to the
subject matter hereof. The Seller shall not assign any of its rights and
obligations hereunder or any interest herein without the prior written consent
of the Purchaser. The Purchaser may assign at any time any of their respective
rights and obligations hereunder or interests herein (including, without
limitation, the sale of undivided participation interests) to any Person. The
Agent shall not assign its rights and obligations hereunder as Agent without
prior written notice to the Seller. Subject to the requirements of this
paragraph 14(d), any assignee of the Purchaser or the Agent may further assign
- - ---------------
at any time its rights and obligations hereunder or interests herein. If the
Purchaser assigns all of its rights and obligations hereunder (but excluding
assignments of security interests, participation interests or other limited
interests herein) to a party that is not an affiliate of, or an entity managed
by, the Agent or any of
- 46 -
<PAGE>
its affiliates, such assignee of the Purchaser shall notify the other parties
hereto of such assignment. If one or more of the Purchaser's assignees purchase
any Lease Receivable, such purchase or purchases shall be made under the terms
and conditions of this Agreement.
(e) No Waiver. All of the covenants, agreements, representations and
---------
warranties made by the Seller in this Agreement shall, notwithstanding any
investigation by the Purchaser, be deemed to be material to and to have been
relied upon by the Purchaser with respect to each Lease Receivable purchased
pursuant to this Agreement. The Purchaser's knowledge at any time of any breach
of or non-compliance with any of such covenants, agreements, representations or
warranties shall not constitute a waiver of any thereof by the Purchaser. None
of the Purchaser's rights under this Agreement will be waived except by a
writing signed by the Purchaser and any such waiver will be effective only as to
the matters expressly set forth in such writing.
(f) Severability. Each party's obligation to perform under this
------------
Agreement is limited by and subject to any and all applicable laws, rules and
regulations. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provisions of this Agreement shall be prohibited or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(g) No Proceedings. Each of the Agent, the Collection Agent and the
--------------
Seller agrees that it will not institute against the Purchaser any proceeding
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property, so long as any commercial paper
issued by the Purchaser shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any such commercial paper shall
have been outstanding.
(h) No Recourse. The purchase of Lease Receivables from the Seller
-----------
hereunder is on a non-recourse basis to the
- 47 -
<PAGE>
Seller with respect to the failure of any Obligor to satisfy its obligations on
a Purchased Lease Receivable. The foregoing limitation shall not affect the
obligations of the Seller with respect to the representations and warranties
made herein or in any agreement which is an exhibit hereto or with respect to
the due performance of the other provisions of this Agreement, including,
without limitation, the provisions of paragraph 7 and the purchase and
-----------
collection procedures described in paragraph 2 and paragraph 8, respectively.
----------- -----------
(i) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall constitute an original, but all of which shall
constitute a single agreement.
- 48 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Receivables Purchase Agreement as of the date first above written.
LEASING SOLUTIONS, INC.
BY:__________________________
TITLE:
CXC INCORPORATED
By: Citicorp North America, Inc.,
its attorney-in-fact
By:_______________________________
Title:
CITICORP NORTH AMERICA, INC.,
AS THE AGENT
By:_______________________________
Title:
SIGNATURE PAGE TO
LEASE RECEIVABLES PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
CREDIT AND COLLECTION POLICY
Credit Policy: Those policies outlined in Leasing Solutions, Inc.'s Credit and
- - -------------
Funding Procedure dated 5/22/96.
Collection Policy:
- - -----------------
Seller shall abide by the following Collection Policy:
- - - Designate a contact person at Seller who will be responsible for
communicating to Agent, upon request, the status of each Lease Receivable
whether serviced by LSI directly or by a Secondary Servicer.
- - - LSI shall commence, either directly or through a Secondary Servicer,
collection activity immediately on any Lease Receivable not paid within 15
days of the rent due date on an LSI serviced Lease Receivable and on any
Lease Receivable not paid within 30 days of a Secondary Servicer Lease
Receivable.
- - - At the request of Agent, directly or through the Secondary Servicer,
collect and remit to Purchaser any due and owing late charges required
under the Lease which are ultimately paid by the Obligor.
- - - Document all collection activity on each Lease Receivable and upon request
make available, or cause such Secondary Servicer to make available, such
documented collection activity to Agent.
- - - Seller or any Secondary Servicer will not offer any Obligor of any Lease
Receivable a rewrite, rent extension, rent abatement, refinance, or other
such accommodation without the prior written consent of Agent.
- - - Seller will cause each Secondary Servicer to invoice and collect each Lease
Receivable in accordance with the terms and conditions of the Lease and the
Secondary Servicer's standard collection policies and procedures,
including, but not limited to, billing the Obligor 30 days prior to the due
date of the Scheduled Payment.
- - - Seller will use its best efforts to cause each Secondary Servicer to
perform their obligations under any lease administration or servicing
agreement by and between Seller and the Secondary Servicer.
<PAGE>
- - - In the event a Secondary Servicer is not fulfilling its servicing and
administration obligations to Seller on any and all Lease Receivables,
Seller agrees to assume direct responsibility for the servicing of those
affected Lease Receivables.
- 2 -
<PAGE>
EXHIBIT B
List of Closing Documents
-------------------------
A. TRANSACTION DOCUMENTS
---------------------
1. Lease Receivables Purchase Agreement ("Receivables Agreement") dated as of
March 29, 1996, among Leasing Solutions, Inc. as Seller (the "Seller") and
Collection Agent, CXC Incorporated (the "Purchaser") and Citicorp North
America, Inc. as agent (the "Agent") for Purchaser.
2. Certificate of the Secretary of the Seller relating to the adoption of
Resolutions of the Board of Directors of the Seller approving the
Receivables Agreement and the other documents related thereto and
certifying the accuracy of the Seller's Certificate of Incorporation
attached thereto, the Seller's By-Laws attached thereto and the incumbency
of certain officers of Seller.
3. Certificate of Incorporation of the Seller certified by the Secretary of
State of California.
4. Good Standing Certificate for the Seller certified by the Secretary of
State of California [and others to be determined].
5. Pre-Closing UCC lien search report listing filings against the Seller in
the office of the Secretary of State of California.
6. Pre-Closing Tax Lien and Judgment search report listing tax liens and
judgments filed against Seller with the Secretary of State of California.
7. Opinion Letter issued to Purchaser by [Doug Neillson][Thatcher Proffitt &
Wood], counsel for the Seller with respect to certain corporate matters and
perfection of security interests.
8. UCC-3 Releases releasing any existing liens on the assets sold to the
Purchaser under the Receivables Agreement.
B. LEASE PURCHASE DOCUMENTS (to be delivered to Citicorp Leasing, Inc. for
------------------------
each purchase)
1. Certified copies of master leases (including any riders or other
modifications thereto).
- 1 -
<PAGE>
2. Original lessor supplements for any related master lease, and original
Computer Software Term Notes.
3. Assignment (in the form of Exhibit C to the Receivables Agreement).
4. Undated signed notice letters for related lessees or payors (in the form of
Exhibit D to the Receivables Agreement), together with the related diskette
containing information with respect to the lessees or payors.
5. Equipment or Computer Software Acceptance Certificates.
6. Evidence of insurance, as requested by the Agent in form and substance
reasonably satisfactory to the Agent.
7. UCC Financing Statement signed by the Seller covering the Leases and
related Equipment and filed with the Secretary of State of California and
all other jurisdictions in which Equipment covered by Purchased Lease
Receivables is located naming the Seller as debtor and Citicorp North
America, Inc., as agent, as secured party.
8. Post-Filing UCC Lien Search Report showing the filing(s) described in the
previous item to be of record (may be obtained post-funding).
9. Copies of UCC financing statements filed against lessees or payors or any
other filing (including fixture filings) required pursuant to the Obligor
Perfection Requirement.
10. To the extent that payments were commenced prior to the Purchase of a Lease
supplement or Computer Software Term Note, payment histories for each such
Lease supplement or Computer Software Term Note.
11. Executed release documents evidencing the release of any existing liens on
the Purchased Assets to be sold to the Purchaser or the Related Assets to
be assigned to the Purchaser under the Receivables Agreement, together with
any other releases with respect to existing liens on such leases and
related assets.
12. Invoices and proof of payment for the Equipment covered by each Lease (if
required by the Agent).
13. Other related documentation provided by the lessee or payor to the Seller
in the ordinary course of the Seller's business.
- 2 -
<PAGE>
EXHIBIT C
FORM OF ASSIGNMENT
ASSIGNMENT
Assignment made this ___ day of __________, 199_ by Leasing Solutions,
Inc. (the "Seller") to CXC Incorporated (the "Purchaser") pursuant to the Lease
Receivables Purchase Agreement dated as of March 29, 1996 between the Seller,
the Purchaser and Citicorp North America, Inc., as agent ("Agent") for the
Purchaser (as amended from time to time, the "Purchase Agreement"; terms defined
therein being used herein as therein defined). In consideration for the payment
of the Purchase Price for the Lease Receivables described on Schedule I attached
hereto, the undersigned hereby sells, assigns and transfers to the Purchaser all
right, title and interest of the undersigned in and to (i) the payments and
rights to payments with respect to the Leases set forth on Schedule I (excluding
any such payments or charges which constitute sales or other taxes) and (ii) all
Collections with respect to said Leases, and assigns, for purposes of creating a
security interest therein, the Related Security with respect to such Leases.
The Purchase Price hereunder will be adjusted post-funding to
compensate for any movement (plus or minus) in the T-Note Proxy Rate between the
date this Assignment is executed and the actual Purchase Date of the Lease
Receivables set forth on Schedule I.
Notwithstanding anything herein or in the Purchase Agreement to the
contrary, the undersigned has not assigned or delegated, and neither the Agent
nor the Purchaser has assumed or promised to perform, any of the undersigned's
duties or obligations under the Leases or with respect to any property referred
to in or covered by the Leases.
The terms and conditions of this Assignment, including, but not
limited to, the undersigned's warranties with respect to the above described
Leases and other property, and the undersigned's obligations to the Purchaser
with respect to such Leases and other property, are as provided for in the
Purchase Agreement, to which reference is hereby made for a statement hereof.
This Assignment shall be governed by and construed in accordance with
the internal laws (as opposed to the conflicts of law provisions) of the State
of New York.
- 1 -
<PAGE>
This Assignment shall be binding upon and inure to the benefit of the
undersigned and the Purchaser and their respective successors and assigns.
Dated: ______________, 199_
Seller: LEASING SOLUTIONS, INC.
By:________________________________
Title:_____________________________
EXHIBIT D
FORM OF NOTICE OF ASSIGNMENT
NOTICE OF ASSIGNMENT/1/
[Date]
_____________________________
_____________________________
_____________________________
_____________________________
RE: LEASE SCHEDULE OR SUPPLEMENT NO. _______ DATED
_____________________ TO THE LEASE AGREEMENT DATED
_____________ (THE "LEASE") BETWEEN
___________________ ("LESSOR") AND
____________________ ("LESSEE")
Lessor hereby gives notice to Lessee that pursuant to the terms of an
assignment agreement (the "Assignment") it has assigned and transferred to CXC
Incorporated ("Purchaser") all of its right, title and interest in and to, but
none of its obligations under, the Lease and all amounts owing thereunder.
____________________
/1/ A separate form of Notice of Assignment is to be used to reflect the
assignment of Computer Software Term Notes. For example, rather than "Lessee"
and "Lessor", the Notice of Assignment will use the terms "Payor" and "Payee"
and will substitute "Computer Software" for "Equipment" and "Computer Software
Term Note" for "Lease".
- 1 -
<PAGE>
Lessor hereby irrevocably directs Lessee to make any and all payments
to Citicorp North America, Inc. ("Agent"), as Agent for Purchaser at the
following address
_______________________________________________________________________________.
All of such payments should be payable to Agent. Lessor agrees that payment to
Agent in accordance with the foregoing instructions will relieve Lessee of its
obligation to make such payment to Lessor pursuant to the Lease.
The Assignment shall not relieve Lessor of the performance of any of
its obligations under the Lease or make or cause Purchaser or Agent to be liable
for such obligations. Lessee should settle all claims against Lessor, whether
arising under or related to the Lease or otherwise, directly with Lessor. Lessee
shall continue to be obligated to make all payments due under the Lease
expressly to the Agent with no right of offset, counterclaim, defense, etc.
Lessee is hereby advised that Lessee cannot, without Agent's prior
written consent: (i) modify or amend the Lease, (ii) assign, encumber or sublet
its rights under the Lease or in the Equipment, unless allowed under the Lease,
(iii) exercise any of its rights under the Lease which are exercisable only with
the consent of Lessor, (iv) return the Equipment to Lessor, or (v) settle any
insurance claims with respect to the Equipment. Agent is hereby irrevocably
appointed as Lessee's attorney-in-fact to make claim for, receive payment of and
execute and endorse all documents, checks or drafts received under any insurance
policy in payment for loss or damage to the Equipment.
A copy of each notice which Lessee is required to give to Lessor under
the terms of the Lease should be sent by Lessee to Agent at its address set
forth above by certified mail, postage prepaid, or at such other address as
Agent may hereafter notify Lessee.
Leasing Solutions, Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
