<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1998
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 0-15525
CAPITAL ASSOCIATES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1055327
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7175 WEST JEFFERSON AVENUE, LAKEWOOD, COLORADO 80235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 980-1000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of the Registrant's $.008 par value common
stock at October 2, 1998, was 5,125,444.
Exhibit Index - Page 16
1 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - August 31, 1998 and May 31, 1998 3
Consolidated Statements of Income - Three Months Ended
August 31, 1998 and 1997 4
Consolidated Statements of Cash Flows - Three Months Ended
August 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Exhibit Index 17
Signature 18
2 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
ASSETS
August 31, May 31,
1998 1998
----------- ----------
Cash and cash equivalents $ 4,095 $ 17,684
Receivables from affiliated limited partnerships 270 352
Accounts receivable, net 5,248 5,835
Inventory 1,653 1,141
Residual values arising from equipment under
lease sold to private investors, net 3,156 4,277
Net investment in direct finance leases 30,731 31,181
Leased equipment, net 97,715 104,825
Investments in affiliated limited partnerships 3,312 3,589
Deferred income taxes 3,649 3,600
Other assets 4,711 4,883
Discounted lease rentals assigned to lenders
arising from equipment sale transactions 32,915 37,626
--------- ---------
$ 187,455 $ 214,993
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Recourse debt $ 32,811 $ 49,088
Accounts payable - equipment purchases 21,156 25,029
Accounts payable and other liabilities 10,104 11,379
Discounted lease rentals 98,055 104,311
--------- ---------
162,126 189,807
--------- ---------
Stockholders' equity:
Common stock 32 32
Additional paid-in capital 16,863 16,863
Retained earnings 8,517 8,374
Treasury stock (83) (83)
--------- ---------
Total stockholders' equity 25,329 25,186
--------- ---------
$ 187,455 $ 214,993
========= =========
The accompanying notes are an integral part
of these consolidated financial statements.
3 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except earnings per share)
Three Months Ended
-----------------------
August 31, August 31,
1998 1997
---------- ----------
Revenue:
Equipment sales to PIFs $ 8,029 $ 11,382
Other equipment sales 48,614 24,475
Leasing 9,115 4,417
Interest 879 955
Other 1,323 809
---------- ----------
Total revenue 67,960 42,038
---------- ----------
Costs and expenses:
Equipment sales to PIFs 7,865 11,116
Other equipment sales 47,164 23,421
Leasing 5,905 2,804
Operating and other expenses 3,668 2,490
Provision for losses 25 170
Interest:
Non-recourse debt 2,148 1,349
Recourse debt 1,028 500
---------- ----------
Total costs and expenses 67,803 41,850
---------- ----------
Net income before income taxes 157 188
Income tax expense 14 47
---------- ----------
Net income $ 143 $ 141
========== ==========
Earnings per common share:
Basic $ 0.03 $ 0.03
========== ==========
Diluted $ 0.03 $ 0.03
========== ==========
Weighted average number of common shares outstanding:
Basic 5,122,000 5,016,000
========== ==========
Diluted 5,463,000 5,357,000
========== ==========
The accompanying notes are an integral part
of these consolidated financial statements.
4 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
-----------------------
August 31, August 31,
1998 1997
---------- ----------
Net cash provided by operating activities $ 44,373 $ 14,920
-------- --------
Cash flows from investing activities:
Equipment purchased for leasing, net (44,679) (14,575)
Investment in leased office facility and capital
expenditures (62) (206)
Net receipts from affiliated public income funds 277 643
-------- --------
Net cash used for investing activities (44,464) (14,138)
-------- --------
Cash flows from financing activities:
Proceeds from securitization 10,527 -
Proceeds from discounting of lease rentals - 4,921
Principal payments on discounted lease rentals (6,084) (2,467)
Net payments on revolving credit facilities (18,739) (3,015)
Net borrowings (payments) on Term Loan 798 (1,084)
-------- --------
Net cash used for financing activities (13,498) (1,645)
-------- --------
Net decrease in cash and cash equivalents (13,589) (863)
Cash and cash equivalents at beginning of period 17,684 6,194
-------- --------
Cash and cash equivalents at end of period $ 4,095 $ 5,331
======== ========
Supplemental schedule of cash flow information:
Recourse interest paid $ 1,028 $ 500
Non-recourse interest paid 1,271 394
Income taxes paid 42 77
Income tax refunds received - 67
Supplemental schedule of non-cash investing and
financing activities:
Discounted lease rentals assigned to lenders
arising from equipment sales transactions 6,269 949
The accompanying notes are an integral part
of these consolidated financial statements.
5 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles for annual financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. For
further information, please refer to the financial statements of Capital
Associates, Inc. (the "Company"), and the related notes, included within
the Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1998 (the "1998 Form 10-K"), previously filed with the Securities and
Exchange Commission.
The balance sheet at May 31, 1998 has been derived from the audited
financial statements included in the Company's 1998 Form 10-K.
2. Securitization Facility
-----------------------
The Company established a securitization facility (the "Securitization
Facility") in August 1998 through a wholly-owned special purpose subsidiary
("SPS") which purchased from the Company equipment leases and related lease
rental payments. The SPS in turn borrowed from Concord Minuteman Capital
Company, LLC, a commercial paper conduit entity, as Senior Lender, and Key
Corporate Capital, Inc., as Junior Lender based on the present value of the
lease rental payments, after being discounted by various factors. The
Securitization Facility has a term of 364 days. The Securitization Facility
is comprised of a senior loan with a maximum principal amount of
$50,000,000 ("Senior Loan") a junior loan with a maximum principal amount
of $5,000,000 ("Junior Loan") and a residual loan with a maximum principal
amount of $10,000,000 ("Residual Loan").
The Senior Loan and the Junior Loan are each a revolving securitization
supported by a security interest in the SPS's ownership of leases and the
related lease rental payments. The SPS is required to enter into interest
rate hedges to provide protection against increasing interest rates
attributable to the outstanding Senior and Junior Loans. The Senior Loan
and the Junior Loan are each repaid out of the collections from the rental
payments attributable to the leases and are recourse only to the extent of
the underlying leases. The Senior and Junior Loans are included with
"Discounted lease rentals" in the accompanying Consolidated Balance Sheets.
The Residual Loan by Key Corporate Capital, Inc. is secured by the residual
value of the equipment acquired by the SPS and is expected to be repaid
from the proceeds related to any remarketing of the equipment. As the SPS
borrows money under the Residual Loan, the SPS lends those funds to the
Company. The loan to the Company is evidenced by a demand promissory note
which can be called only in the event of certain bankruptcy or insolvency
events relating to the Company, or if the remarketing proceeds from the
equipment, together with any other funds that the SPS has available to it
after payment of amounts owed to the Senior and Junior Lenders are
inadequate to pay the amounts then due on the Residual Loan. The Residual
Loan is included with "Recourse debt" in the accompanying Consolidated
Balance Sheets.
6 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Securitization Facility, continued
-----------------------
The Company will service the leases subject to the Securitization Facility
and has been appointed the remarketer of the equipment that secures the
Residual Loan. The Securitization Facility terminates and the right of the
Company to continue as servicer and remarketer terminates, upon the
occurrence of various events, including the Company's failure to maintain
certain financial ratios and defaults under other indebtedness of the
Company.
The Company had outstanding approximately $8.9 million under the Senior and
Junior Loan and $1.7 million under the Residual Loan on August 31, 1998.
Interest on the Senior Loan is equal to the LIBO rate. Interest on the
Junior Loan is the LIBO rate plus 2.8% per annum. Interest on the Residual
Loan is equal to the LIBO rate plus 3.25% per annum.
7 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations
---------------------
General Comments
Several factors cause operating results to fluctuate, including (i) the
seasonality of lease originations, (ii) variations in the relative
percentages of the Company's leases entered into during the period which
are classified as DFLs or OLs, or are sold for fee income and (iii) the
level of fee income obtained from the sale of leases in excess of lease
equipment cost. The Company varies the volume of originated leases held
relative to leases sold to private investors when and as the Company
determines that it would be in its best interests, taking into account
profit opportunities, portfolio concentration, residual risk and its
fiduciary duty to originate leases for its PIFs.
Because the Company finances certain of its lease transactions with
recourse and non-recourse debt, the ultimate profitability of leasing
transactions is dependent, in part, on the difference between the interest
rate inherent in the lease and the underlying debt rate. The ultimate
profitability of the Company's leasing transactions is dependent, in part,
on the general level of interest rates. Lease rates tend to rise and fall
with interest rates, although lease rate movements generally lag interest
rate movements.
Certain of the Company's competitors have access to lower cost funds.
However, the Company has developed relationships with various private
investors and formed various strategic alliances with investors that have a
lower cost of capital enabling the Company to originate and sell leases at
competitive prices. As a result of the low interest rate environment and
resulting low lease rates, the Company sells the majority of leases it
originates to private investors having a lower cost of capital than the
Company.
The Company continues to evaluate additional sources of capital (including
sources such as a private debt placement or a public debt offering) which
would provide the liquidity necessary to significantly add leases to its
own portfolio. The goal of such financing would be to expand the
availability of capital. The Company believes this will enable it to
originate leases for its own portfolio which have competitive market lease
rates and good credit quality. The Company believes that in the present
market there are significant opportunities to originate leases having these
characteristics. However, the Company's present capital structure (i.e.,
both cost of capital and amount available) precludes taking full advantage
of market opportunities for such leases. Should the Company be successful
in identifying and closing on new sources of capital (for which no
assurance can be given), it intends to grow its own lease portfolio.
8 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
Lease Originations
Presented below is a schedule showing volume and placement of new lease
originations during the three months ended August 31, 1998 and August 31,
1997, respectively (in thousands):
Three Months Ended
----------------------
August 31, August 31,
1998 1997
---------- ----------
Placement of lease originations:
Equipment under lease sold to private investors $40,000 $14,000
Leases added to the Company's lease portfolio
(a significant portion of which will
subsequently be sold) 4,000 8,000
Equipment under lease sold to PIFs 8,000 11,000
------- -------
Total lease origination volume $52,000 $33,000
======= =======
Interim Financial Results
Presented below are schedules showing condensed income statement categories
and analyses of changes in those condensed categories derived from the
Consolidated Statements of Income prepared solely to facilitate the
discussion of results of operations that follows (in thousands):
Condensed Consolidated
Statements of Income The Effect on
for the Three Months Ended Net Income of
August 31, of Changes
-------------------------- Between
1998 1997 Years
---------- ----------- -------------
Equipment sales margin $ 1,614 $ 1,320 $ 294
Leasing margin 3,210 1,613 1,597
Other income 1,323 809 514
Operating and other expenses (3,668) (2,490) (1,178)
Provision for losses (25) (170) 145
Interest expense, net (2,297) (894) (1,403)
Income taxes (14) (47) 33
------- ------- -------
Net income $ 143 $ 141 $ 2
======= ======= =======
9 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
EQUIPMENT SALES
Equipment sales revenue and the related equipment sales margin consists of
the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------ Increase
August 31, 1998 August 31, 1997 (Decrease)
-------------------- ------------------- -----------------
Revenue Margin Revenue Margin Revenue Margin
-------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Transactions during initial lease term:
Equipment under lease sold to private
investors $ 39,663 $ 449 $ 23,768 $ 432 $ 15,895 $ 17
Equipment under lease sold to PIFs 8,029 164 11,382 266 (3,353) (102)
-------- ------- -------- ------- -------- ------
47,692 613 35,150 698 12,542 (85)
-------- ------- -------- ------- -------- ------
Transactions subsequent to initial
lease term (remarketing revenue):
Sales of off-lease equipment 1,897 129 128 43 1,769 86
Excess collections (cash collections in
excess of the associated residual value
from equipment under lease sold to
private investors) 97 97 579 579 (482) (482)
-------- ------- -------- ------- -------- ------
1,994 226 707 622 1,287 (396)
Deduct related provision for losses - (25) - (170) - 145
-------- ------- -------- ------- -------- ------
Realizations of value in excess of
provision for losses 1,994 201 707 452 1,287 (251)
Add back related provision for losses - 25 - 170 - (145)
-------- ------- -------- ------- -------- ------
1,994 226 707 622 1,287 (396)
-------- ------- -------- ------- -------- ------
CATG sales 6,957 775 - - 6,957 775
-------- ------- -------- ------- -------- ------
Total equipment sales $ 56,643 $ 1,614 $ 35,857 $ 1,320 $ 20,786 $ 294
======== ======= ======== ======= ======== ======
</TABLE>
Equipment Sales to Private Investors
------------------------------------
Equipment sales to private investors increased principally because of the
sales to new private investment programs which have been developed during
the last year. In addition, leases previously sold to the PIFs are being
sold to private investors or are being retained by the Company.
During the three months ended August 31, 1998 and 1997, other equipment
sales revenue related to equipment leased to one lessee accounted for 29%
and 33%, respectively, of total other equipment sales revenue.
Equipment Sales to PIF's
------------------------
Equipment sales to the PIFs decreased and are expected to decrease further
because three of the PIFs are in their planned liquidation stage. Once a
PIF enters the liquidation stage, it no longer acquires equipment under
lease. Two PIFs are in their reinvestment stage and are actively acquiring
leases.
In February 1998, the Company sold the remaining publicly offered units in
Capital Preferred Yield Fund-IV, L.P. The Company has elected not to
organize additional PIFs. As such, equipment sales to the PIFs will
continue to decline.
10 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
Remarketing of the Portfolio and Related Provision for Losses
-------------------------------------------------------------
The Company has successfully realized gains on the remarketing of its
portfolio of equipment after the initial lease term for the past six years.
The remarketing of equipment for an amount greater than its book value is
reported as part of equipment sales margin (if the equipment is sold) or
leasing margin (if the equipment is re-leased). The realization of less
than the carrying value of equipment is recorded as provision for losses
(which is typically not known until remarketing after the expiration of the
initial lease term). As shown in the table above, the realizations from
sales exceeded the provision for losses during the three months ended
August 31, 1998 and August 31, 1997 even without considering realizations
from remarketing activities recorded as leasing margin.
The level of remarketing revenue is dependent upon the amount of lease
equipment available for remarketing each fiscal quarter as leases in the
Company's portfolio reach the end-of-term. The Company's ability to
remarket additional amounts of equipment and realize a greater amount of
remarketing revenue in future periods is dependent on adding additional
leases to its portfolio. However, adding leases to the Company's portfolio
will not immediately increase the pool of maturing leases because new
leases typically are not remarketed until after their initial term (which
averages approximately four years).
Because the amount of leases added to the Company's portfolio in the past
which is now maturing has not been significant, the amount of leased
equipment available for remarketing is not consistent between quarters and
therefore the amount of remarketing revenue may vary significantly between
quarters. It is expected that the quarterly variations will continue until
the Company's held portfolio is increased to a significant level.
Residual values are established equal to the estimated values to be
received from equipment following termination of the leases. In estimating
such values, the Company considers all relevant facts regarding the
equipment and the lessees, including, for example, the equipment's
remarketability, upgrade potential and the probability that the equipment
will remain in place at the end of an initial lease term. The nature of the
Company's leasing activities is that it has credit and residual value
exposure and, accordingly, in the ordinary course of business, it will
incur losses arising from these exposures. The Company performs quarterly
assessments of its assets to identify other than temporary losses in value.
The Company's policy is to record allowances for losses as soon as any
other-than-temporary declines in asset values are known. However,
chargeoffs are recorded upon the termination or remarketing of the
underlying assets. As such, chargeoffs will primarily occur subsequent to
the recording of the allowances for losses.
The provision for losses recorded during the three months ended August 31,
1998 primarily related to other-than-temporary declines in the value of
equipment which occurred primarily because lessees returned equipment to
the Company at the end of leases. The Company had previously expected to
realize the carrying value of such equipment through lease renewals and
proceeds from sales of the equipment to the original lessees. The fair
market value of the equipment re-leased or sold to third parties is
considerably less than was anticipated.
11 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
LEASING MARGIN
Leasing margin consists of the following (in thousands):
Three Months Ended
--------------------------
August 31, August 31,
1998 1997
---------- ----------
Leasing revenue $ 9,115 $ 4,417
Leasing costs and expenses (5,905) (2,804)
------- -------
Leasing margin $ 3,210 $ 1,613
======= =======
Leasing margin ratio 35% 37%
======= =======
The increase in leasing revenue and leasing costs during the three months
ended August 31, 1998, compared to the three months ended August 31, 1997
is primarily due to growth in the Company's lease portfolio. During the
three months ended August 31, 1998, no lessee accounted for more than 10%
of total leasing revenue. During the three months ended August 31, 1997,
payments from one lessee accounted for 11% of total leasing revenue.
Leasing margin ratio fluctuates based upon (i) the mix of direct finance
leases and operating leases, (ii) remarketing activities, (iii) the method
used to finance leases added to the Company's lease portfolio, and (iv) the
relative age and types of leases in the portfolio (operating leases have a
lower leasing margin early in the lease term, increasing as the term passes
and the majority of leases added to CAI's portfolio have been operating
leases).
OTHER INCOME
Other Income consists of the following (in thousands):
Three Months Ended
----------------------
August 31, August 31,
1998 1997
---------- ----------
Fees and distributions from the Company-sponsored PIFs $ 541 $ 680
Fees from private leasing programs 318 44
Other 464 85
------ ------
$1,323 $ 809
====== ======
OPERATING AND OTHER EXPENSES
The aggregate amount of operating and other expenses increased
approximately $1,178,000 for the three months ended August 31, 1998,
compared to the three months ended August 31, 1997. Approximately $567,000
of the increase is due to the acquisition of CATG described in Footnote 2
of Notes to Consolidated Financial Statements included in Form 10-K for the
fiscal year ended May 31, 1998. The remaining increase is primarily due to
the on-going investment in the Company's marketing and administrative
infrastructure including costs associated with the increase in marketing
personnel and costs associated with the conversion of the Company's leasing
software.
12 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations, continued
---------------------
INTEREST EXPENSE, NET
Interest expense, net consists of the following:
Three Months Ended
August 31,
---------------------
1998 1997
------- --------
Interest income $ (879) $ (955)
Non-recourse interest expense 2,148 1,349
------- -------
Net non-recourse interest expense 1,269 394
Recourse interest expense 1,028 500
------- -------
Interest expense, net $ 2,297 $ 894
======= =======
The Company finances leases for its own portfolio primarily with
non-recourse debt. Interest income arises when equipment financed with
non-recourse debt is sold to investors. As a result, interest income
reported in the accompanying Consolidated Statements of Income reflect an
amount equal to non-recourse interest expense. Therefore, net non-recourse
interest expense on related discounted lease rentals pertains to the
Company's owned lease portfolio. Such amount increased due to an increase
in the average outstanding balance of related discounted lease rentals
related to growth in the Company's owned portfolio. It is anticipated that
net non-recourse interest expense on related discounted lease rentals will
continue to increase in the future as the Company adds additional leases
financed with non-recourse debt to its portfolio.
Interest expense, net increased during the three months ended August 31,
1998 compared to the three months ended August 31, 1997 primarily due to
increased borrowings under the Company's Warehouse Facility used to fund
the growth in the number of leases the Company holds for sale to private
investors.
INCOME TAXES
Income tax expense is provided on income at the appropriate federal and
state statutory rates applicable to such earnings. The aggregate statutory
tax rate is 40%, adjusted for a reduction in the valuation allowance for
deferred income tax assets to reflect a reduction in uncertainty about the
utilization of the AMT credit carryforward in future years as a result of
the Company's recurring profitable results of operations (see Note 10 to
Notes to Consolidated Financial Statements in the 1998 Form 10-K). The
Company believes that it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the remaining
net deferred tax assets.
II. Liquidity and Capital Resources
-------------------------------
The Company's activities are principally funded by proceeds from sales of
on-lease equipment (to PIFs or Private Investors), the Securitization
Facility, non-recourse debt, recourse bank debt rents, fees and
distributions from PIFs, and sales or re-leases of equipment after the
expiration of the initial lease terms. In addition, the Company finances
receivables of its CATG subsidiary primarily under an agreement with a
specialized finance company. Management believes the Company's ability to
generate cash from operations is sufficient to fund operations, as shown in
the accompanying Consolidated Statements of Cash Flows.
13 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
II. Liquidity and Capital Resources, continued
-------------------------------
The Company finances leases for its own portfolio utilizing the
Securitization Facility described in Note 2 to Notes to Consolidated
Financial Statements. The Company's ability to finance leases under the
Securitization Facility will depend upon a number of factors, including
general conditions in the credit markets and the ability of the Company to
originate equipment leases which satisfy eligibility requirements set forth
in the Securitization Facility documents. There can be no assurance that
the Company will continue to originate eligible equipment leases.
III. Year 2000 Issue
---------------
The Company has conducted a comprehensive review of its computer systems to
identify systems that could be affected by the Year 2000 issue. The Year
2000 issue results from computer programs being written using two digits
rather than four to define the applicable year. Certain computer programs
which have time-sensitive software could recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in major system
failures or miscalculations. Certain of the Company's software has already
been updated to correctly account for the Year 2000 issue. In addition, the
Company is engaged in a system conversion, whereby the Company's primary
lease tracking and accounting software is being replaced with new systems
which will account for the Year 2000 correctly. The Company expects that
the new system will be fully operational by December 31, 1999, and
therefore will be fully Year 2000 compliant. The Company does not expect
any other changes required for the Year 2000 to have a material effect on
its financial position or results of operations. As such, the Company has
not developed any specific contingency plans in the event it fails to
complete the conversion to a new system by December 31, 1999. In addition,
the Company does not expect any Year 2000 issues relating to its customers
and vendors to have a material effect on its financial position or results
of operations. The Company expensed all amounts related to its review of
the Year 2000 issue. Amounts expended to date to address the Year 2000
issue have been immaterial.
IV. New Accounting Pronouncements
-----------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("Statement
133"). Statement 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. Statement 133 is effective for fiscal years beginning after June 15,
1999, with earlier application permitted. The Company plans to adopt
Statement 133 in the first fiscal quarter of fiscal year 2001 by
redesignating and documenting all hedging relationship pursuant to the
provision of Statement 133.
The Company's hedging activities are limited to the floating-to-fixed
interest rate swap acquired in connection with the Securitization Facility.
That hedge is designed to effectively hedge the exposure to interest rate
changes. As such, the impact of adoption of SFAS 133 is not expected to be
material.
14 of 18
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
V. "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, and are subject to
factors that could cause actual future results to differ both adversely and
materially from currently anticipated results, including, without
limitation, the level of lease originations, realization of residual
values, the availability and cost of financing sources and the ultimate
outcome of any contract disputes. Certain specific risks associated with
particular aspects of the Company's business are discussed in detail
throughout Item 2 of this report and Parts I and II of the 1997 Form 10-K
when and where applicable.
15 of 18
<PAGE>
CAPITAL ASSOCIATES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
(a) OTHER. The Company is involved in other routine legal
proceedings incidental to the conduct of its business.
Management believes that none of these legal proceedings will
have a material adverse effect on the financial condition or
operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
b. Reports on Form 8-K
-------------------
None
16 of 18
<PAGE>
Item No. Exhibit Index
- -------- -------------
27 Financial Data Schedule
17 of 18
<PAGE>
CAPITAL ASSOCIATES INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL ASSOCIATES, INC.
Registrant
Date: October 14, 1998 By: /s/Anthony M. DiPaolo
---------------------
Anthony M. DiPaolo,
Senior Vice-President and
Chief Financial Officer
18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> AUG-31-1998
<CASH> 4,095
<SECURITIES> 0
<RECEIVABLES> 5,278
<ALLOWANCES> 30
<INVENTORY> 1,653
<CURRENT-ASSETS> 0
<PP&E> 97,715
<DEPRECIATION> 0
<TOTAL-ASSETS> 187,455
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 25,297
<TOTAL-LIABILITY-AND-EQUITY> 187,455
<SALES> 55,029
<TOTAL-REVENUES> 67,960
<CGS> 55,029
<TOTAL-COSTS> 60,934
<OTHER-EXPENSES> 3,668
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 3,176
<INCOME-PRETAX> 157
<INCOME-TAX> 14
<INCOME-CONTINUING> 143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
EXHIBIT 10.64
AMENDMENT TO BUSINESS FINANCING AGREEMENT
AND AGREEMENT FOR WHOLESALE FINANCING
This Amendment is made to (i) that certain Business Financing Agreement
executed on the 21st day of April, 1998, between Capital Associates Technology
Group, Inc. ("Dealer") and Deutsche Financial Services Corporation ("DFS"), as
amended ("BFA") and (ii) that certain Agreement for Wholesale Financing between
Dealer and DFS dated July 15, 1991, as amended ("AWF").
FOR VALUE RECEIVED, DFS and Dealer agree as follows:
1. Section 2.1 of the BFA is hereby amended in its entirety to read
as follows:
"2.1 Accounts Receivable Facility. Subject to the terms of
this Agreement, DFS agrees to provide to Dealer an Accounts
Receivable Facility of Six Million Dollars ($6,000,000.00);
provided, however, that at no time will the principal amount
outstanding under the Accounts Receivable Facility and
Dealer's inventory floorplan credit facility with DFS exceed,
in the aggregate, Six Million Dollars ($6,000,000.00). DFS'
decision to advance funds will not be binding until the funds
are actually advanced."
In addition, subject to the terms of the AWF, DFS agrees to provide to
Dealer an inventory floorplan credit facility of Six Million Dollars
($6,000,000.00); provided, however, that at no time will the principal amount
outstanding under Dealer's inventory floorplan credit facility with DFS and
Dealer's Accounts Receivable Facility exceed, in the aggregate Six Million
Dollars ($6,000,000.00). DFS' decision to advance funds will not be binding
until the funds are actually advanced.
All other terms and provisions of the BFA and AWF, to the extent
consistent with the foregoing, are hereby ratified and will remain unchanged and
in full force and effect.
IN WITNESS WHEREOF, Dealer and DFS have executed this Amendment on this
____ day of June 1 , 1998.
CAPITAL ASSOCIATES TECHNOLOGY GROUP, INC.
By: /s/Anthony M. DiPaolo
---------------------
Title: Senior Vice President
---------------------
DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/John Rowntree
----------------
Title: Credit Manager
--------------
EXHIBIT 10.65
Execution Copy
CREDIT AGREEMENT
Dated as of August 19, 1998
Among
CAI LEASE SECURITIZATION - II CORP.,
as Borrower,
------------
CAPITAL ASSOCIATES INTERNATIONAL, INC.,
as Servicer,
------------
CONCORD MINUTEMEN CAPITAL COMPANY, LLC,
as Senior Lender,
-----------------
KEY CORPORATE CAPITAL INC.,
as Junior Lender, as Residual Lender and as Agent
-------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
.........................................................................1
SECTION 1.01. Certain Defined Terms......................................1
SECTION 1.02. Other Terms...............................................25
SECTION 1.03. Computation of Time Periods...............................25
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
........................................................................25
SECTION 2.01. Advances..................................................25
SECTION 2.02. Making Advances...........................................26
SECTION 2.03. Transfers of Interests....................................27
SECTION 2.04. Use of Proceeds...........................................28
SECTION 2.05. Maturity of Advances......................................28
SECTION 2.06. Payments and Computations, Etc............................28
SECTION 2.07. Increased Costs...........................................28
SECTION 2.08. Increased Capital.........................................29
SECTION 2.09. Taxes.....................................................29
ARTICLE III
CONDITIONS OF ADVANCES
........................................................................31
SECTION 3.01. Conditions Precedent to Initial Advances..................31
SECTION 3.02. Conditions Precedent to All Advances......................33
ARTICLE IV
SETTLEMENT PROCEDURES
........................................................................33
SECTION 4.01. Settlement Procedures.....................................33
ARTICLE V
REPRESENTATIONS AND WARRANTIES
........................................................................37
SECTION 5.01. Representations and Warranties of the Borrower............37
SECTION 5.02. Representations and Warranties of the Servicer............40
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<PAGE>
Section Page
- ------- ----
ARTICLE VI
GENERAL COVENANTS
........................................................................42
SECTION 6.01. Affirmative Covenants of the Borrower.....................42
SECTION 6.02. Reporting Requirements of the Borrower....................45
SECTION 6.03. Negative Covenants of the Borrower........................47
SECTION 6.04. Covenants of the Servicer.................................50
ARTICLE VII
GRANT OF SECURITY INTEREST;
ADMINISTRATION OF RECEIVABLES............................................52
SECTION 7.01. Grant of Security Interest................................52
SECTION 7.02. Designation of Servicer...................................54
SECTION 7.03. Reporting Requirements of the Servicer....................54
SECTION 7.04. Duties of the Servicer....................................54
SECTION 7.05. Rights of the Agent.......................................57
SECTION 7.06. Responsibilities of the Borrower..........................57
SECTION 7.07. Further Action Evidencing Security Interest...............57
SECTION 7.08. Application of Payments...................................58
SECTION 7.09. Release of Lien...........................................58
ARTICLE VIII
EVENTS OF TERMINATION
........................................................................58
SECTION 8.01. Events of Termination.....................................58
ARTICLE IX
THE AGENT
........................................................................61
SECTION 9.01. Authorization and Action..................................61
SECTION 9.02. Agent's Reliance, Etc.....................................62
SECTION 9.03. Agent and Affiliates......................................62
SECTION 9.04. Lending Decisions.........................................62
SECTION 9.05. Resignation of the Agent..................................62
ARTICLE X
INDEMNIFICATION
........................................................................63
SECTION 10.01. Indemnities by the Borrower..............................63
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<PAGE>
Section Page
- ------- ----
ARTICLE XI
MISCELLANEOUS
........................................................................64
SECTION 11.01. Amendments, Etc..........................................64
SECTION 11.02. Notices, Etc.............................................65
SECTION 11.03. No Waiver; Remedies......................................65
SECTION 11.04. Binding Effect; Assignability............................65
SECTION 11.05. GOVERNING LAW; WAIVER OF JURY TRIAL......................66
SECTION 11.06. Costs, Expenses and Taxes................................67
SECTION 11.07. No Proceedings...........................................67
SECTION 11.08. Execution in Counterparts; Severability..................68
-iii-
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT A Form of Servicer Report
EXHIBIT B Form of Release Certificate
EXHIBIT C Description of Credit and Collection Policy
EXHIBIT D Form of Interest Rate Hedge Assignment Acknowledgment
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F-1 Form of Senior Note
EXHIBIT F-2 Form of Junior Note
EXHIBIT F-3 Form of Residual Note
EXHIBIT G List of Offices of Borrower where Records Are Kept
-iv-
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of August 19, 1998, among CAI
Lease Securitization - II Corp., a Delaware corporation, as the borrower,
Capital Associates International, Inc. ("CAPITAL ASSOCIATES"), a Colorado
corporation, as initial servicer, Concord Minutemen Capital Company, LLC, a
Delaware limited liability corporation, as senior lender, Key Corporate Capital
Inc., a Michigan corporation ("KCCI"), as junior lender, as residual lender and
as agent.
PRELIMINARY STATEMENTS. (1) Capital Associates is in the
business of acquiring, leasing, distributing, financing, selling, and otherwise
dealing with, and providing associated services with respect to Equipment;
(2) The Borrower is a special-purpose Subsidiary of Capital
Associates established to purchase and otherwise acquire Lease Receivables and
Equipment;
(3) The Borrower wishes from time to time to receive advances
from the Senior Lender, the Junior Lender and the Residual Lender secured by the
Borrower's Lease Receivables and Equipment; and
(4) Subject to the terms and conditions of this Agreement, the
Senior Lender, the Junior Lender and the Residual Lender shall make such
advances to the Borrower secured by the Borrower's Lease Receivables and
Equipment.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement
(both above and elsewhere), the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"ACTUAL RESIDUAL REALIZATION RATE" means, for each Settlement
Date, with respect to all Fully Remarketed Equipment, a fraction (expressed as a
percentage) having as its numerator the aggregate Remarketing Proceeds received
with respect to such Fully Remarketed Equipment as of the last day of the
immediately preceding month and as its denominator the Equipment Book Value of
such Fully Remarketed Equipment as of the original maturity date of the
applicable Lease.
"ADMINISTRATIVE FEE" has the meaning given such term in the
Fee Letter.
<PAGE>
"ADVANCE" means a Senior Advance, a Junior Advance or a
Residual Advance, and "Advances" means the Senior Advances, the Junior Advances
and the Residual Advances, collectively.
"ADVERSE CLAIM" means a lien, security interest, charge,
encumbrance or other right or claim of any Person, other than any of the
foregoing in favor of the Lenders, the Liquidity Providers, any counterparty
under an Interest Rate Hedge or the Agent hereunder or the rights of the lessee
or payor under a Lease.
"AFFECTED PARTY" means each Lender, the Agent, each Liquidity
Provider and each parent company controlling any of the foregoing.
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with, such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract, or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AFFILIATED OBLIGOR" means any Obligor which is an Affiliate
of another Obligor.
"AGENT" means KCCI, in its capacity as agent hereunder for the
Lenders, together with its successors and assigns.
"AGREEMENT" means this Credit Agreement, as the same may from
time to time be amended, restated, supplemented or otherwise modified.
"AGGREGATE JUNIOR ADVANCES" means, at any time, the sum of the
outstanding principal balances of all Junior Advances at such time.
"AGGREGATE RESIDUAL ADVANCES" means, at any time, the sum of
the outstanding principal balances of all Residual Advances at such time.
"AGGREGATE SENIOR ADVANCES" means, at any time, the sum of the
outstanding principal balances of all Senior Advances at such time.
"ALTERNATE BASE RATE" means a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the highest of (a) the rate of interest published in the Wall
Street Journal as the prime rate, or, in the event that no such rate is
published, the rate of interest announced publicly by KeyBank in Cleveland,
Ohio, as its prime or reference rate, whether or not such rate is the lowest
rate offered by such institution to its corporate borrowers and (b) 0.50% per
annum above the Federal Funds Rate.
"APPLICABLE INTEREST RATE" means, for any Interest Period, (i)
with respect to Senior Advances, the Senior Interest Rate, (ii) with respect to
Junior Advances, the Junior Interest Rate and (iii) with respect to Residual
Advances, the Residual Interest Rate.
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<PAGE>
"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.
"BENEFIT PLAN" means, with respect to any Person, a defined
benefit plan as defined in Section 3(35) of ERISA (other than a Multiemployer
Plan) in respect of which such Person or any ERISA Affiliate of such Person is,
or at any time within the immediately preceding six (6) years was, an "employer"
as defined in Section 3(5) of ERISA.
"BORROWER" means CAI Lease Securitization - II Corp., a
Delaware corporation, together with its successors and permitted assigns.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
any day on which banks are authorized to be closed in New York City, New York,
Denver, Colorado, Chicago, Illinois or Cleveland, Ohio, PROVIDED, HOWEVER, if
the term "Business Day" is used in connection with the LIBO Rate, "Business Day"
means a LIBO Business Day.
"CAPITAL ASSOCIATES" means Capital Associates International,
Inc., a Colorado corporation.
"CAPITAL ASSOCIATES DEMAND NOTE" means that certain demand
note executed by Capital Associates in favor of the Borrower.
"COLLATERAL CUSTODIAN" means Bankers Trust Company, as
collateral custodian pursuant to the Custody Agreement.
"COLLATERAL CUSTODIAN FEE" means the fee payable to the
Collateral Custodian as compensation for its duties under the Custody Agreement.
"COLLECTION ACCOUNT" means the account in the name of CAI
Lease Securitization - II Corp. and maintained at the Collection Account Bank
for the purpose of receiving Collections and Remarketing Proceeds. The use and
maintenance of the Collection Account shall be governed by the terms of the
Collection Account Agreement.
"COLLECTION ACCOUNT AGREEMENT" means that certain letter
agreement among the Borrower, the Agent and the Collection Account Bank.
"COLLECTION ACCOUNT BANK" means Bankers Trust Company.
"COLLECTION DATE" means the date following the Termination
Date on which the Agent shall have received, on behalf of itself and the
Lenders, all accrued Interest, the principal amount of all Advances and all
other amounts payable to the Agent and the Lenders pursuant to this Agreement or
any other agreement executed pursuant hereto.
"COLLECTIONS" means all cash collections and other cash
proceeds of Lease Receivables, including, without limitation, all cash proceeds
of Related Security with respect to such Lease Receivables and all Remarketing
Proceeds, all charges for late payment and shall also include any amounts earned
as a result of the investment of the Collections held by the Agent pursuant to
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<PAGE>
SECTION 4.01 or in the Collection Account, and the "Repurchase Price" (as
defined in the Lease Sale and Contribution Agreement) for each Lease Receivable
repurchased from the Borrower by the Originator under Section 7.02 of the Lease
Sale and Contribution Agreement.
"CONCENTRATION" means, for any Obligor and its Affiliated
Obligors at any time, a ratio calculated by DIVIDING (i) the sum of the Senior
Outstanding Balances of all Eligible Lease Receivables owing by such Obligor and
its Affiliated Obligors by (ii) the Senior Receivables Balance at such time.
"CP DISRUPTION EVENt" shall mean, at any time, (i) the Senior
Lender shall determine that there has been a general disruption in the United
States commercial paper market or in the Senior Lender's ability to access the
United States commercial paper market or (ii) the Aggregate Senior Advances
(including any Senior Advances which have been requested but not yet funded) at
such time which have been funded (or requested to be funded) by the Senior
Lender through the issuance of its commercial paper notes exceeds the principal
amount available to be drawn by the Senior Lender under the Liquidity Agreement
at such time.
"CREDIT AND COLLECTION POLICY" means those credit and
collection policies and practices of the Originator and the Borrower relating to
Leases, Lease Receivables and Obligors described in Exhibit C, as modified in
compliance with SECTION 6.03(c).
"CREDIT QUALITY REQUIREMENT" means, with respect to all Lease
Pools, that (a) the sum of the Senior Outstanding Balances of all Lease
Receivables included in Lease Pools, the Obligors under which have a Risk Rating
of "1" or "2", is equal to or greater than 37.3% of the Senior Receivables
Balance, (b) the sum of the Senior Outstanding Balances of all Lease Receivables
included in Lease Pools, the Obligors under which have a Risk Rating of "1", "2"
or "3(a)", is equal to or greater than 65% of the Senior Receivables Balance,
(c) the sum of the Senior Outstanding Balances of all Lease Receivables included
in Lease Pools, the Obligors under which have a Risk Rating of "3(b)", is equal
to or less than 25% of the Senior Receivables Balance and (d) the sum of the
Senior Outstanding Balances of all Lease Receivables included in Lease Pools,
the Obligors under which have a Risk Rating of "3(c)", is equal to or less than
10% of the Senior Receivables Balance. Notwithstanding the foregoing, the
"Credit Quality Requirement" shall be deemed satisfied prior to December 31,
1998 so long as all Lease Pools do not deviate more than 10% from the
requirements set forth in clauses (a), (b) and (c) above and fully comply with
clause (d) above.
"CUSTODY AGREEMENT" means the Custody Agreement of even date
herewith among the Borrower, the Collateral Custodian, the Servicer and the
Agent, as such agreement may be amended, restated, supplemented or otherwise
modified.
"DEEMED DEFAULTED LEASE RECEIVABLE" means a Lease Receivable
at any time which would otherwise have any Periodic Installment of Rent past due
for more than 120 days but which (i) has been rewritten or restructured for
credit reasons or (ii) has been repurchased from the Borrower by the Originator
-4-
<PAGE>
if at the time of such repurchase any Periodic Installment of Rent had remained
unpaid for 90 days or more (and such Lease Receivable was otherwise an Eligible
Lease Receivable on the date acquired by the Borrower from the Originator).
"DEFAULT RATIO" means, for any calendar month, a fraction
(expressed as a percentage) determined as of the last day of such month equal to
the sum of the Senior Outstanding Balances of all Lease Receivables which became
Defaulted Lease Receivables or Deemed Defaulted Lease Receivables during such
month and the preceding eleven calendar months (net of any recoveries with
respect to Defaulted Lease Receivables for such period) divided by the average
Senior Receivables Balances for such month and the preceding eleven calendar
months, PROVIDED, however, with respect to a calendar month corresponding to the
first twelve Interest Periods, the "DEFAULT RATIO" shall equal (i) the product
of (a) the sum of the Senior Outstanding Balances of all Lease Receivables which
became Defaulted Lease Receivables or Deemed Defaulted Lease Receivables during
such month and the preceding months to and including the month in which the
initial Advance hereunder was made and (b) the number necessary to annualize
such stream of Defaulted Lease Receivables and Deemed Defaulted Lease
Receivables divided by (ii) the average Senior Receivables Balance for such
month and the preceding months to and including the month in which the initial
Advance hereunder was made.
"DEFAULT RATIO TRIGGER EVENT" means, as of any Settlement
Date, the Default Ratio exceeds 3.0%, PROVIDED, that, if as of such Settlement
Date, the aggregate principal amount of the Senior Advances does not exceed the
Senior Borrowing Base (after giving effect to any increase in the Senior
Required Enhancement Percentage as a result of such increase in the Default
Ratio), the Agent may waive the occurrence of such Default Ratio Trigger Event
for such Settlement Date..
"DEFAULTED LEASE RECEIVABLE" means a Lease Receivable at any
time: (i) which arises under a Lease with respect to which any Periodic
Installment of Rent thereunder remains unpaid for more than 120 days from the
original due date for such payment, (ii) as to which the Obligor thereof has
taken any action, or suffered any event to occur, of the type described in
SECTION 8.01(e), (iii) as to which foreclosure proceedings have been initiated
and are continuing, or (iv) which, consistent with the Credit and Collection
Policy, has been or should be written off as uncollectible.
"DELINQUENCY RATIO" means, for any month, a fraction
(expressed as a percentage) determined as of the last day of such month equal to
(a) the average of the sum of the Senior Outstanding Balances of all Lease
Receivables which were Delinquent Lease Receivables on the last day of such
month and each of the preceding two calendar months DIVIDED BY (b) the average
of the Senior Receivables Balances as of the last day of such month and as of
the last day of each of the preceding two calendar months.
"DELINQUENT LEASE RECEIVABLE" means a Lease Receivable that is
not a Defaulted Lease Receivable and (i) as to which any Periodic Installment of
Rent remains unpaid for more than 60 days from the original due date for such
payment or (ii) which, consistent with the Credit and Collection Policy, has
been or should be classified as delinquent.
-5-
<PAGE>
"DEMAND LOAN" has the meaning given to such term in Section
2.04.
"DESIGNATED OFFICER" means the chief executive officer, the
chief financial officer, the treasurer or controller of the Borrower or the
Servicer, as applicable.
"DOL" means the United States Department of Labor and any
successor department or agency.
"DYNAMIC CREDIT ENHANCEMENT PERCENTAGE" means a fraction
(expressed as a percentage) equal to:
(A x B x C) + D
where:
A = the Default Ratio at such time;
B = the Weighted Average Remaining Life at such time
(expressed in years);
C = 3; and
D = the greatest of (i) the largest of the aggregate Senior
Outstanding Balances of Lease Receivables of an Obligor
that is rated A- or higher by S&P, (ii) the sum of the
two largest aggregate Senior Outstanding Balances of
Obligors that are rated BBB- through BBB+ by S&P and
(iii) the sum of the four largest aggregate Senior
Outstanding Balances of Obligors that are rated below
BBB- by S&P or are not then rated by S&P.
"ELIGIBLE INSTITUTION" means a financial institution, the
short term unsecured senior indebtedness of which is rated at least A-1 by S&P
and P-1 by Moody's.
"ELIGIBLE LEASE RECEIVABLE" means, at any time, a Lease
Receivable:
(i) the Obligor of which is a United States resident;
(ii) which (A) is not a Defaulted Lease Receivable and has not
been a Defaulted Lease Receivable during the prior six (6) months or
(B) on the date of the Advance with respect thereto, has no Periodic
Installment of Rent remaining unpaid for more than 45 days from the
original due date for such payment;
(iii) which, on the date of the initial Advance with respect
thereto, is due and payable in full no more than eighty-four (84)
months following such date, PROVIDED, that, in no event shall a Lease
Receivable be an Eligible Lease Receivable, if the inclusion of such
Lease Receivable in a Lease Pool would cause the weighted average
remaining term of all Lease Receivable included in Lease Pools (based
on the Senior Outstanding Balances of such Lease Receivable) to exceed
fifty-one (51) months;
(iv) under which all Periodic Installments of Rent are payable
in monthly or quarterly installments and the first such payment thereon
has been made and which, if included in a Lease Pool, will not cause
-6-
<PAGE>
the sum of the Senior Outstanding Balances of all Leases included in
Lease Pools having Periodic Installments of Rent payable in quarterly
installments to exceed fifteen percent (15%) of the Senior Receivables
Balance;
(v) which, if included in a Lease Pool, would not cause the
Periodic Installments of Rent due and payable under the Lease
Receivables included in Lease Pools which have maturity dates occurring
in the same calendar quarter (A) to exceed $7,500,000 while the
Facility Limit is equal to $50,000,000 and (B) to exceed $15,000,000 at
any time after the Facility Limit initially becomes equal to
$100,000,000;
(vi) which, if included in a Lease Pool, would not result in a
violation of the Credit Quality Requirement;
(vii) which is denominated and payable only in United States
dollars within the United States, the Obligor of which is domiciled in
the United States and the Equipment related thereto is located in the
United States; PROVIDED, however, that the sum of the Senior
Outstanding Balances of Lease Receivables with respect to Equipment
that is not located in the United States may be equal to or less than
10% of the Senior Receivables Balance if the long-term unsecured debt
obligations of all of the Obligors under such Lease Receivables are
rated at least BBB- by S&P and at least Baa3 by Moody's;
(viii) which, together with the Lease related thereto, does
not contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regula tions relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which neither the Originator
nor the Borrower is in violation of any such law, rule or regulation
applicable to such Lease Receivable the effect of which would have a
Material Adverse Effect;
(ix) which is assignable to the Borrower and may be pledged by
the Borrower and does not require the consent, authorization, approval
or notice to the Obligor thereof in connection with the conveyance of
the related Leases, the Related Security and the Collections from the
Originator to the Borrower and the grant of a security interest therein
by the Borrower in favor of the Agent on behalf of the Lenders;
(x) which satisfies, in all material respects, all applicable
requirements of the Credit and Collection Policy;
(xi) the Obligor of which is not, to the knowledge of the
Borrower or the Servicer, an Affiliate of any of the parties hereto;
and
(xii) the Obligor of which has not been released, in whole or
in part, from any of its obligations thereunder, except as otherwise
provided in SECTION 7.04(a);
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<PAGE>
(xiii) the Obligor of which is not the Obligor under Defaulted
Lease Receivables having Senior Outstanding Balances in the aggregate
which exceed 50% of the sum of the Senior Outstanding Balances of all
Lease Receivables of such Obligor;
(xiv) which arises under a Lease:
(A) which has been duly authorized, is in full force
and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Lease enforceable against
such Obligor in accordance with its terms, except as may be
limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors'
rights generally, and (ii) general principles of equity,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance, regardless of whether
considered in a proceeding at equity or at law (the exceptions
under (i) and (ii) above are collectively referred to herein
as the "Enforceability Exceptions");
(B) which is "chattel paper" within the meaning of
Article 9 the UCC as enacted in any applicable jurisdiction;
(C) which constitutes a Finance Lease or a True Lease
and the Obligor UCC Filing Requirement has been satisfied with
respect thereto;
(D) if a True Lease, good and marketable title to all
Equipment related thereto has been transferred to the
Borrower, free and clear of any Adverse Claim which would
reasonably be expected to prevent the Borrower from granting a
security interest in such Equipment to the Agent for the
benefit of the Lenders hereunder, which security interest will
be a first priority security interest in the Equipment located
in the Filing Locations;
(E) as of the Settlement Date such Lease is included
in a Lease Pool, to the best of the Borrower's knowledge (1)
there was no default, breach, violation or event that has
occurred and is continuing permitting acceleration under the
terms of the Lease, and (2) no event had occurred and was
continuing that, with notice, the lapse of time, or both,
would constitute a default, breach, violation or event
permitting acceleration under the terms of such Lease;
(F) which was originated by the Originator or was
purchased by the Originator prior to the date hereof or in the
ordinary course of its business in a manner which satisfies
the underwriting practices set forth in the Credit and
Collection Policy;
(G) which constitutes a "hell or high-water"
obligation of the Obligor within the meaning of Article 2A of
the UCC and requires the Obligor to make all payments of
Periodic Installments of Rent thereunder regardless of the
condition of the Equipment to which such Lease relates;
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(H) which has not been amended, altered or modified
for negative credit reasons or in any other way which would
individually or in the aggregate materially adversely affect
the Originator's rights thereunder or would prohibit payment
by the Obligor to the Lenders, and no material provision of
which has been waived except in writing, copies of all of
which writings are attached to such Lease, except as otherwise
provided in SECTION 7.04(a);
(I) which has not been satisfied, released, canceled,
subordinated or rescinded, nor has any instrument been
executed by the Originator which would effect any such
satisfaction, release, cancellation, subordination or
rescission, except as otherwise provided in SECTION 7.04(a);
(J) which is not subject to any right of rescission,
setoff, recoupment, counterclaim or defense (other than the
Obligor's right of quiet enjoyment), whether arising out of
transactions concerning such Lease or otherwise, and no such
right has been asserted in writing by any person with respect
thereto, the effect of which would have a Material Adverse
Effect;
(K) with respect to which all consents, licenses,
approvals and authorizations of any governmental agencies or
authorities required to be obtained in connection with the
conveyance of the Leases, the Lease Receivables, the Related
Security and the Collections from the Originator to the
Borrower and the granting of a security interest therein by
the Borrower to the Agent have been obtained;
(L) which requires the Obligor thereunder to maintain
the Equipment in good and workable order and provides that,
(x) in the event of any damage to the Equipment covered by or
the subject of such Lease, the Obligor will repair such
Equipment to the extent of such damage and (y) in the event of
the loss or destruction of the Equipment, the Obligor will
replace such Equipment with the same-or-better model Equipment
in same-or-better configuration or the Borrower will receive
from an insurer or from the Obligor as self-insurer, an amount
not less than the Senior Outstanding Balance of the Lease
Receivable;
(M) with respect to which, together with the related
Pledged Assets, all undisputed taxes, assessments, fines, fees
and other liabilities have been paid before they became
delinquent, and, to the best of the Borrower's knowledge, all
filings in respect of any such taxes, assessments, fines, fees
and other liabilities have been timely made (or if such
undisputed 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);
(N) which, if included in a Lease Pool, will not
cause the sum of the Senior Outstanding Balances of Lease
Receivables with an Individual Lease Senior Borrowing Base
that is less than $20,000 to exceed 10% of the Senior
Receivable Balance;
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(O) which does not contractually provide for a final
Periodic Installment of Rent in excess of 10.0% of the
original purchase price of the related Equipment;
(P) which does not relate to an equipment upgrade
unless such equipment upgrade is set forth in an additional
schedule to the related Lease;
(Q) good and marketable title to which (including a
100% first priority ownership interest in all Lease
Receivables thereunder, all Related Security and Collections
with respect thereto) has been conveyed by the Originator to
the Borrower and for which all UCC filings necessary to
perfect the Borrower's ownership interest in such Lease and
the related Lease Receivables have been accomplished and a
valid and perfected first-priority security interest to which
has been granted by the Borrower to the Agent for the benefit
of the Lenders, free and clear of any Adverse Claim;
(R) each Obligor of which has all the legal capacity,
power and right required for it to enter into the Lease and
any supplemental agreements and to perform its obligations
thereunder;
(S) which contains enforceable provisions sufficient
to enable the Originator (or its assigns, including the
Borrower and the Agent on behalf of the Lenders) to realize
against the Equipment related thereto, subject to the
Enforceability Exceptions;
(T) if a purchase option or early termination option
exists with respect to the 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
Senior Outstanding Balance plus any accrued implicit interest
for the period commencing on the date as of which the Senior
Outstanding Balance was last calculated and ending on the last
day of the related Interest Period plus any applicable fees,
costs or expenses (including early termination payments)
resulting from the reduction of the aggregate notional amount
of the Interest Rate Hedges with respect to such Lease
Receivable;
(U) which does not constitute a "consumer lease"
within the meaning of Article 2A of the UCC in any
jurisdiction where such Article 2A has been adopted and
governs the construction thereof;
(V) with respect to which, the Equipment related
thereto is not a vehicle subject to a certificate of title (or
other evidence of ownership) issued by a state department of
motor vehicles, or other appropriate state governmental body;
and
(W) with respect to which the related Equipment has
not, and will not to the best of the Borrower's knowledge, be
used for the manufacture, transportation, treatment, storage,
disposal, generation, remediation, removal, release,
discharge, refining or handling of any substance defined by,
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regulated under, or subject to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section
9601 et seq. and the Resource Conservation and Recovery Act of
1976, 42 U.S.C. Section 6901.
"ELIGIBLE LEASE RECEIVABLES BALANCE" means, at any time, the
sum of the remaining Periodic Installments of Rent on all Eligible Lease
Receivables.
"ENFORCEABILITY EXCEPTIONS" has the meaning assigned to that
term in clause (xiv)(A) of the definition of "Eligible Lease Receivable".
"EQUIPMENT" means all equipment leased or financed by the
Borrower (as assignee of the Originator or otherwise), together with all
additions, replacements, substitutions, parts, repairs, accessories, upgrades,
accessions or attachments thereto.
"EQUIPMENT BOOK VALUE" means, with respect to any Lease, the
book value of the Equipment related thereto as of the end of the term of such
lease as reflected on the books and records of the Borrower.
"EQUIPMENT POOL" means, with respect to each Residual Lease
Pool, the Equipment related to the Leases included in such Residual Lease Pool.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor statute.
"ERISA AFFILIATE" means, with respect to any Person, any (i)
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the IRC) as such Person; (ii)
partnership or other trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the IRC) with such
Person or (iii) member of the same affiliated service group (within the meaning
of Section 414(m) of the IRC) as such Person, any corporation described in
clause (i) above or any partnership or other trade or business described in
clause (ii) above.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"EVENT OF TERMINATION" has the meaning assigned to that term
in SECTION 8.01.
"EXCESS LIQUIDITY INTEREST" means, as of any Settlement Date,
to the extent the Senior Lender has assigned the Senior Advances to the
Liquidity Providers, the portion of the Senior Interest applicable to such
Senior Advances which exceeds an amount equal to the Senior Interest had such
Senior Interest with respect to such Senior Advances been calculated using the
LIBO Rate without any spread added thereto as the Senior Interest Rate.
"EXCESS REMARKETING PROCEEDS" means, with respect to a
Residual Lease Pool, the aggregate amount (if any) of the Remarketing Proceeds
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with respect to Equipment relating to such Residual Lease Pool received after
the Residual Advances with respect to such Residual Lease Pool have been paid in
full.
"FACILITY DOCUMENTS" shall mean collectively, this Agreement,
the Lease Sale and Contribution Agreement, the Liquidity Agreement, the Capital
Associates Demand Note, the Fee Letter, the Lockbox Account Agreement, the
Collection Account Agreement, the Custody Agreement, the Interest Rate Hedges
and all other agreements, documents and instruments delivered pursuant thereto
or in connection therewith.
"FACILITY LIMIT" means $50,000,000 PROVIDED, that the Facility
Limit shall automatically increase to $100,000,000 at such time as (x) the
aggregate commitments under the Liquidity Agreement of the Liquidity Providers
other than KeyBank equals or exceeds $50,000,000 and (y) the aggregate
commitments under the Liquidity Agreement of KeyBank, as Liquidity Provider,
equals or exceeds $50,000,000 (it being understood that KeyBank will not reduce
its commitment of $50,000,000 under the Liquidity Agreement as a result of the
syndication of an additional $50,000,000 of such commitments), PROVIDED,
FURTHER, that at all times on and after the Termination Date, the "FACILITY
LIMIT" shall mean the aggregate outstanding principal of the Advances.
"FAST PAY TRIGGER" means, as of any Settlement Date, (a) a
Default Ratio Trigger Event has occurred or (b) (x) the Senior Receivables
Balance as of the end of the month immediately preceding such Settlement Date
minus the Overconcentration Amount as of the end of such month MINUS the sum of
the outstanding Senior Advances as of the end of such month is less than (y) the
Senior Required Enhancement Floor as of such Settlement Date.
"FEDERAL FUNDS RATE" means, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the KeyBank from three Federal funds brokers of recognized standing
selected by it.
"FEE LETTER" means the Fee Letter dated as of the date hereof
among the Agent, the Borrower and the Originator.
"FILING LOCATIONS" means those States (and any subdivisions
thereof, as required by the laws of such State) where Equipment is located.
"FINANCE LEASE" means a Lease whereby the Originator has, for
purposes of applicable state commercial law, made a loan to the Obligor, which
loan is secured by the Obligor's ownership interest in the related Equipment,
and the lease or installment payments thereon represent repayment on such loan.
"FULLY REMARKETED EQUIPMENT" means, at any time (i) Equipment
which became Remarketed Equipment as a result of the sale thereof or (ii) which
otherwise constitutes Remarketed Equipment but with respect to which no
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Remarketing Proceeds have been realized for the immediately preceding 180 days
(it being understood that the calculation of the Actual Realization Rate will
include all Remarketing Proceeds whether received before or after Remarketed
Equipment becomes Fully Remarketed Equipment.
"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 lessee or payor 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 lien 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.
"INDIVIDUAL LEASE JUNIOR BORROWING BASE" means, with respect
to any Lease Receivable, an amount equal to the product of (x) the Junior
Outstanding Balance of such Lease Receivable and (y) ten percent (10%).
"INDIVIDUAL LEASE RESIDUAL BORROWING BASE" means, with respect
to each Lease included in a Lease Pool which has a fair market value purchase
option and the Equipment related to which is located in the United States, the
lesser of (i) the product of (x) the Equipment Book Value of the Equipment
related to such Lease and (y) the applicable percentage determined in accordance
with the table attached to the Side Letter as SCHEDULE 1 under the appropriate
Residual Realization Percentage on the applicable Settlement Date and (ii) the
product of (x) the Original Equipment Cost of the Equipment related to such
Lease and (y) the applicable percentage determined in accordance with the table
attached to the Side Letter as SCHEDULE 2 under the appropriate equipment and
term.
"INDIVIDUAL LEASE SENIOR BORROWING BASE" means, with respect
to any Lease Receivable, an amount equal to the product of (x) the Senior
Outstanding Balance of such Lease Receivable and (y) a percentage equal to 100%
minus the Senior Required Enhancement Percentage as of the immediately preceding
Settlement Date.
"INDUSTRY SIC CODES" means those codes identified as such by
Dunn & Bradstreet in its publications.
"INTEREST" means, for any Interest Period, the sum of Senior
Interest, Junior Interest and Residual Interest for such Interest Period.
"INTEREST PERIOD" means, initially, the period beginning on
the date of the initial Advances hereunder and ending on the immediately
succeeding Settlement Date and, thereafter, shall mean the period beginning on
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the day following the last day of the immediately preceding Interest Period and
ending on the earlier of (i) the immediately succeeding Settlement Date and (ii)
the Termination Date.
"INTEREST RATE HEDGES" means interest rate swap or similar
agreements entered into by the Borrower in connection herewith to provide
protection to, or minimize the impact upon, the Borrower of increasing interest
rates with respect to Senior Advances and Junior Advances.
"INTEREST RATE HEDGE ASSIGNMENT ACKNOWLEDGMENT" means an
acknowledgment in substantially the form of Exhibit D executed by a counterparty
to an Interest Rate Hedge (if other than in favor of the Agent).
"IRC" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute.
"IRS" means the Internal Revenue Service of the United States
of America.
"JUNIOR ADVANCE" means an advance of funds by the Junior
Lender in accordance with the terms of SECTION 2.01(b).
"JUNIOR BORROWING BASE" means, as of each Settlement Date, an
amount equal to the product of (a) ten percent (10%) and (b) the Junior
Receivables Balance (including the Junior Outstanding Balances of Lease
Receivables included in the Lease Pool relating to such Settlement Date) as of
the end of the month immediately preceding such Settlement Date.
"JUNIOR DISCOUNT RATE" means, for each Lease included in a
Lease Pool, a per annum rate equal to the sum of (i) the fixed interest rate per
annum the Borrower is obligated to pay under the Interest Rate Hedge entered
into with respect to such Lease Pool and (ii) 2.80%.
"JUNIOR INTEREST" means, for any Interest Period, the product
of:
JR x AJA x ED
---
360
where:
AJA = the average daily outstanding Aggregate Junior Advances during
Interest Period.
JR = the Junior Interest Rate for such Interest Period.
ED = the actual number of days elapsed during such Interest Period.
PROVIDED, HOWEVER that (i) no provision of this Agreement shall require the
payment or permit the collection of Junior Interest in excess of the maximum
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permitted by applicable law and (ii) Junior Interest shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
otherwise be returned for any reason.
"JUNIOR INTEREST RATE" means, for any Interest Period, a per
annum rate equal to the sum of (i) the LIBO Rate for such Interest Period and
(ii) 2.8%.
"JUNIOR LENDER" means KCCI, together with its successors and
permitted assigns.
"JUNIOR NOTE" means that promissory note described as such in
SECTION 2.02(b) hereof.
"JUNIOR OUTSTANDING BALANCE" means, with respect to any Lease
Receivable, an amount equal to the present value of the Periodic Installments of
Rent relating to such Lease Receivable, determined by discounting on a monthly
basis (assuming a calendar year consisting of twelve thirty-day months) such
Periodic Installment of Rents from the end of the calendar month in which each
such Periodic Installment of Rent is due, at a rate equal to the Junior Discount
Rate with respect thereto. Notwithstanding anything to the contrary contained in
this Agreement, if any Periodic Installment of Rent was not paid when due and if
such payment remains unpaid at the time the Junior Outstanding Balance of the
related Lease Receivable is calculated for any purpose, then the "JUNIOR
OUTSTANDING BALANCE" of such Lease Receivable shall include such unpaid payment.
"JUNIOR RECEIVABLES BALANCE" means, at any time, the sum of
the Junior Outstanding Balances of all Eligible Lease Receivables at such time.
"KCCI" has the meaning given to such term in the preamble to
this Agreement.
"KEYBANK" means KeyBank National Association, a national
banking association.
"LEASE" means a contract in the form of a lease, installment
sales contract, unsecured promissory note, promissory note/security agreement or
other similar type of chattel paper pursuant to which the Borrower (as assignee
of the Originator or otherwise) leases Equipment to or finances the acquisition
of Equipment by an Obligor.
"LEASE POOL" means those Leases and related Lease Receivables,
Related Security and Collections sold or contributed by the Originator to the
Borrower pursuant to the Lease Sale and Contribution Agreement on the same
Settlement Date.
"LEASE RECEIVABLE" means, with respect to any Lease at any
time, any Periodic Installment of Rent then or thereafter payable by the Obligor
under such Lease, or any supplemental or additional payment, if any, required by
the terms of such Lease with respect to insurance, maintenance, ancillary
products and services and other specific charges, excluding any such payments or
charges which constitute sales or use taxes, personal property taxes, or the
price for a purchase option.
"LEASE SALE AND CONTRIBUTION AGREEMENT" means that certain
Lease Receivables Sale and Contribution Agreement of even date herewith between
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the Originator and the Borrower, as such agreement may be amended, supplemented,
restated or otherwise modified from time to time.
"LEASE SALE AND CONTRIBUTION AGREEMENT RIGHTS" means all
right, title and interest of the Borrower in, to and under the Lease Sale and
Contribution Agreement, including, without limitation, all obligations due and
to become due to the Borrower from the Originator under or in connection
therewith, whether as Lease Receivables or fees, expenses, costs, indemnities,
insurance recoveries, damages for breach or otherwise, and all rights, remedies,
powers, privileges and claims of the Borrower against the Originator under or
with respect to the Lease Sale and Contribution Agreement.
"LEASE TERMINATION PAYMENT" means a payment made by an Obligor
under a Lease upon the early termination of such Lease.
"LENDER" means each of the Senior Lender, the Junior Lender
and the Residual Lender, and "LENDERS" means the Senior Lender, the Junior
Lender and the Residual Lender, collectively.
"LIBO BUSINESS DAY" means a day of the year on which dealings
are carried on in the London interbank market and banks are open for business in
London and are not required or authorized to close in New York City, New York,
Denver, Colorado, Chicago, Illinois or Cleveland, Ohio.
"LIBO RATE" for any Interest Period means the rate of interest
per annum equal to the quotient of (a) an applicable interest rate per annum
appearing on Telerate Page 3750 (or any successor page or if for any reason such
rate is not available for any day, the rate per annum appearing on such other
quotation service such as Reuters Screen LIBO Page) as the London interbank
offered rate for deposits in U.S. dollars in a principal amount of not less than
$1,000,000 for a period of one month at or about 11:00 A.M. (London time) on the
second Business Day before (and for value on) the first day of such Interest
Period, divided by, (b) one minus the LIBO Reserve Percentage (expressed as a
decimal) applicable on such day for that Interest Period.
"LIBO RESERVE PERCENTAGE" of any Lender or the Agent for the
Interest Period for any Advance with respect to which the Applicable Rate is the
LIBO Rate means the reserve percentage applicable during such Interest Period
(or, if more than one such percentage shall be so applicable, the daily average
of such percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for such Lender
or the Agent, as applicable, with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities having a term equal to such Interest
Period.
"LIQUIDITY AGREEMENT" means the Liquidity Agreement dated as
of the date hereof among the Senior Lender and the Liquidity Providers pursuant
to which the Senior Lender may from time to time assign part or all of its
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interests in the Senior Advances arising hereunder, as the same may from time to
time be amended, restated, supplemented or otherwise modified.
"LIQUIDITY FEE" has the meaning given to such term in the Fee
Letter.
"LIQUIDITY PROVIDER" means any of the financial institutions
from time to time party to the Liquidity Agreement.
"LOCKBOX ACCOUNT" means the account in the name of CAI Lease
Securitization - II Corp. and maintained at the Lockbox Account Bank for the
purpose of receiving Collections and Remarketing Proceeds. The use and
maintenance of the Lockbox Account shall be governed by the terms of the Lockbox
Account Agreement.
"LOCKBOX ACCOUNT AGREEMENT" means that certain letter
agreement among the Originator, the Borrower, the Agent and the Lockbox Account
Bank.
"LOCKBOX ACCOUNT BANK" means Norwest Bank Colorado, National
Association.
"MANAGED PORTFOLIO RESIDUAL REALIZATION PERCENTAGE" means
130%, provided, that, commencing with the quarter ending November 30, 1998, and
annually thereafter "MANAGED PORTFOLIO RESIDUAL REALIZATION PERCENTAGE" shall
mean an amount calculated by Capital Associates (such amount to be calculated
and provided to the Agent in writing by no later than February 28 of each year)
as the average percentage achieved on assets remarketed since July of 1996 (see
Schedule 3 to the Side Letter); PROVIDED, FURTHER, that, with respect to a Lease
in a Residual Lease Pool, once more than 90% of the Equipment in such Residual
Lease Pool has been remarketed, "MANAGED PORTFOLIO RESIDUAL REALIZATION
PERCENTAGE" for such Lease shall mean the Actual Residual Realization Rate
calculated within 90 days after the end of the relevant fiscal quarter for all
Fully Remarketed Equipment relating to such Residual Lease Pool.
"MATERIAL ADVERSE EFFECT" means, with respect to any event,
occurrence or omission, a materially adverse effect upon (i) the interests
hereunder of the Agent or of any Lender in the Pledged Assets, or (ii) the
ability of the Borrower or the Servicer to consummate the transactions
contemplated by this Agreement and the other Facility Documents, or to perform
their respective obligations hereunder or under the other Facility Documents.
"MAXIMUM LEASE POOL AMOUNT" means at the time of a related
Advance an amount equal to the sum of (i) with respect to all Leases in a Lease
Pool that have a Risk Rating of "3(c)" and/or with respect to which a Residual
Advance is made, 93% of the sum of the Original Equipment Costs of the Equipment
related to such Leases and (ii) with respect to all Leases in a Lease Pool that
have a Risk Rating of "1", "2", "3(a)" or "3(b)" and with respect to which a
Residual Advance is not made, 100% of the sum of the Original Equipment Costs of
the Equipment related to such Leases.
"MOODY'S" means Moody's Investors Service, Inc. and its
successors.
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"MULTIEMPLOYER PLAN" means, with respect to any Person, a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is, or
within the immediately preceding six (6) years was, contributed to by either
such Person or any ERISA Affiliate of such Person.
"NOTE" means each of the Senior Note, the Junior Note and the
Residual Note, and "NOTES" means the Senior Note, the Junior Note and the
Residual Note, collectively.
"NOTICE OF BORROWING" means a written notice, in substantially
the form of EXHIBIT E, delivered by the Borrower to the Agent pursuant to
SECTION 2.02(a).
"OBLIGATIONS" means all present and future Indebtedness and
other liabilities and obligations of the Borrower to the Lenders and/or any
other Person, arising under or in connection with this Agreement and the other
Facility Documents or the transactions contemplated thereby, and shall include,
without limitation, all liability for principal of the Advances, Interest, fees,
expense reimbursements, indemnifications, and other amounts due or to become due
under this Agreement and under the Interest Rate Hedges.
"OBLIGOR" means a Person obligated to make payments on a Lease
Receivable pursuant to a Lease.
"OBLIGOR UCC FILING REQUIREMENT" means, with respect to any
Lease with an Original Equipment Cost equal to or greater than $25,000, that the
Originator has obtained appropriate UCC financing statements (Form UCC-1)
executed by the Obligor of such Lease which UCC financing statements have been
filed in all applicable jurisdictions, so that, if such Lease is a Finance
Lease, the Originator would reasonably be expected to have a first priority
perfected security interest in the Equipment subject to such Lease.
"ORIGINAL EQUIPMENT COST" means with respect to the Equipment
relating to a Lease, the amount paid by the Originator to acquire such
Equipment.
"ORIGINATOR" means Capital Associates.
"OTHER FEES" means the sum of the amounts owed by the Borrower
hereunder pursuant to SECTIONS 2.07, 2.08, 2.09, 10.01 and 11.06.
"OTHER TAXES" has the meaning assigned to that term in SECTION
2.09(b).
"OVERCONCENTRATION AMOUNT" means, at any time, an amount equal
to the sum of:
(a) for each Obligor, the amount by which (i) the sum of the
Senior Outstanding Balances of all Lease Receivables of such Obligor
exceeds (ii) the Single Obligor Concentration Amount applicable to such
Obligor;
(b) for each Obligor that is in a particular industry (as
determined pursuant to Industry SIC Codes), the amount by which (i) the
sum of the Senior Outstanding Balances of all Lease Receivables of all
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Obligors in that industry (excluding, for each such Obligor, any excess
portions thereof determined under CLAUSE (a) above) exceeds (ii) 15.0%
of the Senior Receivables Balance;
(c) for each Obligor that leases a type of Equipment listed on
Schedule 2 to the Side Letter, the amount by which (i) the sum of the
Senior Outstanding Balances of all Lease Receivables of all the
Obligors that lease such type of Equipment (excluding, for each such
Obligor, any excess portions thereof determined under CLAUSES (a) and
(b) above) exceeds (ii) the percentage set forth under the heading
"Pool Limit" on such Schedule 2 for such type of Equipment of the
Senior Receivables Balance; and
(d) for each State of the United States, the amount by which
(i) the aggregate Senior Outstanding Balance of all Lease Receivables
of all such Obligors having a billing address in such State (excluding,
for each such Obligor, any excess portions thereof determined under
CLAUSES (a) through (c) above) exceeds (ii) 20% of the Senior
Receivables Balance.
For purposes of this definition, Obligor shall mean each Obligor together with
all of its Affiliated Obligors.
"PERIODIC INSTALLMENTS OF RENT" means, with respect to any
Lease, the aggregate amount of rent installments payable by the Obligor under
such Lease, excluding however, (i) all interim rents and (ii) all supplemental
or additional payments, if any, required by the terms of such Lease with respect
to sales and use taxes, personal property taxes, insurance, maintenance,
purchase option payments, ancillary products and services and other specific
charges.
"PERMITTED ENCUMBRANCE" means any of the following:
(a) liens, charges or other encumbrances for taxes and
assessments (i) which are not yet due and payable or (ii) the validity
of which are being contested in good faith by appropriate proceedings
and with respect to which the Borrower or Originator, as applicable, is
maintaining adequate reserves in accordance with generally accepted
accounting principles;
(b) liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Borrower and/or the Originator
shall at any time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured;
(c) liens, charges or other encumbrances or priority claims
incidental to the conduct of business or the ownership of properties
and assets (including mechanics', carriers', repairers', warehousemen's
and attorneys' liens and statutory landlords' liens) and deposits,
pledges or liens to secure statutory obligations, surety or appeal
bonds or other liens of like general nature incurred in the ordinary
course of business and not in connection with the borrowing of money,
provided in each case, the obligation secured is not overdue or, if
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overdue, is being contested in good faith by appropriate actions or
proceedings the effect of which is to stay the enforcement of any such
lien, charge or encumbrance;
(d) liens, charges or encumbrances in favor of any Lender, any
Liquidity Provider or the Agent; and
(e) with respect to Equipment, the interest of an Obligor in
such Equipment under the related Lease.
"PERSON" means an individual, partnership, corporation
(including a business trust), joint stock company, limited liability company,
trust, unincorporated association, joint venture, government (or any agency or
political subdivision thereof) or other entity.
"PLAN" means, with respect to any Person, an employee benefit
plan defined in Section 3(3) of ERISA in respect of which such Person or any
ERISA Affiliate of such Person is, or within the immediately preceding six years
was, an "employer" as defined in Section 3(5) of ERISA.
"PLEDGED ASSETS" means, at any time, (i) all then outstanding
Leases, Lease Receivables, Related Security, Lease Sale and Contribution
Agreement Rights, payments owing to the Borrower or the Agent on behalf of the
Lenders (as applicable) under Interest Rate Hedges covering Lease Receivables
and Collections with respect to, and other proceeds of, such Lease Receivables,
including, without limitation, all Collections of Lease Receivables relating to
payments due thereunder at any time during the month in which such Lease
Receivable was acquired by the Borrower and (ii) all Equipment.
"PROGRAM FEE" has the meaning given to such term in the Fee
Letter.
"RATING AGENCY" means, at any time, each nationally recognized
rating agency which has provided a rating with respect to any of the Notes.
"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 by Borrower with respect to Leases, the related Obligors and
Equipment.
"RELATED SECURITY" means, with respect to any 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
Lenders, of all UCC financing statements or other filings covering any
collateral securing payment of the Lease Receivable arising under such
Lease;
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(iii) all guarantees, indemnities, 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;
(iv) all of the Borrower's right, title and interest in and to
any proceeds of the sale or lease of Equipment that was repossessed
from or returned by an Obligor of a Lease Receivable that was the
subject of such Lease;
(v) all Records related to such Lease; and
(vi) all proceeds of the foregoing.
"RELEASE CERTIFICATE" means a certificate from First Union
National Bank in the form of Exhibit B pursuant to which First Union National
Bank agrees to release its security interest in and deliver to the Collateral
Custodian the original copies of the Leases to be included in the Lease Pool
with respect to a Settlement Date upon payment of the amount specified in such
certificate.
"REMARKETED EQUIPMENT" means Equipment which has been subject
to resale, re-lease or other disposition or transfer.
"REMARKETING PROCEEDS" means the sum of (i) all cash proceeds
received with respect to Remarketed Equipment which exceed the amount, if any,
necessary to pay in full all Lease Receivables under the Lease relating to such
Remarketed Equipment and (ii) any excess of prepayments of Lease Receivables in
the amount by which each prepayment exceeds the sum of the Senior Outstanding
Balance of the related Lease Receivable plus any applicable fees, costs or
expenses (including early termination payments) resulting from the reduction of
the aggregate notional amount of the Interest Rate Hedges with respect to such
Lease Receivable.
"RESIDUAL ADVANCE" means an advance of funds by the Residual
Lender in accordance with the terms of Section 2.01.
"RESIDUAL BORROWING BASe" means, with respect to the Residual
Advance for a Lease Pool the sum of the Individual Lease Residual Borrowing
Bases for each Lease included in such Lease Pool.
"RESIDUAL INTEREST" means, for any Interest Period, the
product of:
ARA x RR x ED
---
360
where:
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ARA = the average daily outstanding Aggregate Residual Advances
during such Interest Period.
RR = the Residual Interest Rate for such Interest Period.
ED = the actual number of days elapsed during such Interest Period.
PROVIDED, HOWEVER that (i) no provision of this Agreement shall require the
payment or permit the collection of Residual Interest in excess of the maximum
permitted by applicable law and (ii) Residual Interest shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
otherwise be returned for any reason.
"RESIDUAL INTEREST RATE" means, for any Interest Period, a
rate equal to the sum of (i) the LIBO Rate for such Interest Period and (ii)
3.25% per annum.
"RESIDUAL LEASE POOL" has the meaning given such term in
SECTION 2.10.
"RESIDUAL LENDER" means KCCI, together with its successors and
permitted assigns.
"RESIDUAL NOTE" means that promissory note described as such
in SECTION 2.02(b) hereof.
"RESIDUAL REALIZATION PERCENTAGE" means the Managed Portfolio
Residual Realization Percentage, PROVIDED, that, for each Settlement Date after
the date on which 90% of the Equipment subject to the Leases in the initial
Residual Lease Pool has become Fully Remarketed Equipment, the "Residual
Realization Rate" shall be the Actual Residual Realization Rate for such
Settlement Date.
"REUTERS SCREEN LIBO PAGE" means the display designated as
page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as
may replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks).
"RISK RATING" means Capital Associates internal rating system
for Obligors together with the additional rating descriptions attached to the
Side Letter as SCHEDULE 4.
"S&P" means Standard & Poor's Ratings Service, a division of
The McGraw-Hill Companies, Inc., and its successors.
"SENIOR ADVANCE" means an advance of funds by the Senior
Lender in accordance with the terms of SECTION 2.01.
"SENIOR BORROWING BASE" means the lesser of (i) the product of
(x) the Senior Receivables Balance (including the Senior Outstanding Balances of
Lease Receivables included in the Lease Pool relating to such Settlement Date)
as of the end of the month immediately preceding such Settlement Date MINUS the
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Overconcentration Amount as of the end of such month and (y) a percentage equal
to 100% MINUS the Senior Required Enhancement Percentage and (ii) the Senior
Receivables Balance (including the Senior Outstanding Balances of Lease
Receivables included in the Lease Pool relating to such Settlement Date) as of
the end of the month immediately preceding such Settlement Date MINUS the
Overconcentration Amount as of the end of such month MINUS the Senior Required
Enhancement Floor.
"SENIOR DISCOUNT RATE" means, for each Lease included in a
Lease Pool, a per annum rate equal to the sum of (a) the fixed interest rate per
annum the Borrower is obligated to pay under the Interest Rate Hedge entered
into with respect to such Lease Pool, PLUS (b) the Senior Margin Rate in effect
at the time of the Senior Advance with respect to such Lease Pool.
"SENIOR INTEREST" means, for any Interest Period, the product
of:
ASA x SR x ED
---
360
where:
ASA = the average daily outstanding Aggregate Senior Advances during
such Interest Period.
SR = the Senior Interest Rate for such Interest Period.
ED = the actual number of days elapsed during such Interest Period.
PROVIDED, HOWEVER that (i) no provision of this Agreement shall require the
payment or permit the collection of Senior Interest in excess of the maximum
permitted by applicable law and (ii) Senior Interest shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
otherwise be returned for any reason.
"SENIOR INTEREST RATE" means, for any Interest Period, an
interest rate per annum equal to the LIBO Rate; PROVIDED, HOWEVER, if the Senior
Lender has assigned the Senior Advances to the Liquidity Providers, "SENIOR
INTEREST RATE" shall mean an interest rate per annum equal to the LIBO Rate PLUS
one percent (1%); ALSO PROVIDED, that (i) if an Advance is made hereunder on any
day other than the last day of an Interest Period, the "SENIOR INTEREST RATE"
applicable to the Advance shall be the Alternate Base Rate in effect from time
to time until the end of the then applicable Interest Period; (ii) in the case
of any Interest Period of less than one month, the "SENIOR INTEREST RATE" for
such Interest Period shall be the Alternate Base Rate in effect during such
Interest Period unless the Agent and the Borrower agree in writing to a
different rate; (iii) if it shall become unlawful for KeyBank to obtain funds in
the London interbank market in order to make, fund or maintain any Advance
hereunder or deposits in dollars (in the applicable amounts) are not being
offered by KeyBank in the London interbank market then the "SENIOR INTEREST
RATE" for any Interest Period shall be calculated using an interest rate per
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annum equal to the Alternate Base Rate; and (iv) following the occurrence of any
Event of Termination or if the Senior Note (at any time after it is initially
rated A- by a Rating Agency) is rated below A- by such Rating Agency, the
"SENIOR INTEREST RATE" for each Interest Period shall be the sum of the
applicable interest rate per annum determined pursuant to provisions set forth
above plus one and one-half percent (1.5%) per annum.
"SENIOR LENDER" means Concord Minutemen Capital Company, LLC,
a Delaware limited liability company, together with its successors and permitted
assigns.
"SENIOR MARGIN RATE" means, with respect to the Senior Advance
made with respect to a Lease Pool, the sum of the per annum rates or percentages
applicable from time to time to calculate each of the Servicer Fee, the Program
Fee, the Liquidity Fee, the Other Fees, the Administrative Fee and the fees, if
any, payable by the Borrower with respect to Interest Rate Hedges related to
such Lease Pool.
"SENIOR NOTE" means that promissory note described as such in
SECTION 2.02(b) hereof.
"SENIOR OUTSTANDING BALANCE" means, with respect to any Lease
Receivable, an amount equal to the present value of the Periodic Installments of
Rent relating to such Lease Receivable, determined by discounting on a monthly
basis (assuming a calendar year consisting of twelve thirty-day months) such
Periodic Installments of Rent from the end of the calendar month in which each
such Periodic Installment of Rent is due, at a rate equal to the Senior Discount
Rate with respect thereto. Notwithstanding anything to the contrary contained in
this Agreement, if any Periodic Installment of Rent was not paid when due and if
such payment remains unpaid at the time the Senior Outstanding Balance of the
related Lease Receivable is calculated for any purpose, then the "SENIOR
OUTSTANDING BALANCE" of such Lease Receivable shall include such unpaid payment.
"SENIOR RECEIVABLES BALANCE" means, at any time, the sum of
the Senior Outstanding Balances of all Eligible Lease Receivables at such time.
"SENIOR REQUIRED ENHANCEMENT FLOOR" means an amount equal to
the greater of (a) the product of (i) twenty-five percent (25%) and (ii) the
greater of (x) the product of the Senior Receivables Balance and a percentage
equal to 100% minus the Senior Required Enhancement Percentage, calculated on
the first Settlement Date to occur on or after the Termination Date and (y) the
product of the Senior Receivables Balance and a percentage equal to 100% minus
the Senior Required Enhancement Percentage, calculated on the last Settlement
Date on which an Advance was made hereunder and (b) the greatest of (i) the
largest of the aggregate Senior Outstanding Balances of Lease Receivables of an
Obligor that is rated A- or higher by S&P, (ii) the sum of the two largest
aggregate Senior Outstanding Balances of Obligors that are rated BBB- through
BBB+ by S&P and (iii) the sum of the seven largest aggregate Senior Outstanding
Balances of Obligors that are rated below BBB- by S&P.
"SENIOR REQUIRED ENHANCEMENT PERCENTAGE" means, with respect
to any Settlement Date, the greatest of (a) 15.0%, and (b) the Dynamic Credit
Enhancement Percentage calculated as of such Settlement Date.
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"SERVICER" means at any time the Person(s) then authorized
pursuant to SECTION 7.02 to service, administer, bill and collect Lease
Receivables.
"SERVICER ADVANCE" has the meaning assigned to that term in
SECTION 4.01(a)(iii).
"SERVICER FEE" means a fee with respect to each Interest
Period, payable to the Agent in arrears for the account of the Servicer, equal
to the product of (i) the average daily Senior Receivables Balance during such
Interest Period and (ii) the per annum rate of 0.50%.
"SERVICER REPLACEMENT EVENT" means the occurrence of any of
the following:
(a) The Servicer shall fail to make any payment or deposit to
be made by it hereunder when due and such failure shall remain unremedied for
two Business Days; or
(b) The Servicer shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or any other Facility
Document on its part to be performed or observed and any such failure shall
remain unremedied for fifteen days after written notice from the Agent,
PROVIDED, that such grace period shall not apply to a breach of the financial
covenants contained in SECTION 6.04(d); or
(c) Any representation or warranty made or deemed to be made
by the Servicer (or any of its Designated Officers) under this Agreement, any
Servicer Report or any Notice of Borrowing shall prove to have been false or
incorrect in any material respect when made; PROVIDED, HOWEVER, that to the
extent any breach of any such representation or warranty may be cured within
fifteen days, the Servicer shall have fifteen days after learning of such breach
to make such representation and warranty true and correct; or
(d) (i) The Servicer shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Servicer (an
"Involuntary 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; or (ii) the
Servicer's Board of Directors shall vote affirmatively to authorize any of the
actions set forth in CLAUSE (i); PROVIDED, HOWEVER, that if any Involuntary
Proceeding (as defined above) is dismissed within sixty (60) days after its
commencement, and if no other Servicer Replacement Event has occurred, then
following such dismissal, the program and the Servicer shall be reinstated as if
the Servicer Replacement Event had not occurred; or
(e) The Servicer shall fail to pay any principal or premium or
interest on any recourse Indebtedness or Indebtedness under which the applicable
lender acquires recourse for any reason when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) or any other default under any agreement or instrument relating to
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any such recourse Indebtedness of the Servicer or any other event, shall occur
and the effect of such default or event is to permit the acceleration of the
maturity of such Indebtedness and such default is neither waived by the
applicable lender nor cured, in each case within five (5) days of the date of
such default, or any such Indebtedness shall be accelerated; or
(f) There shall have been any material adverse change in the
financial condition or operations of the Servicer since May 31, 1998, or there
shall have occurred any other event which materially adversely affects the
ability of the Servicer to collect Lease Receivables generally or the ability of
the Servicer to perform hereunder, in each case, as determined in the reasonable
judgment of the Agent; or
(g) As of the last day of any month or fiscal quarter, as the
case may be, the Actual Residual Realization Rate or the Managed Portfolio
Residual Realization Percentage is less than 100%.
"SERVICER REPORT" means a report, in substantially the form of
EXHIBIT A, furnished by the Servicer to the Agent for the benefit of the Lenders
pursuant to SECTION 7.03.
"SETTLEMENT DATE" means the date of the initial Advance and
thereafter, the 12th of each calender 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 following such 12th day.
"SIDE LETTER" means that certain Letter Agreement dated as of
the date hereof among the parties hereto.
"SINGLE OBLIGOR CONCENTRATION AMOUNT" means, at any time, an
amount equal to:
(a) for each Obligor rated A- or higher by S&P or A3 or higher
by Moody's, 8% of the Senior Receivables Balance;
(b) for each Obligor rated BBB- through BBB+ by S&P or Baa3
through Baa1 by Moody's, 4% of the Senior Receivables Balance; and
(c) for each Obligor rated below BBB- by S&P or below Baa3 by
Moody's or not rated by S&P and Moody's, 2% of the Senior Receivables
Balance.
"STATED MATURITY DATE" means August 18, 2001.
"SUBSIDIARY" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the Board of Directors or other Persons performing
similar functions are at the time directly or indirectly owned by such Person.
"TAXES" has the meaning assigned to that term in SECTION
2.09(a).
"TELERATE PAGE 3750" shall mean the British Bankers
Association Libor Rates (determined at 11:00 a.m. London time) that are
published by Dow Jones Telerate, Inc.
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"TERMINATION DATE" means the earliest of (i) that Business Day
which the Borrower designates as the Termination Date by notice to the Agent at
least fifteen Business Days prior to such Business Day, (ii) the expiration and
nonrenewal of the commitments of the Liquidity Providers under the Liquidity
Agreement, (iii) the declaration or automatic occurrence of the Termination Date
pursuant to Section 8.01, and (iv) the Stated Maturity Date.
"TRUE LEASE" means a Lease which is not a Finance Lease.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"WEIGHTED AVERAGE REMAINING LIFE" means, at any time, a term
(calculated in years) equal to:
Sn (Pn x Tn)
ELRB
where:
S = The mathematical symbol for summation. The summation is
computed from 1 to n, where n is the number of remaining
Periodic Installments of Rent which comprise all Eligible Lease
Receivables at such time.
Pn = The amount of the nth Periodic Installment of Rent which
comprises such Eligible Lease Receivables.
Tn = The remaining period, in years, from such time until the
scheduled due date of such nth Periodic Installment of Rent.
ELRB = The Eligible Lease Receivables Balance at such time.
SECTION 1.02. OTHER TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
SECTION 1.03. COMPUTATION OF TIME PERIODS. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. ADVANCES. On the terms and conditions
hereinafter set forth, the Lenders shall, upon the request of the Borrower as
reflected in the Notice of Borrowing during the period from the date hereof to
the Termination Date, on a Settlement Date make Advances to the Borrower as
described in this SECTION 2.01. Prior to requesting any Advances with respect to
a Lease Pool, the Borrower shall calculate (a) the Individual Lease Senior
Borrowing Base, the Individual Lease Junior Borrowing Base and the Individual
Lease Residual Borrowing Base for each Lease to be included in such Lease Pool
and the Maximum Lease Pool Amount for such Lease Pool (such calculations being
conducted for purposes of determining the Residual Borrowing Base), and (b) pro
forma calculations of the Senior Borrowing Base, the Junior Borrowing Base and
the Residual Borrowing Base, in each case, assuming that such Lease Pool has
been sold or contributed to the Borrower. Based upon the foregoing calculations,
the Borrower may request Advances with respect to such Lease Pool as follows:
(i) an advance made by the Senior Lender ("SENIOR ADVANCE"),
PROVIDED, that such amount requested is equal to or less than the
Senior Borrowing Base on such Settlement Date (as calculated above )
MINUS the Aggregate Senior Advances as of the opening of business on
such Settlement Date;
(ii) an advance made by the Junior Lender ("JUNIOR ADVANCE"),
PROVIDED, that such amount requested is equal to or less than the
Junior Borrowing Base on such Settlement Date (as calculated above )
MINUS the Aggregate Junior Advances as of the opening of business on
such Settlement Date; and
(iii) an advance made by the Residual Lender ("RESIDUAL
ADVANCE"), PROVIDED, that such amount requested is equal to or less
than the Residual Borrowing Base for the Lease Pool sold or contributed
on such Settlement Date;
PROVIDED that any Advances with respect to a Lease Pool shall be subject to the
following additional limitations:
(A) the initial Senior Advance shall be in a minimum principal
amount of $7,500,000 and each subsequent Senior Advance shall be in a
minimum principal amount of $5,000,000;
(B) each Residual Advance shall be in a minimum principal
amount of $1,000,000;
(C) the sum of such Advances requested pursuant to CLAUSES
(i), (ii) and (iii) of this SECTION 2.01 shall not exceed the Maximum
Lease Pool Amount for such Lease Pool;
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(D) after giving effect to such Senior Advances, the aggregate
outstanding principal amount of all Senior Advances hereunder shall not
exceed the Facility Limit at such time;
(E) no CP Disruption Event shall have occurred and be
continuing as of the date of such Advance; and
(F) the satisfaction of the conditions precedent set forth in
ARTICLE III.
SECTION 2.02. MAKING ADVANCES.
(a) NOTICE OF BORROWING. At least 10 Business Days prior to a
Settlement Date on which the Borrower desires the Lenders to make Advances, the
Borrower shall (directly or through the Servicer) deliver to the Agent, and the
Agent shall promptly thereafter deliver to the Lenders (but in no event later
than two (2) Business Days prior to such Settlement Date), a Notice of Borrowing
(which shall include the calculations made pursuant to SECTION 2.01). The Senior
Lender shall promptly thereafter notify the Borrower and the Agent if a CP
Disruption Event has occurred and is continuing. On such Settlement Date, the
applicable Lender shall, upon satisfaction of the applicable conditions set
forth in SECTION 2.01 and ARTICLE III, make available to the Agent at its
address referred to in SECTION 2.07 the amount of the Senior Advance, the Junior
Advance and the Residual Advance, as the case may be, described in SECTION 2.01
in same day funds by wire transfer to the Agent's Account at KeyBank National
Association, Albany, New York, Account No. 325-760-034018, ABA# 021-300-077 or
as otherwise specified by the Agent, and after receipt by the Agent of such
funds, the Agent will make such funds immediately available to the Borrower by
wire transfer to the Borrower's account at Norwest Bank of Denver, Account No.
1018219946, ABA# 102-000-076. If the Borrower withdraws, rescinds or otherwise
cancels a Notice of Borrowing less than two Business Days prior to the related
Settlement Date, the Borrower shall pay to each Lender any and all costs,
expenses and losses incurred in connection with the termination of the funding,
if any, obtained or committed with respect to the Advance requested by the
Borrower pursuant to such Notice of Borrowing.
(b) NOTES. All of the Senior Advances shall be evidenced by a
promissory note in the form attached hereto as EXHIBIT F-1 (the "SENIOR NOTE")
appropriately completed, duly executed and delivered on behalf of the Borrower
and payable to the order of the Senior Lender. All of the Junior Advances shall
be evidenced by a promissory note in the form attached hereto as EXHIBIT F-2
(the "JUNIOR NOTE") appropriately completed, duly executed and delivered on
behalf of the Borrower and payable to the order of the Junior Lender. All of the
Residual Advances shall be evidenced by a promissory note in the form attached
hereto as EXHIBIT F-3 (the "RESIDUAL NOTE") appropriately completed, duly
executed and delivered on behalf of the Borrower and payable to the order of the
Residual Lender. The borrowing date and principal amount of each Advance, the
Applicable Interest Rate and Interest Period applicable thereto and each
repayment or prepayment of principal thereof shall be recorded in the applicable
Lender's internal records and, prior to any transfer of a Note, on the grid
schedule annexed, thereto, and the Borrower hereby authorizes the Lenders to
make such recordation; PROVIDED, HOWEVER, that the failure of any Lender to set
forth any or all of such information on such schedule or any error in such
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schedule shall not in any manner affect the obligation of the Borrower to repay
such Lender the principal amount actually advanced under such Note together with
accrued interest thereon in accordance with the terms hereof and of such Note.
Such updated grid schedules, or other proper records maintained by any Lender in
lieu thereof, shall, in the absence of demonstrable error, be presumptively
correct evidence of the Advances made by such Lender to the Borrower.
SECTION 2.03. TRANSFERS OF INTERESTS. Notwithstanding anything
to the contrary contained in this Agreement, none of the Agent, any Lender or
any Liquidity Provider shall have any affirmative obligation or liability with
respect to any Leases or related Lease Receivables or Equipment or any other
Pledged Assets (including, without limitation, any Interest Rate Hedges unless
it is a party thereto), other than the obligation to observe the quiet enjoyment
right of the Obligors, nor shall any of them be obligated to perform any of the
affirmative obligations of the Borrower or the Originator thereunder.
SECTION 2.04. USE OF PROCEEDS. The Borrower shall use all
proceeds of the (a) Senior Advances and Junior Advances to pay (x) to the
Originator amounts due in respect of the purchase of Lease Receivables under the
Lease Sale and Contribution Agreement and (y) the administrative and operational
costs of the Borrower incurred in the ordinary course of its business and (b)
Residual Advances to make loans to Capital Associates (each, a "Demand Loan")
which shall be evidenced by the Capital Associates Demand Note..
SECTION 2.05. MATURITY OF ADVANCES. The principal amount of
each Advance shall be due and payable in accordance with the settlement
procedures described in SECTION 4.01.
SECTION 2.06. PAYMENTS AND COMPUTATIONS, Etc. All amounts to
be paid or deposited by the Borrower or the Servicer hereunder shall be paid or
deposited in accordance with the terms hereof no later than 11:00 a.m. (New York
City time) on the day when due in lawful money of the United States of America
in immediately available funds to the Collection Account. The Borrower shall, to
the extent permitted by law, pay to the Agent interest on all amounts not paid
or deposited when due hereunder (whether owed by the Borrower or the Servicer)
at 2% per annum above the Alternate 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 applicable Lender or the applicable Liquidity Provider, in which case
such interest accruing after such date shall be for the account of, and
distributed by the Agent to the such Lender or such Liquidity Provider. All
computations of interest and all computations of Senior Interest, Junior
Interest, Residual Interest, Program Fees, Liquidity Fees, Servicer Fees, the
Administrative Fee 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.
SECTION 2.07. INCREASED COSTS. (a) If due to either: (i) the
introduction of or any change (including, without limitation, any change by way
of imposition or increase of reserve requirements) in or in the interpretation
by any governmental or regulatory authority or agency of any law or regulation
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(other than laws or regulations relating to taxes) or (ii) the compliance by any
Lender or any Liquidity Provider with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
(1) there shall be an increase in the cost to such Lender or such Liquidity
Provider of accepting, funding or maintaining any Advance hereunder, (2) there
shall be a reduction in the amount receivable to such Lenders with regard to any
Advance or (3) such Lender or such Liquidity Provider shall be required to make
a payment calculated by reference to the Advances made hereunder or Senior
Interest, Junior Interest or Residual Interest received by it, then the Borrower
shall, from time to time, upon demand by the Agent, pay the Agent for the
account of the such Lender or such Liquidity Provider (as a third party
beneficiary, in the case of any Affected Party other than a Lender), that
portion of such increased costs incurred, amounts not received or required
payment made or to be made, which the Agent reasonably determines is
attributable to accepting, funding and maintaining any Advance hereunder. In
determining such amount, the Agent may use any reasonable averaging and
attribution methods. The applicable Lender or the applicable Liquidity Provider
shall submit to the Borrower a certificate as to such increased costs incurred,
amounts not received or receivable or required payment made or to be made, which
certificate shall, in the absence of demonstrable error, be conclusive and
binding for all purposes. Each of the Agent, each Lender and each Liquidity
Provider agrees to use its best efforts to promptly notify the Borrower upon
learning that amounts for which it is entitled to seek reimbursement under this
SECTION 2.07 have begun to accrue.
(b) With respect to amounts owing under this SECTION 2.07,
each Lender agrees that it will use its reasonable efforts to reduce or
eliminate any claim for compensation pursuant to said SECTION 2.07 including,
subject to applicable law, a change in its applicable lending office for this
transaction; PROVIDED, HOWEVER, that nothing herein contained shall obligate any
Lender to take any action which, in the opinion of such Lender, is unlawful,
otherwise adverse to its interests or results in any unreimbursed cost or
expense to such Lender, which cost or expense would not have been incurred but
for such action.
SECTION 2.08. INCREASED CAPITAL. (a) If either (i) the
introduction of or any change in or in the interpretation by any governmental or
regulatory authority or agency of any law or regulation or (ii) compliance by
any Affected Party with a change in or any new guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be
maintained by such Affected Party or such Affected Party determines that the
amount of such capital is increased by or based upon the existence of any
Lender's agreement, in its discretion, to make or maintain Advances hereunder
and other similar agreements or facilities, then, upon demand by such Affected
Party or the Agent, the Borrower shall immediately pay to such Affected Party
(as a third party beneficiary, in the case of any Affected Party other than a
Lender) or the Agent for the account of such Affected Party from time to time,
as specified by such Affected Party or the Agent, additional amounts sufficient
to compensate such Affected Party in light of such circumstances, to the extent
that such Affected Party or the Agent on behalf of such Affected Party
reasonably determines such increase in capital to be allocable to the existence
any of the Lender's agreements hereunder. A certificate as to such amounts
submitted to the Borrower by such Affected Party or the Agent, shall, in the
absence of demonstrable error, be conclusive and binding for all purposes.
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(b) With respect to amounts owing under this SECTION 2.08,
such Affected Party agrees that it will use its reasonable efforts to reduce or
eliminate any claim for compensation pursuant to said SECTION 2.08 including,
subject to applicable law, a change in its applicable lending office for this
transaction; PROVIDED, HOWEVER, that nothing herein contained shall obligate any
Affected Party to take any action which, in the opinion of such Affected Party,
is unlawful, otherwise adverse to its interests or results in any unreimbursed
cost or expense to such Affected Party, which cost or expense would not have
been incurred but for such action.
SECTION 2.09. TAXES. (a) Any and all payments and deposits
required to be made hereunder or under any instrument delivered hereunder by the
Borrower shall be made, in accordance with SECTION 2.06, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
EXCLUDING, in the case of an Affected Party, net income taxes that are imposed
by the United States and franchise taxes and net income taxes that are imposed
on such Affected Party by the state or foreign jurisdiction under the laws of
which such Affected Party is organized or in which it is otherwise doing
business or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "TAXES"). If the Borrower or the Servicer shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Affected Party, (i) the Borrower shall make an additional
payment to such Affected Party, in an amount sufficient so that, after making
all required deductions (including deductions applicable to additional sums
payable under this SECTION 2.09), such Affected Party receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower or the Servicer, as the case may be, shall make such deductions and
(iii) the Borrower or the Servicer, as the case may be, shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp or other documentary taxes or any other excise or property taxes
charges or similar levies which arise from any payment made hereunder or under
any instrument delivered hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any instrument
delivered hereunder (hereinafter referred to as "OTHER TAXES").
(c) The Borrower will indemnify each Affected Party (as a
third party beneficiary, in the case of any Affected Party other than a Lender)
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
SECTION 2.09) paid by such Affected Party and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto
whether or not such Taxes or Other Taxes were correctly or legally asserted. The
payments with respect to this indemnification shall be made within 30 days from
the date the Affected Party makes written demand therefor. A certificate as to
the amount of such indemnification submitted to the Borrower by such Affected
Party, setting forth the calculation thereof, shall, in the absence of
demonstrable error, be conclusive and binding for all purposes.
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(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this SECTION 2.09 shall survive the Collection Date.
(e) With respect to amounts owing under this SECTION 2.09,
each Lender agrees that it will use its reasonable efforts to reduce or
eliminate any claim for compensation pursuant to said SECTION 2.09 including,
subject to applicable law, a change in its applicable lending office for this
transaction; PROVIDED, HOWEVER, that nothing herein contained shall obligate any
Lender to take any action which, in the opinion of such Lender, is unlawful,
otherwise adverse to its interests or results in any unreimbursed cost or
expense to such Lender, which cost or expense would not have been incurred but
for such action.
SECTION 2.10. RESIDUAL LEASE POOLS. From time to time, as
Residual Advances are made, the Servicer shall create new residual lease pools
(each, a "RESIDUAL LEASE POOL"). Such a new Residual Lease Pool shall be created
with respect to each increment of Residual Advances equaling (x) at least
$2,500,000 if there are fifty (50) or more different Obligors under the related
Leases or (y) $5,000,000 if there are less than fifty (50) different Obligors
under the related Leases. Each such Residual Lease Pool shall be comprised of
the Leases and related Lease Receivables, Related Security and Collections
related to such Residual Advances and, with respect to the most recently created
Lease Pool, any other Leases and related Lease Receivables, Related Security and
Collections that have been included in a Lease Pool but have not been included
in another Residual Lease Pool.
SECTION 2.11. INTEREST AND FEES. (a) Interest shall accrue on
the Advances on each day of each Interest Period. On each Settlement Date,
Senior Interest, Junior Interest and Residual Interest shall be due and payable
by the Borrower with respect to the Interest Period related to such Settlement
Date.
(b) On each Settlement Date, the Borrower shall pay to the
Agent, the Program Fees, Liquidity Fees, the Administrative Fee and Other Fees
with respect to the Interest Period relating to such Settlement Date.
ARTICLE III
CONDITIONS OF ADVANCES
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES. The
initial Advances hereunder shall be subject to the condition precedent that the
Agent (or the Senior Lender in the case of the Liquidity Agreement under (k)
below) shall have received, or waived the receipt of, the following, each in
form and substance satisfactory to the Agent:
(a) This Agreement, the Senior Note, the Junior Note and the
Residual Note executed by each applicable party thereto;
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(b) A copy of the resolutions of the Board of Directors of the
Borrower approving this Agreement, the Lease Sale and Contribution Agreement and
the other Facility Documents to be delivered by it hereunder and the
transactions contemplated hereby, certified by its Secretary or Assistant
Secretary;
(c) The Articles of Incorporation of the Borrower certified by
the Secretary of State of Delaware;
(d) Good Standing Certificates for the Borrower issued by the
Secretary of State of Delaware dated a date reasonably near to the date of the
initial Advance;
(e) A certificate of the Secretary or Assistant Secretary of
the Borrower certifying (i) the names and true signatures of the officers
authorized on its behalf to sign this Agreement, the Lease Sale and Contribution
Agreement and the other Facility Documents to be delivered by it hereunder (on
which certificate the Agent and the Lenders may conclusively rely until such
time as the Agent shall receive from the Borrower a revised certificate meeting
the requirements of this subsection (e)) and (ii) a copy of the Borrower's
by-laws;
(f) Acknowledgment copies of the following UCC-1 financing
statements (executed by the Originator and/or Borrower, as applicable):
(i) A UCC-1 financing statement filed with the Secretary of
State of the State of Colorado naming the Originator, as debtor/seller,
the Borrower as secured party/purchaser, the Agent, as assignee of the
secured party, and the Leases and related assets transferred pursuant
to the Lease Sale and Contribution Agreement as collateral; and
(ii) A UCC-1 financing statement filed with the Secretary of
State of the State of Colorado naming the Borrower, as debtor, the
Agent, as secured party, and the Pledged Assets as collateral;
(g) Certified copies of Requests for Information or Copies
(Form UCC-11) (or a similar search report certified by a party acceptable to the
Agent), dated a date reasonably near to the date of the initial Advance, listing
all effective financing statements which name the Borrower or the Originator
(under their respective present names and any previous names) as debtor and
which are filed in the Office of the Secretary of State of Colorado, together
with copies of such financing statements;
(h) The Lockbox Account Agreement executed by the Borrower and
the Originator and acknowledged and agreed to by the Lockbox Account Bank
together with an acknowledgment and authorization executed by the Agent;
(i) The Collection Account Agreement executed by the Borrower
and the Originator and acknowledged and agreed to by the Collection Account Bank
together with an acknowledgment and authorization executed by the Agent;
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(j) The Lease Sale and Contribution Agreement, executed by the
Borrower and the Originator;
(k) The Liquidity Agreement executed by the Senior Lender and
the Liquidity Providers party thereto;
(l) The Fee Letter executed by the Borrower, the Originator
and the Agent;
(m) A copy of the resolutions of the Board of Directors of the
Originator approving the Lease Sale and Contribution Agreement and the other
Facility Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant Secretary;
(n) The Articles of Incorporation of the Originator certified
by the Secretary of State of Colorado;
(o) Good Standing Certificates for the Originator issued by
the Secretary of State of Colorado dated a date reasonably near to the date of
the initial Advance;
(p) A certificate of the Secretary or Assistant Secretary of
the Originator certifying (i) the names and true signatures of the officers
authorized on its behalf to sign the Lease Sale and Contribution Agreement and
the other Facility Documents to be delivered by it hereunder (on which
certificate the Agent and the Lenders may conclusively rely until such time as
the Agent shall receive from the Originator a revised certificate meeting the
requirements of this subsection (m) and (ii) a copy of the Originator's by-laws;
(q) An opinion of Holme Roberts & Owen LLP, special counsel
for the Originator and Borrower, as to corporate matters, perfection and
enforceability of the Lease Sale and Contribution Agreement; and
(r) An opinion of Holme Roberts & Owen LLP, special counsel
for the Originator and Borrower, as to enforceability of the Credit Agreement
and related documents, true sale and non-consolidation matters.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL ADVANCES. The
Advances (including the initial Advances) by the Lenders to the Borrower on any
Settlement Date shall be subject to the further conditions precedent that (a) on
or prior to such Settlement Date, the Servicer shall have delivered to the
Agent, (i) a completed Notice of Borrowing, (ii) a duly completed Servicer
Report for the immediately preceding month, (iii) evidence (which may be in the
form of a representation by the Borrower) that the Borrower has entered into
Interest Rate Hedges satisfying SECTION 6.01(m) (together, for any Interest Rate
Hedges the counterparty of which is not KeyBank, with an Interest Rate Hedge
Assignment Acknowledgment duly executed by such counterparty and concurrently
delivered to the Agent), and (iv) an executed Release Certificate relating to
the Leases to be included in the Lease Pool for such Settlement Date; and (b) on
such Settlement Date, the follow ing statements shall be true and the Borrower
by accepting the amount of such Advances shall be deemed to have certified that:
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(i) The representations and warranties contained in SECTION
5.01 are correct on and as of such day as though made on and as of such
date, except to the extent that such representations and warranties
relate solely to an earlier date,
(ii) No event has occurred and is continuing, or would result
from such Advance which constitutes an Event of Termination or would
constitute an Event of Termination but for the requirement that notice
be given or time elapse or both, and
(iii) UCC-1 financing statements for the appropriate Filing
Locations naming the Borrower, as debtor, the Agent, as secured party,
and the Pledged Assets as collateral have been delivered to the Agent
for filing or the Agent shall have received evidence (which may be in
the form of a representation by the Borrower) that such filings have
been made.
ARTICLE IV
SETTLEMENT PROCEDURES
SECTION 4.01. SETTLEMENT PROCEDURES.
(a) COLLECTIONS AND OTHER AMOUNTS.
(i) LEASE RECEIVABLE COLLECTIONS. Subject to SECTION 7.04(b),
on each day, both before and after the Termination Date, the Servicer
shall allocate all Collections of Lease Receivables deposited into or
received in the Lockbox Account on such day as follows:
(1) All amounts in respect of such Collections
pertaining to sales, use and personal property taxes
attributable to the Leases that are included in a Lease Pool
and related Equipment shall be set aside in a segregated tax
account until the Servicer or the Agent uses such amounts to
pay such taxes; and
(2) Consistent with the provisions of SECTION 7.04(a)
and SECTION 6.01(h), all remaining Collections shall, within
two Business Days following receipt of information by the
Servicer of the deposit of such Collections into the Lockbox
Account, be transferred to the Collection Account.
(ii) PAYMENTS UNDER INTEREST RATE HEDGEs. Each payment from
the applicable counterparty under an Interest Rate Hedge shall be made
on a Settlement Date and set aside by the Servicer (or the Agent, as
the case may be) and held in trust for the Lenders, the Liquidity
Providers and the Borrower.
(iii) SERVICER ADVANCES. If the Servicer has not collected any
scheduled Periodic Installment of Rent due on a Lease Receivable since
the last Settlement Date and the Servicer reasonably believes that such
Periodic Installment of Rent will be received in ordinary course, the
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Servicer may make an advance ("Servicer Advance") in an amount equal to
such payment and remit the amount of such Servicer Advance to the
Collection Account on the next Settlement Date. The Servicer shall be
reimbursed for any such Servicer Advance from (i) subsequent
Collections of such Periodic Installment of Rent or (ii) if such
Servicer Advance is outstanding on the date on which the related Lease
Receivable becomes a Defaulted Lease Receivable, from Collections as
described in SECTIONS 4.01(b)(ii) and 4.01(c)(ii) hereof.
(iv) DEMAND NOTE PAYMENTS. On each Settlement Date, the
Borrower shall demand repayment by the Originator of Demand Loans
outstanding under the Capital Associates Demand Note to the extent that
on any Settlement Date there are insufficient Remarketing Proceeds
available to pay the amount of Residual Interest due and payable on
such Settlement Date in accordance with SECTION 4.01(d) and use the
funds from such repayment from the Originator to pay such shortfalls.
In addition, if within 90 days following the termination of a Lease,
the Residual Advance made in connection with the Residual Lease Pool
containing such Lease has not been reduced by an amount equal to the
sum of the Individual Residual Borrowing Bases for such Lease and all
other Leases in such Residual Lease Pool which have been terminated for
more than 90 days (whether as a result of the application of
Remarketing Proceeds arising from the Remarketed Equipment relating to
such Lease or otherwise under SECTION 4.01(d)), the Borrower shall
demand repayment by the Originator of amounts outstanding under the
Capital Associates Demand Note in the amount necessary to reduce such
Residual Advance by an amount equal to such Individual Residual
Borrowing Base. Notwithstanding the foregoing, in no event shall the
Borrower be required to demand repayment of the Demand Loans in an
aggregate amount which would exceed the aggregate principal amount of
the Residual Advances and Residual Interest thereon.
(b) SETTLEMENT DATES -- PRE-TERMINATION DATE. On each
Settlement Date occurring prior to the Termination Date, the Agent shall (based
upon the allocations specified in the applicable Servicer Report) direct the
Collection Account Bank to remit from the amounts set aside for the Lenders, the
Liquidity Providers and the Borrower pursuant to SECTION 4.01(a)(i)(2) (other
than Collections which constitute Remarketing Proceeds which shall be allocated
and remitted in accordance with SECTION 4.01(d)) during or in respect of the
immediately preceding month the following amounts for application to the
following in the following order of priority:
(i) FIRST, to each counterparty under an Interest Rate Hedge,
the net amount, if any, due to such counterparty thereunder as of such
Settlement Date;
(ii) SECOND, to the Servicer the aggregate amount of any
unreimbursed Servicer Advances relating to prior Settlement Dates;
(iii) THIRD, to the Servicer (if different than Capital
Associates) in payment of the Servicer Fee for such Settlement Date;
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(iv) FOURTH, to the Senior Lender and the applicable
Liquidity Providers for application to the Senior Interest (other than
Excess Liquidity Interest) due and payable on such Settlement Date;
(v) FIFTH, to the Agent for allocation to itself, the Senior
Lender and the Liquidity Providers in payment of the Program Fee, the
Liquidity Fee and the Administrative Fee (as the case may be) due and
payable on such Settlement Date;
(vi) SIXTH, to the Junior Lender for application to Junior
Interest due and payable on such Settlement Date;
(vii) SEVENTH, to the Senior Lender an amount equal to the
excess, if any, of (x) Aggregate Senior Advances over (y) the Senior
Borrowing Base (as set forth in the Servicer Report for such Settlement
Date and after giving effect to the Lease Pool, if any, arising on such
Settlement Date);
(viii) EIGHTH, to the Junior Lender, an amount equal to the
excess, if any, of (x) Aggregate Junior Advances over (y) the Junior
Borrowing Base (as set forth in the Servicer Report for such Settlement
Date and after giving effect to the Lease Pool, if any, arising on such
Settlement Date);
(ix) NINTH, to the Liquidity Providers, an amount equal to the
Excess Liquidity Interest;
(x) TENTH, to the Servicer (if Capital Associates) in payment
of the Servicer Fee for such Settlement Date;
(xi) ELEVENTH, to the Agent for allocation to itself, the
Lenders and the Liquidity Providers in payment of the Other Fees due
and payable on such Settlement Date; and
(xii) TWELFTH, to the Borrower all remaining amounts (if any)
following the payment of the amounts set forth in CLAUSES (i) through
(xi) above, which amounts the Borrower may use to pay the Residual
Interest due on such Settlement Date.
(c) SETTLEMENT DATES -- POST-TERMINATION DATE. On each
Settlement Date on and after the Termination Date, the Agent shall (based upon
the allocations specified in the applicable Servicer Report) direct the
Collection Account Bank to remit from the amounts set aside for the Lenders, the
Liquidity Providers and the Borrower pursuant to Section 4.01(a) (other than
Remarketing Proceeds which shall be allocated and remitted in accordance with
SECTION 4.01(d)) during or in respect of the immediately preceding month the
following amounts for application to the following in the following order of
priority:
(i) FIRST, to each counterparty under an Interest Rate Hedge,
the net amount, if any, due to such counterparty thereunder as of such
Settlement Date;
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(ii) SECOND, to the Servicer the aggregate amount of any
unreimbursed Servicer Advances relating to prior Settlement Dates;
(iii) THIRD, to the Servicer (if different than Capital
Associates) in payment of the Servicer Fee for such Settlement Date;
(iv) FOURTH, to the Senior Lender and the applicable
Liquidity Providers for application to the Senior Interest (other than
Excess Liquidity Interest) due and payable on such Settlement Date;
(v) FIFTH, to the Agent for allocation to itself, the Senior
Lender and the Liquidity Providers in payment of the Program Fee, the
Liquidity Fee, and the Administrative Fee (as the case may be) due and
payable on such Settlement Date;
(vi) SIXTH, to the Junior Lender for application to Junior
Interest due and payable on such Settlement Date;
(vii) SEVENTH, to the Servicer (if Capital Associates) in
payment of the Servicer Fee for such Settlement Date;
(viii) EIGHTH, to the Senior Lender, in reduction of the
outstanding principal amount of the Senior Advances, an amount equal to
the product of (A) the remaining amount available for distribution
pursuant to this Section 4.01(c)(viii) and (B) a fraction having as its
numerator the Aggregate Senior Advances at such time and as its
denominator the sum of Aggregate Senior Advances and Aggregate Junior
Advances at such time, provided, that on and after the occurrence of a
Fast Pay Trigger (but only for so long as such Fast Pay Trigger shall
be continuing in the case of clause (b) thereof), all remaining amounts
available for distribution pursuant to this Section 4.01(c)(viii) shall
be applied to reduce the outstanding principal amount of the Senior
Advances until such Senior Advances are paid in full;
(ix) NINTH, to the Junior Lender, in reduction of the
outstanding principal amount of the Junior Advances until such Junior
Advance are paid in full;
(x) TENTH, to the Liquidity Providers, an amount equal to the
Excess Liquidity Interest;
(xi) ELEVENTH, to the Agent for allocation to itself, the
Lenders and the Liquidity Providers in payment of the Other Fees due
and payable on such Settlement Date; and
(xii) TWELFTH, to be applied as Remarketing Proceeds pursuant
to Section 4.01(d).
(d) REMARKETING PROCEEDS. On each Settlement Date, Remarketing
Proceeds from the immediately preceding month shall be remitted as follows:
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(i) FIRST, to the Residual Lender in payment of Residual
Interest due and payable on such Settlement Date to the extent such
Residual Interest has not been paid with other funds of the Borrower
available for such purpose;
(ii) SECOND, to the Residual Lender in payment of the
outstanding principal amount of the Residual Advance made in connection
with the Residual Lease Pool containing the Lease which relates to the
Remarketed Equipment giving rise to such Remarketing Proceeds;
(iii) THIRD, to the Residual Lender, until the Residual
Advances have been paid in full, to the extent such Remarketing
Proceeds include Excess Remarketing Proceeds, 50% of such Excess
Remarketing Proceeds shall be applied to the Residual Advances which
relate to Residual Lease Pools which contain Leases having the earliest
maturity dates; and
(iv) FOURTH, any Remarketing Proceeds (including Excess
Remarketing Proceeds) remaining after the payment in full of the
amounts described in clauses (i) and (iii) above shall be remitted to
the Borrower.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrower represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and is duly qualified to do business, and is in good standing,
in every jurisdiction in which the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a Material
Adverse Effect.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery
and performance by the Borrower of this Agreement, the Lease Sale and
Contribution Agreement and all other Facility Documents to which it is a party,
and the transactions contemplated hereby and thereby, are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate action on
the part of the Borrower, do not contravene (i) the Borrower's charter or
by-laws, (ii) any law, rule or regulation applicable to the Borrower, (iii) any
contractual restriction contained in any indenture, loan or credit agreement,
lease, mortgage, security agreement, bond, note, or other agreement or
instrument binding on the Borrower or its property, the contravention of which
would have a Material Adverse Effect or (iv) any order, writ, judgment, award,
injunction or decree binding on the Borrower or its property, and do not result
in or require the creation of any Adverse Claim upon or with respect to any of
its properties pursuant to any material indenture, loan or credit agreement,
lease, mortgage, security agreement, bond, note or other agreement binding on
the Borrower or its properties, the contravention of which would have a Material
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Adverse Effect; and no transaction contemplated hereby requires compliance with
any bulk sales act or similar law. This Agreement and the Lease Sale and
Contribution Agreement have been duly executed and delivered on behalf of the
Borrower.
(c) GOVERNMENTAL CONSENT. The Borrower has obtained all
authorizations or approvals or other actions by, and has given such notices and
made such filings with, any governmental authority or regulatory body that are
required for the due execution, delivery and performance by the Borrower of this
Agreement, the Lease Sale and Contribution Agreement or any other Facility
Document to be delivered by it hereunder, except for filings under the UCC.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement and
each other Facility Document to be delivered by the Borrower in connection
herewith constitute the legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with their respective terms,
subject to the Enforceability Exceptions.
(e) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Borrower threatened in writing, against the
Borrower, or the property of the Borrower, in any court, or before any
arbitrator of any kind, or before or by any governmental body, which (i) assert
the invalidity of any Facility Document or any action to be taken by the
Borrower in connection therewith, or (ii) seek to prevent the consummation of
the transactions contemplated by this Agreement and the other Facility
Documents. The Borrower is not in default with respect to any order of any
court, arbitrator or governmental body except for defaults with respect to
orders of governmental bodies that would not reasonably be expected to have a
Material Adverse Effect.
(f) PERFECTION OF INTERESTS. Each Lease Receivable shall,
together with the Lease related thereto, at all times, be owned by the Borrower
free and clear of any Adverse Claim except for Permitted Encumbrances or as
provided herein or arising as a result of any action taken by any Affected Party
or any assignee thereof, and upon each Advance, the Lenders shall acquire a
valid and perfected first priority interest in each Lease Receivable then
existing or thereafter arising and in the Related Security, Collections,
Equipment, Remarketing Proceeds and Pledged Assets with respect thereto
(subject, in the case of Related Security, to Section 7.07), in each case free
and clear of any Adverse Claim except for Permitted Encumbrances or as provided
herein or arising as a result of any action taken by any Affected Party or any
assignee thereof; and no effective financing statement or other instrument
similar in effect, filed or permitted to be filed by the Borrower, covering any
Lease Receivable, the Related Security, Collections, Remarketing Proceeds or the
Pledged Assets with respect thereto shall at any time be on file in any
recording office except such as may be filed (x) in favor of the Agent in
accordance with this Agreement, (y) against the Originator, as seller, in favor
of the Borrower, as purchaser, and (z) against the related Obligor in favor of
the Originator.
(g) ACCURACY OF INFORMATION. No Servicer Report or Notice of
Borrowing (if prepared by the Borrower) (other than forecasts required to be
delivered by the Borrower hereunder) furnished or to be furnished by the
Borrower to the Agent, any Lender or any Liquidity Provider in connection with
this Agreement is or shall be inaccurate in any material respect as of the date
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it is or shall be dated or (except as otherwise disclosed to the Agent, such
Lender or such Liquidity Provider, as the case may be, at such time) as of the
date so furnished.
(h) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief
place of business and chief executive office of the Borrower are located at the
address of the Borrower referred to in Section 11.02 hereof and the locations of
the offices where the Borrower keeps all the Records are listed on Exhibit G (or
at such other locations, notified to the Agent in accordance with Section
6.01(f), in jurisdictions where all action required by Section 7.07 has been
taken and completed).
(i) ACCOUNT INFORMATION. The Lockbox Account is the only
account to which the Borrower instructs Obligors to remit Collections of Lease
Receivables.
(j) "CURRENT TRANSACTION". Each Advance hereunder will
constitute a "current transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended.
(k) NO TRADE NAMES. The Borrower has no trade names,
fictitious names, assumed names or "doing business as" names.
(l) SEPARATE CORPORATE EXISTENCE. The Borrower is operated as
an entity with assets and liabilities distinct from those of Capital Associates,
the Originator, the Servicer and any other Affiliates of the Borrower, and the
Borrower hereby acknowledges that the Agent and the Lenders are entering into
the transactions contemplated by this Agreement in reliance upon the Borrower's
identity as a separate legal entity from the Originator and each such Affiliate.
Since its incorporation, the Borrower has been operated in such a manner as to
comply with the covenants set forth in SECTION 6.01(l).
(m) INVESTMENTS. The Borrower does not own or hold, directly
or indirectly, any capital stock or equity security of, or any equity interest
in, any Person.
(n) FACILITY DOCUMENTS. The Lease Sale and Contribution
Agreement is the only agreement pursuant to which the Borrower purchases and
receives contributions of Leases, Lease Receivables or any other accounts
receivable from the Originator, and the Facility Documents delivered to the
Agent represent all material agreements between the Originator, on the one hand,
and the Borrower on the other. Upon the purchase and/or contribution of each
Lease Receivable pursuant to the Lease Sale and Contribution Agreement, the
Borrower shall be the lawful owner of, and have good title to, such Lease
Receivable and all assets relating thereto, free and clear of any Adverse Claims
other than Permitted Encumbrances. All such assets are transferred without
recourse to the Originator (except as described in the Lease Sale and
Contribution Agreement and the Demand Note) or to the Servicer.
(o) BUSINESS. Since its incorporation, the Borrower has
conducted no business other than the purchase and receipt of Lease Receivables
and related assets from the Originator under the Lease Sale and Contribution
Agreement, the pledge of Pledged Assets under this Agreement to finance any such
purchases, and such other activities as are incidental to the foregoing.
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(p) TAXES. The Borrower has filed or caused to be filed all
Federal and all material state and local tax returns which are required to be
filed by it, and has paid or caused to be paid all taxes prior to such taxes
becoming delinquent, other than any taxes or assessments the validity of which
are being contested in good faith by appropriate proceedings.
(q) SOLVENCY. The Borrower is not "insolvent" (as such term is
defined in ss.101(32)(A) of the Bankruptcy Code).
(r) SOFTWARE. Each of (i) the Borrower and (ii) the Servicer,
as assignee of the Borrower, has (or will have, concurrently with the
effectiveness hereof) the right (whether by license, sublicense or assignment)
to use all of the computer software used to account for the Lease Receivables
and the Equipment to the extent necessary to administer the Lease Receivables
and the Equipment, except where the failure to have or obtain such right would
not have a Material Adverse Effect.
(s) INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" or controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 5.02. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
The Servicer represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Servicer is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and is duly qualified to do business,
and is in good standing, in every jurisdiction in which the nature of its
business requires it to be so qualified, except where the failure to be so
qualified would not have a Material Adverse Effect.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery
and performance by the Servicer of this Agreement and the Facility Documents to
be delivered by it hereunder, and the transactions contemplated hereby and
thereby, are within the Servicer's corporate powers, have been duly authorized
by all necessary corporate action on the part of the Servicer, do not contravene
(i) the Servicer's charter or by-laws, (ii) any law, rule or regulation
applicable to the Servicer, (iii) any contractual restriction contained in any
inden ture, loan or credit agreement, lease, mortgage, security agreement, bond,
note, or other agreement or instru ment binding on the Servicer or its property,
the contravention of which would have a Material Adverse Effect or (iv) any
order, writ, judgment, award, injunction or decree binding on the Servicer or
its property, and do not result in or require the creation of any Adverse Claim
upon or with respect to any of its properties pursuant to any such indenture,
loan or credit agreement, lease mortgage, security agreement, bond, note or
other such agreement binding on the Servicer or its properties, the
contravention of which would have a Material Adverse Effect. This Agreement and
the other Facility Documents to which it is a party have been duly executed and
delivered on behalf of the Servicer.
(c) GOVERNMENTAL CONSENT. To the Servicer's knowledge, no
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required (or, if required, has
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been given, taken or made) for the due execution, delivery and performance by
the Servicer of this Agreement or any other Facility Document to which it is a
party, except for filings under the UCC.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement and
each other Facility Document to be delivered by the Servicer in connection
herewith constitute the legal, valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with their respective terms,
subject to the Enforceability Exceptions.
(e) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Servicer threatened in writing, against or
affecting the Servicer, or the property of the Servicer, in any court, or before
any arbitrator of any kind, or before or by any governmental body, which (i)
assert the invalidity of any Facility Document or any action to be taken by the
Servicer in connection therewith, or (ii) seek to prevent the consummation of
the transactions contemplated by this Agreement and the other Facility
Documents. The Servicer is not in default with respect to any order of any
court, arbitrator or governmental body except for defaults with respect to
orders of governmental agencies that would not reasonably be expected to have a
Material Adverse Effect.
(f) ACCURACY OF INFORMATION. No Servicer Report or Notice of
Borrowing (if prepared by the Servicer), furnished or to be furnished by the
Servicer to the Agent, any Lender or any Liquidity Provider 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, such
Lender or such Liquidity Provider, as the case may be, at such time) as of the
date so furnished.
(g) FINANCIAL STATEMENTS. The balance sheet of the Servicer as
at May 31, 1998, and the related statement of income of the Servicer for the
twelve-month period then ended, certified by its chief financial officer, copies
of which have been furnished to the Agent, present fairly in all material
respects the financial position of the Servicer at such date and the results of
the operations of the Servicer for the period ended on such date, all in
accordance with generally accepted accounting principles consistently applied,
and since May 31, 1998 there has been no material adverse change in any such
condition or operations.
(h) ELIGIBILITY OF LEASE RECEIVABLES. Each Lease Receivable
included as an Eligible Lease Receivable in the calculation of the Senior
Borrowing Base in each Servicer Report satisfied the requirements of eligibility
contained in the definition of "Eligible Receivable" as of the date of such
Servicer Report.
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ARTICLE VI
GENERAL COVENANTS
SECTION 6.01. AFFIRMATIVE COVENANTS OF THE BORROWER. From the
date of the initial Advance until the later of the Termination Date or the
Collection Date, the Borrower will, unless the Agent shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders with respect to all
Lease Receivables and related Leases.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualifications would
have a Material Adverse Effect.
(c) AUDITS. From time to time upon reasonable prior written
notice to the Borrower and during regular business hours, permit the Agent, or
its agents or representatives, (i) to have access to all records, files, books
of account, data bases and information pertaining to all Lease Receivables,
related Leases, Related Security and Equipment, (ii) to discuss matters relating
to the Lease Receivables or the Borrower's performance hereunder with any of the
officers of the Borrower having knowledge of such matters, and (iii) on a
semi-annual basis after reasonable notice, at a time selected by the Agent in
its sole discretion, permit such Persons to inspect, audit and to make extracts
therefrom at Borrower's expense.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the Lease Receivables in
the event of the destruction of the originals thereof) and keep and maintain,
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Lease Receivables (including, without
limitation, records adequate to permit the daily identification of all
Collections of and adjustments to each Lease Receivable and the daily
identification of all Remarketing Proceeds). The original counterpart of each
Lease subject to an Advance hereunder shall be delivered to the Collateral
Custodian within ten (10) days following the date of such Advance and all other
Records relating thereto shall be held by the Servicer; such original
counterpart and all such Records shall in any event be marked with a legend
indicating the interests of the Borrower and the Lenders therein.
(e) PERFORMANCE AND COMPLIANCE WITH LEASE RECEIVABLES AND
LEASES. At its expense (unless otherwise provided for in the Lease) timely and
fully perform and comply, in all material respects, with all material
provisions, covenants and other promises required to be observed by it under the
Leases related to the Lease Receivables and the Equipment.
(f) LOCATION OF RECORDS. Keep its chief place of business and
chief executive office, and the offices where it keeps the Records, at the
address(es) of the Borrower referred to in SECTION 5.01(h), or, in any such
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case, upon 30 days' prior written notice to the Agent, at such other locations
within the United States where all action required by SECTION 7.07 shall have
been taken and completed.
(g) CREDIT AND COLLECTION POLICIES. Comply in all material
respects with its Credit and Collec tion Policy in regard to each Lease
Receivable and the related Lease.
(h) COLLECTIONS. Instruct all Obligors of Lease Receivables to
cause all Collections to be deposited directly to the Lockbox Account and if the
Borrower shall receive any Collections or Remarketing Proceeds, the Borrower
shall remit such Collections and Remarketing Proceeds to the Lockbox Account
within two Business Days following the Borrower's receipt and identification
thereof; and within two Business Days following the deposit of Collections into
the Lockbox Accounts, cause such amounts to be transferred to the Collection
Account.
(i) POSTING OF COLLECTIONS AND LEASE RECEIVABLES. Apply all
Collections to the applicable Lease Receivables pursuant to the terms of Section
7.08 and modify its general trial balance to reflect such Collections, in each
case, within three Business Days following the Borrower's receipt of information
in respect of such Collections.
(j) OBLIGOR UCC FILING REQUIREMENT. With respect to each Lease
Receivable, comply with the Obligor UCC Filing Requirement.
(k) FACILITY DOCUMENTS. Comply in all material respects with
the terms of and employ the pro cedures outlined in and enforce its rights with
respect to the obligations of the Originator under the Lease Sale and
Contribution Agreement, and all of the other Facility Documents to which it is a
party.
(l) SEPARATE CORPORATE EXISTENCE. Maintain the Borrower's
identity as a separate legal entity from the Originator and the Servicer and not
mislead others as to the separate identity of Borrower and the Originator and
the Servicer. Without limiting the generality of the foregoing and in addition
to and consistent with the covenants set forth in SECTIONS 6.01(b) and 6.01(l),
the Borrower shall:
(i) constitute a limited purpose corporation whose activities
are restricted in its articles of incorporation;
(ii) not permit the direct involvement by the Originator or
any other Affiliate of the Originator in the day-to-day management of
the Borrower (other than permitting employees, officers and directors
of the Originator to serve as employees, officers and directors of the
Borrower and to take such acts and do such things in connection
therewith as such persons deem reasonable or necessary under the
circumstances to faithfully fulfill their duties as officers, directors
and employees of Borrower, or as they are required to take or do by any
applicable law, rule or regulation, or by the order, decree or judgment
of any court, arbitrator or governmental body);
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(iii) other than activities undertaken pursuant to the Lease
Sale and Contribution Agreement and this Agreement and the other
Facility Documents, not engage in intercorporate transactions with the
Originator or any other Affiliate of the Originator, other than
transactions in the ordinary course of business between a parent
corporation and its subsidiary;
(iv) maintain its own corporate records and books of account
separate and apart from the Originator and the other Affiliates of the
Originator, hold corporate meetings and otherwise observe corporate
formalities;
(v) prepare its financial statements separately from those of
the Originator and its other Affiliates and insure that any
consolidated financial statements and books and records of the
Originator that include the Borrower have notes to the effect that the
Borrower is a separate corporate entity and that the Borrower's
creditors have a claim on its assets prior to those assets becoming
available to any creditors of the Originator;
(vi) use its best efforts not to commingle funds or other
assets of the Borrower with those of the Originator and any other
Affiliate, and not to hold its assets in any manner that would create
an appearance that such assets belong to the Originator or any other
Affiliate, and will not maintain bank accounts or other depository
accounts (other than the Lockbox Account) to which any Affiliate is an
account party, into which any Affiliate makes deposits or from which
any Affiliate has the power to make withdrawals;
(vii) pay its own expenses and obligations out of its own
funds and assets, other than expenses incurred in connection with the
closing of the transactions contemplated by this Agreement and the
other Facility Documents;
(viii) not permit the Originator or any Affiliate of the
Originator (other than in connection with the Lockbox Account in its
capacity as Servicer) to either (A) guaranty any of the Borrower's
obligations or (B) advance funds to the Borrower for the payment of
expenses or otherwise, provided, however, that nothing in this clause
(viii) shall prohibit any Servicer Advances made pursuant to the terms
of this Agreement;
(ix) not pay any expenses, guaranty any obligations or advance
funds for the payment of expenses or obligations of the Originator or
any other Affiliate of the Originator;
(x) conduct all business and all correspondence in connection
therewith, of the Borrower and other communications, in the Borrower's
own name and on its own stationery;
(xi) not permit the Originator or any other Affiliate of the
Originator to act as an agent of the Borrower in any capacity (except
as Servicer hereunder) and not itself act as an agent for the
Originator, but instead present itself to the public as a corporation
separate from the Originator, independently engaged in the business of
purchasing and selling Leases; and
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(xii) maintain one independent director at all times who shall
at no time be a shareholder, director, officer, employee or Affiliate
of the Originator as provided in its articles of incorporation,
provided, that such independent director may also be a director of any
other similar special purpose entity created for the purpose of
purchasing lease receivables and related assets from the Originator.
(m) INTEREST RATE HEDGES. Maintain with respect to the Senior
Advances and Junior Advances, at all times, Interest Rate Hedges (i) between the
Borrower and either KeyBank and/or such other counterparties as may be
acceptable to the Agent and have a long-term rating of at least AA- from S&P and
Aa3 from Moody's and a short-term rating of at least A1 from S&P and P1 from
Moody's, (ii) with an aggregate notional amount not less than the sum of the
Aggregate Senior Advances and the Aggregate Junior Advances, and (iii) with
respect to which the Borrower makes periodic payments to the applicable
counterparty (solely on a net basis from funds available under SECTION
4.01(b)(i)) by reference to a fixed rate and the counterparty makes periodic
payments to the Borrower or (to the extent the Agent has required such
counterparty to remit such payments directly to the Agent) to the Agent (in
either case, solely on a net basis) by reference to a rate equal during any
Interest Period to the LIBO Rate for such Interest Period.
(n) INTEREST RATE HEDGE PORTFOLIO INFORMATION. Prior to each
Settlement Date, provide to the Servicer such information as is necessary for
the Servicer to complete the portion of the Servicer Report for such Settlement
Date summarizing the portfolio of Interest Rate Hedges.
(o) RATING AGENCY REQUIREMENTS. Assist in attaining a rating
from a Rating Agency of A- with respect to the Senior Note and BB with respect
to the Junior Note and, if required by such Rating Agency in order to obtain
such ratings, agree to amendments to this Agreement to increase the Senior
Required Enhancement Percentage and the Junior Required Enhancement Percentage.
SECTION 6.02. REPORTING REQUIREMENTS OF THE BORROWER. From the
date of the initial Advance until the later of the Termination Date or the
Collection Date, the Borrower will, unless the Agent shall otherwise consent in
writing, furnish to the Agent:
(a) EVENT OF TERMINATION. As soon as reasonably practicable
and in any event within five Business Days after the Borrower has actual
knowledge of the occurrence of each Event of Termination or each event which,
with the giving of notice or lapse of time or both, would constitute an Event of
Termination, the statement of the chief financial officer, chief accounting
officer or treasurer of the Borrower setting forth details of such Event of
Termination or event and the action which the Borrower proposes to take with
respect thereto.
(b) 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 sixty (60) days after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Originator, copies of
the consolidated financial statements of Originator and its subsidiaries,
including a balance sheet of Originator and its subsidiaries on a consolidated
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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 and
ten (110) days after the end of each fiscal year of the Originator, copies of
the consolidated financial statements of Originator and its subsidiaries,
including a balance sheet of Originator 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 Originator, 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 Originator with the Securities and Exchange Commission,
including, without limitation, forms 10-Q and 10-K, or with any national
securities exchange, (iv) from time to time any other information concerning the
Originator, the Pledged Assets or the Related Security as the Agent may
reasonably request, (v) within sixty (60) days after the end of the first,
second and third quarterly accounting periods in each fiscal year of the
Borrower, copies of the financial statements of Borrower, including a balance
sheet of Borrower 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, and (vi) within one hundred and ten (110) days after the end of each
fiscal year of the Borrower, copies of the financial statements of Borrower,
including a balance sheet of Borrower 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.
(c) ADDITIONAL MONTHLY REPORTS. If requested by the Agent,
provide the Agent on each Settlement Date with, in a form and with a content
reasonably acceptable to the Agent (which form and content shall be on a basis
consistent with the then current capabilities of the Originator's information
systems), (A) summaries of billings to the related Obligor, and (B) updated
payment histories for each Lease Receivable.
(d) 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 Borrower's obtaining actual knowledge
(through any of its officers) of the default or violation of any provision of
the Lease related to any Lease Receivable or other related documents by the
Obligor thereof, and (ii) the Borrower's obtaining actual knowledge (through any
of its officers) of (x) any and all litigation concerning the Borrower and (y)
any litigation, or any other matters or events concerning the Borrower or an
Obligor which might reasonably be expected to have a Material Adverse Effect.
(f) OBLIGOR INFORMATION. Make available to the Agent
semi-annually and more frequently upon reasonable request written or
electronically readable information, stating any changes in the names and
current addresses of, and, to the extent known by the Borrower, the names of the
contact persons, for each Obligor under any Lease Receivable.
(g) CREDIT AND COLLECTION POLICY. Provide the Agent with
prompt notice of any change in the Credit and Collection Policy.
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(h) OTHER INFORMATION. As soon as reasonably practicable, from
time to time, such other information, documents, records or reports respecting
the Lease Receivables or the conditions or operations, financial or otherwise,
of the Borrower as the Agent may from time to time reasonably request in order
to protect the interests of the Agent, any Lender or any Liquidity Provider
under or as contemplated by this Agreement.
SECTION 6.03. NEGATIVE COVENANTS OF THE BORROWER. From the
date of the initial Advance until the later of the Termination Date or the
Collection Date, the Borrower will not, without the written consent of the
Agent:
(a) SALES, LIENS, ETC. AGAINST LEASE RECEIVABLES AND RELATED
ASSETS. Except as otherwise provided herein, sell, assign (by operation of law
or otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse
Claim (other than a Permitted Encumbrance) upon or with respect to, any Lease
Receivable, Related Security, Equipment, Remarketing Proceeds, Collections or
any other Pledged Assets, or any related Lease, or assign any right to receive
income in respect thereof.
(b) EXTENSION OR AMENDMENT OF LEASE RECEIVABLES. Except as
otherwise permitted in SECTION 7.04, extend, amend or otherwise modify, the
terms of any Lease Receivable, or amend, modify or waive, any term or condition
of any Lease related thereto.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make
any change in the character of its business or in the Credit and Collection
Policy, which change would, in either case, materially impair the collectibility
of any Lease Receivable.
(d) CHANGE IN ACCOUNT AGREEMENTS OR INSTRUCTIONS TO OBLIGORS.
Make any amendment, change or other modification to the terms of the Lockbox
Account Agreement, the Collection Account Agreement or to its instructions to
Obligors described in SECTION 6.01(h) hereof.
(e) STOCK, MERGER, CONSOLIDATION, ETC. Sell any shares of any
class of its capital stock to any Person (other than the Originator) or
consolidate with or merge into or with any other corporation, or purchase or
otherwise acquire all or substantially all of the assets or capital stock, or
other ownership interest of, any Person or sell, transfer, lease or otherwise
dispose of all or substantially all of its assets to any Person, except as
expressly permitted under the terms of this Agreement.
(f) CHANGE IN CORPORATE NAME. Make any change to its corporate
name or use any trade names, fictitious names, assumed names or "doing business
as" names unless the Borrower shall give the Agent thirty (30) days prior
written notice thereof and shall take such other steps reasonably requested by
the Agent (including, without limitation, the filing of amendments to and/or new
UCC financing statements) in order to maintain a first priority interest of the
Lenders in the Pledged Assets.
(g) ERISA MATTERS. Establish or be party to any Plan,
Multiemployer Plan or Benefit Plan.
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(h) TERMINATE OR REJECT LEASES. Without limiting SECTION
6.03(b), terminate or reject any Lease under which a Lease Receivable has arisen
prior to the end of 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 (i) with respect to Defaulted Lease
Receivables, the Borrower has determined in good faith that such termination or
rejection will maximize the recovery thereon, or (ii) prior to such termination
or rejection, the Borrower pays the Agent, for the benefit of the Lenders and
the Liquidity Providers, an amount equal to the sum of aggregate Senior
Outstanding Balance with respect thereto (such Senior Outstanding Balance to be
calculated assuming that the Lease is in effect for its full term) plus any
applicable fees, costs or expenses (including early termination payments)
resulting from the reduction of the aggregate notional amount of the Interest
Rate Hedges with respect to such Lease Receivable.
(i) INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness except for (i) Indebtedness to the Agent, any Lender or any
Affected Party expressly contemplated hereunder or (ii) Indebtedness to the
Originator pursuant to the Lease Sale and Contribution Agreement or any other
Facility Document.
(j) GUARANTEES. Guarantee, endorse or otherwise be or become
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of the Agent, any Lender
or any Affected Party as provided for under this Agreement.
(k) LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into, or
be a party to any transaction with any Affiliate of the Borrower, except for:
(i) the transactions contemplated by the Lease Sale and
Contribution Agreement and the other Facility Documents;
(ii) other transactions in the nature of employment contracts
and directors' fees, upon fair and reasonable terms materially no less
favorable to the Borrower than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate; and
(iii) with respect only to transactions between the Borrower
and the Originator, transactions in the ordinary course of business
between a parent corporation and its subsidiary.
(l) FACILITY DOCUMENTS. Except as otherwise permitted under
SECTION 11.01, (a) terminate, amend or otherwise modify any Facility Document to
which it is a party or grant any waiver or consent thereunder, or (b) without
the prior written consent of the Agent, which consent will not unreasonably be
withheld, consent to any amendment or modification of the Credit and Collection
Policy, which would, in either case, impair in any material respect the
collectibility of any Lease Receivable.
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(m) CHARTER AND BY-LAWS. Amend or otherwise modify Articles
Third, Seventh, Eighth, Eleventh, Twelfth and Thirteenth of its Certificate of
Incorporation or its By-laws in any manner which requires the consent of the
"Independent Director" (as defined in the Borrower's Articles of Incorporation)
without the prior written consent of the Agent or delivery of an opinion of
counsel that such amendment shall not alter the conclusions set forth in the
legal opinion described in SECTION 3.01(r).
(n) LINES OF BUSINESS. Conduct any business other than that
described in SECTION 5.01(o), or enter into any transaction with any Person
which is not contemplated by or incidental to the performance of its obligations
under the Facility Documents.
(o) ACCOUNTING TREATMENT. Prepare any stand-alone financial
statements or other statements (including any tax filings which are not
consolidated with those of the Originator) which shall account for the
transactions contemplated by the Lease Sale and Contribution Agreement in any
manner other than as the sale of, or a capital contribution of, the Leases, the
Lease Receivables and the related assets by the Originator to the Borrower.
(p) LIMITATION ON INVESTMENTS. Make or suffer to exist any
loans or advances to, or extend any credit to, or make any investments (by way
of transfer of property, contributions to capital, purchase of stock or
securities or evidences of indebtedness, acquisition of the business or assets,
or otherwise) in, any Affiliate or any other Person except for the purchase of
Lease Receivables and related assets pursuant to the terms of the Lease Sale and
Contribution Agreement.
(q) PREPAYMENTS OF LEASE RECEIVABLES. Permit or accept the
proceeds of any prepayment of a Lease Receivable, unless (i) upon the
application of such amounts pursuant to SECTION 4.01(b) hereof, the Borrower
causes the aggregate notional amount of Interest Rate Hedges to be reduced by
the amount of the Advances outstanding with respect to such Lease Receivable,
and (ii) the Borrower is entitled to receive and apply such proceeds in an
amount sufficient to repay in full the Senior and Junior Advances outstanding
with respect to such Lease Receivable and any interest (including interest
through the end of the related Interest Period), fees, costs or expenses
(including early termination payments) resulting from the reduction of the
aggregate notional amount of the Interest Rate Hedges.
SECTION 6.04. COVENANTS OF THE SERVICER.
(a) AFFIRMATIVE COVENANTS OF THE SERVICER. From the date of
the initial Advance until the later of the Termination Date or the Collection
Date, the Servicer will, unless the Agent shall otherwise consent in writing:
(i) COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with all applicable laws, rules, regulations and orders with respect
to, and the servicing of, all Lease Receivables and related Leases.
(ii) PRESERVATION OF CORPORATE EXISTENCE. Preserve and
maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain qualified
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in good standing as a foreign corporation in each jurisdiction where
the failure to preserve and maintain such existence, rights,
franchises, privileges and qualifications would have a Material Adverse
Effect.
(iii) AUDITS. From time to time upon reasonable prior written
notice to the Servicer and during regular business hours, permit the
Agent, or its agents or representatives, (1) to examine and make copies
of and abstracts from all Records, and (2) to visit the offices and
properties of the Servicer for the purpose of examining such Records,
and to discuss matters relating to the Lease Receivables or the
Servicer's performance hereunder with any of the officers of the
Servicer having knowledge of such matters; the parties hereto agree
that the foregoing shall permit the Agent to engage a "big six"
accounting firm to perform a semi-annual audit.
(iv) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the Lease
Receivables in the event of the destruction of the originals thereof)
and keep and maintain, all documents, books, records and other
information reasonably necessary for the collection of all Lease
Receivables (including, without limitation, records adequate to permit
the daily identification of all Collections of and adjustments to each
Lease Receivable and the daily identification of all Remarketing
Proceeds). The original counterpart of each Lease subject to an Advance
hereunder shall be delivered to the Collateral Custodian within ten
(10) days following the date of such Advance and all other Records
relating thereto shall be held by the Servicer segregated from any
similar documents; such original counterpart and all such Records shall
in any event be marked with a legend indicating the interests of the
Lenders and the Liquidity Providers therein.
(v) PERFORMANCE AND COMPLIANCE WITH LEASE RECEIVABLES AND
LEASES. At its expense (unless otherwise provided for in the Lease)
timely perform and comply, in all material respects, with all material
provisions, covenants and other promises required to be observed by it
under the Leases related to the Lease Receivables.
(vi) CREDIT AND COLLECTION POLICIES. Comply in all material
respects with its Credit and Collec tion Policy in regard to each Lease
Receivable and the related Lease.
(vii) COLLECTIONS. Instruct all Obligors of Pledged Leases to
cause all Collections to be deposited directly to the Lockbox Account
and, if the Servicer shall receive any Collections or Remarketing
Proceeds, the Servicer shall remit such Collections and Remarketing
Proceeds to the Lockbox Account within two Business Days following the
Servicer's receipt and identification thereof; and within two Business
Days following the receipt and identification of deposits deposited
into the Lockbox Account, cause such amounts to be transferred to the
Collection Account.
(viii) POSTING OF COLLECTIONS AND LEASE RECEIVABLES. Apply all
Collections to the applicable Lease Receivables pursuant to the terms
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of SECTION 7.08 within three Business Days following the Borrower's or
the Servicer's receipt of information in respect of such Collections.
(ix) PROCEEDS OF INSURANCE. The Servicer shall remit, or shall
cause to be remitted, the proceeds of any insurance policy with respect
to the Equipment to the Collection Account.
(x) FACILITY DOCUMENTS. The Servicer shall comply in all
material respects with the terms of and employ the procedures outlined
in the Lease Sale and Contribution Agreement, and all of the other
Facility Documents to which it is a party.
(b) REPORTING REQUIREMENTS OF THE SERVICER. From the date of
the initial Advance until the later of the Termination Date or the Collection
Date, the Servicer will, unless the Agent shall otherwise consent in writing,
furnish to the Agent:
(i) As soon as reasonably practicable and in any event within
five Business Days after the Servicer has actual knowledge of the
occurrence of each Event of Termination or each event which, with the
giving of notice or lapse of time or both, would constitute such an
Event of Termination, the statement of the chief financial officer,
chief accounting officer or treasurer of the Servicer setting forth
details of such Event of Termination or event and the action which the
Servicer proposes to take with respect thereto.
(ii) As soon as reasonably practicable, from time to time,
such other information, documents, records or reports within its
possession respecting the Lease Receivables, the Equipment or the
conditions or operations, financial or otherwise, of the Servicer as
the Agent may from time to time reasonably request in order to protect
the interests of the Agent, any Lender or any Liquidity Provider under
or as contemplated by this Agreement.
(iii) Prompt notice of any change in the Credit and Collection
Policy.
(c) NEGATIVE COVENANTS OF THE SERVICER. From the date of the
initial Advance until the later of the Termination Date or the Collection Date,
the Servicer will not, without the written consent of the Agent:
(i) EXTENSION OR AMENDMENT OF LEASE RECEIVABLES. Except as
otherwise permitted in SECTION 7.04, extend, amend or otherwise modify,
the terms of any Lease Receivable, or amend, modify or waive, any
material term or condition of any Lease related thereto.
(ii) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make
any material change in the character of its business or in the Credit
and Collection Policy, which change would, in either case, materially
impair the collectibility of any Lease Receivable.
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(iii) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Make any
amendment, change or other modification to its instruction to Obligors
or to the Lockbox Account Agreement without the Agent's prior written
consent.
(iv) ERISA. So long as the Servicer is Capital Associates or
an Affiliate thereof, (1) engage or permit any ERISA Affiliate to
engage in any prohibited transaction for which an exemption is not
available or has not previously been obtained from the DOL; (2) permit
to exist any accumulated funding deficiency, as defined in Section
302(a) of ERISA and Section 412(a) of the IRC, or funding deficiency
with respect to any Benefit Plan other than a Multiemployer Plan; (3)
fail to make any payments to any Multiemployer Plan that the Servicer
or any ERISA Affiliate may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (4)
terminate any Benefit Plan so as to result in any liability; or (5)
permit to exist any occurrence of any reportable event described in
Title IV of ERISA which represents a material risk of a liability of
the Servicer or any ERISA Affiliate under ERISA or the IRC.
(d) FINANCIAL COVENANTS OF THE SERVICER.
(i) DEFINITIONS. As used in this Section 6.04(d), the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"ACCRUAL LEASES" means a lease for which only a commitment to
lease exists but is included in the Servicer's records as a lease for
accounting purposes pursuant to SFAS No. 23, thereby resulting in the
Servicer's recording of an accrued equipment payable as a liability and
the corresponding leased equipment as an asset, although the Servicer
has no legal liability to pay any vendors until the actual lease
documents are executed and delivered.
"DESIGNATED CREDIT RATING" means the credit rating assigned to
an Obligor pursuant to the Credit Policy Manual, Appendix C, Credit
Risk Rating Guidelines.
"EBIT" means the Servicer's Net Income, plus interest expenses
(excluding any interest expense which is otherwise characterized as
Nonrecourse Debt) and income taxes determined on a consolidated basis,
in accordance with GAAP.
"FINANCIAL STATEMENTS" means the financial statements of the
Servicer prepared in accordance with GAAP.
"GAAP" means generally accepted accounting principles as in
effect on the date hereof, as may be amended from time to time, and in
any event, consistently applied.
"INTEREST COVERAGE RATIO" means the ratio of EBIT to interest
expense (excluding any interest expense which is otherwise
characterized as Nonrecourse Debt), determined in accordance with GAAP
on a consolidated, rolling four quarter basis.
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"LIABILITIES" means, collectively, all liabilities of every
kind of the Servicer including, without limitation, those liabilities
as would be shown on a consolidated Financial Statement of the Servicer
prepared in accordance with GAAP, and all contingent liabilities and
obligations of the Servicer (including guaranty obligations) whether or
not shown on the consolidated Financial Statement of the Servicer,
other than Nonrecourse Debt and accounts payable of Capital Associates
Technology Group Inc. which are less than 30 days past the invoice
date.
"LIABILITIES TO TANGIBLE NET WORTH RATIO" means, at any time,
the ratio of (i) total Liabilities to (ii) Tangible Net Worth,
determined on a consolidated basis.
"NET INCOME" means the consolidated net income after taxes of
the Servicer as such would appear on the Servicer's consolidated
statement of income, prepared in accordance with GAAP.
"NONRECOURSE DEBT" means all Liabilities of the Servicer which
(i) correspond to Accrual Leases or (ii) are non-recourse in nature and
treated as non-recourse obligations on Servicer's Financial Statements.
"TANGIBLE NET WORTH" means, at any time, with respect to the
Servicer, the amount of stockholders equity (excluding the value of
leased equipment relating to Accrual Leases, trademarks, goodwill,
covenants not to compete, deferred closing costs in conjunction with
this Agreement and all other intangible assets as that term is defined
under GAAP).
(ii) FINANCIAL COVENANTS. The Servicer shall maintain and
comply with the following financial covenants as reflected on and
computed from its consolidated Financial Statements:
(A) TANGIBLE NET WORTH. The Servicer shall have and maintain
a Tangible Net Worth on a consolidated basis, measured
quarterly as of the last day of each fiscal quarter, of not
less than $18,000,000; provided that such Tangible Net Worth
covenant shall increase annually by an amount equal to 50% of
Servicer's Net Income for the immediately preceding fiscal
year, beginning with the fiscal year commencing on June 1,
1998.
(B) NET INCOME/LOSS. The Servicer shall not suffer an
operating loss and/or incur negative income on a consolidated
basis (i) in excess of $2,000,000 during any fiscal year or
(ii) in any amount for two consecutive fiscal years.
(C) LIABILITIES TO TANGIBLE NET WORTH RATIO. The Servicer
shall have and maintain a Liabilities to Tangible Net Worth
Ratio on a consolidated basis, measured quarterly as of the
last day of each fiscal quarter, of not greater than 4.5:1.
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(D) INTEREST COVERAGE RATIO. The Servicer shall have and
maintain at all times an Interest Coverage Ratio on a
consolidated basis, measured quarterly as of the last day of
each fiscal quarter, of not less than 1.10:1.
(E) RESTRICTED PAYMENTS AND RESTRICTIONS ON DIVIDENDS - The
Servicer will not make restricted payments or permit
restrictions on its Subsidiaries' ability to pay dividends to
the Servicer, in each case, if such payment or restriction
would breach the covenants covering such limitations in the
indenture for the Servicer's $15,000,000 senior subordinated
debt to be distributed through Legg Mason Wood Walker
Incorporated (without giving effect to any waiver of a breach
of such covenants by the holders of such subordinated debt).
ARTICLE VII
GRANT OF SECURITY INTEREST;
ADMINISTRATION OF RECEIVABLES
SECTION 7.01. GRANT OF SECURITY INTEREST.
(a) To secure the prompt and complete payment when due of the
Obligations and the performance by the Borrower of all of the covenants and
obligations to be performed by it pursuant to this Agreement, the Borrower
hereby assigns as security and pledges to the Agent, for the benefit of the
Lenders and any successor and assign thereof (including, without limitation, the
Liquidity Providers), and grants to the Agent, for the benefit of the Lenders,
the counterparties to any Interest Rate Hedges and any successor and assign
thereof (including, without limitation, the Liquidity Providers), a security
interest in all of the Borrower's right, title and interest in and to all of the
following property and interests in property (collectively, the "COLLATERAL"),
whether now owned or existing or hereafter arising or acquired and wheresoever
located:
(i) all Equipment and substitutions therefor and products and
proceeds thereof, including, without limitation, all Remarketing Proceeds and
all payments under insurance (whether or not the Agent is the loss payee
thereof) or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing;
(ii) all Lease Receivables;
(iii) Related Security with respect to the Lease Receivables;
(iv) all Leases;
(v) all funds on deposit in the Lockbox Account and the
Collection Account;
(vi) all Collections;
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(vii) the Capital Associates Demand Note; and
(viii) proceeds and other monies due and to become due to the
Borrower in respect of any of the foregoing;
PROVIDED, HOWEVER, that the portion of the Collateral consisting of the Capital
Associates Demand Note shall only be pledged to the Agent for the benefit of the
Residual Lender to secure the repayment of the Residual Advances and Residual
Interest.
(b) The Collateral shall include, and the Borrower hereby
assigns to the Agent, for the benefit of the Lenders and any successor and
assign thereof, all of the Borrower's right and title to, and interest in, the
Lease Sale and Contribution Agreement. Accordingly, the Agent shall have the
sole right to enforce the Borrower's rights and remedies under the Lease Sale
and Contribution Agreement, but without any obligation on the part of the Agent
or any Lender or any of its or their respective Affiliates to perform any of the
obligations of the Borrower under the Lease Sale and Contribution Agreement. The
assignment to the Agent pursuant to this SECTION 7.01 shall terminate upon the
Collection Date; PROVIDED, HOWEVER, that the rights of the Agent pursuant to
such assignment with respect to rights and remedies in connection with any
indemnification or any breach of any representation, warranty or covenant made
by the Originator in the Lease Sale and Contribution Agreement shall be
continuing and shall survive any termination of such assignment.
(c) It is expressly agreed that, subject to the provisions of
SECTION 7.09, the Collateral assigned and pledged to the Agent hereunder, for
the benefit of the Lenders, shall include all of Borrower's right, title and
interest to the residual interest in Equipment.
SECTION 7.02. DESIGNATION OF SERVICER.
(a) The servicing, administering and collection of the Lease
Receivables shall be conducted by the Person (the "SERVICER") so designated from
time to time in accordance with this SECTION 7.02. Until the Agent gives notice
to the Borrower (as provided in clause (b) below) of the designation of a new
Servicer as provided in clause (b) below, Capital Associates is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms hereof. The Servicer may, with the prior consent
of the Agent, which consent shall not be unreasonably withheld, subcontract with
any other Person for servicing, administering or collecting the Lease
Receivables, provided that the Servicer shall remain liable for the performance
of the duties and obligations of the Servicer pursuant to the terms hereof.
(b) The Agent may only designate as Servicer any Person to
succeed Capital Associates or any successor Servicer upon written notice
following the occurrence of a Servicer Replacement Event, and on the condition
in each case that any such Person so designated shall agree to perform the
duties and obligations of the Servicer pursuant to the terms hereof. The
Servicer shall not resign from the obligations and duties hereby imposed on it
except upon determination that (i) the performance of its duties hereunder is no
longer permissible under applicable law and (ii) there is no reasonable action
which the Servicer could take to make the performance of its duties hereunder
permissible under applicable law.
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(c) Capital Associates agrees that, upon its resignation or
replacement as Servicer pursuant to clause (b) above, it will cooperate with the
Agent and the successor Servicer in effecting the termination of its
responsibilities and rights as Servicer hereunder, including, without
limitation, (i) assisting the successor Servicer in enforcing all rights under
the Leases, (ii) transferring, promptly upon receipt, to the successor Servicer
any Collections, Remarketing Proceeds or other amounts related to the Leases
received by Capital Associates and (iii) transferring to the successor Servicer
all Records held by or under the control of Capital Associates. Upon the
resignation or replacement of Capital Associates as Servicer, Capital Associates
shall no longer be entitled to the Servicer Fee accruing from and after the
effective date of such resignation or replacement.
SECTION 7.03. REPORTING REQUIREMENTS OF THE SERVICER. No later
than 1:00 p.m. (New York City time) on the second Business Day prior to each
Settlement Date, the Servicer shall prepare and forward to the Agent for the
Lenders, a Servicer Report, indicating the status of the Lease Receivables and
the Equipment as of the close of business of the Servicer on the last day of the
immediately preceding month (together with such attachments as may be required
thereunder), setting forth the payments made on the immediately preceding
Settlement Date and summarizing the portfolio of Interest Rate Hedges, as of
such day.
SECTION 7.04. DUTIES OF THE SERVICER. (a) The Servicer shall
take or cause to be taken all such actions as it deems necessary or advisable to
collect each 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. Each of the Borrower, each
Lender, each Liquidity Provider and the Agent hereby appoints as its agent the
Servicer, from time to time designated pursuant to SECTION 7.02, to enforce its
respective rights and interests in and under the Lease Receivables, the Related
Security and the related Leases. The Servicer (so long as it is Capital
Associates) will at all times apply the same standards and follow the same
procedures with respect to the decision to commence, and in prosecuting and
litigating with respect to Lease Receivables owned by the Borrower as it applies
and follows with respect to Lease Receivables which are not owned by the
Borrower. In no event shall the Servicer be entitled to make the Agent, any
Lender or any Liquidity Provider a party to any litigation without the Agent's
express prior written consent.
The Servicer shall set aside for the account of the Lenders
and the Liquidity Providers the Collections and Remarketing Proceeds in
accordance with SECTION 4.01. The Servicer (to the extent received by the
Servicer) shall segregate and deposit with the Collection Account Bank the
Collections and Remarketing Proceeds within two Business Days following receipt
of information by the Servicer of such Collections and Remarketing Proceeds.
Provided that the Termination Date shall not have occurred, Capital Associates,
while it is Servicer, may, in accordance with the Credit and Collection Policy,
amend, modify or waive any term or condition of any Lease unless such amendment,
modification or waiver (i) is inconsistent with the servicing standards set
forth above, (ii) would reduce or adversely affect the Obligor's obligation to
maintain, service and insure the underlying Equipment, (iii) would cause Lease
Receivables arising thereunder to fail to be Eligible Lease Receivables (as if
tested on the date of such amendment, modification or waiver) or (iv) would
materially adversely affect the amount or collectibility of any Lease Receivable
arising thereunder. Notwithstanding the provisions of the preceding sentence,
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the Servicer may (1) permit any of the actions set forth in such clause, which
in the Servicer's sole discretion, in accordance with the same manner in which
it services contracts and equipment held for its own account, would maximize
recoveries on any Lease, or (2) permit termination of a Lease which does not
otherwise provide for termination by requiring, in the case of either clause (1)
or (2), that the Obligor deposit in the Lockbox Account, in lieu of all future
Periodic Installments of Rent with respect to such Lease, an amount which equals
or exceeds the sum of the Senior Outstanding Balance of the related Lease
Receivable plus any applicable fees, costs or expenses (including early
termination payments) resulting from the reduction of the aggregate notional
amount of the Interest Rate Hedges with respect to such Lease Receivable by not
later than the second Business Day following the consummation of such action;
PROVIDED, HOWEVER, that the Servicer will not be permitted to allow prepayment
by an Obligor if there are any amounts due under the related Lease after such
prepayment. The Borrower shall deliver to the Servicer, and the Servicer shall
hold in trust for the Borrower, the Lenders and the Liquidity Providers in
accordance with their respective interests, all Records.
(b) The Servicer shall as soon as practicable following
receipt of any Collections turn over to the Borrower (for distribution to the
appropriate Persons by the Borrower) the Collections of any Lease Receivable
which is not owned by the Borrower less all reasonable and appropriate
out-of-pocket costs and expenses of such Servicer incurred in collecting and
enforcing the Lease Receivables. The Servicer, if other than Capital Associates,
shall as soon as practicable upon demand deliver to the Borrower all Records in
its possession relating to Lease Receivables of the Borrower other than Lease
Receivables that are not owned by the Borrower, and copies of Records in its
possession relating to Lease Receivables that are not owned by the Borrower. The
Servicer's authorization under this Agreement shall terminate on the Business
Day immediately after the Collection Date.
(c) Upon receipt of notice from the Borrower, the Agent or any
other Person, or if the Servicer otherwise learns, that the Obligor under any
Lease is in default thereunder, the Servicer will take such action as is
appropriate, consistent with the Servicer's administration of leases held for
its own account and consistent with the customary practices of servicers in the
same segment of the industry, including such action as may be necessary to
cause, or attempt to cause, the Obligor thereunder to cure such default (if the
same may be cured) or to terminate or attempt to terminate such Lease and to
recover, or attempt to recover, all damages resulting from such default to the
extent permitted under such Lease and under applicable law.
All amounts realized by the Servicer in the performance of its
duties under this SECTION 7.04(c) with respect to any item constituting part of
the Pledged Assets (net of Servicer's actual out-of-pocket expenses and internal
commissions reasonably incurred in such realization) shall be held in trust by
the Servicer, as agent for the Agent, and deposited within two Business Days of
receipt thereof for deposit in the Collection Account in accordance with the
provisions of this Agreement.
(d) Notwithstanding anything to the contrary contained in this
ARTICLE VII, the Servicer, if the Agent or its designee, shall have no
obligation to collect, enforce or take any other action described in this
ARTICLE VII with respect to any Lease Receivable that is not a Lease Receivable
owned by the Borrower other than to deliver to the Borrower the Collections and
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documents with respect to any such Lease Receivable that is not a Lease
Receivable owned by the Borrower as described in the first two sentences of
SECTION 7.04(b) and to exercise the same degree of care with respect to
Collections and documents in its possession as it would with respect to its own
property.
(e) Upon the expiration or termination of a Lease, and subject
to any purchase provisions thereof and the rights of the related Obligor, the
Servicer or the Agent, as applicable, shall use commercially reasonable best
efforts to sell or lease the Equipment under such Lease on behalf of the
Borrower to any willing end user. The proceeds realized in connection with each
such sale or lease shall be deposited in the Collection Account. The Borrower
hereby appoints the Servicer as its attorney in fact for the purpose of selling
or leasing any such Equipment, and the Servicer shall have the right and
authority, as attorney in fact for the Borrower, to do any and all things and to
execute and deliver any and all instruments on behalf of the Borrower that the
Borrower could do or execute and deliver directly, PROVIDED that all such powers
of the Servicer as attorney in fact for the Borrower and the right to sell and
lease Equipment may be terminated following the occurrence of a Servicer
Replacement Event upon notice by the Agent to the Servicer (such notice, a
"TERMINATION NOTICE"). Upon delivery of a Termination Notice, the Borrower shall
be deemed to have appointed the Agent (or any Person designated by the Agent) as
its attorney in fact for the purpose of selling or leasing any such Equipment,
and the Agent (or any Person designated by the Agent) shall have the right and
authority, as attorney in fact for the Borrower, to do any and all things and to
execute and deliver any and all instruments on behalf of the Borrower that the
Borrower could do or execute and deliver directly. The Borrower agrees to
execute any and all powers of attorney and other instruments reasonably
necessary or convenient to evidence or give effect to the foregoing powers of
attorney.
SECTION 7.05. RIGHTS OF THE AGENT. (a) The Agent is hereby
authorized at any time to (i) notify the Lockbox Account Bank and the Collection
Account Bank to accept directions with respect to the related accounts only from
the Agent or its designee and (ii) notify the counterparties to each Interest
Rate Hedge to make any payments owed by such counterparties thereunder directly
to the Agent or its designee.
(b) At any time following the designation of a Servicer other
than Capital Associates pursuant to SECTION 7.02:
(i) The Agent may notify (or may direct the Servicer to
notify) at any time the Obligors of Lease Receivables, or any of them,
of the Lenders' and the Liquidity Providers' interest in Pledged Assets
and direct such Obligors, or any of them, (x) that payment of all
amounts payable under any Lease Receivable be made directly to the
Agent or its designee and (y) that Equipment to be returned to the
borrower pursuant to the terms of any Pledged Lease be returned
directly to the Agent or its designee.
(ii) The Borrower shall, at the Agent's request and at the
Borrower's expense, give notice of the Lenders' and the Liquidity
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Providers' interest in Lease Receivables and the Equipment to each
Obligor and direct that payments be made and Equipment be returned
directly to the Agent or its designee.
(iii) Each of the Borrower, each Lender and each Liquidity
Provider hereby authorizes the Agent to take any and all steps in the
Borrower's name and on behalf of the Borrower, the Lenders and the
Liquidity Providers necessary or desirable, in the determination of the
Agent, to collect all amounts due under any and all Lease Receivables
and Equipment, including, without limitation, endorsing the Borrower's
name on checks and other instruments representing Collections,
enforcing such Lease Receivables and the related Leases and selling the
Equipment.
SECTION 7.06. RESPONSIBILITIES OF THE BORROWER. Anything
herein to the contrary notwithstanding, the Borrower shall (i) perform all of
its obligations under the Leases related to the Lease Receivables to the same
extent as if Pledged Assets had not been pledged hereunder and the exercise by
Agent of its rights hereunder shall not relieve Borrower from such obligations
and (ii) pay any taxes, including without limitation, sales, excise and personal
property taxes payable in connection with the Lease Receivables, before such
taxes become delinquent, unless the Borrower is contesting the payment of such
taxes in good faith and by appropriate proceedings.
SECTION 7.07. FURTHER ACTION EVIDENCING SECURITY INTEREST. The
Borrower agrees that from time to time, at its expense, it will promptly execute
and deliver all further instruments and documents, and take all further action
that the Agent may reasonably request in order to perfect, protect or more fully
evidence the security interest of the Agent granted hereunder or the enable the
Agent to exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Borrower will (i) mark its master data
processing records evidencing such Lease Receivables and related Leases with a
legend, acceptable to the Agent, evidencing that a security interest therein has
been granted under this Agreement, (ii) comply with the Obligor UCC Filing
Requirement, and (iii) upon the request of the Agent, execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate or as the Agent may reasonably request. The Borrower hereby
authorizes the Agent to file one or more financing or continuation statements,
and amendments thereto and assignments thereof, relative to all or any of the
Lease Receivables, the Related Security and the Equipment now existing or
hereafter arising without the signature of the Borrower where permitted by law.
A carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Lease Receivables and the Equipment, or any part thereof,
shall be sufficient as a financing statement. If the Borrower 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 expenses of the Agent incurred in connection
therewith shall be payable by the Borrower upon the Agent's demand therefor;
provided, however, prior to taking any such action, the Agent shall give notice
of such intention to the Borrower and provide the Borrower with a reasonable
opportunity to take such action itself.
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SECTION 7.08. APPLICATION OF PAYMENTS. To the extent the
Servicer receives a payment from an Obligor of a Lease Receivable with respect
to which the Obligor has not identified the Lease Receivable to which such
payment should be applied (a payment in the exact amount of an outstanding
invoice being sufficient identification), the Servicer shall use reasonable
efforts to contact such Obligor to confirm the Lease Receivable to which such
Obligor intended that such payment be applied.
SECTION 7.09. RELEASE OF LIEN. The parties hereto agree that
upon the sale of Equipment related to a Lease that has been terminated or the
repurchase of a Lease by the Originator pursuant to the Lease Sale and
Contribution Agreement, the Agent, for the benefit of the Lenders and any
successor and assign thereof, will take such action as may be necessary to
release its lien on such Equipment. The Agent and the Lenders hereby grant to
the Servicer a power of attorney to execute on behalf of the Agent and the
Lenders with respect to the Equipment described in the preceding sentence, UCC
releases, PROVIDED, that the Servicer shall not execute in any month UCC
releases with respect to Equipment which in the aggregate relates to Remarketing
Proceeds and Leases having "Repurchase Prices" (as defined in the Lease Sale and
Contribution Agreement) in excess of $1,000,000. A list of all such UCC releases
executed by the Servicer (including the related Remarketing Proceeds or
Repurchase Prices) shall be delivered by the Servicer to the Agent
simultaneously with the delivery of each Servicer Report. Such power of attorney
may be revoked by the Agent and the Lenders upon the occurrence of an Event of
Termination. The parties hereto further agree that upon the Borrower's
satisfaction of all Obligations hereunder, the Agent, for the benefit of the
Lenders and any successor and assign thereof, will take such action as may be
necessary to release its lien on Pledged Assets.
SECTION 7.10. ACCESS TO LEASES. The Agent and the Lenders
agree that the right of the Borrower and the Servicer to obtain the Leases and
related documents held by the Collateral Custodian as provided in Section
2.04(b) of the Custody Agreement will not be revoked by the Agent prior to the
occurrence of an Event of Termination.
ARTICLE VIII
EVENTS OF TERMINATION
SECTION 8.01. EVENTS OF TERMINATION. If any of the following
events ("Events of Termination") shall occur:
(a) The Borrower shall fail to make any payment or deposit to
be made by it hereunder when due and such failure shall remain unremedied for
two Business Days; or
(b) The Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or any other Facility
Document on its part to be performed or observed and any such failure shall
remain unremedied for fifteen days after written notice from the Agent; or
(c) Any representation or warranty made or deemed to be made
by the Borrower (or any of its Designated Officers) under or in connection with
this Agreement, any Notice of Borrowing or other infor mation or report
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delivered pursuant hereto shall prove to have been false or incorrect in any
material respect when made; provided, however, that (i) to the extent any breach
of any such representation or warranty may be cured within fifteen days, the
Borrower shall have fifteen days after learning of such breach to make such
representation and warranty true and correct and (ii) if such breach results
from the failure of such Lease Receivable to be an Eligible Lease Receivable,
then such breach may be cured by the repurchase of such non- Eligible Lease
Receivable in accordance with Section 7.02 of the Lease Sale and Contribution
Agreement; or
(d) Except to the extent permitted by the terms hereof, the
Lenders shall cease to have a valid and perfected first priority interest in
each Lease Receivable and Related Security (subject to SECTION 7.07 hereof), the
Equipment, Remarketing Proceeds and Collections; PROVIDED, HOWEVER, that (i) to
the extent any breach of the foregoing may be cured within fifteen days, the
Borrower shall have fifteen days after learning thereof to cure such breach
(including by the repurchase of such Lease Receivable in accordance with Section
7.02 of the Lease Sale and Contribution Agreement); or
(e) (i) The Borrower shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted against the Borrower (an
"Involuntary Proceeding") or by the Borrower 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; or (ii) the Borrower's Board of Directors shall vote affirmatively to
authorize any of the actions set forth in CLAUSE (i) above in this SUBSECTION
(e); or
(f) A Servicer Replacement Event shall occur; or
(g) As of the last day of any month, (1) the Delinquency Ratio
for such month shall exceed 6%, or (2) the Default Ratio for such month shall
exceed 2.2%; or
(h) As of the close of business on any Settlement Date, (i)
the Senior Borrowing Base for such Settlement Date shall be less than Aggregate
Senior Advances (after giving effect to any increases or reductions to Aggregate
Senior Advances on such Settlement Date), or (ii) the Junior Borrowing Base for
such Settlement Date shall be less than Aggregate Junior Advances (after giving
effect to any increases or reductions to Aggregate Junior Advances on such
Settlement Date); or
(i) There shall have been any material adverse change in the
financial condition or operations of the Borrower after the date hereof, or
there shall have occurred any event which materially adversely affects the
collectibility of the Lease Receivables generally or there shall have occurred
any other event which materially adversely affects the ability of the Borrower
to collect Lease Receivables generally or the ability of the Borrower to perform
hereunder, in each case, as determined in the reasonable judgment of the Agent;
or
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(j) The Originator shall cease to directly own 100% of the
outstanding capital stock of the Borrower; or
(k) [Intentionally Omitted]
(l) The Pension Benefit Guaranty Corporation or the IRS shall
have filed notice of one or more liens against either the Originator or the
Borrower (unless such lien does not purport to cover the Lease Receivables), and
such notice shall have remained in effect for more than thirty (30) days unless,
prior to the expiration of such period, such liens shall have been adequately
bonded by the Originator or the Borrower, as applicable; or
(m) The Liquidity Agreement is terminated or expires and is
not renewed or replaced; or
(n) A "Purchase" (as defined in the Liquidity Agreement) is
made by a Liquidity Providers under the Liquidity Agreement;
then, and in any such event, the Agent shall, at the request, or may with the
consent, of the Lenders, by notice to the Borrower declare the Termination Date
to have occurred, EXCEPT that, in the case of any event described in CLAUSE (i)
of SUBSECTION (e) above, the Termination Date shall be deemed to have occurred
automatically upon the occurrence of such event; PROVIDED, HOWEVER, that if any
Involuntary Proceeding (as defined in SUBSECTION (e) above) is dismissed within
sixty (60) days after its commencement, and if no other Event of Termination has
occurred, then following such dismissal, the program shall be reinstated as if
the Termination Date had not occurred. Upon any such declaration or automatic
occurrence, the Agent and the Lenders shall have, in addition to all other
rights and remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE IX
THE AGENT
SECTION 9.01. AUTHORIZATION AND ACTION. Each Lender 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 Lenders and the Liquidity Providers.
SECTION 9.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them as 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 Servicer pursuant to SECTION
7.02) or any other agreement executed pursuant hereto, except for its or their
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own gross negligence or willful malfeasance or misfeasance. Without limiting the
foregoing, the Agent: (i) may consult with legal counsel (including counsel for
the Borrower), 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; (ii) makes no warranty or representation to any Lender or any Liquidity
Provider and shall not be responsible to any Lender or any Liquidity Provider
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 Borrower or to inspect the property (including
the books and records) of the Borrower; (iv) shall not be responsible to any
Lender or any Liquidity Provider for the due execution, legality, validity,
enforceability, genuineness or sufficiency of value of this Agreement 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 with respect to notices under SECTION 2.02), consent, certificate or
other instrument or writing (which may be by telex or facsimile) believed by it
to be genuine and signed or sent by the proper party or parties.
SECTION 9.03. AGENT AND AFFILIATES. With respect to any
interests which may be assigned by any Lender to KCCI pursuant to SECTION 11.04,
KCCI shall have the same rights and powers under this Agreement as would the
applicable Lender if it were holding such interests and may exercise the same as
though it were not the Agent. KCCI and its Affiliates may generally engage in
any kind of business with the Borrower or any Obligor, any of their respective
Affiliates and any Person who may do business with or own securities of the
Borrower or any Obligor or any of their respective Affiliates, all as if KCCI
were not the Agent and without any duty to account therefor to any Lender or any
Liquidity Provider.
SECTION 9.04. LENDING DECISIONS. Each Lender and each
Liquidity Provider acknowledges that it has, independently and without reliance
upon the Agent, KCCI or any Affiliate of KCCI, and based on such documents and
information as it has deemed appropriate, made its own evaluation and decision
to enter into this Agreement and, if it so determines, to make Advances
hereunder. Each Lender and each Liquidity Provider also acknowledges that it
will, independently and without reliance upon the Agent, KCCI or any Affiliate
of KCCI, and based on such documents and information as it shall deem
appropriate at the time, con tinue to make its own decisions in taking or not
taking action under this Agreement.
SECTION 9.05. RESIGNATION OF THE AGENT. The Agent may resign
as Agent hereunder at any time by giving not less than five (5) Business Days'
prior written notice to the Lenders, the Borrower, the Servicer and the
Liquidity Providers, such resignation to be effective on the earlier of (i) the
appointment and acceptance of a successor Agent as provided below and (ii) the
30th day following delivery of such notice. Upon any such resignation, the
Lenders shall, after consultation with the Borrower, appoint a financial
institution of its choosing as Agent, which financial institution shall be
approved by the Borrower if it is not an Affiliate of KCCI. Following the
appointment of a successor Agent and such successor Agent's acceptance thereof,
such successor Agent shall succeed to and become vested with all the rights,
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powers, privileges and duties of the resigning Agent as Agent hereunder, and the
resigning Agent shall be discharged from its duties and obligations as Agent
hereunder. After the Agent's resignation, the provisions of this ARTICLE VIII
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent.
ARTICLE X
INDEMNIFICATION
SECTION 10.01. INDEMNITIES BY THE BORROWER. (a) Without
limiting any other rights which any Affected Party may have hereunder or under
applicable law, the Borrower hereby agrees to indemnify KCCI, individually, in
its capacity as Agent and in its capacity as Lender, any other Lender, and any
Liquidity Provider (the "INDEMNIFIED PARTIES"), from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or incurred
by such Indemnified Party arising out of or as a result of this Agreement or the
pledge of the Pledged Assets or in respect of any Lease Receivable or any Lease,
excluding, however, (i) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of any Indemnified Party or (ii)
recourse for an Obligor's inability for credit reasons to make payments of Lease
Receivables. Without limiting the foregoing, Borrower shall indemnify each
Indemnified Party for Indemnified Amounts relating to or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the Borrower (or any of its officers) under this Agreement,
which shall have been false or incorrect in any material respect when
made or deemed made or delivered;
(ii) the failure by the Borrower to comply with any term,
provision or covenant contained in this Agreement, the Lease Sale and
Contribution Agreement or any Facility Document to which it is party or
with any applicable law, rule or regulation with respect to any Lease
Receivable, the related Lease, the Related Security or any Equipment,
or the nonconformity of any Lease Receivable, the related Lease, the
Related Security or any Equipment with any such applicable law, rule or
regulation;
(iii) any reduction of a Lease Receivable due to a Permitted
Encumbrance (excluding any Permitted Encumbrance in favor of an
Indemnified Party), whether existing at the time of the pledge of such
Lease Receivable or at any time thereafter;
(iv) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with goods, merchandise
and/or services which are the subject of any Lease Receivable or Lease;
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(v) the failure to pay when due any taxes, including, without
limitation, sales, excise or personal property taxes payable by the
Borrower or the Originator in connection with the Lease Receivables or
Equipment; or
(vi) the payment by such Indemnified Party of Taxes,
including, without limitation, any Taxes imposed by any jurisdiction on
amounts payable and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto to the extent
caused by the Borrower's actions or failure to act; PROVIDED that an
Indemnified Party, making a demand for indemnity payment shall provide
the Borrower, at its address referred to in SECTION 11.02, with a
certificate from the relevant taxing authority or from a responsible
officer of such Indemnified Party stating or otherwise evidencing that
such Indemnified Party has made payment of such Taxes and, within 30
days thereafter, will provide a copy of or extract from documentation,
if available, furnished by such taxing authority evidencing assertion
or payment of such Taxes.
Any amounts subject to the indemnification provisions of this SECTION 10.01
shall be paid by the Borrower to the Agent within two Business Days following
Agent's demand therefor.
SECTION 10.02. INDEMNITIES BY THE SERVICER. (a) Without
limiting any other rights which any Affected Party may have hereunder or under
applicable law, the Servicer hereby agrees to indemnify the Indemnified Parties,
from and against any and all damages, losses, claims, liabilities and related
costs and expenses, including reasonable attorneys' fees and disbursements
awarded against or incurred by such Indemnified Party relating to or resulting
from the following but excluding (i) Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of any Indemnified Party
or (ii) recourse for an Obligor's inability for credit reasons to make payments
of Lease Receivables:
(i) reliance on any representation or warranty made or deemed
made by the Servicer (or any of its officers) under this Agreement or
in any Servicer Report, which shall have been false or incorrect in any
material respect when made or deemed made or delivered; or
(ii) the failure by the Servicer (so long as the Servicer is
the Originator or an Affiliate of the Originator) to comply with any
term, provision or covenant contained in this Agreement, the Lease Sale
and Contribution Agreement or any Facility Document to which it is
party or with any applicable law, rule or regulation with respect to
any Lease Receivable, the related Lease, the Related Security or any
Equipment, or the nonconformity of any Lease Receivable, the related
Lease, the Related Security or any Equipment with any such applicable
law, rule or regulation.
Any amounts subject to the indemnification provisions of this SECTION 10.02
shall be paid by the Servicer to the Agent within two Business Days following
Agent's demand therefor.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. AMENDMENTS, Etc. No amendment to or waiver of
any provision of this Agreement nor consent to any departure by the Borrower,
shall in any event be effective unless the same shall be in writing and signed
by (i) the Borrower, the Agent and each Lender (with respect to an amendment) or
(ii) the Agent and each Lender (with respect to a waiver or consent by them) or
the Borrower (with respect to a waiver or consent by it), as the case may be,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; PROVIDED, HOWEVER, that no such
amendment, modification or waiver shall affect the rights or duties of the
Servicer hereunder without the prior written consent of the Servicer. This
Agreement contains a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement (together with the exhibits hereto) among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings.
SECTION 11.02. NOTICES, ETC. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including telex communication and communication by facsimile copy)
and shall be personally delivered or sent by first class mail, postage prepaid,
or by courier or by facsimile, to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall
be designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, upon receipt, or in the case
of delivery by mail, three days after being deposited in the mails, or, in the
case of notice by facsimile, when electronic communication of receipt is
obtained, in each case addressed as aforesaid.
SECTION 11.03. NO WAIVER; Remedies. No failure on the part of
the Agent, any Lender or any Liquidity Provider to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Without limiting the foregoing, the Agent is hereby authorized by the Borrower
at any time after an Event of Termination has occurred and from time to time, to
the fullest extent permitted by law, to instruct KeyBank or any Affiliate of
KeyBank to set off and apply any and all deposits (whether general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by KeyBank or such Affiliate to or for the credit or the account
of the Borrower against any and all of the obligations of Borrower, now or
hereafter existing under this Agreement or under any agreement executed pursuant
hereto, to the Agent, any Lender or any Liquidity Provider or their respective
successors and assigns irrespective of whether or not demand therefor shall have
been made under this Agreement or under any agreement executed pursuant hereto.
The Borrower acknowledges that the rights of the Agent, the Lenders and the
Liquidity Providers or any of their respective successors and assigns described
in this paragraph are in addition to other rights and remedies (including,
without limitation, other rights of set-off) such parties may have.
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SECTION 11.04. BINDING EFFECT; ASSIGNABILITY. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Servicer, the Agent, the Lenders and their respective successors and permitted
assigns, (which successors of the Borrower shall include a trustee in bankruptcy
and which successors of the Lenders shall include the Liquidity Providers). This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until such time, after the Termination Date, as the Collection Date shall occur;
PROVIDED, HOWEVER, that the rights and remedies with respect to any breach of
any representation and warranty made by the Borrower pursuant to ARTICLE V and
the indemnification and payment provisions of ARTICLE IX and ARTICLE X shall be
continuing and shall survive any termination of this Agreement for one year.
(b) The Borrower may not assign any of its rights and
obligations hereunder or any interest herein without the prior written consent
of the Agent and each Lender and any successor and assign thereof (including,
without limitation, the Liquidity Providers).
(c) Any Lender may, without the consent of the Borrower,
assign at any time all of its rights and obligations hereunder and interest
herein to any Person, except that if such Person is not KCCI, KeyBank or any
other affiliate thereof or any affiliate of Concord Minutemen Capital Company,
LLC, such Lender shall be required to acquire the prior written consent of the
Agent and the Borrower to any such assignment. Any permitted assignee of any
Lender as described in the preceding sentence may further assign at any time its
rights and obligations hereunder or interests herein with the consent of the
Agent and the Borrower to the extent required in the preceding sentence. Upon
any such assignment, the assignee shall succeed to and become vested with all
the rights, powers, privileges and duties of the applicable Lender, and the
resigning Lender shall be discharged from its duties and obligations as Lender
hereunder. The Borrower and the Servicer agree to execute or obtain such other
documentation as may be reasonably requested by the assigning Lender in order to
effectuate such assignment.
(d) Notwithstanding anything to the contrary contained herein,
at any time and from time to time, the Senior Lender may, without the consent of
the Borrower, assign all or a portion of its interests in the Notes, this
Agreement and the Pledged Assets hereunder to the Liquidity Providers pursuant
to the Liquidity Agreement. The Liquidity Providers shall also be entitled to
sell their interests (or portions thereof) to other Liquidity Providers pursuant
to the terms of the Liquidity Agreement. The Senior Lender or the Liquidity
Provider making any such assignment shall provide notice to the Borrower of any
assignment hereunder or thereunder.
SECTION 11.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS
BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES), EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF THE LENDERS IN THE
PLEDGED ASSETS OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. THE
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BORROWER AND THE SERVICER HEREBY AGREE TO THE JURISDICTION OF ANY FEDERAL COURT
LOCATED WITHIN THE STATE OF NEW YORK. THE BORROWER AND THE SERVICER EACH HEREBY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE AMONG ANY OF THE BORROWER, THE
SERVICER, ANY LENDER, ANY LIQUIDITY PROVIDER OR THE AGENT ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING CONSENT
TO JURISDICTION, EACH OF THE BORROWER AND THE SERVICER HEREBY WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
11.05 SHALL AFFECT THE RIGHT OF ANY LENDER, ANY LIQUIDITY PROVIDER OR THE AGENT
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT
OF SUCH LENDER, SUCH LIQUIDITY PROVIDER OR THE AGENT TO BRING ANY ACTION OR
PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 11.06. COSTS, EXPENSES AND TAXES. (a) In addition to
the rights of indemnification under ARTICLE IX hereof, the Borrower agrees to
pay on demand all reasonable costs and expenses of the Agent and the Lenders in
connection with the preparation, execution, delivery and administration
(including periodic auditing and any requested amendments, waivers or consents)
of this Agreement and the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent and the Lenders with respect thereto and with respect to advising
the Agent and the Lenders as to their respective rights and remedies under this
Agreement, and the other agreements executed pursuant hereto and all costs and
expenses, if any (including reasonable counsel fees and expenses), in connection
with the enforcement of this Agreement and the other agreements and documents to
be delivered hereunder.
(b) In addition, the Borrower shall pay any and all stamp,
sales, excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other agreements and documents to be delivered hereunder, and agrees to
indemnify the Agent, the Lenders and the Liquidity Providers against any
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
(c) In addition, the Borrower shall pay on demand all other
reasonable costs and expenses incurred by any Lender ("Other Costs"), including,
without limitation, the cost of auditing such Lender's books by certified public
accountants, the cost of rating such Lender's promissory notes by independent
financial rating agencies and the reasonable fees and out-of-pocket expenses of
counsel for such Lender with respect to (i) advising such Lender as to its
rights and remedies under this Agreement, (ii) the enforcement of this Agreement
and the other documents to be delivered hereunder or (iii) advising such Lender
as to matters relating to such Lender's operations; PROVIDED, HOWEVER, that if
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such Lender enters into agreements for the purchase of receivables from one or
more other Persons ("Other Borrowers"), the Borrower and such Other Borrowers
shall each be liable for such Other Costs ratably in accordance with the usage
under the respective facilities of the such Lender to purchase receivables from
the Borrower and each Other Borrower; and PROVIDED, FURTHER, that if such Other
Costs are attributable to the Borrower and not attributable to any Other
Borrower, the Borrower shall be solely liable for such Other Costs.
SECTION 11.07. NO PROCEEDINGS. (a) Each Lender, the Servicer,
the Borrower, each Liquidity Provider and the Agent each hereby agrees that it
will not institute against the Senior Lender any proceeding of the type referred
to in clause (i) of Section 8.01(e) so long as any promissory notes issued by
the Senior Lender shall be outstanding or there shall not have elapsed one year
plus one day since the last day on which any such promissory notes shall have
been outstanding.
(b) Each Lender, the Servicer each Liquidity Provider and the
Agent each hereby agree that it will not institute against the Borrower any
proceeding of the type referred to in clause (i) of SECTION 8.01(e) so long as
any obligations of the Borrower shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such obligations
shall have been outstanding.
SECTION 11.08. NONRECOURSE NATURE OF TRANSACTIONS. The Junior
Lender, the Residual Lender, the Servicer, the Borrower, each Liquidity Provider
and the Agent hereby acknowledges and agrees that all transactions with the
Senior Lender hereunder shall be without recourse of any kind to the Senior
Lender. The Junior Lender, the Residual Lender, the Servicer, the Borrower, each
Liquidity Provider and the Agent agrees that the Senior Lender shall have no
obligation to pay any of the Junior Lender, the Residual Lender, the Servicer,
the Borrower, any Liquidity Provider or the Agent, any amounts constituting
commitment fees, a reimbursement for expenses or indemnities (collectively,
"Expense Claims") and such Expense Claims shall not constitute a claim against
the Senior Lender (as defined in Section 101 of Title 11 of the United States
Bankruptcy Code), unless or until the Senior Lender has received amounts
sufficient to pay such Expense Claims pursuant to SECTION 4.01 and such amounts
are not required to pay the commercial paper of the Senior Lender.
SECTION 11.09. EXECUTION IN COUNTERPARTS; SEVERABILITY. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same agreement. In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obli gations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER: CAI LEASE SECURITIZATION - II CORP.
By /s/Anthony M. Dipaolo
------------------------------
Title: President
------------------------
7175 W. Jefferson Avenue, Suite 4000
Lakewood, Colorado 80235
Attn: President
Telecopy No.: (303) 980-____
SERVICER: CAPITAL ASSOCIATES INTERNATIONAL, INC.
By /s/Anthony M. Dipaolo
------------------------------
Title: Chief Financial Officer and Treasurer
-------------------------------------
7175 W. Jefferson Avenue, Suite 4000
Lakewood, Colorado 80235
Attn:
Telecopy No.: (303) 980-____
SENIOR LENDER: CONCORD MINUTEMEN CAPITAL COMPANY, LLC
By /s/Tom Iravin
------------------------------
Title: Manager
------------------------
c/o The Liberty Hampshire Company, LLC
227 West Monroe
Suite 4101
Chicago, Illinois 60606
Telecopy No.: (312) 977-1699
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE>
AGENT, JUNIOR
LENDER and RESIDUAL
LENDER: KEY CORPORATE CAPITAL INC
By /s/Steven T. Dixon
------------------------------
Title: Managing Director
------------------------
30 Federal Street
Boston, MA 02110
Attention: Risk Manager
Telecopy No.: (617) 654-2727
SIGNATURE PAGE TO CREDIT AGREEMENT
EXHIBIT 10.66
LEASE RECEIVABLES
SALE AND CONTRIBUTION AGREEMENT
Dated as of August 19, 1998
Between
CAI LEASE SECURITIZATION-II CORP.
as the Buyer
and
CAPITAL ASSOCIATES INTERNATIONAL, INC.
as the Originator
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms...........................................1
SECTION 1.02. Other Terms.....................................................5
SECTION 1.03. Computation of Time Periods.....................................5
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Agreement to Purchase...........................................5
SECTION 2.02. Making Purchases from the Originator............................6
SECTION 2.03. Security Deposits and Taxes.....................................7
SECTION 2.04. Collections.....................................................7
SECTION 2.05. Transfer of Records to the Buyer................................7
SECTION 2.06. Perfection of Liens; Further Assurances.........................8
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase........................8
SECTION 3.02. Conditions Precedent to All Purchases...........................8
SECTION 3.03. Effect of Payment of Purchase Price.............................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Originator................9
ARTICLE V
GENERAL COVENANTS OF THE ORIGINATOR
SECTION 5.01. Affirmative Covenants of the Originator........................12
SECTION 5.02. Reporting Requirements of the Originator.......................13
SECTION 5.03. Negative Covenants of the Originator...........................13
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ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Servicer........................................14
ARTICLE VII
INDEMNIFICATION; REPURCHASES
SECTION 7.01. Indemnities by the Originator..................................15
SECTION 7.02. Repurchase of Lease Receivables................................16
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc................................................16
SECTION 8.02. Notices, Etc...................................................17
SECTION 8.03. No Waiver; Remedies............................................17
SECTION 8.04. Binding Effect; Assignability..................................17
SECTION 8.05. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL.................................18
SECTION 8.06. Costs, Expenses and Taxes......................................18
SECTION 8.07. Execution in Counterparts; Severability........................19
SECTION 8.08. No Proceedings.................................................19
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LEASE RECEIVABLES SALE AND CONTRIBUTION AGREEMENT
Dated as of August 19, 1998
CAI LEASE SECURITIZATION-II CORP., a Delaware corporation (the
"Buyer"), and CAPITAL ASSOCIATES INTERNATIONAL, INC., a Colorado corporation (as
the "Originator"), agree as follows:
PRELIMINARY STATEMENTS.
(1) The Originator is in the business of leasing, financing and
providing associated services with respect to equipment;
(2) The Buyer is a special-purpose subsidiary of the Originator
established to purchase and otherwise acquire Lease Receivables, related
Equipment and other related Purchased/Contributed Assets;
(3) The Originator wishes from time to time to offer to sell or
contribute as capital to the Buyer Lease Receivables, related Equipment and
other related Purchased/Contributed Assets; and
(4) The Buyer desires to procure such Lease Receivables, related
Equipment and other related Purchased/Contributed Assets from the Originator.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION a. CERTAIN DEFINED TERMS. Unless otherwise defined herein, all
capitalized terms shall have the meanings set forth in the Credit Agreement
defined below. As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"AGENT" means Key Corporate Capital Inc., a Michigan corporation, in
its capacity as "Agent" for the Lenders pursuant to the Credit Agreement,
together with its successors and assigns.
"BUSINESS DAY" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks in New York City, Denver, Colorado or
Cleveland, Ohio.
"COLLECTIONS" means all cash collections and other cash proceeds of a
Purchased Lease Receivable and all related Remarketing Proceeds, including,
without limitation, all cash proceeds of Related Security and other related
Purchased/Contributed Assets with respect to such Purchased Lease Receivable and
the Repurchase Price received with respect to each Lease Receivable repurchased
by the Originator under SECTION 7.02; provided, that Collections shall not
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include any cash collections or cash proceeds that have been paid with respect
to a Lease prior to the first day of the month in which it became a
Purchased/Contributed Asset.
"CREDIT AGREEMENT" means that certain Credit Agreement dated as of
August 19, 1998, among the Buyer, as borrower, the Originator, as servicer,
Concord Minuteman Capital Company, LLC as senior lender, Key Corporate Capital,
Inc., as junior lender, residual lender and as the Agent.
"DOL" means the United States Department of Labor and any successor
department or agency.
"ELIGIBLE LEASE RECEIVABLE" means, at any time, a Lease Receivable
which would be an "Eligible Lease Receivable" under the Credit Agreement.
"EQUIPMENT" means any equipment leased or financed by the Originator as
lessor together with all additions, replacements, substitutions, parts, repairs,
accessories, accessions or attachments to such equipment; and, to the extent
added pursuant to an addendum to the related Lease, upgrades to such equipment.
"LEASE" means a contract in the form of a lease, installment sales
contract, unsecured promissory note, promissory note/security agreement or other
similar type of chattel paper pursuant to which the Originator leases Equipment
to or finances the acquisition of Equipment by an Obligor.
"LEASE RECEIVABLE" means, with respect to any Lease at any time, any
Periodic Installments of Rent then or thereafter payable by the Obligor under
such Lease, or any supplemental or additional payment, if any, required by the
terms of such Lease with respect to insurance, maintenance, ancillary products
and services and other specific charges, excluding any such payments or charges
which constitute sales or use taxes, personal property taxes, or the price for a
purchase option.
"OBLIGOR" means a Person obligated to make payments on a Lease
Receivable pursuant to a Lease.
"OBLIGOR UCC FILING REQUIREMENT" means, with respect to any Lease, that
the Originator has obtained appropriate UCC financing statements (Form UCC-1)
executed by the Obligor of such Lease which UCC financing statements have been
filed in all applicable jurisdictions, so that, if such Lease is a Finance
Lease, the Originator would reasonably be expected to have a first priority
perfected security interest in the Equipment subject to such Lease.
"PERIODIC INSTALLMENTS OF RENT" means, with respect to any Lease, the
aggregate amount of rent installments payable by the Obligor under such Lease,
excluding however, (i) all interim rents and (ii) all supplemental or additional
payments, if any, required by the terms of such Lease with respect to sales and
use taxes, personal property taxes, insurance, maintenance, purchase option
payments, ancillary products and services and other specific charges.
"PERMITTED ENCUMBRANCE" means any of the following:
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(a) liens, charges or other encumbrances for taxes and
assessments (i) which are not yet due and payable or (ii) the validity of which
are being contested in good faith by appropriate proceedings and with respect to
which the Originator, as applicable, is maintaining adequate reserves in
accordance with generally accepted accounting principles;
(b) liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have expired, or in
respect of which the Originator shall at any time in good faith be prosecuting
an appeal or proceeding for a review and in respect of which a stay of execution
pending such appeal or proceeding for review shall have been secured;
(c) liens, charges or other encumbrances or priority claims
incidental to the conduct of business or the ownership of properties and assets
(including mechanics', carriers', repairers', warehousemen's and attorneys'
liens and statutory landlords' liens) and deposits, pledges or liens to secure
statutory obligations, surety or appeal bonds or other liens of like general
nature incurred in the ordinary course of business and not in connection with
the borrowing of money, PROVIDED in each case, the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate actions
or proceedings the effect of which is to stay the enforcement of any such lien,
charge or encumbrance; and
(d) with respect to Equipment, the interest of an Obligor in
such Equipment under the related Lease.
"PURCHASE" has the meaning assigned to that term in SECTION 2.01.
"PURCHASE DATE" means each "Settlement Date" under the Credit Agreement
on which the Originator has requested in writing that a Purchase occur
hereunder.
"PURCHASE PRICE" has the meaning assigned to that term in SECTION 2.02.
"PURCHASED/CONTRIBUTED ASSETS" means, at any time, all then outstanding
Purchased Lease Receivables, the Lease and Equipment related thereto, Related
Security with respect to such Purchased Lease Receivables and Collections with
respect to, and other proceeds of, such Purchased Lease Receivables, including,
without limitation, all Collections of Purchased Lease Receivables relating to
payments due thereunder at any time during the month in which such Lease
Receivable became a Purchased Lease Receivable.
"PURCHASED LEASE RECEIVABLE" means any Lease Receivable which is listed
in a Sale Notice at any time hereafter submitted to and accepted by the Buyer
pursuant to SECTION 2.02, whether purchased by the Buyer or contributed to the
capital of the Buyer. Once a Lease Receivable appears on any such Sale Notice,
and has been accepted by the Buyer, it shall remain a Purchased Lease
Receivable; PROVIDED, HOWEVER, that with respect to any Lease Receivable that is
repurchased by the Originator pursuant to SECTION 7.02, following the Buyer's
receipt of the Repurchase Price for such Lease Receivable, "PURCHASED LEASE
RECEIVABLE" shall not include the Lease Receivable so repurchased.
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"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 by the Originator with respect to Leases included in the
Purchased/Contributed Assets and the related Obligors and Equipment.
"RELATED SECURITY" means with respect to any 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 Buyer of all UCC financing
statements or other filings covering any collateral securing payment of
the Lease Receivable arising under such Lease;
(iii) all guarantees, indemnities, 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;
(iv) all of the Originator's right, title and interest in and
to any proceeds of the sale or lease of Equipment that was repossessed
from or returned by an Obligor of a Lease Receivable that was the
subject of such Lease;
(v) all Records related to such Lease; and
(vi) all proceeds of the foregoing.
"REPURCHASE PRICE" means, with respect to a Lease Receivable, an amount
equal to the Purchase Price attributable to such Lease Receivable recalculated
as if the date of Repurchase were the "PURCHASE DATE" and using the same
assumptions for such Lease Receivable as were used in connection with its
original acquisition.
"SALE NOTICE" has the meaning assigned to that term in Section 2.02.
"TERMINATION DATE" has the meaning assigned to the term "Termination
Date" in the Credit Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
SECTION 1.02. OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.
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SECTION 1.03. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
ARTICLE II.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. AGREEMENT TO PURCHASE. Prior to the Termination Date and
subject to the conditions of this Agreement, the Buyer shall, on each Purchase
Date, purchase, or agree to have contributed to it, all the Originator's right,
title and interest in and to the Lease Receivables arising under the Leases
described in the Sale Notice for such Purchase Date, together with all right,
title and interest of Originator in and to the Purchased/Contributed Assets
related thereto, including, without limitation, the Equipment related thereto
(each, a "Purchase"), from the Originator on the terms hereof.
(b) Although the parties hereto intend that each transfer made
hereunder shall constitute a sale of chattel paper with respect to Purchased
Lease Receivables and related Leases, and a capital contribution of the other
related Purchased/Contributed Assets, to protect the Buyer in the event that,
contrary to the express intent of the parties hereto, the transactions
contemplated hereunder are characterized as loans from the Buyer to the
Originator, the Originator hereby pledges, grants a security interest in and
assigns to the Buyer, all of the Originator's right and title to and interest in
the Purchased Lease Receivables and the other Purchased/Contributed Assets as
security for such loans and for the payment and performance of all obligations
of the Originator hereunder. The foregoing pledge, grant of a security interest
and assignment from Originator to Buyer is an unconditional, present pledge,
grant of a security interest in, and assignment of the Purchased Lease
Receivables and the other Purchased/Contributed Assets.
SECTION 2.02. MAKING PURCHASES FROM THE ORIGINATOR.
(a) At least 10 Business Days before each Purchase Date, the
Originator shall give the Buyer, the Servicer and the Agent written notice of
the Purchase to occur on such date (in each case, a "SALE NOTICE") including (i)
a schedule listing all Leases and related Equipment subject to such Purchase
(which shall only include Lease Receivables that are Eligible Lease
Receivables), (ii) a list of Related Security with respect to such Lease
Receivables (to the extent such information is available to Buyer after
reasonable diligence), (iii) the amortization schedule (in the aggregate) of the
Lease Receivable arising under such Leases, and (iv) the applicable Purchase
Price Discount Rate (as hereinafter defined),
(b) The purchase price (the "PURCHASE PRICE") payable for the
Purchased/Contributed Assets transferred to the Buyer on any Purchase Date shall
be an amount equal to the aggregate present values of the aggregate amount of
the remaining Periodic Installments of Rent under each Lease listed in the
related Sale Notice, with such aggregate amount discounted to present value
using the Purchase Price Discount Rate applicable on such Purchase Date and a
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payment schedule of the first day of each month commencing with the first day of
the month in which the Purchase Price is calculated. "PURCHASE PRICE DISCOUNT
RATE" means, for purposes of the foregoing calculation, the rate set forth in
each Sale Notice (and agreed to by the Buyer), which rate is a reflection of
actual historical losses of the Originator with respect to similar Leases
(taking into account, among other things, the credit quality of the Obligors,
the type of Equipment and the remaining term on the Leases) and the anticipated
carrying costs of the Buyer (which may include a weighted average of the Senior
Discount Rate and the Junior Discount Rate).
(c) Except as otherwise provided below in this SECTION 2.02,
the Purchase Price for the Purchased/Contributed Assets sold by the Originator
under this Agreement shall be payable in full in cash by the Buyer, in each case
on the applicable Purchase Date, except that the Buyer may, with respect to any
Purchase, offset against such Purchase Price any amounts owed by the Originator
to the Buyer hereunder with respect to repurchase obligations which remain
unpaid. On the date of each Purchase, the Buyer shall, upon satisfaction of the
applicable conditions set forth in Article III, make available to the Originator
the portion of the Purchase Price payable in cash referred to above in same day
funds.
(d) Notwithstanding SECTION 2.02(c) above, if, on any Purchase
Date, the Buyer has insufficient funds to pay in full the Purchase Price owed on
such day, then the Originator shall be deemed to have contributed to the capital
of the Buyer Purchased/Contributed Assets having a Purchase Price equal to the
portion of the total Purchase Price owed on such day which is not paid in cash.
SECTION 2.03. Security Deposits and Taxes.
(a) The amount of any security deposits received by Originator
attributable to any Lease included in any Sale Notice shall be held by
Originator and either returned to the Obligor or applied to the Obligor's lease
obligations by remitting to Buyer, both in accordance with the terms of such
Lease.
(b) (i) The amount of any sales or use taxes or personal
property taxes attributable to any Lease, Lease Receivable, Equipment or other
Purchased/Contributed Asset received by Originator with respect to any Lease
included in a Sale Notice, and not yet applied to payment of such taxes, shall
be held by Originator in trust in its segregated tax account and applied to the
payment of such taxes before the same becomes delinquent.
(ii) The amount of any sales or use taxes or personal
property taxes attributable to any Lease, Lease Receivable, Equipment or other
Purchased/Contributed Asset paid by an Obligor after the Purchase Date for such
property, shall be held by Buyer (either by Buyer or through its agents,
including Servicer) in trust in a segregated tax account on behalf of the
Obligor to be applied to the payment of such taxes before the same becomes
delinquent.
(c) (i) The amount of any insurance premiums attributable
to any Lease, Lease Receivable, Equipment or other Purchased/Contributed Asset
received by Originator with respect to any Lease included in a Sale Notice, and
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not yet applied to payment of such insurance premiums, shall be held by
Originator in trust and applied to the payment of insurance premiums before the
same becomes delinquent.
(ii) The amount of any insurance premiums attributable
to any Lease, Lease Receivable, Equipment or other Purchased/Contributed Asset
paid by an Obligor after the Purchase Date for such property, shall be held by
Buyer (either by Buyer or through its agents, including Servicer) in trust on
behalf of the Obligor to be applied to the payment of such insurance premiums
before the same becomes delinquent.
SECTION 2.04. COLLECTIONS. Any Collections received (or deemed to have
been received) by the Originator shall be held in trust by Originator for the
benefit of the Buyer and shall be remitted directly to the Buyer by depositing
such Collections in the Lockbox Account within two Business Days of Originator's
knowledge of receipt thereof.
SECTION 2.05. TRANSFER OF RECORDS TO THE BUYER.
(a) In connection with the Purchases of Lease Receivables and
related Purchased/Contributed Assets hereunder, the Originator hereby sells,
transfers, assigns and otherwise conveys to the Buyer all of the Originator's
right and title to and interest in the Records relating to all Purchased Lease
Receivables, and the Leases and Equipment included in the Purchased/Contributed
Assets, without the need for any further documentation in connection with any
Purchase. In furtherance of the foregoing, the Originator hereby grants to the
Buyer and its agents, including the Servicer an irrevocable, non-exclusive
license to use, without royalty or payment of any kind, all software used by the
Originator to account for the Purchased Lease Receivables and related
Purchased/Contributed Assets, to the extent necessary to administer such assets,
whether such software is owned by the Originator or is owned by others and used
by the Originator under license agreements with respect thereto. The license
granted hereby shall be irrevocable, and shall terminate upon the termination of
this Agreement.
(b) The Originator shall take such action reasonably requested
by the Buyer and/or the Servicer, from time to time hereafter, that may be
necessary or appropriate, including the transfer of certain Records to the
Custodian as provided in SECTION 5.01(d), to ensure that Buyer has (i) access
to, and an enforceable and ownership interest in, the Records relating to the
Purchased Lease Receivables and related Purchased/Contributed Assets and (ii) an
enforceable right (whether by license or sublicense or otherwise) to use all of
the computer software used to account for the Purchased Lease Receivables and
related Purchased/Contributed Assets and/or to recreate such Records.
SECTION 2.06. PERFECTION OF LIENS; FURTHER ASSURANCES.
(a) Upon the request of the Buyer, the Originator shall, at
its expense, promptly execute and deliver all further instruments and documents,
and take all further action (including, without limitation, the execution and
filing of such financing or continuation statements, or amendments thereto or
assignments thereof), that may be necessary or desirable, or that the Buyer may
request, in order to (i) assure compliance with the Obligor UCC Filing
Requirement and (ii) perfect and protect any ownership or security interest
granted or purported to be granted to the Buyer hereunder or to enable the Buyer
to exercise and enforce its rights and remedies hereunder with respect to any
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Purchased/Contributed Assets. The Originator hereby authorizes the Buyer to file
one or more continuation statements, amendments and/or assignments of financing
statements, relative to all or any part of the Purchased/Contributed Assets now
existing or hereafter arising without the signature of the Originator where
permitted by law. A carbon, photographic or other reproduction of this Agreement
or any financing statement covering the Purchased/Contributed Assets or any part
thereof shall be sufficient as a financing statement. The Originator will
furnish to the Buyer from time to time statements and schedules further
identifying and describing the Purchased/Contributed Assets and such other
reports in connection with the Purchased/Contributed Assets as the Buyer may
reasonably request, all in reasonable detail.
(b) The Originator shall mark its master data processing
records evidencing the Purchased Lease Receivables and related Leases with a
legend, acceptable to the Buyer, evidencing that the Buyer has acquired the
ownership thereof as provided in this Agreement. If the Originator fails to
perform any of its agreements or obligations under this Agreement, the Buyer may
(but shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the expenses of the Buyer incurred in connection
therewith shall be payable by the Originator upon the Buyer's demand therefor;
PROVIDED, HOWEVER, prior to taking any such action, the Buyer shall give notice
of such intention to the Originator and provide the Originator with a reasonable
opportunity to take such action itself.
ARTICLE 3.
CONDITIONS OF PURCHASES
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial
Purchase shall be subject to the condition precedent that the Credit Agreement
shall have become effective and all conditions precedent to the initial Advances
thereunder shall have been satisfied or waived in accordance with the terms
thereof.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase
(including the initial Purchase) by the Buyer from the Originator shall be
subject to the further conditions precedent that (a) with respect to any such
Purchase, no later than 10 Business Days prior to the date of such Purchase, the
Originator shall have delivered to the Buyer, in form and substance satisfactory
to the Buyer, a completed Sale Notice containing the information set forth in
SECTION 2.02(a) hereof and such additional information as may be reasonably
requested by the Buyer and (b) on the date of such Purchase the representations
and warranties contained in SECTION 4.01 are correct in all material respects on
and as of such day as though made on and as of such date, and the Originator by
accepting the cash portion of the Purchase Price shall be deemed to have
certified thereto.
SECTION 3.03. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment of
the Purchase Price for any Purchase (whether in cash or through a capital
contribution), title to the Purchased Lease Receivables and the related
Purchased/Contributed Assets shall vest in the Buyer, whether or not the
conditions precedent to such Purchase were in fact satisfied.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR. The
Originator represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Originator is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction named at the beginning hereof and is duly qualified to
do business, and is in good standing, in every jurisdiction in which the nature
of its business requires it to be so qualified, except where the failure to be
so qualified would materially adversely affect the ability of the Originator to
perform its obligations hereunder.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution,
delivery and performance by the Originator of this Agreement and the
transactions contemplated hereby are within the Originator's corporate powers,
have been duly authorized by all necessary corporate action on the part of the
Originator, do not contravene (i) the Originator's charter or by- laws, (ii) any
law, rule or regulation applicable to the Originator, (iii) any material
contractual restriction contained in any material indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note, or other material
agreement or instrument binding on the Originator or its property or (iv) any
material order, writ, judgment, award, injunction or decree binding on the
Originator or its property, and do not result in or require the creation of any
Adverse Claim upon or with respect to any of its properties pursuant to any
material indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note or other material agreement binding on the Originator or
its property (other than in favor of the Buyer as contemplated hereunder); and
no transaction contemplated hereby requires compliance with any bulk sales act
or similar law. This Agreement has been duly executed and delivered on behalf of
the Originator.
(c) GOVERNMENTAL CONSENT. To the Originator's knowledge, no
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for the due execution,
delivery and performance by the Originator of this Agreement or any other
agreement, document or instrument to be delivered hereunder, except for filings
under the UCC.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement
constitutes the legal, valid and binding obligation of the Originator
enforceable against the Originator in accordance with its terms, subject to the
Enforceability Exceptions.
(e) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Originator threatened in writing, against
the Originator or any of its subsidiaries, or the property of the Originator or
any of its subsidiaries, in any court, or before any arbitrator of any kind, or
before or by any governmental body, which (i) assert the invalidity of this
Agreement or any action to be taken by the Originator in connection, or (ii)
seek to prevent the consummation of the transactions contemplated by this
Agreement. The Originator is not in default with respect to any order of any
court, arbitrator or governmental body except for defaults with respect to
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orders of governmental agencies that would not reasonably be expected to have a
material adverse effect on the interests of the Buyer in the
Purchased/Contributed Assets or on the ability of the Originator to consummate
the transactions contemplated by this Agreement.
(f) USE OF PROCEEDS. No proceeds of any Purchase will be used
by the Originator to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(g) PERFECTION OF INTEREST IN PURCHASED/CONTRIBUTED ASSETS.
Prior to the Buyer's Purchase and/or acquisition of each Purchased/Contributed
Asset hereunder, each Purchased Lease Receivable shall, together with the
related Purchased/Contributed Assets, be owned by the Originator free and clear
of any Adverse Claim except as provided herein or arising as a result of any
action taken by the Buyer or any assignee thereof, and upon each Purchase, the
Buyer shall acquire a valid and perfected first priority ownership interest in
each Purchased Lease Receivable then existing or thereafter arising and
ownership of the Related Security, Collections and Equipment with respect
thereto, in each case free and clear of any Adverse Claim except as provided
herein or arising as a result of any action taken by the Buyer or any assignee
thereof. Ownership of the Purchased Lease Receivable and the related
Purchased/Contributed Assets shall be transferred to Buyer in accordance with
applicable state law, including without limitation, delivery of all chattel
paper related to such Purchased/Contributed Asset to the Collateral Custodian on
behalf of Buyer, filing of any UCC financing statements under Article 9 of the
Uniform Commercial Code as it relates to sales of accounts and of chattel paper,
and bills of sale for the related Equipment. No effective financing statement or
other instrument similar in effect filed by or permitted to be filed by the
Originator covering any Purchased Lease Receivable, the Related Security,
Collections or, the other Purchased/Contributed Assets with respect thereto
shall at any time be on file in any recording office except as such may be filed
in favor of the Buyer or its assignees in accordance with this Agreement and,
with respect to the related Equipment, against the related Obligor in favor of
the Originator.
(h) ACCURACY OF INFORMATION. No Sale Notice or other written
information or reports (if prepared by the Originator) furnished or to be
furnished by the Originator to the Buyer 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 Buyer, as the case may be, at
such time) as of the date so furnished.
(i) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief
place of business and chief executive office of the Originator are located at
the address of the Originator referred to in SECTION 8.02 hereof and the
locations of the offices where the Originator keeps all the Records are listed
on EXHIBIT A (or at such other locations, notified to the Buyer in accordance
with SECTION 5.01(e), in jurisdictions where all action required by SECTION 2.06
and SECTION 6.02 has been taken and completed).
(j) LOCKBOX ACCOUNT. Each Obligor of a Purchased Lease
Receivable has been instructed to remit payment on the Purchased Lease
Receivables to the Lockbox Account. The bank at which the Lockbox Account is
maintained is the only bank to which Obligors are instructed to remit
Collections of Purchased Lease Receivables.
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(k) NO TRADE NAMES. Except as described in Exhibit B, the
Originator has no trade names, fictitious names, assumed names or "doing
business as" names.
(l) DOCUMENTS. This Agreement is the only agreement pursuant
to which the Buyer purchases and receives contributions of Leases, Lease
Receivables and any other accounts receivable from the Originator, and the
Facility Documents represent all material agreements between Capital Associates
International, Inc., as Originator, Servicer or otherwise and the Buyer. Except
as otherwise expressly provided in ss. 7.02, all such assets are transferred
without recourse to the Originator.
(m) TAXES. The Originator has filed or caused to be filed all
Federal, and all material state and local tax returns which are required to be
filed by it, and has paid or caused to be paid all taxes before such taxes
became delinquent, other than any taxes or assessments the validity of which are
being contested in good faith by appropriate proceedings.
(n) SOLVENCY. The Originator is not "insolvent" (as such term
is defined in ss.101(32)(A) of the Bankruptcy Code).
(o) OWNERSHIP OF THE BUYER. One hundred percent (100%) of the
outstanding capital stock of the Buyer is directly owned (both beneficially and
of record) by the Originator. Such stock is validly issued, fully paid and
nonassessable and there are no options, warrants or other rights to acquire
capital stock from the Buyer.
(p) NO FRAUDULENT CONVEYANCE. The transactions contemplated by
this Agreement and by each of the Facility Documents are being consummated by
the Originator in furtherance of the Originator's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors.
(q) SOFTWARE. Each of the Buyer and the Servicer, as assignee
of the Buyer, has (or will have, concurrently with the effectiveness hereof) an
enforceable right (whether by license, sublicense or assignment) to use all of
the computer software used to account for the Purchased Lease Receivables and
other Purchased/Contributed Assets to the extent necessary to administer the
Purchased Lease Receivables and other Purchased/Contributed Assets, except where
the failure to have or obtain such right would not materially adversely affect
(i) the interests hereunder of the Buyer in the Purchased/Contributed Assets, or
(ii) the ability of the Originator to perform its obligations hereunder.
(r) ELIGIBLE LEASE RECEIVABLES. All Purchased Lease
Receivables included on a Sale Notice are and will be Eligible Lease Receivables
as of the Purchase Date for such Purchased Lease Receivable.
ARTICLE 5.
GENERAL COVENANTS OF THE ORIGINATOR
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE ORIGINATOR. The Originator
will, unless the Buyer shall otherwise consent in writing:
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(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with all applicable laws, rules, regulations and orders with respect to it, its
business and properties and in creating any Lease Receivables and related Leases
intended to become Purchased Lease Receivables.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualifications would
materially adversely affect (i) the interests hereunder of the Buyer or (ii) the
ability of the Originator to perform its obligations hereunder.
(c) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The original
counterpart of each Lease subject to a Purchase hereunder shall be delivered to
the Collateral Custodian within ten days following the Purchase Date of such
Lease and all other Records relating thereto shall be delivered to the Servicer;
such original counterpart and any related master lease agreement and all such
Records shall in any event be marked with a legend indicating the interests of
the Buyer and its successors and assigns.
(d) LOCATION OF RECORDS. Keep its chief place of business and
chief executive office, and the offices where it keeps the Records, at the
address(es) of the Originator referred to in SECTION 4.01(i), or, in any such
case, upon 30 days' prior written notice to the Buyer, at such other locations
within the United States where all action required by SECTION 2.06 and SECTION
6.02 shall have been taken and completed.
(e) COLLECTIONS. Instruct all Obligors of Purchased Lease
Receivables to cause all Collections to be deposited directly to the Lockbox
Account, and if the Originator shall receive any Collections, the Originator
shall remit such Collections to the Lockbox Account within two Business Days
following the Originator's knowledge of its receipt thereof.
(f) COMPLIANCE WITH ERISA. Establish, maintain and operate all
Plans to comply in all material respects with the provisions of ERISA, the IRC,
and all other applicable laws, and the regulations and interpretations
thereunder.
(g) OBLIGOR UCC FILING REQUIREMENT. With respect to each Lease
Receivable that constitutes a Purchased Lease Receivable and all Equipment
related thereto, comply with the Obligor UCC Filing Requirement.
(h) SEPARATE IDENTITY. The Originator acknowledges that the
Buyer, the Agent and the Lenders are entering into the transactions contemplated
by this Agreement and the other Facility Documents in reliance upon the Buyer's
identity as a separate legal entity from the Originator. Accordingly, the
Originator has reviewed SECTION 6.01(l) of the Credit Agreement and agrees to
comply with the requirements therein.
(i) FACILITY DOCUMENTS. Comply in all material respects with
the terms of and employ the procedures outlined in this Agreement.
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SECTION 5.02. REPORTING REQUIREMENTS OF THE ORIGINATOR. The Originator
will, unless the Buyer shall otherwise consent in writing, furnish to the Buyer,
as soon as reasonably practicable, from time to time, such information,
documents, records or reports respecting the Purchased Lease Receivables or the
conditions or operations, financial or otherwise, of the Originator as the Buyer
may from time to time reasonably request in order to protect the interests of
the Buyer under or as contemplated by this Agreement.
SECTION 5.03. NEGATIVE COVENANTS OF THE ORIGINATOR. From the date
hereof, the Originator will not, without the written consent of the Buyer:
(a) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Make any
amendment, change or other modification to the terms of the Lockbox Account
Agreement or its instructions to Obligors as described in Section 5.01(g).
(b) CHANGE IN CORPORATE NAME. Make any change to its corporate
name or use any trade names, fictitious names, assumed names or "doing business
as" names other than those described in EXHIBIT B, unless prior to the effective
date of any such name change or use, Originator delivers to the Buyer such
Financing Statements (Form UCC-1 and UCC-3) executed by Originator which the
Buyer may reasonably request to reflect such name change or use, together with
such other documents and instruments that the Buyer may request in connection
therewith in order to maintain a first priority interest in and good title in
the Buyer in the Purchased/Contributed Assets free from Adverse Claims.
(c) ERISA MATTERS. (i) Engage or permit any ERISA Affiliate to
engage in any prohibited transaction for which an exemption is not available or
has not previously been obtained from the DOL; (ii) permit to exist any
accumulated funding deficiency, as defined in Section 302(a) of ERISA and
Section 412(a) of the IRC, or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to any
Multiemployer Plan that the Originator or any ERISA Affiliate may be required to
make under the agreement relating to such Multiemployer Plan or any law
pertaining thereto; (iv) terminate any Benefit Plan so as to result in any
material liability; or (v) permit to exist any occurrence of any reportable
event described in Title IV of ERISA which represents a material risk of a
material liability of the Originator or any ERISA Affiliate under ERISA or the
IRC.
(d) TERMINATE OR REJECT LEASES. 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 such termination or rejection, the Originator repurchases the Purchased
Lease Receivable pursuant to SECTION 7.02 hereof.
(e) FACILITY DOCUMENTS. Except as otherwise permitted under
SECTION 8.01, terminate, amend or otherwise modify any Facility Document to
which it is a party or grant any waiver or consent thereunder.
(f) ACCOUNTING TREATMENT. Prepare any financial statements or
other statements which shall account for the transactions contemplated by this
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Agreement in any manner other than as the sale, or a capital contribution, of
the Purchased/Contributed Assets by the Originator to the Buyer.
ARTICLE 6.
ADMINISTRATION AND COLLECTION
SECTION 6.01. DESIGNATION OF SERVICER. Consistent with the Buyer's
ownership of the Purchased Lease Receivables and the other Purchased/Contributed
Assets, and subject to the Credit Agreement, the Buyer shall have the sole right
to service, administer and collect the Purchased Lease Receivables and
Collections attributable thereto, and to delegate such right to the Servicer.
Pursuant to the Credit Agreement, the Originator has been appointed by the Buyer
and the Agent as the Servicer thereunder and the Originator has accepted such
appointment thereunder. The ability of Originator to maintain its relationships
with the Obligors is a valuable right to Originator and part of the
consideration for the Purchases hereunder. The Originator hereby consents to its
appointment as Servicer and agrees to perform each of the duties and obligations
of the Servicer pursuant to the terms of the Credit Agreement until removed or
replaced pursuant to the terms thereof. In addition, the Originator acknowledges
that if the Originator is replaced as Servicer pursuant to SECTION 7.02 of the
Credit Agreement, the Agent and the successor Servicer shall have all of the
rights, duties, and obligations of Servicer under the Credit Agreement.
ARTICLE 7.
INDEMNIFICATION; REPURCHASES; SUBSTITUTION
SECTION 7.01. INDEMNITIES BY THE ORIGINATOR. Without limiting any other
rights which the Buyer may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Buyer from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or incurred
by the Buyer arising out of or as a result of this Agreement or the ownership of
the Purchased/Contributed Assets or in respect of any Lease Receivable or any
Lease relating to or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the Originator (or any of its officers) under or in connection
with this Agreement, any Sale Notice or any other information or
report delivered by the Originator pursuant hereto, which shall have
been false or incorrect in any material respect when made or deemed
made or delivered;
(ii) the failure by the Originator to comply with any term,
provision or covenant contained in this Agreement, or with any
applicable law, rule or regulation as of the Purchase Date for any
Purchased Lease Receivable, the related Lease, the Related Security or
the other Purchased/Contributed Assets, or, as of the Purchase Date,
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the nonconformity of any Purchased Lease Receivable, the related
Lease, the Related Security or the other Purchased/Contributed Assets
with any such applicable law, rule or regulation;
(iii) the reduction of Purchased Lease Receivables due to any
Permitted Encumbrance (except in favor of the Buyer or its assignees)
whether existing at the time of the Purchase of such Lease Receivable
or at any time thereafter to the extent arising by, through or under
Originator but not otherwise; and
(iv) any products liability claim o r personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with the Equipment which
is the subject of any Purchased Lease Receivable or Lease.
The foregoing Indemnified Amounts shall exclude: (i) Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of the
Buyer, or (ii) recourse for an Obligor's inability for Credit reasons to make
payments of Lease Receivables.
Any amounts subject to the indemnification provisions of this SECTION 7.01 shall
be paid by the Originator to the Buyer within two Business Days following the
Buyer's demand therefor.
SECTION 7.02. REPURCHASE OF LEASE RECEIVABLES AND EQUIPMENT. The
following rights are in addition to and not in limitation of any other rights or
remedies that the Buyer may have hereunder.
(a) In the event that any representation or warranty of the
Originator in SECTION 4.01 hereof is incorrect at the time made and materially
and adversely affects the interest of the Buyer, the Agent or the Lenders, then
the Originator shall eliminate or otherwise cure the circumstance or condition
which has caused such representation or warranty to be incorrect within 15 days
(or such longer period as the Buyer and Agent may in their discretion consent
to) after the discovery thereof by or notice thereof to the Originator. If such
breach relates to whether a Purchased Lease Receivable is an Eligible Lease
Receivable as of the Purchase Date, and the Originator fails or is unable to
cure such circumstances or condition within such cure period, then on or before
the next succeeding Settlement Date after the expiration of such cure period,
the Originator shall purchase, for the Repurchase Price, each Purchased Lease
Receivable and the related Purchased/Contributed Assets as to which such
representation or warranty is incorrect. The proceeds of any such repurchase
shall be remitted by the Originator to Buyer by depositing into the Lockbox
Account.
(b) Any such repurchase by the Originator from the Buyer of a
Purchased Lease Receivable and related Purchased/Contributed Assets pursuant to
this SECTION 7.02 shall be made without recourse or warranty, express or implied
(other than a representation and warranty that such Lease Receivable and related
Purchased/Contributed Assets are free and clear of any Adverse Claim created by
or through the Buyer). The Originator and the Buyer shall execute and deliver
such instruments of transfer or assignments as are necessary to vest ownership
of such Lease Receivable and such Purchased/Contributed Assets in the
Originator.
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ARTICLE 8.
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Agreement nor consent to any departure by the Originator from
the terms hereof, shall, subject to the provisions ofss. 8.04, in any event be
effective unless the same shall be in writing and signed by (i) the Originator
and the Buyer (with respect to an amendment) or (ii) the Buyer (with respect to
a waiver or consent by it) or the Originator (with respect to a waiver or
consent by it), as the case may be, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. This Agreement contains a final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement (together with the exhibits hereto) among
the parties hereto with respect to the subject matter hereof, superseding all
prior oral or written understandings.
SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, upon receipt, or
in the case of delivery by mail, three days after being deposited in the mails,
or, in the case of notice by facsimile, when electronics communications of a
receipt is obtained, in each case addressed as aforesaid.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of the Buyer
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8.04. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the Originator, the Buyer and their
respective successors and permitted assigns (which successors of the Originator
shall include a trustee in bankruptcy). The Originator may not assign any of its
rights and obligations hereunder or any interest herein without the prior
written consent of the Buyer and the Agent. The Originator acknowledges that the
Buyer shall assign to the Agent, for the benefit of the Lenders, as collateral
security for its obligations under the Credit Agreement, all of its rights,
remedies, powers and privileges hereunder. The Originator agrees that the Agent,
as the assignee of the Buyer, shall, subject to the terms of the Credit
Agreement, have the right to enforce this Agreement and to exercise directly all
of the Buyer's rights and remedies under this Agreement (including, without
limitation, the rights and remedies under SECTIONS 6.01, 6.02, 7.01, 7.02, and
8.01), and the Originator agrees to cooperate fully with the Agent and the
Servicer in the exercise of such rights and remedies. Without limitation by the
foregoing, the Originator hereby acknowledges that the Buyer and the Servicer
have agreed pursuant to the Credit Agreement and certain related agreements
that, subject to the restrictions set forth therein, the Agent shall be entitled
to exercise the Buyer's rights under this Agreement. The Originator hereby
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consents to the foregoing and agrees to cooperate with any such Person electing
to exercise the Buyer's rights under this Agreement. The Buyer may assign at any
time its rights and obligations hereunder and interests herein to any other
Person without the consent of the Originator. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms which shall remain in full force and effect until such time as this
Agreement shall terminate; provided, however, that the rights and remedies with
respect to any breach of any representation and warranty made by the Originator
pursuant to Article IV and the indemnification and payment provisions of Article
VII and Article VIII shall be continuing and shall survive any termination of
this Agreement.
SECTION 8.05. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS
OTHER THAN ss. 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF NEW YORK, WHICH SHALL
BE APPLICABLE HERETO) OF THE STATE OF NEW YORK.
(b) THE ORIGINATOR AND THE BUYER HEREBY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED THIRTY DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U. S.
MAILS, POSTAGE PREPAID. THE ORIGINATOR AND THE BUYER EACH HEREBY WAIVE ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE ORIGINATOR OR THE BUYER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT EITHER'S RIGHT TO BRING ANY ACTION
OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE ORIGINATOR AND THE BUYER EACH HEREBY WAIVES ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, SOUNDING IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
SECTION 8.06. COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification under ARTICLE VII hereof, the Originator agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution and delivery (including periodic auditing and any requested
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amendments, waivers or consents) of this Agreement and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Buyer with respect thereto and with
respect to advising the Buyer as to its rights and remedies under this
Agreement, and the other agreements executed pursuant hereto and all costs and
expenses, if any (including reasonable counsel fees and expenses), in connection
with the enforcement of this Agreement and the other agreements and documents to
be delivered hereunder.
(b) In addition, the Originator shall pay any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other agreements and documents to be delivered hereunder, and agrees to
indemnify the Buyer and its assignees against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 8.07 EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 8.08. NO PROCEEDINGS. The Originator hereby agrees that it will
not institute against the Buyer any involuntary proceeding or otherwise
institute any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law so long as any obligations of the Buyer shall be outstanding or there shall
not have elapsed one year plus one day since the last day on which any such
obligations shall have been outstanding.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BUYER: CAI LEASE SECURITIZATION-II CORP.
By /s/Anthony M. DiPaolo
----------------------------------
Name: Anthony M. DiPaolo
Title: President
Address:
7175 West Jefferson Avenue, Suite 4000
Lakewood, CO 80235
Attn: Anthony M. DiPaolo
Telecopy No.: 303-980-7017
ORIGINATOR: CAPITAL ASSOCIATES INTERNATIONAL, INC.
By /s/Anthony M. DiPaolo
----------------------------------
Name: Anthony M. DiPaolo
Title: Chief Financial Officer and Treasurer
Address:
7175 West Jefferson Avenue, Suite 4000
Lakewood, CO 80235
Attn: Anthony M. DiPaolo
Telecopy No.: 303-980-7017
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EXHIBIT 10.67
Execution Copy
CUSTODY AGREEMENT
Dated as of August 19, 1998
CAI LEASE SECURITIZATION - II CORP., a Delaware corporation (the
"Borrower"), CAPITAL ASSOCIATES INTERNATIONAL, INC., a Colorado corporation
("Capital Associates"), as originator (the "Originator"), KEY CORPORATE CAPITAL
INC., as agent for the "Lenders" under the "Credit Agreement" defined below (the
"Agent"), and BANKERS TRUST COMPANY ("Bankers Trust") agree as follows:
PRELIMINARY STATEMENTS.
(1) The Agent has requested that Bankers Trust act as collateral
custodian (the "Collateral Custodian") for the purposes of receiving and holding
all original copies of Leases which have been sold by Capital Associates to the
Borrower and in which a security interest has been granted by the Borrower to
the Agent for the benefit of the "Lenders" under the Credit Agreement pursuant
to that certain Credit Agreement dated August 19, 1998 (the "Credit Agreement"),
among the Borrower, Capital Associates, as servicer (the "Servicer"), Concord
Minutemen Capital Company, LLC, as Senior Lender, and Key Corporate Capital Inc.
as Junior Lender, Residual Lender and Agent. Capitalized terms which are used
herein and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Credit Agreement.
(2) Bankers Trust is willing to act in such capacity as Collateral
Custodian in order to perfect the security interest of the Borrower as purchaser
of such Leases and to perfect the security interest of the Agent in such Leases.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used herein, the following terms shall
have the meanings assigned thereto below:
"AGREEMENT" shall mean this Custody Agreement, as the same may from
time to time be amended, restated, supplemented or otherwise modified.
"AUTHORIZED EMPLOYEE" means any of the employees of the Agent listed on
SCHEDULE I hereto and any other employee of the Agent who is hereafter
authorized in writing by an existing Authorized Employee (which authorization
must be delivered to the Borrower and to the Collateral Custodian) to act as an
Authorized Employee of Agent hereunder, PROVIDED, HOWEVER, that any Authorized
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Employee may send a notice to the Borrower and the Collateral Custodian
informing them of any other Authorized Employee who ceases to be an Authorized
Employee.
"REPORT" has the meaning ascribed to such term in Section 2.08.
"REPORT EFFECTIVE DATE" has the meaning ascribed to such term in
Section 2.08.
"TERMINATION DATE" means that date when the Agent notifies the
Collateral Custodian in writing that the Credit Agreement is terminated and all
amounts payable under the Credit Agreement have been paid.
ARTICLE II
COLLATERAL CUSTODIAN
SECTION 2.01. DESIGNATION AND APPOINTMENT OF BANKERS TRUST AS
COLLATERAL CUSTODIAN. Bankers Trust is hereby designated as, and hereby agrees
to perform the duties and obligations of, the Collateral Custodian under, and as
such duties and obligations are set forth in, this Agreement. Bankers Trust
shall serve as Collateral Custodian from the date hereof until the Termination
Date, subject to resignation or removal pursuant to SECTION 4.05 hereof.
SECTION 2.02. DUTIES OF THE COLLATERAL CUSTODIAN. At all times that
Bankers Trust shall be the Collateral Custodian, it shall duly discharge its
duties of receiving and holding the Leases in accordance with this Agreement. As
to any matters not expressly provided for by this Agreement, the Collateral
Custodian shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the written instructions
of the Agent (executed by an Authorized Employee); PROVIDED, HOWEVER, that the
Collateral Custodian shall not be required to take any action which is contrary
to this Agreement or applicable law.
SECTION 2.03. LEASES. (a) From time to time as provided in the Lease
Receivables Sale and Contribution Agreement and the Credit Agreement, the Leases
sold by Capital Associates to the Borrower and pledged by the Borrower to the
Agent for the benefit of the "Lenders" under the Credit Agreement shall be
delivered by the Originator or the Borrower to the Collateral Custodian for
purposes of perfecting the Borrower's security interest therein as purchaser of
the Leases and perfecting the security interest therein of the Agent on behalf
of the Lenders under the Credit Agreement. Each such Lease shall be delivered to
the Custodian together with an electronic tape and shall be held by the
Collateral Custodian pursuant to the terms hereof. As used herein, "Lease" shall
mean a certified copy of the original Master Lease, the original equipment
schedule and riders, if any, thereto, and an original acceptance certificate.
(b) Within five (5) Business Days of delivery by the Borrower to the
Collateral Custodian of any Leases, as provided for in SECTION 2.03(a) above,
the Collateral Custodian shall deliver to the Agent a certification with respect
to such Leases in the form attached hereto as EXHIBIT A.
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SECTION 2.04. REMOVAL OF DOCUMENTS. (a) The Agent shall have the
unlimited right, upon written notice (by facsimile or otherwise) executed by an
Authorized Employee and delivered to the Collateral Custodian, with a copy sent
to the Borrower, to remove any or all of the Leases from the custody of the
Collateral Custodian.
(b) From time to time, with not less than twenty-four hours' prior
written notice (substantially in the form of EXHIBIT B hereto) delivered to the
Collateral Custodian (with simultaneous delivery thereof by facsimile to the
Agent), the Borrower may request the Collateral Custodian to release certain
Leases held by the Collateral Custodian to the Borrower; PROVIDED, that the
Collateral Custodian shall release such Leases only if (i) at least twenty-four
hours shall have passed since the receipt of such notice, and the Agent shall
not have notified the Collateral Custodian not to release such Leases, and (ii)
the Borrower shall have certified that either (1) the applicable Advances with
respect to such Lease have been paid in full, or (2) the Originator shall have
repurchased such Lease in accordance with the terms of the Lease Sale and
Contribution Agreement. The right of the Borrower to request the release of
Leases under this SECTION 2.04(b) may be withdrawn by the Agent at any time by
written notice to the Collateral Custodian (with a copy to the Borrower) from an
Authorized Employee stating that an Event of Termination under the Credit
Agreement has occurred and that Leases may not thereafter be released to the
Borrower without the written consent of the Agent..
(c) Other than as described in the this SECTION 2.04, the Collateral
Custodian shall have no authority to release any Lease to any Person, including,
without limitation, the Borrower or the Originator.
SECTION 2.05. DOCUMENTS HELD BY THE COLLATERAL CUSTODIAN. Any and all
Leases coming into the possession of the Collateral Custodian, (a) shall be held
by it in trust for the benefit of the Agent, on behalf of the Borrower and the
Lenders, and shall be segregated from all other documents held by the Collateral
Custodian and placed for safekeeping in a fireproof file cabinet (or similar
safekeeping device) located on its premises, (b) shall be held by it as agent
and bailee on behalf of the Borrower, subject to the rights of the Agent, on
behalf of the Lenders hereunder and under the Credit Agreement, for the purpose
of perfecting the security interest therein of the Borrower as the purchaser of
Leases from the Originator, (c)shall be held by it as agent and bailee on behalf
of the Agent for the purposes of perfecting the security interest therein of the
Agent on behalf of the "Lenders" under the Credit Agreement, (d) shall be made
available to the Agent on any Business Day, for inspection or otherwise, upon
the Agent's request therefor, and (e) shall be held in a manner which allows
such Leases to be released within one Business Day following the Collateral
Custodian's receipt of notice pursuant to the terms set forth in SECTION 2.04
above.
SECTION 2.06. NO LIENS OR ENCUMBRANCES. The Collateral Custodian hereby
agrees not to assert any statutory or possessory liens or encumbrances of any
kind with respect to the Leases held by it, and hereby waives all such liens and
encumbrances.
SECTION 2.07. MAINTENANCE OF RECORDS. The Collateral Custodian shall
implement and maintain administrative and operating procedures pursuant to which
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it shall keep and maintain all records and information necessary to permit the
regular identification of all Leases held or released by it.
SECTION 2.08. REPORTS; VISITATION RIGHTS; OTHER INFORMATION. (a) The
Collateral Custodian shall furnish to the Agent (with a copy to the Borrower),
not later than the Settlement Date for each month that is the last month of a
calendar quarter (and, upon the request of the Agent, for any other month), a
report substantially in the form of EXHIBIT C hereto (each, a "Report"), setting
forth, as of the last day of such month (with respect to each Report, the
"Report Effective Date"), (i) the Leases held by the Collateral Custodian as of
such Report Effective Date and as of the Report Effective Date for the
immediately preceding Report, (ii) the Leases delivered to the Collateral
Custodian since the Report Effective Date for the immediately preceding Report,
and (iii) the Leases released by the Collateral Custodian since the Report
Effective Date for the immediately preceding Report. For purposes of CLAUSES
(iii) above with respect to the first Report delivered by the Collateral
Custodian hereunder, "the Report Effective Date for the immediately preceding
Report" shall be deemed to mean the date on which the Leases are initially
delivered to the Collateral Custodian hereunder. Each Report shall identify the
applicable Leases by lease number.
(b) At any time and from time to time, during normal business hours,
the Agent and any of its respective agents, employees or representatives
(including, without limitation, an independent accounting firm performing an
audit of the Borrower or Servicer in accordance with the terms of the Credit
Agreement), shall have the right (i) to visit the office of the Collateral
Custodian where the Leases are kept, (ii) to examine the facilities for the
storage and safekeeping thereof, (iii) to review the procedures with which such
documents are stored and catalogued, (iv) to examine and make copies of and
abstracts from such documents, and (v) to discuss matters relating to the Leases
and the Collateral Custodian's performance hereunder with any of the officers or
employees of the Collateral Custodian having knowledge of such matters.
(c) The Collateral Custodian shall provide to the Agent such other
information, as the Agent may from time to time reasonably request, concerning
the Leases which are in the possession of the Collateral Custodian.
SECTION 2.09. COLLATERAL CUSTODIAN'S LIABILITY. The Collateral
Custodian shall have no liability whatsoever by reason of any error of judgment
for any act done or step taken or omitted by it, or for any mistake of fact or
law for anything which it may do or refrain from doing in connection herewith,
unless caused by or arising out of its own gross negligence or willful
misconduct. Furthermore, the Agent and the Borrower agree to indemnify and hold
the Collateral Custodian harmless from any and all losses, expenses, damages and
costs (including, without limitation, attorneys fees and expenses) incurred by
it as a result of its execution of, or performance as Collateral Custodian under
this Agreement, unless however, such losses, expenses, damages and costs are
caused by or arise out of the Collateral Custodian's gross negligence or willful
misconduct.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COLLATERAL CUSTODIAN. The Collateral Custodian hereby represents, warrants and
covenants to the Borrower and to the Agent, on behalf of itself and the Lenders,
as follows:
(i) The Collateral Custodian is a bank duly organized, validly existing
and in good standing under the laws of the State of New York and has all
required power, authority, licenses, permits and franchises in order to
enter into and perform its obligations under this Agreement.
(ii) The execution, delivery and performance by the Collateral
Custodian of this Agreement has been duly authorized by all necessary
organizational action on the part of the Collateral Custodian and the
performance of and compliance with the terms hereof by it will not (i)
violate contravene or create a default under any applicable laws, license or
permits to the best of its knowledge, or (ii) violate, contravene or create
a default under any charter document or by-law of the Collateral Custodian.
(iii) The Collateral Custodian has not created any liens against any
Lease.
(iv) This Agreement has been duly executed and delivered by the
Collateral Custodian and constitutes a valid, legal and binding obligation
of the Collateral Custodian, enforceable against the Collateral Custodian in
accordance with its terms, except (A) as the enforcement thereof may be
limited by applicable debtor relief laws and (B) that certain equitable
remedies may not be available regardless of whether enforcement is sought in
equity or at law.
(v) No Uniform Commercial Code financing statements or other filings or
recordations exe cuted by or, to the best of its knowledge, on behalf of the
Collateral Custodian (in its individual capacity) have been filed by or
against it with respect to any of the Leases.
SECTION 3.02. REPRESENTATION AND WARRANTY OF THE COLLATERAL CUSTODIAN
AND THE BORROWER. As of the date hereof, each of the Collateral Custodian and
the Borrower hereby represent and warrant that the Collateral Custodian is not
an agent of, controlled by, under common control with, or otherwise an affiliate
of, the Borrower, except that the Collateral Custodian is the agent of the
Borrower for the limited purpose of perfecting the Borrower's security interest
in the Leases as purchaser thereof. The Borrower and the Collateral Custodian
acknowledge and agree that for so long as this Custody Agreement is in effect,
the Agent's and the Lenders' rights with respect to the Leases hereunder and
under the Credit Agreement shall in all respects be superior to the Borrower's
rights hereunder.
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ARTICLE IV
MISCELLANEOUS
SECTION 4.01. FEES AND EXPENSES OF THE COLLATERAL CUSTODIAN. The
Borrower agrees to pay the Collateral Custodian such fees (the "Collateral
Custodian Fees") and expenses as the Borrower and the Collateral Custodian may
mutually agree from time to time. Furthermore, no party hereto shall pay any
other fees, costs or expenses to the Collateral Custodian with respect to the
Collateral Custodian's obligations and duties created herein other than the
Collateral Custodian Fees.
SECTION 4.02. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement nor consent to any departure therefrom, shall in any event be
effective unless the same shall be in writing and signed by each party hereto,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 4.03. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. All such notices and
communications shall be effective, upon receipt, or in the case of delivery by
mail, five days after being deposited in the mails, or in the case of notice by
telex, when telexed against receipt of answer back, or in the case of notice by
facsimile copy, when verbal communication of receipt is obtained, in each case
addressed as aforesaid.
SECTION 4.04. BINDING EFFECT; ASSIGNABILITY; TERM. This Agreement shall
be binding upon and inure to the benefit of the Agent, the Borrower and the
Collateral Custodian and their respective successors and permitted assigns. The
Agent may assign at any time its rights and obligations hereunder and interests
herein without the consent of the Borrower or the Collateral Custodian. This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until the Termination Date. The Collateral Custodian may not assign any of its
rights, duties and obligations hereunder or any interest herein without the
prior written consent, executed by an Authorized Employee, of the Agent.
SECTION 4.05. RESIGNATION AND REMOVAL. The Collateral Custodian may
resign at any time by giving written notice thereof to the Agent not less than
two (2) months prior to the effective date of such resignation. The Collateral
Custodian may be removed by the Agent (at the direction of the Lenders) at any
time, with or without cause, by the Agent giving written notice thereof to the
Collateral Custodian not less than ten (10) days prior to the effective date of
such removal. Upon any such resignation or removal, the Agent (at the direction
of the Lenders) shall have the right to appoint a successor Collateral
Custodian. Any such successor shall, upon its acceptance thereof, succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Collateral Custodian, and the retiring Collateral Custodian shall be discharged
from its duties and obligations as Collateral Custodian under this Agreement.
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SECTION 4.06. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws (including, without limitation, Section
5-1401 of the General Obligations Laws of New York, but otherwise without regard
to conflict of laws provisions) and decisions of the State of New York.
SECTION 4.07. EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
BORROWER: CAI LEASE SECURITIZATION - II CORP.
By /s/Anthony M. DiPaolo
-------------------------------
Title: Chief Financial Officer and Treasurer
7175 W. Jefferson Avenue, Suite 4000
Lakewood, Colorado 80235
Attn: President
Telecopy No.: (303) 980-7065
ORIGINATOR:
CAPITAL ASSOCIATES INTERNATIONAL, INC.
By /s/Anthony M. DiPaolo
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Title: Chief Financial Officer and Treasurer
7175 W. Jefferson Avenue, Suite 4000
Lakewood, Colorado 80235
Attn:
Telecopy No.: (303) 980-7065
AGENT: KEY CORPORATE CAPITAL INC.,
as Agent
By /s/Steven T. Dixon
-------------------------------
Duly Authorized Signatory
30 Federal Street
Boston, MA 02110
Attention: Risk Manager
Telecopy No.: (617) 654-2727
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COLLATERAL CUSTODIAN: BANKERS TRUST COMPANY
as Collateral Custodian
By /s/Marc Fishman
-------------------------------
Title: Assistant Secretary
4 Albany Street
New York, New York 10006
Attn: Corporate Trust and Services
Telecopy No.: (212) 250-6439
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EXHIBIT 10.68
(Local Currency -- single Jurisdiction)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
Dated as of : August 24, 1998
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Kay National Association and CAI Lease Securitization-II Corp.
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have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 12 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value on
that date in the place of the account specified in the relevant Confirmation
or otherwise pursuant to this Agreement, in freely transferable funds and in
the manner customary for payments in the required currency. Where settlement
is by delivery (that is, other than by payment), such delivery will be made
for receipt on the due date in the manner customary for the relevant
obligation unless otherwise specified in the relevant Confirmation or
elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
Copyright (c) 1992 by International Swap Dealers Association, Inc.
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(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of branches or offices through which the parties make
and receive payments or deliveries.
(d) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of the
jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other agency
of government applicable to it or any of its assets or any contractual
restriction binding on or affecting it or any of its assets;
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(iv) CONSENTS. All governmental and other consents that are required to have
been obtained by it with respect to this Agreement or any Credit Support
Document to which it is a party have been obtained and are in full force and
effect and all conditions of any such consents have been complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit
Support Document to which it is a party constitute its legal, valid and
binding obligations, enforceable in accordance with their respective terms
(subject to applicable bankruptcy, reorganisation, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless
of whether enforcement is sought in a proceeding in equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party any forms,
documents or certificates specified in the Schedule or any Confirmation by the
date specified in the Schedule or such Confirmation or, if none is specified, as
soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(d)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any
agreement or obligation (other than an obligation to make any payment under
this Agreement or delivery under Section 2(a)(i) or 2(d) or to give notice
of a Termination Event) to be complied with or performed by the party in
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Second Printing
<PAGE>
accordance with this Agreement if such failure is not remedied on or before
the thirtieth day after notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to
be complied with or performed by it in accordance with any
Credit Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this
Agreement (in either case other than in accordance with its
terms) prior to the satisfaction of all obligations of such
party under each Transaction to which such Credit Support
Document relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support Document proves
to have been incorrect or misleading in any material respect when made
or repeated or deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local
Business Days if there is no applicable notice requirement or grace
period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act on its
behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
described) in respect of such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party under one
or more agreements or instruments relating to Specified Indebtedness of
any of them (individually or collectively) in an aggregate amount of
not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in
an aggregate amount of not less than the applicable Threshold Amount
under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights,
or a petition is presented for its winding-up or liquidation,
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and, in the case of any such proceeding or petition instituted
or presented against it, such proceeding or petition (A) results
in a judgment of insolvency or bankruptcy or theentry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which,
under the applicable laws of any jurisdiction, has an analogous
effect to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any
of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its
obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii)
below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party
(or such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
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Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(iii) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5 (a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
occurs and there are two Affected Parties, each party will use all
reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iii) RIGHT TO TERMINATE. If:--
(1) an agreement under Section 6(b)(ii) has not been effected
with respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section
6(b)(ii), a Credit Event Upon Merger or an Additional Termination
Event occurs,
either party in the case of an Illegality, any Affected Party in the
case of an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
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(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(d) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is to
be paid. In the absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment), from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination results from an Event
of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Unpaid Amounts owing to the Non-defaulting Party over
(B) the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non- defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Unpaid Amounts owing to the Non-defaulting Party less
(B) the Unpaid Amounts owing to the Defaulting Party. If that
amount is a positive number, the Defaulting Party will pay it to
the Non-defaulting party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount
to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's
Loss in respect of this Agreement. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting
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<PAGE>
Party; if it is a negative number, the Non-defaulting Party will
pay the absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4),
if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed
to be references to the Affected Party and the party which is
not the Affected Party, respectively, and, if Loss applies and
fewer than all the Transactions are being terminated, Loss shall
be calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties: --
(A) If Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Unpaid Amounts owing to X less (II)
the Unpaid Amounts owing to Y; and
(B) If Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with
the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of
that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination"
applies in respect of a party, the amount determined under this
Section 6(e) will be subject to such adjustments as are
appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement
(and retained by such other party) during the period from the
relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation
applies an amount recoverable under this Section 6(e) is a
reasonable pre-estimate of loss and not a penalty. Such amount
is payable for the loss of bargain and the loss of protection
against future risks and except as otherwise provided in this
Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
7. TRANSFER
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party
without the prior written consent of the other party, except that: --
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
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<PAGE>
8. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(E) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
10. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
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<PAGE>
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the
sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
12. DEFINITIONS
As used in this Agreement:--
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<PAGE>
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non- defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"LAW" includes any treaty, law, rule or regulation and "LAWFUL" and "UNLAWFUL"
will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
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<PAGE>
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain resulting from any of them). Loss includes losses and costs (or
gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before the
relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party's legal fees and out-of-pocket expenses referred to under
Section 9. A party will determine its Loss as of the relevant Early Termination
Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or more
leading dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non- defaulting Party (as certified by it)
if it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
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"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION EVENT" means Illegality or, if specified to be applicable, a Credit
Event Upon Merger or an Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
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together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the fair market values reasonably determined by both
parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
Key Bank National Association CAI Lease Securitization-II Corp.
- -------------------------------------- -----------------------------------
(Name of Party) (Name of Party)
By: /s/Jodie Howe By: /s/Anthony M. DiPaolo
Name: Jodie Howe Name: Anthony M. DiPaolo
Title: Assistant Vice President Title: Chief Financial Officer
and Treasurer
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EXHIBIT 10.69
SCHEDULE TO THE MASTER AGREEMENT
dated as of August 19, 1998
between KEYBANK NATIONAL ASSOCIATION and CAI LEASE
SECURITIZATION - II CORP.
("Party A") ("Party B")
Part 1. Termination Provisions.
(a) "Specified Entity" means in relation to Party A for the purpose of:
Section 5(a)(v), NOT APPLICABLE
Section 5(a)(vi), NOT APPLICABLE
Section 5(a)(vii), NOT APPLICABLE
Section 5(b)(ii), NOT APPLICABLE
and in relation to Party B for the purpose of:
Section 5(a)(v), NOT APPLICABLE
Section 5(a)(vi), NOT APPLICABLE
Section 5(a)(vii), NOT APPLICABLE
Section 5(b)(ii), NOT APPLICABLE
(b) "Specified Transaction" will have the meaning specified in Section 12 of
this Agreement.
(c) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party A
and will not apply to Party B.
If such provisions apply:--
(d) "Specified Indebtedness" will have the meaning specified in Section 12 of
this Agreement.
(e) "Threshold Amount" means 2% of the stockholders' equity of Party A.
(f) The "Credit Event Upon Merger" provisions of Section 5(b)(ii) will apply to
Party A and will not apply to Party B.
(g) The "Automatic Early Termination" provision of Section 6(a) will not apply
to Party A will not apply to Party B.
(h) Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply.
<PAGE>
(i) Additional Termination Event. None applicable.
(j) Additional Events of Default. The occurrence of either of the following
events shall be an additional Event of Default under this Agreement with
respect to Party B as the Defaulting Party: (i) the grant of the lien and
security interest in the Collateral, under and as defined in the Credit
Agreement, in favor of Party A as a counterparty to one or more Interest
Rate Hedges, as defined in the Credit Agreement, shall fail to be
effective, or (ii) Party B shall amend the Credit Agreement in violation of
Part 4(m) of this Schedule.
Part 2. Agreement to Deliver Documents.
For the purpose of Section 4(a) of this Agreement, Party B agrees to
deliver the following documents:
(a) A certificate of an authorized officer of Party B evidencing the necessary
corporate authorizations, resolutions, and approvals with respect to the
execution, delivery and performance of this Agreement, and certifying the
names, true signatures, and authority of the officer(s) signing this
Agreement and executing Transactions hereunder.
(b) Quarterly and annual financial statements when requested by Party A.
Part 3. Miscellaneous.
(a) Addresses for Notices: For the purpose of Section 10(a) of this Agreement
Address for notices or communications to Party A:
Address: 127 PUBLIC SQUARE, 01-127-0405, CLEVELAND, OHIO 44114
Attention: INTEREST RATE RISK MANAGEMENT
Facsimile No.: (216) 689-4737
Telephone No:(216) 689-4224
Address for notices or communications to Party B:
Address: 7175 W. JEFFERSON AVE., SUITE 4000, LAKEWOOD, CO 80235
Attention: PRESIDENT
Facsimile No.: 303-980-5403
Telephone No: 303-980-7507
(b) Calculation Agent. The Calculation Agent is Party A.
(c) Credit Support Document: Party B shall deliver the Credit Agreement, dated
as of August 19, 1998, among Party B, as "Borrower", Capital Associates
International, Inc., as "Servicer", Concord Minutemen Capital Company,
LLC., as Senior Lender, Key Corporate Capital Inc., as "Junior Lender",
"Residual Lender", and "Agent" ("Credit Agreement"), which shall be a
Credit Support Document with respect to Party B hereunder.
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<PAGE>
(d) Credit Support Provider. None applicable.
(e) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (including Section 5-1401
of the General Obligations Laws of the State of New York, but otherwise
without regard to conflicts of law principles).
(f) "Affiliate" will have the meaning specified in Section 12 of this
Agreement.
(g) Definitions. Section 12 is modified as follows:
(i) "Default Rate" means Prime +2%.
(h) Payments. Party A will make payments to Party B by transfer to the account
of Party B at Bankers Trust Company, New York, New York (Account Number:
26209).
Party B will make payments to Party A by transfer to KeyBank National
Association in Cleveland, ABA #041001039 (Account Number: 1553), Attention:
Derivatives Operations.
Part 4. Other Provisions.
(a) Confirmations. Notwithstanding anything to the contrary in the Agreement:
(i) The parties hereto agree that with respect to each Transaction
hereunder a legally binding agreement shall exist from the moment that
the parties hereto agree on the essential terms of such Transaction,
which the parties anticipate will occur by telephone.
(ii) For each Transaction Party A and Party B agree to enter into
hereunder, Party A shall promptly send to Party B a Confirmation,
setting forth the terms of such Transaction. Party B shall execute and
return the Confirmation to Party A or request correction of any error
within three Business Days of receipt. Failure of Party B to respond
within such period shall not affect the validity or enforceability of
such Transaction and shall be deemed to be an affirmation of such
terms.
(b) Additional Agreement. Each party agrees, upon learning of the occurrence of
any event or commencement of any condition that constitutes (or that with
the giving of notice or passage of time or both would constitute) an Event
of Default or Termination Event with respect to the party, promptly to give
the other party notice of such event or condition that with the giving of
notice or passage of time or both would constitute an Event of Default or
Termination Event with respect to such party.
(c) Additional Representations.
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<PAGE>
(i) Party B represents to Party A (which representation will be
deemed to be repeated by Party B on each date on which a Transaction
is entered into) that it, or any Credit Support Provider, has total
assets exceeding $10,000,000, and is entering into the Transaction in
connection with the conduct of its business or to manage the risk of
an asset or liability owned or incurred, or reasonably likely to be
owned or incurred in the conduct of its business.
(ii) Master Agreement. The parties hereto intend that this Agreement
shall be a master agreement, as defined in 11 U.S.C. ss. 101 (53B) and
12 U.S.C. ss. 18.
(iii) Eligible Swap Participant. It is an "eligible swap participant"
as that term is defined by the Commodity Futures Trading Commission at
17 C.F.R. ss. 35.1(b)(2).
(iv) Relationship Between Parties.
(A) It is not relying on any advice, statements or recommendations
(whether written or oral) of the other party regarding any Transaction,
other than the written representations expressly made by that other party
in this Agreement and in the Confirmation in respect of that Transaction;
(B) In respect of each Transaction under this Agreement,
(1) it has the capacity to evaluate (internally or through independent
professional advice) that Transaction (including decisions regarding
the appropriateness or suitability of that Transaction) and has made
its own decision to enter into that Transaction;
(2) it understands the terms, conditions and risks of that Transaction
and is willing to accept those terms and conditions and to assume
(financially and otherwise) those risks;
(3) it is entering into that Transaction as principal and not as agent
for any other party;
(4) it acknowledges and agrees that the other party is not acting as a
fiduciary or advisor to it in connection with that Transaction; and
(5) it is entering into that Transaction for the purposes of managing
its borrowings or investments, hedging its underlying assets or
liabilities or in connection with a line of business, and not for
purposes of speculation.
(d) Consent to Assignment. Party A hereby consents to the assignment by Party B
of its rights under this Agreement and all Transactions to the "Agent" under the
Credit Agreement
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<PAGE>
(e) Limited Recourse. Party A hereby agrees that, notwithstanding any provision
of this Agreement, at any time that (a) Party B is required to make payments to
Party A pursuant to the terms of this Agreement and (b) no Event of Default of
the type described in Section 5(a)(vii) of the Master Agreement has occurred and
is continuing with respect to Party B: (i) Party B shall make any such payment
to Party A; (ii) Party B shall have a duty, liability and obligation to make
each such payment to Party A; (iii) each such payment shall be due from Party B;
and (iv) Party A shall have the right to enforce any such claim against Party B
in respect of any such payment, in each case only to the extent that Party B has
funds available to make such payment under the terms of the Credit Agreement or,
where the payment is a termination payment under this Agreement, where Party B
will have funds available to make such payment upon entering into one or more
Interest Rate Hedges, under and as defined in the Credit Agreement, with a
successor counterparty to Party A; provided that Party B's obligations and Party
A's rights shall only be suspended during such period of funds unavailability,
and not be permanently extinguished, until such time, if any, that additional
funds become available pursuant to the terms of the Credit Agreement, whether as
a result of the collection, foreclosure, or other realization upon the
Collateral provided thereunder or otherwise; and provided further that nothing
hereunder shall be interpreted as in any way reducing Party A's priority to
payment under Section 4.01 and other applicable provisions of the Credit
Agreement or limiting Party A's remedies hereunder if such priority is not
recognized.
(f) No Petition for Bankruptcy. Party A, by entering into this Agreement, hereby
covenants and agrees that in connection with any obligations of Party B under
this Agreement, Party A will not institute against Party B, or join in any
institution against Party B of, any proceeding under any bankruptcy, insolvency
or similar law for one year and one day after the date on which all obligations
of Party B under the Credit Agreement have been paid in full.
(g) Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of the Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. The parties hereto
shall endeavor in good faith negotiations to replace the prohibited or
unenforceable provision with a valid provision, the economic effect of which
come as close as possible to that of the prohibited or unenforceable provision.
(h) WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY PROCEEDINGS.
(i) Rating Agency Consent. No amendment, modification or waiver of this
Agreement can be effected without the prior written consent of each "Rating
Agency" (as defined in the Credit Agreement).
(j) Illegality. The "Illegality" provisions Section 5(b)(i) shall be expanded to
include the obligation of a party to comply with any directive, direction or
similar order issued or given by any government agency or authority with
competent jurisdiction (whether or not having the force of law) which prohibits
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<PAGE>
its performance under this Agreement, and in that event such party will be the
Affected Party for the purpose of that Section.
(k) Telephonic Recording. The parties agree that each may electronically record
all telephonic conversations between them and that any such tape recordings may
be submitted as the preferred evidence in any Proceedings. In the event of any
dispute between the parties relating to a Transaction, the parties may use
electronic recordings between the persons who entered into such Transaction as
evidence of the terms and conditions of such Transaction, despite any writing to
the contrary.
(l) Disclaimer. In entering into this Agreement, Party B understands that there
is no assurance as to the direction in which interests rates in financial
markets may move in the future and that Party A makes no covenant,
representation, or warranty in this regard or in regard to the suitability of
the terms of the Agreement or any Transaction to the particular needs and
financial situation of Party B. Party B represents, which representation shall
be deemed repeated with respect to and at the time of each Transaction, that it
has had the opportunity, independently of Party A and Party A's affiliates,
officers, employees, and agents, to consult its own financial advisors and has
determined that it is in Party B's interest to enter into the Agreement and any
Transaction.
(m) Agent. If Key Corporate Capital Inc. shall for any reason cease to be the
Agent under the Credit Agreement, Party B shall not agree to any amendment or
waiver of any provision of the Credit Agreement without the consent in writing
of Party A, which consent shall not be unreasonably withheld.
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<PAGE>
IN WITNESS WHEREOF the parties have executed this document on
the respective dates specified below with effect from the date specified on the
first page of this document.
KEYBANK NATIONAL ASSOCIATION CAI LEASE SECURITIZATION - II
CORP.
- ------------------------------------- ------------------------------------
By: /s/Jodie Howe By: /s/ Anthony M. DiPaolo
-------------------------------- ------------------------------
Name: Jodie Howe Name: Anthony M. DiPaolo
Title: Assistant Vice President Title: Chief Financial Officer
and Treasurer
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