UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal quarter ended September 30, 1995.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934 For the transition period from to
Commission file number 1-9670
-------------------------------
PLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3041257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower,
Suite 900, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
----------------------------------------------------------------------
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Common Stock - $.01
Par Value; Outstanding as of November 1, 1995 - 11,568,357 shares
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1995 1994
----------------------------------------
(in thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 15,077 $ 16,131
Receivables 5,965 5,747
Receivables from affiliates 7,893 7,001
Assets held for sale 12,900 17,644
Equity interest in affiliates 25,713 18,374
Transportation equipment held for operating leases 121,871 141,469
Less accumulated depreciation (66,758) (77,744)
----------------------------------------
55,113 63,725
Restricted cash and cash equivalents 10,727 1,409
Other 7,183 10,341
----------------------------------------
Total assets $ 140,571 $ 140,372
========================================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt $ -- $ 6,404
Senior secured debt 35,000 35,000
Other secured debt 1,267 2,119
Subordinated debt 23,000 23,000
Payables and other liabilities 10,623 11,589
Deferred income taxes 19,824 16,165
----------------------------------------
Total liabilities 89,714 94,277
Minority interest 431 400
Shareholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized, 11,568,357
issued and outstanding at September 30, 1995 and 11,699,673 at December
31, 1994 (excluding 1,018,034 and 871,057 shares held
in treasury at September 30, 1995 and
December 31, 1994, respectively) 117 117
Paid in capital, in excess of par 77,743 77,699
Treasury stock (3,325) (2,831)
----------------------------------------
74,535 74,985
Accumulated deficit (24,109) (29,290)
----------------------------------------
Total shareholders' equity 50,426 45,695
----------------------------------------
Total liabilities, minority interest,
and shareholders' equity $ 140,571 $ 140,372
========================================
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1995 1994 1995 1994
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Operating leases $ 5,311 $ 6,855 $ 17,942 $ 22,102
Management fees 2,909 2,757 8,231 8,342
Partnership interests and other fees 1,410 743 3,739 2,584
Acquisition and lease negotiation fees 2,467 493 4,797 2,219
Commissions -- 1,140 1,322 3,881
Aircraft brokerage and services 1,383 1,214 3,700 3,361
Gain (loss) on the sale or disposition
of assets, net 730 (109) 5,911 (574)
Other 540 230 1,062 856
----------------------------------------------------------------
Total revenues 14,750 13,323 46,704 42,771
Costs and expenses:
Operations support 6,050 6,149 18,602 17,731
Depreciation and amortization 2,104 3,106 6,491 9,411
Commissions (51) 1,194 1,417 4,067
General and administrative 2,579 3,096 7,646 7,861
Reduction in carrying value of certain assets -- 4,247 -- 4,247
----------------------------------------------------------------
Total costs and expenses 10,682 17,792 34,156 43,317
----------------------------------------------------------------
Operating income (loss) 4,068 (4,469) 12,548 (546)
Interest expense 1,609 2,602 5,540 7,310
Other income (expense), net 591 (2,619) 537 (2,349)
Interest income 566 963 1,491 2,643
----------------------------------------------------------------
Income (loss) before income taxes 3,616 (8,727) 9,036 (7,562)
Provision for (benefit from) income taxes 1,559 (3,485) 3,884 (3,963)
----------------------------------------------------------------
Net income (loss) before cumulative effect
of accounting change 2,057 (5,242) 5,152 (3,599)
Cumulative effect of accounting change -- -- -- 5,130
----------------------------------------------------------------
Net income (loss) 2,057 (5,242) 5,152 (8,729)
Preferred dividend imputed on allocated shares -- 562 -- 1,686
----------------------------------------------------------------
Net income (loss) to common shares $ 2,057 $ (5,804) $ 5,152 $ (10,415)
================================================================
Earnings (loss) per common share outstanding $ 0.18 $ (0.46) $ 0.44 $ (0.83)
================================================================
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY For
the Year Ended December
31, 1994 and the Nine
Months Ended September 30,
1995
(in thousands)
<CAPTION>
Loan to
Employee Common Stock
--------------------------------------------
Preferred Stock Paid-in Retained
Stock at Ownership Capital in Earnings Total
Paid-in Plan At Excess Treasury Accumulated Shareholders'
Amount (ESOP) Par of Par Stock (Deficit) Equity
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1993 $ 63,569 $ (50,280) $ 109 $ 55,557 $ (131) $ (17,691) $ 51,133
Net loss (6,641) (6,641)
Cumulative effect of
change in
accounting on unearned
compensation 7,130 7,130
Common stock repurchases (2,997) (2,997)
Conversion of preferred
stock (192) 161 31 --
Allocation of shares (4,091) 6,044 1,953
Current year imputed
dividend on
allocated ESOP shares (2,430) (2,430)
Prior year preferred
dividend not
charged to equity
until paid (2,565) (2,565)
Cancellation of
preferred stock and
issuance of common
stock upon
termination of the ESOP (59,286) 37,106 8 21,906 266 --
Exercise of stock options 75 75
Translation gain 37 37
-----------------------------------------------------------------------------------------------------------
Balances, December 31,
1994 -- -- 117 77,699 (2,831) (29,290) 45,695
Net income 5,152 5,152
Common stock repurchases (494) (494)
Exercise of stock options 44 44
Translation gain 29 29
===========================================================================================================
Balances, September 30,
1995 $ -- $ -- $ 117 $ 77,743 $ (3,325) $ (24,109) $ 50,426
===========================================================================================================
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the nine months
ended September 30,
1995 1994
---------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 5,152 $ (8,729)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 6,491 9,411
Foreign currency translations 29 --
Cumulative effect of accounting change -- 5,130
Increase (decrease) in deferred income taxes 3,659 (4,573)
Compensation expense for ESOP -- 255
(Gain) loss on sale or disposition of assets, net (5,911) 574
Reduction in carrying value of certain assets -- 4,247
Undistributed residual value interests (201) 405
Minority interest in net income of subsidiaries 31 56
Decrease in payables and other liabilities (472) (5,872)
(Increase) decrease in receivables and receivables from affiliates (2,063) 4,374
Cash distributions from affiliates in excess of income accrued 580 488
(Increase) decrease in other assets (906) 950
Purchase of equipment for lease (7,420) (821)
Proceeds from sale of equipment for lease 11,498 10,056
Purchase of assets held for sale (34,034) (11,455)
Proceeds from sale of assets held for sale 38,462 5,190
Financing of assets held for sale to affiliates 9,800 2,953
Repayment of financing of assets held for sale to affiliates (16,204) (2,953)
---------------------------------
Net cash provided by operating activities 8,491 9,686
---------------------------------
Investing activities:
Additional investment in affiliates (7,718) (210)
Purchase of residual option (200) --
Proceeds from the disposition of residual options 2,059 89
Proceeds from the sale of leveraged leased assets 4,530 --
Proceeds from the maturity and sale of restricted
marketable securities -- 30,872
Purchase of restricted marketable securities -- (15,436)
Increase in restricted cash and restricted cash equivalents (9,318) (15,716)
Acquisition of subsidiaries net of cash acquired -- (1,013)
---------------------------------
Net cash used in investing activities (10,647) (1,414)
---------------------------------
Financing activities:
Proceeds from long-term equipment loans 657 45,366
Principal payments under loans (33) (51,237)
Cash dividends paid on Preferred Stock -- (7,007)
Payments received from ESOP Trustee 928 4,739
Repurchase of treasury stock (494) --
Proceeds from exercise of stock options 44 68
---------------------------------
Net cash provided by (used in) financing activities 1,102 (8,071)
---------------------------------
Net (decrease) increase in cash and cash equivalents (1,054) 201
Cash and cash equivalents at beginning of period 16,131 19,685
=================================
Cash and cash equivalents at end of period $ 15,077 $ 19,886
=================================
Supplemental information:
Interest paid during the period $ 4,878 $ 7,674
=================================
Income taxes paid during the period $ 595 $ 4,007
=================================
See accompanying notes to these consolidated financial statements.
</TABLE>
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
1. General
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of September 30, 1995, the statements of operations for
the three and nine months ended September 30, 1995 and 1994, the statements of
cash flows for the nine months ended September 30, 1995 and 1994, and the
statements of changes in shareholders' equity for the year ended December 31,
1994 and the nine months ended September 30, 1995. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted from the accompanying consolidated financial statements. For further
information, reference should be made to the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, on file at the Securities and Exchange Commission.
Certain amounts in the 1994 financial statements have been reclassified to
conform to the 1995 presentation.
The Company is involved as plaintiff or defendant in various legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company.
2. Equipment
The Company classifies assets as held for sale if the particular asset is
subject to a pending contract for sale, or is held for sale to one or more
affiliated parties or third parties. At September 30, 1995, $12.9 million in
transportation equipment was held for sale to one or more affiliated parties or
third parties.
During the last three years, the Company has significantly downsized the
equipment portfolio through the sale or disposal of underperforming and
nonperforming assets. The Company will continue to identify underperforming and
nonperforming assets for sale or disposal as necessary.
Periodically, the Company will purchase groups of assets whose ownership may be
allocated among affiliated partnerships and the Company. Generally in these
cases, only assets that are on-lease will be purchased by the affiliated
partnerships. The Company will generally assume the ownership and remarketing
risks associated with off-lease equipment. Allocation of the purchase price will
be determined by a combination of the Company's knowledge and assessment of the
relevant equipment market, third party industry sources, and recent transactions
or published fair market value references. During the nine months ended
September 30, 1995, the Company realized $1.2 million of gains on sales of
railcars and aircraft purchased by the Company as part of a group of assets.
3. Debt
Assets acquired and held on an interim basis for placement with affiliated
partnerships have, from time to time, been partially funded by a $25.0 million
short-term equipment acquisition loan facility. The Company amended this
facility on September 27, 1995. The amendment extended the facility until
September 30, 1996. The Company had no borrowings on this facility at September
30, 1995.
This facility, which is shared with Equipment Growth Funds (EGFs) II, III, IV,
V, VI, VII and the LLC, allows the Company to purchase equipment prior to a
designated program or partnership being identified, or prior to having raised
sufficient capital to purchase the equipment. This facility provides 80%
financing if the Company is the borrower and working capital is used for the
nonfinanced costs of these acquisitions. The Company can
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
3. Debt (continued)
hold purchased assets under this bridge facility for up to 150 days. Interest
accrues at prime or LIBOR plus 2.5% at the option of the borrower at the time of
the advance under the facility. As provided for in the program offering
documents, the Company retains the difference between the net lease revenue
earned and the carrying costs incurred during the interim holding period as the
Company's capital is at risk.
The Company has entered into a securitization facility to borrow up to $80
million on a nonrecourse basis for a one year period that will be secured
primarily by finance type leases which generally have terms of four to five
years. The securitized debt is expected to bear interest at treasury rate plus
1%. As of September 30, 1995, there were no borrowings under this facility.
4. Shareholders' Equity
Effective February 1995, the Company adopted the Directors' 1995 Non-qualified
Stock Option Plan which reserves 120,000 shares of the Company's common stock
for issuance to directors who are nonemployees of the Company. All options
outstanding are exercisable at prices equal to the closing price as of the date
of grant. Vesting of options occurs in three equal installments of 33 1/3% per
year, initiating from the date of the grant. During the nine months ended
September 30, 1995, 40,000 options were granted under this plan at $2.63 per
share.
In February 1995, the Company announced that its Board of Directors authorized
the repurchase of up to $0.5 million of the Company's common stock. The shares
could be purchased in the open market or through private transactions with
working capital and existing cash reserves. Shares repurchased could be used for
corporate purposes, including option plans, or they could be retired. The
Company had purchased 146,977 shares under this program for $0.5 million as of
September 30, 1995.
The total common shares outstanding at September 30, 1995, were 11,568,357, a
decrease from the 11,699,673 outstanding at December 31, 1994. Net income (loss)
per common share was computed by dividing net income (loss) to common shares by
common stock equivalents which included the weighted average number of shares
and stock options deemed outstanding during the period. The weighted average
number of shares and stock options deemed outstanding during the three months
ended September 30, 1995 and 1994, were 11,755,658 and 12,682,432, respectively.
The weighted average number of shares and stock options deemed outstanding
during the nine months ended September 30, 1995 and 1994, were 11,799,894 and
12,521,313, respectively.
5. Limited Liability Company Interests
In January 1995, the registration statement for the Professional Lease
Management Income Fund I, L.L.C. (LLC) became effective. PLM Financial Services,
Inc. (FSI) serves as the manager for the new program. This program, organized as
a limited liability company with a no front-end fee structure, began syndication
in the first quarter of 1995. There is no compensation paid to FSI, or any of
its subsidiaries, for the organization and syndication of interests in the LLC,
the acquisition of equipment, nor the negotiation of the leases by the LLC. FSI
is funding the cost of organization, syndication and offering through use of
operating cash and is capitalizing these costs as its investment in the LLC. The
Company will amortize its investment in the LLC over the life of the program. In
return for its investment, FSI is entitled to a 15% interest in the cash
distributions and earnings of the LLC subject to certain allocation provisions.
FSI's interest in the cash distributions and earnings of the LLC will increase
to 25% after the investors have received distributions equal to their invested
capital. The Company is also entitled to monthly fees for equipment management
services and reimbursement for certain accounting and administrative services
provided by the Company.
As of the date of this report, the LLC had raised $43 million in equity and had
met the legal requirements for breaking impound and entering the equipment
investment phase of the program.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
6. Management Agreement
In January 1995, the Company entered into an agreement, through a new equipment
leasing and management subsidiary, to manage the operations of Boston-based,
privately-held American Finance Group, L.P. (AFG). The new entity, as a
wholly-owned subsidiary of FSI, will acquire AFG's proprietary software and
provide equipment management and investor relations services to AFG's existing
investor programs. The Company has the right to terminate the contract subject
to certain terms and conditions. Affiliates of AFG will continue to be the
general partners of the existing AFG programs. AFG currently manages a portfolio
of approximately $864 million of capital equipment (at original cost), subject
to primarily full payout leases, for its own account and approximately 50,000
investors.
7. Recent Developments
The Company is in negotiations with its subordinated debt lender to prepay a
portion of the notes in 1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company owns a diversified portfolio of transportation equipment from which
it earns operating lease revenue and incurs operating expenses. The Company's
transportation equipment held for operating leases, which consists of aircraft,
marine containers, trailers, railcars and storage vaults at September 30, 1995,
is mainly equipment built prior to 1988. As equipment ages, the Company
continues to monitor the performance of its assets on lease and market
conditions for leasing equipment in general in order to seek the best
opportunities for investment. Failure to replace equipment may result in shorter
lease terms and higher costs of maintaining and operating aged equipment and, in
certain instances, limited remarketability.
The Company also syndicates investment programs from which it earns various fees
and equity interests. The Company is currently marketing an investment program
structured as a limited liability company (LLC) with a no front-end fee
structure. The previously syndicated limited partnership programs have allowed
the Company to receive fees for the acquisition and initial lease of the
equipment. The LLC program does not provide for acquisition and lease
negotiation fees. The Company invests the equity raised through syndication in
transportation equipment which is then managed on behalf of the investors. The
equipment management activities for this type of program generate equipment
management fees for the Company over the life of the program, typically 10 to 12
years. The limited partnership agreements generally entitle the Company to
receive a 1% or 5% interest in the cash distributions and earnings of the
partnership subject to certain allocation provisions. The LLC agreement entitles
the Company to a 15% interest in the cash distributions and earnings of the
program subject to certain allocation provisions which will increase to 25%
after the investors have received distributions equal to their original invested
capital.
For the Three Months Ended September 30, 1995 versus September 30, 1994
The following analysis reviews the operating results of the Company:
Revenue:
For the three months
ended September 30,
1995 1994
---- ----
(in thousands)
Operating leases $ 5,311 $ 6,855
Management fees 2,909 2,757
Partnership interests and other fees 1,410 743
Acquisition and lease negotiation fees 2,467 493
Commissions -- 1,140
Aircraft brokerage and services 1,383 1,214
Gain (loss) on the sale or disposition of assets, net 730 (109)
Other 540 230
-------- --------
Total revenues $ 14,750 $ 13,323
<PAGE>
The fluctuations in revenues for the three months ended September 30, 1995 from
the same period in 1994 are summarized and explained below.
Operating lease revenue:
For the three months
ended September 30,
1995 1994
---- ----
(in thousands)
By equipment type or subsidiary:
Trailers $ 2,508 $ 3,606
Aircraft 1,514 2,381
Marine vessels (13) 393
Marine containers 156 226
Storage vaults 263 193
Railcars 190 56
AFG 693 --
------- -------
$ 5,311 $ 6,855
As of September 30, 1995, the Company owned transportation equipment held for
operating leases with an original cost of $121.9 million, which was $58.2
million less than the original cost of equipment owned and held for operating
leases at September 30, 1994. The reduction in equipment, on an original cost
basis, is a consequence of the Company's strategic decision to dispose of
certain underperforming and nonperforming assets resulting in a 100% reduction
in its marine vessel fleet, a 54% net reduction in its marine container
portfolio, a 39% net reduction in its aircraft portfolio, a 13% net reduction in
its trailer portfolio, and a 48% net reduction in its railcar portfolio compared
to September 30, 1994. Operating lease revenue is also impacted by the level of
assets held for sale and the AFG lease originations which can earn lease revenue
for the Company.
The reduction in equipment available for lease is the primary reason marine
vessel, trailer, marine container, and aircraft revenue were all reduced as
compared to the prior year. The decrease in operating lease revenues as a result
of the reduction in equipment available for lease was partially offset by a $0.7
million increase in operating lease revenues generated by AFG-related leases
prior to being sold to third parties, a $0.1 million increase in railcar lease
revenues, and a $0.1 million increase in storage vault revenues. The increase in
railcar revenue of $0.1 million for the quarter is comprised primarily of
revenues on railcars acquired by the Company of which the majority have been
sold to both affiliated programs and third parties as of September 30, 1995.
Storage vault revenue increased $0.1 million for the quarter ended September 30,
1995, compared to the same quarter of the prior year, due to additions of $0.6
million in new storage vaults made during the fourth quarter of 1994.
<TABLE>
Management fees:
<CAPTION>
For the three months Year
ended September 30, Liquidation
1995 1994 Phase Begins
------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Management fees by fund were:
EGF I $ 331 $ 396 1998
EGF II 204 301 1999
EGF III 274 427 2000
EGF IV 287 291 1999
EGF V 468 449 2000
EGF VI 445 433 2002
EGF VII 259 137 2003
AFG programs 240 -- --
Other programs 401 323 --
--------------------------
$ 2,909 $ 2,757
</TABLE>
<PAGE>
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. The managed equipment portfolio for new
programs grows correspondingly with new syndication activity. Affiliated
partnership and investment program surplus operating cash flows and loan
proceeds invested in additional equipment favorably influence management fees.
The original cost of the equipment under management, excluding equipment managed
under the AFG programs, (measured at original cost) amounted to $1.10 billion
and $1.11 billion at September 30, 1995 and 1994, respectively. The increase in
management fees of $0.2 million resulted from an increase of $0.2 million in
management fees from the January 1995 agreement with AFG to provide management
services to their existing programs, and from an increase of $0.2 million in
management fees generated from the new LLC program, partially offset by a net
decrease in management fees generated by gross revenues from the other programs
which fell due to a net decrease in managed equipment and a decrease in lease
rates for certain types of equipment.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated partnerships. The net earnings and distribution levels from
the affiliated partnerships were $1.4 million and $0.7 million for the quarters
ended September 30, 1995 and 1994, respectively. In 1995, the equity interest
recorded was impacted by net increases of $0.6 million in the Company's recorded
residual values which included $0.4 million in residual income for the equipment
purchased for the LLC, and $0.2 million in residual income for the AFG programs.
A net decrease in the recorded residual values related to other existing
programs of $0.2 million was recorded for the same period in 1994. Residual
income is recognized on residual interests based upon the general partner's
share of the present value of the estimated disposition proceeds of the
equipment portfolio of the affiliated partnership. Net decreases in the recorded
residual values result when partnership assets are sold and the reinvestment
proceeds are less than the original investment in the sold equipment.
Acquisition and lease negotiation fees:
During the quarter ended September 30, 1995, a total of $41.2 million of
equipment was purchased on behalf of the equipment growth funds compared to $9.0
million during the same quarter of the prior year, resulting in an increase in
acquisition and lease negotiation fees of $1.8 million. In addition, $0.2
million in acquisition and lease negotiation fees were generated by AFG-related
purchases during the quarter ended September 30, 1995. There were no AFG-related
transactions during the same quarter of 1994. As a result of the Company's
decision to market a new investment program with a no front-end fee structure,
acquisition and lease negotiation fees will be significantly reduced in the
future unless a new program with a front-end fee structure is brought to market.
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the equipment growth funds, earned upon the sale of
partnership units to investors. During the quarter ended September 30, 1995,
there was no program equity raised for the equipment growth funds compared to
$12.9 million of equity raised during the quarter ended September 30, 1994,
resulting in a decrease in placement commissions of $1.1 million. The Company
closed PLM Equipment Growth & Income Fund VII (EGF VII) syndication activities
on April 30, 1995. As a result of the Company's decision to market a new
investment program with a no front-end fee structure, which raised $25.9 million
in equity during the quarter, commission revenue will be eliminated unless a new
program with a front-end fee is brought to market.
Aircraft brokerage and services:
Aircraft brokerage and services revenue increased $0.2 million during
the quarter ended September 30, 1995 compared to the comparable prior year
quarter, and represents revenue earned by Aeromil Australia, the Company's
aircraft leasing, spare parts brokerage, and related services subsidiary,
acquired in February 1994.
Gain (loss) on the sale or disposition of assets, net:
During the quarter ended September 30, 1995, the Company purchased a
commuter aircraft for $0.7 million and sold the aircraft for a gain of $0.1
million, net of selling costs. Additional net gains on the sale or disposition
of assets for the quarter ended September 30, 1995 of $0.6 million resulted
mainly from the
<PAGE>
sale or disposition of 68 marine containers, one commuter aircraft, three
helicopters, 91 railcars, 12 storage vaults, and 101 trailers. The $0.1 million
net loss for the same period in 1994 resulted from the sale or disposition of
trailers and marine containers.
Other:
Other revenues increased $0.3 million during the quarter ended
September 30, 1995, compared to the comparable prior year quarter, due to
increased revenue earned for data processing services provided to the Company's
affiliated programs and due to an increase in brokerage fees.
Costs, Expenses and Other:
<TABLE>
<CAPTION>
For the three months
ended September 30,
1995 1994
-----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 6,050 $ 6,149
Depreciation and amortization 2,104 3,106
Commissions (51) 1,194
General and administrative 2,579 3,096
Reduction in carrying value of certain assets -- 4,247
Interest expense 1,609 2,602
Other income (expense), net 591 (2,619)
Interest income 566 963
</TABLE>
Operations support:
Operations support expense (including salary and office-related
expenses for operational activities, provision for doubtful accounts, equipment
insurance, repair and maintenance costs, and equipment remarketing costs)
decreased $0.1 million (2%) for the quarter ended September 30, 1995, from the
same quarter in 1994. The decrease resulted from $0.8 million in lower operating
and repair and maintenance costs due to the sale of the Company's entire owned
vessel portfolio and the sale of other equipment, a $0.4 million decrease in the
provision for bad debts, a $0.3 million decrease in compensation expense booked
in 1994 related to the adoption of Statement of Position 93-6 ("SOP 93-6")
"Employers' Accounting for Employee Stock Ownership Plans", and a $0.2 million
decrease in bonus expense, offset partially by increased costs of $1.3 million
and $0.3 million associated with the operation of AFG and Aeromil, respectively.
Depreciation and amortization:
Depreciation and amortization expense decreased $1.0 million (32%) for
the quarter ended September 30, 1995, as compared to the quarter ended September
30, 1994. The decrease resulted from the reduction in depreciable equipment
discussed in the operating lease revenue section.
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Historically, commission costs
related to the equipment growth funds have been expensed as incurred. Since
syndication efforts related to EGF VII have ended, commission expense for the
quarter decreased $1.2 million (104%) from the same period in 1994. Commission
costs related to the LLC will be capitalized as part of the Company's investment
in the LLC program as equity is raised for the LLC and commissions paid.
<PAGE>
General and administrative:
General and administrative expense decreased $0.5 million (17%) during
the quarter ended September 30, 1995, compared to the same quarter in 1994, due
to a decrease in the management bonus recorded in the third quarter, and a
decrease in professional services and fees.
Reduction in carrying value of certain assets:
As a result of the Company's regular analysis of its transportation equipment
portfolio, no adjustments to the carrying value of equipment were made during
the quarter ended September 30, 1995. Valuation adjustments to the estimated net
realizable value of certain equipment totaling $4.2 million were made during the
quarter ended September 30, 1994, consisting of adjustments to certain aircraft
($2.1 million), trailers ($1.1 million), storage vaults ($0.2 million),
containers ($0.1 million), and one marine vessel ($0.7 million).
Interest expense:
Interest expense decreased $1.0 million (38%) during the quarter ended
September 30, 1995, compared to the same quarter in 1994, due to the reduction
in senior and subordinated debt levels in 1995 from the third quarter of 1994,
partially offset by increased interest rates.
Other income (expense), net:
Other income (expense), net was income of $0.6 million for the three months
ended September 30, 1995, which represented a receipt of an account receivable
from a previously bankrupt debtor. For the same quarter of 1994, other expense
of $2.6 million was due to the write-off of unamortized loan fees related to the
termination of the Company's ESOP and reductions in the carrying value of
certain marketable securities.
Interest income:
Interest income decreased $0.4 million (41%) in the quarter ended
September 30, 1995, compared to the same quarter in 1994 from a reduction in
interest income earned on the ESOP cash collateral account which existed prior
to the termination of the Company's ESOP at the end of 1994.
Income taxes:
For the three months ended September 30, 1995, the provision for income
taxes was $1.6 million, which represented an effective rate of 43%. For the same
quarter in 1994, the $3.5 million tax benefit reflected the benefit for the
Company's losses and the tax benefit on the ESOP dividend.
Net income (loss):
As a result of the foregoing, for the three months ended September 30,
1995 net income was $2.1 million resulting in net income per common share of
$0.18. For the same quarter in 1994, net loss was $5.2 million. In addition,
$0.6 million was required in 1994 for the imputed preferred dividend allocated
on ESOP shares resulting in a $5.8 million net loss to common shareholders, or
$0.46 loss per common share outstanding.
<PAGE>
For the Nine Months Ended September 30, 1995 versus September 30, 1994
The following analysis reviews the operating results of the Company:
<TABLE>
Revenue:
<CAPTION>
For the nine months
ended September 30,
1995 1994
-------------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 17,942 $ 22,102
Management fees 8,231 8,342
Partnership interests and other fees 3,739 2,584
Acquisition and lease negotiation fees 4,797 2,219
Commissions 1,322 3,881
Aircraft brokerage and services 3,700 3,361
Gain (loss) on the sale or disposition of assets, net 5,911 (574)
Other 1,062 856
-------------------------------
Total revenues $ 46,704 $ 42,771
</TABLE>
The fluctuations in revenues for the nine months ended September 30, 1995 from
the same period in 1994 are summarized and explained below.
<TABLE>
Operating lease revenue:
<CAPTION>
For the nine months
ended September 30,
1995 1994
-------------------------------
(in thousands)
<S> <C> <C>
By equipment type or subsidiary:
Trailers $ 7,888 $ 10,700
Aircraft 4,587 7,115
Marine vessels 1,079 2,782
Marine containers 456 722
Storage vaults 763 557
Railcars 1,453 226
AFG 1,716 --
-------------------------------
$ 17,942 $ 22,102
</TABLE>
As of September 30, 1995, the Company owned transportation equipment held for
operating leases with an original cost of $121.9 million, which was $58.2
million less than the original cost of equipment owned and held for operating
leases at September 30, 1994. The reduction in equipment, on an original cost
basis, is a consequence of the Company's strategic decision to dispose of
certain underperforming and nonperforming assets resulting in a 100% reduction
in its marine vessel fleet, a 54% net reduction in its marine container
portfolio, a 39% net reduction in its aircraft portfolio, a 13% net reduction in
its trailer portfolio, and a 48% net reduction in its railcar portfolio compared
to 1994. Operating lease revenue is also impacted by the level of assets held
for sale and the AFG lease originations which can earn lease revenue for the
Company.
The reduction in equipment available for lease is the primary reason marine
vessel, trailer, marine container, and aircraft revenue were all reduced as
compared to the prior year. The decrease in operating lease revenues as a result
of the reduction in equipment available for lease was partially offset by a $1.7
million increase in operating lease revenues generated by AFG-related leases, a
$1.2 million increase in railcar lease revenues, and a $0.2 million increase in
storage vault revenues. The increase in railcar revenue of $1.2 million for the
nine months is comprised primarily of revenues on railcars acquired by the
Company of which the majority have been sold to both affiliated programs and
third parties as of September 30, 1995. Storage vault revenue increased $0.2
million for the nine months ended September 30, 1995, compared to the same
period in the prior year, due to additions of $0.6 million in new storage vaults
made during the fourth quarter of 1994.
<PAGE>
<TABLE>
Management fees:
<CAPTION>
For the nine months Year
ended September 30, Liquidation
1995 1994 Phase Begins
------------------------------------------------------
(in thousands)
Management fees by fund were:
<S> <C> <C> <C>
EGF I $ 1,014 $ 1,052 1998
EGF II 638 912 1999
EGF III 838 1,363 2000
EGF IV 806 963 1999
EGF V 1,354 1,505 2000
EGF VI 1,307 1,306 2002
EGF VII 663 311 2003
AFG programs 599 -- --
Other programs 1,012 930 --
--------------------------
$ 8,231 $ 8,342
</TABLE>
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. The managed equipment portfolio grows
correspondingly with new syndication activity. Affiliated partnership and
investment program surplus operating cash flows and loan proceeds invested in
additional equipment favorably influence management fees. The original cost of
the equipment under management, excluding equipment managed under the AFG
programs, (measured at original cost) amounted to $1.10 billion and $1.11
billion at September 30, 1995 and 1994, respectively. The decrease in management
fees of $0.1 million resulted from a decrease in management fees generated by
gross revenues of the equipment growth funds, which fell due to a net decrease
in managed equipment and a decrease in lease rates for certain types of
equipment, partially offset by $0.6 million increase from the January 1995
agreement with AFG to provide management services to their existing investor
programs and from a $0.2 million increase in management fees generated by the
new LLC program.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of
the Company's affiliated partnerships. The net earnings and distribution levels
from the affiliated partnerships were $3.7 million and $2.6 million for the
periods ended September 30, 1995 and 1994, respectively, which were impacted by
net increases/decreases in the Company's recorded residual values. In 1995, the
equity interest recorded was impacted by net increases of $1.2 million in the
Company's recorded residual values which included $1.5 million in residual
income recorded for the equipment purchased for the LLC, and $0.7 million in
residual income for the AFG programs, offset partially by a decrease in residual
income related to other existing programs. A net decrease in the recorded
residual values of $0.4 million was recorded for the same period in 1994.
Residual income is recognized on residual interests based upon the general
partners' share of the present value of the estimated disposition proceeds of
the equipment portfolios of the affiliated partnerships. Net decreases in the
recorded residual values result when partnership assets are sold and the
reinvestment proceeds are less than the original investment in the sold
equipment. During the nine months ended September 30, 1994, the Company also
recorded $0.2 million in debt financing fees earned for debt placed in
affiliated partnerships.
Acquisition and lease negotiation fees:
During the nine months ended September 30, 1995, a total of $69.8 million of
equipment was purchased on behalf of the equipment growth funds compared to
$40.9 million during the same period in 1994, resulting in an increase in
acquisition and lease negotiation fees of $1.6 million. In addition, $1.0
million in acquisition and lease negotiation fees were generated by AFG-related
purchases during the nine months ended September 30, 1995. There were no
AFG-related transactions during the same period in 1994. As a result of the
Company's decision to market a new investment program with a no front-end fee
structure, acquisition and lease negotiation fees will be significantly reduced
in the future unless a new program with a front-end fee structure is brought to
market.
<PAGE>
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the equipment growth funds, earned upon the sale of
partnership units to investors. During the nine months ended September 30, 1995,
program equity raised for the equipment growth funds totaled $14.6 million
compared to $43.5 million during the same period during 1994, resulting in a
decrease in placement commissions of $2.6 million. The Company closed EGF VII
syndication activities on April 30, 1995. As a result of the Company's decision
to market a new investment program with a no front-end fee structure, which
raised $43.1 million in equity during the nine months ended September 30, 1995,
commission revenue will be eliminated unless a new program with a front-end fee
is brought to market.
Aircraft brokerage and services:
Aircraft brokerage and services revenue increased $0.3 million during
the nine months ended September 30, 1995, compared to the same period of 1994.
The increase represents revenue earned by Aeromil Australia, the Company's
aircraft leasing, spare parts brokerage, and related services subsidiary,
acquired in February 1994.
Gain (loss) on the sale or disposition of assets, net:
The $5.9 million net gain recorded during the nine months ended
September 30, 1995 included gains from the sale of three option contracts for
railcar equipment, and the disposition of one marine vessel, 578 marine
containers, two commercial aircraft, two commuter aircraft, four helicopters,
307 railcars, 22 storage vaults and 326 trailers. Additionally, during the nine
months ended September 30, 1995, the Company purchased three commuter aircraft
and sold them for an aggregate gain of $0.5 million, net of selling costs. The
$0.6 million net loss for the same period in 1994 resulted from the sale or
disposition of trailers and marine containers.
Other:
Other revenues increased $0.2 million in the nine months ended
September 30, 1995, from the same period in 1994, due to an increase in revenue
earned for data processing services provided to the Company's affiliated
programs.
Costs, Expenses and Other:
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1995 1994
-------------------------------
(in thousands)
<S> <C> <C>
Operations support $ 18,602 $ 17,731
Depreciation and amortization 6,491 9,411
Commissions 1,417 4,067
General and administrative 7,646 7,861
Reduction in carrying value of certain assets -- 4,247
Interest expense 5,540 7,310
Other income (expense), net 537 (2,349)
Interest income 1,491 2,643
</TABLE>
Operations support:
Operations support expense (including salary and office-related
expenses for operational activities, provision for doubtful accounts, equipment
insurance, repair and maintenance costs, and equipment remarketing costs)
increased $0.9 million (5%) for the nine months ended September 30, 1995, from
the same period in 1994. The increase resulted from $3.5 million in costs
associated with the operation of AFG, a $0.6 million increase in accrued
compensation expense primarily to compensate employees for lost benefits
resulting from the termination of the Company's 401(k) plan, and a $0.6 million
increase in Aeromil expenses due to higher operational expenses and revenues in
the current year, offset partially by a $2.1 million decrease in operating costs
and repair and maintenance expenses due to the sale of the entire owned marine
vessel portfolio and other equipment, a $0.8 million decrease in the provision
for bad debts, and a $0.9 million decrease in compensation expenses booked in
1994 related to the adoption of SOP 93-6.
Depreciation and amortization:
Depreciation and amortization expense decreased $2.9 million (31%) for
the nine months ended September 30, 1995, as compared to the nine months ended
September 30, 1994. The decrease resulted from the reduction in depreciable
equipment discussed in the operating lease revenue section.
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Historically, commission costs
related to the equipment growth funds have been expensed as incurred. Since
syndication efforts related to EGF VII have ended, commission expense for the
nine months ended September 30, 1995 decreased $2.7 million (65%) from the same
period in 1994. Commission costs related to the LLC will be capitalized as part
of the Company's investment in the LLC program as equity is raised for the LLC
and commissions paid.
General and administrative:
General and administrative expenses decreased $0.2 million (3%) during
the nine months ended September 30, 1995, compared to the same period in 1994.
The decrease resulted from a decrease in professional services and fees, offset
partially by an increase in accrued compensation expense primarily to compensate
employees for lost benefits resulting from the termination of the Company's
401(k) plan.
Reduction in carrying value of certain assets:
As a result of the Company's regular analysis of its transportation equipment
portfolio, no adjustments in the carrying value of equipment were made in 1995.
Valuation adjustments to the estimated net realizable value of certain equipment
totaling $4.2 million were made in 1994, consisting of adjustments to certain
aircraft ($2.1 million), trailers ($1.1 million), storage vaults ($0.2 million),
containers ($0.1 million), and one marine vessel ($0.7 million).
Interest expense:
Interest expense decreased $1.8 million (24%) during the nine months
ended September 30, 1995, compared to the same period in 1994 due to the
reduction in senior and subordinated debt levels in 1995 from the same period in
1994, partially offset by increased interest rates.
Other income (expense), net:
Other income (expense), net was income of $0.5 million in the nine
months ended September 30, 1995 mainly due to receipt of an account receivable
from a previously bankrupt debtor. For the same period in 1994, other expense of
$2.3 million was due to the write-off of unamortized loan fees related to the
termination of the Company's ESOP and a reduction in the carrying value of
certain marketable securities.
Interest income:
Interest income decreased $1.2 million (44%) in the nine months ended
September 30, 1995, compared to the same period in 1994 from a reduction in
interest income earned on the ESOP cash collateral account which existed prior
to the termination of the Company's ESOP at the end of 1994.
<PAGE>
Income taxes:
For the nine months ended September 30, 1995, the provision for income
taxes was $3.9 million, which represented an effective rate of 43%. For the same
period in 1994, the $4.0 million tax benefit reflected the benefit for the
Company's losses and the tax benefit on the ESOP dividend.
Cumulative effect of accounting change:
The adoption of SOP 93-6 in the nine months ended September 30, 1994,
resulted in a noncash charge to earnings of $5.1 million for the impact of the
change in accounting principle and is reflected as the "Cumulative effect of
accounting change" in the Consolidated Statements of Operations.
Net income (loss):
As a result of the foregoing, for the nine months ended September 30,
1995 net income was $5.2 million resulting in net income per common share of
$0.44. For the same period in 1994, net loss was $8.7 million. In addition, $1.7
million was required in 1994 for the imputed preferred dividend allocated on
ESOP shares resulting in a $10.4 million net loss to common shareholders, or
$0.83 loss per common share outstanding.
Liquidity and Capital Resources:
Cash requirements historically have been satisfied through cash flow
from operations, borrowings, or sales of transportation equipment.
Liquidity in 1995 will depend, in part, on continued remarketing of the
equipment portfolio at similar lease rates, management of existing and newly
sponsored programs, effectiveness of cost control programs, and possible
additional equipment sales. Management believes the Company can accomplish the
preceding and will have sufficient liquidity and capital resources for the
future. Specifically, future liquidity is influenced by the following:
(a) Debt Financing:
Senior Debt: On June 30, 1994, the Company closed a $45.0 million
senior loan facility with a syndicate of insurance companies and repaid the
prior facility. The Company has pledged substantially all of its equipment as
collateral to the loan facility. The facility provides that equipment sale
proceeds, from pledged equipment, or cash deposits be placed into collateral
accounts or used to purchase additional equipment. The facility requires
quarterly interest only payments through March 31, 1997, with quarterly
principal payments of $2.1 million plus interest charges beginning June 30,
1997, through the termination of the loan in June 2001.
In December 1994, the Company repaid $10.0 million of its senior debt
through the use of cash collateral from the sale of pledged equipment.
Bridge Financing: Assets acquired and held on an interim basis for
placement with affiliated partnerships have, from time to time, been partially
funded by a $25.0 million short-term equipment acquisition loan facility. The
Company amended this facility on September 27, 1995. The amendment extended the
facility until September 30, 1996, and provides for a $5.0 million letter of
credit facility as part of the $25.0 million facility.
This facility, which is shared with EGFs II, III, IV, V, VI, VII and
the LLC, allows the Company to purchase equipment prior to the designated
program or partnership being identified, or prior to having raised sufficient
capital to purchase the equipment. This facility provides 80% financing if the
Company is the borrower and working capital is used for the nonfinanced costs of
these acquisitions. The Company can hold assets under this bridge facility for
up to 150 days. Interest accrues at prime or LIBOR plus 2.5% at the option of
the borrower at the time of the advance under the facility. As provided for in
the program offering documents, the Company retains the net lease revenue earned
and pays the carrying costs incurred during the interim holding period since its
capital is at risk. As of November 1, 1995, the Company had no borrowings and
EGFs VI and VII had $1.7 million and $9.6 million in borrowings, respectively.
<PAGE>
Subordinated Debt: The Company is in negotiations with its subordinated
debt lender to prepay a portion of the notes in 1995. If successful, the
Company's liquidity will be negatively impacted in the short term with a
subsequent cash flow increase due to reduced interest costs.
Securitized Debt: The Company has entered into a securitization
facility to borrow up to $80 million on a non-recourse basis for a one year
period that will be secured primarily by finance type leases which generally
have terms of four to five years. The securitized debt is expected to bear
interest at treasury rate plus 1%. As of November 1,1995, there were no
borrowings on this facility.
(b) Portfolio Activities:
During the nine months ended September 30, 1995, the Company generated
proceeds of $7.4 million from the sale of equipment for lease. These net
proceeds were placed in a collateral account as required by the senior secured
term loan agreement. In March 1995, the lender consented to the Company's
request to release $10.8 million in funds from the cash collateral account
primarily relating to asset sales in 1994. The request to release funds and the
subsequent approval were based on the appraised fair market value of the
equipment portfolio and the related collateral coverage ratio.
Over the last three years, the Company has downsized the equipment
portfolio through the sale or disposal of underperforming and nonperforming
assets. The Company will continue to identify underperforming and nonperforming
assets for sale or disposal as necessary.
(c) Syndication Activities:
The Company earned fees from syndication activities related to EGF VII
during the first four months of 1995. Total equity raised since inception for
this partnership was $107.4 million through April 30, 1995 when the program
closed. There will be no more equity raised for this partnership.
The overall limited partnership syndication market has been
contracting. The Company's management is concerned with the continued
contraction of the equipment leasing syndication market and its effect on the
volume of partnership equity that can be raised. The Company's newly registered
and currently marketed no front-end fee syndication product (LLC) was developed
to capture a larger share of the syndication market. The no front-end fee
structure of the LLC requires the Company to pay offering and organizational
costs, including payment of broker-dealer commissions, as syndicated equity is
raised. In previous investor programs sponsored by the Company, most offering
and organizational expenses were reimbursed to the Company. Since May 1995
through October 31, 1995, the LLC has raised 43 million in equity investment
from the public. This is 89% higher than the equity raised for EGF VII during
the same period of 1994. Though the Company receives a higher share of LLC
distributions versus its share of Equipment Growth Fund program distributions,
the no front-end fee investments required by the Company in the form of expense
payments on behalf of the LLC will negatively impact the Company's liquidity
during the investment phase of the program.
Management believes that through debt and equity financing, possible
sales of transportation equipment, and cash flows from operations, the Company
will have sufficient liquidity and capital resources to meet its projected
future operating needs.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 1 of Notes to Consolidated Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
10.1 Amended and restated Warehousing Credit Agreement,
dated as of September 27, 1995.
10.2 Asset Purchase Agreement, dated as of July 1, 1995.
10.3 Pooling and Servicing Agreement and Indenture of Trust,
dated as of July 1, 1995.
(B) Reports on Form 8-K
None.
<PAGE>
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.
PLM INTERNATIONAL, INC.
/s/ David J. Davis
------------------
David J. Davis
Vice President and Corporate
Controller
Date: November 1, 1995
AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
AMONG
TEC ACQUISUB, INC.
and
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
and Such Other Financial Institutions
as Shall Become LENDERS Hereunder
and
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,
as Agent
SEPTEMBER 27, 1995
<PAGE>
WAREHOUSING CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................1
1.1 Defined Terms.............................................1
1.2 Accounting Terms..........................................17
1.3 Other Terms...............................................18
1.4 Schedules and Exhibits....................................18
SECTION 2. AMOUNT AND TERMS OF CREDIT......................18
2.1 Commitment to Lend........................................18
2.1.1 Revolving Facility..............................18
(a) Facility Commitments....................18
(b) Each Loan...............................19
2.1.2 Funding.........................................20
2.1.3 Utilization of the Loans........................20
2.2 Repayment and Prepayment..................................20
2.2.1 Repayment.......................................20
2.2.2 Voluntary Prepayment............................20
2.2.3 Mandatory Prepayments...........................21
2.3 Calculation of Interest; Post-Maturity Interest...........22
2.4 Manner of Payments........................................22
2.5 Payment on Non-Business Days..............................22
2.6 Application of Payments...................................22
2.7 Procedure for the Borrowing of Loans......................23
2.7.1 Notice of Borrowing.............................23
2.7.2 Unavailability of LIBOR Loans...................23
2.8 Conversion and Continuation Elections.....................23
2.8.1 Election........................................23
2.8.2 Notice of Conversion............................24
2.8.3 Interest Period.................................24
2.8.4 Unavailability of LIBOR Loans...................24
2.9 Discretion of Lenders as to Manner of Funding.............24
2.10 Distribution of Payments..................................25
2.11 Agent's Right to Assume Funds Available for Advances......25
2.12 Agent's Right to Assume Payments Will be Made by Borrower.25
2.13 Capital Requirements......................................25
2.14 Taxes.....................................................26
2.14.1 No Deductions...........................26
2.14.2 Miscellaneous Taxes.....................26
2.14.3 Indemnity...............................26
2.14.4 Required Deductions.....................26
2.14.5 Evidence of Payment.....................27
2.14.6 Foreign Persons.........................27
i.
<PAGE>
TABLE OF CONTENTS
(continued)
Page
2.14.7 Income Taxes............................28
2.14.8 Reimbursement of Costs..................28
2.14.9 Jurisdiction............................28
2.15 Illegality................................................28
2.15.1 LIBOR Loans.............................28
2.15.2 Prepayment..............................29
2.15.3 Prime Rate Borrowing....................29
2.16 Increased Costs...........................................29
2.17 Inability to Determine Rates..............................29
2.18 Prepayment of LIBOR Loans.................................29
SECTION 3. CONDITIONS PRECEDENT............................30
3.1 Effectiveness of this Agreement...........................30
3.1.1 Corporate Documents.............................30
3.1.2 Note............................................30
3.1.3 Opinion of Counsel..............................31
3.1.4 Reaffirmation of Guaranty.......................31
3.1.5 Growth Fund Agreement...........................31
3.1.6 Bringdown Certificate...........................31
3.1.7 Other Documents.................................31
3.2 All Loans.................................................31
3.2.1 Notice of Borrowing.............................31
3.2.2 Invoices........................................31
3.2.3 Title to Equipment..............................32
3.2.4 Approval of Loan................................32
3.2.5 Leases..........................................32
3.2.6 No Event of Default.............................32
3.2.7 Officer's Certificate...........................32
3.2.8 Officer's Certificate - Leases..................32
3.2.9 Insurance.......................................33
3.2.10 Warranty of TEC AcquiSub................33
3.2.11 Other Instruments.......................34
3.3 Further Conditions to All Loans...........................34
3.3.1 General Partner or Manager......................34
3.3.2 Removal of General Partner or Manager...........34
3.3.3 Cash Balances...................................34
3.3.4 Purchaser.......................................34
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES.......34
4.1 Existence and Power.......................................34
4.2 Loan Documents and Note Authorized; Binding Obligations...35
ii.
<PAGE>
TABLE OF CONTENTS
(continued)
Page
4.3 No Conflict; Legal Compliance.............................35
4.4 Financial Condition.......................................35
4.5 Executive Offices.........................................35
4.6 Litigation................................................35
4.7 Material Contracts........................................36
4.8 Consents and Approvals....................................36
4.9 Other Agreements..........................................36
4.10 Employment and Labor Agreements...........................36
4.11 ERISA.....................................................36
4.12 Labor Matters.............................................36
4.13 Margin Regulations........................................36
4.14 Taxes.....................................................37
4.15 Environmental Quality.....................................37
4.16 Trademarks, Patents, Copyrights, Franchises and Licenses..38
4.17 Full Disclosure...........................................38
4.18 Other Regulations.........................................38
4.19 Solvency..................................................38
4.20 Survival of Representations and Warranties................38
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS................38
5.1 Records and Reports.......................................38
5.1.1 Quarterly Statements............................38
5.1.2 Annual Statements...............................39
5.1.3 Borrowing Base Certificate......................39
5.1.4 Compliance Certificate..........................39
5.1.5 Reports.........................................39
5.1.6 Insurance Reports...............................40
5.1.7 Certificate of Responsible Officer..............40
5.1.8 Employee Benefit Plans..........................40
5.1.9 ERISA Notices...................................40
5.1.10 Pension Plans...........................41
5.1.11 SEC Reports.............................41
5.1.12 Tax Returns.............................41
5.1.13 Additional Information..................41
5.2 Existence; Compliance with Law............................41
5.3 Insurance.................................................41
5.4 Taxes and Other Liabilities...............................42
5.5 Inspection Rights; Assistance.............................42
5.6Maintenance of Facilities; Modifications; Performance of Leases.42
5.6.1 Maintenance of Facilities.......................42
5.6.2 Certain Modifications to the Equipment..........42
iii.
<PAGE>
TABLE OF CONTENTS
(continued)
Page
5.6.3 Performance of Leases...........................43
5.7 Supplemental Disclosure...................................43
5.8 Further Assurances........................................43
5.9 Lockbox...................................................43
5.10 Environmental Laws........................................43
5.11 Equipment Purchase Agreement..............................43
SECTION 6. BORROWER'S NEGATIVE COVENANTS...................43
6.1 Liens; Negative Pledges; and Encumbrances.................43
6.2 Acquisitions..............................................44
6.3 Limitations on Indebtedness...............................44
6.4 Use of Proceeds...........................................44
6.5 Disposition of Assets.....................................45
6.6 Restricted Payments.......................................45
6.7 Restriction on Fundamental Changes........................45
6.8 Transactions with Affiliates..............................45
6.9 No Loans to Affiliates....................................46
6.10 No Investment.............................................46
6.11 Maintenance of Business...................................46
6.12 No Modification to Leases.................................46
6.13 No Subsidiaries...........................................46
6.14 Amendments of Charter Documents...........................46
6.15 Events of Default.........................................46
6.16 ERISA.....................................................46
6.17 No Use of Any Lender's Name...............................47
6.18 Certain Accounting Changes................................47
SECTION 7. FINANCIAL COVENANTS OF BORROWER.................47
7.1 Minimum Consolidated Tangible Net Worth...................47
SECTION 8. EVENTS OF DEFAULT AND REMEDIES..................47
8.1 Events of Default.........................................47
8.1.1 Failure to Make Payments........................47
8.1.2 Other Agreements................................48
8.1.3 Breach of Covenants.............................48
8.1.4 Breach of Representations or Warranties.........48
8.1.5 Failure to Cure.................................48
8.1.6 Insolvency......................................49
8.1.7 Bankruptcy Proceedings..........................49
8.1.8 Material Adverse Effect.........................49
8.1.9 Judgments, Writs and Attachments................49
iv.
<PAGE>
TABLE OF CONTENTS
(continued)
Page
8.1.10 Legal Obligations.................................49
8.1.11 Growth Fund Agreement.............................49
8.1.12 Board of Directors................................50
8.1.13 Criminal Proceedings..............................50
8.1.14 Action by Governmental Authority..................50
8.1.15 Governmental Decrees..............................50
8.2 Waiver of Default.........................................50
8.3 Remedies..................................................51
8.4 Set-Off...................................................51
8.5 Rights and Remedies Cumulative............................52
SECTION 9. AGENT...........................................52
9.1 Appointment...............................................52
9.2 Delegation of Duties......................................53
9.3 Exculpatory Provisions....................................53
9.4 Reliance by Agent.........................................53
9.5 Notice of Default.........................................53
9.6 Non-Reliance on Agent and Other Lenders...................54
9.7 Indemnification...........................................54
9.8 Agent in Its Individual Capacity..........................54
9.9 Resignation and Appointment of Successor Agent............55
SECTION 10. EXPENSES AND INDEMNITIES........................55
10.1 Expenses..................................................55
10.2 Indemnification...........................................56
10.2.1 General Indemnity.......................56
10.2.2 Environmental Indemnity.................56
10.2.3 Survival; Defense.......................57
SECTION 11. MISCELLANEOUS...................................57
11.1 Survival..................................................57
11.2 No Waiver by Agent or Lenders.............................57
11.3 Notices...................................................57
11.4 Headings..................................................58
11.5 Severability..............................................58
11.6 Entire Agreement; Construction; Amendments and Waivers....58
11.7 Reliance by Lenders.......................................59
11.8 Marshalling; Payments Set Aside...........................59
11.9 No Set-Offs by Borrower...................................59
11.10 Binding Effect, Assignment......................59
11.11 Counterparts....................................60
v.
<PAGE>
TABLE OF CONTENTS
(continued)
Page
11.12 Equitable Relief................................61
11.13 Written Notice of Claims; Claims Bar............61
11.14 Waiver of Punitive Damages......................61
11.15 Governing Law...................................61
11.16 Consent to Jurisdiction.........................61
11.17 Waiver of Jury Trial............................62
vi.
<PAGE>
INDEX OF EXHIBITS
Exhibit A Form of Revolving Promissory Note
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Compliance Certificate
Exhibit D Form of Growth Fund Agreement
Exhibit E Form of Opinion of Counsel (Stephen Peary)
Exhibit F Form of Lockbox Agreement
Exhibit G Form of Notice of Borrowing
Exhibit H Form of Notice of Conversion/Continuation
vii.
<PAGE>
INDEX OF SCHEDULES
Schedule A Commitments
Schedule 1.1 Amendments to Schedule A
Schedule 4.5 Executive Offices and Principal Places of Business
Schedule 4.6 Litigation
Schedule 4.7 Material Contracts
Schedule 4.8 Consent and Approvals
Schedule 4.15 Environmental Disclosures
Schedule 6.1 Existing Liens
viii.
<PAGE>
AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
THIS AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is entered into
as of September 27, 1995, by and between TEC ACQUISUB, INC., a California
special purpose corporation ("Borrower"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA ("FUNB") and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 11.10 (any one individually, a "Lender," and collectively,
"Lenders"), and FUNB, as agent on behalf of Lenders (not in its individual
capacity, but solely as agent, "Agent").
RECITALS
A. Borrower, Lenders and Agent have entered into that Warehousing
Credit Agreement dated as of June 30, 1993, as amended by that as amended by
that Amendment No. 1 to Warehousing Credit Agreement dated as of December 20,
1993, that Amendment No. 2 to Warehousing Credit Agreement dated as of June 28,
1994 and that Amendment No. 3 to Warehousing Credit Agreement dated as of May 5,
1995 and that Amendment No. 4 to Warehousing Credit Agreement dated as of June
30, 1995 (the "TEC AcquiSub Agreement").
B. The Agreement amends and restates the TEC AcquiSub Agreement in its
entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. As used herein, the following terms have the
following meanings:
"Acquisition" means any transaction, or any series of related
transactions, by which Borrower directly or indirectly (a) acquires any ongoing
business or all or substantially all of the assets of any Person or any division
thereof, whether through a purchase of assets, merger or otherwise, or (b)
acquires (in one transaction or as the most recent transaction in a series of
transactions) control of at least a majority of the stock of a corporation
having ordinary voting power for the election of directors, or (c) acquires
control of at least a majority of the ownership interests in any partnership or
joint venture.
1.
<PAGE>
"Adjustable LIBOR" means, for each Interest Period in respect of LIBOR
Loans, an interest rate per annum (rounded upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:
The Adjusted LIBOR shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Advance" means any Advance made or to be made by any Lender to
Borrower as set forth in Section 2.1.1.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, through one or more intermediaries, owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, five percent
(5.0%) or more of the stock having ordinary voting power in the election of
directors of such Person or of the ownership interests in any partnership or
joint venture, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or (c) each of
such Person's officers, directors, joint venturers and partners; provided,
however, that in no case shall any Lender or Agent be deemed to be an Affiliate
of Borrower for purposes of this Agreement. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means FUNB solely when acting in its capacity as the Agent
under this Agreement or any of the other Loan Documents, and any successor
Agent.
"Agreement" means this Amended and Restated Warehousing Credit
Agreement dated as of September 27, 1995, including all amendments,
modifications and supplements hereto, renewals, extensions or restatements
hereof, and all appendices, exhibits and schedules to any of the foregoing, and
shall refer to the Agreement as the same may be in effect from time to time.
"Aircraft" means any corporate, commuter, or commercial aircraft or
helicopters, with modifications (as applicable) and replacement or spare parts
used in connection therewith, including, without limitation, engines, rotables
and propellers, and any engines, rotables or propellers used on a stand-alone
basis.
"Applicable Margin" means:
(a) with respect to Prime Rate Loans, zero percent
(0.00%); and
(b) with respect to LIBOR Loans, two and one-half of one
percent (2.50%).
2.
<PAGE>
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Borrowing Base" means, as at and for any date of determination, an
amount not to exceed the lesser of:
(a) an amount equal to eighty percent (80.0%) of the aggregate
Invoice Price of all Eligible Inventory then owned of record by Borrower or any
Marine Subsidiary or of record by an Owner Trustee for the beneficial interest
of Borrower or any Marine Subsidiary (provided, however, that there shall be
excluded from this clause (a) the aggregate Invoice Price of all items of
Eligible Inventory subject to a Lease under which any applicable lease or rental
payment is more than ninety (90) days past due), computed (1) with respect to
any requested Loan, as of the requested Funding Date (and shall include the
item(s) of Eligible Inventory to be acquired with the proceeds of the requested
Loan), and (2) with respect to the delivery of any monthly Borrowing Base
Certificate to be furnished pursuant to Section 5.1.3, as of the last day of the
calendar month for which such Borrowing Base Certificate is furnished (provided
that if any portion of Borrower's, such Marine Subsidiary's or such Owner
Trustee's ownership interest in any such item of Eligible Inventory is sold or
assigned to one or more of the Equipment Growth Funds such that Borrower, such
Marine Subsidiary or such Owner Trustee continues to retain less than the entire
record or beneficial ownership interest therein, then for the purpose of
computing the Borrowing Base under this clause (a), the Invoice Price of such
item of Eligible Inventory shall be deemed to be equal to Borrower's or such
Marine Subsidiary's ratable portion of the Invoice Price of such item of
Eligible Inventory); or
(b) an amount equal to one hundred percent (100.0%) of the
unrestricted cash available for purchase of Equipment by Equipment Growth Funds,
computed (x) with respect to any requested Loan, as of the requested Funding
Date (and shall include the aggregate Invoice Price of all item(s) of Eligible
Inventory to be acquired with the proceeds of the requested Loan), and (y) with
respect to the delivery of any monthly Borrowing Base Certificate to be
furnished pursuant to Section 5.1.3, as of the last day of the calendar month
for which such Borrowing Base Certificate is furnished (provided, that for the
purpose of computing the Borrowing Base, in the event that Borrower, any Marine
Subsidiary or any Owner Trustee shall own less than one hundred percent (100.0%)
of the record or beneficial interests in any item of Equipment, with one or more
of the other Equipment Growth Funds owning of record or beneficially the
remaining interests, there shall be included only Borrower's, such Marine
Subsidiary's or such Owner Trustee's, as the case may be, ratable interest in
such item of Equipment).
"Borrowing Base Certificate" means a certificate with appropriate
insertions setting forth the components of the Borrowing Base as of the last day
of the month for which such
3.
<PAGE>
certificate is submitted or as of a requested Funding Date, as the case may be,
which certificate shall be substantially in the form set forth in Exhibit B and
certified by a Responsible Officer of Borrower.
"Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking institutions located in the States of California or North
Carolina are authorized or permitted by law or other governmental action to
close and, with respect to LIBOR Loans, means any day on which dealings in
foreign currencies and exchanges may be carried on by Agent and Lenders in the
London interbank market.
"Casualty Loss" means any of the following events with respect to any
item of Eligible Inventory: (a) the actual total loss or compromised total loss
of such item of Eligible Inventory; (b) such item of Eligible Inventory shall
become lost, stolen, destroyed, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever; (c) the seizure of such item of
Eligible Inventory for a period exceeding sixty (60) days or the condemnation or
confiscation of such item of Eligible Inventory; or (d) such item of Eligible
Inventory shall be deemed under its lease to have suffered a casualty loss as to
the entire item of Eligible Inventory.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes, levies, assessments, charges or claims, in
each case then due and payable, upon or relating to (a) the Loans hereunder, (b)
Borrower's employees, payroll, income or gross receipts, (c) Borrower's
ownership or use of any of its Properties or assets or (d) any other aspect of
Borrower's business.
"Closing" means the time at which each of the conditions precedent set
forth in Section 3 to the making of the first Loan hereunder shall have been
duly fulfilled or satisfied by Borrower.
"Closing Date" means the date on which Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, the
Treasury Regulations adopted thereunder and the Treasury Regulations proposed
thereunder (to the extent Requisite Lenders, in their sole discretion,
reasonably determine that such proposed regulations set forth the regulations
that apply in the circumstances), as the same may be in effect from time to
time.
"Collateral" means the Collateral described in the Security Agreement.
"Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the execution and delivery of an instrument of
assignment pursuant to Section 11.10, which amendments shall be evidenced on
Schedule 1.1.
"Commitment Termination Date" means September 30, 1996.
4.
<PAGE>
"Compliance Certificate" means a certificate signed by a Responsible
Officer of Borrower, substantially in the form set forth in Exhibit C, with such
changes therein as the Required Lenders may from time to time reasonably request
for the purpose of having such certificate disclose the matters certified
therein and the method of computation thereof.
"Consolidated Funded Debt" means for any Person, as measured at any
date of determination on a consolidated basis, the total amount of all interest
bearing obligations (including Indebtedness for borrowed money), capital lease
obligations as a lessee and the stated amount of all issued and undrawn letters
of credit.
"Consolidated Intangible Assets" means for any Person, on a
consolidated basis, as at any date of determination, all intangible assets of
such Person, as determined and computed in accordance with GAAP.
"Consolidated Net Worth" means, on a consolidated basis, as at any date
of determination, the difference between Consolidated Total Assets and
Consolidated Total Liabilities.
"Consolidated Tangible Net Worth" means, as at any date of
determination, the difference between Consolidated Net Worth and Consolidated
Intangible Assets.
"Consolidated Total Assets" means for any Person, on a consolidated
basis, as at any date of determination, all assets of such Person, as determined
and computed in accordance with GAAP.
"Consolidated Total Liabilities" means for any Person, on a
consolidated basis, as at any date of determination, all liabilities of such
Person, as determined and computed in accordance with GAAP.
"Contingent Obligation" means, as to any Person, (a) any Guaranty
Obligation of that Person and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, (ii) with
respect to the Indebtedness of any partnership or joint venture of which such
Person is a partner or a joint venturer, (iii) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (iv) in respect of any interest rate protection contract that is
not entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof, and shall, with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.
5.
<PAGE>
"Default Rate" has the meaning set forth in Section 2.3.
"Designated Deposit Account" means a demand deposit account maintained
by Borrower with FUNB designated by written notice from Borrower to Agent.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"EGF" means PLM Equipment Growth Fund, a California limited
partnership.
"EGF II" means PLM Equipment Growth Fund II, a California limited
partnership.
"EGF III" means PLM Equipment Growth Fund III, a California limited
partnership.
"EGF IV" means PLM Equipment Growth Fund IV, a California limited
partnership.
"EGF V" means PLM Equipment Growth Fund V, a California limited
partnership.
"EGF VI" means PLM Equipment Growth Fund VI, a California limited
partnership.
"EGF VII" means PLM Equipment Growth Fund VII, a California limited
partnership.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000, (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.
"Eligible Inventory" means all Trailers (less than ten 10 years old),
Aircraft and Aircraft engines (complying with (a) Stage III noise reduction
requirements or (b) with Stage II noise reduction requirements if the present
value of the Lease payments with respect to such Aircraft, discounted at a rate
equal to the Prime Rate, exceeds seventy percent (70.0%) of the purchase price
for such Aircraft paid by Borrower); and Railcars (less than twenty (20) years
old), cargo containers (less than ten (10) years old), marine vessels (less than
fifteen (15) years old) and, if approved by the Requisite Lenders, other related
Equipment, in each case that (a) is owned of record by Borrower or a Marine
Subsidiary or, subject to the approval of Agent, any owner trust of which
Borrower is the sole beneficiary or owner, as applicable, or solely with respect
to any marine vessel registered in Liberia, the Bahamas, Hong Kong, Singapore or
other registry acceptable to Agent in its sole discretion, any nominee entity of
which Borrower or a Marine Subsidiary is the sole beneficiary or direct or
indirect owner; (b) is purchased in whole or in part by Borrower or such owner
trust of which Borrower is the sole beneficiary (or nominee entity of which
Borrower is the sole beneficiary or direct or indirect owner) with Loans from
Lenders under this Agreement; (c) is subject to a Lease acceptable to Agent in
its sole discretion (as reviewed in full in connection with each requested
borrowing hereunder), which Lease shall, at
6.
<PAGE>
a minimum, (A) be non-cancelable, (B) be with a lessee of acceptable credit
quality as determined by Agent, and (C) be of a firm term in excess of one (1)
year, except that cargo- containers and Trailers may be on Utilization Leases;
(d) has a value and marketability reasonably satisfactory to the Agent; (e) was
not previously financed with the proceeds of a Loan under this Agreement; (f)
would, except for the fact such item of Equipment is not owned of record or
beneficially by any Growth Fund, qualify as "Eligible Inventory" under and as
defined in the Growth Fund Agreement; and (g) is free and clear of all Liens,
except (i) any interest of a lessee thereof pursuant to a Lease entered into
with Borrower or a Marine Subsidiary or Borrower's or such Marine Subsidiary's
predecessor in interest or such owner trust or nominee entity, as lessor, or
(ii) as otherwise permitted by Section 6.1, provided that any Liens of the type
permitted under clause (ii) encumbering any item of Equipment shall not secure
obligations in amounts which materially impair the equity value in such item of
Equipment. Requisite Lenders in their sole discretion, on a case by case basis,
may approve other items or types of Equipment for credit under "Eligible
Inventory" from time to time. "Eligible Inventory" shall include only Equipment
purchased by Borrower or such owner trust (or nominee entity) of which Borrower
is sole beneficiary, whether by sale or assignment or otherwise, from
independent third-parties not related to PLMI or its Affiliates. Borrower may
sell or assign a partial ownership interest in any item of Eligible Inventory to
one or more of the Equipment Growth Funds in consideration of a purchase price,
paid in cash, equal to the ratable portion of the Invoice Price paid by Borrower
for such item of Eligible Inventory so sold or assigned without causing the
underlying item of Equipment to lose its status as Eligible Inventory by virtue
of such sale on the condition that, and only on the condition that, (x) a
portion of the cash purchase price, ratably related to the percentage of the
Invoice Price of such item of Eligible Inventory financed by a Loan advanced by
Lenders hereunder, shall be used to prepay such Loan in accordance with Section
2.2.3(c) and (y) Agent shall continue to retain possession of the Lease in
respect of such item of Equipment. Subject to the immediately preceding
sentence, Equipment which is Eligible Inventory will cease to be Eligible
Inventory at any time it no longer continues to meet all of the above
requirements. Eligible Inventory shall not include any Equipment that was
included in the borrowing base against which loans shall have previously been
made to Growth Funds under the Growth Fund Agreement.
"Employee Benefit Plan" means any Pension Plan and any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, that is maintained for the
employees of Borrower or any ERISA Affiliate of Borrower.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from Property,
whether
7.
<PAGE>
or not owned by Borrower, or (b) any other circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all foreign, federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Emergency Planning and
Community Right-to-Know Act.
"Environmental Permit" has the meaning set forth in Section 4.15.2.
"Equipment" means all items of transportation-related equipment owned
directly or beneficially by Borrower, by any Marine Subsidiary or by any Growth
Fund and held for lease or rental, and shall include items of equipment legal or
record title to which is held by any owner trust or nominee entity in which
Borrower, any Marine Subsidiary or Growth Funds holds the sole beneficial
interest.
"Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.
"Equipment Purchase Agreement" means an equipment purchase agreement,
in form and substance satisfactory to Agent, between Borrower and any Growth
Fund, entered into for the benefit of Lenders, providing for the purchase by
such Growth Fund of the Equipment upon which a Loan has been made.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, as the same may be in effect from time to time, and any successor
statute.
"ERISA Affiliate" means, as applied to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Code.
"Eurodollar Reserve Percentage" means the maximum reserve percentage
(expressed as a decimal, rounded upward to the nearest 1/100th of one percent
(0.01%)) in effect from time to time (whether or not applicable to any Lender)
under regulations issued by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency liabilities having a
term comparable to such Interest Period.
"Event of Default" means any of the events set forth in Section 8.1.
8.
<PAGE>
"Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended from time to time as set forth on Schedule 1.1, for
the revolving credit facility described in Section 2.1.1 to be provided by
Lenders to Borrower according to each Lender's Pro Rata Share.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation, the rate for such day
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System and any successor thereto.
"Form 1001" has the meaning set forth in Section 2.14.6.
"Form 4224" has the meaning set forth in Section 2.14.6.
"FSI" means PLM Financial Services, Inc., a Delaware corporation of
which Borrower is an indirect Subsidiary.
"Funding Date" means with respect to any proposed borrowing hereunder,
the date funds are advanced to Borrower for any Loan.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar function of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
9.
<PAGE>
"Growth Funds" means any and all of EGF II, EGF III, EGF IV, EGF V, EGF
VI, EGF VII and Income Fund I.
"Growth Fund Agreement" means the Amended and Restated Warehousing
Credit Agreement dated as of September 27, 1995, by and among each of the Growth
Funds, and Lenders, and Agent substantially in the form of Exhibit D hereto, as
the same may from time to time be amended, modified, supplemented, renewed,
extended or restated.
"Guaranties" means those certain Guaranties each dated as of June 30,
1993, executed by FSI and TEC in favor of Lenders and Agent.
"Guaranty Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease for
capital equipment other than Eligible Inventory, dividend, letter of credit or
other obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect thereof. The
amount of any Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"Income Fund I" means Professional Lease Management Income Fund I,
L.L.C., a Delaware limited liability company.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above, all capital leases of such
Person as lessee, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than trade or other accounts payable in the
ordinary course of business and not more than ninety (90) days past due), (e)
any obligation of such Person that is secured by a Lien on assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person arising under acceptance
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facilities or under facilities for the discount of accounts receivable of such
Person and (g) any obligation of such Person to reimburse the issuer of any
letter of credit issued for the account of such Person upon which a draw has
been made.
"Indemnified Liability" has the meaning set forth in Section 10.2.1.
"Indemnified Person" has the meaning set forth in Section 10.2.1.
"Interest Differential" means, with respect to any prepayment of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures, the difference between (a) the per annum interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as practicable to, the date of the prepayment for a LIBOR
Loan commencing on such date and ending on the last day of the applicable
Interest Period. The determination of the Interest Differential by Agent shall
be conclusive in the absence of manifest error.
"Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest Period applicable to such Loan and, with respect to Prime
Rate Loans, the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan.
"Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Borrower pursuant to Section 2,
in each instance commencing on the applicable Funding Date of the Loan;
provided, however, that any Interest Period which would otherwise end on a day
that is not a Business Day shall end on the next succeeding Business Day except
that in the instance of any LIBOR Loan, if such next succeeding Business Day
falls in the next calendar month, the Interest Period shall end on the next
preceding Business Day.
"Investment" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of loan
or advance (other than advances to employees for moving or travel expenses,
drawing accounts and similar expenditures in the ordinary course of business),
capital contribution, guaranty or other debt or equity participation or
interest, or otherwise, in any other Person, including any partnership and joint
venture interests of such Person in any other Person or in any item of
transportation-related equipment, owned by a Person unaffiliated with Borrower
and on lease to another third party, in which Borrower acquires a right to
share, directly or indirectly.
"Investment Company Act" means the Investment Company Act of 1940, as
amended (15 U.S.C. ss.80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.
"Invoice Price" means the sum of the purchase price (including
modifications, as applicable), delivery charges, third party brokerage fees and
other reasonable closing costs, if any (provided that delivery charges, third
party brokerage fees and closing costs shall be
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included in the computation of the "Invoice Price" only to the extent that they
do not, in the aggregate, exceed five percent (5.0%) of the total purchase
price), and all applicable taxes, paid by Borrower for or with respect to any
item of Eligible Inventory.
"IRS" means the Internal Revenue Service and any successor thereto.
"Lease" means each and every item of chattel paper, installment sales
agreement, equipment lease or rental agreement (including progress payment
authorizations) relating to an item of Equipment of which Borrower or any Growth
Fund is the lessor and in respect of which the lessee and lease terms
(including, without limitation, as to rental rate, maturity and insurance
coverage) are acceptable to Agent, in its reasonable discretion. The term
"Lease" includes (a) all payments to be made thereunder, (b) all rights of
Borrower therein, and (c) any and all amendments, renewals, extensions or
guaranties thereof.
"Lending Office" means, with respect to any Lender, the office or
offices of the Lender specified as its lending office opposite its name on the
applicable signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrower and Agent.
"LIBOR" means, with respect to any Loan to be made, continued as or
converted into a LIBOR Loan, the London Inter-Bank Offered Rate (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which Dollar deposits are offered to Agent by major banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related Interest Period with respect to such Loan
in an aggregate amount approximately equal to the amount of such Loan and for a
period of time comparable to the number of days in the applicable Interest
Period. The determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.
"LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.
"Lien" means any mortgage, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and the filing of or agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
"Loan" has the meaning set forth in Section 2.1.1(a)(i).
"Loan Document" when used in the singular and "Loan Documents" when
used in the plural means any and all of this Agreement, the Note, the Security
Agreement, the Lockbox Agreement and the Guaranties and any and all other
agreements, documents and instruments executed and delivered by or on behalf or
support of Borrower to Agent or any Lender or any of their respective authorized
designees evidencing or otherwise relating to the Advances and
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the Liens granted to Agent, on behalf of Lenders, with respect to the Advances,
as the same may from time to time be amended, modified, supplemented or renewed.
"Lockbox" has the meaning set forth in Section 5.9.
"Lockbox Agreement" means the Agreement of even date herewith between
Borrower, FUNB and Agent on behalf of Lenders, substantially in the form of
Exhibit F, relating to the Lockbox.
"Marine Subsidiary" means a wholly-owned Subsidiary of Borrower
organized for the purpose of holding record or beneficial title to one or more
marine vessels or aircraft rotables and spare parts; provided that such
Subsidiary shall continue to be deemed a Marine Subsidiary if Borrower shall
thereafter sell and transfer partial, but not the entire, record or beneficial
ownership interest therein to one or more Equipment Growth Funds (but for
purposes of computing the Borrowing Base, such Marine Subsidiary's record or
beneficial title to its owned Equipment shall be deemed to be limited to
Borrower's continuing ratable ownership interest in such Marine Subsidiary).
"Material Adverse Effect" means any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of any Loan Document, (b)
is or could reasonably be expected to be material and adverse to the condition
(financial or otherwise) or business operations of Borrower, FSI or TEC (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, FSI or TEC to perform its Obligations, or (d) materially
impairs or could reasonably be expected to materially impair the ability of
Agent or any Lender to enforce any of its or their legal remedies pursuant to
the Loan Documents.
"Maturity Date" means, with respect to each Loan advanced by Lenders
hereunder, the date which is one hundred fifty (150) days after the Funding Date
of such Loan or such earlier or later date as requested by Borrower and approved
by the Requisite Lenders, in their sole and absolute discretion; provided,
however, in no event shall any Maturity Date be a date which is later than the
Commitment Termination Date.
"Maximum Availability" has the meaning set forth in Section 2.1.1.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, and to which Borrower or any ERISA Affiliate of Borrower is
making, or is obligated to make, contributions or has made, or been obligated to
make, contributions within the preceding five (5) years.
"Note" has the meaning set forth in Section 2.1.1(a)(i), and any and
all replacements, extensions, substitutions and renewals thereof.
"Notice of Borrowing" means a notice given by Borrower to Agent in
accordance with Section 2.7, substantially in the form of Exhibit G, with
appropriate insertions.
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"Notice of Conversion/Continuation" means a notice given by Borrower to
Agent in accordance with Section 2.8, substantially in the form of Exhibit H,
with appropriate insertions.
"Obligations" means all loans, advances, liabilities and obligations
for monetary amounts owing by Borrower to any Lender or Agent, whether due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any kind
or nature, arising under any of the Loan Documents. This term includes, without
limitation, all principal, interest (including interest that accrues after the
commencement of a case or proceeding against Borrower under the Bankruptcy
Code), fees, including, without limitation, any and all prepayment fees,
facility fees, commitment fees, arrangement fees, agent fees and attorneys' fees
and any and all other fees, expenses, costs or other sums chargeable to Borrower
under any of the Loan Documents.
"Operating Agreement" means the Fifth Amended and Restated Operating
Agreement of Income Fund I, entered into as of January 24, 1995.
"Opinion of Counsel" means the favorable written legal opinions of
Stephen Peary, general counsel of FSI and TEC, substantially in the form of
Exhibits E, respectively, together with copies of any officer's certificate or
legal opinion of another counsel or law firm specifically identified and
expressly relied upon by such counsel in its opinion.
"Other Taxes" has the meaning set forth in Section 2.14.2.
"Overadvance" has the meaning set forth in Section 2.1.1(a)(iii).
"Owner Trustee" means any person acting in the capacity of (a) a
trustee for any owner trust or (b) a nominee entity, in each case holding title
to any Eligible Inventory pursuant to a trust or similar agreement with Borrower
or FSI.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, that is maintained for the employees of Borrower or any
ERISA Affiliate of Borrower, other than a Multiemployer Plan.
"Permitted Liens" has the meaning set forth in Section 6.1.
"Permitted Rights of Others" means, as to any Property in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary interest of a lessor under a lease of such
Property, and (c) an option or right of the lessee under a lease of such
Property to purchase such Property at fair market value.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.
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"PLMI" means PLM International, Inc., a Delaware corporation.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, will constitute an Event of Default.
"Prepayment Date" has the meaning set forth in Section 2.2.2.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by FUNB as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.
"Prime Rate Loan" means any borrowing which bears interest at a rate
determined with reference to the Prime Rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Pro Rata Share" means, for any Lender, the proportion such Lender's
Commitment with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.
"Public Utility Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C. ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.
"Railcar" means all railroad rolling stock, including, without
limitation, all coal, timber, plastic pellet, tank, hopper, flat and box cars
and locomotives.
"Reaffirmation of Guaranty" means the Acknowledgement and Reaffirmation
of Guaranty, dated as of even date herewith, executed by FSI and TEC in favor of
Lenders reaffirming their obligations under their respective Guaranties.
"Regulations G, T, U and X" means, collectively, Regulations G, T, U
and X adopted by the Federal Reserve Board (12 C.F.R. Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule, regulation, guideline or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property is
subject.
"Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this Agreement, or,
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in the event there are no amounts outstanding, the Commitments, is greater than
sixty percent (60.0%) of all such amounts outstanding or the total Commitments,
as the case may be.
"Responsible Officer" means any of the President, Executive Vice
President, Chief Financial Officer, Secretary or Corporate Controller of
Borrower having authority to request Loans or perform other duties required
hereunder.
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Security Agreement" means the Security Agreement entered into as of
June 30, 1993 between Borrower and Agent, on behalf of Lenders, including all
amendments, modifications and supplements thereto and all appendices, exhibits
and schedules to any of the foregoing, and shall refer to the Security Agreement
as the same may be in effect from time to time.
"Security Documents" means the Security Agreement, each chattel
mortgage, ship mortgage or similar security agreement, mortgage or other
agreement or document entered into with respect to this Agreement, each UCC-1
financing statement delivered pursuant hereto and any and all other related
documents.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
Property in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company (other than Equipment Growth
Funds) or other business entity of which an aggregate of fifty percent (50.0%)
or more of the beneficial interest (in the case of a partnership) or fifty
percent (50.0%) or more of the outstanding stock, units, or other voting
interest having ordinary voting power to elect a majority of the directors,
managers or trustees of such Person (irrespective of whether, at the time, the
stock, units or other voting interest of any other class or classes of such
Person shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person.
"Taxes" has the meaning set forth in Section 2.14.1.
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"TEC" means PLM Transportation Equipment Corporation, a California
corporation and a wholly-owned Subsidiary of FSI and of which Borrower is a
special purpose Subsidiary.
"Termination Event" means (a) a "reportable event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a reportable
event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of Borrower, FSI or any of FSI's other
Subsidiaries or any of their ERISA Affiliates from a Pension Plan during a plan
year in which any of them was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate a
Pension Plan by the PBGC, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan.
"Trailer" means (a) vehicles having a minimum length of twenty (20)
feet used in trailer or freight car service and constructed for the transport of
commodities or containers from point to point and (b) associated equipment.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of North Carolina; provided, however, in the
event that, by reason of mandatory provisions of law, any and all of the
attachment, perfection or priority of the Lien of Agent, on behalf of Lenders,
in and to the Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of North Carolina, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Utilization Leases" means Leases for Equipment held for lease in
pooling or similar arrangements where the actual rental payments under such
Lease is based on and for the actual period of utilization of such item of
Equipment rather than the Lease term.
1.2 Accounting Terms. Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the meaning customarily
given such term in accordance with GAAP, and all financial data required to be
submitted by this Agreement shall be prepared and computed, unless otherwise
specifically provided herein, in accordance with GAAP. That certain terms or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. In the event that GAAP
changes during the term of this Agreement such that the covenants contained in
Section 7 would then be calculated in a different manner or with different
components, (a) the parties hereto agree to amend this Agreement in such
respects as are necessary to conform those covenants as criteria for evaluating
Borrower's financial condition to substantially the same criteria as were
effective prior to such change in GAAP and (b) Borrower shall be deemed to be in
compliance with the covenants contained in the aforesaid subsections during the
sixty (60) day period following any such change in GAAP if and to the extent
that Borrower would have been in compliance therewith under GAAP as in effect
immediately prior to such change.
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1.3 Other Terms. All other undefined terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are used or defined therein. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole, including the Exhibits and Schedules hereto, all of which
are by this reference incorporated into this Agreement, as the same may from
time to time be amended, modified or supplemented, and not to any particular
section, subsection or clause contained in this Agreement. The term "including"
shall not be limiting or exclusive, unless specifically indicated to the
contrary. The term "or" is disjunctive; the term "and" is conjunctive. The term
"shall" is mandatory; the term "may" is permissive. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, feminine and the neuter.
1.4 Schedules and Exhibits. Any reference to a "Sections",
"Subsection", "Exhibit", or "Schedule" shall refer to the relevant Section or
Subsection of or Exhibit or Schedule to this Agreement, unless specifically
indicated to the contrary.
SECTION 2. AMOUNT AND TERMS OF CREDIT.
2.1 Commitment to Lend.
2.1.1 Revolving Facility. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties of
Borrower set forth herein, Lenders hereby agree to make Advances (as defined
below) of immediately available funds to Borrower, on a revolving basis, from
the Closing Date until the Business Day immediately preceding the Commitment
Termination Date, in the aggregate principal amount outstanding at any time not
to exceed the lesser of (a) the total Commitments for the Facility less the
aggregate principal amount then outstanding under the Growth Fund Agreement or
(b) the Borrowing Base (such lesser amount being the "Maximum Availability"), as
more fully set forth in this Section 2.1.1.
(a) Facility Commitments.
(i) On the Funding Date requested by Borrower,
after Borrower shall have satisfied all applicable conditions precedent set
forth in Section 3, each Lender shall advance immediately available funds to
Agent (each such advance being an "Advance") evidencing such Lender's Pro Rata
Share of a loan ("Loan"). Agent shall immediately advance such immediately
available funds to Borrower at the Designated Deposit Account (or such other
deposit account at FUNB or such other financial institution as to which Borrower
and Agent shall agree at least three (3) Business Days prior to the requested
Funding Date) on the Funding Date with respect to such Loan. Borrower shall pay
interest accrued on the Loan at the rates and in the manner set forth in Section
2.1.1(b). Subject to the terms and conditions of this Agreement, the unpaid
principal amount of each Loan and all unpaid interest accrued thereon, together
with all other fees, expenses, costs and other sums chargeable to Borrower
incurred in connection therewith shall be due and payable no later than the
Maturity Date of such Loan.
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Each Loan advanced hereunder shall be evidenced by Borrower's revolving
promissory note, substantially in the form of Exhibit A (the "Note").
(ii) The obligation of Lenders to make any Loan
from time to time hereunder shall be limited to the then applicable Maximum
Availability. For the purpose of determining the amount of the Borrowing Base
available at any one time, the amount available shall be the total amount of the
Borrowing Base as set forth in the Borrowing Base Certificate delivered to Agent
pursuant to Section 3.2.1 with respect to each requested Loan. Nothing contained
in this Agreement shall under any circumstance be deemed to require any Lender
to make any Advance under the Facility which, in the aggregate principal amount,
either (1) taking into account such Lender's Pro Rata Share of the principal
amounts outstanding under this Agreement and the making of such Advance exceeds
the lesser of (A) such Lender's Commitment for the Facility and (B) such
Lender's Pro Rata Share of the Borrowing Base, or (2) taking into account such
Lender's Pro Rata Share of the principal amounts outstanding under this
Agreement and under the Growth Fund Agreement and the making of such Advance
exceeds such Lender's Commitment for the Facility.
(iii) If at any time and for any reason the
aggregate principal amount of the Loan(s) then outstanding shall exceed the
Maximum Availability (the amount of such excess, if any, being an
"Overadvance"), Borrower shall immediately repay the full amount of such
Overadvance, together with all interest accrued thereon; provided, however, that
if such Overadvance occurs solely as a result of a decrease in the amount of the
Borrowing Base due solely to a decrease in the computation of the Borrowing Base
under either clause (c) or (d), then, to the extent of such decrease, Borrower
shall not be required under this Section 2.1.1(a)(iii) to prepay such
Overadvance but Lenders shall have no obligation to make or fund any Loans or
extend any credit hereunder so long as such Overadvance condition shall remain
in effect.
(iv) Amounts borrowed by Borrower under this
Facility may be repaid and, prior to the Commitment Termination Date and subject
to the applicable terms and conditions precedent to borrowings hereunder,
reborrowed; provided, however, that no Loan shall have a Maturity Date which is
later than the Commitment Termination Date.
(v) Each request for a Loan hereunder shall
constitute a reaffirmation by Borrower and the Responsible Officer requesting
the same that the representations and warranties contained in this Agreement are
true, correct and complete in all material respects to the same extent as though
made on and as of the date of the request, except to the extent such
representations and warranties specifically relate to an earlier date, in which
event they shall be true, correct and complete in all material respects as of
such earlier date.
(b) Each Loan. Each Loan made by Lenders hereunder
shall, at Borrower's option in accordance with the terms of this Agreement, be
either in the form of a Prime Rate Loan or a LIBOR Loan. Subject to the terms
and conditions of this Agreement, each Loan shall bear interest on the sum of
the unpaid principal balance thereof outstanding on each day from the date when
made, continued or converted until such Loan shall have been fully
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repaid at a rate per annum equal to the Prime Rate, as the same may fluctuate on
a daily basis or the Adjusted LIBOR, as the case may be plus the Applicable
Margin. Interest on each Loan funded hereunder shall be due and payable in
arrears on each Interest Payment Date, with all accrued but unpaid interest on
such Loan being due and payable on the date such Loan is repaid, whether by
prepayment or at maturity, and with all accrued but unpaid interest being due
and payable on the Maturity Date for such Loan.
Each Advance made by a Lender as part of a Loan hereunder and all
repayments of principal with respect to such Advance shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however, that the failure by such Lender to make such notations shall not limit
or otherwise affect the obligations of Borrower with respect to the repayments
of principal or payments of interest on any Advance or Loan. The aggregate
unpaid amount of each Advance set forth on the books and records of a Lender
shall be presumptive evidence of such Lender's Pro Rata Share of the principal
amount owing and unpaid under the Note.
2.1.2 Funding. Promptly following the receipt of such
documents required pursuant to Section 3.2.1 and approval of a Loan by the
Agent, Agent shall notify by telephone, telecopier, facsimile or telex each
Lender of the principal amount (including Lender's Pro Rata Share thereof) and
Funding Date of the Loan requested by Borrower. Not later than 1:00 p.m., North
Carolina time, on the Funding Date for any Loan, each Lender shall make an
Advance to Agent for the account of Borrower in the amount of its Pro Rata Share
of the Loan being requested by Borrower. Upon satisfaction of the applicable
conditions precedent set forth in Section 3, all Advances shall be credited in
immediately available funds to the Designated Deposit Account.
2.1.3 Utilization of the Loans. The Loans made under the
Facility may be used solely for the purpose of acquiring the specific items of
Eligible Inventory approved by Requisite Lenders, in their sole discretion, and
against which Lenders have made Advances; provided, however, in no event shall
the proceeds of any Loan be used to finance more than eighty percent (80.0%) of
the Invoice Price of any item of Eligible Inventory to be purchased with the
proceeds of such Loan. The parties hereto understand and contemplate that the
Loans are being requested to finance the acquisition of items of Eligible
Inventory and that only upon the funding of such Loans and the acquisition of
record title by Borrower or a Marine Subsidiary or by an Owner Trustee for the
beneficial interest of Borrower or a Marine Subsidiary in a single or
back-to-back transaction will the ownership requirements of Eligible Inventory
be satisfied.
2.2 Repayment and Prepayment.
2.2.1 Repayment. Unless prepaid pursuant to Section 2.2.2, the
principal amount of each Loan hereunder shall be repaid by Borrower to Lenders
not later than the Maturity Date of such Loan.
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2.2.2 Voluntary Prepayment. Subject to Section 2.18, Borrower
may in the ordinary course of Borrower's business, upon at least three (3)
Business Days' written notice, or telephonic notice promptly confirmed in
writing to Agent, which notice shall be irrevocable, prepay any Loan in whole or
in part. Such notice of prepayment shall specify the date and amount of such
prepayment and whether such prepayment is of Prime Rate Loans or LIBOR Loans, or
any combination thereof. Such prepayment of Loans, together with any amounts
required pursuant to Section 2.18, shall be in immediately available funds and
delivered to Agent not later than 1:00 p.m., North Carolina time, on the date
for prepayment stated in such notice (the "Prepayment Date"). With respect to
any prepayment under this Section 2.2.2, all interest on the amount prepaid
accrued up to but excluding the date of such prepayment shall be due and payable
on the Prepayment Date.
2.2.3 Mandatory Prepayments.
(a) In the event that any item of Eligible Inventory
shall be sold or assigned by Borrower or any Marine Subsidiary, or the ownership
interests (whether Stock or otherwise) of Borrower in any Marine Subsidiary
owning record or beneficial title to any item of Eligible Inventory shall be
sold or transferred, then Borrower shall immediately prepay the Loan made with
respect to such Eligible Inventory so sold or assigned or with respect to the
Eligible Inventory owned by such Marine Subsidiary so sold or transferred,
together with accrued interest on such Loan to the date of prepayment and any
amounts required pursuant to Section 2.18. The sale or assignment of Eligible
Inventory by an Owner Trustee, or the sale or assignment of Borrower's or any
Marine Subsidiary's beneficial interest in any owner trust (or nominee entity)
holding title to Eligible Inventory shall be considered a sale or assignment, as
the case may be, of such Eligible Inventory by Borrower or such Marine
Subsidiary, as the case may be.
(b) In the event that any of the Eligible Inventory
shall have sustained a Casualty Loss, Borrower shall promptly notify Agent and
Lenders of such Casualty Loss and make arrangements reasonably acceptable to the
Agent to cause any and all cash proceeds received by Borrower to be paid to
Lenders as a prepayment hereunder. To the extent not so prepaid, the Loan funded
with respect to such Eligible Inventory will nevertheless be paid by Borrower as
provided in Section 2.2.1.
(c) In the event Borrower, any Marine Subsidiary or
any Owner Trustee shall sell or assign any partial (i.e., less than one hundred
percent (100.0%)) interest in any item of Eligible Inventory pursuant to Section
6.5, Borrower shall immediately prepay the Loan made with respect to such
Eligible Inventory in which an interest has been so sold or assigned in an
amount equal to that portion of the purchase price paid for such partial
interest which is ratably related to the percentage of the Invoice Price paid by
Borrower, such Marine Subsidiary or Owner Trustee for such item of Eligible
Inventory when originally financed by such Loan, together with all interest
accrued on such Loan to the date of prepayment. For example, if Borrower paid an
Invoice Price of $10,000,000 for an item of Eligible Inventory, of which
$8,000,000 was financed with a Loan hereunder, if Borrower subsequently sells to
an Equipment Growth Fund a forty percent (40.0%) interest in such item of
Eligible Inventory for
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a purchase price of $4,000,000, Borrower shall prepay the related Loan in the
principal amount of $3,200,000.
(d) In the event that the Growth Fund Agreement
shall be terminated for any reason as to any one or more of the Growth Funds,
then Borrower shall immediately prepay any and all amounts outstanding under
this Agreement and the Lenders' Commitments shall, without notice, immediately
and automatically terminate.
2.3 Calculation of Interest; Post-Maturity Interest. Interest on the
Loans shall be computed on the basis of a 365/366-day year for all Prime Rate
Loans and a 360-day year for all LIBOR Loans and the actual number of days
elapsed in the period during which such interest accrues. In computing interest
on any Loan, the date of the making of such Loan shall be included and the date
of payment shall be excluded. Each change in the interest rate of the Prime Rate
Loans based on changes in the Prime Rate and each change in the Adjusted LIBOR
based on changes in the Eurodollar Reserve Percentage shall be effective on the
effective date of such change and to the extent of such change. Agent shall give
Borrower notice of any such change in the Prime Rate; provided, however, that
any failure by Agent to provide Borrower with notice hereunder shall not affect
Agent's right to make changes in the interest rate of any Loan based on changes
in the Prime Rate. Upon the occurrence and during the continuation of any Event
of Default under this Agreement, Advances under this Agreement will at the
option of Requisite Lenders bear interest at a rate per annum which is
determined by adding two percent (2.0%) to the Applicable Margin for such Loan
(the "Default Rate"). This may result in the compounding of interest. The
imposition of a Default Rate will not constitute a waiver of any Event of
Default.
2.4 Manner of Payments. All repayments or prepayments of principal and
all payments of interest, fees, costs, expenses and other sums chargeable to
Borrower under this Agreement, the Note or any of the other Loan Documents shall
be in lawful money of the United States of America in immediately available
funds and delivered to Agent, for the account of Lenders, not later than 1:00
p.m., North Carolina time, on the date due at First Union National Bank of North
Carolina, One First Union Center, 301 South College Street, Charlotte, North
Carolina 28288, Attention: Hannah Carmody, or such other place as shall have
been designated in writing by Agent.
2.5 Payment on Non-Business Days. Whenever any payment to be made under
this Agreement, the Note or any of the other Loan Documents shall be stated to
be due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall in such case be
included in the computation of the payment of interest thereon; provided,
however, that no Loan shall have remained outstanding after the Maturity Date of
such Loan.
2.6 Application of Payments. All payments to or for the benefit of
Lenders hereunder shall be applied in the following order: (a) at the direction
of Borrower or upon prior notice given to Borrower by Agent, then due and
payable fees, expenses and costs; (b) then due and payable interest payments and
mandatory prepayments; and (c) then due and payable
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principal payments and optional prepayments; provided that if an Event of
Default shall have occurred and be continuing, Lenders shall have the exclusive
right to apply any and all such payments against the then due and owing
Obligations of Borrower as Lenders may deem advisable. To the extent Borrower
fails to make payment required hereunder or under any of the other Loan
Documents, each Lender is authorized to, and at its sole option may, make such
payments on behalf of Borrower. To the extent permitted by law, all amounts
advanced by any Lender hereunder or under other provisions of the Loan Documents
shall accrue interest at the same rate as Loans hereunder.
2.7 Procedure for the Borrowing of Loans.
2.7.1 Notice of Borrowing. Each borrowing of Loans shall be
made upon Borrower's irrevocable written notice delivered to Agent in the form
of a Notice of Borrowing, executed by a Responsible Person of Borrower, with
appropriate insertions (which Notice of Borrowing must be received by Lender
prior to 12:00 noon, Charlotte, North Carolina time, three (3) Business Days
prior to the requested Funding Date) specifying:
(a) the amount of the requested borrowing, which, if
a LIBOR Loan is requested, shall be not less than One Million Dollars
($1,000,000);
(b) the requested Funding Date, which shall be a
Business Day;
(c) whether the borrowing is to be comprised of one
or more LIBOR Loans or Prime Rate Loans; and
(d) the duration of the Interest Period applicable
to any such LIBOR Loans included in such Notice of Borrowing. If the Notice of
Borrowing shall fail to specify the duration of the Interest Period for any
borrowing comprised of LIBOR Loans, such Interest Period shall be three (3)
months.
2.7.2 Unavailability of LIBOR Loans. Unless Agent shall
otherwise consent, during the existence of an Event of Default or Potential
Event of Default, Borrower may not elect to have a Loan made as a LIBOR Loan.
2.8 Conversion and Continuation Elections.
2.8.1 Election. Borrower may, upon irrevocable written notice
to Agent:
(a) elect to convert on any Business Day, any Prime
Rate Loan (or any portion thereof in an amount equal to at least One Million
Dollars ($1,000,000) into a LIBOR Loan; or
(b) elect to convert on any Interest Payment Date
any LIBOR Loan maturing on such Interest Payment Date (or any portion thereof)
into a Prime Rate Loan; or
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(c) elect to continue on any Interest Payment Date
any LIBOR Loan maturing on such Interest Payment Date (or any portion thereof in
an amount equal to at least One Million Dollars ($1,000,000);
provided, that if the aggregate amount of LIBOR Loans outstanding to Borrower
shall have been reduced, by payment, prepayment, or conversion of portion
thereof, to be less than $1,000,000, such LIBOR Loans shall automatically
convert into Prime Rate Loans, and on and after such date the right of Borrower
to continue such Loans as, and convert such Loans into, LIBOR Loans shall
terminate.
2.8.2 Notice of Conversion. Each conversion or continuation of
Loans shall be made upon Borrower's irrevocable written notice delivered to
Agent in the form of a Notice of Conversion/Continuation, executed by a
Responsible Person of Borrower, with appropriate insertions (which Notice of
Conversion/Continuation must be received by Lender prior to 12:00 noon,
Charlotte, North Carolina time, at least three (3) Business Days in advance of
the proposed conversion date or continuation date specifying:
(a) the proposed conversion date or continuation
date;
(b) the aggregate amount of Loans to be converted or
continued;
(c) the nature of the proposed conversion or
continuation; and
(d) the duration of the requested Interest Period.
2.8.3 Interest Period. If upon the expiration of any Interest
Period applicable to any LIBOR Loan, Borrower has failed to select a new
Interest Period to be applicable to such LIBOR Loan, Borrower shall be deemed to
have elected to convert such LIBOR Loan into a Prime Rate Loan effective as of
the last day of such current Interest Period.
2.8.4 Unavailability of LIBOR Loans. Unless Agent shall
otherwise consent, during the existence of an Event of Default or Potential
Event of Default, Borrower may not elect to have a Loan converted into or
continued as a LIBOR Loan.
2.9 Discretion of Lenders as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Lender shall be entitled to
fund and maintain its funding of all or any part of its LIBOR Loans in any
manner it elects, it being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if such Lender actually
funded and maintained each LIBOR Loan through the purchase of deposits having a
maturity corresponding to the maturity of the LIBOR Loan and bearing an interest
rate equal to the LIBOR rate (whether or not, in any instance, Lender shall have
granted any participations in such Loan). Each Lender may, if it so elects,
fulfill any commitment to make LIBOR Loans by causing a foreign branch or
affiliate to make or continue such LIBOR Loans; provided, however, that in such
event such Loans shall be deemed for the purposes of this Agreement to have been
made by such Lender, and the obligation of Borrower to repay such Loans shall
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nevertheless be to such Lender and shall be deemed held by such Lender, to the
extent of such Loans, for the account of such branch or affiliate.
2.10 Distribution of Payments. Agent shall immediately distribute to
each Lender, at such address as each Lender shall designate, its respective
interest in all repayments and prepayments of principal and all payments of
interest and all fees, expenses and costs received by Agent on the same day and
in the same type of funds as payment was received. In the event Agent does not
distribute such payments on the same day received, if such payments are received
by Agent by 1:00 p.m., North Carolina time, or if received after such time, on
the next succeeding Business Day, such payment shall accrue interest at the
Federal Funds Rate.
2.11 Agent's Right to Assume Funds Available for Advances. Unless Agent
shall have been notified by any Lender no later than the Business Day prior to
the respective Funding Date of a Loan that such Lender does not intend to make
available to Agent an Advance in immediately available funds equal to such
Lender's Pro Rata Share of the total principal amount of such Loan, Agent may
assume that such Lender has made such Advance to Agent on the date of the Loan
and Agent may, in reliance upon such assumption, make available to Borrower a
corresponding Advance. If Agent has made funds available to Borrower based on
such assumption and such Advance is not in fact made to Agent by such Lender,
Agent shall be entitled to recover the corresponding amount of such Advance on
demand from such Lender. If such Lender does not promptly pay such corresponding
amount upon Agent's demand, Agent shall notify Borrower and Borrower shall repay
such Advance to Agent. Agent also shall be entitled to recover from such Lender
interest on such Advance in respect of each day from the date such Advance was
made by Agent to Borrower to the date such corresponding amount is recovered by
Agent at the Federal Funds Rate. Nothing in this Section 2.11 shall be deemed to
relieve any Lender from its obligation to fulfill its Commitment or to prejudice
any rights which Agent or Borrower may have against such Lender as a result of
any default by such Lender under this Agreement.
2.12 Agent's Right to Assume Payments Will be Made by Borrower. Unless
Agent shall have been notified by Borrower prior to the date on which any
payment to be made by Borrower hereunder is due that Borrower does not intend to
remit such payment, Agent may, in its sole discretion, assume that Borrower has
remitted such payment when so due and Agent may, in its sole discretion and in
reliance upon such assumption, make available to each Lender on such payment
date an amount equal to such Lender's Pro Rata Share of such assumed payment. If
Borrower has not in fact remitted such payment to Agent, each Lender shall
forthwith on demand repay to Agent the amount of such assumed payment made
available to such Lender, together with interest thereon in respect of each date
from and including the date such amount was made available by Agent to such
Lender to the date such amount is repaid to Agent at the Federal Funds Rate.
2.13 Capital Requirements. If any Lender determines that compliance
with any law or regulation or with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law)
has or would have the effect of reducing the rate of return on the capital of
such Lender or any corporation controlling such Lender as a
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consequence of, or with reference to, such Lender's Commitment or its making or
maintaining its Pro Rata Share of the Loans below the rate which such Lender or
such other corporation could have achieved but for such compliance (taking into
account the policies of such Lender or corporation with regard to capital), then
Borrower shall from time to time, upon written demand by such Lender (with a
copy of such demand to Agent), immediately pay to such Lender such additional
amounts as shall be sufficient to compensate such Lender or other corporation
for such reduction. A certificate submitted by such Lender to Borrower, stating
that the amounts set forth as payable to such Lender are true and correct, shall
be conclusive and binding for all purposes, absent manifest error. Each Lender
agrees promptly to notify Borrower and Agent of any circumstances that would
cause Borrower to pay additional amounts pursuant to this section, provided that
the failure to give such notice shall not affect Borrower's obligation to pay
any such additional amounts.
2.14 Taxes.
2.14.1 No Deductions. Subject to Subsection 2.14.7, any and
all payments by Borrower to each Lender or Agent under this Agreement shall be
made free and clear of, and without deduction or withholding for, any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Lender
and Agent, such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Lender's net income (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes").
2.14.2 Miscellaneous Taxes. In addition, Borrower shall pay
any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or any other Loan Documents (hereinafter referred to as "Other
Taxes").
2.14.3 Indemnity. Subject to Subsection 2.14.7, Borrower shall
indemnify and hold harmless each Lender and Agent for the full amount of Taxes
or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section 2.14) paid by such Lender or Agent and any
liability (including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within thirty (30) days from the date any Lender or Agent makes written demand
therefor.
2.14.4 Required Deductions. If Borrower shall be required by
law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum
payable hereunder to any Lender or Agent, then, subject to Subsection 2.14.7:
(a) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under
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this Section 2.14) such Lender or Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made;
(b) Borrower shall make such deductions, and
(c) Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law.
2.14.5 Evidence of Payment. Within thirty (30) days after the
date of any payment by Borrower of Taxes or Other Taxes, Borrower shall furnish
to Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to Agent.
2.14.6 Foreign Persons. Each Lender which is a foreign person
(i.e., a person other than a United States person for United States Federal
income tax purposes) shall:
(a) No later than the date upon which such Lender
becomes a party hereto deliver to Borrower through Agent two (2) accurate and
complete signed originals of IRS Form 4224 or any successor thereto ("Form
4224"), or two accurate and complete signed originals of IRS Form 1001 or any
successor thereto ("Form 1001"), as appropriate, in each case indicating that
such Lender is on the date of delivery thereof entitled to receive payments of
principal, interest and fees under this Agreement free from withholding of
United States Federal income tax;
(b) If at any time such Lender makes any changes
necessitating a new Form 4224 or Form 1001, with reasonable promptness deliver
to Borrower through Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder, two accurate and complete signed originals
of Form 4224; or two accurate and complete signed originals of Form 1001, as
appropriate, in each case indicating that the Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal income tax;
(c) Before or promptly after the occurrence of any
event (including the passing of time but excluding any event mentioned in (ii)
above) requiring a change in or renewal of the most recent Form 4224 or Form
1001 previously delivered by such Lender, deliver to Borrower through Agent two
accurate and complete original signed copies of Form 4224 or Form 1001 in
replacement for the forms previously delivered by the Lender; and
(d) Promptly upon Borrower's or Agent's reasonable
request to that effect, deliver to Borrower or Agent (as the case may be) such
other forms or similar documentation as may be required from time to time by any
applicable law, treaty, rule or regulation in order to establish such Lender's
tax status for withholding purposes.
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2.14.7 Income Taxes. Borrower will not be required to pay any
additional amounts in respect of United States Federal income tax pursuant to
Subsection 2.14.4 to Lender for the account of any Lending Office of such
Lender:
(a) If the obligation to pay such additional amounts
would not have arisen but for a failure by such Lender to comply with its
obligations under Subsection 2.14.6 in respect of such Lending Office;
(b) If such Lender shall have delivered to Borrower
a Form 4224 in respect of such Lending Office pursuant to Subsection 2.14.6 and
such Lender shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by
Borrower hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or in the official
interpretation of such law or regulations by any Governmental Authority charged
with the interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 4224; or
(c) If such Lender shall have delivered to Borrower
a Form 1001 in respect of such Lending Office pursuant to Subsection 2.14.6, and
such Lender shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by
Borrower hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or any applicable tax treaty
or regulations or in the official interpretation of any such law, treaty or
regulations by any Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after the date
of delivery of such Form 1001.
2.14.8 Reimbursement of Costs. If, at any time, Borrower
requests any Lender to deliver any forms or other documentation pursuant to
Subsection 2.14.6(d), then Borrower shall, on demand of such Lender through
Agent, reimburse such Lender for any costs and expenses (including reasonable
attorney fees) reasonably incurred by such Lender in the preparation or delivery
of such forms or other documentation.
2.14.9 Jurisdiction. If Borrower is required to pay additional
amounts to any Lender or Agent pursuant to Subsection 2.14.4, then such Lender
shall use its reasonable good faith efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending Office so as
to eliminate any such additional payment by Borrower which may thereafter accrue
if such change in the judgment of such Lender is not otherwise disadvantageous
to such Lender.
2.15 Illegality.
2.15.1 LIBOR Loans. If any Lender shall determine that the
introduction of any Requirement of Law, or any change in any Requirement of Law
or in the interpretation or administration thereof, has made it unlawful, or
that any central bank or other Governmental Authority has asserted that it is
unlawful, for such Lender or its Lending Office to make LIBOR
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Loans, then, on notice thereof by Lender to Borrower, the obligation of such
Lender to make LIBOR Loans shall be suspended until such Lender shall have
notified Borrower that the circumstances giving rise to such determination no
longer exists.
2.15.2 Prepayment. If a Lender shall determine that it is
unlawful to maintain any LIBOR Loan, Borrower shall prepay in full all LIBOR
Loans of such Lender then outstanding, together with interest accrued thereon,
either on the last day of the Interest Period thereof if such Lender may
lawfully continue to maintain such LIBOR Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such LIBOR Loans, together
with any amounts required to be paid in connection therewith pursuant to Section
2.18.
2.15.3 Prime Rate Borrowing. If Borrower is required to prepay
any LIBOR Loan immediately as provided in Section 2.2.3, then concurrently with
such prepayment, Borrower shall borrow, in the amount of such prepayment, a
Prime Rate Loan.
2.16 Increased Costs. If any Lender shall determine that, due to either
(a) the introduction of or any change (other than any change by way of
imposition of or increase in reserve requirements included in the calculation of
the LIBOR) in or in the interpretation of any Requirement of Law or (b) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Lender of agreeing to make or making, funding
or maintaining any LIBOR Loans, then Borrower shall be liable, and shall from
time to time, upon demand therefor by such Lender, pay to such Lender such
additional amounts as are sufficient to compensate such Lender for such
increased costs.
2.17 Inability to Determine Rates. If Agent shall have determined that
for any reason adequate and reasonable means do not exist for ascertaining the
LIBOR for any requested Interest Period with respect to a proposed LIBOR Loan or
that the LIBOR applicable for any requested Interest Period with respect to a
proposed LIBOR Loan does not adequately and fairly reflect the cost to Lenders
of funding such Loan, Agent will forthwith give notice of such determination to
Borrower and each Lender. Thereafter, the obligation of Lenders to make or
maintain LIBOR Loans, as the case may be, hereunder shall be suspended until
Agent, upon instruction from the Requisite Lenders, revokes such notice in
writing. Upon receipt of such notice, Borrower may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted. If Borrower does
not revoke such notice, Lenders shall make, convert or continue the Loans, as
proposed by Borrower, in the amount specified in the applicable notice submitted
by Borrower, but such Loans shall be made, converted or continued as Prime Rate
Loans instead of LIBOR Loans, as the case may be.
2.18 Prepayment of LIBOR Loans. Borrower agrees that in the event that
Borrower prepays or is required to prepay any LIBOR Loan by acceleration or
otherwise or fails to draw down or convert to a LIBOR Loan after giving notice
thereof, it shall reimburse each Lender for its funding losses due to such
prepayment or failure to draw. Borrower and Lenders hereby agree that such
funding losses shall consist of the sum of the discounted monthly differences
for
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each month during the applicable or requested Interest Period, calculated as
follows for each such month:
2.18.1 Principal amount of such LIBOR Loan times (number of
days between the date of prepayment and the last day in the applicable Interest
Period divided by 360), times the applicable Interest Differential, plus
2.18.2 all actual out-of-pocket expenses (other than those
taken into account in the calculation of the Interest Differential) incurred by
Lenders and Agent (excluding allocation of any expense internal to Lenders and
Agent) and reasonably attributable to such payment, prepayment or failure to
draw down or convert as described above; provided that no prepayment fee shall
be payable (and no credit or rebate shall be required) if the product of the
foregoing formula is not a positive number.
SECTION 3. CONDITIONS PRECEDENT.
3.1 Effectiveness of this Agreement. The effectiveness of this amended
and restated Agreement is subject to the satisfaction of the following
conditions precedent:
3.1.1 Corporate Documents. Agent shall have received, in form
and substance satisfactory to Lenders and their respective counsel, the
following:
(a) A certified copy of the records of all actions
taken by Borrower, TEC and FSI, including all corporate resolutions of Borrower,
TEC and FSI authorizing or relating to the execution, delivery and performance
of the Loan Documents and the consummation of the transactions contemplated
hereby and thereby;
(b) A certificate of a Responsible Officer each of
Borrower, TEC and FSI, respectively, stating that (A) the articles or
certificate of incorporation, as the case may be, bylaws and any other formation
documents of Borrower, TEC and FSI, previously delivered to Agent in relation to
the TEC AcquiSub Agreement are true and accurate, remain in full force and
effect and have not been amended since the date thereof and (B) each of
Borrower, TEC and FSI are in good standing under the laws of the state of its
formation and each other jurisdiction where its ownership of Property and assets
or conduct of business requires such qualification;
(c) Certificates of incumbency and signature with
respect to the authorized representatives of Borrower, TEC and FSI executing the
Loan Documents and requesting Loans; and
(d) Such other documents relating to Borrower, TEC
or FSI as Lenders reasonably may request.
3.1.2 Note. Agent shall have received the Note, in form and
substance satisfactory to Lenders, duly executed and delivered by Borrower.
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3.1.3 Opinion of Counsel. Agent shall have received an
originally executed legal opinion of Stephen Peary, general counsel of Borrower,
FSI and TEC, on behalf of Borrower, FSI and TEC, in form and substance
satisfactory to Lenders, dated as of the Closing Date and addressed to Lenders,
together with copies of any officer's certificate or legal opinion of other
counsel or law firm specifically identified and expressly relied upon by such
counsel.
3.1.4 Reaffirmation of Guaranty. Agent shall have received the
Reaffirmation of Guaranty duly executed and delivered by FSI and by TEC.
3.1.5 Growth Fund Agreement. Agent shall have received the
Growth Fund Agreement, duly executed and delivered by each of the Growth Funds
and all conditions precedent to the effectiveness of the Growth Fund Agreement
shall have been satisfied.
3.1.6 Bringdown Certificate. A certificate or certificates,
dated as of the Closing Date, of the Chief Financial Officer or Corporate
Controller of Borrower to the effect that (i) the representations and warranties
of Borrower contained in Section 4 are true, accurate and complete in all
material respects as of the Closing Date as though made on such date and (ii) no
Event of Default or Potential Event of Default under this Agreement has
occurred.
3.1.7 Other Documents. Agent shall have received such other
documents, information and items from Borrower and FSI as reasonably requested
by Agent.
3.2 All Loans. Unless waived in writing by Requisite Lenders, the
obligation of any Lender to make any Advance is subject to the satisfaction of
the following further conditions precedent:
3.2.1 Notice of Borrowing. At least three (3) Business Days
before each Loan hereunder with respect to any acquisition of Equipment by
Borrower, Agent shall have received (a) a Notice of Borrowing; (b) a Borrowing
Base Certificate; (c) a description of the transaction, including (i) a listing
of all Equipment against which Borrower is requesting that a Loan be made,
identifying each item of Equipment by serial number, registration number or
other identifying mark, as applicable, and indicating whether each such item is
owned by Borrower or by an Owner Trustee for the benefit of Borrower (and if the
latter, identifying such Owner Trustee and date of any applicable trust or
similar agreement), (ii) the lessee, the date of the lease and the lease
termination date, (iii) lessee financial information, and (iv) the terms of the
underlying lease; and (d) other information as may be requested by the Agent to
confirm that such Equipment satisfies the criteria for Eligible Inventory.
3.2.2 Invoices. At least five (5) Business Days before each
Loan hereunder with respect to any acquisition of Equipment by Borrower, Agent
shall have received invoice and such other information related to the purchase
of each item of Equipment as Agent shall reasonably request to confirm that the
proceeds of the requested Loan will not be used to finance more than eighty
percent (80.0%) of the Invoice Price of such Equipment.
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3.2.3 Title to Equipment. At least five (5) Business Days
before each Loan hereunder with respect to any acquisition of Equipment by
Borrower, Agent shall have received such documents and copies of instruments of
title as Agent shall reasonably request to confirm that upon the consummation of
such acquisition, Borrower shall have acquired of record (or if such Equipment
is to be acquired of record by an Owner Trustee, the beneficial interest in)
such Equipment, free and clear of any Liens or other encumbrances on title
(other than Permitted Liens).
3.2.4 Approval of Loan. Approval of such requested Loan by
Agent, after review of the lessee, Equipment, Lease and any other material
circumstances relating to the Loan.
3.2.5 Leases. Prior to the Funding Date of any such Loan, if
available, and in no event later than five (5) Business Days following such
Funding Date, Borrower shall have delivered to Agent, on behalf of Lenders, the
original executed counterparts of each Lease or schedules thereto or other
chattel paper, if any, relating to such Equipment and Eligible Inventory (other
than with respect to Railcars if such Railcars are leased pursuant to a master
lease, in which event Borrower shall deliver to Agent the applicable schedule(s)
to such master lease), against which the Loan is to be made.
3.2.6 No Event of Default. No event shall have occurred and be
continuing or would result from the making of any Loan on such Funding Date
which constitutes an Event of Default or Potential Event of Default under this
Agreement or under (and as separately defined in) the Growth Fund Agreement, or
which with notice or lapse of time or both would constitute an Event of Default
or Potential Event of Default under this Agreement or under the Growth Fund
Agreement.
3.2.7 Officer's Certificate. Agent shall have received a
certificate, dated as of the Funding Date, of the Chief Financial Officer or
Corporate Controller of Borrower to the effect that (i) all representations and
warranties contained in the Loan Documents are true, accurate and complete in
all material respects with the same effect as though such representations and
warranties had been made on and as of such Funding Date (except to the extent
such representations and warranties specifically relate to an earlier date, in
which case they shall be true, accurate and complete in all material respects as
of such earlier date), (ii) Borrower shall have either available cash or have
received a capital contribution from TEC for the purpose of funding at least
twenty percent (20.0%) of the Invoice Price of the Equipment to be financed with
such requested Loan, and if such a capital contribution has been made, attaching
a certificate of the Chief Financial Officer or Corporate Controller of TEC to
the effect that the making of such capital contributions has not caused TEC to
cease to be Solvent and (iii) from the perspective of prudent portfolio
diversity and management, given the Growth Funds' then existing portfolio, such
Equipment is of a type, model, age and condition consistent with the investment
objectives of the Growth Funds.
3.2.8 Officer's Certificate - Leases. Agent shall have
received a certificate, dated as of the Funding Date of the Chief Financial
Officer or Corporate Controller of Borrower
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with respect to each Lease relating to an item of Equipment being financed with
such Loan to the effect that:
(a) The Lease constitutes the entire agreement of
the parties thereto and no party thereto shall be bound except in accordance
therewith;
(b) No amendments, modifications, supplements or
addenda have been made to, or schedules attached to, the Lease except as
disclosed in such certificate and the sole original thereof having been
delivered to Agent;
(c) No material default exists under the Lease as of
the date of the Loan;
(d) The Lease constitutes the valid contract of
Borrower and each lessee that is a party to the Lease, and shall at all times be
enforceable against each such lessee in accordance with its terms, subject to
the limitations on enforceability imposed by bankruptcy and creditors' rights
laws and the general principles of equity, and each party thereto has executed
the Lease with full power, authority and capacity to contract;
(e) Borrower is the sole owner and lessor of the
Equipment covered by the Lease;
(f) The lessee is responsible for the payment of all
taxes, insurance and similar charges so that all Lease payments will be net to
Borrower (except with respect to Leases covering time charters for marine
vessels, railcars and trailers consistent with industry standards for such type
of leases);
(g) Borrower has not and will not give or loan to
any lessee that is a party to the Lease, directly or indirectly, any unpaid rent
or other amount due or to become due under the Lease; and
(h) No rentals, fees, costs, expenses or charges
paid or payable by any lessee under the Lease violate any known statute, rule,
regulation, court ruling or other regulation or limitation relating to the
maximum fees, costs, expenses or charges permitted in any state in which the
Equipment is located or in which the lessee is located, resides or is domiciled,
or in which the transaction was consummated, or in any other state which has
jurisdiction of the Equipment, Lease or lessee.
3.2.9 Insurance. The insurance required to be maintained by
Borrower pursuant to the Loan Documents shall be in full force and effect.
3.2.10 Warranty of TEC AcquiSub. Agent shall have received
from Borrower its written representation and warranty that upon delivery of the
purchase price and the executed bill of sale or similar instrument of title, a
true and correct copy of which is to be attached, Borrower (or if an Owner
Trustee or Marine Subsidiary is to acquire record title, such Owner
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Trustee or Marine Subsidiary) shall acquire good title to the item of Equipment
against which the Loan is to be made, free and clear of all Liens and other
encumbrances on title (other than Permitted Liens).
3.2.11 Other Instruments. Agent shall have received such other
instruments and documents as it may have reasonably requested from Borrower in
connection with the Loans to be made on such date.
3.3 Further Conditions to All Loans. Notwithstanding anything to the
contrary contained in this Agreement, unless waived in writing by Requisite
Lenders, no Lender shall have any obligation hereunder to make any Advance if
any of the following events shall occur:
3.3.1 General Partner or Manager. FSI shall have ceased to be
the sole general partner of any Growth Fund or the sole manager of Income Fund
I, whether due to the voluntary or involuntary withdrawal, substitution, removal
or transfer of FSI from or of all or any portion of FSI's general partnership
interest in any Growth Fund or capital contribution in Income Fund I.
3.3.2 Removal of General Partner or Manager. Twenty five
percent (25.0%) or more of the limited partners (measured by such partners'
percentage interest) of any Equipment Growth Fund shall at any time vote to
remove FSI as the general partner of such Equipment Growth Fund or a majority in
interest of Class A members, as that term is defined in the Operating Agreement
of Income Fund I, of Income Fund I shall at any time vote to remove FSI as the
manager of Income Fund I, in each case, regardless of whether FSI is actually
removed.
3.3.3 Cash Balances. The Equipment Growth Funds of which FSI
is the sole general partner shall at any time fail to maintain unrestricted cash
balances totalling, in the aggregate, $10,000,000.
3.3.4 Purchaser. Borrower or its Subsidiaries, Growth Funds,
FSI or its Subsidiaries shall have ceased to be the purchaser of Eligible
Inventory for any Growth Fund.
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower hereby warrants and represents to Agent and each Lender as
follows, and agrees that each of said warranties and representations shall be
deemed to continue until full, complete and indefeasible payment and performance
of the Obligations and shall apply anew to each borrowing hereunder:
4.1 Existence and Power. Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified and licensed as a foreign corporation and authorized to do
business in each jurisdiction within the United States where its ownership of
Property and assets or conduct of business requires such qualification. Borrower
has the corporate power and authority, rights and franchises to own its
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Property and assets and to carry on its business as now conducted. Borrower has
the corporate power and authority to execute, deliver and perform the terms of
the Loan Documents (to the extent either is a party thereto) and all other
instruments and documents contemplated hereby or thereby.
4.2 Loan Documents and Note Authorized; Binding Obligations. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which Borrower is a party and payment of the Note have been duly
authorized by all necessary and proper corporate action on the part of Borrower.
The Loan Documents constitute legally valid and binding obligations of Borrower,
enforceable against Borrower, to the extent Borrower is a party thereto, in
accordance with their respective terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights generally.
4.3 No Conflict; Legal Compliance. The execution, delivery and
performance of this Agreement, and each of the other Loan Documents and the
execution, delivery and payment of the Note will not: (a) contravene any
provision of Borrower's articles of incorporation or bylaws; (b) contravene,
conflict with or violate any applicable law or regulation, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority, which contravention, conflict or violation, in the aggregate, may
have a Material Adverse Effect; or (c) violate or result in the breach of, or
constitute a default under any indenture or other loan or credit agreement, or
other agreement or instrument to which Borrower is a party or by which Borrower,
or its Property and assets may be bound or affected. Borrower is not in
violation or breach of or default under any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any contract, agreement,
lease, license, indenture or other instrument to which it is a party, the
non-compliance with, the violation or breach of or the default under which
would, with reasonable likelihood, have a Material Adverse Effect.
4.4 Financial Condition. FSI's audited consolidated financial
statements as of December 31, 1994, and Borrower's and FSI's unaudited
consolidated financial statements as of June 30, 1995, copies of which
heretofore have been delivered to Agent by Borrower, and all other financial
statements and other data submitted in writing by Borrower to Agent or any
Lender in connection with the request for credit granted by this Agreement, are
true, accurate and complete in all material respects, and said financial
statements and other data fairly present the consolidated financial condition of
FSI, as of the date thereof, and have been prepared in accordance with GAAP,
subject to fiscal year-end audit adjustments. There has been no material adverse
change in the business, properties or assets, operations, prospects,
profitability or financial or other condition of Borrower or FSI since June 30,
1995.
4.5 Executive Offices. The current location of Borrower's chief
executive offices and principal places of business is set forth on Schedule 4.5.
4.6 Litigation. Except as set forth in Schedule 4.6, there are no
claims, actions, suits, proceedings or other litigation pending or, to the best
of Borrower's knowledge, after due inquiry, threatened against Borrower, at law
or in equity before any Governmental Authority or,
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to the best of Borrower's knowledge, after due inquiry, any investigation by any
Governmental Authority of Borrower's Properties or assets. Borrower has no
Contingent Obligations.
4.7 Material Contracts. Schedule 4.7 lists all currently effective
contracts and agreements (whether written or oral) to which Borrower is a party.
There are no material defaults under any such contract or agreement by Borrower.
Borrower has delivered to Agent true and correct copies of all such contracts or
agreements (or, with respect to oral contracts or agreements, written
descriptions of the material terms thereof).
4.8 Consents and Approvals. No approval, authorization or consent of
any trustee or holder of any indebtedness or obligation of Borrower or of any
other Person under any such material agreement, contract, lease or license or
similar document or instrument to which Borrower is a party or by which Borrower
is bound, is required to be obtained by Borrower in order to make or consummate
the transactions contemplated under the Loan Documents. Except as set forth in
Schedule 4.8, all consents and approvals of, filings and registrations with, and
other actions in respect of, all Governmental Authorities required to be
obtained by Borrower in order to make or consummate the transactions
contemplated under the Loan Documents have been, or prior to the time when
required will have been, obtained, given, filed or taken and are or will be in
full force and effect.
4.9 Other Agreements. Borrower is not a party to and is not bound by
any agreement, contract, lease, license or instrument, and is not subject to any
restriction under its respective charter or formation documents, which has, or
is likely in the foreseeable future to have, a Material Adverse Effect. Borrower
has not entered into and, as of the Closing Date does not contemplate entering
into, any material agreement or contract with any Affiliate of Borrower on terms
that are less favorable to Borrower than those that might be obtained at the
time from Persons who are not such Affiliates.
4.10 Employment and Labor Agreements. There are no employment
agreements covering management of Borrower and there are no collective
bargaining agreements or other labor agreements covering any employees of
Borrower.
4.11 ERISA. Borrower does not have any Employee Benefit Plan which is
subject to ERISA.
4.12 Labor Matters. There are no strikes or other labor disputes
against or threatened against Borrower. All payments due from Borrower on
account of employee health and welfare insurance which would, with reasonable
likelihood, have a Material Adverse Effect if not paid have been paid or, if not
due, accrued as a liability on the books of Borrower.
4.13 Margin Regulations. Borrower does not own any "margin security",
as that term is defined in Regulations G and U of the Federal Reserve Board, and
the proceeds of the Loans under this Agreement will be used only for the
purposes contemplated hereunder. None of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred
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to purchase or carry any margin security or for any other purpose which might
cause any of the Loans under this Agreement to be considered a "purpose credit"
within the meaning of Regulations G, T, U and X. Borrower will not take or
permit any agent acting on its behalf to take any action which might cause this
Agreement or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
4.14 Taxes. All federal, state, local and foreign tax returns, reports
and statements required to be filed by Borrower have been filed with the
appropriate Governmental Authorities where failure to file would, with
reasonable likelihood, have a Material Adverse Effect, and all material Charges
and other impositions shown thereon to be due and payable by Borrower have been
paid prior to the date on which any fine, penalty, interest or late charge may
be added thereto for nonpayment thereof, or any such fine, penalty, interest,
late charge or loss has been paid, or Borrower is contesting its liability
therefore in good faith and has fully reserved all such amounts according to
GAAP in the financial statements provided to Agent pursuant to Section 5.1.
Borrower has paid when due and payable all material Charges upon the books of
Borrower and no Government Authority has asserted any Lien against Borrower with
respect to unpaid Charges. Proper and accurate amounts have been withheld by
Borrower from its employees for all periods in full and complete compliance with
the tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities.
4.15 Environmental Quality.
4.15.1 Except as specifically disclosed in Schedule 4.15, the
on-going operations of Borrower comply in all material respects with all
Environmental Laws.
4.15.2 Except as specifically disclosed in Schedule 4.15,
Borrower has obtained all licenses, permits, authorizations and registrations
required under any Environmental Law ("Environmental Permits") and necessary for
its ordinary course operations, all such Environmental Permits are in good
standing, and Borrower is in compliance with all material terms and conditions
of such Environmental Permits.
4.15.3 Except as specifically disclosed in Schedule 4.15,
neither Borrower nor any of its present Property or operations is subject to any
outstanding written order from or agreement with any Governmental Authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material.
4.15.4 There are no Hazardous Materials or other conditions or
circumstances existing with respect to any Property, or arising from operations
prior to the Closing Date, of Borrower that would reasonably be expected to give
rise to any Environmental Claim with a potential liability of Borrower in excess
of $100,000 in the aggregate from any such condition, circumstance or Property.
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4.16 Trademarks, Patents, Copyrights, Franchises and Licenses. Borrower
possesses and owns all necessary trademarks, trade names, copyrights, patents,
patent rights, franchises and licenses which are material to the conduct of its
business as now operated.
4.17 Full Disclosure. As of the Closing Date, no information contained
in this Agreement, the other Loan Documents or any other documents or written
materials furnished by or on behalf of Borrower to Agent or any Lender pursuant
to the terms of this Agreement or any of the other Loan Documents contains any
untrue or inaccurate statement of a material fact or omits to state a material
fact necessary to make the statement contained herein or therein not misleading
in light of the circumstances under which made.
4.18 Other Regulations. Borrower is not: (a) a "public utility company"
or a "holding company," or an "affiliate" or a "subsidiary company" of a
"holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act or (b) an
"investment company," or an "affiliated person" of, or a "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act. The making of the Loans hereunder and the
application of the proceeds and repayment thereof by Borrower and the
performance of the transactions contemplated by this Agreement and the other
Loan Documents will not violate any provision of the Investment Company Act or
the Public Utility Holding Company Act, or any rule, regulation or order issued
by the SEC thereunder.
4.19 Solvency. Borrower is Solvent.
4.20 Survival of Representations and Warranties. So long as any of the
Commitments shall be available and until payment and performance in full of the
Obligations, the representations and warranties contained herein shall have a
continuing effect as having been true when made.
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any of the Commitments
shall be available and until full, complete and indefeasible payment and
performance of the Obligations, unless Requisite Lenders shall otherwise consent
in writing, Borrower shall do or cause to have done all of the following:
5.1 Records and Reports. Maintain a system of accounting administered
in accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP, and deliver to Agent or caused to be
delivered to Agent:
5.1.1 Quarterly Statements. As soon as practicable and in any
event within sixty (60) days after the end of each quarterly accounting period
of Borrower, FSI and PLMI, except with respect to the final fiscal quarter of
each fiscal year, in which case as soon as practicable and in any event within
one hundred twenty (120) days after the end of such fiscal quarter, consolidated
and consolidating balance sheets of FSI and PLMI and a balance sheet of
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Borrower as at the end of such period and the related consolidated (and, as to
statements of income only for FSI, consolidating) statements of income and
stockholders' equity of Borrower and FSI and the related consolidated statements
of income, stockholders' equity and cash flows of PLMI (and, as to statements of
income only, consolidating) for such quarterly accounting period, setting forth
in each case in comparative form the consolidated figures for the corresponding
periods of the previous year, all in reasonable detail and certified by the
Chief Financial Officer or Corporate Controller of Borrower, FSI and PLMI that
they (i) are complete and fairly present the financial condition of Borrower,
FSI and PLMI as at the dates indicated and the results of their operations and
changes in their cash flow for the periods indicated, (ii) disclose all
liabilities of Borrower, FSI and PLMI that are required to be reflected or
reserved against under GAAP, whether liquidated or unliquidated, fixed or
contingent and (iii) have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end adjustment;
5.1.2 Annual Statements. As soon as practicable and in any
event within one hundred twenty (120) days after the end of each fiscal year of
Borrower, FSI and PLMI, consolidated and consolidating balance sheets of FSI and
PLMI and a balance sheet of Borrower as at the end of such year and the related
consolidated (and, as to statements of income only for FSI and PLMI,
consolidating) statements of income, stockholders' equity and cash flows of
Borrower, FSI and PLMI for such fiscal year, setting forth in each case, in
comparative form the consolidated figures for the previous year, all in
reasonable detail and (i) in the case of such consolidated financial statements,
accompanied by a report thereon of an independent public accountant of
recognized national standing selected by Borrower, FSI and PLMI and satisfactory
to Agent, which report shall contain an opinion which is not qualified in any
manner or which otherwise is satisfactory to Requisite Lenders, in their sole
discretion, and (ii) in the case of such consolidating financial statements,
certified by the Chief Financial Officer or Corporate Controller of FSI and
PLMI;
5.1.3 Borrowing Base Certificate. As soon as practicable, and
in any event not later than fifteen (15) days after the end of each calendar
month in which a Loan has been, or is outstanding, a Borrowing Base Certificate
dated as of the last day of such month, duly executed by a Chief Financial
Officer or Corporate Controller of Borrower, with appropriate insertions;
5.1.4 Compliance Certificate. As soon as practicable, and in
any event not later than forty-five (45) days after the end of each fiscal
quarter of Borrower, a Compliance Certificate dated as of the last day of such
fiscal quarter, duly executed by the Chief Financial Officer or Corporate
Controller of Borrower, with appropriate insertions;
5.1.5 Reports. At Agent's request, promptly upon receipt
thereof, copies of all reports submitted to Borrower, FSI, TEC or PLMI by
independent public accountants in connection with each annual, interim or
special audit of the financial statements of Borrower, FSI, TEC or PLMI made by
such accountants;
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5.1.6 Insurance Reports. (i) On the date six (6) months after
the Closing Date and thereafter upon Agent's reasonable request, which request
shall not be made more than once during any calendar year (unless an Event of
Default shall have occurred and be continuing, in which event such limitation
shall not apply), a report from Borrower's insurance broker, in such detail as
Agent may reasonably request, as to the insurance maintained or caused to be
maintained by Borrower pursuant to this Agreement, demonstrating compliance with
the requirements hereof and thereof, and (ii) as soon as possible and in no
event later than fifteen (15) days prior to the expiration date of any insurance
policy of Borrower, a written confirmation of such policy's renewal from
Borrower's insurance broker; provided, however, that Borrower shall give Agent
prompt written notice if changes affecting risk coverage will be made to the
insurance policy or if the policy will be cancelled;
5.1.7 Certificate of Responsible Officer. Promptly upon any
officer of Borrower obtaining knowledge (i) of any condition or event which
constitutes an Event of Default or Potential Event of Default under this
Agreement, (ii) that any Person has given any notice to Borrower, FSI, TEC or
PLMI or taken any other action with respect to a claimed default or event or
condition of the type referred to in Section 8.1.2, (iii) of the institution of
any litigation or of the receipt of written notice from any Governmental
Authority as to the commencement of any formal investigation involving an
alleged or asserted liability of Borrower of any amount and of FSI, TEC or PLMI
equal to or greater than $500,000 or any adverse judgment in any litigation
involving a potential liability of Borrower of any amount and of FSI, TEC or
PLMI equal to or greater than $500,000, or (iv) of a material adverse change in
the business, operations, properties, assets or condition (financial or
otherwise) of Borrower, FSI, TEC or PLMI, a certificate of a Responsible Officer
of Borrower, specifying the notice given or action taken by such Person and the
nature of such claimed default, Event of Default, Potential Event of Default,
event or condition and what action Borrower, FSI, TEC or PLMI has taken, is
taking and proposes to take with respect thereto;
5.1.8 Employee Benefit Plans. Promptly upon becoming aware of
the occurrence of any (i) Termination Event in connection with any Pension Plan
or (ii) "prohibited transaction" (as such term is defined in ERISA and the Code)
in connection with any Employee Benefit Plan or any trust created thereunder, a
written notice specifying the nature thereof, what action Borrower or any of its
ERISA Affiliates has taken, is taking or proposes to take with respect thereto,
and, when known, any action taken or threatened by the IRS or the PBGC with
respect thereto;
5.1.9 ERISA Notices. With reasonable promptness, copies of (i)
all notices received by Borrower or any of its ERISA Affiliates of the PBGC's
intent to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (ii) each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by Borrower or any of its ERISA
Affiliates with the IRS with respect to each Pension Plan covering employees of
Borrower, and (iii) all notices received by Borrower or any of its ERISA
Affiliates from a Multiemployer Plan sponsor concerning the imposition or amount
of withdrawal liability pursuant to Section 4202 of ERISA;
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5.1.10 Pension Plans. Promptly upon receipt by Borrower any
challenge by the IRS to the qualification under Section 401 or 501 of the Code
of any Pension Plan;
5.1.11 SEC Reports. As soon as available and in no event later
than five (5) days after the same shall have been filed with the SEC, a copy of
each Form 8-K Current Report, Form 10-K Annual Report, Form 10-Q Quarterly
Report, Annual Report to Shareholders, Proxy Statement and Registration
Statement of PLMI;
5.1.12 Tax Returns. Upon the request of Agent, copies of all
federal, state, local and foreign tax returns and reports in respect of income,
franchise or other taxes on or measured by income (excluding sales, use or like
taxes) filed by or on behalf of Borrower, FSI, TEC and PLMI; and
5.1.13 Additional Information. Such other information
respecting the condition or operations, financial or otherwise, of Borrower and
PLMI and its Subsidiaries as Agent or any Lender may from time to time
reasonably request, and such information regarding the lessees under Leases as
Borrower from time to time receives or Agent or any Lender reasonably requests.
All financial statements of Borrower, FSI and PLMI to be delivered by
Borrower, FSI and PLMI to Agent pursuant to this Section 5.1 will be complete
and correct and present fairly the financial condition of Borrower, FSI and PLMI
as of the date thereof; will disclose all liabilities of Borrower, FSI and PLMI
that are required to be reflected or reserved against under GAAP, whether
liquidated or unliquidated, fixed or contingent; and will have been prepared in
accordance with GAAP. All tax returns submitted to Agent by Borrower, FSI and
PLMI will, to the best of Borrower's, FSI's and PLMI's knowledge, after due
inquiry, be true and correct. Borrower, FSI and PLMI hereby agree that each time
either submits a financial statement or tax return to Agent, Borrower, FSI and
PLMI shall be deemed to represent and warrant to Lenders that such financial
statement or tax return complies with all of the preceding requirements set
forth in this paragraph.
5.2 Existence; Compliance with Law. Borrower shall preserve and
maintain its existence and all of its licenses, permits, governmental approvals,
rights, privileges and franchises necessary or desirable in the normal conduct
of its business as now conducted or presently proposed to be conducted
(including, without limitation, its qualification to do business in each
jurisdiction in which such qualification is necessary or desirable in view of
its business); to conduct its business in an orderly and regular manner; and
comply with (a) the provisions of its articles of incorporation and bylaws and
(b) the requirements of all applicable laws, rules, regulations or orders of any
Governmental Authority and requirements for the maintenance of Borrower's
insurance, licenses, permits, governmental approvals, rights, privileges and
franchises, except, in either case, to the extent that the failure to comply
therewith would not, in the aggregate, with reasonable likelihood, have a
Material Adverse Effect.
5.3 Insurance. Borrower shall maintain and keep in force insurance of
the types and in amounts then customarily carried in lines of business similar
to that of Borrower including,
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but not limited to, fire, extended coverage, public liability, property damage,
environmental hazard and workers' compensation, in each case carried with
financially sound Persons and in amounts satisfactory to the Requisite Lenders
(subject to commercial reasonableness as to each type of insurance); provided,
however, that the types and amounts of insurance shall not provide any less
coverage for Borrower than provided as of the Closing Date by the existing
blanket policies of insurance for PLMI and its Subsidiaries. All such policies
of property insurance carry endorsements naming Agent as principal loss payee as
to any property owned by Borrower and all such policies as to liability
insurance shall carry endorsements naming Agent and each Lender as an additional
insured, and in each case indicating that (i) any loss thereunder shall be
payable to Agent or Lenders, as the case may be, notwithstanding any action,
inaction or breach of representation or warranty by Borrower; (ii) there shall
be no recourse against any Lender for payment of premiums or other amounts with
respect thereto, and (iii) at least fifteen (15) days' prior written notice of
cancellation, lapse or material change in coverage shall be given to Agent by
the insurer.
5.4 Taxes and Other Liabilities. Promptly pay and discharge all
material Charges when due and payable, except (a) such as may be paid thereafter
without penalty or (b) such as may be contested in good faith by appropriate
proceedings and for which an adequate reserve has been established and is
maintained in accordance with GAAP. Borrower shall promptly notify Agent of any
material challenge, contest or proceeding pending by or against Borrower or
against PLMI or any of its other Subsidiaries before any taxing authority.
5.5 Inspection Rights; Assistance. At any reasonable time and from time
to time during normal business hours, permit Agent or any Lender or any agent,
representative or employee thereof, to examine and make copies of and abstracts
from the financial records and books of account of Borrower and other documents
in the possession or under the control of Borrower relating to any obligation of
Borrower arising under or contemplated by this Agreement, and to visit the
offices of Borrower to discuss the affairs, finances and accounts of Borrower
with any of the officers of Borrower, and, upon reasonable notice and during
normal business hours (unless an Event of Default or Potential Event of Default
shall have occurred and be continuing, in which event no notice is required) to
conduct audits of and appraise the Equipment. Such audits and appraisals shall
be subject to the lessee's right to quiet enjoyment as set forth in the
respective Lease.
5.6 Maintenance of Facilities; Modifications; Performance of Leases.
5.6.1 Maintenance of Facilities. Borrower shall keep its
Properties which are useful or necessary to Borrower in good repair and
condition, normal wear and tear excepted, and from time to time make necessary
repairs thereto, and renewals and replacements thereof so that Borrower's
Properties shall be fully and efficiently preserved and maintained.
5.6.2 Certain Modifications to the Equipment. Subject to
Section 5.6.1, Borrower shall promptly make, or cause to be made, all
modifications, additions and adjustments to the Eligible Inventory as may from
time to time be required by any Governmental Authority having jurisdiction over
the operation, safety or use thereof.
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5.6.3 Performance of Leases. Borrower shall timely perform in
all material respects each of its covenants and obligations under the Leases to
which it is a party.
5.7 Supplemental Disclosure. From time to time as may be necessary (in
the event that such information is not otherwise delivered by Borrower to Agent
or Lenders pursuant to this Agreement), so long as there are Obligations
outstanding hereunder, disclose to Agent in writing any material matter
hereafter arising which, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described by Borrower in this
Agreement or any of the other Loan Documents (including all Schedules and
Exhibits hereto or thereto) or which is necessary to correct any information set
forth or described by Borrower hereunder or thereunder or in connection herewith
which has been rendered inaccurate thereby.
5.8 Further Assurances. In addition to the obligations and documents
which this Agreement expressly requires Borrower to execute, deliver and
perform, Borrower shall execute, deliver and perform any and all further acts or
documents which Agent or Lenders may reasonably require to effectuate the
purposes of this Agreement or any of the other Loan Documents.
5.9 Lockbox. Borrower shall unless otherwise directed in writing by
Agent, cause all remittances made by the obligor under any Lease to be made to a
lock box (the "Lockbox") maintained with FUNB pursuant to the Lockbox Agreement.
Unless otherwise directed by Agent in writing, all invoices and other
instructions submitted by Borrower to the obligor relating to Lease payments
shall designate the Lockbox as the place to which such payments shall be made.
5.10 Environmental Laws. Borrower shall conduct its operations and keep
and maintain its Property in material compliance with all Environmental Laws.
5.11 Equipment Purchase Agreement. Borrower shall, upon the request of
Agent, which request may be made with respect to any Loan on or after the date
which is one hundred twenty (120) days after the Funding Date of such Loan,
deliver to Agent an Equipment Purchase Agreement with respect to the Equipment
against which such Loan was made.
SECTION 6. BORROWER'S NEGATIVE COVENANTS.
So long as any of the Commitments shall be available and until full,
complete and indefeasible payment and performance of the Obligations, unless
Requisite Lenders shall otherwise consent in writing, Borrower covenants and
agrees as follows:
6.1 Liens; Negative Pledges; and Encumbrances. Borrower shall not
create, incur, assume or suffer to exist, and shall not permit any Marine
Subsidiary or Owner Trustee to create, incur, assume or suffer to exist, any
Lien of any nature upon or with respect to any of their respective Property,
whether now or hereafter owned, leased or acquired, except (collectively, the
"Permitted Liens"):
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6.1.1 Liens granted in favor of Agent on behalf of Lenders
under the Security Agreement and the other Security Documents;
6.1.2 Liens for Charges if payment shall not at the time be
required to be made in accordance with Section 5.4;
6.1.3 Liens in respect of pledges, obligations or deposits (i)
under workers' compensation laws, unemployment insurance and other types of
social security or similar legislation, (ii) in connection with surety, appeal
and similar bonds incidental to the conduct of litigation, (iii) in connection
with bid, performance or similar bonds and mechanics', laborers' and
materialmen's and similar statutory Liens not then delinquent; or (iv)
incidental to the conduct of the business of Borrower, any Marine Subsidiary or
any Owner Trustee and which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit; provided that the Liens
permitted by this Section 6.1.3 do not in the aggregate materially detract from
the value of any assets or property of or materially impair the use thereof in
the operation of the business of Borrower or any Owner Trustee; and provided
further that the adverse determination of any claim or liability, contingent or
otherwise, secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect; and
6.1.4 Permitted Rights of Others.
6.2 Acquisitions. Borrower shall not, and shall not permit any Marine
Subsidiary to, make any Acquisition or enter into any agreement to make any
Acquisition, except with respect to the formation of Marine Subsidiaries and the
purchase of Equipment in the ordinary course of its or their respective
business.
6.3 Limitations on Indebtedness. Borrower shall not, and shall not
permit any Marine Subsidiary or Owner Trustee to, create, incur, assume or
suffer to exist, any Indebtedness or Contingent Obligation; provided, however,
that this Section 6.3 shall not be deemed to prohibit:
6.3.1 The Obligations to Lenders and Agent arising under this
Agreement and the other Loan Documents; and
6.3.2 With the prior written consent of Agent, Indebtedness
incurred in respect of the deferred purchase price for an item of Eligible
Inventory to be financed with the proceeds of a Loan hereunder, but only to the
extent that the incurrence of such Indebtedness is customary in the industry
with respect to the purchase of this type of equipment (provided that such
Indebtedness shall only be permitted under this clause (b) if, taking into
account the incurrence of such Indebtedness, Borrower shall not be in violation
of any of the financial covenants set forth in Section 7 if measured as of the
date of incurrence as determined by GAAP).
6.4 Use of Proceeds. Borrower and FSI shall not, and shall not permit
any Marine Subsidiary or Owner Trustee holding record title to any Eligible
Inventory for the beneficial
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interest of Borrower or FSI to, use the proceeds of any Loan except for the
purpose set forth in Recital B above and shall not, and shall not permit any
such Marine Subsidiary or such Owner Trustee to, use the proceeds to repay any
loans or advances made by any other Person.
6.5 Disposition of Assets. Borrower shall not, and shall not permit any
Marine Subsidiary or any Owner Trustee to, sell, assign or otherwise dispose of,
any of its or their respective assets, except for full, fair and reasonable
consideration, or enter or permit any Marine Subsidiary or Owner Trustee to
enter into any sale and leaseback agreement covering any of its fixed or capital
assets. In this regard, Borrower shall not sell, assign or dispose of, and shall
not permit any Marine Subsidiary or Owner Trustee to sell, assign or dispose of,
any partial record or beneficial ownership interest in any Eligible Inventory,
except upon the payment in cash of a purchase price equal to the ratable portion
of the Invoice Price paid by Borrower or such Marine Subsidiary or Owner Trustee
for such item of Eligible Inventory so sold, assigned or otherwise disposed of,
which cash purchase price will be subject to mandatory prepayment pursuant to
Section 2.2.3(c).
6.6 Restricted Payments. Borrower shall not declare or make any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock, or purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding; except that Borrower may, (a) following the resale of any
item of Eligible Inventory to PLMI, any Equipment Growth Fund or any third party
and after having repaid in full the Loan advanced by Lender to finance the
acquisition of such Eligible Inventory, dividend the remaining proceeds of such
resale to TEC and (b) no more frequently than monthly and in no event prior to
such time has Borrower shall have made payment in full of all interest on the
Loans funded hereunder accrued through the last day of the previous calendar
month, Borrower may dividend its net profits (revenues less interest and
operating expenses) to TEC.
6.7 Restriction on Fundamental Changes. Borrower shall not, and shall
not permit any Marine Subsidiary to, enter into any transaction of merger,
consolidation or recapitalization, directly or indirectly, whether by operation
of law or otherwise, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
part of its business, Property or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or substantially all the
business, Property or assets of, or stock or other evidence of beneficial
ownership of, any Person, except for the formation of Marine Subsidiaries, the
sale and transfer of all of its ownership interest (whether Stock or otherwise)
in any Marine Subsidiary to an Equipment Growth Fund and the acquisition or
resale of Equipment in the ordinary course of business and as contemplated by
this Agreement.
6.8 Transactions with Affiliates. Borrower shall not, and shall not
permit any Marine Subsidiary to, directly or indirectly, enter into or permit to
exist any transaction (including, without limitation, the purchase, sale, lease
or exchange of any property or the rendering of any service) with any of its
Affiliates on terms that are less favorable to Borrower
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or such Marine Subsidiary than those that might be obtained at the time from
Persons who are not such Affiliates.
6.9 No Loans to Affiliates. Borrower shall not make any loans to any of
its Affiliates other than to its Marine Subsidiaries.
6.10 No Investment. Borrower shall not make or suffer to exist, or
permit or suffer any of its Marine Subsidiaries to make or suffer to exist, any
Investment except the sharing arrangements with respect to Equipment which are
shared with Equipment Growth Funds.
6.11 Maintenance of Business. Borrower shall not engage in any business
other than the purchase of transportation equipment and the operation, leasing,
remarketing and resale of such equipment.
6.12 No Modification to Leases. Borrower shall not modify or agree to
modify any material term of any Lease to which it is a party without the written
consent of Agent, which consent will not be unreasonably withheld. For purposes
of this Section 6.12, material Lease terms shall include, without limitation,
terms relating to lease payments, maturity and the amount and scope of the
lessee's insurance coverage.
6.13 No Subsidiaries. Borrower shall not create any Subsidiaries except
Marine Subsidiaries.
6.14 Amendments of Charter Documents. Borrower shall not amend its
articles of incorporation, bylaws and any other charter documents or permit any
Marine Subsidiary to amend its articles of incorporation, bylaws or other
charter documents.
6.15 Events of Default. Borrower shall not take or omit to take any
action, which act or omission would, with the lapse of time, or otherwise
constitute (a) a default, event of default or Event of Default under any of the
Loan Documents or (b) a default or an event of default under any other material
agreement, contract, lease, license, mortgage, deed of trust or instrument to
which it is a party or by which it or any of its Properties or assets is bound,
which default or event of default would, with reasonable likelihood, have a
Material Adverse Effect.
6.16 ERISA.
6.16.1 Borrower shall not incur any obligation to contribute
to a Pension Plan required by a collective bargaining agreement or as a
consequence of the acquisition of an ERISA Affiliate, unless (i) Borrower shall
notify Agent in writing that it intends to incur such obligation and (ii) after
Agent's receipt of such notice, Requisite Lenders consent to the establishment
or maintenance of, or Borrower's incurring an obligation to contribute to, the
Pension Plan, which consent may not unreasonably be withheld but may be subject
to such reasonable conditions as Requisite Lenders may require.
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6.16.2 If Borrower or any ERISA Affiliate of Borrower incurs
any obligation to contribute to any Pension Plan, then Borrower shall not (i)
terminate, or permit such ERISA Affiliate to terminate, any Pension Plan so as
to result in any liability that would, with reasonable likelihood, have a
Material Adverse Effect or (ii) make or permit such ERISA Affiliate to make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multiemployer Plan so as to result in any liability that would, with
reasonable likelihood, have a Material Adverse Effect.
6.17 No Use of Any Lender's Name. Borrower shall not use or authorize
others to use any Lender's name or marks in any publication or medium,
including, without limitation, any prospectus, without such Lender's advance
written authorization.
6.18 Certain Accounting Changes. Borrower shall not change its fiscal
year end from December 31, nor make any change in its accounting treatment and
reporting practices except as permitted by GAAP; provided, however, that should
Borrower change its accounting treatment or reporting practices in a way that
would cause a change in the calculation, or in the results of a calculation, of
any of the financial covenants set forth in Section 7, below, then Borrower,
shall continue to calculate such covenants as if such accounting treatment or
reporting practice had not been changed unless otherwise agreed to by Requisite
Lenders.
SECTION 7. FINANCIAL COVENANTS OF BORROWER.
Borrower covenants and agrees that, so long as the Commitments
hereunder shall be available, and until full, complete and indefeasible payment
and performance of the Obligations, including, without limitation, all Loans
evidenced by the Note, unless Requisite Lenders shall otherwise consent in
writing, Borrower shall perform the following financial covenants. Borrower
agrees and understands that (except as expressly provided herein) all covenants
under this Section 7 shall be subject to quarterly compliance (as measured on
the last day of each fiscal quarter of Borrower), and in each case review by
Lenders of the respective fiscal quarter's consolidated financial statements
delivered to Agent by Borrower pursuant to Section 5.1.
7.1 Minimum Consolidated Tangible Net Worth. Borrower shall at all
times maintain a Consolidated Tangible Net Worth of not less than twenty percent
(20.0%) of the net book value of Eligible Inventory.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Events of Default. The occurrence of any one or more of the
following shall constitute an Event of Default:
8.1.1 Failure to Make Payments. Borrower, FSI or any Owner
Trustee fails to pay any sum due to Lenders or Agent arising under this
Agreement, the Note or any of the other Loan Documents when and as the same
shall become due and payable, whether by acceleration or otherwise and such
failure shall not have been cured to Lenders' satisfaction within five (5)
calendar days; or
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8.1.2 Other Agreements. (a) Borrower or any Marine Subsidiary
or any Owner Trustee thereof defaults in the repayment of any principal of or
the payment of any interest on any Indebtedness of Borrower or such Marine
Subsidiary or Owner Trustee, or breaches any term of any evidence of such
Indebtedness or defaults in any payment in respect of any Contingent Obligation,
(b) FSI, TEC or any Owner Trustee thereof defaults in the repayment of any
principal of or the payment of any interest on any Indebtedness of FSI or TEC,
respectively, or breaches any term of any evidence of such Indebtedness or
defaults in any payment in respect of any Contingent Obligations (excluding, as
to FSI, any Contingent Obligations of FSI arising solely as a result of FSI's
status as a general partner of any Person other than Borrower), in each case
exceeding, in the aggregate outstanding principal amount, $2,000,000, (c)
Borrower, any Marine Subsidiary, FSI, TEC or any Owner Trustee breaches or
violates any term or provision of any evidence of such Indebtedness or
Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto if the effect of such breach is to
permit acceleration under the applicable instrument, loan agreement, mortgage,
indenture, guaranty or other agreement and such failure shall not have been
cured within the applicable cure period, or there is an acceleration under the
applicable instrument, loan agreement, mortgage, indenture, guaranty or other
agreement, or (d) PLMI defaults in the repayment of any principal of or the
payment of any interest on any Indebtedness, including, without limitation,
Indebtedness arising under or in respect of the Senior Agreement or defaults in
any payment in respect of any Contingent Obligation, in each case exceeding, in
the aggregate outstanding principal amount, $2,000,000, or PLMI breaches or
violates any term or provision of any evidence of such Indebtedness or
Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto with the result that such
Indebtedness or Contingent Obligation becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or
8.1.3 Breach of Covenants. Borrower fails or neglects to
perform, keep or observe any of the covenants contained in Sections 2.1.3, 5.2,
5.3, 5.9, 5.11, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13
and 6.14, or any of the financial covenants contained in Section 7 of this
Agreement; or
8.1.4 Breach of Representations or Warranties. Any
representation or warranty made by or on behalf of Borrower or FSI in this
Agreement or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false, misleading or incomplete in any
material respect when made; or
8.1.5 Failure to Cure. Except as provided in Sections 8.1.1
and 8.1.3, Borrower, FSI or any Marine Subsidiary or Owner Trustee fails or
neglects to perform, keep or observe any covenant or provision of this Agreement
or of any of the other Loan Documents or any other document or agreement
executed by Borrower, FSI or any Marine Subsidiary or Owner Trustee in
connection therewith and the same has not been cured to Requisite Lenders'
satisfaction within thirty (30) calendar days after Borrower, FSI or any Marine
Subsidiary or Owner Trustee shall become aware thereof, whether by written
notice from Agent or any Lender or otherwise; or
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8.1.6 Insolvency. Borrower, any Marine Subsidiary, FSI, TEC,
PLMI or any Owner Trustee or any other guarantor of any of Borrower's or FSI's
obligations to Lenders shall (i) cease to be Solvent, (ii) admit in writing its
inability to pay its debts as they mature, (iii) make an assignment for the
benefit of creditors, (iv) apply for or consent to the appointment of a
receiver, liquidator, custodian or trustee for it or for a substantial part of
its Properties or business, or such a receiver, liquidator, custodian or trustee
otherwise shall be appointed and shall not be discharged within sixty (60) days
after such appointment; or
8.1.7 Bankruptcy Proceedings. Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by
or against Borrower, any Marine Subsidiary, FSI, TEC, PLMI or any Owner Trustee
or any other guarantor of any of Borrower's or FSI's obligations to Lenders or
any order, judgment or decree shall be entered against Borrower, any Marine
Subsidiary, FSI, TEC, PLMI or any Owner Trustee or any other guarantor of any of
Borrower's or FSI's obligations to Lenders decreeing its dissolution or
division; provided, however, with respect to an involuntary petition in
bankruptcy, such petition shall not have been dismissed within sixty (60) days
after the filing of such petition; or
8.1.8 Material Adverse Effect. There shall have been a change
in the assets, liabilities, financial condition, operations, affairs or
prospects of Borrower, any Marine Subsidiary, FSI, TEC, PLMI or any Owner
Trustee or any other guarantor of any of Borrower's or FSI's obligations to
Lenders which, in the reasonable determination of Requisite Lenders has, either
individually or in the aggregate, had a Material Adverse Effect; or
8.1.9 Judgments, Writs and Attachments. There shall be a money
judgment, writ or warrant of attachment or similar process entered or filed
against Borrower, any Marine Subsidiary, FSI, TEC or any Owner Trustee which
(net of insurance coverage) remains unvacated, unbonded, unstayed or unpaid or
undischarged for more than sixty (60) days (whether or not consecutive) or in
any event later than five (5) calendar days prior to the date of any proposed
sale thereunder, which, together with all such other unvacated, unbonded,
unstayed, unpaid and undischarged judgments or attachments against Borrower or
any Marine Subsidiary in any amount; against FSI exceeds in the aggregate
$500,000; against TEC exceeds in the aggregate $500,000; or against any Owner
Trustee exceeds in the aggregate $1,000,000; or against any combination of the
foregoing Persons exceeds in the aggregate $1,000,000; or
8.1.10 Legal Obligations. Any of the Loan Documents shall for
any reason other than the full, complete and indefeasible satisfaction of the
Obligations thereunder cease to be, or be asserted by Borrower, FSI, TEC or any
Marine Subsidiary or Owner Trustee not to be, a legal, valid and binding
obligation of Borrower, FSI, TEC or any such Marine Subsidiary or Owner Trustee,
respectively, enforceable against such Person in accordance with its terms; or
8.1.11 Growth Fund Agreement. Without limiting the generality
of, and in addition to the events described in Section 8.1.1, the occurrence of
any "Event of Default" as
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defined under the Growth Fund Agreement or any other loan or security document
related to the Growth Fund Agreement; or
8.1.12 Board of Directors. Borrower shall at any time fail
either (i) to have at least one member of its board of directors be an outside
independent director, not employed or otherwise engaged as an officer, employee,
consultant, director or in any other capacity by PLMI or any of its Subsidiaries
or (ii) to have (1) at least one member of its board of directors be a Person
who is not a member of the board of directors of PLMI or any of its other
Subsidiaries and (2) at least one additional member of its board of directors be
a Person who is not an inside director, whether employed as an officer or
employee, of PLMI or any of its other Subsidiaries and is not the Chairman of
the Board of PLMI; or
8.1.13 Criminal Proceedings. A criminal proceeding shall have
been filed in any court naming Borrower or any Marine Subsidiary or Owner
Trustee as a defendant for which forfeiture is a potential penalty under
applicable federal or state law which, in the reasonable determination of
Requisite Lenders, may have a Material Adverse Effect; or
8.1.14 Action by Governmental Authority. Any Governmental
Authority enters a decree, order or ruling ("Government Action") which will
materially and adversely affect Borrower's, any Marine Subsidiary's, FSI's,
TEC's, or PLMI's financial condition, operations or ability to perform or pay
such party's obligations arising under this Agreement or any instrument or
agreement executed pursuant to the terms of this Agreement or which will
similarly affect any Owner Trustee. Borrower or FSI shall have thirty (30) days
from the earlier of the date (a) Borrower or FSI, as applicable, first discovers
it is the subject of Government Action or (b) a Lender or any agency gives
notice of Government Action to take such steps as are necessary to obtain relief
from the Government Action. For the purpose of this paragraph, "relief from
Government Action" means to discharge or to obtain a dismissal of or release or
relief from (i) any Government Action so that the affected party or parties do
not incur (v) any monetary liability in the case of Borrower or any Marine
Subsidiary, (w) monetary liability of more than $500,000 in the case of FSI, (x)
monetary liability of more than $500,000 in the case of TEC, (y) monetary
liability of more than $1,000,000 in the case of PLMI, or (z) monetary liability
of more than $1,000,000, in the aggregate, in the case of any combination of the
foregoing Persons, or (ii) any disqualification of or other limitation on the
operation of Borrower, any Marine Subsidiary, FSI, TEC, and PLMI, or any of
them, which in the reasonable determination of the Requisite Lenders may have a
Material Adverse Effect; or
8.1.15 Governmental Decrees. Any Governmental Authority,
including, without limitation, the SEC, shall enter a decree, order or ruling
prohibiting the Equipment Growth Funds from releasing or paying to FSI any funds
in the form of management fees, profits or otherwise which, in the reasonable
determination of Requisite Lenders, may have a Material Adverse Effect.
8.2 Waiver of Default. An Event of Default may be waived only with the
written consent of Requisite Lenders, or if expressly provided, of all Lenders.
Any Event of Default so waived shall be deemed to have been cured and not to be
continuing; but no such waiver shall
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be deemed a continuing waiver or shall extend to or affect any subsequent like
default or impair any rights arising therefrom.
8.3 Remedies. Upon the occurrence and continuance of any Event of
Default or Potential Event of Default, Lenders shall have no further obligation
to advance money or extend credit to or for the benefit of Borrower.
In addition, upon the occurrence and during the continuance of an Event
of Default, Lenders or Agent, on behalf of Lenders, may, at the option of
Requisite Lenders, do any one or more of the following, all of which are hereby
authorized by Borrower:
8.3.1 Declare all or any of the Obligations of Borrower under
this Agreement, the Note, the other Loan Documents and any other instrument
executed by Borrower pursuant to the Loan Documents to be immediately due and
payable, and upon such declaration such obligations so declared due and payable
shall immediately become due and payable; provided that if such Event of Default
is under Section 8.1.6 or 8.1.7, then all of the Obligations shall become
immediately due and payable forthwith without the requirement of any notice or
other action by Lenders or Agent;
8.3.2 Terminate this Agreement as to any future liability or
obligation of Agent or Lenders; and
8.3.3 Exercise in addition to all other rights and remedies
granted hereunder, any and all rights and remedies granted under the Loan
Documents or otherwise available at law or in equity.
8.4 Set-Off.
8.4.1 During the continuance of an Event of Default, any
deposits or other sums credited by or due from any Lender to Borrower, TEC or
FSI (exclusive of deposits in accounts expressly held in the name of third
parties or held in trust for benefit of third parties) may be set-off against
the Obligations and any and all other liabilities, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising, of
Borrower, TEC or FSI to Lenders. Each Lender agrees to notify promptly Borrower,
TEC or FSI and Agent of any such set-off; provided, that the failure to give
such notice shall not affect the validity of any such set-off.
8.4.2 Each Lender agrees that if it shall, whether by right of
set-off, banker's lien or similar remedy pursuant to Section 8.4.1, obtain any
payment as a result of which the outstanding and unpaid principal portion of the
Commitments of such Lender shall be less than such Lender's Pro Rata Share of
the outstanding and unpaid principal portion of the aggregate of all
Commitments, such Lender receiving such payment shall simultaneously purchase
from each other Lender a participation in the Commitments held by such Lenders
so that the outstanding and unpaid principal amount of the Commitments and
participations in Commitments of such Lender shall be in the same proportion to
the unpaid principal amount of the aggregate
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of all Commitments then outstanding as the unpaid principal amount under the
Commitments of such Lender outstanding immediately prior to receipt of such
payment was to the unpaid principal amount of the aggregate of all Commitments
outstanding immediately prior to such Lender's receipt of such payment;
provided, however, that if any such purchase shall be made pursuant to this
Section 8.4.2 and the payment giving rise thereto shall thereafter be recovered,
such purchase shall be rescinded to the extent of such recovery and the purchase
price restored without interest. Borrower expressly consents to the foregoing
arrangements and agrees that any Lender holding a participation in a Commitment
deemed to have been so purchased may exercise any and all rights of set-off,
banker's lien or similar remedy with respect to any and all moneys owing by
Borrower to such Lender as fully as if such Lender held a Commitment in the
amount of such participation.
8.5 Rights and Remedies Cumulative. The enumeration of the rights and
remedies of Agent and Lenders set forth in this Agreement is not intended to be
exhaustive and the exercise by Agent and Lenders of any right or remedy shall
not preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of Agent and Lenders in exercising any right, power or privilege shall
operate as a waiver hereof, nor shall any single or partial exercise of any such
right, power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or shall be construed to be a
waiver of any Event of Default or Potential Event of Default. No course of
dealing between Borrower, Agent or any Lender or their respective agents or
employees shall be effective to change, modify or discharge any provision of
this Agreement or any of the Loan Documents or to constitute a waiver of any
Event of Default or Potential Event of Default.
SECTION 9. AGENT.
9.1 Appointment. Each of the Lenders hereby irrevocably designates and
appoints First Union National Bank of North Carolina as the Agent of such Lender
under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes First Union National Bank of North Carolina as the Agent
for such Lender to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against Agent. To the extent any provision of this Agreement permits action by
Agent, Agent shall, subject to the provisions of this Section 9, take such
action if directed in writing to do so by the Requisite Lenders.
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9.2 Delegation of Duties. Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or the other Loan Documents (except
for its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any Lender for any recitals, statements,
representations or warranties made by Borrower or any officer thereof contained
in this Agreement or the other Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or the other Loan Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the other Loan Documents or for any failure of Borrower to
perform its obligations hereunder or thereunder. Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the Properties, books or records of Borrower.
9.4 Reliance by Agent. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Borrower), independent accountants and other experts
selected by Agent. Agent may deem and treat the payee of any promissory note
issued pursuant to this Agreement as the owner thereof for all purposes unless
such promissory note shall have been transferred in accordance with Section
11.10 hereof. Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Requisite Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action except for its own gross
negligence or willful misconduct. Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in accordance with a
request of the Requisite Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all Lenders.
9.5 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default or Potential Event of Default
hereunder unless Agent has received notice from a Lender or Borrower referring
to this Agreement, describing such Event of Default or Potential Event of
Default and stating that such notice is a "notice of default". In the event that
Agent receives such a notice, Agent shall promptly give notice thereof to
Lenders. The Agent shall take such action with respect to such Event of Default
or Potential Event of
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Default as shall be reasonably directed by the Requisite Lenders; provided that
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Event of Default or Potential Event of Default as it shall deem
advisable in the best interests of Lenders.
9.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by Agent hereinafter taken, including any
review of the affairs of Borrower, shall be deemed to constitute any
representation or warranty by Agent to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
Borrower and FSI and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of Borrower and FSI. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by Agent hereunder or by the other Loan Documents, Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of Borrower and FSI which may come into the
possession of Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
9.7 Indemnification. Each Lender agrees to indemnify Agent in its
capacity as such (to the extent not reimbursed by Borrower and without limiting
the obligation of Borrower to do so), ratably according to the respective
amounts of their Pro Rata Share of the Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's bad faith, gross negligence or willful misconduct.
The agreements in this Section 9.7 shall survive the repayment of the Loans and
all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Agent and its Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
Borrower or FSI as though Agent were not Agent hereunder. With respect to
Advances made or renewed by it,
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Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not
Agent, and the terms "Lender" and "Lenders" shall include Agent in its
individual capacity.
9.9 Resignation and Appointment of Successor Agent. Agent may resign at
any time by giving thirty (30) days' prior written notice thereof to Lenders and
Borrower; provided, however, that the retiring Agent shall continue to serve
until a successor Agent shall have been selected and approved pursuant to this
Section 9.9. Upon any such notice, Agent shall have the right to appoint a
successor Agent; provided, however, that if such successor shall not be a
signatory to this Agreement, such appointment shall be subject to the consent of
Requisite Lenders. Agent may be replaced by the Requisite Lenders, with or
without cause; provided, however, that any successor agent shall be subject to
Borrower's consent, which consent shall not be unreasonably withheld. Upon the
acceptance of any appointment as an Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
SECTION 10. EXPENSES AND INDEMNITIES.
10.1 Expenses. Borrower agrees to pay promptly on demand, and, in any
event, within thirty (30) days of the invoice date therefor, (a) all costs,
expenses, charges and other disbursements (including, without limitation, all
reasonable attorneys' fees and allocated expenses of outside counsel and
in-house legal staff) incurred by or on behalf of Agent or any Lender in
connection with the preparation of the Loan Documents and all amendments and
modifications thereof, extensions thereto or substitutions therefor, and all
costs, expenses, charges or other disbursements incurred by or on behalf of
Agent or any Lender (including, without limitation all reasonable attorney's
fees and allocated expenses of outside counsel and in-house legal staff) in
connection with the furnishing of opinions of counsel (including, without
limitation, any opinions requested by Lenders as to any legal matters arising
hereunder) and of Borrower's performance of and compliance with all agreements
and conditions contained herein or in any of the other Loan Documents on its
part to be performed or complied with; (b) all other costs, expenses, charges
and other disbursements incurred by or on behalf of Agent or any Lender in
connection with the negotiation, preparation, execution, administration,
continuation and enforcement of the Loan Documents, and the making of the Loans
hereunder; (c) all costs, expenses, charges and other disbursements (including,
without limitation, all reasonable attorney's fees and allocated expenses of
outside counsel and in-house legal staff) incurred by or on behalf of Agent or
FUNB in connection with the assignment or attempted assignment to any other
Person of all or any portion of any Lender's interest under this Agreement
pursuant to Section 11.10; and (d) regardless of the existence of an Event of
Default or Potential Event of Default, all legal, appraisal, audit, accounting,
consulting or other fees, costs, expenses, charges or other disbursements
incurred by or on behalf of Agent or any Lender in connection with any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Lenders, Agent, Borrower or any other Person) seeking to enforce any Obligations
of, or collecting any
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payments due from, Borrower under this Agreement and the Note, all of which
amounts shall be deemed to be part of the Obligations. Notwithstanding anything
to the contrary contained in this Section 10.1, so long as no Event of Default
or Potential Event of Default shall have occurred and be continuing, all
appraisals of the Eligible Inventory shall be at the expense of Lenders. If an
Event of Default or Potential Event of Default shall have occurred and be
continuing, such appraisals shall be at the expense of Borrower.
10.2 Indemnification. Whether or not the transactions contemplated
hereby shall be consummated:
10.2.1 General Indemnity. Borrower shall pay, indemnify, and
hold each Lender, Agent and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including reasonable attorney's fees and the allocated cost of in-house
counsel) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents, or the transactions contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding (including any case,
action or proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person.
10.2.2 Environmental Indemnity.
(a) Borrower hereby agrees to indemnify, defend and
hold harmless each Indemnified Person, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including reasonable attorneys' fees and the
allocated cost of in-house counsel and internal environmental audit or review
services), which may be incurred by or asserted against such Indemnified Person
in connection with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with respect to any
Environmental Claim arising out of or related to any Property owned, leased or
operated by Borrower. No action taken by legal counsel chosen by Agent or any
Lender in defending against any such investigation, litigation or proceeding or
requested remedial, removal or response action (except for actions which
constitute fraud, willful misconduct, gross negligence or material violations of
law) shall vitiate or in any way impair Borrower's obligation and duty hereunder
to indemnify and hold harmless Agent and each Lender. Agent and Lenders agree to
use reasonable efforts to cooperate with Borrower respecting the defense of any
matter indemnified hereunder, except insofar as and to the extent that their
respective interests may be adverse to Borrower's, in Agent's and each Lenders'
sole discretion.
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(b) In no event shall any site visit, observation,
or testing by Agent or any Lender be deemed a representation or warranty that
Hazardous Materials are or are not present in, on, or under the site, or that
there has been or shall be compliance with any Environmental Law. Neither
Borrower nor any other Person is entitled to rely on any site visit,
observation, or testing by Agent or any Lender. Except as otherwise provided by
law, neither Agent nor any Lender owes any duty of care to protect Borrower or
any other Person against, or to inform Borrower or any other party of, any
Hazardous Materials or any other adverse condition affecting any site or
Property. Neither Agent nor any Lender shall be obligated to disclose to
Borrower or any other Person any report or findings made as a result of, or in
connection with, any site visit, observation, or testing by Agent or any Lender.
10.2.3 Survival; Defense. The obligations in this Section 10.2
shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using legal
counsel satisfactory to such Indemnified Person in such Person's sole
discretion, at the sole cost and expense of Borrower. All amounts owing under
this Section 10.2 shall be paid within thirty (30) days after written demand.
SECTION 11. MISCELLANEOUS.
11.1 Survival. All covenants, agreements, representations and
warranties made herein shall survive the execution and delivery of the Loan
Documents and the making of the Loans hereunder.
11.2 No Waiver by Agent or Lenders. No failure or delay on the part of
Agent or any Lender in the exercise of any power, right or privilege under this
Agreement, the Note or any of the other Loan Documents shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
11.3 Notices. Except as otherwise provided in this Agreement, any
notice or other communication herein required or permitted to be given shall be
in writing and may be delivered in person, with receipt acknowledged, or sent by
telex, facsimile, telecopy, computer transmission or by United States mail,
registered or certified, return receipt requested, or by Federal Express or
other nationally recognized overnight courier service, postage prepaid and
confirmation of receipt requested, and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which the same
shall have been personally delivered, with receipt acknowledged, or sent by
telex, facsimile, telecopy or computer transmission (with appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United States mail or on the next succeeding Business Day if the same has
been sent by Federal Express or other nationally recognized overnight courier
service. Failure or delay in delivering copies of any notice,
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demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
11.4 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.5 Severability. Whenever possible, each provision of this Agreement,
the Note and each of the other Loan Documents shall be interpreted in such a
manner as to be valid, legal and enforceable under the applicable law of any
jurisdiction. Without limiting the generality of the foregoing sentence, in case
any provision of this Agreement, the Note or any of the other Loan Documents
shall be invalid, illegal or unenforceable under the applicable law of any
jurisdiction, the validity, legality and enforceability of the remaining
provisions, or of such provision in any other jurisdiction, shall not in any way
be affected or impaired thereby.
11.6 Entire Agreement; Construction; Amendments and Waivers.
11.6.1 This Agreement, the Note and each of the other Loan
Documents dated as of the date hereof, taken together, constitute and contain
the entire agreement among Borrower, Lenders and Agent and supersede any and all
prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
11.6.2 This Agreement is the result of negotiations between
and has been reviewed by each of Borrower, the Lenders executing this Agreement
as of the Closing Date and Agent and their respective counsel; accordingly, this
Agreement shall be deemed to be the product of the parties hereto, and no
ambiguity shall be construed in favor of or against Borrower, Lenders or Agent.
Borrower, Lenders and Agent agree that they intend the literal words of this
Agreement and the other Loan Documents and that no parol evidence shall be
necessary or appropriate to establish Borrower's, any Lender's or Agent's actual
intentions.
11.6.3 No amendment, modification, discharge or waiver of or
consent to any departure by Borrower or FSI from, any provision in this
Agreement or any of the other Loan Documents relating to (i) the definition of
"Borrowing Base" or "Requisite Lenders," (ii) any increase of the amount of any
Commitment, (iii) any reduction of principal, interest or fees payable
hereunder, (iv) any postponement of any date fixed for any payment or prepayment
of principal or interest hereunder or (v) this Section 11.6.3 shall be effective
without the written consent of all Lenders. Any and all other amendments,
modifications, discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan Documents shall not be
effective without the written consent of the Requisite Lenders. Any waiver or
consent with respect to any provision of the Loan Documents shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, waiver or consent
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effected in accordance with this Section 11.6 shall be binding upon each Lender
then party hereto and each subsequent Lender, and on Borrower.
11.7 Reliance by Lenders. All covenants, agreements, representations
and warranties made herein by Borrower shall, notwithstanding any investigation
by Lenders or Agent be deemed to be material to and to have been relied upon by
Lenders.
11.8 Marshalling; Payments Set Aside. Lenders shall be under no
obligation to marshall any assets in favor of Borrower or any other person or
against or in payment of any or all of the Obligations. To the extent that
Borrower makes a payment or payments to Lenders or Agent, or Lenders or Agent,
on behalf of Lenders, enforce their or its Liens or exercises their or its
rights of set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party under Title 11 of the United States Code
or under any other similar federal or state law, common law or equitable cause,
then to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or set-off had not
occurred.
11.9 No Set-Offs by Borrower. All sums payable by Borrower pursuant to
this Agreement, the Note or any of the other Loan Documents shall be payable
without notice or demand and shall be payable in United States Dollars without
set-off or reduction of any manner whatsoever.
11.10 Binding Effect, Assignment.
11.10.1 This Agreement, the Note and the other Loan Documents
shall be binding upon and shall inure to the benefit of the parties hereto and
thereto and their respective successors and assigns, except that Borrower may
not assign its rights hereunder or thereunder or any interest herein or therein
without the prior written consent of each Lender. Each Lender shall (i) have the
right in accordance with this Section 11.10 to sell and assign to any Eligible
Assignee all or any portion of its interest under this Agreement, the Note and
the other Loan Agreements subject to the prior written consent of Borrower,
which consent shall not be unreasonably withheld, and (ii) to grant any
participation or other interest herein or therein, except that each potential
participant to which a Lender intends to grant any rights under Sections 2.9,
2.10, 5.1 or 10.2 shall be subject to the prior written consent of Borrower,
which consent shall not be unreasonably withheld; provided, however, that no
such sale, assignment or participation grant shall result in requiring
registration under the Securities Act of 1933, as amended, or qualification
under any state securities law.
11.10.2 Subject to the limitations of this Section 11.10.2,
each Lender may sell and assign, from time to time, all or any portion of its
Pro Rata Share of the Commitments to any of its Affiliates or, with the approval
of Borrower (which approval shall not be unreasonably withheld), to any other
financial institution acceptable to Agent, subject to the assumption by such
assignee of the share of the Commitments so assigned. The assignment to such
Affiliate
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or other financial institution shall be evidenced by a written instrument of
assignment and assumption executed by the assignor Lender (hereinafter from time
to time referred to as the "Assignor Lender") and such Affiliate or other
financial institution (which, upon such assignment shall become a Lender
hereunder (hereinafter from time to time referred to as the "Assignee Lender"))
containing terms mutually acceptable to them and approved in writing as to form
by Borrower (which approval shall not be unreasonably withheld). The instrument
of assignment and assumption need not include any of the economic or financial
terms upon which such Assignee Lender receives the assignment from the Assignor
Lender, and such terms need not be disclosed to or approved by Borrower;
provided only that such terms do not diminish the obligations undertaken by such
Assignee Lender in the instrument of assignment and assumption or increase the
obligations of Borrower under this Agreement. Upon execution of such instrument
of assignment and assumption, (i) the definition of "Commitments" in Section 1
hereof and the Pro Rata Shares set forth therein shall be deemed to be amended
to reflect each Lender's share of the Commitments, giving effect to the
assignment and (ii) the Assignee Lender shall, from the effective date of the
instrument of assignment and assumption, be subject to all of the obligations,
and entitled to all of the rights, of a Lender hereunder, except as may be
expressly provided to the contrary in the instrument of assignment and
assumption. To the extent the obligations hereunder of the Assignor Lender are
assumed by the Assignee Lender, the Assignor Lender shall be relieved of such
obligations. Upon the assignment of any interest by any Assignor Lender pursuant
to this Section 11.10(b), such Assignor Lender agrees to supplement Schedule 1.1
to show the date of such assignment, the Assignor Lender, the Assignee Lender,
the Assignee Lender's address for notice purposes and the amount of the
Commitments so assigned.
11.10.3 Subject to the limitations of this Section 11.10.3,
any Lender may also grant, from time to time, participation interests in the
interests of such Lender under this Agreement, the Note and the other Loan
Documents to any other financial institution without notice to, or approval of,
Borrower. The grant of such a participation interest shall be on such terms as
the granting Lender determines are appropriate, provided only that (i) the
holder of such participation interest shall not have any of the rights of a
Lender under this Agreement except, if the participation agreement expressly
provides, rights under Sections 2.9, 2.10, 5.1 and 10.2, and (ii) the consent of
the holder of such a participation interest shall not be required for amendments
or waivers of provisions of the Loan Documents other than, if the participation
agreement expressly provides, those which (A) increase the monetary amount of
any Commitment, (B) decrease any fee or any other monetary amount payable to
Lenders, or (C) extend the date upon which any monetary amount is payable to
Lenders.
11.11 Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Each such agreement
shall become effective upon the execution of a counterpart hereof or thereof by
each of the parties hereto or thereto, delivery of each such counterpart to
Agent.
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11.12 Equitable Relief. Borrower recognize that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, the Note or any of the other Loan Agreements, any remedy
at law may prove to be inadequate relief to Lenders or Agent; therefore,
Borrower agrees that Lenders or Agent, if Lenders or Agents so request, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
11.13 Written Notice of Claims; Claims Bar. BORROWER HEREBY AGREES THAT
IT SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES
IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST ANY LENDER OR AGENT, WHETHER
SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS
AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR TO THE LOANS
CONTEMPLATED HEREBY OR THEREBY OR ANY ACT OR OMISSION TO ACT BY ANY LENDER OR
AGENT WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE SUCH
PROMPT NOTICE TO AGENT WITH REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION, IT
SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED FROM BRINGING OR
ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR PROCEEDING IN ANY
COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY.
11.14 Waiver of Punitive Damages. NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN THIS AGREEMENT, BORROWER HEREBY AGREES THAT IT SHALL NOT
SEEK FROM LENDERS OR AGENT, UNDER ANY THEORY OF LIABILITY, INCLUDING, WITHOUT
LIMITATION, ANY THEORY IN TORTS, ANY PUNITIVE DAMAGES.
11.15 Governing Law. Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of construction,
validity and performance, this Agreement and the Obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of North Carolina applicable to contracts made and performed in such
state, without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.
11.16 Consent to Jurisdiction. Borrower hereby irrevocably consents to
the personal jurisdiction of the state and federal courts located in Mecklenburg
County, North Carolina, in any action, claim or other proceeding arising out of
any dispute in connection with this Agreement, the Note and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. Borrower hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by Agent or any Lender in connection with this Agreement or
the other Loan Documents, any rights or obligations hereunder or thereunder, or
the performance of such rights and obligations, on behalf of itself or its
Property, in the manner specified in Section 11.3. Nothing in this Section 11.16
shall affect the right of the Agent or any Lender to serve legal process in any
other manner permitted by applicable law or affect the right of Agent or any
61.
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Lender to bring any action or proceeding against Borrower or its properties in
the courts of any other jurisdictions.
11.17 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER AND FSI, BY EXECUTION HEREOF, AND THE AGENT AND EACH LENDER, BY
ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS
AGREEMENT, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE AGENT AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES
EXECUTED AND DELIVERED BY BORROWER PURSUANT TO THIS AGREEMENT.
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER TEC ACQUISUB, INC.
By
Printed Name:
Title:
Notice to be sent to:
TEC AcquiSub, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood
Vice President of Finance
and Chief Financial Officer
Telephone: 415/896-1138
Facsimile: 415/882-0860
62.
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With a copy to:
TEC AcquiSub, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: General Counsel
Telephone: 415/896-1138
Facsimile: 415/882-0860
AGENT FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By
Printed Name:
Title:
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
LENDERS FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By
Printed Name:
Title:
63.
<PAGE>
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
64.
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ACKNOWLEDGEMENT AND
REAFFIRMATION OF GUARANTY
SECTION 1. PLM Financial Services, Inc. ("FSI") and PLM Transportation
Equipment Corporation ("TEC") each hereby acknowledge and confirm that it has
reviewed and approved the terms and conditions of this Agreement.
SECTION 2. FSI and TEC each hereby consent to this Agreement and agree
that its respective joint and several Guaranty of the Obligations of Borrower
under the Agreement shall continue in full force and effect, shall be valid and
enforceable and shall not be impaired or otherwise affected by the execution of
this Agreement or any other document or instrument delivered in connection
herewith.
SECTION 3. FSI and TEC each severally represent and warrant that, after
giving effect to this Agreement, that all representations and warranties
contained in its respective Guaranty are true, accurate and complete as if made
the date hereof.
GUARANTOR PLM FINANCIAL SERVICES, INC.
By:
Printed Name:
Title:
GUARANTOR PLM TRANSPORTATION EQUIPMENT CORPORATION
By:
Printed Name:
Title:
<PAGE>
- -----------------------------------------------------------------
ASSET PURCHASE AGREEMENT
------------------------
between
AMERICAN FINANCE GROUP, INC.
and
AFG CREDIT CORPORATION
------------------------
Dated as of
July 1, 1995
- -----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............1
1.1 Definitions.......................................................1
1.2 Other Definitional Provisions.........................................5
(a) Terms Used in Related Documents................................5
(b) Accounting Terms...............................................5
(c) "Hereof", etc..................................................5
ARTICLE II
SALE OF ORIGINAL ASSETS;
SALE OF ADDITIONAL ASSETS;..........................................6
2.1 Sale of Original Assets...............................................6
(a) Sale............................................................6
(b) Purchase Price..................................................6
(c) Recordation.....................................................6
(d) Marking of Original Leases......................................7
(e) Custody of Lease Files..........................................7
(f) Title to Equipment..............................................7
2.2 Contribution or Sale of Additional Assets.............................7
(a) Additional Sales and Contributions..............................7
(b) Purchase Price..................................................7
(c) Recordation.....................................................8
(d) Marking of Additional Leases....................................8
(e) Custody of Lease Files..........................................8
(f) Title to Equipment..............................................8
ARTICLE III
AFG TO ACT AS AGENT FOR AFG CREDIT;
ORIGINATION OF LEASES BY AFG CREDIT.............................9
3.1 Agency Agreement......................................................9
(a) Origination of AFG Credit Leases................................10
(b) Custody of Lease Files..........................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.......................................11
4.1 Representations and Warranties of AFG.................................11
(a) Representations and Warranties with Respect
to the Assets..................................................11
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Page
(b) Representations and Warranties with Respect
to the AFG Credit Leases........................................12
(c) Representations and Warranties as to AFG........................13
4.2 Representations and Warranties of AFG Credit...........................15
(a) Organization and Good Standing..................................15
(b) Due Qualification...............................................15
(c) Due Authorization...............................................16
(d) No Conflict.....................................................16
(e) No Violation....................................................16
(f) All Consents Required...........................................16
4.3 Purchase of Ineligible Leases and Equipment by
AFG..................................................................16
4.4 Indemnification........................................................17
ARTICLE V
COVENANTS OF AFG AND AFG Credit.......................................17
5.1 AFG Covenants..........................................................17
(a) Lease Files.....................................................18
(b) Compliance with Law.............................................18
(c) Preservation of Ownership Interest..............................18
(d) Obligations with Respect to Leases..............................18
(e) No Bankruptcy Petition..........................................18
(f) Security Interests..............................................19
(g) Location of Records.............................................19
(h) Agency Relationship.............................................19
(i) Indemnification.................................................19
5.2 Consent to Assignment..................................................19
ARTICLE VI
CONDITIONS PRECEDENT............................................. 20
6.1 Conditions to AFG Credit's Obligations.................................20
(a) Representations and Warranties..................................20
(b) Other Information...............................................20
(c) Obligations.....................................................20
(d) Corporate Proceedings...........................................20
6.2 Conditions to AFG's Obligations........................................20
(a) Representations and Warranties..................................21
(b) Corporate Proceedings...........................................21
ARTICLE VII
TERMINATION................................................. 21
7.1 Termination............................................................21
7.2 Effect of Termination..................................................21
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ARTICLE VIII
MISCELLANEOUS PROVISIONS........................................... 22
8.1 Amendment............................................................22
8.2 Governing Law........................................................22
8.3 Notice...............................................................22
8.4 Severability of Provisions...........................................22
8.5 Assignment...........................................................22
8.6 Further Assurances...................................................22
8.7 No Waiver; Cumulative Remedies.......................................23
8.8 Counterparts.........................................................23
8.9 Third-Party Beneficiaries............................................23
8.10 Merger and Integration..............................................23
8.11 Headings............................................................23
8.12 Schedules and Exhibits..............................................23
Exhibits
Exhibit A Form of Assignment for Original Assets
Exhibit B Form of Assignment for Additional Assets
Schedules
1. Original Lease Schedule
2. Portfolio Parameters Schedule
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Page
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of July 1, 1995 (this
"Agreement"), is entered into between American Finance Group, Inc. ("AFG"), a
Delaware corporation, and AFG Credit Corporation ("AFG Credit"), a Delaware
corporation.
AFG in the ordinary course of its business originates
equipment and other leases, and purchases equipment and other leases originated
by other Persons, in the United States and abroad.
AFG desires, on the date hereof, to transfer the Original
Leases, its interests in the related Equipment and other assets (as such
capitalized terms are defined pursuant to Article I below) to AFG Credit upon
the terms and conditions set forth in this Agreement.
It is contemplated that, from time to time after the date
hereof, AFG and AFG Credit may agree that AFG will transfer additional Leases,
its interests in the related Equipment and other assets to AFG Credit upon the
terms and conditions set forth in this Agreement.
It is contemplated that, following such transfers, AFG, in its
capacity as Servicer pursuant to the Pooling and Servicing Agreement and
Indenture of Trust, will continue to administer and service the Leases and
Equipment transferred to AFG Credit.
AFG and AFG Credit desire that from time to time on or after
the date hereof, AFG Credit will purchase Property and originate equipment and
other leases, and that in connection therewith AFG will act as agent on behalf
of AFG Credit, as principal, upon the terms and conditions set forth in this
Agreement.
It is contemplated that, following such origination of leases
by AFG Credit, AFG, in its capacity as Servicer pursuant to the Pooling and
Servicing Agreement and Indenture of Trust, will continue to administer and
service the leases and Equipment originated by AFG Credit.
In consideration of the mutual covenants set forth in this
Agreement, and other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, AFG and AFG Credit agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. (a) Capitalized terms used in this Agreement
shall have the respective meanings assigned to such terms in the Pooling and
Servicing Agreement (as defined in this Section 1.1) unless otherwise defined
herein.
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Page
(b) Whenever used in this Agreement, the following words and
phrases will have the following meanings:
"Additional Assets" shall mean all right, title and interest
of AFG in, to, and under (i) the Additional Leases (including AFG's
obligations under the Additional Leases) and all monies due or to
become due thereunder after the related Additional Cut-Off Date and all
Collections in respect thereof, (ii) the related Equipment, (iii) the
related Lease Files, (iv) the Insurance Policies and any Insurance
Proceeds related to the Additional Leases and (v) all income and
proceeds of the foregoing or relating thereto.
"Addition Date" shall have the meaning set forth in Section
2.2(a) of this Agreement.
"Additional Lease Schedule" shall have the meaning set forth
in Section 2.2(d) of this Agreement.
"Additional Cut-Off Date" shall mean each date as of which an
Additional Lease is to be contributed or sold to AFG Credit.
"Additional Leases" shall mean the Leases listed on any
Additional Lease Schedule created pursuant to Section 2.2(d) of this
Agreement.
"AFG Credit Assets" shall mean all right, title and interest
of AFG Credit in, to, and under (i) the AFG Credit Leases (including
AFG Credit's obligations under the AFG Credit Leases) and all monies
due or to become due thereunder after the related Origination Cut-Off
Date and all Collections in respect thereof, (ii) the related
Equipment, (iii) the related Lease Files, (iv) the Insurance Policies
and any Insurance Proceeds related to the AFG Credit Leases and (v) all
income and proceeds of the foregoing or relating thereto.
"AFG Credit Lease" shall mean each agreement, including, as
applicable, schedules, subschedules, summary schedules, supplements and
amendments to a master lease, that is entered into by AFG as agent on
behalf of AFG Credit as lessor thereunder, and pursuant to which AFG
Credit, as lessor, leases specified assets to a Lessee at a specified
monthly or quarterly or semi-annual rental, and which is identified in
the AFG Credit Lease Schedule; provided, that, from and after the date
on which an AFG Credit Lease is purchased from AFG Credit by AFG
pursuant to Section 4.3 of this Agreement or an AFG Credit Lease is
otherwise transferred by AFG Credit to AFG, such AFG Credit Lease shall
no longer be an AFG Credit Lease for purposes of this Agreement.
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"AFG Credit Lease Schedule" shall have the meaning set forth
in Section 3.2(a) of this Agreement.
"Assets" shall mean the Original Assets and any
Additional Assets.
"Assignee" shall mean, at any time, any Person to whom the
Assets and the AFG Credit Assets have been assigned, whether absolutely
or by way of the grant of a security interest therein under any then
existing Transfer Agreement and to which AFG Credit's rights under this
Agreement have been assigned, and shall initially refer to AFG Master
Trust created pursuant to the Pooling and Servicing Agreement.
"Business Day" shall mean each day which is neither a
Saturday, a Sunday nor any other day on which banking institutions in
New York, New York, or San Francisco, California are authorized or
obligated by law or required by executive order to be closed.
"Closing Date" shall mean _____ __, 1995.
"Cut-Off Date" shall mean _____ __, 1995.
"Equipment" shall mean the assets (including office or other
equipment) leased to a Lessee pursuant to a Lease or AFG Credit Lease,
as the case may be, and/or, unless the context otherwise requires, a
security interest in such assets.
"Filing Locations" shall mean the States of California
and Massachusetts.
"Ineligible Lease" shall have the meaning set forth in Section
4.3 of this Agreement.
"Lease" shall mean each agreement, including, as applicable,
schedules, subschedules, summary schedules, supplements and amendments
to a master lease, pursuant to which the Originator, as lessor, leases
specified assets to a Lessee at a specified monthly or quarterly or
semi-annual rental, and which is identified in the Lease Schedule,
including all Original Leases and Additional Leases; provided, that,
from and after the date on which a Lease is repurchased by AFG pursuant
to Section 4.3 of this Agreement or a Lease is otherwise transferred by
AFG Credit to AFG, such Lease shall no longer be a Lease for purposes
of this Agreement.
"Lease Files" shall mean, with respect to each Lease and each
AFG Credit Lease, the fully executed original counterpart (for UCC
purposes) of such Lease, the original certificate of title or other
title document with respect to
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the related Equipment (if applicable), and otherwise such documents, if
any, that AFG keeps on file in accordance with its customary
procedures, indicating ownership of such Equipment.
"Lease Schedule" shall mean the Original Lease Schedule and
all Additional Lease Schedules, as amended to show the deletion of
Leases repurchased by AFG pursuant to Section 4.3 or otherwise
transferred by AFG Credit to AFG.
"Opinion of Counsel" shall mean a written opinion of counsel,
who may be counsel (including internal counsel) to AFG, and who shall
be reasonably acceptable to AFG Credit.
"Original Assets" shall mean all right, title and interest of
AFG in, to, and under (i) the Original Leases (including AFG's
obligations under the Original Leases) and all monies due or to become
due thereunder after the Cut-Off Date and all Collections in respect
thereof, (ii) the related Equipment, (iii) the related Lease Files,
(iv) the Insurance Policies and any Insurance Proceeds related to the
Original Leases and (v) all income and proceeds of the foregoing or
relating thereto.
"Original Leases" shall mean the Leases listed on the Original
Lease Schedule attached hereto.
"Original Lease Schedule" shall have the meaning set forth in
Section 2.1(d) of this Agreement.
"Origination Cut-Off Date" shall mean each date as of which an
AFG Credit Lease is to be originated by AFG as agent on behalf of AFG
Credit as lessor thereunder.
"Pooling and Servicing Agreement" shall mean, at any time, any
agreement then in effect pursuant to which any Person has agreed to
service the Assets (as such agreement is then in effect), and shall
initially refer to the Pooling and Servicing Agreement and Indenture of
Trust dated as of the date hereof, among AFG Credit, AFG, as Servicer,
and the Trustee.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, whether tangible or intangible.
"Responsible Officer" shall mean, with respect to AFG and AFG
Credit, any officer of such entity with direct responsibility for the
administration of this Agreement and also, with respect to a particular
matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular
subject. The term "Responsible Officer", when used herein with
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respect to any Person other than either AFG or AFG Credit, shall mean
an officer or employee of such Person corresponding to any officer or
employee described in the preceding sentence.
"Servicer" shall mean, at any time, any Person then acting as
servicer under a servicing agreement, and shall initially refer to AFG
in its capacity as servicer under the Pooling and Servicing Agreement.
"Transfer Agreement" shall mean, at any time, any then
existing agreement pursuant to which AFG Credit has assigned its rights
in the Assets and the AFG Credit Assets, whether absolutely or by way
of the grant of a security interest therein (as such agreement is then
in effect), and shall initially refer to the Pooling and Servicing
Agreement.
"Trustee" shall mean the institution executing the Pooling and
Servicing Agreement as trustee, or its successor in interest, or any
successor trustee appointed as therein provided.
"Warranty Purchase Price" shall mean, with respect to any
Lease or AFG Credit Lease and the related Equipment to be repurchased
or purchased, respectively, by AFG, (a) the amount set forth as such in
any then applicable Transfer Agreement, or (b) if no such amount is set
forth or no Transfer Agreement is then in effect, an amount agreed to
by AFG and AFG Credit as reflecting the fair market value therefor,
determined on the same basis as the purchase price for sales of
Original Leases and Additional Leases has been determined hereunder.
1.2 Other Definitional Provisions.
(a) Terms Used in Related Documents. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto or thereto unless otherwise defined
therein.
(b) Accounting Terms. As used in this Agreement or in any
certificate or other document made or delivered pursuant hereto, accounting
terms not defined in Section 1.1, and accounting terms partially defined in
Section 1.1 to the extent not defined, shall have the meanings given to them
under generally accepted accounting principles. To the extent that the
definitions of accounting terms herein are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained herein shall control.
(c) "Hereof", etc. The words "hereof"; "herein" and
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
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<PAGE>
particular provision of this Agreement; and Section, Schedule and Exhibit
references contained in this Agreement are references to Sections, Schedules and
Exhibits in or to this Agreement, unless otherwise specified.
ARTICLE II
SALE OF ORIGINAL ASSETS;
SALE OF ADDITIONAL ASSETS;
2.1 Sale of Original Assets.
(a) Sale. On the Closing Date, AFG will sell, assign, transfer
and convey to AFG Credit the Original Assets and will deliver to AFG Credit an
executed assignment substantially in the form of Exhibit A. Except for the
obligations of AFG pursuant to Section 4.3, the sale of the Original Assets will
be without recourse to AFG.
(b) Purchase Price. The purchase price for the Original Assets
shall be paid in immediately available funds on the Closing Date from AFG Credit
to AFG and shall be equal to the sum of (i) the sum of the discounted values of
the Original Leases, as estimated by AFG at the Cut-Off Date in accordance with
its normal valuation procedures, on a cumulative basis, plus (ii) the sum of the
anticipated residual values of each piece of Equipment related to an Original
Lease upon the expiration of each such Original Lease in accordance with its
terms (as such residual values are estimated by AFG on or about the date on
which each such Lease was created in accordance with its normal valuation
procedures), but not in excess of any purchase option price with respect thereto
set forth in each such Lease, on a cumulative basis.
(c) Recordation. AFG shall record and file, at its own
expense, financing statements (including any continuation statements with
respect to such financing statements when applicable) with respect to the
Original Assets meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect the sale of the Original
Leases from AFG to AFG Credit, and to deliver file-stamped copies of such
financing statements or continuation statements or other evidence of such
filings (which may, for purposes of this Section 2.1, consist of telephone
confirmations of such filings with the file-stamped copy to be provided to AFG
Credit as soon as practicable after receipt thereof by AFG) to AFG Credit (and
copies to the Assignee) on or prior to the Closing Date, and in the case of any
continuation statements filed pursuant to this Section 2.1(c), as soon as
practicable after receipt thereof by AFG.
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(d) Marking of Original Leases. AFG shall, at its own expense,
on or prior to the Closing Date in the case of the Original Leases (A) indicate
in its books and records, including the appropriate computer files relating to
the Original Leases, that such Leases have been sold to AFG Credit pursuant to
this Agreement and stamp such Leases or otherwise mark such Leases with a legend
to the effect that such Leases have been assigned to the Assignee under the
Pooling and Servicing Agreement and (B) on or prior to the Closing Date, deliver
to AFG Credit a computer file or microfiche or written list (the "Original Lease
Schedule") containing a true and complete list of all Original Leases then being
sold to AFG Credit, identified by account number and by the Discounted Lease
Balance as of the Cut-Off Date. The Original Lease Schedule is attached to this
Agreement as Schedule 1.
(e) Custody of Lease Files. AFG shall, at its own expense, on
or prior to the Initial Closing Date in the case of the Original Leases deliver
to the Custodian the related Lease Files to be held by the Custodian in
accordance with the Custodian Agreement.
(f) Title to Equipment. AFG shall, at its own expense, on or
prior to the Closing Date in the case of the Original Leases, with respect to
any item of related Equipment with respect to which title thereto or a security
interest therein is required to be noted on a certificate of title or otherwise
recorded, take such steps as shall be necessary or appropriate, in the
reasonable judgement of AFG, to fully vest all right, title and interest in such
Equipment in the Assignee.
2.2 Contribution or Sale of Additional Assets.
(a) Additional Sales and Contributions. From time to time
after the date hereof, AFG Credit may request to purchase additional assets from
AFG, and AFG may agree to so sell, assign, transfer and convey such additional
assets. From time to time after the date hereof, in connection with a sale of
Additional Assets or otherwise, AFG may contribute to AFG Credit as a
contribution to capital, Additional Assets. The date on which any such sale or
contribution of any Additional Assets to be purchased by AFG Credit takes place
is herein referred to as an "Addition Date". On each Addition Date, AFG will
deliver to AFG Credit an executed assignment substantially in the form of
Exhibit B. Except for the obligations of AFG pursuant to Section 4.3, the sale
and contribution of the Additional Assets will be without recourse to AFG.
(b) Purchase Price. If AFG agrees to sell, assign, transfer
and convey any additional assets as described in Section 2.2(a) above, the
purchase price for any Additional Assets shall be payable in immediately
available funds on the Additional Closing Date from AFG Credit to AFG and shall
be equal to the sum
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of (i) the sum of the discounted values of the Additional Leases, as estimated
by AFG at the related Additional Cut-Off Date in accordance with its normal
valuation procedures, on a cumulative basis, plus (ii) the sum of the
anticipated residual values of each piece of Equipment related to an Additional
Lease upon the expiration of each such Additional Lease in accordance with its
terms (as such residual values are estimated by AFG on or about the date on
which each such Lease was created in accordance with its normal valuation
procedures), but not in excess of any purchase option price with respect thereto
set forth in each such Lease, on a cumulative basis.
(c) Recordation. In connection with any sale or contribution
of Additional Assets, AFG shall record and file, at its own expense, financing
statements (including any continuation statements with respect to such financing
statements when applicable) with respect to the Additional Assets meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the sale or contribution of the Additional Leases from
AFG to AFG Credit, and to deliver file-stamped copies of such financing
statements or continuation statements or other evidence of such filings (which
may, for purposes of this Section 2.2, consist of telephone confirmations of
such filings with the file-stamped copy to be provided to AFG Credit as soon as
practicable after receipt thereof by AFG) to AFG Credit (and copies to the
Assignee) on or prior to the Addition Date, and in the case of any continuation
statements filed pursuant to this Section 2.2(c), as soon as practicable after
receipt thereof by AFG.
(d) Marking of Additional Leases. In connection with any
contribution or sale of Additional Assets, AFG shall, at its own expense, on or
prior to the Addition Date (A) indicate in its books and records, including the
appropriate computer files relating to the Additional Leases, that such Leases
have been sold or contributed to AFG Credit pursuant to this Agreement and stamp
such Leases or otherwise mark such Leases with a legend to the effect that such
Leases have been assigned to the Assignee under a Transfer Agreement and (B) on
or prior to the Addition Date, deliver to AFG Credit a computer file or
microfiche or written list (an "Additional Lease Schedule") containing a true
and complete list of all Additional Leases then being sold or contributed to AFG
Credit, identified by account number and by the Discounted Lease Balance as of
the related Additional Cut-Off Date. Each Additional Lease Schedule shall be
attached to the related assignment as a schedule thereto.
(e) Custody of Lease Files. AFG shall, at its own expense, on
or prior to the related Addition Date in the case of the Additional Leases
deliver to the Custodian the related Lease Files to be held by the Custodian in
accordance with the Custodian Agreement.
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(f) Title to Equipment. AFG shall, at its own expense, on or
prior to the related Addition Date in the case of Additional Leases, with
respect to any item of related Equipment with respect to which title thereto or
a security interest therein is required to be noted on a certificate of title or
otherwise recorded, take such steps as shall be necessary or appropriate, in the
reasonable judgement of AFG, to fully vest all right, title and interest in such
Equipment in the Assignee.
ARTICLE III
AFG TO ACT AS AGENT FOR AFG CREDIT;
ORIGINATION OF LEASES BY AFG CREDIT
3.1 Agency Agreement.
(a) Appointment of Agent. AFG and AFG Credit contemplate that
from time to time on or after the date hereof, AFG and AFG Credit may agree that
AFG Credit will purchase Property and originate equipment and other leases with
Lessees, and that in connection therewith, AFG will act as agent on behalf of
AFG Credit as principal. AFG Credit hereby appoints AFG to act as its agent and
grants to AFG the power and authority to act on its behalf and to take whatever
actions are deemed by AFG to be necessary in connection with such purchases of
Property and origination of leases by AFG Credit. AFG hereby accepts such
appointment as agent on the terms and conditions and for the purposes set forth
herein.
(b) Duties of Agent. AFG, as agent for AFG Credit, will be
wholly responsible for performing such functions as are necessary in connection
with all matters relating to the purchase of Property by AFG Credit and the
origination of the AFG Credit Leases by AFG Credit, including reviewing and
preparing contracts, certificates, legal opinions and other instruments and
performing due diligence, providing and receiving all notices and other
documentation and otherwise fulfilling all ongoing duties and responsibilities
that may be required under any documents that are entered into by AFG Credit
through AFG, as its agent, and fulfilling and complying with, in all material
respects, all obligations on the part of the "lessor" to be fulfilled or
complied with under or in connection with each AFG Credit Lease.
(c) Power of Attorney. In connection with the appointment of
AFG to act as agent on its behalf, AFG Credit hereby appoints AFG to act as AFG
Credit's attorney-in-fact for the purposes of entering into purchase or similar
agreements with vendors in connection with the purchase by AFG Credit of
Property, entering into the AFG Credit Leases with Lessees with respect to the
leasing of Equipment by AFG Credit, and executing any certificates, reports,
filings, instruments or other documents incident to the foregoing. AFG and AFG
Credit hereby
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agree that the power of attorney granted hereby shall be limited to those
documents incident to the specific transactions to be entered into by AFG as
agent for AFG Credit as contemplated by Section 3.1(a). AFG Credit will execute
such powers of attorney as are requested by AFG to evidence the appointment of
AFG as its attorney-in-fact.
3.2 The AFG Credit Leases.
(a) Origination of AFG Credit Leases. AFG and AFG Credit
contemplate that from time to time on or after the date hereof, AFG and AFG
Credit may agree that AFG Credit will originate leases as lessor and that AFG
will act as agent on AFG Credit's behalf in connection therewith pursuant to the
agency relationship established in Section 3.1(a) above. The date on which any
such origination of an AFG Credit lease takes place is herein referred to as an
"Origination Date". In connection with the origination of the AFG Credit Leases
by AFG as agent for AFG Credit, AFG shall, at its own expense, on or prior to
the Origination Date, deliver to AFG Credit a computer file or microfiche or
written list (an "AFG Credit Lease Schedule") containing a true and complete
list of all AFG Credit Leases then being originated by AFG as agent on behalf of
AFG Credit, identified by account number and by the Discounted Lease Balance as
of the related Origination Cut-Off Date.
(b) Custody of Lease Files. AFG shall, at its own expense, on
or prior to the related Origination Date in the case of the AFG Credit Leases
deliver to the Custodian the related Lease Files to be held by the Custodian in
accordance with the Custodian Agreement.
(c) Criteria for AFG Credit Leases. AFG agrees that it will,
in evaluating and selecting Lessees to be parties to the AFG Credit Leases,
utilize the same credit guidelines, eligibility and other criteria that it
customarily utilizes in selecting lessees for Leases that AFG enters into as
lessor on its own behalf.
3.3 Payment; Compensation.
(a) Purchase of Property by AFG Credit. AFG Credit hereby
authorizes AFG, as agent on its behalf, to pay to the vendor thereof the full
purchase price of any Property purchased by AFG as agent on behalf of AFG Credit
pursuant to Section 3.1. AFG shall promptly notify AFG Credit and send AFG
Credit an invoice for any such payments made by AFG on AFG Credit's behalf. AFG
Credit hereby agrees to reimburse AFG, promptly upon receipt of an invoice,
fully for any amounts paid by AFG, as agent on behalf of AFG Credit, to a vendor
for the purchase of Property by AFG Credit pursuant to this Article III.
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(b) Compensation of Agent. AFG and AFG Credit hereby agree
that as compensation for acting hereunder as agent for AFG Credit, AFG, as
Servicer, will retain the right to service the AFG Credit Leases pursuant to the
Pooling and Servicing Agreement and shall be entitled to receive the Servicing
Fee payable thereunder with respect to the AFG Credit Leases.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of AFG. AFG makes the
following representations and warranties for the benefit of AFG Credit and any
Assignee, on which AFG Credit relies in purchasing the Original Assets and any
Additional Assets, in accepting any contribution of any Additional Assets, and
in purchasing any Property and originating any AFG Credit Leases through AFG as
its agent pursuant to Article III hereof. Unless otherwise indicated, such
representations and warranties, with respect to the Original Assets, are as of
the Closing Date, with respect to any Additional Assets, are deemed to be made
as of the related Addition Date, and with respect to the AFG Credit Leases and
the assets subject thereto, are deemed to be made as of the related Origination
Date, and in each case will survive the contribution and/or sale of the Original
and Additional Leases and related Equipment to AFG Credit, the origination of
the AFG Credit Leases by AFG Credit, and the transfer of an interest in the
Leases and the AFG Credit Leases to any Assignee. Upon discovery by AFG or AFG
Credit or its assignee of a breach of any of the representations and warranties
contained in this Section 4.1, the party discovering such breach shall give
prompt written notice to the other.
(a) Representations and Warranties with Respect to the
Assets. As to the Assets:
(i) as of the Cut-Off Date, the Original Lease Schedule is
an accurate and complete listing in all material respects of all the
Original Leases and the information contained therein with respect to
the identity of such Leases and the amounts owing thereunder is true
and correct in all material respects as of the Cut-Off Date;
(ii) each Original Lease is an Eligible Lease;
(iii) each Original Lease and the related Equipment has been
transferred to AFG Credit or its Assignee free and clear of any Lien of
any Person (other than Permitted Liens) and is in compliance, in all
material respects, with all Requirements of Law applicable to AFG or
the Originator thereof;
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(iv) with respect to each Original Lease, all material
consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained,
effected or given by AFG in connection with the transfer of such Lease
and the related Equipment to AFG Credit or its Assignee have been duly
obtained, effected or given and are in full force and effect;
(v) as of the Closing Date, the Original Leases
satisfy the criteria set forth on the Portfolio Parameters
Schedule attached to this Agreement as Schedule 2;
(vi) as of any Additional Cut-Off Date, the related
Additional Lease Schedule is an accurate and complete listing in all
material respects of all the Additional Leases being transferred on the
related Addition Date and the information contained therein with
respect to the identity of such Leases and the amounts owing thereunder
is true and correct in all material respects as of the related
Additional Cut-Off Date;
(vii) each such Additional Lease is an Eligible Lease;
(viii) each such Additional Lease and the related Equipment
has been transferred to AFG Credit or its Assignee free and clear of
any Lien of any Person (other than Permitted Liens) and is in
compliance, in all material respects, with all Requirements of Law
applicable to AFG or the Originator thereof;
(ix) with respect to each such Additional Lease, all
material consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority required
to be obtained, effected or given by AFG in connection with the
transfer of such Lease and the related Equipment to AFG Credit or its
Assignee have been duly obtained, effected or given and are in full
force and effect; and
(x) as of any Addition Date, the addition of the related
Additional Leases does not cause any of the criteria set forth on the
Portfolio Parameters Schedule attached to this Agreement as Schedule 2
to be untrue; and
(xi) as of any Addition Date, AFG is not insolvent and
will not be rendered insolvent by selling or contributing the related
Additional Leases to AFG Credit.
(b) Representations and Warranties with Respect to the
AFG Credit Leases. As to the AFG Credit Leases:
(i) each AFG Credit Lease is an Eligible Lease;
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(ii) each AFG Credit Lease satisfies all of the same
eligibility and other criteria as the Original Leases and the
Additional Leases being sold or to be sold by AFG to AFG Credit
pursuant to Article II of this Agreement;
(iii) AFG will not record any of the AFG Credit Assets on
its own books and will take no actions that are inconsistent with all
right, title and interest of AFG Credit or any Assignee in and to the
AFG Credit Assets;
(iv) as of any Origination Date, the addition of the
related AFG Credit Lease does not cause any of the criteria set forth
on the Portfolio Parameters Schedule attached to this Agreement as
Schedule 2 to be untrue, unless, with respect to any of the Individual
Lessee Excess Concentration Amount, the Industry Excess Concentration
Amount, the SemiAnnual Lease Excess Concentration Amount or the
Equipment Excess Concentration Amount, the Rating Agency Condition
shall have been satisfied with respect thereto; and
(v) each AFG Credit Lease is in compliance, in all
material respects, with all Requirements of Law applicable to the
Originator thereof (if other than AFG Credit).
(c) Representations and Warranties as to AFG. As to
AFG:
(i) Organization and Good Standing. AFG is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware, with all requisite corporate power and authority
to own its properties and to conduct its business as presently
conducted and to enter into and perform its obligations pursuant to
this Agreement;
(ii) Due Qualification. AFG is qualified to do business as
a foreign corporation, is in good standing, and has obtained all
licenses and approvals as required under the laws of, all states in
which the ownership or lease of its property, the performance of its
obligations pursuant to this Agreement or the other conduct of its
business requires such qualification, standing, license or approval,
except to the extent that the failure to so qualify, maintain such
standing or be so licensed or approved would not, in the aggregate,
materially and adversely affect the ability of AFG to comply with this
Agreement or to perform its obligations hereunder or adversely effect
the enforceability of the Leases;
(iii) Power and Authority. AFG has the corporate power and
authority to execute and deliver this Agreement and to carry out its
terms. AFG has duly authorized the execution,
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delivery, and performance of this Agreement by all requisite
corporate action;
(iv) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by
AFG (with or without notice or lapse of time) will not (i) conflict
with, result in any breach of any of the terms or provisions of, or
constitute a default under, the certificate of incorporation or by-laws
of AFG, or any term of any indenture, agreement, mortgage, deed of
trust or other instrument to which AFG is a party or by which it is
bound, (ii) result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, or (iii)
violate any law, regulation, order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority applicable to AFG
or any of its properties;
(v) No Consent. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or
with any Governmental Authority having jurisdiction over AFG or any of
its properties is required to be obtained by or with respect to AFG in
order for AFG to enter into this Agreement or perform its obligations
hereunder;
(vi) Valid Contribution and Sale; Binding Obligations. The
sale of the Original Assets constitutes, and each contribution and sale
of any Additional Assets will constitute, a valid transfer to AFG
Credit or its assignee of all right, title and interest of AFG in, to
and under the Assets, and such property will be held by AFG Credit or
its assignee free and clear of any Lien of any Person claiming through
or under AFG or its Affiliates, except for Permitted Liens; and this
Agreement constitutes a legal, valid and binding obligation of AFG,
enforceable against AFG in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (whether considered in a suit at law
or in equity);
(vii) No Proceedings. There are no proceedings or
investigations pending, or, to the best of AFG's knowledge, threatened
against AFG, before any Governmental Authority (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or (iii)
seeking any determination or ruling that might (in the reasonable
judgment of AFG) materially and adversely affect the
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performance by AFG of its obligations under, or the validity
or enforceability of, this Agreement;
(viii) Bulk Sales. The execution, delivery and
performance of this Agreement do not require compliance with
any "bulk sales" law by AFG;
(ix) Fair Consideration. The consideration received by AFG
in exchange for the transfer of the Assets on the date hereof and on
each Addition Date is fair consideration having value equivalent to or
in excess of the value of the Assets transferred on each such date; and
the consideration received by AFG in exchange for performing the
services as agent for AFG Credit pursuant to Article III hereof is fair
consideration;
(x) Principal Place of Business. AFG's principal place of
business is in the State of California, City and County of San
Francisco;
(xi) Ability to Perform. At the date hereof, AFG does not
believe, nor does it have any reasonable cause to believe, that it
cannot perform each and every covenant contained in this Agreement; and
(xii) Transfer Taxes. The sale, transfer, assignment and
conveyance of the Assets by AFG described in this Agreement will not
result in the imposition of any tax Lien or any liability of AFG Credit
for any tax on such sale, transfer, assignment and conveyance.
4.2 Representations and Warranties of AFG Credit. AFG
--------------------------------------------
Credit makes the following representations and warranties on
which AFG relies in selling the Original Assets, contributing and
selling any Additional Assets and purchasing Property and acting
as agent on behalf of AFG Credit in connection with the purchase
of Property and the origination of the AFG Credit Leases by AFG
Credit. Such representations and warranties speak as of the
Closing Date and each Addition Date and Origination Date, but
shall survive the contribution and/or sale of the Leases and
related Equipment to AFG Credit, the origination of the AFG
Credit Leases, and the grant of a security interest to the Leases
and to the AFG Credit Leases and the related Equipment to any
Assignee. Upon discovery by AFG or AFG Credit or its assignee of
a breach of any of the representations and warranties contained
in this Section 4.2, the party discovering such breach shall give
prompt written notice to the others.
(a) Organization and Good Standing. AFG Credit is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware, and has full corporate power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and
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such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement and the Pooling and Servicing Agreement;
(b) Due Qualification. AFG Credit is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt from
such requirements), and has obtained or will obtain all necessary licenses and
approvals, in each jurisdiction in which failure to so qualify or to obtain such
licenses and approvals would have a material adverse effect on its ability to
perform its obligations hereunder;
(c) Due Authorization. The execution and delivery of
this Agreement and the Pooling and Servicing Agreement and the
consummation of the transactions provided for herein and therein
have been duly authorized by AFG Credit by all necessary
corporate action on the part of AFG Credit;
(d) No Conflict. The execution and delivery of this Agreement
and the Pooling and Servicing Agreement, the performance of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof will not conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a default under, any indenture, contract, agreement, mortgage, deed of
trust, or other instrument to which AFG Credit is a party or by which it or any
of its property is bound;
(e) No Violation. The execution and delivery of this Agreement
and the Pooling and Servicing Agreement, the performance of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof will not conflict with or violate, in any material respect, any
Requirements of Law applicable to AFG Credit;
(f) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental Authority
required in connection with the execution and delivery of this Agreement, the
performance of the transactions contemplated by this Agreement, and the
fulfillment of or terms hereof, have been obtained.
4.3 Purchase of Ineligible Leases and Equipment by AFG. In the
event of a breach of any representation or warranty set forth in Section 4.1(a)
with respect to a Lease or Section 4.1(b) with respect to an AFG Credit Lease
(each such Lease or AFG Credit Lease, an "Ineligible Lease"), within 60 days of
the receipt by AFG of written notice of such breach given by AFG Credit, AFG
shall repurchase each such Lease or purchase each such AFG Credit Lease to which
such breach relates on the terms and conditions set forth below; provided,
however, that no such repurchase or purchase shall be required to be made with
respect
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to such Ineligible Lease (and such Lease or AFG Credit Lease, as the case may
be, shall cease to be an Ineligible Lease) if, on any day within such 60 day
period, the representations and warranties in subsection 4.1(a) or 4.1(b), as
the case may be, with respect to such Ineligible Lease shall then be true and
correct in all material respects with respect to such Ineligible Lease as if
such Ineligible Lease had been sold or contributed to AFG Credit or originated
by AFG Credit, as the case may be, on such day. With respect to each repurchase
or purchase of an Ineligible Lease, as the case may be, required to be made
pursuant to this Section 4.3, AFG shall repurchase or purchase, as the case may
be, and AFG Credit shall convey, without recourse, representation or warranty,
all of its right, title and interest in each Ineligible Lease. AFG shall be
obligated to repurchase or purchase, as the case may be, each such Ineligible
Lease. As payment for the Ineligible Leases, AFG shall, on the date of transfer
or retransfer, as the case may be, of such Ineligible Lease, (i) make a payment
to AFG Credit in immediately available funds in an amount equal to the Warranty
Purchase Price. Upon each repurchase or purchase, as the case may be, by AFG of
each such Ineligible Lease, AFG Credit shall automatically and without further
action be deemed to transfer, assign and set-over to AFG, without recourse,
representation or warranty, all the right, title and interest of AFG Credit in,
to and under such Ineligible Lease and all monies due or to become due with
respect thereto, the related Equipment and all proceeds of the Ineligible Lease
and Liquidation Proceeds and Insurance Proceeds relating thereto and all rights
to security for any such Ineligible Lease, and all proceeds and products of the
foregoing. AFG Credit shall execute such documents and instruments of transfer
and purchase or repurchase, as the case may be, as may be prepared by AFG and
take such other actions as shall reasonably be requested by AFG to effect the
purchase or repurchase, as the case may be, of such Ineligible Lease pursuant to
this subsection. The obligation of AFG to purchase or repurchase, as the case
may be, any Ineligible Lease and the indemnification provided for in Section 4.4
shall constitute the sole remedy respecting any breach of the representations
and warranties set forth in subsection 4.1(a) with respect to such Lease or
subsection 4.1(b) with respect to such AFG Credit Lease, as the case may be,
available to AFG Credit or the Assignee.
4.4 Indemnification. In addition to any remedy pursuant to
Section 4.3, AFG agrees to indemnify, defend and hold AFG Credit harmless from
and against any out of pocket expense (including interest, penalties, reasonable
attorneys' fees and amounts paid in settlement) to which AFG Credit or the
Assignee may become subject insofar as such expense arises solely out of or is
based solely upon the untruth of any representation or warranty of AFG set forth
in Section 4.1. The obligations of AFG under this Section 4.4 will be considered
to have been relied upon by AFG Credit and the Assignee and will survive the
execution, delivery, and performance of this Agreement regardless
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of any investigation made by AFG Credit or the Assignee or on
their behalf.
ARTICLE V
COVENANTS OF AFG AND AFG Credit
5.1 AFG Covenants. AFG covenants and agrees with AFG Credit as
follows for the benefit of AFG Credit and any Assignee:
(a) Lease Files. AFG will comply with the provisions
of the Custodian Agreement insofar as such provisions are
applicable to it.
(b) Compliance with Law. AFG will comply, in all material
respects, with all laws and regulations of any Governmental Authority
applicable to AFG, the Leases or the AFG Credit Leases and the related
Equipment and Lease Files or any part thereof; provided that AFG may
contest any such law or regulation in any reasonable manner which will
not materially and adversely affect the value of (or the rights of AFG
Credit or the Assignee, with respect to) the Assets or the AFG Credit
Assets.
(c) Preservation of Ownership Interest. AFG will execute and
file such financing and continuation statements and any other documents
reasonably requested by AFG Credit to be filed or which may be required
by any law or regulation of any Governmental Authority to preserve and
protect fully the interest of AFG Credit and the Assignee in, to and
under the Assets and the AFG Credit Assets.
(d) Obligations with Respect to Leases. AFG will duly fulfill
and comply with, in all material respects, all obligations on the part
of the "lessor" to be fulfilled or complied with under or in connection
with each Lease, and will do nothing to impair the rights of AFG Credit
in, to and under the Assets. AFG, as agent for AFG Credit, will duly
fulfill and comply with, in all material respects, all obligations on
the part of the "lessor" to be fulfilled or complied with under or in
connection with each AFG Credit Lease and will do nothing to impair the
rights of AFG Credit in, to and under the AFG Credit Assets. AFG will
perform such obligations under the Leases and AFG Credit Leases and
will not change or modify the Leases or AFG Credit Leases, except as
otherwise provided in the Pooling and Servicing Agreement and except
insofar as any such failure to perform, change or modification would
not materially and adversely affect the value of (or the rights of AFG
Credit or the Assignee, with respect to) the Leases or the AFG Credit
Leases, or the related Equipment.
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(e) No Bankruptcy Petition. AFG agrees that, prior to the date
that is one year and one day after the termination of this Agreement
pursuant to Section 7.1 herein, it will not institute against AFG
Credit, or join any other Person in instituting against AFG Credit, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United
States or any state of the United States. This Section 5.1(e) will
survive the termination of this Agreement.
(f) Security Interests. Except as otherwise herein provided,
AFG will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Lease
or related Equipment, whether now existing or hereafter transferred to
AFG Credit, or any interest therein. AFG will immediately notify AFG
Credit and the Assignee of the existence of any Lien on any Lease or
related Equipment; and AFG shall defend the right, title and interest
of AFG Credit in, to and under the Leases and the related Equipment,
against all claims of third parties; provided, however, that nothing in
this subsection 5.1(f) shall prevent or be deemed to prohibit AFG from
suffering to exist upon any of the Leases Permitted Liens.
(g) Location of Records. AFG (i) shall not move outside the
State of California the location of its chief executive office without
45 days' prior written notice to AFG Credit and (ii) will promptly take
all actions required (including but not limited to all filings and
other acts necessary or advisable under the UCC of each relevant
jurisdiction) in order to continue the first priority perfected
ownership interest of the Assignee in the Leases. AFG will give AFG
Credit prompt notice of a change within the State of California of the
location of its chief executive office.
(h) Agency Relationship. AFG (i) shall not take any actions on
behalf of AFG Credit that are outside the scope of or are in violation
of the agency agreement set forth herein, and (ii) when acting as agent
for AFG Credit, will fully disclose this fact to the related Equipment
vendor or Lessee, as applicable.
(i) Indemnification. AFG agrees to indemnify, defend and hold
AFG Credit and the Assignee harmless from and against any and all loss,
liability, damage, judgment, claim, deficiency, or expense (including
interest, penalties, reasonable attorneys' fees and amounts paid in
settlement) to which AFG Credit or the Assignee may become subject
insofar as such loss, liability, damage, judgment, claim, deficiency or
expense arises out of or is based upon a breach by AFG of its covenants
contained in this Section
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5.1. The obligations of AFG under this Section 5.1(i) will be
considered to have been relied upon by AFG Credit and the Assignee and
will survive the execution, delivery, and performance of this Agreement
regardless of any investigation made by AFG Credit or the Assignee or
on their behalf.
5.2 Consent to Assignment. AFG understands that AFG Credit
intends to assign all its right, title and interest in, to and under the Assets
and the AFG Credit Assets to the Assignee pursuant to the Pooling and Servicing
Agreement. AFG consents to the assignment of all or any portion of this
Agreement by AFG Credit to any such Assignee. AFG agrees that any such Assignee
(or, in each case, the Servicer or Trustee on its behalf) may exercise the
rights of AFG Credit hereunder and will be entitled to all of the benefits of
AFG Credit hereunder to the extent provided in the Pooling and Servicing or the
related Transfer Agreement, as applicable.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to AFG Credit's Obligations. The obligations of
AFG Credit to purchase the Original Assets on the Closing Date, to accept and/or
purchase, as the case may be, any Additional Assets on the related Addition
Date, and to originate any AFG Credit Leases on the related Origination Date are
subject to the satisfaction or waiver of the following conditions as of such
Closing Date, Addition Date or Origination Date, as applicable:
(a) Representations and Warranties. All representations and
warranties of AFG contained in this Agreement will be true and correct
in all material respects as of the Closing Date, such Addition Date,
and such Origination Date (except as otherwise specified herein), as if
each such representation or warranty were made as of the Closing Date,
such Addition Date or such Origination Date;
(b) Other Information. All information concerning the
Assets and the AFG Credit Assets provided to AFG Credit will
be true and correct as of the Cut-Off Date, the related
Additional Cut-Off Date or the related Origination Cut-Off
Date, as applicable, in all material respects;
(c) Obligations. AFG will have performed in all material
respects all obligations required to be performed by AFG on or prior to
the Closing Date, the related Addition Date, or the related Origination
Date, as applicable, pursuant to the provisions of this Agreement; and
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(d) Corporate Proceedings. All corporate and legal proceedings
and all instruments in connection with the transactions contemplated by
this Agreement will be satisfactory in form and substance to AFG
Credit, and AFG Credit will have received from AFG such copies of
documents (including records of corporate proceedings, certificates of
Responsible Officers and Opinions of Counsel) relevant to the
transactions herein contemplated as AFG Credit may reasonably have
requested.
6.2 Conditions to AFG's Obligations. The obligations of AFG to
sell the Original Assets on the Closing Date, to contribute or sell any
Additional Assets as of any Addition Date, and to act as agent on behalf of AFG
Credit pursuant to Article III hereof as of any Origination Date will be subject
to the satisfaction or waiver of the following conditions as of the Closing
Date, such Addition Date or such Origination Date, as applicable:
(a) Representations and Warranties. All representations and
warranties of AFG Credit contained in this Agreement will be true and
correct in all material respects as of the Closing Date, such Addition
Date or such Origination Date (except as otherwise specified herein),
as if each such representation or warranty were made as of the Closing
Date, such Addition Date or such Origination Date;
(b) Corporate Proceedings. All corporate and legal proceedings
and all instruments in connection with the transactions contemplated by
this Agreement will be satisfactory in form and substance to AFG, and
AFG will have received from AFG Credit such copies of documents
(including records of corporate proceedings, certificates of
Responsible Officers, and Opinions of Counsel) relevant to the
transactions herein contemplated as AFG may reasonably have requested.
ARTICLE VII
TERMINATION
7.1 Termination. The respective obligations and
responsibilities of AFG and AFG Credit created by this Agreement and the agency
relationship established pursuant to Article III hereunder will terminate upon
the last to occur of (i) the maturity or other liquidation of all Leases and AFG
Credit Leases and (ii) the termination of all Transfer Agreements.
7.2 Effect of Termination. No termination, rejection or
failure to assume the executory obligations of this Agreement in the bankruptcy
of AFG or AFG Credit will be deemed to impair or affect the obligations
pertaining to any executed
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contribution, executed sale or executed obligations, including breaches of
representations and warranties by AFG or AFG Credit prior to termination.
Without limiting the foregoing, prior to termination, the failure of AFG to pay
a Warranty Purchase Price will not render such contribution, sale or obligations
executory and the continued respective duties of AFG and AFG Credit pursuant to
Article V will not render an executed sale or contribution executory.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Amendment. This Agreement may be amended from time to time
by AFG and AFG Credit, without the consent of the Assignee, (i) to cure any
ambiguity, to revise any Exhibits or Schedules, to correct or supplement any
provisions herein or thereon or (ii) to add any other provisions with respect to
matters or questions raised under this Agreement which shall not be inconsistent
with the provisions of this Agreement; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of the Assignee.
8.2 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
8.3 Notice. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by registered mail, return receipt requested, to (a) in
the case of AFG, to One Market Place, Suite 900, San Francisco, California
94105, Attn: _________ ____________, Chief Financial Officer, with a copy to
_______________________, and (b) in the case of AFG Credit, to One Market Place,
Suite 900, San Francisco, California 94105, Attn: ____________________, with a
copy to
- ------------------------.
8.4 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
8.5 Assignment. This Agreement may not be assigned by
AFG, without the prior written consent of AFG Credit and the
Assignee.
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<PAGE>
8.6 Further Assurances. AFG and AFG Credit agree to do and
perform, from time to time, any and all acts and to execute any and all further
instruments required or reasonably requested by the Assignee more fully to
effect the purposes of this Agreement, including, without limitation, the
execution of any financing statements or continuation statements relating to the
Assets for filing under the provisions of the UCC of any applicable
jurisdiction.
8.7 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of AFG Credit or AFG, any right, remedy,
power or privilege under this Agreement will operate as a waiver of such right,
remedy, power or privilege; nor will any single or partial exercise of any
right, remedy, power or privilege under this Agreement preclude any other or
further exercise of such right, remedy, power or privilege. The rights,
remedies, powers and privileges provided under this Agreement are cumulative and
not exhaustive of any other rights, remedies, powers and privileges provided by
law.
8.8 Counterparts. This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
8.9 Third-Party Beneficiaries. This Agreement shall inure to
the benefit of and be binding upon the parties hereto, and their respective
successors and permitted assigns and will also, to the extent expressly provided
in this Agreement, inure to the benefit of the Servicer and the Assignee. Except
as otherwise provided in this Section 8.9, no other Person will have any right
or obligation hereunder.
8.10 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
8.11 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
8.12 Schedules and Exhibits. The Schedules and Exhibits
constitute a part of this Agreement and are incorporated into this Agreement for
all purposes.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
AMERICAN FINANCE GROUP, INC.
By:
Name:
Title:
AFG CREDIT CORPORATION
By:
Name:
Title:
<PAGE>
AFG CREDIT CORPORATION,
as Transferor,
AMERICAN FINANCE GROUP, INC.,
as Servicer,
and
BANKERS TRUST COMPANY,
as Trustee and as Collateral Trustee
on behalf of the Holders
of the AFG MASTER TRUST
POOLING AND SERVICING AGREEMENT AND INDENTURE OF TRUST
Dated as of July 1, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.......................................1
Section 1.1 Definitions.....................................1
Section 1.2 Other Definitional Provisions...................25
ARTICLE II
TRANSFER OF TRUST ASSETS..........................26
Section 2.1 Transfer of Trust Assets........................26
Section 2.2 Acceptance by Trustee; Acknowledgment
by Collateral Trustee..........................30
Section 2.3 Representations and Warranties of
Transferor Relating to Transferor..............31
Section 2.4 Representations and Warranties of
Transferor Relating to the Agreement
and the Included Leases........................33
Section 2.5 Covenants of Transferor.........................36
Section 2.6 Addition of Leases..............................40
Section 2.7 Substitution or Reallocation of Leases..........42
Section 2.8 Removal of Leases...............................44
Section 2.9 Release of Lien on Equipment....................45
Section 2.10 Hedging of Included Leases After the
Related Addition Date..........................46
ARTICLE III
ADMINISTRATION AND SERVICING OF INCLUDED LEASES...46
Section 3.1 Appointment and Acceptance; Duties..............46
Section 3.2 Collection of Payments..........................48
Section 3.3 Servicer Advances...............................50
Section 3.4 Realization Upon Defaulted Lease................51
Section 3.5 Maintenance of Insurance Policies...............51
Section 3.6 Representations and Warranties of
Servicer.......................................52
Section 3.7 Covenants of Servicer...........................53
Section 3.8 Servicing Compensation..........................54
Section 3.9 Payment of Certain Expenses by Servicer.........55
Section 3.10 Monthly Statement; Annual Report................55
Section 3.11 Annual Statement as to Compliance...............55
Section 3.12 Annual Independent Public Accountant's
Servicing Reports..............................56
Section 3.13 Tax Treatment...................................56
Section 3.14 Adjustments.....................................57
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ARTICLE IV
RIGHTS OF NOTEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS...................57
Section 4.1 Rights of Holders...............................57
Section 4.2 Establishment of Accounts.......................58
Section 4.3 Collections and Allocations.....................61
Section 4.4 Determination of the Amortizing Pools...........66
Section 4.5 Interest Rate Hedges............................67
[THE REMAINDER OF ARTICLE IV IS RESERVED AND
SHALL BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]..........................68
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL
BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES].......................69
ARTICLE VI
THE NOTES........................................69
Section 6.1 The Notes and the Transferor Interest...........69
Section 6.2 Authentication of Notes and Transferor
Interest.......................................69
Section 6.3 Registration of Transfer and Exchange
of Notes.......................................69
Section 6.4 Mutilated, Destroyed, Lost or Stolen
Notes..........................................71
Section 6.5 Persons Deemed Owners...........................71
Section 6.6 Appointment of Paying Agent.....................72
Section 6.7 Access to List of Holders' Names and
Addresses......................................72
Section 6.8 Authenticating Agent............................73
Section 6.9 Book-Entry Notes................................74
Section 6.10 Notices to Clearing Agent.......................75
Section 6.11 Definitive Notes Initially Issued as
Book-Entry Notes...............................75
Section 6.12 Exchange of Transferor Interest.................76
Section 6.13 Note Transfer Restrictions......................78
Section 6.14 Constituent Transferor Interests................79
ARTICLE VII
OTHER MATTERS RELATING TO TRANSFEROR.............80
Section 7.1 Liability of Transferor.........................80
Section 7.2 Merger or Consolidation of, or
Assumption of the Obligations of,
Transferor, etc................................80
Section 7.3 Limitation on Liability of Transferor...........81
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Section 7.4 Liabilities.....................................81
Section 7.5 Decisions with Respect to the Trust.............82
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER...........82
Section 8.1 Liability of the Servicer.......................82
Section 8.2 Merger or Consolidation of, or
Assumption of the Obligations of,
the Servicer...................................82
Section 8.3 Limitation on Liability of the Servicer
and Others.....................................83
Section 8.4 Indemnification of the Trust, the
Trustee and the Collateral Trustee.............83
Section 8.5 The Servicer Not to Resign......................84
Section 8.6 Access to Certain Documentation and
Information Regarding the Included
Leases.........................................84
Section 8.7 Delegation of Duties............................85
Section 8.8 Contents of Records.............................85
ARTICLE IX
PAY OUT EVENTS ..................................85
Section 9.1 Pay Out Events..................................85
Section 9.2 Additional Rights Upon the Occurrence
of Certain Events..............................87
ARTICLE X
SERVICER DEFAULTS................................88
Section 10.1 Servicer Defaults...............................88
Section 10.2 Trustee to Act; Appointment of
Successor......................................90
Section 10.3 Notification to Holders.........................92
Section 10.4 Waiver of Past Defaults.........................92
ARTICLE XI
THE TRUSTEE AND THE COLLATERAL TRUSTEE...........92
Section 11.1 Duties of Trustee...............................92
Section 11.2 Certain Matters Affecting the Trustee...........95
Section 11.3 Trustee Not Liable for Recitals in
Notes..........................................96
Section 11.4 Trustee May Own Notes...........................97
Section 11.5 Servicer to Pay Trustee's Fees and
Expenses.......................................97
Section 11.6 Eligibility Requirements for Trustee............98
Section 11.7 Resignation or Removal of Trustee...............98
Section 11.8 Successor Trustee...............................99
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<PAGE>
Section 11.9 Merger or Consolidation of Trustee..........................99
Section 11.10 Appointment of Co-Trustee or Separate
Trustee....................................................99
Section 11.11 Tax Returns.................................................101
Section 11.12 Trustee May Enforce Claims Without
Possession of Notes........................................101
Section 11.13 Suits for Enforcement.......................................102
Section 11.14 Rights of Holders to Direct Trustee.........................102
Section 11.15 Representations and Warranties of
Trustee....................................................102
Section 11.16 Maintenance of Office or Agency.............................103
Section 11.17 Release of Collateral Trustee's Lien........................103
Section 11.18 Requests for Agreement......................................103
Section 11.19 Duties of Collateral Trustee................................103
Section 11.20 Certain Matters Affecting the
Collateral Trustee.........................................105
Section 11.21 Collateral Trustee Not Liable for
Recitals in Notes..........................................106
Section 11.22 Collateral Trustee May Own Notes............................107
Section 11.23 Servicer to Pay Collateral Trustee's
Fees and Expenses..........................................107
Section 11.24 Eligibility Requirements for Collateral
Trustee....................................................108
Section 11.25 Resignation or Removal of Collateral
Trustee....................................................108
Section 11.26 Successor Collateral Trustee................................109
Section 11.27 Merger or Consolidation of Collateral
Trustee....................................................109
Section 11.28 Appointment of Co-Collateral Trustee or
Separate Collateral Trustee................................110
Section 11.29 Collateral Trustee May Enforce Claims
Without Possession of Notes................................111
Section 11.30 Suits for Enforcement.......................................111
Section 11.31 Rights of Holders to Direct Collateral
Trustee....................................................112
Section 11.32 Representations and Warranties of
Collateral Trustee.........................................112
Section 11.33 Limitation of Liability.....................................112
ARTICLE XII
TERMINATION......................................113
Section 12.1 Termination of Trust............................113
Section 12.2 Optional Purchase and Final Trust
Termination Date of Notes......................114
Section 12.3 Final Distributions.............................115
Section 12.4 Termination Rights of the Holder of
the Transferor Interest........................116
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<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS.........................116
Section 13.1 Amendment...................................................116
Section 13.2 Protection of Right, Title and Interest
to Trust...................................................118
Section 13.3 Limitation on Rights of Holders.............................119
SECTION 13.4 GOVERNING LAW...............................................120
Section 13.5 Notices.....................................................120
Section 13.6 Severability of Provisions..................................121
Section 13.7 Rule 144A Information.......................................121
Section 13.8 Notes Nonassessable and Fully Paid..........................121
Section 13.9 Further Assurances..........................................121
Section 13.10 No Waiver: Cumulative Remedies..............................121
Section 13.11 Counterparts................................................121
Section 13.12 Third-Party Beneficiaries...................................122
Section 13.13 Actions by Holders..........................................122
Section 13.14 Merger and Integration......................................122
Section 13.15 No Bankruptcy Petition......................................123
Section 13.16 Headings....................................................123
v
<PAGE>
EXHIBITS
Exhibit A: Form of Custodian Agreement
Exhibit B: Form of Transfer Agreement of Additional Leases
Exhibit C: Form of Opinion of Counsel with Respect to
Additional Leases
Exhibit D: Form of Retransfer Agreement
Exhibit E: Form of Lockbox Agreement
Exhibit F: Form of Monthly Servicer's Certificate
Exhibit G: Form of Annual Independent Auditors' Report
Exhibit H: Form of Monthly Payment Instructions and
Notification
Exhibit I: Form of Opinion with Respect to Amendments
Exhibit J: Form of Annual Opinion of Counsel
SCHEDULES
Schedule 1 List of Leases
Schedule 2 List of Lockboxes
Schedule 3 Portfolio Parameters
Schedule 4 Identification of Accounts
vi
<PAGE>
POOLING AND SERVICING AGREEMENT AND INDENTURE OF TRUST, dated
as of July 1, 1995, among AFG CREDIT CORPORATION, a Delaware corporation, as
Transferor, AMERICAN FINANCE GROUP, INC., a Delaware corporation ("AFG"), as
Servicer, and BANKERS TRUST COMPANY, a banking corporation organized and
existing under the laws of the State of New York, as Trustee (in such capacity,
the "Trustee") and as Collateral Trustee (in such capacity, the "Collateral
Trustee").
In consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties and for the
benefit of the Noteholders and the Holder of the Transferor Interest:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Whenever used in this
Agreement, the following words and phrases shall have the
following meanings:
"Accelerated Funding Requirement" shall mean, with respect to
any Series, the obligation to prepay the Principal Amount of such
Series to the extent specified in the related Supplement.
"Accelerated Payment Event" shall have for any Series the
meaning, if any, specified in the related Supplement.
"Accrual Period" shall mean the period from and including a
Distribution Date (or in the case of the initial Accrual Period, the
Initial Closing Date) to but excluding the succeeding Distribution
Date.
"Accumulating Series" shall mean, as of a date of
determination, each Series that is then in its Accumulation Period.
"Accumulation Period" shall mean, with respect to any Series,
the period, if any, specified as such in the related Supplement.
"Addition Date" shall mean, with respect to any Additional
Leases, the date on which such Additional Leases are transferred to the
Trust pursuant to Section 2.6.
"Additional Cut Off Date" shall mean each date as of which an
Additional Lease is to be transferred to the Trust, as specified in the
related Assignment.
vii
<PAGE>
"Additional Leases" shall mean the Leases transferred to the
Trust after the Initial Closing Date.
"Additional Selection Criteria" shall have for any Series the
meaning, if any, specified in the related Supplement.
"Adjusted Principal Amount" shall mean on any date of
determination, with respect to any Series, the excess, if any, of the
Principal Amount for such Series over the amount on deposit in the
related Distribution Account for application to reduce the Note
Principal Amount thereof, in each case on such date of determination.
"Advance Payment" means, with respect to any Lease and any
Monthly Period, any Scheduled Payment (or portion thereof) which is due
in a subsequent Monthly Period which the Servicer has received, and
expressly permitted the related Lessee to make, in advance of its
scheduled due date and which will be applied to such Scheduled Payment
on such due date.
"Affiliate" of any specified Person, shall mean any other
Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For
purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Aggregate Adjusted Principal Amount" shall mean, as of any
date of determination, the sum of the Adjusted Principal Amounts of all
Series issued and outstanding on such date of determination.
"Aggregate Net Pool Balance" means, on any date of
determination, the product of (i) the excess of (A) the Aggregate Pool
Balance over (B) the sum of the Excess Concentration Amounts, in each
case as of such date of determination, and (ii) prior to the Crossover
Date, 80% and thereafter, 100%.
"Aggregate Pool Balance" means, on any date of determination,
the sum of the Discounted Lease Balances of all Included Leases on such
date. For purposes of calculating such sum on any date other than the
last day of a Monthly Period, the Discounted Lease Balance of any
Included Lease shall be as of the last day of the preceding Monthly
Period or, with respect to any Lease transferred to the Trust after
such last day, the Discounted Lease Balance on the Cut Off Date for
such Lease.
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<PAGE>
"Aggregate Principal Amount" shall mean, as of any date of
determination, the sum of the Principal Amounts of all Series issued
and outstanding on such date of determination.
"Aggregate Principal Percentage" shall mean, as of any date of
determination, the percentage equivalent of a fraction the numerator of
which is the Aggregate Adjusted Principal Amount and the denominator of
which is the Aggregate Net Pool Balance in each case on such date of
determination; provided, however, that the Aggregate Principal
Percentage shall not exceed 100%.
"Agreement" shall mean this Pooling and Servicing Agreement
and Indenture of Trust and all amendments hereof and supplements
hereto, including any Supplement.
"Amortization Commencement Date" shall mean, with respect to
any Series, the first day to occur after the last day of the Revolving
Period for such Series.
"Amortization Period" shall mean, with respect to any Series,
the period, if any, specified as such in the related Supplement.
"Amortizing Pool" shall mean with respect to each Series that
is then in its Amortization Period or Accumulation Period, the Included
Leases (or portions thereof) that have been allocated to such Series
pursuant to Section 4.4 for the purposes of making the calculations
referred to therein.
"Amortizing Series" shall mean each Series in its Amortization
Period as of a date of determination.
"Applicable Discount Rate" shall mean (i) with respect to each
Included Lease that is a Hedged Lease, the sum of (w) the effective per
annum interest rate implicit in the Interest Rate Hedge applicable
thereto, (x) the Servicing Fee Percentage, (y) the Weighted Average
Applicable Margin, and (z) the Weighted Average Applicable Additional
Fees, and (ii) with respect to each Included Lease that is not a Hedged
Lease, a rate per annum equal to the sum of (w) the yield (determined
by the Servicer on the third Business Day prior to the Closing Date or
Addition Date for such Lease, as the case may be) for actively traded
U.S. Treasury securities having a constant maturity equal to the then-
remaining weighted average life to maturity of such Lease (or, if there
is no such security, such yield shall be obtained by interpolation of
such securities having a constant maturity closest to such average
life), (x) 1.60%, (y) the Servicing Fee Percentage and (z) the Weighted
Average Applicable Additional Fees.
ix
<PAGE>
"Applicable Margin" shall mean, with respect to each Series,
or each Class within a Series, that bears interest at a floating rate,
the margin over such rate specified for such Series or Class in the
related Supplement.
"Applicants" shall have the meaning specified in Section 6.7.
"Asset Base" shall mean as of any date of determination the
sum of (i) the amount on deposit in the Excess Funding Account on such
day and (ii) the Aggregate Net Pool Balance on such day.
"Asset Purchase Agreement" shall mean the Asset Purchase
Agreement, dated as of July 1, 1995, between the Transferor and AFG, as
amended from time to time.
"Authorized Newspaper" shall mean The New York Times or the
Wall Street Journal.
"Available Amount" shall mean, in respect of any Distribution
Date, the sum of (i) all amounts on deposit in the Collection Account
on the immediately preceding Determination Date other than amounts
representing Advance Payments due in a Monthly Period commencing after
the last day of the preceding Monthly Period or that were received by
the Servicer after the last day of the preceding Monthly Period, (ii)
any investment earnings credited to the Collection Account, the Excess
Funding Account or the Tax Escrow Account during the preceding Monthly
Period pursuant to the terms of this Agreement or any Supplement, (iii)
any amount to be received from a Hedging Counterparty on or prior to
the Transfer Date preceding such Distribution Date in respect of the
Accrual Period ending on such Distribution Date, and (iv) any other
amounts received in respect of an Enhancement.
"Available Excess Funding Amount" shall mean as of any date of
determination the lesser of (i) the amount on deposit in the Excess
Funding Account on such day and (ii) an amount that would not, after
giving effect to the application thereof, cause the Asset Base to be
less than the Aggregate Adjusted Principal Amount.
"Book-Entry Notes" shall mean entries evidencing a beneficial
interest in any Notes, ownership and transfers of which shall be made
through book entries by a Clearing Agency as described in Section 6.9,
provided, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive Notes
are to be issued to the Note Owners, such Notes shall no longer be
"Book-Entry Notes".
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"Business Day" shall mean each day which is neither a
Saturday, a Sunday nor any other day on which banking institutions in
Boston, Massachusetts, New York, New York, San Francisco, California
(or, with respect to any Series, any additional city specified in the
related Supplement) are authorized or obligated by law or required by
executive order to be closed.
"Casualty Loss" means, with respect to any item of Equipment,
the loss, theft, damage beyond repair or governmental condemnation or
seizure of such item of Equipment.
"Casualty Payment" means any payment pursuant to the terms of
a Lease in connection with a Casualty Loss.
"Class" shall mean, with respect to any Series, any one or
more of the classes of Notes of such Series as specified in the related
Supplement.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange
Act of 1934, as amended.
"Clearing Agency Participant" shall mean a broker, dealer,
bank, other financial institution or other Person for whom from time to
time a Clearing Agency effects book-entry transfers and pledges of
securities deposited with the Clearing Agency.
"Closing Date" shall mean, with respect to any Series, the
date specified as such in the related Supplement.
"Collateral Trustee" shall mean the institution executing this
Agreement as Collateral Trustee, or its successor in interest, or any
successor collateral trustee appointed as herein provided.
"Collection Account" shall have the meaning specified in
subsection 4.2(a).
"Collections" means all payments received on or with respect
to the Included Leases or the related Equipment, including, without
limitation, Scheduled Payments, Advance Payments, Liquidation Proceeds,
amounts received in respect of Warranty Purchase Prices, Insurance
Proceeds, Early Termination Lease Proceeds and Expired Lease Proceeds,
all as related to amounts attributable to the Equipment and the
Included Leases, but excluding any Excluded Amounts.
"Corporate Trust Office" shall mean the principal office of
the Trustee at which at any particular time its corporate trust
business shall be administered, which office
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<PAGE>
at the date of the execution of this Agreement is located at Four
Albany Street, New York, New York 10006.
"Credit Guidelines" shall mean the Transferor's and AFG's
Standard Credit Underwriting Guidelines as in effect from time to time.
"Crossover Date" shall mean the first Distribution Date to
occur after the Initial Closing Date on which the Aggregate Net Pool
Balance equals or exceeds $30,000,000.
"Custodian" shall mean initially the party that is designated
as the custodian under the Custodian Agreement and its permitted
successors and assigns, and thereafter any Person appointed as
successor Custodian as therein provided.
"Custodian Agreement" shall have the meaning specified in
Section 2.2(b).
"Cut Off Date" shall mean with respect to each Original Lease,
the date established as such by the Servicer, and with respect to each
Additional Lease, the related Additional Cut Off Date.
"Date of Processing" shall mean, with respect to any
transaction, the date on which such transaction is first recorded on
the Servicer's computer master file of Leases (without regard to the
effective date of such recordation).
"Debtor Relief Laws" shall mean the Bankruptcy Code of the
United States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, or similar debtor
relief laws from time to time in effect affecting the rights of
creditors generally.
"Default Amount" shall mean, for any Monthly Period, an amount
(which shall not be less than zero) equal to the Discounted Lease
Balance for each Included Lease that became a Defaulted Lease during
such Monthly Period.
"Defaulted Lease" means an Included Lease as to which (i) the
Servicer has determined in its sole discretion, in accordance with its
customary servicing procedures, that such Lease is not collectible, or
(ii) all or part of a Scheduled Payment thereunder is more than 90 days
delinquent.
"Definitive Notes" shall have the meaning specified in
Section 6.9.
"Delinquent Lease" shall mean, on any date of determination,
each Included Lease with respect to which any
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<PAGE>
Scheduled Payment or portion thereof is more than 60 days delinquent as
of such date of determination.
"Depository Agreement" shall mean, with respect to any Series,
the agreement (if any) among the Transferor, the Trustee and the
initial Clearing Agency (if any) with respect to such Series.
"Determination Date" shall mean with respect to any Monthly
Period, the tenth day of the succeeding calendar month or, if such
tenth day is not a Business Day, the next succeeding Business Day.
"Discounted Lease and Residual Balance" means, with respect to
any Included Lease, at any time of determination, the sum of (i) the
Discounted Lease Balance plus (ii) the Equipment Residual Value for the
related Equipment.
"Discounted Lease Balance" means, with respect to any Included
Lease, at any time of determination, the sum of (i) the present value
of all of the remaining Scheduled Payments becoming due under such
Lease after such date of determination (not to exceed the Stipulated
Loss Value thereunder), discounted monthly at the Applicable Discount
Rate in the manner described below and (ii) the aggregate amount of all
Scheduled Payments (due after the applicable Cut Off Date) then due and
payable under such Lease which have not been received by the Servicer;
provided, however, that for purposes of computing the Aggregate Pool
Balance, the Discounted Lease Balance of any Defaulted Lease,
Ineligible Lease, Early Termination Lease or Expired Lease or Removed
Lease shall be equal to zero.
In connection with all calculations required to be made
pursuant to this Agreement with respect to the determination of
Discounted Lease Balances, for any date of determination the
"Discounted Lease Balance" for each Lease shall be calculated assuming:
(i) all payments due in any Monthly Period are due
on the last day of such Monthly Period;
(ii) payments are discounted on a monthly basis using
a 30 day month and a 360 day year;
(iii) payments are discounted to the last day of the
Monthly Period in which the date of determination falls; and
(iv) all security deposits are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
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"Distribution Account" shall have the meaning specified in any
applicable Supplement.
"Distribution Date" shall mean the fifteenth day of each month
or, if such fifteenth day is not a Business Day, the next succeeding
Business Day.
"Early Termination Lease" means any Lease that has terminated
prior to its scheduled expiration date (including because of a Casualty
Loss), other than a Defaulted Lease.
"Early Termination Lease Proceeds" means any and all cash
proceeds or rents realized from the sale or re-lease of Equipment under
an Early Termination Lease (net of Liquidation Expenses).
"Eligible Deposit Account" shall mean either (a) a segregated
account with a Qualified Institution or (b) a segregated trust account
with the corporate trust department of a depository institution
organized under the laws of the United States or any one of the states
thereof, including the District of Columbia (or any domestic branch of
a foreign bank), and acting as a trustee for funds deposited in such
account, so long as any of the securities of such depository
institution shall have a credit rating from each Rating Agency in one
of its short-term credit rating categories which signifies investment
grade.
"Eligible Equipment" shall mean any item of Equipment other
than commercial jet aircraft designed to carry more than 50 passengers
or self-powered ocean-going vessels.
"Eligible Lease" shall mean at any date of determination, each
Lease:
(a) which is payable in United States dollars;
(b) the Lessee in respect of which is an Eligible
Lessee and with respect to which the related Equipment is
Eligible Equipment;
(c) which is not a Defaulted Lease as of the related
Cut Off Date, and with respect to which, as of such date no
Scheduled Payment was more than 60 days past due;
(d) which was originated or acquired by the
Transferor in accordance with the Credit Guidelines;
(e) which was created in compliance, in all material
respects, with all Requirements of Law and which complies, in
all material respects, with all Requirements of Law;
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(f) with respect to which all material consents,
licenses, approvals or authorizations of, or registrations or
declarations with, any Governmental Authority required to be
obtained, effected or given by the Originator thereof or the
Transferor in connection with the creation of such Lease or
the execution, delivery and performance by such Originator or
the Transferor of its obligations under the Lease, have been
duly obtained, effected or given and are in full force and
effect;
(g) as to which and as to the related Equipment,
immediately prior to the transfer of same to the Trust by the
Transferor, the Transferor had good title thereto free and
clear of all Liens arising under or through the Originator
thereof, the Transferor or their respective Affiliates (other
than Permitted Liens and except for the interest of the Lessee
in the related Equipment pursuant to such Lease) and as to
which immediately after the transfer of same to the Trust by
the Transferor, the Trust will have good title thereto free
and clear of all Liens arising under or through the Originator
thereof, the Transferor or their respective Affiliates (other
than Permitted Liens and except for the interest of the Lessee
in the related Equipment pursuant to such Lease);
(h) which is the legal, valid and binding payment
obligation of the Lessee with respect thereto, enforceable
against such Lessee in accordance with its terms, except as
such enforceability may be limited by applicable Debtor Relief
Laws, and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at
law or in equity);
(i) which constitutes an "account," a "general
intangible" or "chattel paper" under and as defined in Article
9 of the UCC as then in effect in the State of California;
(j) no provision of which, at the time of transfer to
the Trust, has been waived, altered or otherwise modified
except by an instrument or document contained in the related
Lease File;
(k) which obligates the Lessee to maintain the
related Equipment in good working order, to bear all costs of
operating such Equipment (including taxes and insurance) and
unconditionally, and without set-off or deduction, to make all
payments thereunder, free and clear of any taxes, including
without limitation withholding taxes, and, without limiting
the foregoing,
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contains provisions requiring the Lessee to assume all
risk of loss or malfunction of the related Equipment;
(l) which provides to the lessor the option, upon a
Casualty Loss, to do one or more of the following: (i) at the
Lessee's expense to repair the Equipment, (ii) to replace the
Equipment with similar Equipment of equal or greater value or
(iii) to require that the Lessee pay to the lessor the
Stipulated Loss Value;
(m) which obligates the Lessee to make Scheduled
Payments thereunder no less frequently than once every six
months and provides that the lessor may accelerate all
remaining Scheduled Payments upon default (and the expiration
of any applicable grace period) by the Lessee thereunder;
(n) which, as of the related Cut Off Date, had a
lease term of not less than 6 months and of not more than 72
months;
(o) which, as of the applicable Cut Off Date and
after giving effect to its transfer to the Trust, did not
cause any of the Portfolio Parameters to be untrue;
(p) which are not and will not be subject to any
claim of rescission, set-off, counterclaim or any other
defense of the Lessee, other than defenses arising out of
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors'
rights in general; and
(q) as to which, at the time of transfer to the
Trust, the related vendor has been paid in full, and each of
the Transferor and the Originator has satisfied all its
obligations required to be satisfied by such time.
"Eligible Lessee" shall mean at any date of determination, a
Lessee (i) that has provided a billing address for the related Lease in
the United States of America, (ii) that is organized under the laws of
the United States of America or any State thereof, or that is organized
under the laws of Canada or any province thereof, or (iii) with respect
to which the Rating Agency Condition has been satisfied. For purposes
of this definition, any Lessee the obligations of which under the
related Lease are fully and unconditionally guaranteed by an entity
that would be an Eligible Lessee under the preceding sentence, shall be
deemed to be an Eligible Lessee.
"Enhancement" shall mean, with respect to any Series, the cash
collateral account, letter of credit, guaranteed rate agreement,
maturity guaranty facility, tax protection
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agreement, interest rate swap or any other contract, arrangement or
agreement for the benefit of the Noteholders of such Series (or
Noteholders of a Class within such Series), as designated in the
applicable Supplement.
"Enhancement Provider" shall mean, with respect to any Series,
the Person, if any, designated as such in the related Supplement.
"Equipment" means the assets (including office or other
equipment) leased to a Lessee pursuant to a Lease and/or, unless the
context otherwise requires, a security interest in such assets.
"Equipment Excess Concentration Amount" shall have the meaning
specified in Schedule 3.
"Equipment Residual Value" means the anticipated residual
value of the Equipment related to a Lease upon the expiration of such
Lease in accordance with its terms (as such residual value is estimated
by the Servicer on or about the date on which such Lease was created in
accordance with its normal valuation procedures), but not in excess of
any purchase option price with respect thereto set forth in such Lease.
"Excess Concentration Amount" shall mean as of any date of
determination, the sum of the Individual Lessee Excess Concentration
Amount, the Industry Excess Concentration Amount, the Semi-Annual Lease
Excess Concentration Amount and the Equipment Excess Concentration
Amount, in each case
as of such date of determination.
"Excess Funding Account" shall have the meaning
specified in subsection 4.2(b).
"Exchange" shall have the meaning specified in
subsection 6.12(b).
"Exchange Date" shall have the meaning specified in
subsection 6.12(b).
"Exchange Notice" shall have the meaning specified in
subsection 6.12(b).
"Excluded Amounts" means any Tax Collections and any payments
received from a Lessee in connection with any insurance premiums or
fees, any indemnity payments made by a Lessee for the benefit of the
lessor under the related Lease or any payments collected from a Lessee
relating to servicing and/or maintenance payments pursuant to the
related Lease or maintenance agreement, as applicable.
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"Expired Lease" means any Lease that has terminated on
its scheduled expiration date.
"Expired Lease Proceeds" means any and all cash proceeds or
rents realized from the sale or re-lease of Equipment under an Expired
Lease (net of Liquidation Expenses).
"FDIC" shall mean the Federal Deposit Insurance
Corporation, or any successor thereto.
"Filing Locations" means the States of California and
Massachusetts.
"Final Trust Termination Date" shall mean December 31,
2015.
"Floating Pool" shall mean on any date of determination, all
Included Leases (or portions thereof) on such date other than Included
Leases (or portions thereof) allocated to an Amortizing Pool as of such
date.
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hedge Termination Payment" shall mean with respect to any
Hedged Lease that becomes an Early Termination Lease and for which a
Substitute Lease is not provided, the amount, if any, owing to the
related Hedge Counterparty in respect of the corresponding early
termination of the related Interest Rate Hedge.
"Hedged Lease" shall mean on any date of determination each
Included Lease that is the subject of an Interest Rate Hedge on such
date of determination.
"Hedging Counterparty" shall mean initially, First Union
National Bank of North Carolina in its capacity as obligor under the
Interest Rate Hedge, and any other Person that provides an Interest
Rate Hedge as provided in Section 4.5(a) or if any Replacement Interest
Rate Hedge or Qualified Substitute Arrangement is obtained pursuant to
Section 4.5(b), any obligor with respect to such Replacement Interest
Rate Hedge or Qualified Substitute Arrangement.
"Highest Required Investment Category" shall mean (i) with
respect to ratings assigned by Standard & Poor's, A-1+ for short-term
instruments and AAA for long-term instruments and (ii) with respect to
ratings assigned by Moody's, A-2 or P-1 for one month instruments, A-1
or P-1 for three month
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instruments, AA3 or P-1 for six month instruments and AAA or P-1 for
instruments with a term in excess of six months.
"Holder" shall mean the Person in whose name a Note or the
Transferor Interest is registered in the Register.
"Included Lease" shall mean each Original Lease and each
Additional Lease, but shall exclude any Removed Lease after the Removal
Date with respect thereto.
"Indebtedness" shall mean, with respect to any Person at any
date, (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than current
liabilities incurred in the ordinary course of business and payable in
accordance with customary trade practices) or which is evidenced by a
note, bond, debenture or similar instrument, (b) all obligations of
such Person under capital leases, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person
and (d) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Individual Lessee Excess Concentration Amount" shall have the
meaning specified in Schedule 3.
"Industry Excess Concentration Amount" shall have the meaning
specified in Schedule 3.
"Ineligible Lease" shall have the meaning specified in
subsection 2.4(d).
"Initial Closing Date" shall mean the date on which the
initial Series is issued.
"Initial Principal Amount" with respect to any Series, shall
have the meaning specified in the related Supplement.
"Insolvency Event" means, with respect to a specified Person,
(a) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of such Person or any
substantial part of its property in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such
Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary
case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by
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such Person to the entry of an order for relief in an involuntary case
under any such law, or the consent by such Person to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any
general assignment for the benefit of creditors, or the failure by such
Person generally to pay its debts as such debts become due, or the
taking of action by such Person in furtherance of any of the foregoing.
"Insurance Policy" means, with respect to any Lease, an
insurance policy covering physical damage to or loss of the related
Equipment.
"Insurance Proceeds" means, depending on the context, any
amounts payable or any payments made, to the Servicer under any
Insurance Policy.
"Interest Rate Hedge" shall mean the master agreement between
the Trustee on behalf of the Trust and the initial Hedging
Counterparty, and any other similar agreement executed by the Trust and
delivered pursuant to Section 4.5(a), in each case as supplemented from
time to time by the Trustee on behalf of the Trust and the relevant
Hedging Counterparty, or any Replacement Interest Rate Hedge or
Qualified Substitute Arrangement.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Lease" shall mean each agreement, including, as applicable,
schedules, subschedules, supplements and amendments to a master lease,
pursuant to which the Originator, as lessor, leases specified assets to
a Lessee at a specified monthly or quarterly rental.
"Lease Files" shall mean, with respect to each Included Lease,
the fully executed original counterpart (for UCC purposes) of the
Lease, the original certificate of title or other title document with
respect to the related Equipment (if applicable), and otherwise such
documents, if any, that the Servicer keeps on file in accordance with
its customary procedures, evidencing ownership of such Equipment.
"Lessee" means, with respect to any Lease, the Person or
Persons obligated to make payments with respect to such Lease,
including any guarantor thereof.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), equity interest, participation interest,
preference, priority or other security agreement or preferential
arrangement of any kind or nature
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whatsoever, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing;
provided, however, that any assignment pursuant to Section 7.2 shall
not be deemed to constitute a Lien.
"Liquidation Expenses" means, with respect to any Lease, the
aggregate amount of all out-of-pocket expenses reasonably incurred by
the Servicer (including amounts paid to any subservicer) and any
reasonably allocated costs of internal counsel, in each case in
accordance with the Servicer's customary procedures in connection with
the repossession, refurbishing and disposition of any related Equipment
upon or after the expiration or earlier termination of such Lease and
other out-of-pocket costs related to the liquidation of any such
Equipment, including the attempted collection of any amount owing
pursuant to such Lease if it is a Defaulted Lease.
"Liquidation Proceeds" means, with respect to a Defaulted
Lease, proceeds from the sale or re-lease of the Equipment, proceeds of
the related Insurance Policy and any other recoveries with respect to
such Defaulted Lease and the related Equipment, net of Liquidation
Expenses and amounts, if any, so received that are required to be
refunded to the Lessee on such Lease.
"Lockbox" shall mean the post office boxes listed on Schedule
2 to which the Lessees are instructed to remit payments on the Included
Leases and/or such other post office boxes as may be established
pursuant to subsection 3.2(f).
"Lockbox Account" shall mean the intervening account used by a
Lockbox Processor for deposit of funds received in a Lockbox prior to
their transfer to the Collection Account.
"Lockbox Agreement" shall have the meaning specified in
Section 3.2(f).
"Lockbox Processor" shall mean the depositary institution or
processing company (which may be the Trustee) which processes payments
on the Leases sent by the Lessees thereon forwarded to a Lockbox.
"Monthly Period" shall mean a calendar month.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.8.
"Monthly Statement" shall have the meaning specified in
Section 3.10.
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"Moody's" shall mean Moody's Investors Service, Inc., or any
successor thereto.
"Note" shall mean any one of the notes of any Series executed
by the Trust and authenticated by the Trustee substantially in the form
(or forms, in the case of a Series with multiple Classes) of the notes
attached to the related Supplement.
"Note Interest" shall mean interest payable in respect of the
Notes of any Series pursuant to Article IV as set forth in the
Supplement related to such Series.
"Note Owner" shall mean, with respect to a Book-Entry Note,
the Person who is the owner of such Book-Entry Note, as reflected on
the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an
indirect participant, in accordance with the rules of such Clearing
Agency).
"Note Principal" shall mean principal payable in respect of
the Notes of any Series pursuant to Article IV as set forth in the
Supplement related to such Series.
"Note Rate" shall mean, with respect to any Series of Notes
(or, for any Series with more than one Class, for each Class of such
Series), the rate (or formula on the basis of which such rate shall be
determined) per annum stated for such Series in the related Supplement,
which rate shall be calculated in each case on the basis set forth in
the related Supplement.
"Noteholder" shall mean the Person in whose name a Note
is registered in the Register.
"Notice Date" shall have the meaning specified in Section
2.6(b).
"Officer's Certificate" shall mean a certificate signed by any
officer of Transferor or the Servicer and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel,
who may be counsel (including internal counsel) for the Transferor or
the Servicer, which counsel shall be reasonably acceptable to the
Trustee.
"Optional Repurchase Percentage" shall have, with respect to
any Series, the meaning specified in the related Supplement.
"Original Lease" shall mean each Lease identified by account
number and Lease Balance in a computer file or list
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delivered to the Trustee by the Transferor on or prior to the Initial
Closing Date pursuant to Section 2.1.
"Originator" shall mean, with respect to each Lease, the party
that is the original lessor thereunder.
"Paying Agent" shall mean any paying agent appointed pursuant
to Section 6.6 and shall initially be the Trustee.
"Pay Out Commencement Date" shall mean, with respect to each
Series, (a) the date on which a Trust Pay Out Event is deemed to occur
pursuant to Section 9.1, or (b) the date on which a Series Pay Out
Event is deemed to occur pursuant to the Supplement for such Series.
"Pay Out Event" shall mean either a Trust Pay Out Event or a
Series Pay Out Event.
"Pay Out Event Series Share" shall mean, with respect to any
allocation or payment following the occurrence of a Pay Out Event and
any particular Series, the lesser of (i) the percentage equivalent of a
fraction, the numerator of which is the Adjusted Principal Amount of
such Series as of the first day of the Pay Out Event and the
denominator of which is the Aggregate Adjusted Principal Amount, as of
such first day and (ii) the remaining unpaid Adjusted Principal Amount
of such Series.
"Permitted Investments" shall mean negotiable instruments or
securities or other investments (a) which, except in the case of demand
or time deposits, investments in money market funds and Repurchase
Obligations, are represented by instruments in bearer or registered
form or ownership of which is represented by book entries by a Clearing
Agency or by a Federal Reserve Bank in favor of depository institutions
eligible to have an account with such Federal Reserve Bank who hold
such investments on behalf of their customers and (b) which evidence:
(i) direct obligations of, and obligations fully
guaranteed as to full and timely payment by, the United States
of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the
United States of America);
(ii) demand deposits, time deposits or certificates
of deposit of depository institutions or trust companies
incorporated under the laws of the United States of America or
any state thereof and subject to supervision and examination
by federal or state banking or depository institution
authorities; provided, however, that at the time of the
Trust's investment or contractual commitment to invest
therein, the commercial paper, if any, and short-term
unsecured debt
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obligations (other than such obligation whose rating is based
on the credit of a Person other than such institution or trust
company) of such depository institution or trust company shall
have a credit rating from the Rating Agency in the Highest
Required Investment Category granted by such Rating Agency;
(iii) commercial paper having, at the time of the
Trust's investment or contractual commitment to invest
therein, a rating in the Highest Required Investment Category
granted by the Rating Agency;
(iv) bankers' acceptances issued by any depository
institution or trust company referred to in (ii) above;
(v) investments in money market funds having, at the
time of the Trust's investment or contractual commitment to
invest therein, a rating of the Highest Required Investment
Category from the Rating Agency;
(vi) time deposits (having maturities of not more
than 90 days) or notes which are payable on demand by an
entity the commercial paper of which has, at the time of the
Trust's investment or contractual commitment to invest
therein, a rating of the Highest Required Investment Category
granted by the Rating Agency; and
(vii) Repurchase Obligations.
"Permitted Liens" shall mean (a) with respect to Included
Leases:
(i) Liens for state, municipal or other local taxes if such
taxes shall not at the time be due and payable or if the
Transferor shall currently be contesting the validity thereof
in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto, and
(ii) Liens in favor of the Trustee created pursuant to this
Agreement;
and (b) with respect to the related Equipment:
(i) Liens for state, municipal or other local taxes if such
taxes shall not at the time be due and payable or if the
Transferor shall currently be contesting the validity thereof
in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto,
(ii) Liens in favor of the Trustee created pursuant to this
Agreement, and (iii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like
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non-consensual Liens arising in the ordinary course of
business.
"Permitted Transaction" shall mean any transaction or series
of related transactions pursuant to which the Transferor finances an
interest in the Trust Assets or the Transferor Interest pursuant to the
transfer of a Note or the Transferor Interest or otherwise and (i) as
to which the Rating Agency Condition is satisfied and (ii) which in the
reasonable judgment of the Transferor as evidenced by an Officer's
Certificate, could not reasonably be expected to have a material
adverse effect on the interests of any of the Noteholders.
"Person" shall mean any legal person, including any
individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental
entity or other entity of similar nature.
"Pool Sale" shall have the meaning specified in Section
12.2(b).
"Portfolio Parameters" shall mean the criteria specified in
Schedule 3.
"Principal Amount" shall have, with respect to any Series, the
meaning specified in the related Supplement.
"Principal Exchange" shall have the meaning specified in
subsection 6.12(b).
"Principal Percentage" shall have, for any Series, the meaning
specified in the related Supplement.
"Principal Terms" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.12(c).
"Publication Date" shall have the meaning specified in
Section 9.2(a).
"Qualified Institution" shall have the meaning specified in
Section 4.2(a).
"Qualified Substitute Arrangement" shall have the meaning
specified in Section 4.5(b).
"Rating Agency" shall mean, with respect to each Series, the
rating agency or agencies, if any, designated as a "Rating Agency" in
the related Supplement.
"Rating Agency Condition" shall mean, with respect to any
action or series of related actions or proposed
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transaction or series of related proposed transactions, that each
Rating Agency shall have notified the Transferor and the Trustee in
writing that such action or series of related actions or the
consummation of such proposed transaction or series of related
transactions will not result in a reduction or withdrawal of the rating
of any outstanding Series or Class with respect to which it is a Rating
Agency.
"Record Date" shall mean with respect to any Series, any date
specified as such in the applicable Supplement.
"Register" shall have the meaning specified in Section 6.3.
"Removal Date" shall have the meaning specified in Section
2.8(a).
"Removal Notice Date" shall have the meaning specified in
Section 2.8(a).
"Removed Leases" shall have the meaning specified in Section
2.8.
"Replacement Interest Rate Hedge" shall mean any interest rate
swap or cap having substantially the same terms and conditions as the
Interest Rate Hedge and otherwise satisfying the conditions set forth
in Section 4.5.
"Replacement Series" shall mean a Series which is
designated as such by the Transferor.
"Repurchase Obligations" shall mean repurchase obligations
with respect to any security that is a direct obligation of, or fully
guaranteed by, the United States of America or any agency or
instrumentality thereof, the obligations of which are backed by the
full faith and credit of the United States of America (collectively,
"Eligible Collateral"), in either case entered into with a depository
institution or trust company (acting as principal) described in clause
(b)(ii) of the definition of Permitted Investments.
"Required Holders" shall have, for any Series, the meaning
specified in the related Supplement.
"Requirements of Law" for any Person shall mean the
certificate of incorporation or articles of association and by-laws or
other organizational or governing documents of such Person, and any
law, treaty, rule or regulation, or order or determination of an
arbitrator or Governmental Authority, in each case applicable to or
binding upon such Person or to which such Person is subject, whether
Federal, state or local (including, without limitation, usury laws,
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the Federal Truth in Lending Act and Regulation Z and Regulation B of
the Board of Governors of the Federal Reserve System).
"Reserve Funding Requirement" shall mean, with respect to any
Series, the obligation to fund a reserve account to the extent
specified in the related Supplement.
"Response" shall have the meaning specified in subsection
9.2(a).
"Responsible Officer" shall mean any Vice President, any
Assistant Vice President, any Assistant Secretary, any Assistant
Treasurer or any other officer of the Trustee with direct
responsibility for the administration of this Agreement and also, with
respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with
the particular subject. The term "Responsible Officer", when used
herein with respect to any Person other than the Trustee, means an
officer or employee of such Person corresponding to any officer or
employee described in the preceding sentence.
"Retransfer Agreement" shall have the meaning specified in
subsection 2.8(b)(ii).
"Retransfer Date" shall have the meaning specified in
subsection 2.4(e).
"Revolving Period" shall have, with respect to any Series, the
meaning specified in the related Supplement.
"Scheduled Interest Payment" means, with respect to any
Included Lease in any Monthly Period, the excess of the Scheduled
Payment over the Scheduled Principal Payment for
such Monthly Period.
"Scheduled Payment" means, with respect to any Included Lease,
the monthly or quarterly or semi-annual rent payment to be made by the
related Lessee under the terms of such Lease after the related Cut Off
Date or Additional Cut Off Date (it being understood that Scheduled
Payments do not include any Excluded Amounts).
"Scheduled Principal Payment" means, with respect to any
Included Lease in any Monthly Period, the excess of the Discounted
Lease Balance on the first day of such Monthly Period over the
Discounted Lease Balance thereof on the first day of the succeeding
Monthly Period.
"Scheduled Termination Date" means, for each Series, its
Scheduled Termination Date as set forth in the related Supplement.
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"Semi-Annual Lease Excess Concentration Amount" shall have the
meaning specified in Schedule 3.
"Series" shall mean any series of Notes, which may include
within any such Series a Class or Classes of Notes subordinate to
another such Class or Classes of Notes.
"Series Account" shall mean, with respect to any Series, any
of the accounts established and designated as such pursuant to the
related Supplement.
"Series Pay Out Event" shall have, with respect to any Series,
the meaning specified in the related Supplement.
"Series Representative" shall mean, with respect to any
Series, the Series Trustee or other representative of the Noteholders
of such Series, if any, appointed as such in the related Supplement.
"Series Sale" shall have the meaning specified in Section
12.2(b).
"Series Share" shall mean, with respect to any allocation or
payment and any particular Series, the percentage equivalent of a
fraction, the numerator of which is the aggregate amount required to be
allocated or paid in respect thereof to such Series and the denominator
of which is the total amount thereof to be allocated or paid to all
Series, in each case without giving effect to any limitation based on
insufficient available funds.
"Series Termination Date" shall mean, with respect to any
Series, the date, if any, specified as such in the related Supplement.
"Series Trustee" shall have, with respect to any Series, the
meaning, if any, specified in the related Supplement.
"Servicer" shall mean initially AFG and its permitted
successors and assigns, and thereafter any Person appointed as
successor as herein provided to service the Trust Assets.
"Servicer Advance" means an advance of Scheduled Payments made
by the Servicer pursuant to Section 3.3.
"Servicer Default" shall have the meaning specified in Section
10.1.
"Servicing Fee Percentage" shall mean .75%.
"Servicing Officer" shall mean any employee of the Servicer
involved in, or responsible for, the administration and servicing of
the Trust Assets whose name appears on a
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list of servicing officers furnished to the Trustee by the Servicer on
the Initial Closing Date, as such list may from time to time be
amended.
"Standard & Poor's" shall mean Standard & Poor's Ratings
Group, a division of McGraw Hill, Inc., or any successor thereto.
"Stipulated Loss Value" shall mean, with respect to any Lease,
the amount payable by the Lessee upon a Casualty Loss in respect of the
related Equipment.
"Substitute Lease" means a Lease that is added to the Trust
pursuant to Section 2.7(a).
"Successor Servicer" shall have the meaning specified in
Section 10.2(a).
"Supplement" shall mean, with respect to any Series, a
supplemental Indenture to this Agreement complying with the terms of
Section 6.12, executed in conjunction with the issuance of any Series
(or, in the case of the issuance of Notes and the book-entry notation
of the Transferor Interest in the Register on the Initial Closing Date,
the supplemental indenture executed in connection with such issuance).
"Target Repayment Amount" shall mean, for each Amortizing
Series in respect of each Monthly Period commencing on and after the
Amortization Commencement Date for such Series, the Target Repayment
Percentage of the excess of (i) the sum of (A) the Scheduled Principal
Payments, (B) Early Termination Lease Proceeds, (C) Warranty Purchase
Price and (D) the Default Amount over (ii) any Unreimbursed Servicer
Advances, in each case in respect of all Included Leases (or portions
thereof) in the related Amortizing Pool for such Monthly Period and
after giving effect to any substitution or reallocation.
"Target Repayment Percentage" with respect to any Series,
shall have the meaning specified in the related Supplement.
"Tax Collections" means all payments received on or with
respect to the Included Leases or the related Equipment that are
Excluded Amounts attributable to any taxes, fees or other charges
imposed by any Governmental Authority.
"Tax Escrow Account" shall have the meaning specified in
Section 4.2(c).
"Tax Opinion" shall mean, with respect to any action, an
opinion of outside counsel to the effect that, for federal income tax
purposes, (i) such action will not
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adversely affect the characterization as debt or as an interest in a
partnership (other than a partnership taxable as a corporation), as the
case may be, of any Notes of any outstanding Series or Class not
retained by the Transferor or any affiliate of the Transferor, (ii)
such action will not cause or constitute a sale, exchange or other
disposition by the Transferor or the Trust of the Trust Assets, or by
the Noteholders of such Noteholders' Notes of any Outstanding Series or
Class and (iii) on each Closing Date, the Notes of the new Series which
are not retained by the Transferor will be characterized as debt or as
an interest in a partnership (other than a partnership taxable as a
corporation).
"Termination Notice" shall have the meaning specified in
Section 10.1.
"Transfer Agent and Registrar" shall have the meaning
specified in Section 6.3(a) and shall initially be the Trustee.
"Transfer Agreement" shall have the meaning specified in
subsection 2.6(b)(iv).
"Transfer Date" shall mean the Business Day immediately
preceding each Distribution Date.
"Transferor" shall mean AFG Credit Corporation, a Delaware
corporation, or any successor thereto.
"Transferor Amount" shall mean, on any date of determination,
the Aggregate Net Pool Balance at the end of the day immediately prior
to such date of determination, minus the Aggregate Adjusted Principal
Amount at the end of such day. The Transferor Amount may be a negative
number.
"Transferor Exchange" shall have the meaning specified
in subsection 6.12(b).
"Transferor Interest" shall mean the interest which represents
the Transferor Amount and which has been evidenced by book-entry
notation in the Register, and is exchangeable as provided in Section
6.12; provided, that at any time there shall be only one Transferor
Interest, which shall not be transferable except as provided in Section
6.3(b).
"Transferor Percentage" shall mean, on any date of
determination, a percentage equal to 100% minus the Aggregate Principal
Percentage calculated on such date; provided, however, that the
Transferor Percentage shall never be less than zero.
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"Trust" shall mean the trust created by this Agreement and
known as the "AFG Master Trust".
"Trust Assets" shall have the meaning specified in Section
2.1.
"Trust Pay Out Event" shall have, with respect to each Series,
the meaning specified in Section 9.1.
"Trust Termination Date" shall have the meaning specified in
subsection 12.1.
"Trustee" shall mean the institution executing this Agreement
as Trustee, or its successor in interest, or any successor trustee
appointed as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified jurisdiction.
"Unreimbursed Servicer Advances" means, at any time, the
amount of all previous Servicer Advances (or portions thereof) as to
which the Servicer has not been reimbursed as of such time pursuant to
Section 4.3(d) and which the Servicer has determined in its sole
discretion will not be recoverable from Collections with respect to the
related Included Leases.
"Variable Funding Series" shall mean any Series designated as
a Variable Funding Series in the related Supplement.
"Warranty Purchase Price" means, with respect to an Included
Lease and date of determination, an amount equal to the Discounted
Lease and Residual Balance as of the preceding Determination Date, plus
one month's interest thereon at the Applicable Discount Rate.
"Weighted Average Applicable Additional Fees" shall mean at
any date of determination the weighted average of any per annum fees
that are identified as "Applicable Additional Fees" in a Supplement for
a particular Series.
"Weighted Average Applicable Margin" shall mean at any date of
determination the weighted average of the Applicable Margins in effect
on such date, as estimated by the Servicer using the weighted average
life of the Included Leases and assuming no prepayments or defaults.
Section 1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement or in any Supplement
shall have the defined meanings when used in any
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certificate or other document made or delivered pursuant hereto or thereto
unless otherwise defined therein.
(b) As used in this Agreement or in any Supplement and in any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in Section 1.1, and accounting terms partially
defined in Section 1.1 to the extent not defined, shall have the meanings given
to them under generally accepted accounting principles. To the extent that the
definitions of accounting terms herein are inconsistent with the meaning of such
terms under generally accepted accounting principles, the definitions contained
herein shall control.
(c) The agreements, representations and warranties of AFG in
this Agreement and in any Supplement in its capacity as Servicer shall be deemed
to be the agreements, representations and warranties of AFG solely in its
capacity as Servicer for so long as it acts in such capacity under this
Agreement.
(d) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement or any Supplement shall refer to this
Agreement or any Supplement as a whole and not to any particular provision of
this Agreement or any Supplement; and Section, subsection, Schedule and Exhibit
references contained in this Agreement or any Supplement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement or any
Supplement unless otherwise specified.
ARTICLE II
TRANSFER OF TRUST ASSETS
Section 2.1 Transfer of Trust Assets. (a) Transfer. The
Transferor does hereby transfer, assign and set-over to the Trust for the
benefit of the Noteholders and the Holder of the Transferor Interest, all right,
title and interest of the Transferor in, to and under the following:
(i) on the Initial Closing Date and as of the related Cut
Off Date, the Original Leases and all monies due or to become due
thereunder after such Cut Off Date and all Collections in respect
thereof;
(ii) on the Addition Date with respect thereto and as of
the related Additional Cut Off Date, the Additional Leases and all
monies due or to become due thereunder after such Additional Cut Off
Date and all Collections in respect thereof;
(iii) the related Equipment;
(iv) the related Lease Files;
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(v) the Asset Purchase Agreement, including, but not
limited to, the obligation of AFG to purchase or repurchase Leases
under certain circumstances as specified therein;
(vi) the Insurance Policies and any Insurance Proceeds
related to the Included Leases;
(vii) the right to any Enhancement with respect to any
Series; and
(viii) all income or proceeds of the foregoing or
relating thereto.
Such property, together with all monies and investments on deposit, from time to
time, in the Collection Account, the Excess Funding Account and the Series
Accounts, shall constitute the assets of the Trust (collectively, the "Trust
Assets"). The foregoing transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in the creation of an assumption by the
Trust, the Trustee or any Noteholder of any obligation of the Transferor, the
Servicer or any other Person in connection with the Included Leases or any
agreement or instrument relating thereto, including, without limitation, any
obligation to any Lessees or insurers, or in connection with the Asset Purchase
Agreement.
(b) Financing Arrangement. The Transferor hereby transfers
the Trust Assets to the Trust with the intent of issuing indebtedness secured by
the Trust Assets.
(c) Grant of Security Interest to Collateral Trustee. The
Trustee hereby grants to the Collateral Trustee for the benefit of the
Noteholders a security interest in all of the Trustee's right, title and
interest in, to and under the Trust Assets to secure the payment of principal
and interest on, and any other amounts owing in respect of, the Notes, and to
secure compliance with the provisions of this Agreement, all as provided in this
Agreement. This Agreement constitutes a security agreement under applicable law.
(d) Perfection of Transfer. In connection with the
transfer, assignment and set-over set forth in Section 2.1(a),
the Transferor agrees as follows:
(i) The Transferor shall record and file, at its own
expense, financing statements (including any continuation statements
with respect to such financing statements when applicable) with respect
to the Included Leases now existing or hereafter transferred to the
Trust meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect the transfer of
the Leases from the Transferor to the Trust and (subject to the
limitations set forth below) to perfect the interest of the Trust in
the related Equipment to the extent the same
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may be viewed as inventory of the Transferor, and to deliver
file-stamped copies of such financing statements or continuation
statements or other evidence of such filings (which may, for purposes
of this Section 2.1, consist of telephone confirmations of such filings
with the file-stamped copy to be provided to the Trustee as soon as
practicable after receipt thereof by the Transferor) to the Trustee on
or prior to the Initial Closing Date, in the case of the Original
Leases, and the applicable Addition Date in the case of Additional
Leases and in the case of any continuation statements filed pursuant to
this Section 2.1(d), as soon as practicable after receipt thereof by
the Transferor. Notwithstanding the foregoing, the Transferor shall
only be obligated to record financing statements with respect to the
Equipment in the Filing Locations.
(ii) The Transferor shall, at its own expense, on or prior
to (x) the Initial Closing Date in the case of the Original Leases, and
(y) the applicable Addition Date, in the case of Additional Leases (A)
indicate in its books and records, including the appropriate computer
files relating to the Leases, that such Leases have been transferred to
the Trust pursuant to this Agreement for the benefit of the Noteholders
and the Holder of the Transferor Interest and stamp the related Lease
Files or otherwise mark such Leases with a legend to the effect that
such Leases have been transferred to the Trust for the benefit of the
Noteholders and the Holder of the Transferor Interest pursuant hereto
and (B) on or prior to the Initial Closing Date with respect to the
Original Leases and on or prior to the related Addition Date with
respect to Additional Leases to deliver to the Trustee a computer file
or microfiche or written list containing a true and complete list of
all Leases then being transferred to the Trust, identified by account
number and by the Discounted Lease Balance as of the related Cut Off
Date. Such file or list, as amended from time to time to reflect
Additional Leases and Removed Leases, shall be marked as Schedule 1 to
this Agreement and is hereby incorporated into and made a part of this
Agreement.
(iii) The Transferor shall, at its own expense, on or prior
to (x) the Initial Closing Date in the case of the Original Leases, and
(y) the applicable Addition Date, in the case of Additional Leases,
deliver to the Custodian the related Lease Files to be held by the
Custodian in accordance with the Custodian Agreement.
(iv) The Transferor shall, at its own expense, on or prior
to (x) the Initial Closing Date in the case of the Original Leases, and
(y) the applicable Addition Date, in the case of Additional Leases,
with respect to any item of related Equipment with respect to which
title thereto or a security interest therein is required to be noted on
a certificate of title or otherwise recorded, to take such
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steps as shall be necessary or appropriate, in the reasonable judgment
of the Servicer, to fully vest all right, title and interest in such
Equipment in the Trustee on behalf of the Trust, provided, that to the
extent UCC or similar filings are required with respect to any item of
related Equipment, the Transferor shall only be obligated to record
such filings in the Filing Locations. The Trustee is hereby authorized
and directed to sign all financing statements under this Section
2.1(d).
(e) Perfection of Security Interest of Collateral Trustee. In
connection with the grant of a security interest by the Trustee to the
Collateral Trustee set forth in Section 2.1(b), the Servicer agrees that it
will, on behalf of the Trustee, record and file, at its own expense, financing
statements (including any continuation statements with respect to such financing
statements when applicable) with respect to the Included Leases now existing or
hereafter transferred to the Trust meeting the requirements of applicable state
law in such manner and in such jurisdictions as are necessary to perfect the
security interest of the Collateral Trustee in the Included Leases, and to
deliver file-stamped copies of such financing statements or continuation
statements or other evidence of such filings (which may, for purposes of this
Section 2.1, consist of telephone confirmations of such filings with the
file-stamped copy to be provided to the Collateral Trustee as soon as
practicable after receipt thereof by the Servicer) to the Collateral Trustee on
or prior to the Initial Closing Date, in the case of the Original Leases, and
the applicable Addition Date in the case of Additional Leases and in the case of
any continuation statements filed pursuant to this Section 2.1(e), as soon as
practicable after receipt thereof by the Servicer. Notwithstanding the
foregoing, the Servicer shall only be obligated to record financing statements
with respect to the Equipment in the Filing Locations.
(f) Grant of Security Interest to Trustee. To the extent that
the Transferor retains or is deemed to retain any interest in the Included
Leases or the related Equipment or any other property included in the Trust
Assets, the Transferor hereby grants to the Trustee, for the benefit of the
Noteholders, a first priority perfected security interest in all of the Trust
Assets to secure a loan in an amount equal to the unpaid principal amount of the
Notes issued hereunder or to be issued hereunder, the interest accruing thereon
at the applicable Note Rates and all of the Transferor's and the Servicer's
other obligations hereunder, and agrees that this Agreement shall constitute a
security agreement under applicable law.
(g) References. The foregoing transfer, assignment, set-over,
conveyance and grant from the Transferor to the Trust shall be made to the
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfer, assignment, set- over and conveyance to the Trust, and each
retransfer,
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reassignment or reconveyance by the Trust, shall be construed
accordingly.
Section 2.2 Acceptance by Trustee; Acknowledgment by
Collateral Trustee.
(a) Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance, on behalf of the Trust, of the Trust Assets, and declares that it
shall maintain such right, title and interest, upon the trust herein set forth
in accordance with the terms of this Agreement, for the benefit of all
Noteholders and the Holder of the Transferor Interest. The Transferor shall
deliver to the Trustee on the Closing Date a certificate certifying that the
computer file or microfiche or written list with respect to the Original Leases
described in Section 2.1(d)(ii) has been provided to the Trustee.
(b) Acknowledgment by Collateral Trustee. The Collateral
Trustee hereby acknowledges its acceptance, on behalf of the Noteholders, of the
grant by the Trustee of a security interest in the Trust Assets.
(c) Custodian Agreement. In connection with the sale, transfer
and assignment of the Included Leases to the Transferor pursuant to the Asset
Purchase Agreement and to the Trust pursuant hereto, the Trustee, on behalf of
the Trust, simultaneously with the execution and delivery of this Agreement,
shall enter into a Custodian Agreement with the Custodian (the "Custodian
Agreement") in a form substantially similar to Exhibit A, pursuant to which the
Trustee, on behalf of the Trust, shall revocably appoint the Custodian, and the
Custodian shall accept such appointment, to act as the agent of the Trustee, on
behalf of the Trust, as custodian of the Lease Files.
(d) Confidentiality. The Trustee hereby agrees not to disclose
to any Person any of the account numbers or other information contained in the
computer files or microfiche or written lists delivered to the Trustee by the
Transferor pursuant to Sections 2.1 and 2.6, except as is required in connection
with the performance of its duties hereunder or in enforcing its rights or the
rights of the Noteholders and the Holder of the Transferor Interest, or to a
Successor Servicer appointed pursuant to Section 10.2, any successor trustee
appointed pursuant to Section 11.8, any co-trustee or separate trustee appointed
pursuant to Section 11.10 or as mandated by any Requirement of Law applicable to
the Trustee. The Trustee agrees to take such measures as shall be reasonably
requested by the Transferor to protect and maintain the security and
confidentiality of such information, and, in connection therewith, shall allow,
upon reasonable notice, the Transferor to inspect the Trustee's security and
confidentiality arrangements from time to time during normal business hours.
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(e) No Indebtedness. The Trustee shall have no power to
create, assume or incur indebtedness or other liabilities in the name of the
Trust other than as contemplated in this Agreement.
Section 2.3 Representations and Warranties of Transferor
Relating to Transferor. The Transferor hereby represents and warrants as of the
Initial Closing Date and on each Addition Date that:
(a) Organization and Good Standing. The Transferor is a
corporation duly organized and validly existing in good standing under
the laws of the State of Delaware, and has full corporate power,
authority and legal right to own its properties and conduct its
business as such properties are presently owned and such business is
presently conducted, and to execute, deliver and perform its
obligations under this Agreement and the Asset Purchase Agreement and
to direct the Trustee to execute and deliver the Notes and to make a
book-entry notation in the Register evidencing the Transferor Interest.
(b) Due Qualification. The Transferor is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements), and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have a material
adverse effect on its ability to perform its obligations hereunder.
(c) Due Authorization. The execution and delivery of this
Agreement and the Asset Purchase Agreement and the consummation of the
transactions provided for herein and therein have been duly authorized
by the Transferor by all necessary corporate action on the part of the
Transferor.
(d) No Conflict. The execution and delivery of this Agreement
and the Asset Purchase Agreement, the performance of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof
and thereof will not conflict with, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice
or lapse of time or both) a default under, any indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which the
Transferor is a party or by which it or any of its property is bound.
(e) No Violation. The execution and delivery of this Agreement
and the Asset Purchase Agreement, the performance of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof
and thereof will not conflict with or violate, in any material respect,
any Requirements of Law applicable to the Transferor.
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(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Transferor, threatened against
the Transferor, before any court, regulatory body, administrative
agency, or other tribunal or governmental instrumentality (i) asserting
the invalidity of this Agreement, the Asset Purchase Agreement or the
Notes, (ii) seeking to prevent the issuance of the Notes or the making
of a book-entry notation in the Register evidencing the Transferor
Interest or the consummation of any of the transactions contemplated by
this Agreement, the Asset Purchase Agreement or the Notes or the
Transferor Interest, (iii) seeking any determination or ruling that, in
the reasonable judgment of the Transferor, could reasonably be expected
to be adversely determined, and if adversely determined, would
materially and adversely affect the performance by the Transferor of
its obligations under this Agreement or the Asset Purchase Agreement or
(iv) seeking to impose income taxes on the Trust.
(g) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental
Authority required in connection with the execution and delivery of
this Agreement and the Notes and the book-entry notation in the
Register evidencing the Transferor Interest, the performance of the
transactions contemplated by this Agreement, and the fulfillment of or
terms hereof, have been obtained.
(h) Bulk Sales. The execution, delivery and performance of
this Agreement do not require compliance with any "bulk sales" law by
the Transferor.
(i) Solvency. The transactions under this Agreement do not and
will not render the Transferor insolvent.
The representations and warranties set forth in this Section 2.3 shall survive
the transfer of the Trust Assets to the Trust, and termination of the rights and
obligations of the Servicer pursuant to Section 10.1. Upon discovery by the
Transferor, the Servicer or a Responsible Officer of the Trustee of a breach of
any of the foregoing representations and warranties, the party discovering such
breach shall give prompt written notice to the others and any Enhancement
Provider. For the purposes of the representations and warranties contained in
this Section 2.3 and made by the Transferor on the Initial Closing Date, "Notes"
shall mean the Notes issued on the Initial Closing Date. The Transferor hereby
represents and warrants, with respect to any Series, as of the Closing Date with
respect to such Series, unless otherwise stated in the related Supplement, that
the representations and warranties of the Transferor set forth in this Section
2.3 will be true and correct as of such date (for the purposes of such
representations and warranties, "Notes" shall mean the Notes issued on such
Closing Date).
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Section 2.4 Representations and Warranties of Transferor
Relating to the Agreement and the Included Leases.
(a) Binding Obligation; Valid Transfer and Security Interest.
The Transferor hereby represents and warrants that, as of the Initial Closing
Date and, with respect to any Series issued after the Initial Closing Date,
unless otherwise stated in the related Supplement, as of the Closing Date for
such Series and as of each Addition Date:
(i) This Agreement constitutes a legal, valid and
binding obligation of the Transferor, enforceable against the
Transferor in accordance with its terms, except as such enforceability
may be limited by Debtor Relief Laws and except as such enforceability
may be limited by general principles of equity (whether considered in a
suit at law or in equity).
(ii) This Agreement constitutes either (A) a valid
transfer to the Trust of all right, title and interest of the
Transferor in, to and under the Trust Assets, and such property will be
held by the Trust free and clear of any Lien of any Person claiming
through or under the Transferor or its Affiliates, except for (w) the
interests of the Trustee and the Noteholders, (x) Permitted Liens, and
(y) the interest of the Transferor as Holder of the Transferor Interest
or (B) a grant of a security interest (as defined in the UCC as in
effect in the State of California) in such property to the Trust. Upon
the filing of the financing statements described in Section 2.1 and, in
the case of Additional Leases on the applicable Addition Date, the
Trustee on behalf of the Trust shall have a first priority perfected
security interest in such property, subject only to Permitted Liens.
Neither the Transferor nor any Person claiming through or under
Transferor shall have any claim to or interest in the Collection
Account, the Excess Funding Account or any Series Account, except as
expressly provided in this Agreement or any Supplement, in accordance
with the provisions of Article IV, and, if this Agreement constitutes
the grant of a security interest in such property, except for the
interest of the Transferor in such property as a debtor for purposes of
the UCC as in effect in the State of California.
(b) Eligibility of Leases. The Transferor hereby represents
and warrants as of the Initial Closing Date that (i) as of the initial Cut Off
Date, Schedule 1 to this Agreement and the computer file or microfiche or
written list delivered pursuant to Section 2.1 is an accurate and complete
listing in all material respects of all the Included Leases as of such Cut Off
Date and the information contained therein with respect to the identity of such
Leases and the amounts owing thereunder is true and correct in all material
respects as of such Cut Off Date, (ii) each such Lease is an Eligible Lease,
(iii) each such
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Lease and the related Equipment has been transferred to the Trust free and clear
of any Lien of any Person (other than Permitted Liens and the interest of the
Transferor as holder of the Transferor Interest) and in compliance, in all
material respects, with all Requirements of Law applicable to the Transferor and
(iv) with respect to each such Lease, all material consents, licenses, approvals
or authorizations of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Transferor in
connection with the transfer of such Lease and the related Equipment to the
Trust have been duly obtained, effected or given and are in full force and
effect.
On each day on which any Additional Lease is transferred by
the Transferor to the Trust, Transferor shall be deemed to represent and warrant
that (i) each Additional Lease transferred on such day is an Eligible Lease,
(ii) each such Additional Lease and the related Equipment has been transferred
to the Trust free and clear of any Lien of any Person (other than Permitted
Liens and the interest of the Transferor as holder of the Transferor Interest)
and in compliance, in all material respects, with all Requirements of Law
applicable to the Transferor or the Originator thereof, (iii) with respect to
each such Additional Lease, all material consents, licenses, approvals or
authorizations of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Transferor in
connection with the transfer of such Lease and the related Equipment to the
Trust have been duly obtained, effected or given and are in full force and
effect and (iv) the representations and warranties set forth in subsection
2.4(a) are true and correct with respect to each Lease transferred on such day
as if made on such day.
(c) Notice of Breach. The representations and warranties set
forth in this Section 2.4 shall survive the transfer of the respective Included
Leases and related Equipment to the Trust, and termination of the rights and
obligations of the Servicer pursuant to Section 10.1. Upon discovery by the
Transferor, the Servicer or a Responsible Officer of the Trustee of a breach of
any of the foregoing representations and warranties, the party discovering such
breach shall give prompt written notice to the others and any Enhancement
Provider.
(d) Retransfer of Ineligible Leases. In the event of a breach
of any representation and warranty set forth in Section 2.4(b) or in subsection
2.6(b)(v)(w) with respect to an Included Lease (each such Lease, an "Ineligible
Lease"), within 60 days of the receipt by the Transferor of written notice of
such breach given by the Trustee or the Servicer, the Transferor shall accept a
retransfer of each such Included Lease to which such breach relates on the terms
and conditions set forth below; provided, however, that no such retransfer shall
be required to be made with respect to such Ineligible Lease (and such Lease
shall cease to be an Ineligible Lease) if, on any day within such 60 day
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period, the representations and warranties in subsection 2.4(b) or in subsection
2.6(b)(v)(w), with respect to such Ineligible Lease shall then be true and
correct in all material respects with respect to such Ineligible Lease as if
such Ineligible Lease had been transferred to the Trust on such day. With
respect to each retransfer of an Ineligible Lease required to be made pursuant
to this Section 2.6(d), the Transferor shall repurchase and the Trustee shall
convey, without recourse, representation or warranty, all of the Trustee's
right, title and interest in each such Ineligible Lease. The Transferor shall
accept a retransfer of each such Ineligible Lease and there shall be deducted
from the Aggregate Pool Balance the Discounted Lease Balance of each such
Ineligible Lease. On and after the date such Lease becomes an Ineligible Lease,
such Lease shall not be included in the Aggregate Pool Balance. In consideration
of such retransfer the Transferor shall, on the date of retransfer of such
Ineligible Lease, either (i) make a deposit in the Collection Account (for
allocation pursuant to Article IV) in immediately available funds in an amount
equal to the Warranty Purchase Price or (ii) transfer to the Trust a Substitute
Lease. Upon each retransfer to the Transferor of such Ineligible Lease, the
Trust shall automatically and without further action be deemed to transfer,
assign and set-over to the Transferor, without recourse, representation or
warranty (other than that the Trustee has not encumbered such Lease and the
related Equipment, except for the grant of a security interest therein to the
Collateral Trustee), all the right, title and interest of the Trust in, to and
under such Ineligible Lease and all monies due or to become due with respect
thereto, the related equipment and all proceeds of the Ineligible Lease and
Liquidation Proceeds and Insurance Proceeds relating thereto and all rights to
security for any such Ineligible Lease, and all proceeds and products of the
foregoing. The Trustee shall execute such documents and instruments of transfer
as may be prepared by the Transferor and take such other actions as shall
reasonably be requested by the Transferor to effect the transfer of such
Ineligible Lease pursuant to this subsection. The obligation of the Transferor
to accept retransfer of any Ineligible Lease shall constitute the sole remedy
respecting any breach of the representations and warranties set forth in Section
2.4(b) and subsection 2.6(b)(v)(w) with respect to such Lease available to
Noteholders and the Holder of the Transferor Interest, or the Trustee on their
behalf.
(e) Retransfer of Trust Portfolio. In the event of a breach of
any of the representations and warranties set forth in Section 2.4(a) hereof
which breach could reasonably be expected to have a material adverse affect on
the rights of the Noteholders or of the Trustee hereunder or on the ability of
the Transferor to perform its obligations hereunder, either the Trustee, or the
Holders of a principal amount of Notes aggregating more than 662/3% of the
Aggregate Principal Amount, by notice then given in writing to the Transferor
(and to the Trustee and the Servicer, if given by the Noteholders), may
<PAGE>
direct the Transferor to accept retransfer of all of the Included Leases and the
Transferor shall be obligated to accept retransfer of such Leases on a
Distribution Date specified by the Transferor (such date, the "Retransfer Date")
occurring within the period of 60 days after such notice on the terms and
conditions set forth below; provided, however, that no such retransfer shall be
required to be made if, at any time during such applicable period, the
representations and warranties contained in Section 2.4(a) shall then be true
and correct in all material respects. The Transferor shall deposit on the
Retransfer Date an amount equal to the deposit amount provided in the next
sentence for such Leases in the Collection Account for distribution to the
Noteholders pursuant to Section 12.3. The deposit amount for such retransfer
will be equal to the sum of (i) the Aggregate Adjusted Principal Amount at the
end of the day on the Business Day preceding the Distribution Date on which the
retransfer is scheduled to be made, plus (ii) an amount equal to all interest
accrued but unpaid on the Notes at the applicable Note Rate through such
Distribution Date, plus (iii) an amount sufficient to pay all unreimbursed
amounts owing to each Enhancement Provider (to the extent set forth in the
applicable Supplement) less (iv) the amount, if any, available in the Collection
Account and the Excess Funding Account on such Transfer Date. On the Retransfer
Date immediately following the Transfer Date on which such amount has been
deposited in full into the Collection Account, the Included Leases and all
monies due or to become due with respect thereto, the related Equipment and all
proceeds thereof, all rights to security for any such Leases, and all proceeds
and products of the foregoing, shall be transferred to the Transferor, and the
Trustee shall execute and deliver such instruments of transfer, in each case
without recourse, representation or warranty (other than that the Trustee has
not encumbered any such Lease and the related Equipment), as shall be prepared
and reasonably requested by the Transferor to vest in the Transferor, or its
designee or assignee, all right, title and interest of the Trust in, to and
under the Included Leases, all monies due or to become due with respect thereto,
the related Equipment and all proceeds thereof and Insurance Proceeds relating
thereto. If the Trustee or the Noteholders give a notice directing the
Transferor to accept a retransfer as provided above, the obligation of the
Transferor to accept a retransfer of the Included Leases pursuant to Section
2.4(e) shall constitute the sole remedy respecting a breach of the
representations and warranties contained in Section 2.4(a) available to the
Noteholders or the Trustee on behalf of the Noteholders.
Section 2.5 Covenants of Transferor. The Transferor hereby
covenants that:
(a) Leases Not to be Evidenced by Promissory Notes. The
Transferor will take no action to cause any Included Lease to be
evidenced by any "instrument" (as defined in the UCC as in effect in
the State of California) that is not
<PAGE>
also considered "chattel paper", except in connection with the
enforcement or collection of such Lease. The Servicer will deliver
promptly any such instruments to the Custodian.
(b) Security Interests. Except for the transfers hereunder,
the Transferor will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on
any Included Lease or related Equipment, whether now existing or
hereafter transferred to the Trust, or any interest therein. The
Transferor will immediately notify the Trustee of the existence of any
Lien on any Included Lease or related Equipment; and the Transferor
shall defend the right, title and interest of the Trustee on behalf of
the Trust in, to and under the Included Leases and the related
Equipment, against all claims of third parties; provided, however, that
nothing in this subsection 2.5(b) shall prevent or be deemed to
prohibit the Transferor from suffering to exist upon any of the
Included Leases Permitted Liens; provided further, however, that
nothing in this subsection 2.5(b) shall prevent or be deemed to
prohibit the Transferor from granting a participation interest in the
Transferor Interest or the interest in the Trust evidenced thereby.
(c) Reserved.
(d) Delivery of Collections. The Transferor agrees to pay to
the Servicer promptly (but in no event later than two Business Days
after receipt) all Collections and Tax Collections received by the
Transferor in respect of the Included Leases.
(e) Regulatory Filings. The Transferor shall make any filings,
reports, notices, applications and registrations with, and seek any
consents or authorizations from, the Securities and Exchange Commission
and any state securities authority on behalf of the Trust as may be
necessary or that Transferor deems advisable to comply with any federal
or state securities or reporting requirements laws.
(f) Reserved.
(g) Reserved.
(h) Compliance with Law. The Transferor hereby agrees to
comply in all material respects with all Requirements of Law applicable
to the Transferor.
(i) Activities of Transferor. The Transferor shall not engage
in any business or activity of any kind, or enter into any transaction
or indenture, mortgage, instrument, agreement, contract, lease or other
undertaking, which is not directly related to the transactions
contemplated and
er
<PAGE>
authorized by this Agreement or the Asset Purchase Agreement or which
is otherwise a Permitted Transaction.
(j) Indebtedness. The Transferor shall not create, incur,
assume or suffer to exist any Indebtedness or other liability
whatsoever, except (i) obligations incurred or owing to the Trust under
this Agreement or the Asset Purchase Agreement, (ii) liabilities
incident to the maintenance of its corporate existence in good standing
or (iii) obligations incident to a Permitted Transaction.
(k) Guarantees. The Transferor shall not become or remain
liable, directly or contingently, in connection with any Indebtedness
or other liability of any other Person, whether by guarantee,
endorsement (other than endorsements of negotiable instruments for
deposit or collection in the ordinary course of business), agreement to
purchase or repurchase, agreement to supply or advance funds, or
otherwise except incident to a Permitted Transaction.
(l) Investments. The Transferor shall not make or suffer to
exist any loans or advances to, or extend any credit to, or make any
investments (by way of transfer of property, contributions to capital,
purchase of stock or securities or evidences of indebtedness,
acquisition of the business or assets, or otherwise) in, any Person
except (i) for acquisitions of Leases pursuant to the Asset Purchase
Agreement, (ii) for investments in Permitted Investments in accordance
with the terms of this Agreement or (iii) pursuant to a Permitted
Transaction.
(m) Merger; Sales. The Transferor shall not enter into any
transaction of merger or consolidation, or liquidate or dissolve itself
(or suffer any liquidation or dissolution), or acquire or be acquired
by any Person, or convey, sell, lease or otherwise dispose of all or
substantially all of its property or business, except as provided for
in this Agreement.
(n) Distributions. The Transferor shall not declare or pay,
directly or indirectly, any dividend or make any other distribution
(whether in cash or other property) with respect to the profits, assets
or capital of the Transferor or any Person's interest therein, or
purchase, redeem or otherwise acquire for value any of its capital
stock now or hereafter outstanding, except that so long as no Pay Out
Event or Accelerated Payment Event has occurred and is continuing and
no Pay Out Event or Accelerated Payment Event would occur as a result
thereof or after giving effect thereto, the Transferor may declare and
pay dividends on its capital stock.
(o) Agreements. The Transferor shall not become a party to, or
permit any of its properties to be bound by,
<PAGE>
any indenture, mortgage, instrument, contract, agreement, lease or
other undertaking, except this Agreement, the Asset Purchase Agreement
and the Supplements and except incidental to a Permitted Transaction or
amend or modify the provisions of its Certificate of Incorporation or
issue any power of attorney except to the Trustee or to the Servicer.
(p) Asset Purchase Agreement. The Transferor shall not give
any material consent under the Asset Purchase Agreement unless the
Rating Agency Condition is satisfied with respect thereto.
(q) Net Worth. The Transferor shall maintain a net worth,
exclusive of the Transferor Interest, that is, at any date of
determination, at least equal to 5% of the sum of (i) the Aggregate
Pool Balance plus (ii) the Equipment Residual Value calculated at such
date.
(r) Separate Corporate Existence. The Transferor shall:
(i) Maintain its own deposit account or accounts,
separate from those of any Affiliate, with commercial banking
institutions. The funds of the Transferor will not be diverted
to any other Person or for other than corporate uses of the
Transferor, except as expressly permitted herein.
(ii) Ensure that, to the extent that it shares the
same officers or other employees as any of its stockholders or
Affiliates, the salaries of and the expenses related to
providing benefits to such officers and other employees shall
be fairly allocated among such entities, and each such entity
shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees.
(iii) Ensure that, to the extent that it jointly
contracts with any of its stockholders or Affiliates to do
business with vendors or service providers or to share
overhead expenses, the costs incurred in so doing shall be
allocated fairly among such entities, and each such entity
shall bear its fair share of such costs. To the extent that
the Transferor contracts or does business with vendors or
service providers when the goods and services provided are
partially for the benefit of any other Person, the costs
incurred in so doing shall be fairly allocated to or among
such entities for whose benefit the goods and services are
provided, and each such entity shall bear its fair share of
such costs. All material transactions between Transferor and
any of its Affiliates shall be either (i) in accordance with
the Asset Purchase Agreement or, if such Affiliate is not a
party to the Asset Purchase
<PAGE>
Agreement, on substantially similar terms), or (ii) only on an
arm's length basis.
(iv) Maintain a principal executive and
administrative office through which its business is conducted
separate from those of its Affiliates. To the extent that
Transferor and any of its stockholders or Affiliates have
offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each
such entity shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with
its Certificate of Incorporation and observe all necessary,
appropriate and customary corporate formalities, including,
but not limited to, holding all regular and special
stockholders' and directors' meetings appropriate to authorize
all corporate action, keeping separate and accurate minutes of
its meetings, passing all resolutions or consents necessary to
authorize actions taken or to be taken, and preparing and
maintaining its own accurate, separate, full and complete
books, records, accounts and financial statements, including,
but not limited to, payroll and intercompany transaction
accounts. The Transferor's financial statements will comply
with generally accepted accounting principles.
(vi) Within 120 days after the end of its fiscal
year, distribute a copy of its audited annual financial
statements to the Trustee.
(s) Location of Records. The Transferor (i) shall not move
outside the State of California, the location of its chief executive
office, without 45 days' prior written notice to the Trustee and (ii)
will promptly take all actions required (including but not limited to
all filings and other acts necessary or advisable under the UCC of each
relevant jurisdiction) in order to continue the first priority
perfected ownership interest of the Trust, the Noteholders and the
Holder of the Transferor Interest in all Included Leases. The
Transferor will give the Trustee prompt notice of a change within the
State of California of the location of its chief executive office.
Section 2.6 Addition of Leases.
(a) Permitted Additions. The Transferor may from time to time,
at its sole discretion, subject to the conditions specified in subsection 2.6(b)
below, transfer additional Eligible Leases to the Trust as Additional Leases as
of the applicable Additional Cut Off Date.
<PAGE>
(b) Conditions to Permitted Additions. The Transferor agrees
that any Additional Leases and the related Equipment shall be transferred by the
Transferor to the Trust under subsection 2.6(a) upon and subject to the
following conditions:
(i) On or before the fifth Business Day (the "Notice
Date") prior to the Addition Date, the Transferor shall give the
Trustee, the Servicer and any Enhancement Provider entitled thereto
pursuant to the relevant Supplement written notice that such Additional
Leases will be transferred to the Trust and specifying (A) the
applicable Addition Date, (B) the Additional Cut Off Date (which shall
be the last day of a Monthly Period), (C) the approximate number of
Additional Leases expected to be added, (D) the approximate Discounted
Lease Balances expected to be outstanding with respect to the
Additional Leases to be added as of the Additional Cut Off Date with
respect thereto and (E) if such Additional Leases are to be Hedged
Leases, the identity of the Hedging Counterparty and the effective
interest rate under the related hedging transaction, and if such
Additional Leases are not Hedged Leases, the effective interest rate as
calculated in accordance with the definition of "Discounted Lease
Balance".
(ii) The Transferor shall have complied with the
requirements of Section 2.1(c) with respect to such Additional Leases
and the related Equipment.
(iii) The Transferor shall have deposited (A) in the
Collection Account, Collections with respect to such Additional Leases
since the Additional Cut Off Date and (B) in the Tax Escrow Account,
any Tax Collections received in respect of such Lease that have not
been disbursed to the relevant Governmental Authority.
(iv) On or prior to the Addition Date the Transferor shall
have delivered to the Trustee a written transfer agreement (including
an acceptance by the Trustee on behalf of the Trust for the benefit of
the Noteholders) in substantially the form of Exhibit B (the "Transfer
Agreement").
(v) The Transferor shall be deemed to represent and
warrant that (v) as of the Addition Date, Schedule 1 to the Transfer
Agreement and the computer file or microfiche or written list delivered
pursuant to Section 2.1 is an accurate and complete listing in all
material respects of all the Additional Leases as of the Additional Cut
Off Date and the information contained therein with respect to the
identity of such Additional Leases is true and correct in all material
respects as of the Additional Cut Off Date, (w) each Additional Lease
is, as of the Additional Cut Off Date, an Eligible Lease, (x) no
selection procedures reasonably believed by the Transferor to be
materially adverse to the
<PAGE>
interests of the Noteholders were utilized in selecting the Additional
Leases from the available Eligible Leases, (y) the transfer of such
Leases to the Trust will not cause the Portfolio Parameters to be
untrue and (z) as of the Addition Date, the Transferor is not insolvent
and will not be rendered insolvent by transferring any such Additional
Lease to the Trust.
(vi) The Transferor shall be deemed to represent and
warrant that, as of the Addition Date, the representations and
warranties set forth in Section 2.4 are true and correct with respect
to the Additional Accounts and the related Transfer Agreement.
(vii) The Transferor shall, on each Addition Date, deliver
an Officer's Certificate of a Vice President or more senior officer
confirming the items set forth in paragraphs (ii), (iii), (iv), (v) and
(vi) above.
(viii) The Transferor shall on each Addition Date deliver an
Opinion of Counsel with respect to the Additional Leases to the Trustee
substantially in the form of Exhibit C.
Section 2.7 Substitution or Reallocation of Leases.
(a) Right of Substitution. Subject to the provisions of
Sections 2.7(b) through (d), the Transferor may transfer to the Trust a Lease
and the related Equipment (each a "Substitute Lease") in substitution for any
Included Lease and the related Equipment. In instances where an Included Lease
being substituted for had been allocated to an Amortizing Pool prior to the
substitution, the Substitute Lease (or portion thereof) being substituted
therefor shall be allocated to the corresponding Amortizing Pool.
(b) Eligible Leases. Each Substitute Lease shall be an
Eligible Lease the transfer of which to the Trust shall be subject to the
satisfaction of the conditions set forth in Section 2.6(b).
(c) Conditions to Substitution. The Servicer shall not permit
any substitution under Section 2.7(a) on any Addition Date:
(i) if the sum of the Discounted Lease Balances (as of the
related Cut Off Date) of Leases substituted for Defaulted Leases on a
cumulative basis (A) during any period of twelve consecutive Monthly
Periods would exceed 4% of the Aggregate Net Pool Balance on the
related Cut Off Date for such Substitute Leases or (B) after the Pay
Out Commencement Date would exceed 7% of the Aggregate Net Pool Balance
as of the Pay Out Commencement Date, unless, in either case, the Rating
Agency Condition shall have been satisfied with respect thereto;
<PAGE>
(ii) if the sum of the Discounted Lease Balances (as of the
related Cut Off Date) of all Substitute Leases on a cumulative basis
(A) during any period of twelve consecutive Monthly Periods would
exceed 10% of the Aggregate Net Pool Balance on the related Cut Off
Date for such Substitute Leases or (B) after the Pay Out Commencement
Date would exceed 15% of the Aggregate Net Pool Balance as of the Pay
Out Commencement Date, unless, in either case, the Rating Agency
Condition shall have been satisfied with respect thereto;
(iii) unless as of the related Additional Cut Off Date, each
Substitute Lease has a Discounted Lease Balance not less than the
Discounted Lease Balance of the Lease being replaced;
(iv) if after giving effect to all proposed substitutions
to be made on such Addition Date, the sum of the Scheduled Principal
Payments on all Included Leases due in any Monthly Period would be less
than the sum of all Scheduled Principal Payments on the Included Leases
in each such Monthly Period before giving effect to such proposed
substitutions;
(v) if an Insolvency Event has occurred with respect to
the Transferor or the Servicer or a Servicer Default has occurred and
is continuing.
(d) Security Interest. Upon the replacement of an Included
Lease and the related Equipment with a Substitute Lease as described above, the
interest of the Trustee on behalf of the Trust in such replaced Lease, the
related Equipment and all proceeds thereon shall be terminated.
(e) Reallocation of Leases. During any period prior to the Pay
Out Commencement Date when there is both a Floating Pool and an Amortizing Pool,
subject to the provisions of this Section 2.7(e), the Servicer may reallocate an
Included Lease (or a portion thereof) and the related Equipment from such
Floating Pool to any such Amortizing Pool (each a "Reallocated Lease") in
exchange for any Included Lease and the related Equipment in such Amortizing
Pool that has become a Defaulted Lease, an Early Termination Lease or an
Ineligible Lease. The Servicer shall not permit any reallocation under this
Section 2.7(e) on any day:
(i) unless as of the last day of the preceding Monthly
Period, each Reallocated Lease has a Discounted Lease Balance not less
than the Discounted Lease Balance of the Lease being replaced in such
Amortizing Pool; and
(ii) if after giving effect to all proposed exchanges to be
made on such day, the sum of the Scheduled Principal Payments on all
Included Leases due in any Monthly Period in such Amortizing Pool would
be less than the sum of all
<PAGE>
Scheduled Principal Payments on the Included Leases in such pool in
each such Monthly Period before giving effect to such proposed
exchange.
Upon the reallocation of an Included Lease and the related Equipment as
described above, all Collections from the first day of the Monthly Period in
which such reallocation occurs in respect of (i) the Reallocated Lease and the
related Equipment shall be attributable to the Amortizing Pool and (ii) the
Included Lease and the related Equipment being exchanged for such Reallocated
Lease shall be attributable to the Floating Pool.
Section 2.8 Removal of Leases.
(a) Removal. Subject to the conditions set forth below, and
without limiting its rights under Section 2.7(d), the Transferor may designate
from time to time Included Leases no longer to be designated for inclusion in
the Trust (the "Removed Leases"). On or before the fifth Business Day (the
"Removal Notice Date") prior to the date on which Included Leases are to be
removed (the "Removal Date"), the Transferor shall give the Trustee, the
Servicer and each Enhancement Provider entitled thereto pursuant to the relevant
Supplement written notice that the Removed Leases are to be retransferred to the
Transferor.
(b) Conditions to Removal. The Transferor shall be permitted
to designate and require retransfer to it of the Removed Leases only upon
satisfaction of the following conditions:
(i) The Transferor shall satisfy the Rating Agency
Condition with respect thereto by such Removal Date.
(ii) On each Removal Date, the Trustee shall deliver to
the Transferor a written retransfer agreement in substantially the form
of Exhibit D (the "Retransfer Agreement") prepared by the Transferor,
and the Transferor shall deliver to the Trustee a computer file,
microfiche or written list containing a true and complete schedule
identifying all Removed Leases specifying for each such Removed Lease,
as of the Removal Notice Date, its account number and the Discounted
Lease Balance thereof. Such computer file, microfiche or written list
shall, as of the date of such Retransfer Agreement, be incorporated
into and made a part of this Agreement.
(iii) The Transferor shall represent and warrant as of each
Removal Date that (a) the list of Removed Leases, as of the Removal
Notice Date, complies in all material respects with the requirements of
(ii) above; (b) no selection procedure used by the Transferor which is
adverse to the interests of the Noteholders was utilized in selecting
the Removed Leases; and (c) as of the Removal Notice Date and as of the
Removal Date, the Transferor is not insolvent and the
<PAGE>
Transferor has no present intention of seeking protection under any
Debtor Relief Laws.
(iv) The removal of any Removed Leases on any Removal
Date shall not cause a Pay Out Event to occur, or an event which with
notice or lapse of time or both would constitute a Pay Out Event or
cause the Portfolio Parameters to be untrue.
(v) Such Lease shall not be allocated to an Amortizing
Pool (unless such Lease is substituted for in accordance with Section
2.7).
(vi) The Asset Base shall not be less than the
Aggregate Adjusted Principal Amount; and
(vii) The Transferor shall have delivered to the Trustee
and to each Enhancement Provider entitled thereto pursuant to the
relevant Supplement an Officer's Certificate of an officer of the
Transferor confirming the items set forth in (i) through (vi) above.
Upon satisfaction of the above conditions, the Trustee shall
execute and deliver the Retransfer Agreement to the Transferor, and the Removed
Leases shall no longer constitute a part of the Trust.
Section 2.9 Release of Lien on Equipment. At the same time as
(i) any Included Lease becomes an Expired Lease and the Equipment related to
such Lease is sold, (ii) any Lease becomes an Early-Termination Lease and the
Equipment related to such Early-Termination Lease is sold, or (iii) the Servicer
substitutes or replaces any unit of Equipment as contemplated in Section 3.1 or
any Lease and related Equipment as contemplated in Section 2.7 or 2.8, the
Trustee, on behalf of the Trust, will to the extent requested by the Servicer
release its interest in the Equipment relating to such Expired Lease or
Early-Termination Lease or such substituted or replaced Equipment or Lease and
related Equipment, as the case may be; provided that such release will not
constitute a release of the Trust's interest in the proceeds of such sale (other
than with respect to Equipment or Lease and related Equipment that is replaced
pursuant to Section 3.1(c) or 2.7 or removed pursuant to Section 2.8, as the
case may be). In connection with any sale of such Equipment, the Trustee will
execute and deliver to the Servicer any assignments, bills of sale, termination
statements and any other releases and instruments as the Servicer may request in
order to effect such release and transfer; provided that the Trustee will make
no representation or warranty, express or implied, with respect to any such
Equipment in connection with such sale or transfer and assignment other than
with respect to its interest in such Equipment or the absence of any such
interest and other than that the Trustee has not encumbered such Lease or the
related Equipment. Nothing in this Section 2.9 shall diminish the
<PAGE>
Servicer's obligations pursuant to Section 3.1(d) with respect to the proceeds
of any such sale.
Section 2.10 Hedging of Included Leases After the
Related Addition Date.
(a) Subject to the provisions of Section 2.10(b), the
Transferor may on any Distribution Date transfer to the Trust an Interest Rate
Hedge with respect to one or more Included Leases that were not originally
Hedged Leases hereunder.
(b) The Transferor agrees that any such Interest Rate Hedge
shall be transferred to the Trust under Section 2.10(a) upon and subject to the
following conditions:
(i) On or before the Determination Date preceding such
Distribution Date, the Transferor shall give the Trustee, the Servicer,
each Rating Agency and any Enhancement Provider entitled thereto
pursuant to the relevant Supplement written notice that such Interest
Rate Hedge will be transferred to the Trust and specifying (A) the
applicable Distribution Date for such transfer, (B) the specific
Included Leases being hedged thereunder, (C) the sum of the Discounted
Lease Balances of such Leases as of the last day of the preceding
Monthly Period before giving effect to such Interest Rate Hedge and
after giving effect thereto, (D) the identity of the Hedging
Counterparty and the effective interest rate under the related hedging
transaction and (E) a recalculation of the Asset Base, the Aggregate
Pool Balance and the Aggregate Net Pool Balance as of such
Determination Date (after giving effect to all transactions to occur on
such date hereunder).
(ii) On such Distribution Date, after giving effect to
the transfer of such Interest Rate Hedge to the Trust and the
corresponding recalculation of the Asset Base, no Pay Out Event or
Accelerated Payment Event, or an event which with notice or lapse of
time or both would constitute a Pay Out Event or Accelerated Payment
Event, shall have occurred, the Asset Base shall be at least equal to
the Aggregate Adjusted Principal Amount and the Portfolio Parameters
shall be true.
ARTICLE III
ADMINISTRATION AND SERVICING OF INCLUDED LEASES
Section 3.1 Appointment and Acceptance; Duties.
(a) Appointment of Initial Servicer. AFG is hereby appointed
as Servicer pursuant to this Agreement. AFG accepts the appointment and agrees
to act as the Servicer pursuant to this Agreement.
<PAGE>
(b) General Duties. The Servicer will service, administer and
enforce the Included Leases on behalf of the Trust and will have full power and
authority to do any and all things in connection with such servicing and
administration which it deems necessary or desirable. The Servicer will manage,
service, administer, and make collections on the Included Leases with reasonable
care, using that degree of skill and attention that the Servicer exercises with
respect to all comparable equipment leases that it services for itself or
others. The Servicer's duties will include collection and posting of all
payments, responding to inquiries of Lessees regarding the Included Leases,
investigating delinquencies, accounting for collections, furnishing monthly and
annual statements with respect to collections and payments in accordance with
Section 3.10, making Servicer Advances in its discretion, enforcing the Asset
Purchase Agreement and maintaining the perfected first priority security
interest of the Trustee in the Trust Assets. The Servicer will follow its
customary standards, policies, and procedures and will have full power and
authority, acting alone, to do any and all things in connection with such
managing, servicing, administration, and collection that it deems necessary or
desirable. If the Servicer commences a legal proceeding to enforce a Defaulted
Lease pursuant to Section 3.4 or commences or participates in a legal proceeding
(including a bankruptcy proceeding) relating to or involving an Included Lease,
the Trust will be deemed to have automatically assigned such Included Lease to
the Servicer for purposes of commencing or participating in any such proceeding
as a party or claimant, and the Servicer is authorized and empowered by the
Trustee, pursuant to this Section 3.1(b), to execute and deliver, on behalf of
itself and the Trust, any and all instruments of satisfaction or cancellation,
or partial or full release or discharge, and all other notices, demands, claims,
complaints, responses, affidavits or other documents or instruments in
connection with any such proceedings. If in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce an Included Lease on the
ground that it is not a real party in interest or a holder entitled to enforce
the Included Lease, then the Trustee will, at the Servicer's expense and
direction, take steps to enforce the Included Lease, including bringing suit in
its name.
(c) Consent to Assignment or Replacement. At the request of a
Lessee, the Servicer may in its sole discretion consent to the assignment of the
related Included Lease or the sublease of a unit of the Equipment relating to an
Included Lease, so long as such Lessee remains liable for all of its obligations
under such Included Lease. Upon the request of any Lessee, the Servicer may, in
its sole discretion, provide for the substitution or replacement of any unit of
Equipment for a substantially similar unit of equipment.
(d) Disposition Upon Termination of Included Lease. Upon the
expiration or termination of an Included Lease the Servicer will use
commercially reasonable efforts to dispose of
<PAGE>
any related Equipment. Without limiting the generality of the foregoing, the
Servicer may dispose of any such Equipment by selling such Equipment to the
Servicer or any of its Affiliates for a purchase price equal to the fair market
value thereof. The Servicer will deposit any Early Termination Lease Proceeds
and any Expired Lease Proceeds of any such disposition in accordance with
Section 4.3.
(e) Subservicers. The Servicer may enter into servicing
agreements with one or more subservicers (including any Affiliate of the
Servicer) to perform all or a portion of the servicing functions on behalf of
the Servicer; provided that the Servicer will remain obligated and be liable to
the Trust for servicing and administering the Included Leases in accordance with
the provisions of this Agreement without diminution of such obligation and
liability by virtue of the appointment of such subservicer, to the same extent
and under the same terms and conditions as if the Servicer alone were servicing
and administering the Included Leases. The fees and expenses of the subservicer
(if any) will be as agreed between the Servicer and its subservicer and neither
the Trustee, the Trust nor the Holders will have any responsibility therefor.
All actions of a subservicer taken pursuant to such a subservicer agreement will
be taken as an agent of the Servicer with the same force and effect as though
performed by the Servicer.
(f) Further Assurances. The Trustee will furnish the Servicer,
and the Servicer will furnish any subservicer, with any limited powers of
attorney prepared by the Servicer and other documents reasonably necessary or
appropriate to enable the Servicer or a subservicer, as applicable, to carry out
its servicing and administrative duties under this Agreement.
(g) Notice to Lessees. Subject to the provisions of Section
3.2(e), the Servicer will not be required to notify any Lessee that such
Lessee's Included Lease or related Equipment has been sold, transferred,
assigned, or conveyed pursuant to the Asset Purchase Agreement or pursuant to
this Agreement; provided that, in the event that the Servicer resigns or is
replaced, then if the place for payment pursuant to any Included Lease is
changed, the Successor Servicer must give each related Lessee prompt written
notice of the appointment of the Successor Servicer and the place to which such
Lessee should make payments pursuant to each such Included Lease.
Section 3.2 Collection of Payments.
(a) Collection Efforts. The Servicer will make reasonable
efforts to collect all payments called for under the terms and provisions of the
Included Leases as and when the same become due, and will follow those
collection procedures which it follows with respect to all comparable equipment
leases that it services for itself or others. To the extent consistent with the
Servicer's past practices, the Servicer may grant extensions,
<PAGE>
rebates, or adjustments on an Included Lease which will not, for purposes of
this Agreement, extend the original due dates or the number of Scheduled
Payments or reduce the amount of any Scheduled Payment. The Servicer may in its
discretion waive any late payment charge or any other fees that may be collected
in the ordinary course of servicing any Included Lease.
(b) Early Termination Lease. The Servicer may, in its sole
discretion, permit an Included Lease to become an Early Termination Lease (which
shall not include an Included Lease that becomes an Early Termination Lease due
to a Casualty Loss), so long as, unless another Included Lease is substituted
therefor as described in Section 2.7, (i) the Servicer deposits in the
Collection Account, not later than the second Business Day after the Date of
Processing thereof by the Servicer, the sum of (A) the Discounted Lease and
Residual Balance of such Included Lease as of the Determination Date in the
month prior to the month in which such Included Lease becomes an Early
Termination Lease and (B) the amount of any Hedge Termination Payment owing in
respect thereof and (ii) at the time the Servicer permits an Included Lease to
become an Early Termination Lease the Discounted Lease Balance of all Included
Leases which have become Early Termination Leases (and for which substitute
Included Leases have not been transferred to the Trust) for the period of twelve
months ending with the current Monthly Period does not exceed 4% of the
Aggregate Pool Balance as of the last day of the preceding Monthly Period.
(c) Acceleration. The Servicer, in its sole discretion, may
accelerate (or elect not to accelerate) the maturity of all or any Scheduled
Payments under any Included Lease under which a default under the terms thereof
has occurred and is continuing (after the lapse of any applicable grace period);
provided that the Servicer is required to accelerate the Scheduled Payments due
under any Included Lease (and take other action in accordance with the
Originator's past practice, including repossessing or otherwise converting the
related Equipment, to realize upon the value of such Included Lease and the
related Equipment) to the fullest extent permitted by the terms of such Included
Lease, promptly after such Included Lease becomes a Defaulted Lease.
(d) Taxes and Other Amounts. To the extent provided for in any
Included Lease, the Servicer will make reasonable efforts to collect all
payments with respect to amounts due for taxes, assessments and insurance
premiums relating to the Included Leases or the Equipment, to withdraw any such
amounts deposited in the Tax Escrow Account, and to remit such amounts to the
appropriate Governmental Authority or insurer on or prior to the date such
payments are due.
(e) Lockboxes. On or before the Initial Closing Date with
respect to the Original Leases and on or before the relevant Addition Date, with
respect to Additional Leases, the Servicer
<PAGE>
shall have instructed all Lessees to make all payments in respect of the
Included Leases to a Lockbox. All Collections received in a Lockbox shall,
within one Business Day of receipt thereof be deposited in the Lockbox Account.
In the event that any payments in respect of the Included Leases are made
directly to the Servicer, the Servicer shall, within two Business Days of
receipt thereof, deposit such amounts in a Lockbox Account or in the Collection
Account.
(f) Lockbox Agreements. On or before the Initial Closing Date,
the Transferor, the Servicer, the Collateral Trustee on behalf of the
Noteholders and the Holder of the Transferor Interest and each Lockbox Processor
shall have entered into an agreement (each a "Lockbox Agreement") in a form
substantially similar to Exhibit E, as the same may be amended, supplemented or
otherwise modified from time to time (provided, however, that if the Collateral
Trustee is not the Lockbox Processor, no such amendment, supplement or
modification will permit, without the consent of the Collateral Trustee, (i) any
increase in the time between receipt of a payment and remittance to the
Collateral Trustee, (ii) a change in the payment instruction to the Collateral
Trustee or (iii) a change in the payment instruction to the Lockbox Processor),
pursuant to which such Lockbox Processor is irrevocably directed, and such
Lockbox Processor irrevocably agrees, to deposit funds received in the Lockbox
in the Lockbox Account. Pursuant to the Lockbox Agreement, the Lockbox Processor
maintaining the Lockbox Account shall be irrevocably directed, and shall
irrevocably agree, to transfer funds on deposit in the Lockbox Account within
two Business Days of receipt thereof to the Collection Account. The Lockbox
Account shall be maintained in accordance with the terms and conditions of such
documentation. A new Lockbox Account may be designated by the Transferor and the
Servicer, and the Collateral Trustee shall consent to any such change in the
Lockbox Account; provided that (i) the Collateral Trustee shall have received
from the Transferor or the Servicer written notice of such change at least 30
days prior to the proposed effective date of such change and (ii) the Lockbox
Processor chosen to maintain such new Lockbox Account shall enter into a Lockbox
Agreement with the Transferor, the Servicer and the Collateral Trustee,
substantially similar to Exhibit E.
(g) Remittances. As soon as practicable but in any event not
later than the Business Day following the date of establishment by the Servicer
that any of the collected funds received in any of the Lockboxes do not
constitute Collections on account of the Included Leases, such monies which do
not constitute such Collections shall be remitted to or at the direction of the
Transferor.
Section 3.3 Servicer Advances. For each Monthly Period, if the
Servicer determines that any Scheduled Payment (or portion thereof) which was
due and payable pursuant to an Included Lease during such Monthly Period was not
received prior
<PAGE>
to the end of such Monthly Period, the Servicer may make a Servicer Advance in
an amount up to the amount of such delinquent Scheduled Payment (or portion
thereof), to the extent that in its sole discretion it determines that it can
recoup such amount from subsequent collections under the related Included Lease.
The Servicer will deposit any Servicer Advances into the Collection Account on
or prior to 11:00 a.m. (New York City time) on the related Transfer Date, in
immediately available funds. The Servicer will be entitled to be reimbursed for
Servicer Advances pursuant to Section 4.3(d).
Section 3.4 Realization Upon Defaulted Lease. The Servicer
will use its best efforts consistent with its customary and usual practices and
procedures in its servicing of equipment leases to repossess or otherwise
comparably convert the ownership of any Equipment relating to a Defaulted Lease
and will act as sales and processing agent for Equipment which it repossesses.
The Servicer will follow such other practices and procedures as it deems
necessary or advisable and as are customary and usual in its servicing of
equipment leases and other actions by the Servicer in order to realize upon such
Equipment, which practices and procedures may include reasonable efforts to
enforce all obligations of Lessees and repossessing and selling such Equipment
at public or private sale in circumstances other than those described in the
preceding sentence. Without limiting the generality of the foregoing, the
Servicer may sell any such Equipment to the Servicer or its Affiliates for a
purchase price equal to the then fair market value thereof. In any case in which
any such Equipment has suffered damage, the Servicer will not expend funds in
connection with any repair or towards the repossession of such Equipment unless
it determines in its discretion that such repair and/or repossession will
increase the Liquidation Proceeds by an amount greater than the amount of such
expenses. The Servicer will remit to the Collection Account the Liquidation
Proceeds received in connection with the sale or disposition of Equipment
relating to a Defaulted Lease in accordance with Section 4.3(a).
Section 3.5 Maintenance of Insurance Policies. The Servicer
will use its best efforts to ensure that each Lessee maintains an Insurance
Policy with respect to the related Equipment in an amount at least equal to the
sum of the Discounted Lease and Residual Balance of the related Included Lease;
provided that the Servicer, in accordance with its customary servicing
procedures, may allow Lessees to self-insure. Additionally, the Servicer will
require that each Lessee maintain physical damage and liability insurance during
the term of each Included Lease in amounts and against risks customarily insured
against by the Lessee on equipment owned by it. If a Lessee fails to maintain
physical damage and liability insurance, the Servicer may purchase and maintain
such insurance on behalf of, and at the expense of, the Lessee. In connection
with its activities as Servicer of the Included Leases, the Servicer agrees to
present, on behalf of itself, the Trust and the
<PAGE>
Holders, claims to the insurer under each Insurance Policy and any such
liability policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each Included Lease. The Servicer's Insurance
Policies with respect to the related Equipment will insure against liability for
personal injury and property damage relating to such Equipment, will name the
Trustee as an insured thereunder.
Section 3.6 Representations and Warranties of Servicer. The
Servicer represents and warrants to the Trust, the Trustee and the Holders that,
as of the Initial Closing Date and each subsequent Closing Date and on each
Addition Date, insofar as any of the following affects the Servicer's ability to
perform its obligations pursuant to this Agreement in any material respect:
(a) Organization and Good Standing. The Servicer is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, with all requisite corporate power
and authority to own its properties and to conduct its business as
presently conducted and to enter into and perform its obligations
pursuant to this Agreement.
(b) Due Qualification. The Servicer is qualified to do
business as a foreign corporation, is in good standing, and has
obtained all licenses and approvals as required under the laws of, all
states in which the ownership or lease of its property, the performance
of its obligations pursuant to this Agreement or the other conduct of
its business requires such qualification, standing, license or
approval, except to the extent that the failure to so qualify, maintain
such standing or be so licensed or approved would not, in the
aggregate, materially and adversely affect the ability of the Servicer
to comply with this Agreement or to perform its obligations hereunder
or adversely effect the enforceability of the Included Leases.
(c) Power and Authority. The Servicer has the corporate power
and authority to execute and deliver this Agreement and to carry out
its terms. The Servicer has duly authorized the execution, delivery and
performance of this Agreement by all requisite corporate action.
(d) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by
the Servicer (with or without notice or lapse of time) will not (i)
conflict with, result in any breach of any of the terms or provisions
of, or constitute a default under, the certificate of incorporation or
by-laws of the Servicer, or any term of any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound, (ii) result in the creation or
imposition of any Lien upon any of
<PAGE>
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, or (iii) violate any law,
regulation, order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority applicable to the Servicer or any
of its properties.
(e) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Servicer or any of
its properties is required to be obtained by or with respect to the
Servicer in order for the Servicer to enter into this Agreement or
perform its obligations hereunder.
(f) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer, enforceable against the
Servicer in accordance with its terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (whether considered in a suit at law
or in equity).
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the best of the Servicer's knowledge, threatened
against the Servicer, before any Governmental Authority (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement
or (iii) seeking any determination or ruling that might (in the
reasonable judgment of the Servicer) materially and adversely affect
the performance by the Servicer of its obligations under, or the
validity or enforceability of, this Agreement.
(h) Location of Lease Files. Except as provided in the
Custodian Agreement, the Lease Files shall remain at all times in the
possession of the Custodian or the Trustee.
Section 3.7 Covenants of Servicer. The Servicer hereby
covenants that:
(a) Lease Files. The Servicer will, at its own cost and
expense, maintain all Lease Files with the Custodian in accordance with
the terms of the Custodian Agreement. Without limiting the generality
of the preceding sentence, the Servicer will not dispose of any
documents constituting the Lease Files in any manner which is
inconsistent with the performance of its obligations as the Servicer
pursuant to this Agreement and will not dispose of any Included Lease
except as contemplated by this Agreement.
<PAGE>
(b) Compliance with Law. The Servicer will comply, in all
material respects, with all laws and regulations of any Governmental
Authority applicable to the Servicer or the Included Leases and related
Equipment and Lease Files or any part thereof; provided that the
Servicer may contest any such law or regulation in any reasonable
manner which will not materially and adversely affect the value of (or
the rights of the Trustee on behalf of the Holders, with respect to)
the Trust Assets.
(c) Preservation of Security Interest. The Servicer will
execute and file such financing and continuation statements and any
other documents reasonably requested by the Trustee to be filed or
which may be required by any law or regulation of any Governmental
Authority to preserve and protect fully the interest of the Trustee in,
to and under the Trust Assets; provided that the Servicer will not be
required (i) to file any financing or continuation statements with
respect to the Equipment in any jurisdiction other than the Filing
Locations.
(d) Obligations with Respect to Included Leases. The Servicer
will duly fulfill and comply with, in all material respects, all
obligations on the part of the "lessor" to be fulfilled or complied
with under or in connection with each Included Lease and will do
nothing to impair the rights of the Trustee and the Holders in, to and
under the Trust Assets. The Servicer will perform such obligations
under the Included Leases and will not change or modify the Included
Leases, except as otherwise provided herein and except insofar as any
such failure to perform, change or modification would not materially
and adversely affect the value of (or the rights of the Trustee, on
behalf of the Holders, with respect to) the Included Leases or the
related Equipment.
(e) No Bankruptcy Petition. The Servicer agrees that, prior to
the date that is one year and one day after the payment in full of all
amounts owing in respect of all outstanding Notes, it will not
institute against the Transferor, or the Trust, or join any other
Person in instituting against the Transferor or the Trust, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United
States or any state of the United States. This Section 3.7(e) will
survive the termination of this Agreement.
Section 3.8 Servicing Compensation. As compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in Section 3.9, the Servicer shall be entitled to receive a monthly servicing
fee in respect of any Monthly Period (or portion thereof) prior to the
termination of the Trust pursuant to Section 12.1 (with respect to each Monthly
<PAGE>
Period, the "Monthly Servicing Fee") equal to one-twelfth of the product of (A)
the Servicing Fee Percentage and (B) the Aggregate Pool Balance on the first day
of such Monthly Period.
Section 3.9 Payment of Certain Expenses by Servicer. The
Servicer will be required to pay all expenses incurred by it in connection with
its activities under this Agreement, including fees and disbursements of
independent accountants, the Trustee, the Collateral Trustee, taxes imposed on
the Servicer, expenses incurred in connection with payments and reports pursuant
to this Agreement, and all other fees and expenses not expressly stated under
this Agreement for the account of the Trust or the Transferor, but excluding
Liquidation Expenses incurred as a result of activities contemplated by Section
3.4. The Servicer will be required to pay all reasonable fees and expenses owing
to the Trustee and the Collateral Trustee in connection with the maintenance of
the Trust Accounts. The Servicer shall be required to pay such expenses for its
own account and shall not be entitled to any payment therefor other than the
Monthly Servicing Fee.
Section 3.10 Monthly Statement; Annual Report.
(a) Monthly Statement. With respect to each Distribution Date
and the related Monthly Period, the Servicer will provide to the Trustee and
each Rating Agency, on the related Determination Date, a monthly statement (a
"Monthly Statement"), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit F and such other information as may be
specified in a Supplement.
(b) Annual Summary Statement. The Servicer will provide to the
Trustee, each Rating Agency and each Enhancement Provider, on or prior to March
31 of each year, commencing March 31, 1996, a cumulative summary of the
information required to be included in the Monthly Statements for the Monthly
Periods ending during the immediately preceding calendar year.
Section 3.11 Annual Statement as to Compliance. The Servicer
will provide to the Trustee, each Rating Agency and each Enhancement Provider,
on or prior to March 31 of each year, commencing March 31, 1996, an annual
report signed by a Responsible Officer of the Servicer stating that (a) a review
of the activities of the Servicer, and the Servicer's performance pursuant to
this Agreement, for the period ending on the last day of the immediately
preceding calendar year has been made under such Person's supervision and (b) to
the best of such Person's knowledge, based on such review, the Servicer has
performed or has caused to be performed in all material respects all of its
obligations under this Agreement throughout such year and no Servicer Default
has occurred and is continuing (or, if a Servicer Default has so occurred and is
continuing, specifying each such event, the nature and status thereof and the
steps necessary to remedy such event, and, if a Servicer Default
<PAGE>
occurred during such year and no notice thereof has been given to the Trustee,
specifying such Servicer Default and the steps taken to remedy such event).
Section 3.12 Annual Independent Public Accountant's Servicing
Reports. The Servicer will cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish to the Trustee, each Rating Agency, and each Enhancement Provider, on or
prior to March 31 of each year, commencing March 31, 1996, (i) a report relating
to the previous calendar year to the effect that (a) such firm has reviewed
certain documents and records relating to the servicing of the Included Leases,
and (b) based on such examination, such firm is of the opinion that the Monthly
Statements for such year were prepared in compliance with this Agreement, except
for such exceptions as it believes to be immaterial and such other exceptions as
will be set forth in such firm's report and (ii) a report covering the preceding
calendar year to the effect that such accountants have applied certain
procedures agreed upon by the Servicer and such accountants to certain documents
and records relating to the servicing of Accounts under this Agreement, compared
the information contained in the Servicer's certificates delivered during the
period covered by such report with such documents and records in each case as
specified in Exhibit G and that no matters came to the attention of such
accountants that caused them to believe that such servicing was not conducted in
compliance with Article III, Article IV and Article VIII of this Agreement,
except for such exceptions as such accountants shall believe to be immaterial
and such other exceptions as shall be set forth in such statement. A copy of
such report may be obtained by any Noteholder by a request in writing to the
Trustee addressed to the Corporate Trust Office. In addition, the Servicer shall
cause such accountants to furnish a copy of such report to each Rating Agency
and to each Enhancement Provider.
Section 3.13 Tax Treatment. The Transferor has structured this
Agreement and the Notes to facilitate a secured, credit-enhanced financing on
behalf of the Transferor on favorable terms with the intention that the Notes
will constitute indebtedness of the Transferor for federal income and state and
local tax purposes and the Trust shall be treated as a "security device" for
such purposes. The Transferor, the Servicer, each Holder and each Note Owner
agree to treat and to take no action inconsistent with the treatment of the
Notes (or any beneficial interest therein) as indebtedness for purposes of
federal, state, local and foreign income or franchise taxes and any other tax
imposed on or measured by income. Each Holder, by accepting its Note or the
Transferor Interest, as the case may be, and each Note Owner, by acquiring a
beneficial interest in a Note, agrees to be bound by the provisions of this
Section 3.13. Each Noteholder will cause any Note Owner acquiring an interest in
a Note through it to comply with this Agreement as to treatment as indebtedness
under applicable tax law, as described in this
<PAGE>
Section 3.13. Furthermore, subject to Section 11.11, the Trustee shall not file
tax returns or obtain an employer identification number on behalf of the Trust.
Section 3.14 Adjustments. If (i) the Servicer makes a deposit
into the Collection Account in respect of a Collection of an Included Lease and
such Collection was received by the Servicer in the form of a check which is not
honored for any reason or (ii) the Servicer makes a mistake with respect to the
amount of any Collection and deposits an amount that is less than or more than
the actual amount of such Collection, the Servicer shall appropriately adjust
the amount subsequently deposited into the Collection Account to reflect such
dishonored check or mistake. Any Scheduled Payment in respect of which a
dishonored check is received shall be deemed not to have been paid.
ARTICLE IV
RIGHTS OF NOTEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Holders.
(a) The Notes. The Notes shall represent indebtedness secured
by the Trust Assets and an obligation to pay the Noteholders Note Interest and
Note Principal out of the Trust Assets, which, with respect to each Series,
shall consist of the right to receive, to the extent necessary to make the
required Note Principal, Note Interest and any other payments with respect to
the Notes of such Series at the times and in the amounts specified in the
related Supplement, the portion of Collections allocable to Noteholders of such
Series pursuant to this Agreement and such Supplement, funds on deposit in the
Collection Account allocable to Noteholders of such Series pursuant to this
Agreement and such Supplement, funds on deposit in any related Series Account
and funds available pursuant to any related Enhancement, it being understood
that the Notes of any Series or Class shall not represent any interest in any
Series Account or Enhancement for the benefit of any other Series or Class. The
Transferor Interest shall represent the interest in the remainder of the Trust
Assets not allocated pursuant to this Agreement or any Supplement to the
Noteholders, including the right to receive Collections with respect to the
Included Leases and other amounts at the times and in the amounts specified in
this Agreement or any Supplement to be paid to the holder of the Transferor
Interest, provided, however, that the Transferor Interest shall not represent
any interest in the Collection Account, any Series Account or any Enhancement,
except as specifically provided in this Agreement or any Supplement.
(b) No Recourse. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Transferor, the Trustee or
the Collateral Trustee on the Notes or under this
<PAGE>
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against: (i) the Trustee or the Collateral Trustee in its
individual capacity; (ii) any owner of a beneficial interest in the Transferor;
or (iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Trustee or the Collateral Trustee in their individual capacities,
any holder of a beneficial interest in the Transferor, the Trustee or the
Collateral Trustee or of any successor or assign of the Trustee or the
Collateral Trustee in their individual capacities (or any of their successors or
assigns), except as any such Person may have expressly agreed (it being
understood that the Trustee and the Collateral Trustee have no such obligations
in their individual capacities) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any instalment or call owing to such entity.
Section 4.2 Establishment of Accounts.
(a) The Collection Account. The Servicer, for the benefit of
the Noteholders and the Holder of the Transferor Interest, shall establish and
maintain in the name of the Collateral Trustee on behalf of the Noteholders and
the Holder of the Transferor Interest, or cause to be established and
maintained, with an office or branch located in the state designated by the
Servicer of a depository institution or trust company (which may include the
Collateral Trustee) organized under the laws of the United States of America or
any one of the states thereof a non-interest bearing segregated deposit account
(the "Collection Account") bearing a designation clearly indicating that the
funds deposited therein are held in trust for the benefit of the Noteholders and
the Holder of the Transferor Interest; provided, however, that at all times the
certificates of deposit, short-term deposits or commercial paper or the
long-term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such depository
institution or trust company) of such depository institution or trust company if
other than the Collateral Trustee or First Union National Bank of North
Carolina, shall have a credit rating from the Rating Agency or Agencies for each
Series outstanding hereunder of P-1, A-1+, as applicable, respectively, in the
case of the certificates of deposit, short-term deposits or commercial paper, or
a rating from the applicable Rating Agency of Aaa or AAA, as applicable, in the
case of the long-term unsecured debt obligations, and which is a member of the
FDIC (each of First Union National Bank of North Carolina, the Collateral
Trustee or any such depository institution trust company, a "Qualified
Institution"). The Supplement for a Series may require the Collateral Trustee to
establish and maintain, for administrative purposes only, other Series Accounts
for such Series bearing a designation clearly indicating that the funds
allocated thereto are held in trust for the benefit of the Noteholders of such
Series. Pursuant to
<PAGE>
authority granted to it pursuant to subsection 3.1(b), the Servicer shall have
the power, revocable by the Trustee, to withdraw funds from the Collection
Account for the purposes of carrying out its duties hereunder.
(b) Establishment of the Excess Funding Account. The Servicer,
for the benefit of the Noteholders and the Holder of the Transferor Interest,
shall establish and maintain or cause to be established and maintained in the
name of the Collateral Trustee, on behalf of the Noteholders and the Holder of
the Transferor Interest, with a Qualified Institution designated by the
Servicer, a segregated trust account within the corporate trust department of
such Qualified Institution (the "Excess Funding Account"), bearing a designation
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Noteholders and the Holder of the Transferor Interest. The
Collateral Trustee shall possess all right, title and interest in all funds on
deposit from time to time in the Excess Funding Account and in all proceeds
thereof. Pursuant to the authority granted to it pursuant to subsection 3.1(b),
the Servicer shall have the power, revocable by the Trustee, to withdraw funds
and to instruct the Trustee to withdraw funds from the Excess Funding Account
for the purposes of carrying out its duties hereunder.
(c) Establishment of the Tax Escrow Account. The Servicer, for
the benefit of the Noteholders and the Holder of the Transferor Interest, shall
establish and maintain or cause to be established and maintained in the name of
the Collateral Trustee, on behalf of the Noteholders and the Holder of the
Transferor Interest, with a Qualified Institution designated by the Servicer, a
segregated trust account within the corporate trust department of such Qualified
Institution (the "Tax Escrow Account"), bearing a designation clearly indicating
that the funds deposited therein are held in trust for the purpose of paying the
underlying tax obligations. The Collateral Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Tax Escrow
Account and in all proceeds thereof. Pursuant to the authority granted to it
pursuant to subsection 3.1(b), the Servicer shall have the power, revocable by
the Trustee, to withdraw funds and to instruct the Trustee to withdraw funds
from the Tax Escrow Account for the purposes of carrying out its duties
hereunder.
(d) Failure of Institution to Qualify. If any institution with
which any of the accounts established pursuant to this Section 4.2 are
established ceases to be a Qualified Institution, the Servicer or the Collateral
Trustee (as the case may be) shall within 10 Business Days establish a
replacement account at a Qualified Institution after notice thereof.
(e) Amounts in Excess Funding Account. Amounts on deposit in
the Excess Funding Account on any Business Day will be invested, at the written
direction of the Servicer to the Collateral Trustee or the Qualified Institution
(with a copy to
<PAGE>
the Collateral Trustee), in Permitted Investments maturing or available for
withdrawal on the next Transfer Day. Earnings from such investments received
shall be treated as part of the Available Amount and shall be deposited in the
Collection Account. Any investment instructions to the Collateral Trustee or the
Qualified Institution may be in writing or made orally and confirmed promptly in
writing, shall be deemed to include a certification that the proposed investment
is a Permitted Investment that matures at or prior to the date required by this
Agreement, and may be given pursuant to standing instructions.
(f) Amounts in Collection Account. Amounts on deposit in the
Collection Account on any Business Day will be invested, at the written
direction of the Servicer to the Collateral Trustee or the Qualified Institution
(with a copy to the Collateral Trustee), in Permitted Investments maturing or
available for withdrawal on the next Business Day; provided that any portion of
such funds that are allocable to a particular Monthly Period may be invested in
Permitted Investments maturing on the Transfer Date preceding the Distribution
Date on which such funds will be included in the "Available Amount". Earnings
from such investments received shall be treated as part of the Available Amount
and shall be deposited in the Collection Account. Any investment instructions to
the Collateral Trustee or the Qualified Institution may be in writing or made
orally and confirmed promptly in writing, shall be deemed to include a
certification that the proposed investment is a Permitted Investment that
matures at or prior to the date required by this Agreement, and may be given
pursuant to standing instructions.
(g) Amounts in Tax Escrow Account. Amounts on deposit in the
Tax Escrow Account on any Business Day will be invested, at the written
direction of the Servicer to the Collateral Trustee or the Qualified Institution
(with a copy to the Collateral Trustee), in Permitted Investments maturing or
available for withdrawal on the Business Day that the Servicer determines such
funds will be required to be withdrawn from such account. Earnings from such
investments received shall be treated as part of the Available Amount and shall
be deposited in the Collection Account. Any investment instructions to the
Collateral Trustee or the Qualified Institution may be in writing or made orally
and confirmed promptly in writing, shall be deemed to include a certification
that the proposed investment is a Permitted Investment that matures at or prior
to the date required by this Agreement, and may be given pursuant to standing
instructions.
(h) Identification of Accounts. Schedule 4, which is hereby
incorporated into and made a part of this Agreement, identifies the Collection
Account, the Excess Funding Account, and the Tax Escrow Account by setting forth
the account number of such account, the account designation of such account and
the name of the institution with which such account has been established.
<PAGE>
Section 4.3 Collections and Allocations.
(a) Collections. The Servicer shall, subject to subsections
4.3(c) and 4.3(d), transfer, or cause to be transferred, all Collections on
deposit in the form of available funds in the Lockbox Account to the Collection
Account as promptly as possible after the Date of Processing of such
Collections, but in no event later than the fourth Business Day following such
Date of Processing. The Servicer shall promptly (but in no event later than two
Business Days after the Date of Processing thereof) deposit all Collections
received directly by it in the Collection Account. The Servicer shall transfer,
or cause to be transferred, all Tax Collections on deposit in the form of
available funds in the Collection Account to the Tax Escrow Account as promptly
as possible after the Date of Processing of such Tax Collections, but in no
event later than the fourth Business Day following such Date of Processing. The
Servicer shall promptly (but in no event later than two Business Days after the
Date of Processing thereof) deposit all Tax Collections received directly by it
in the Tax Escrow Account.
The Servicer shall allocate such amounts to each Series of
Notes and to the Holder of the Transferor Interest in accordance with this
Article IV and shall withdraw the required amounts from the Collection Account
or pay such amounts to the Holder of the Transferor Interest or to the other
Persons entitled thereto in accordance with this Article IV. The Servicer shall
make such deposits or payments on the date indicated therein, if applicable, by
wire transfer in immediately available funds or as otherwise provided in the
Supplement for any Series with respect to such Series.
(b) Initial Deposits. On the Initial Closing Date and on each
Addition Date thereafter, the Servicer will deposit (in immediately available
funds) into the Collection Account all Collections received after the applicable
Cut Off Date and through and including the Initial Closing Date or Addition
Date, as the case may be, in respect of Leases being transferred to the Trust on
such date.
(c) Payments from Tax Escrow Account. The Servicer may from
time to time withdraw amounts on deposit in the Tax Escrow Account for the
purpose of paying, or reimbursing itself for paying, any taxes allocable to the
Included Leases or the related Equipment.
(d) Amounts Exempt from Deposit. Notwithstanding Sections
4.3(a) and 4.3(b), the following collections (or portions thereof) are not
required to be deposited into the Collection Account:
(i) Collections on any Included Leases on which (and to
the extent that) the Servicer has previously made a Servicer Advance
which has not been reimbursed, which
<PAGE>
amounts the Servicer may retain (as a reimbursement of such
Servicer Advance); and
(ii) Collections from any Removed Lease or any Included
Lease for which another Included Lease has been substituted as
described in Section 2.7, which amounts the Servicer may retain to the
extent necessary to reimburse itself for any related Servicer Advance
which has not been reimbursed, and the remainder of which amounts the
Servicer will pay to the Transferor or Originator, as the case may be.
(e) Allocations Prior to Pay Out Event. On each Determination
Date prior to a Pay Out Event, the Servicer, by means of a Monthly Payment
Instructions and Notification, substantially in the form of Exhibit H, shall
instruct the Collateral Trustee to withdraw, and on the succeeding Distribution
Date the Collateral Trustee acting in accordance with such instructions shall
withdraw, the amounts required to be withdrawn from the Collection Account
pursuant to this Section in order to make the following payments or allocations
from the Available Amount for the related Distribution Date (in each case, such
payment or transfer to be made only to the extent funds remain available
therefor after all prior payments and transfers for such Distribution Date have
been made), in the following order of priority:
(i) pay to the Servicer, the amount of any Unreimbursed
Servicer Advance;
(ii) pay to the Servicer the Monthly Servicing Fee for the
preceding Monthly Period together with any amounts in respect of the
Monthly Servicing Fee that were due in respect of prior Monthly Periods
that remain unpaid;
(iii) pay to each Hedging Counterparty the amount owing to
such Hedging Counterparty under the related Interest Rate Hedge for the
Accrual Period ending on such Distribution Date, together with any such
amounts that were due in respect of prior Accrual Periods that remain
unpaid (excluding, in each case, any amounts owing in respect of
termination payments (other than Hedge Termination Payments),
liquidated damages and gross-ups); provided that if the Available
Amount remaining to be allocated pursuant to this Section 4.3(e)(iii)
is less than the full amount required to be so allocated, such
remaining Available Amount shall be allocated to each Hedging
Counterparty pro rata based on the amount owing to it;
(iv) allocate to each Series an amount equal to Note
Interest accrued in respect thereof for the Accrual Period ending on
such Distribution Date, together with any such amounts that accrued in
respect of prior Accrual Periods for which no allocation was previously
made; provided that if the Available Amount remaining to be allocated
pursuant to
<PAGE>
this Section 4.3(e)(iv) is less than the full amount required to be so
allocated, such remaining Available Amount shall be allocated to each
Series in accordance with its Series Share thereof;
(v) allocate to each Series which was as of the first day
of the preceding Monthly Period an Amortizing Series or an Accumulating
Series its Target Repayment Amount for such Monthly Period, together
with any such amounts that were due in respect of prior Monthly Periods
for which no allocation was previously made; provided that if the
Available Amount remaining to be allocated pursuant to this Section
4.3(e)(v) is less than the full amount required to be so allocated,
such remaining Available Amount shall be allocated to each Series in
accordance with its Series Share thereof; and
(vi) allocate any remaining Available Amount to the
Excess Funding Account.
(f) Allocations after a Pay Out Event. On each Determination
Date after the occurrence of a Pay Out Event, the Servicer, by means of a
Monthly Payment Instructions and Notification, substantially in the form of
Exhibit H, shall instruct the Collateral Trustee to withdraw, and on the
succeeding Distribution Date the Collateral Trustee acting in accordance with
such instructions shall withdraw, the amounts required to be withdrawn from the
Collection Account pursuant to this Section in order to make the following
payments or allocations from the Available Amount for the related Distribution
Date (in each case, such payment or transfer to be made only to the extent funds
remain available therefor after all prior payments and transfers for such
Distribution Date have been made), in the following order of priority:
(i) pay to the Servicer, the amount of any Unreimbursed
Servicer Advance;
(ii) pay to the Servicer the Monthly Servicing Fee for the
preceding Monthly Period together with any amounts in respect of the
Monthly Servicing Fee that were due in respect of prior Monthly Periods
that remain unpaid;
(iii) pay to each Hedging Counterparty the amount owing to
such Hedging Counterparty under the applicable Interest Rate Hedge for
the Accrual Period ending on such Distribution Date, together with any
such amounts that were due in respect of prior Accrual Periods that
remain unpaid (excluding, in each case, any amounts owing in respect of
termination payments (other than Hedge Termination Payments),
liquidated damages and gross-ups); provided that if the Available
Amount remaining to be allocated pursuant to this Section 4.3(f)(iii)
is less than the full amount required to be so allocated, such
remaining Available Amount
<PAGE>
shall be allocated to each Hedging Counterparty pro rata
based on the amount owing to it;
(iv) allocate to each Series an amount equal to Note
Interest accrued in respect thereof for the Accrual Period ending on
such Distribution Date, together with any such amounts that accrued in
respect of prior Accrual Periods for which no allocation was previously
made; provided that if the Available Amount remaining to be allocated
pursuant to this Section 4.3(f)(iv) is less than the full amount
required to be so allocated, such remaining Available Amount shall be
allocated to each Series in accordance with its Pay Out Event Series
Share thereof;
(v) allocate to each Series the remaining Adjusted
Principal Amount thereof; provided that if the Available Amount
remaining to be allocated pursuant to this Section 4.3(f)(v) is less
than the full amount required to be so allocated, such remaining amount
shall be allocated to each such Series in accordance with its Pay Out
Event Series Share thereof; and
(vi) allocate any remaining Available Amount to the
Excess Funding Account.
(g) Excess Funding Account Prior to a Pay Out Event. On each
Business Day prior to a Pay Out Event, the Servicer shall instruct the
Collateral Trustee to withdraw, and on such day the Collateral Trustee acting in
accordance with such instructions shall withdraw, the amounts required to be
withdrawn from the Excess Funding Account pursuant to this Section in order to
make the following payments or allocations from the amount on deposit therein on
such day up to the Available Excess Funding Amount on such day (in each case,
such payment or transfer to be made only to the extent funds remain available
therefor after all prior payments and transfers for such day have been made and
after giving effect to any Additional Leases transferred to the Trust on such
day), in the following order of priority:
(i) allocate to each Series which is a Variable Funding
Series such amount, if any, as shall be directed by the Servicer to be
applied in accordance with the terms of the related Supplement to
reduce the Principal Amount thereof;
(ii) allocate to each Series an amount equal to any amounts
then due and payable in respect of any Reserve Funding Requirement
thereunder or any Accelerated Funding Requirement thereunder; provided
that if the Available Excess Funding Amount remaining to be allocated
pursuant to this Section 4.3(g)(ii) is less than the full amount
required to be so allocated, such remaining amount shall be allocated
to each Series in accordance with its Series Share thereof;
<PAGE>
(iii) allocate to each Series an amount equal to any amounts
then due and payable in respect of fees and expenses owing in respect
thereof; provided that if the Available Excess Funding Amount remaining
to be allocated pursuant to this Section 4.3(g)(iii) is less than the
full amount required to be so allocated, such remaining amount shall be
allocated to each Series in accordance with its Series Share thereof;
(iv) pay to each Hedging Counterparty any unpaid amounts
owing to such Hedging Counterparty under the related Interest Rate
Hedge; provided that if the Available Amount remaining to be allocated
pursuant to this Section 4.3(g)(iv) is less than the full amount
required to be so allocated, such remaining Available Amount shall be
allocated to each Hedging Counterparty pro rata based on the amount
owing to it; and
(v) So long as no event which, with the passage of time or
the giving of notice or both, would be a Pay Out Event or an
Accelerated Payment Event has occurred and is continuing, pay to the
Holder of the Transferor Interest any remaining Available Excess
Funding Amount.
(h) Excess Funding Account after a Pay Out Event. On each
Distribution Date after a Pay Out Event, the Servicer shall instruct the
Collateral Trustee to withdraw, and on such day the Collateral Trustee acting in
accordance with such instructions shall withdraw, the amounts required to be
withdrawn from the Excess Funding Account pursuant to this Section in order to
make the following payments or allocations from the amount on deposit therein on
such day (in each case, such payment or transfer to be made only to the extent
funds remain available therefor after all prior payments and transfers for such
day have been made), in the following order of priority:
(i) on the first Distribution Date following the Monthly
Period in which a Pay Out Event occurs the entire balance in the Excess
Funding Account shall be treated as part of the Available Amount on
such day and shall be distributed pursuant to Section 4.3(f);
(ii) on each subsequent Distribution Date, pay to the
Trustee any unpaid fees and expenses owing to it hereunder;
(iii) on each subsequent Distribution Date, allocate to each
Series an amount equal to any amounts then due and payable in respect
of fees and expenses owing in respect thereof; provided that if the
amount remaining to be allocated pursuant to this Section 4.3(h)(iii)
is less than the full amount required to be so allocated, such
remaining amount shall be allocated to each Series in accordance with
its Series Share thereof;
<PAGE>
(iv) on each Distribution Date to occur after all amounts
owing in respect of all outstanding Series have been repaid in full,
pay to each Hedging Counterparty any unpaid amounts owing to such
Hedging Counterparty under the related Interest Rate Hedge; provided
that if the Available Amount remaining to be allocated pursuant to this
Section 4.3(h)(iv) is less than the full amount required to be so
allocated, such remaining Available Amount shall be allocated to each
Hedging Counterparty pro rata based on the amount owing to it; and
(v) on each Distribution Date to occur after all amounts
owing in respect of all outstanding Series and Interest Rate Hedges
have been paid in full, pay to the Holder of the Transferor Interest
any remaining amount.
Section 4.4 Determination of the Amortizing Pools.
(a) On or before the Distribution Date immediately preceding
the Amortization Commencement Date for each Series, the Servicer will select a
group of Included Leases (or portions thereof), to be used to establish a
repayment schedule for such Series (each such group, an "Amortizing Pool") in
accordance with the following criteria and procedures:
(i) The Servicer shall make such selection from among
those Included Leases that are not then assigned to another Amortizing
Pool (unless the Principal Amount of the related Series has been repaid
in full) and are not then Defaulted Leases.
(ii) The aggregate number of Included Leases (or portions
thereof) shall be such as to provide an Aggregate Pool Balance for such
Amortizing Pool at least equal to the Principal Amount of such Series
as of the related Amortization Commencement Date.
(iii) If and to the extent Additional Selection Criteria are
specified in the Supplement for such Series, the Servicer shall use
such criteria.
(iv) Except as specified above in this Section, the
Servicer shall have complete discretion when selecting Included Leases
for inclusion in an Amortizing Pool.
(b) Upon the payment in full of the related Principal Amount,
any Included Leases (or portions thereof) remaining outstanding in such
Amortizing Pool shall be released from such Amortizing Pool.
(c) It is understood that the allocation of specific Included
Leases (or portions thereof) to a particular Amortizing Pool and Series is
solely for the purpose of establishing a target repayment schedule for such
Series and of allocating the
<PAGE>
Available Amount prior to a Pay Out Event and does not give any such Series any
preference or priority with respect to the Included Leases (or portions thereof)
allocated to the related Amortizing Pool.
Section 4.5 Interest Rate Hedges. (a) The Servicer may from
time to time designate Persons to become additional Hedging Counterparties
hereunder, provided that (i) when designating such additional Hedging
Counterparty, the Servicer shall deliver to the Trustee an Opinion of Counsel as
to the due authorization, execution and delivery and validity and enforceability
of the Interest Rate Hedge with such additional Hedging Counterparty and (ii) at
the time of such designation, the long term unsecured debt or long term
certificate of deposit rating assigned to such additional Hedging Counterparty,
shall be at least A by Standard & Poor's and A2 by Moody's.
(b) In the event that the long term unsecured debt or long
term certificate of deposit rating of a Hedging Counterparty is withdrawn or
reduced below A by Standard & Poor's or is withdrawn or reduced below A2 by
Moody's, then within 30 days after receiving notice of such decline in
creditworthiness, either (x) such Hedging Counterparty, at its own expense, will
obtain a Replacement Interest Rate Hedge or (y) the Trustee, at the direction of
the Servicer to do either of the following, shall either (i) with the prior
written confirmation of the Rating Agency that such action will not result in a
reduction or withdrawal of the rating of any Class of Notes, use its best
efforts to (A) cause such Hedging Counterparty to pledge securities in the
manner provided by applicable law or (B) otherwise cause to be pledged
securities, which shall be held by the Trustee, its custodian, or its agent free
and clear of the Lien of any third party, in a manner conferring on the Trustee
a perfected first Lien in such securities securing the Hedging Counterparty's
performance of its obligations under the Interest Rate Hedge, or (ii) provided
that a Replacement Interest Rate Hedge or Qualified Substitute Arrangement
meeting the requirements of Section 4.5(c) has been obtained, (A) provide
written notice to the Hedging Counterparty of its intention to terminate the
Interest Rate Hedge within such 30-day period and (B) terminate the Interest
Rate Hedge within such 30-day period, request the payment to it of all amounts
due to the Trust under the Interest Rate Hedge through the termination date and
deposit any such amounts so received, on the day of receipt, to the Collection
Account, or (iii) use reasonable efforts to establish any other arrangement
satisfactory to the Rating Agency including collateral, guarantees or letters of
credit, which arrangement will result in the Rating Agency's not reducing or
withdrawing the then rating of any Class of Notes (a "Qualified Substitute
Arrangement"); provided, however, that in the event at any time any alternative
arrangement established pursuant to clause (x) or (y)(i) or (y)(iii) above shall
cease to be satisfactory to the Rating Agency, then the provisions of this
Section 4.5(b) shall again be applied and in connection therewith the 30-day
period
<PAGE>
referred to above shall commence on the date the Servicer receives notice of
such cessation or termination, as the case may be.
(c) Unless an alternative arrangement pursuant to clause (x)
or (y)(i) of Section 4.5(b) is being established, the Trustee, at the direction
of the Servicer shall use its best efforts to obtain a Replacement Interest Rate
Hedge or Qualified Substitute Arrangement meeting the requirements of this
Section 4.5(c) during the 30-day period referred to in Section 4.5(b). The
Trustee shall not at any time terminate the Interest Rate Hedge unless, prior to
such termination, the Trustee or the Servicer has obtained (i) a Replacement
Interest Rate Hedge or Qualified Substitute Arrangement, (ii) to the extent
applicable, an Opinion of Counsel as to the due authorization, execution,
delivery, validity and enforceability of such Replacement Interest Rate Hedge or
Qualified Substitute Arrangement, as the case may be, and (iii) a letter from
the Rating Agency confirming that the termination of the Interest Rate Hedge and
its replacement with such Replacement Interest Rate Hedge or Qualified
Substitute Arrangement will not adversely affect its rating of any Class of
Notes.
(d) The Servicer shall notify the Trustee and the Rating
Agency within five Business Days after obtaining knowledge that the long term
unsecured debt or the long term certificate of deposit rating of a Hedging
Counterparty has been withdrawn or reduced by Standard & Poor's or Moody's.
(e) Notwithstanding the foregoing, the Servicer may at any
time obtain a Replacement Interest Rate Hedge, provided that the Servicer
delivers to the Trustee (i) an Opinion of Counsel as to the due authorization,
execution and delivery and validity and enforceability of such Replacement
Interest Rate Hedge and (ii) a letter from the Rating Agency confirming that the
termination of the then current Interest Rate Hedge and its replacement with
such Replacement Interest Rate Hedge will not adversely affect its rating of any
Class of Notes. Upon the effectiveness of a Replacement Interest Rate Hedge, the
Trustee is authorized to reconvey the benefits of the replaced Interest Rate
Hedge to the Transferor.
(f) The Trustee on behalf of the Trust hereby appoints each
Hedging Counterparty to perform the duties of the calculation agent under the
related Interest Rate Hedge.
[THE REMAINDER OF ARTICLE IV IS RESERVED AND
SHALL BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
<PAGE>
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL
BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
ARTICLE VI
THE NOTES
Section 6.1 The Notes and the Transferor Interest. The Notes
of each Series and any Class thereof shall be issued in fully registered form
and shall be substantially in the form of the exhibits with respect thereto
attached to the related Supplement. The Transferor Interest shall be evidenced
by book-entry notation in the Register. The Notes shall, upon issue, be
executed, authenticated and delivered by the Trustee. The Notes shall be
issuable in a minimum denomination of $1,000 principal amount and integral
multiples thereof, unless otherwise provided in any Supplement, and the Notes of
each Series shall be issued upon initial issuance in an aggregate original
principal amount equal to the Initial Principal Amount of such Series. Each Note
shall be executed by manual or facsimile signature on behalf of the Trust by a
Responsible Officer of the Trustee. Any Note bearing the manual or facsimile
signature of the individual who was, at the time when such signature was
affixed, authorized to sign on behalf of the Trustee shall not be rendered
invalid, notwithstanding that such individual has ceased to be so authorized
prior to the authentication and delivery of such Note or does not hold such
office at the date of such Note. No Note shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by the manual or facsimile signature of
a Responsible Officer, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder. All Notes shall be dated the date of their authentication.
Section 6.2 Authentication of Notes and Transferor Interest.
Contemporaneously with the initial transfer of the Original Leases and the other
initial Trust Assets to the Trust, the Trustee shall authenticate and deliver
the initial Series of Notes. The Trustee shall evidence the Transferor Interest
of the Transferor by notation in the Register simultaneously with its delivery
to or upon the order of the Transferor of the initial Series of Notes. The Notes
shall be duly authenticated by or on behalf of the Trustee.
Section 6.3 Registration of Transfer and Exchange of
Notes. (a) The Trustee shall cause to be kept at the office or
agency to be maintained by a transfer agent and registrar (the
<PAGE>
"Transfer Agent and Registrar") in accordance with the provisions of Section
11.16 a register (the "Register") in which, subject to such reasonable
regulations as it may prescribe, the Transfer Agent and Registrar shall provide
for the registration of the Notes and of transfers and exchanges of the Notes as
herein provided. The Trustee is hereby initially appointed Transfer Agent and
Registrar for the purpose of registering the Notes and transfers and exchanges
of the Notes as herein provided. The Trustee shall be permitted to resign as
Transfer Agent and Registrar upon 30 days written notice to the Transferor. In
the event that the Trustee shall no longer be the Transfer Agent and Registrar,
the Transferor shall appoint a successor Transfer Agent and Registrar.
Upon surrender for registration of transfer of any Note of any
Series at any office or agency of the Transfer Agent and Registrar maintained
for such purpose, the Trust shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Notes of such Series in authorized denominations of like aggregate
principal amounts.
At the option of a Noteholder, Notes of any Series may be
exchanged for other Notes of the same Series and authorized denominations of
like principal amounts, upon surrender of the Notes to be exchanged at any such
office or agency. Whenever any Notes are so surrendered for exchange the Trust
shall execute, and the Trustee shall authenticate and deliver the Notes which
the Noteholder making the exchange is entitled to receive. Every Note presented
or surrendered for registration of transfer or exchange shall be accompanied by
a written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Noteholder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Transfer Agent and Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
All Notes surrendered for registration of transfer or exchange
shall be canceled and disposed of in the Trustee's customary manner.
(b) It is the understanding of the parties to this Agreement
that AFG has particular expertise in performing the functions given by this
Agreement to the Servicer and that the Noteholders will be purchasing Notes
relying on its exercising such expertise in performing such functions. As
provided in Sections 8.5 and 8.7, the Servicer is not permitted to resign,
except as otherwise permitted in such sections. Except as provided in Section
6.12, Section 6.14 and Section 7.2, the Transferor Interest, or any interest
therein, shall not be
<PAGE>
transferred, assigned, exchanged, or otherwise transferred, unless (i) the
Rating Agency Condition will have been satisfied with respect thereto, (ii) the
Transferor will have delivered to the Trustee an Officer's Certificate to the
effect that, based upon the facts known to such officer at such time, such
transfer, assignment or exchange will not cause a Pay Out Event and (iii) the
Transferor will have delivered to the Trustee a Tax Opinion, and provided,
however, in any event, the Transferor shall retain at all times at least 25% in
interest of the Transferor Interest (without exclusion for any constituent
interests therein) which interest cannot be subordinated to any constituent
interests in the Transferor Interest.
(c) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Notes may be surrendered for registration of
transfer or exchange.
Section 6.4 Mutilated, Destroyed, Lost or Stolen Notes. If (a)
any mutilated Note is surrendered to the Transfer Agent and Registrar, or the
Transfer Agent and Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Note and (b) there is delivered to the
Transfer Agent and Registrar and the Trustee such security or indemnity as may
be required by them to save each of them harmless, then, in the absence of
notice to the Trustee that such Note has been acquired by a bona fide purchaser,
the Trust shall execute, and the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
new Note of like tenor and aggregate principal amount. In connection with the
issuance of any new Note under this Section 6.4, the Trustee or the Transfer
Agent and Registrar may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee and the Transfer
Agent and Registrar) connected therewith. Any duplicate Note issued pursuant to
this Section 6.4 shall constitute complete and indefeasible evidence of a right
to receive payments from the Trust on the terms set forth therein, as if
originally issued, whether or not the lost, stolen or destroyed Note shall be
found at any time.
Section 6.5 Persons Deemed Owners. Prior to due presentation
of a Note for registration of transfer, the Trustee and the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the Person
in whose name any Note is registered as the owner of such Note for the purpose
of receiving distributions pursuant to Article V (as described in any
Supplement) and for all other purposes whatsoever, and neither the Trustee and
the Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary: provided, however, that in
determining whether the Holders of Notes evidencing the requisite principal
amounts have given any request, demand, authorization, direction,
<PAGE>
notice, consent or waiver hereunder, Notes owned by the Transferor, the Servicer
or any Affiliate thereof shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which a Responsible Officer in the Corporate Trust Office of
the Trustee actually knows to be so owned shall be so disregarded. Notes so
owned which have been pledged in good faith shall not be disregarded and may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Transferor, the Servicer or an Affiliate thereof.
Section 6.6 Appointment of Paying Agent. (a) The Paying Agent
shall make distributions to Noteholders from a Distribution Account pursuant to
Article V. Any Paying Agent shall have the revocable power to withdraw funds
from such Distribution Account for the purpose of making distributions referred
to above. The Trustee may revoke such power and remove the Paying Agent for a
particular Series, if the Trustee determines in its sole discretion that the
Paying Agent shall have failed to perform its obligations under this Agreement
in any material respect. The Paying Agent, unless the Supplement relating to any
Series states otherwise, shall initially be the Collateral Trustee. The
Collateral Trustee shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Transferor. In the event that the Collateral Trustee shall
no longer be the Paying Agent, the Transferor shall appoint a successor. Each
Paying Agent must be reasonably acceptable to the Transferor, the Trustee and
the Servicer. The provisions of Sections 11.1, 11.2 and 11.3 shall apply to the
Trustee also in its role as Paying Agent, for so long as the Trustee shall act
as Paying Agent.
(b) The Trustee shall cause the Paying Agent (other than
itself or the Collateral Trustee) to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee that such
Paying Agent will hold all sums, if any, held by it for payment to the
Noteholders in trust for the benefit of the Noteholders entitled thereto until
such sums shall be paid to such Noteholders and shall agree, and if the
Collateral Trustee is the Paying Agent it hereby agrees, that it shall comply
with all requirements of the Internal Revenue Code regarding the withholding of
payments in respect of federal income taxes due from Noteholders and the Holder
of the Transferor Interest by the Collateral Trustee.
Section 6.7 Access to List of Holders' Names and Addresses.
The Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to the Servicer or the Paying Agent, within five Business Days after
receipt by the Trustee of a request therefor from the Servicer or the Paying
Agent, respectively, in writing, a list in such form as the Servicer or
<PAGE>
the Paying Agent may reasonably require, of the names and addresses of the
Noteholders as of the most recent Record Date for payment of distributions to
Noteholders. If Holders of a principal amount of Notes aggregating not less than
10% of the Principal Amount of the Notes of any Series (the "Applicants") apply
in writing to the Trustee, and such application states that the Applicants
desire to communicate with other Noteholders of any Series with respect to their
rights under this Agreement or under the Notes and is accompanied by a copy of
the communication which such Applicants propose to transmit, then the Trustee,
after having been indemnified to its satisfaction by such Applicants for its
costs and expenses, shall afford or shall cause the Transfer Agent and Registrar
to afford such Applicants access during normal business hours to the most recent
list of Noteholders held by the Trustee and shall give the Servicer notice that
such request has been made, within five Business Days after the receipt of such
application. Such list shall be as of a date no more than 45 days prior to the
date of receipt of such Applicants' request. Every Noteholder and the Holder of
the Transferor Interest, by receiving and holding a Note or the Transferor
Interest, as the case may be, agrees that neither the Trustee nor the Transfer
Agent and Registrar nor the Transferor nor any of their respective agents shall
be held accountable by reason of the disclosure of any such information as to
the names and addresses of the Noteholders and the Holder of the Transferor
Interest hereunder, regardless of the source from which such information was
obtained.
Section 6.8 Authenticating Agent. (a) The Trustee may appoint
one or more authenticating agents with respect to the Notes which shall be
authorized to act on behalf of the Trustee in authenticating the Notes in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of Notes. Whenever reference is made in this Agreement to the
authentication of Notes by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent.
Each authenticating agent must be reasonably acceptable to the Transferor and
the Servicer.
(b) Any institution succeeding to the corporate agency
business of an authenticating agent shall continue to be an authenticating agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Transferor. The Trustee
may at any time terminate the agency of an authenticating agent by giving notice
of termination to such authenticating agent and to the Transferor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
<PAGE>
any time an authenticating agent shall cease to be acceptable to the Trustee or
the Transferor or the Servicer, the Trustee promptly may appoint a successor
authenticating agent. Any successor authenticating agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent shall be appointed
unless reasonably acceptable to the Trustee, the Transferor and the Servicer.
(d) The Transferor agrees to pay each authenticating agent
from time to time reasonable compensation for its services under this Section
6.8.
(e) The provisions of Sections 11.1, 11.2 and 11.3
shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8,
the Notes may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the Notes described in the Pooling and
Servicing Agreement and Indenture of Trust.
as Authenticating Agent for the Trustee,
By:
Authorized Officer
Section 6.9 Book-Entry Notes. Unless otherwise provided in any
related Supplement, the Notes of any Series upon original issuance, shall be
issued in the form of one or more physical Notes representing the Book-Entry
Notes, to be delivered to the Clearing Agency specified in the Supplement for
such Series, by, or on behalf of, the Transferor. The Notes of each Series
shall, unless otherwise provided in the related Supplement, initially be
registered on the Register in the name of the nominee of the Clearing Agency,
and no Note Owner will receive a definitive certificate representing such Note
Owner's interest in the Notes, except as provided in Section 6.11. Unless and
until definitive, fully registered Notes of any Series (the "Definitive Notes")
have been issued to Note Owners:
(i) the provisions of this Section 6.9 shall be in
full force and effect with respect to each such Series;
(ii) the Transferor, the Servicer, the Paying Agent, the
Transfer Agent and Registrar and the Trustee may deal with the related
Clearing Agency and the related Clearing Agency Participants for all
purposes (including the making of distributions on the Notes of each
such Series) as the authorized representatives of such Note Owners;
<PAGE>
(iii) to the extent that the provisions of this Section
6.9 conflict with any other provisions of this Agreement, the
provisions of this Section 6.9 shall control with respect to each such
Series; and
(iv) the rights of Note Owners of each such Series shall
be exercised only through the Clearing Agency and the applicable
Clearing Agency Participants and shall be limited to those established
by law and agreements between such Note Owners and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the Depository
Agreement applicable to a Series, unless and until Definitive Notes are
issued pursuant to Section 6.11, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit distributions of principal and interest on the Notes to
such Clearing Agency Participants.
Section 6.10 Notices to Clearing Agent. Whenever notice or
other communication to the Noteholders of a Series is required under this
Agreement, unless and until Definitive Notes shall have been issued to the Note
Owners of such Series, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes of such
Series to the Clearing Agency.
Section 6.11 Definitive Notes Initially Issued as Book-Entry
Notes. If (i)(A) the Transferor advises the Trustee in writing that the Clearing
Agency is no longer willing or able properly to discharge its responsibilities
under the related Depository Agreement, and (B) the Trustee or the Transferor is
unable to locate a qualified successor, (ii) the Transferor, at its option,
advises the Trustee in writing that it elects to terminate the book-entry system
through such Clearing Agency or (iii) after the occurrence of a Pay Out Event,
Note Owners of a Series representing beneficial interests aggregating not less
than 50% of the Principal Amount of a Series advise the Trustee and the related
Clearing Agency through the related Clearing Agency Participants in writing that
the continuation of a book-entry system through such Clearing Agency is no
longer in the best interests of the Note Owners, the Trustee shall notify all
Note Owners of such Series through such Clearing Agency, of the occurrence of
any such event and of the availability of Definitive Notes to Note Owners
requesting the same. Upon surrender to the Trustee of the Notes of such Series
by the related Clearing Agency, accompanied by registration instructions from
the related Clearing Agency for registration, the Trustee on behalf of the Trust
shall issue the Definitive Notes of such Series. Neither the Transferor nor the
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes of such Series, all references herein to
obligations imposed upon or to be performed by the Clearing Agency shall be
deemed to be imposed
<PAGE>
upon and performed by the Trustee, to the extent applicable with respect to such
Definitive Notes and the Trustee shall recognize the Holders of the Definitive
Notes of such Series as Noteholders of such Series hereunder.
Section 6.12 Exchange of Transferor Interest.
(a) Upon any Exchange, the Transferor shall, pursuant to
Section 6.1, deliver to the Trustee for execution and authentication under
Section 6.2, one or more new Series of Notes. Any such Series of Notes shall be
substantially in the form specified in the related Supplement and shall bear,
upon its face, the designation for the Series to which it belongs, as selected
by the Transferor. Except as specified in the related Supplement, all Notes of
any Series shall rank pari passu and be equally and ratably entitled as provided
herein to the benefits hereof (except that the Enhancement provided for any
Series shall not be available for any other Series) without preference, priority
or distinction on delivery, all in accordance with terms and provisions of this
Agreement and the related Supplement.
(b) The Holder of the Transferor Interest may direct the
Trustee in writing to make an appropriate entry in the Register to evidence an
exchange of the Transferor Interest for (i) one or more newly issued Series of
Notes and (ii) a new Transferor Interest evidenced by book-entry notation in the
Register (any such exchange, a "Transferor Exchange"). In addition, to the
extent permitted for any Series of Notes as specified in the related Supplement,
the Noteholders of such Series may tender their Notes and the Holder of the
Transferor Interest may direct the Trustee in writing to make an appropriate
entry in the Register to evidence an exchange of the Transferor Interest
pursuant to the terms and conditions set forth in such Supplement in exchange
for (i) one or more newly issued Series of Notes and (ii) a new Transferor
Interest evidenced by book-entry notation in the Register (a "Principal
Exchange"). The Transferor Exchange and Principal Exchange are referred to
collectively herein as an "Exchange". The Holder of the Transferor Interest may
perform an Exchange by notifying the Trustee in writing at least five days (but
in no event less than three Business Days) in advance (an "Exchange Notice") of
the date upon which the Exchange is to occur (an "Exchange Date"). Any Exchange
Notice shall state the designation of any Series to be issued on the Exchange
Date and, with respect to each such Series: (a) its Initial Principal Amount (or
the method of calculating such Initial Principal Amount), (b) its Note Rate (or
the method of allocating interest payments or other cash flows to such Series),
if any, (c) the Enhancement Provider(s), if any, with respect to such Series,
and (d) whether such Series is a Replacement Series. On the Exchange Date, the
Trustee shall execute, authenticate and deliver any such Series of Notes only
upon delivery to it of the following: (a) a Supplement in form satisfactory to
the Trustee satisfying the criteria set forth in subsection 6.12(c) executed by
the Transferor and specifying the
<PAGE>
Principal Terms of such Series, (b) the applicable Enhancement, if any, (c) the
agreement, if any, pursuant to which the Enhancement Provider(s) agree(s) to
provide the Enhancement, if any, (d) a Tax Opinion with respect to the newly
issued Series of Notes, (e) proof that the Rating Agency Condition with respect
to the Exchange has been satisfied, (f) an Officer's Certificate of the
Transferor that on the Exchange Date (i) after giving effect to the Exchange,
and any Additional Lease being transferred to the Trust on the Exchange Date
pursuant to subsection 2.6(a), no Pay Out Event or an event which with notice or
lapse of time or both would constitute a Pay Out Event shall have occurred and
(ii) after giving effect to such Exchange, the Asset Base would at least equal
the Aggregate Adjusted Principal Amount, and (g) evidence, satisfactory to the
Trustee, of any deposit to a Distribution Account required in connection with
the issuance of a Replacement Series. Upon satisfaction of such conditions, the
Trustee shall cancel the existing Transferor Interest or applicable Notes, as
the case may be, and issue or make an appropriate entry in the Register, as the
case may be and as provided above, such Series of Notes and a new Transferor
Interest, dated the Exchange Date. There is no limit to the number of Exchanges
that may be performed under this Agreement.
(c) In conjunction with an Exchange, the parties hereto shall
execute a Supplement, which shall specify the relevant terms with respect to any
newly issued Series of Notes, which may include without limitation: (i) its name
or designation, (ii) an Initial Principal Amount or the method of calculating
the Initial Principal Amount, (iii) the Note Rate (or formula for the
determination thereof), (iv) the Closing Date, (v) the Rating Agency or Agencies
rating such Series, (vi) the name of the Clearing Agency, if any, (vii) the
rights of the Holder of the Transferor Interest that have been transferred to
the Holders of such Series pursuant to such Exchange, (viii) the interest
payment date or dates and the date or dates from which interest shall accrue,
(ix) the method of allocating amounts to such Series pursuant to Article IV and,
if applicable, with respect to other Series and the method by which the
principal amount of Notes of such Series shall amortize or accrue, (x) the names
of any accounts to be used by such Series and the terms governing the operation
of any such accounts, (xi) the Series Termination Date, (xii) the terms of any
Enhancement with respect to such Series, (xiii) the Enhancement Provider(s), if
applicable, (xiv) the terms on which the Notes of such Series may be repurchased
or remarketed to other investors, (xv) any deposit into any account provided for
such Series, (xvi) the number of Classes of such Series, and if more than one
Class, the rights and priorities of each such Class, (xvii) the priority of any
Series with respect to any other Series, and (xviii) any other relevant terms of
such Series (including whether or not such Series will be pledged as collateral
for an issuance of any other securities, including commercial paper or whether
or not such Series is a Replacement Series) (all such terms, the "Principal
Terms" of such Series). The terms of such Supplement may modify
<PAGE>
or amend the terms of this Agreement solely as applied to such
new Series.
Section 6.13 Note Transfer Restrictions.
(a) Unless otherwise provided in the related Supplement, in
the case of any Notes issued by the Trust for which an Opinion of Counsel is not
delivered that such Class of Notes will be treated as debt for federal income
tax purposes (a "Restricted Note"), no sale, assignment, participation, transfer
or other disposition (a "Transfer") of any such Restricted Note (or any interest
therein) shall be made unless the Transferor and the Servicer shall have granted
their prior consent to such Transfer, which consent shall not be unreasonably
withheld. Moreover, in no event shall a transfer of a Restricted Note be
permitted to a partnership, S corporation or grantor trust. The Transferor and
Servicer shall not approve a Transfer of a Restricted Note and consent will be
deemed to be reasonably withheld if the Transfer creates a substantial risk that
the Trust would be taxable as a corporation for federal income tax purposes. Any
Holder of a Restricted Note which wishes to effect a Transfer must deliver to
the Transferor and the Servicer the following representation prior to the
Transfer:
The Purchaser has neither acquired nor will it sell, trade, assign or
otherwise dispose of the Note(s) (or any interest therein) or cause the
Note(s) (or any interest therein) to be marketed on or through (i) an
"established securities market" within the meaning of section
7704(b)(1) of the Code, including, without limitation, an
over-the-counter market or an interdealer quotation system that
regularly disseminates firm buy or sell quotations or (ii) a "secondary
market" within the meaning of section 7704(b)(2) of the Code, including
a market wherein the Notes (or any interests therein) are regularly
quoted by any person making a market in such interests and a market
wherein any person regularly makes available bid or offer quotes with
respect to the Notes (or any interest therein) and stands ready to
effect buy or sell transactions at the quoted prices for itself or on
behalf of others.
If the Transferor and Servicer do not object to the Transfer within 5 Business
Days of the receipt of the above representation, the Transfer Agent and
Registrar shall record the Transfer.
(b) The Transferor shall designate 20% of the principal amount
of each Class of Notes of a Series which is issued by the Trust for which an
Opinion of Counsel is not delivered that such Class of Notes will be treated as
debt for federal income tax purposes ("Restricted Subclass Notes") to be subject
to the following transfer restrictions in addition to those described in
subparagraph (a) of this Section: (i) if Restricted Subclass Notes are held by
the Transferor, such Notes
<PAGE>
will only be transferable with the consent of a majority in interest of each
Class of Notes for which an Opinion of Counsel is not delivered that such Class
of Notes will be treated as debt for federal income tax purposes and a majority
in interest of the holders of each issuance of constituent interests in the
Transferor Interest and (ii) if Restricted Subclass Notes are held by a Person
other than the Transferor, such Notes will only be transferable with the consent
of the Transferor, a majority in interest of each Class of Notes for which an
Opinion of Counsel is not delivered that such Class of Notes will be treated as
debt for federal income tax purposes and a majority in interest of the holders
of any constituent interests in the Transferor Interest.
Section 6.14 Constituent Transferor Interests.
(a) Subject to the satisfaction of the conditions set forth in
Section 6.14(c) and Section 6.3(b), the Holder of the Transferor Interest may at
any time and from time to time create a constituent interest in the Transferor
Interest by (i) authorizing or directing the Trustee to issue an interest in the
Trust that is payable from amounts that are otherwise allocable to the
Transferor Interest, or (ii) authorizing or directing the Trustee to reallocate
all or any portion of the amounts distributable to the Holder of the Transferor
Interest pursuant to Article IV and Article V to any other Holder. In connection
with such issuance or reallocation, the Transferor may assign an interest rate
to the Transferor Interest(s) or a portion thereof. Upon presentation to the
Trustee and the Paying Agent of documentation satisfactory to the Trustee (to
which the Trustee may be a party, if requested by the Transferor) reallocating
payments with respect to the Transferor Interest, the Paying Agent shall pay
amounts due hereunder to the Holder of the Transferor Interest or to the holders
of such constituent interests, as the case may be, pursuant to the terms of such
documentation. The minimum denomination of issuance of any constituent interest
in the Transferor Interest will be $20,000.
(b) The documentation referred to in subsection (a) of this
Section 6.14 shall set forth the rights of the holders of the interests issued
thereby with respect to the approval of amendments and waivers pursuant to
Section 13.1.
(c) As a condition precedent to the issuance of the
constituent interests pursuant to this Section 6.14, (A) the Trustee and the
Transferor shall have received an opinion of outside tax counsel to the effect
that (i) the constituent interests issued and sold to third parties will be
characterized as indebtedness or an interest in a partnership (not taxable as a
corporation) for federal income tax purposes, (ii) the issuance of the
constituent interests will not cause outstanding Notes to be characterized as
other than indebtedness for federal income tax purposes and (iii) the issuance
of the constituent interests will not be treated as a taxable sale, exchange or
other disposition of the Trust Assets for federal income tax purposes,
<PAGE>
(B) in the reasonable belief of the Transferor, as evidenced by an Officer's
Certificate, such issuance of constituent interests would not cause a Pay Out
Event to occur, or an event which, with notice or lapse of time or both, would
constitute a Pay Out Event, and (C) the Rating Agency Condition shall have been
satisfied.
(d) Any holder who wishes to effect a Transfer of a
constituent interest must deliver to the Transferor and the Servicer the
representation set forth in Section 6.13.
ARTICLE VII
OTHER MATTERS RELATING TO TRANSFEROR
Section 7.1 Liability of Transferor. The Transferor shall be
liable in accordance herewith to the extent, and only to the extent, of the
obligations specifically undertaken by the Transferor hereunder.
Section 7.2 Merger or Consolidation of, or Assumption
of the Obligations of, Transferor, etc.
(a) Transferor shall not consolidate with or merge into any
other Person or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the Person formed by such consolidation or into
which Transferor is merged or the Person which acquires by conveyance
or transfer the properties and assets of the Transferor substantially
as an entirety shall be, if the Transferor is not the surviving entity,
organized and existing under the laws of the United States of America
or any State or the District of Columbia and shall expressly assume, by
an agreement supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the performance of every
covenant and obligation of the Transferor, as applicable hereunder, and
shall benefit from all the rights granted to the Transferor, as
applicable hereunder;
(ii) the Transferor shall have delivered to the Trustee
and, to the extent provided in the related Supplement, to each
Enhancement Provider, an Officer's Certificate of Transferor and an
Opinion of Counsel, each stating that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply with this
Section 7.2 and that all conditions precedent herein provided for
relating to such transaction have been complied with and, in the case
of the Opinion of Counsel, that such supplemental agreement is legal,
valid and binding with respect to such surviving entity;
<PAGE>
(iii) the Transferor shall have complied with Section
6.3(b) to the extent applicable; and
(iv) the Transferor shall have delivered notice of such
consolidation, merger, conveyance or transfer to each Rating Agency
and, with respect to each Series that is rated by a Rating Agency, the
Rating Agency Condition shall have been satisfied and, with respect to
each other Series, the consent thereto of the Required Holders has been
obtained.
(b) The obligations of the Transferor hereunder shall not be
assignable nor shall any Person succeed to the obligations of the Transferor
hereunder except for mergers, consolidations, assumptions or transfers in
accordance with the provisions of the foregoing paragraph.
Section 7.3 Limitation on Liability of Transferor. Except as
expressly provided herein, neither the Transferor nor any of the directors,
officers, employees and agents of the Transferor shall be under any liability to
the Trust, the Trustee, the Noteholders, the Holder of the Transferor Interest
or any other Person for any action taken or for refraining from the taking of
any action pursuant to this Agreement whether arising from express or implied
duties under this Agreement, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement and any Supplement and the
issuance of the Notes and the book-entry notation in the Register evidencing the
Transferor Interest; provided, however, that the Transferor hereby assumes
liability for any liabilities, costs or expenses of the Trust arising under any
tax law, including without limitation any foreign, federal, state or local
income or franchise taxes or any other tax imposed on or measured by income (or
any interest or penalties with respect thereto or arising from a failure to
comply therewith) required to be paid by the Trust in connection herewith to any
taxing authority; provided, further, that this provision shall not protect
Transferor or any such Person against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of willful misconduct hereunder. The
Transferor and any director, officer, employee and agent of the Transferor may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.
Section 7.4 Liabilities. A creditor of the Trust may seek
personal satisfaction from the Transferor to the extent that the Trust assets
are insufficient to satisfy the creditor's claims as though this Agreement
created a partnership under the Delaware Uniform Partnership law in which the
Transferor is the general partner; provided, however, that the Transferor shall
not be liable to or indemnify or hold harmless the Trustee, the Noteholders or
the Collateral Trustee or any of its respective officers, directors, employees
or agents as to any loss,
<PAGE>
liability, expense, damage or injury suffered or sustained by reason of fraud,
negligence or willful misconduct on the part of the Trustee or the Collateral
Trustee, as the case may be, or any of its respective officers, directors,
employees or agents; and provided further, however, that, in no event will the
Transferor be liable, directly or indirectly, for or in respect of any
indebtedness evidenced or created by any Note or the Transferor Interest,
recourse as to which shall be limited solely to the assets of the Trust
allocated for the payment thereof as provided in this Agreement and any
applicable Supplement.
Section 7.5 Decisions with Respect to the Trust. Transferor
agrees that all decisions with respect to the Trust that are not, pursuant to
the terms of this Agreement, otherwise required to be made by other parties, are
to be made by the Transferor.
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.1 Liability of the Servicer. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) the Person formed by such consolidation or into
which the Servicer is merged or the Person which acquires by conveyance
or transfer the properties and assets of the Servicer substantially as
an entirety shall be, if the Servicer is not the surviving entity,
organized and existing under the laws of the United States of America
or any State or the District of Columbia and shall expressly assume, by
an agreement supplemental hereto, executed and delivered to the Trustee
in form satisfactory to the Trustee, the performance of every covenant
and obligation of the Servicer hereunder, and shall benefit from all
the rights granted to the Servicer, as applicable hereunder;
(ii) the Servicer has delivered to the Trustee and each
Enhancement Provider an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation, merger, conveyance or transfer
and such supplemental agreement comply with this Section 8.2 and that
all conditions precedent herein provided for relating to such
transaction have been complied with and, in the case of the Opinion of
Counsel, that such supplemental agreement is
<PAGE>
legal, valid and binding with respect to such surviving
entity;
(iii) the Servicer shall have delivered notice of such
consolidation, merger, conveyance or transfer to each of the Rating
Agencies; and
(iv) after giving effect thereto, no Pay Out Event or an
event which with notice or lapse of time or both would constitute a Pay
Out Event shall have occurred.
Section 8.3 Limitation on Liability of the Servicer and
Others. Except as provided herein, neither the Servicer nor any of the directors
or officers or employees or agents of the Servicer shall be under any liability
to the Trust, the Trustee, the Noteholders, the Holder of the Transferor
Interest or any other Person for any action taken or for refraining from the
taking of any action pursuant to this Agreement whether arising from express or
implied duties under this Agreement; provided, however, that this provision
shall not protect the Servicer or any such Person against any liability which
would otherwise be imposed by reason of its willful misfeasance, bad faith or
negligence in the performance of duties or by reason of its willful misconduct
hereunder. The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
Section 8.4 Indemnification of the Trust, the Trustee and the
Collateral Trustee. The Servicer shall indemnify and hold harmless the
Transferor, the Trust, the Trustee (and its officers, directors, employees and
agents) and the Collateral Trustee (and its officers, directors, employees and
agents) from and against any loss, liability, expense, damage or injury suffered
or sustained by reason of any acts, omissions or alleged acts or omissions
arising out of activities of the Trust, the Trustee or the Collateral Trustee
pursuant to this Agreement, including those arising from acts or omissions of
the Servicer pursuant to this Agreement, including, but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim; provided, however, that the Servicer shall not
indemnify the Transferor, the Trust, the Trustee or the Collateral Trustee if
such acts, omissions or alleged acts (other than its own) constitute willful
misfeasance, bad faith or negligence by such Person; provided further, that the
Servicer shall not indemnify the Transferor, the Trust, the Trustee or the
Collateral Trustee (or, directly or indirectly, any Noteholders or any Note
Owners), for any liabilities, costs or expenses of the Transferor or the Trust
with respect to any action taken by the Trustee or the Collateral Trustee, as
the case may be, at the request of any Noteholders; provided further, that the
Servicer shall not indemnify the
<PAGE>
Transferor or the Trust (or, directly or indirectly, any Noteholders or any Note
Owners) as to any losses, claims or damages incurred by any of them in their
capacities as investors, including without limitation losses incurred as a
result of Defaulted Leases which are written off as uncollectible; and provided
further, that the Servicer shall not indemnify the Trust, the Trustee, the
Collateral Trustee (or, directly or indirectly, any Noteholders or the Note
Owners) for any liabilities, costs or expenses of the Trust, the Trustee, the
Collateral Trustee (or, directly or indirectly, any Noteholders or the Note
Owners) arising under any tax law, including without limitation any federal,
state or local income or franchise taxes or any other tax imposed on or measured
by income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith) required to be paid by the Trust, such Noteholders
or such Note Owners in connection herewith to any taxing authority. The
provisions of this indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof.
Any indemnification pursuant to this Section shall not be
payable from the Trust Assets.
The obligations of the Servicer under this Section 8.4 shall
survive the termination of the Trust and the removal of the Servicer and the
resignation or removal of the Trustee and/or the Collateral Trustee.
Notwithstanding the foregoing, the Servicer shall not be responsible for the
actions of a successor servicer.
Section 8.5 The Servicer Not to Resign. The Servicer shall not
resign from the obligations and duties hereby imposed on it except upon
determination that (i) the performance of its duties hereunder is or becomes
impermissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 10.2. If the Trustee is unable within 120 days of the date of such
determination to appoint a Successor Servicer, the Trustee shall serve as
successor Servicer hereunder subject to the provisions of Section 10.2 hereof.
Section 8.6 Access to Certain Documentation and Information
Regarding the Included Leases. To the extent that documentation regarding
Included Leases and related Equipment is not otherwise held in custody by the
Trustee, the Servicer shall provide to the Trustee access to the documentation
regarding such Included Leases and the related Equipment in such cases where the
Trustee is required in connection with the enforcement of the rights of the
Trust, or by applicable statutes or regulations to
<PAGE>
review such documentation, such access being afforded without charge but only
(i) upon reasonable request, (ii) during normal business hours, (iii) subject to
the Servicer's normal security and confidentiality procedures and (iv) at
offices designated by the Servicer.
Section 8.7 Delegation of Duties. Any delegation of duties
permitted under Article III shall not relieve the Servicer of its liability and
responsibility with respect to such duties, and shall not constitute a
resignation within the meaning of Section 8.5.
Section 8.8 Contents of Records. The Servicer shall clearly
and unambiguously identify each Included Lease and the related Equipment in its
computer or other records to reflect that such Leases and Equipment have been
transferred by the Transferor to the Trust pursuant to this Agreement.
ARTICLE IX
PAY OUT EVENTS
Section 9.1 Pay Out Events. If any one of the
following events shall occur with respect to any Series:
(a) failure on the part of the Transferor:
(i) to make any payment or deposit required by the
terms of (A) the Agreement, or (B) any Supplement, on or
before the date occurring three Business Days after the date
such payment or deposit is required to be made; or
(ii) duly to observe or perform in any material respect
any covenants or agreements applicable to it set forth in the
Agreement or any Supplement, which failure has a material
adverse effect on the Noteholders of such Series and which
continues unremedied for a period of 60 days after the first
to occur of (A) the date on which written notice of such
failure, requiring the same to be remedied, shall have been
given to the Transferor by the Trustee, or to the Transferor
and the Trustee by the Holders of a principal amount of Notes
aggregating not less than 25% of the Principal Amount of any
Series adversely affected thereby or (B) the date on which a
Responsible Officer of the Servicer becomes aware of such
failure, and such failure continues to affect materially and
adversely the interests of such Noteholders for such period;
or
(b) any representation or warranty made by the Transferor in
this Agreement or any Supplement, or any
<PAGE>
information contained in a computer file or microfiche list required to
be delivered by the Transferor pursuant to Section 2.1 or 2.6, shall
prove to have been incorrect in any material respect when made or when
delivered, which continues to be incorrect in any material respect for
a period of 60 days after the first to occur of (A) the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Transferor by the Trustee, or to the
Transferor and the Trustee by the Holders of a principal amount of
Notes aggregating not less than 25% of the Principal Amount of any
Series adversely affected thereby and (B) the date on which a
Responsible Officer of the Transferor becomes aware of such
incorrectness, and as a result of which the interests of the
Noteholders are materially and adversely affected and continue to be
materially and adversely affected for such period; provided, however,
that a Pay Out Event pursuant to this subsection 9.1(b) shall not be
deemed to have occurred hereunder if the Transferor has accepted
reassignment of the related Lease, or all of such Leases, if
applicable, during such period in accordance with the provisions
hereof; or
(c) an Insolvency Event shall occur with respect to the
Transferor or the Servicer; or
(d) any Servicer Default shall occur; or
(e) any Note has not been paid in full on or before its
Scheduled Termination Date; or
(f) the Trust or Transferor shall become an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
then, and in any such event described in subparagraph (a), (b) or (d), after the
applicable grace period set forth in such subparagraphs, either the Trustee or
the Holders of a principal amount of Notes aggregating more than 662/3% of the
Aggregate Principal Amount by notice then given in writing to the Transferor and
the Servicer (and to the Trustee if given by the Noteholders) may declare that a
pay out event (a "Trust Pay Out Event") has occurred as of the date of such
notice and in the case of any event described in subparagraph (c), (e) or (f) a
Pay Out Event shall occur immediately upon the occurrence of such event without
any notice or other action on the part of the Trustee or the Noteholders.
Notwithstanding the foregoing, a delay in or failure of performance referred to
in subsection 9.1(a)(i) for a period of ten Business Days, or under subsection
9.1(a)(ii) or 9.1(b) for a period of 60 days, in each case without giving effect
to any grace period specified in such subsections, shall not constitute a Pay
Out Event for purposes of this sentence until the expiration of such period, if
such failure could not be prevented by the exercise of reasonable diligence by
the Transferor or the Servicer and such failure was
<PAGE>
caused by (i) an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion, riot or sabotage, epidemics, landslides,
lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or
meltdowns, floods, power outages, bank closings, or similar causes or (ii)
computer malfunction, communication malfunction or other electronic system
malfunction or similar causes. The preceding sentence shall not relieve the
Transferor or the Servicer from using all reasonable efforts to perform their
respective obligations in a timely manner in accordance with the terms of this
Agreement and any Supplement and the Transferor or the Servicer shall provide
the Trustee and each Rating Agency with an Officer's Certificate giving prompt
notice of such failure, together with a description of its efforts to so perform
its obligations. Notice of any such Pay Out Event shall be given by the Servicer
to the Rating Agencies.
Section 9.2 Additional Rights Upon the Occurrence of Certain
Events. (a) If an Insolvency Event occurs with respect to the Transferor, the
Transferor shall promptly give notice to the Trustee thereof. Within 15 days
after a Responsible Officer of the Trustee receives notice of the Insolvency
Event or otherwise learns of an Insolvency Event, the Trustee shall (i) publish
a notice in an Authorized Newspaper that an Insolvency Event has occurred and
that the Trustee intends to sell, dispose of or otherwise liquidate the Trust
Assets in a commercially reasonable manner and (ii) send written notice to the
Noteholders describing the provisions of this Section 9.2 and requesting
instructions from such Holders. If after 30 days from the day notice pursuant to
clause (i) above is first published (the "Publication Date"), the Trustee shall
not have received written instructions from a majority in interest of the
Holders of each Class of Notes of a Series which is issued by the Trust for
which an Opinion of Counsel is not delivered that such Class of Notes will be
treated as debt for federal income tax purposes and a majority in interest of
the holders of each issuance of constituent interests in the Transferor Interest
to the effect that the Trustee shall not instruct the Servicer to sell, dispose
of, or otherwise liquidate the Trust Assets, the Trustee, subject to the
following proviso, shall instruct the Servicer to proceed to take such
preparatory actions as the Trustee may deem appropriate in order to sell,
dispose of, or otherwise liquidate the Trust Assets in a commercially reasonable
manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids; provided, however, no such sale, disposition
or liquidation, whether in whole or in part, of the Trust Assets shall be
consummated until and unless the occurrence of refusal to provide the written
response referred to above within the 30 days described above (a "Response").
The Trustee may obtain a prior determination from any bankruptcy trustee,
conservator or receiver that the terms and manner of any proposed sale,
disposition or liquidation are commercially reasonable. The provisions of
Sections 9.1 and 9.2 shall not be deemed to be mutually exclusive.
<PAGE>
(b) The proceeds from the sale, disposition or liquidation of
the Trust Assets pursuant to subsection (a) above shall be treated as
Collections on the Included Leases and shall be allocated and deposited in
accordance with the provisions of Article IV. On the day following the
Distribution Date on which such proceeds are scheduled to be distributed to the
Noteholders, the Trust shall terminate.
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults. If any one of the
following events (a "Servicer Default") shall occur and be
continuing:
(a) any failure by the Servicer to make any payment, transfer
or deposit or to give instructions or notice to the Trustee pursuant to
Article IV or to make any required drawing, withdrawal, or payment
under any Enhancement, or to deliver any required monthly servicing
report hereunder on or before the date occurring three Business Days
after the date such payment, transfer, deposit, withdrawal or drawing,
or such instruction or notice or report is required to be made or
given, as the case may be, under the terms of this Agreement; or
(b) failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the Servicer set forth in this Agreement or any Supplement which has a
material adverse effect on the Noteholders and the Holder of the
Transferor Interest, which continues unremedied for a period of 30 days
after the first to occur of (A) the date on which written notice of
such failure requiring the same to be remedied shall have been given to
the Servicer by the Trustee, or to the Servicer and the Trustee by the
Holders of a principal amount of Notes aggregating not less than 25% of
the Principal Amount of any Series adversely affected thereby and (B)
the date on which a Responsible Officer of the Servicer becomes aware
thereof and such failure continues to materially adversely affect such
Noteholders for such period; or
(c) any representation, warranty or certification made by the
Servicer in this Agreement or any Supplement or in any certificate
delivered pursuant to this Agreement or any Supplement shall prove to
have been incorrect when made, which has a material adverse effect on
the Noteholders and the Holder of the Transferor Interest and which
continues to be incorrect in any material respect for a period of 30
days after the first to occur of (A) the date on which written notice
of such incorrectness requiring the same to be
<PAGE>
remedied shall have been given to the Servicer by the Trustee, or to
the Servicer and the Trustee by the Holders of a principal amount of
Notes aggregating not less than 25% of the Principal Amount of any
Series adversely affected thereby and (B) the date on which a
Responsible Officer of the Servicer becomes aware thereof, and such
incorrectness continues to materially adversely affect such Holders for
such period; or
(d) an Insolvency Event shall occur with respect to the
Servicer; or
(e) the Servicer delegates any of its duties hereunder except
to the extent such delegation is permitted hereunder; or
(f) as of the last day of any fiscal quarter of the Servicer
the consolidated net worth of the Servicer is less than $6,000,000;
then, so long as such Servicer Default shall not have been remedied, either the
Trustee or the Holders of a principal amount of Notes aggregating more than
662/3% of the Aggregate Principal Amount, by notice then given in writing to the
Servicer (and to the Trustee if given by the Noteholders) (a "Termination
Notice"), may terminate all of the rights and obligations of the Servicer as
Servicer under this Agreement. After receipt by the Servicer of such Termination
Notice, and on the date that a Successor Servicer shall have been appointed by
the Trustee pursuant to Section 10.2, all authority and power of the Servicer
under this Agreement shall pass to and be vested in a Successor Servicer; and,
without limitation, the Trustee is hereby authorized and empowered (upon the
failure of the Servicer to cooperate) to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other instruments
upon the failure of the Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights. The
Servicer agrees to cooperate with the Trustee and such Successor Servicer in
effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing hereunder, including without limitation, the transfer to such
Successor Servicer of all authority of the Servicer to service the Trust Assets
provided for under this Agreement, including, without limitation, all authority
over all Collections which shall on the date of transfer be held by the Servicer
for deposit, or which have been deposited by the Servicer, in any Collection
Account or Series Account, or which shall thereafter be received with respect to
the Trust Assets, and in assisting the Successor Servicer and in enforcing all
rights to Insurance Proceeds. The Servicer shall promptly transfer the Lease
Files and its electronic records relating to the Included Leases to the
Successor Servicer in such electronic form as the Successor Servicer may
reasonably request
<PAGE>
and shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Included Leases in the manner and at such times as the Successor Servicer shall
reasonably request. To the extent that compliance with this Section 10.1 shall
require the Servicer to disclose to the Successor Servicer information of any
kind which the Servicer reasonably deems to be confidential, the Successor
Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the Servicer shall deem reasonably necessary to
protect its interest. The Servicer shall, on the date of any servicing transfer,
transfer all of its rights and obligations, if any, in respect of any
Enhancement to the Successor Servicer. In connection with any servicing
transfer, all reasonable costs and expenses (including reasonable attorneys'
fees and expenses) incurred in connection with transferring the Included Leases
and the other Trust Assets to the Successor Servicer and amending this Agreement
to reflect such succession as Successor Servicer pursuant to this Section 10.1
and Section 10.2 shall be paid by the Servicer (unless the Trustee is acting as
the Servicer, in which case the original Servicer) upon presentation of
reasonable documentation of such costs and expenses.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in subsection 10.1(a) for a period of ten Business Days,
or under subsection 10.1(b), (c) or (e) for a period of 60 days, in each case
without giving effect to any grace period specified in such subsections, shall
not constitute a Servicer Default if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Servicer and such delay
or failure was caused by an act of God or public enemy, acts of declared or
undeclared war, public disorder, rebellion, riot or sabotage, epidemics,
landslides, lightning, fire, hurricanes, tornadoes, earthquakes, nuclear
disasters or meltdowns, floods, power outages, bank closings, communications
malfunction, computer malfunction or other electronic system malfunction or
similar causes. The preceding sentence shall not relieve the Servicer from using
its best efforts to perform its obligations in a timely manner in accordance
with the terms of this Agreement and the Servicer shall provide the Trustee and
the Transferor with an Officer's Certificate giving prompt notice of such
failure or delay by it, together with a description of the cause of such failure
or delay and its efforts so to perform its obligations.
Section 10.2 Trustee to Act; Appointment of Successor. (a) On
and after the receipt by the Servicer of a Termination Notice pursuant to
Section 10.1, the Servicer shall continue to perform all servicing functions
under this Agreement until the date specified in the Termination Notice or
otherwise specified by the Trustee in writing or, if no such date is specified
in such Termination Notice or otherwise specified by the Trustee, until a date
mutually agreed upon by the Servicer and the Trustee. The Trustee shall as
promptly as possible after the
<PAGE>
giving of a Termination Notice appoint a successor servicer (the "Successor
Servicer"), and such Successor Servicer shall accept its appointment by a
written assumption in a form acceptable to the Trustee. If the Trustee is unable
to appoint any successor servicer and the Servicer delivers an Officer's
Certificate to the effect that it cannot in good faith cure the Servicer Default
which gave rise to a transfer of servicing, then the Trustee shall offer the
Servicer the right to accept retransfer of all the Trust Assets and the Servicer
may accept retransfer of all the Trust Assets, provided, however, that if the
long-term unsecured debt obligations of the Servicer are not rated at the time
of such purchase at least investment grade by each Rating Agency, no such
retransfer shall occur unless the Servicer shall deliver an Opinion of Counsel
reasonably acceptable to the Trustee that such retransfer would not constitute a
fraudulent conveyance of the Servicer. The retransfer deposit amount for such a
retransfer shall be equal to the sum of the Aggregate Principal Amount, plus
accrued interest thereon, at the Note Rate, through the date of retransfer. In
the event that a Successor Servicer has not been appointed and has not accepted
its appointment at the time when the Servicer ceases to act as Servicer, the
Trustee without further action shall automatically be appointed the Successor
Servicer. Notwithstanding the above, the Trustee shall, if it is legally unable
so to act, petition a court of competent jurisdiction to appoint any established
financial institution having a net worth of not less than $20,000,000 and whose
regular business includes the servicing of Leases as the Successor Servicer
hereunder.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer. Any Successor Servicer, by its
acceptance of its appointment, will automatically agree to be bound by the terms
and provisions of any Enhancement to the extent that such terms apply to the
Servicer.
(c) In connection with such appointment and assumption, the
Trustee shall be entitled to such compensation, or may make such arrangements
for the compensation of the Successor Servicer out of Collections, as it and
such Successor Servicer shall agree; provided, however, that no such
compensation shall be in excess of the Monthly Servicing Fee.
(d) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of the Trust
pursuant to Section 12.1 and shall pass to and be vested in the Transferor and,
without limitation, the Transferor is hereby authorized and empowered to execute
and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and
<PAGE>
accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Servicer agrees to cooperate
with the Transferor in effecting the termination of the responsibilities and
rights of the Servicer to conduct servicing on the Included Leases.
Section 10.3 Notification to Holders. Upon the Servicer's
becoming aware of the occurrence of any Servicer Default, the Servicer shall
give prompt written notice thereof to the Trustee and the Trustee shall give
notice to the Noteholders at their respective addresses appearing in the
Register. Upon any termination or appointment of a Successor Servicer pursuant
to this Article X, the Trustee shall give prompt written notice thereof to the
Noteholders at their respective addresses appearing in the Register. A copy of
any notice given pursuant to this Section 10.3 shall be delivered by the
Servicer to each Rating Agency.
Section 10.4 Waiver of Past Defaults. The Holders of a
principal amount of Notes aggregating not less than 662/3% of the Principal
Amount of each Series affected thereby may, on behalf of all Noteholders and the
Holder of the Transferor Interest, waive any default by the Servicer or the
Transferor in the performance of its obligations hereunder and its consequences,
except a default in the failure to make any required deposits or payments in
accordance with Article IV, provided, however, that no such waiver shall affect
any rights of, or obligations to, any Enhancement Provider hereunder. Upon any
such waiver of a past default, such default shall cease to exist, and any
default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
ARTICLE XI
THE TRUSTEE AND THE COLLATERAL TRUSTEE
Section 11.1 Duties of Trustee.
(a) The Trustee, prior to the occurrence of a Servicer Default
of which a Responsible Officer of the Trustee has actual knowledge and after the
curing of all Servicer Defaults which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement, and no implied duties or covenants shall be read into this Agreement
against the Trustee. If a Responsible Officer of the Trustee has received notice
that a Servicer Default has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in the exercise of such
rights and powers, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs,
<PAGE>
provided, however, that if the Trustee shall assume the duties of the Servicer
pursuant hereto, the Trustee in performing such duties shall use the degree of
skill and attention customarily exercised by a servicer with respect to
comparable Leases that it services for itself or others.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they reasonably conform to the requirements of this Agreement.
The Trustee shall give prompt written notice to all Holders of any material lack
of conformity of any such instrument to the applicable requirements of this
Agreement discovered by the Trustee which would entitle a specified percentage
of the Holders to take any action pursuant to this Agreement. Notwithstanding
the foregoing, prior to the occurrence of a Servicer Default actually known to a
Responsible Officer of the Trustee, the Trustee shall have no obligation to
independently calculate, recompute, verify or confirm any information received
from the Servicer.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however, that:
(i) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the Holders of a
principal amount of Notes aggregating more than 50% of the Principal
Amount of any Series relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement; and
(iii) the Trustee shall not be charged with knowledge of
any failure by the Servicer to comply with the obligations of the
Servicer referred to in Section 10.1 or any Pay Out Event unless a
Responsible Officer of the Trustee obtains actual knowledge of such
failure or Pay Out Event or the Trustee receives written notice of such
failure from the Servicer or any Holders of a principal amount of Notes
aggregating not less than 10% of the Principal Amount of any Series.
<PAGE>
(d) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if
there is reasonable ground for believing that the repayment of such funds or
indemnity against satisfactory to it such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall in
any event require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement,
the Trustee shall take no action reasonably likely to impair the interests of
the Trust in the Trust Assets now existing or hereafter arising or to impair the
value of any Included Lease.
(f) Except as provided in Sections 2.6 and 2.7, the Trustee
shall have no power to vary the corpus of the Trust, including, without
limitation, the power to (i) accept any substitute obligation for a Lease
initially assigned to the Trust under Section 2.1 or 2.6, (ii) add any other
investment, obligation or security to the Trust or (iii) withdraw from the Trust
any Leases, except for a withdrawal permitted under subsection 2.4(d) or 2.4(e),
Article IV, or Section 9.2 or 12.1.
(g) In the event that to the actual knowledge of a Responsible
Officer of the Trustee the Paying Agent or the Transfer Agent and Registrar
shall fail to perform any obligation, duty or agreement in the manner or on the
day required to be performed by the Paying Agent or the Transfer Agent and
Registrar, as the case may be, under this Agreement, the Trustee shall be
obligated promptly to perform such obligation, duty or agreement in the manner
so required.
(h) If the Transferor has agreed to transfer any of its Leases
to another Person, upon the written request of the Transferor, the Trustee on
behalf of the Trust will enter into such intercreditor agreements with the
transferee of such Leases as are customary and necessary to identify the rights
of the Trust and such other Person, as the case may be, in the Transferor's
Leases: provided, that the Trust shall not enter into any intercreditor
agreement which could reasonably be expected to adversely affect the interests
of itself or the Noteholders and the Holder of the Transferor Interest and, upon
the request of the Trustee, the Transferor will deliver an Opinion of Counsel on
any matters relating to such intercreditor agreement, requested by the Trustee.
Section 11.2 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.1:
<PAGE>
(a) the Trustee may rely on and shall be protected in
acting on, or in refraining from acting in accordance with, any
resolution, Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented to it pursuant to
this Agreement by the proper party or parties;
(b) the Trustee may consult with counsel and any advice
from counsel or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered
or omitted by it hereunder in good faith and in accordance with such
advice or Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Noteholders or
the Holder of the Transferor Interest or any Enhancement Provider,
pursuant to the provisions of this Agreement, unless such Holders or
such Enhancement Provider shall have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby; provided,
however, that nothing contained herein shall relieve the Trustee of the
obligations, upon the occurrence of any Servicer Default (which has not
been cured) of which a Responsible Officer of the Trustee has actual
knowledge, to exercise such of the rights and powers vested in it by
this Agreement or any Enhancement, and to use the same degree of care
and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs;
(d) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(e) the Trustee shall not be bound to make any investigation
into the facts of matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in
writing so to do by Holders of a principal amount of Notes aggregating
more than 50% of the Principal Amount of any Series, provided, however,
that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the
making of such investigation shall be, in the sole discretion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Agreement, the
<PAGE>
Trustee may require indemnity satisfactory to it against such cost,
expense or liability as a condition to so proceeding;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian or nominee, and the Trustee
shall not be responsible for the supervision of or any misconduct or
negligence on the part of any such agent, attorney, custodian or
nominee appointed with due care by it hereunder;
(g) except as may be required pursuant to subsection 11.1(a),
the Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Included Leases
or the related Equipment for the purpose of establishing the presence
or absence of defects, the compliance by the Transferor with its
representations and warranties or for any other purpose; and
(h) the right of the Trustee to perform any discretionary act
enumerated in this Agreement or any Supplement shall not be construed
as a duty, and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of any such act.
(i) in the event that the Trustee is the Paying Agent,
Transfer Agent or Registrar, the rights and protections afforded to the
Trustee hereunder shall also be afforded to the Trustee acting in such
other capacities.
Section 11.3 Trustee Not Liable for Recitals in Notes. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Notes (other than the certificate of authentication on the
Notes). Except as set forth in Section 11.15, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or any
Supplement or of the Notes and the Transferor Interest (other than the
certificate of authentication on the Notes) or of any Lease or related document.
The Trustee shall not be accountable for the use or application by the
Transferor of any of the Notes or the Transferor Interest or of the proceeds
thereof, or for the use or application of any funds paid to the Transferor in
respect of the Included Leases or deposited in the Collection Account, the
Excess Funding Account or any other Series Account, or withdrawn from the
Collection Account, by the Servicer. The Trustee shall have no duty to conduct
any affirmative investigation as to the occurrence of any condition requiring
the repurchase of any Lease by the Transferor pursuant to this Agreement or any
Supplement or the eligibility of any Lease for purposes of this Agreement or any
Supplement. The Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
<PAGE>
hereunder (unless the Trustee shall have become the Successor Servicer) or to
prepare or file any Securities and Exchange Commission filing for the Trust or
to record this Agreement or any Supplement.
Section 11.4 Trustee May Own Notes. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes, and
may deal with the Transferor, the Servicer or any Enhancement Provider, with the
same rights as it would have if it were not the Trustee.
Section 11.5 Servicer to Pay Trustee's Fees and Expenses. The
Servicer covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to receive, compensation as agreed upon (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trust hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and, subject to Section 8.4, the
Servicer will pay or reimburse the Trustee (without reimbursement from any
Series Account or otherwise) upon its request for all reasonable expenses,
disbursements and advances, if any, incurred or made by the Trustee in
accordance with any of the provisions of this Agreement (including the fees and
reasonable expenses of its agents and counsel) except any such expense,
disbursement or advance as may arise from its negligence or bad faith and except
as provided in the following sentence. If the Trustee is appointed Successor
Servicer pursuant to Section 10.2, the provisions of this Section 11.5 shall not
apply to expenses, disbursements and advances made or incurred by the Trustee in
its capacity as Successor Servicer.
The obligations of the Servicer under this Section 11.5 shall
survive the termination of the Trust and the resignation or removal of the
Trustee.
In the case of a sale, disposition or liquidation of the Trust
Assets pursuant to subsection 9.2(a), the Trustee shall be entitled to retain
from any amounts distributable to the Transferor pursuant to any Supplement with
respect to any Series from the proceeds of such sale, disposition or liquidation
an amount equal to the Trustee's expenses in connection with such sale,
disposition or liquidation and the performance by the Trustee of the procedures
set forth in subsection 9.2(a).
Whenever the Trustee incurs expenses after the occurrence of
an Insolvency Event with respect to the Transferor or Servicer, the expenses are
intended to constitute expenses of administration under Title 11 of the United
States Code or any other applicable federal or state bankruptcy, insolvency or
similar law.
<PAGE>
Section 11.6 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States of America or any state thereof authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $100,000,000 and subject to supervision or examination by
Federal or state authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section 11.6,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In addition, no institution shall qualify as a successor trustee
hereunder unless its long-term debt obligations are rated at least investment
grade by each Rating Agency. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 11.6, the Trustee
shall resign immediately in the manner and with the effect specified in Section
11.7.
Section 11.7 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Transferor and
the Servicer. Upon receiving such notice of resignation, the Transferor shall
(i) promptly appoint a successor trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee and (ii) provide written notice to each Rating
Agency of such resignation. If no successor trustee shall have been so appointed
and have accepted within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
(b) The Servicer may at any time remove the Trustee and
discharge it from the trust hereby created and appoint a successor trustee if
(i) no Pay Out Event shall have occurred and is continuing and (ii) the Rating
Agency Condition shall have been satisfied with respect thereto, by giving
written notice thereof to the Trustee, provided, that all amounts then owing to
the Trustee shall have been paid in full prior to any such removal.
(c) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 and shall fail to resign after
written request therefor by the Transferor, or if at any time the Trustee shall
be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee by written instrument, in duplicate, one copy
<PAGE>
of which instrument shall be delivered to the Trustee so removed
and one copy to the successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 11.7
shall not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.8.
Section 11.8 Successor Trustee. (a) Any successor trustee
appointed as provided in Section 11.7 shall execute, acknowledge and deliver to
the Transferor and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein. The predecessor Trustee shall
deliver to the successor trustee all documents and statements held by it
hereunder; and Transferor and the predecessor Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided
in this Section 11.8 unless at the time of such acceptance such successor
trustee shall be eligible under the provisions of Section 11.6.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to all Noteholders and the Holder of the Transferor
Interest at their addresses as shown in the Register, and also to each Rating
Agency.
Section 11.9 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.6, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust may at the time be located, the Trustee shall have the power and
<PAGE>
may execute and deliver all instruments to appoint one or more Persons to act as
a co-trustee or co-trustees, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity
and for the benefit of the Noteholders and the Holder of the Transferor
Interest, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section 11.10, such powers, duties, obligations, rights
and trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 11.6 and no notice to Noteholders and the
Holder of the Transferor Interest of the appointment of any co-trustee or
separate trustee shall be required under Section 11.8.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any laws of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording
<PAGE>
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11 Tax Returns. As set forth in Section 3.13, the
Trustee shall not file any federal tax returns on behalf of the Trust; provided,
however, that if the Trust shall be required to file tax returns, the Servicer,
as soon as practicable after it is made aware of such requirement, shall prepare
or cause to be prepared, and the Trustee is authorized hereunder to sign, any
tax returns required to be filed by the Trust and, to the extent possible, the
Servicer shall deliver such returns to the Trustee at least five days before
such returns are due to be filed. The Servicer shall prepare or shall cause to
be prepared all tax information required by law to be distributed to Noteholders
and the Holder of the Transferor Interest and shall deliver such information to
the Trustee at least five days prior to the date it is required by law to be so
distributed to Holders. The Trustee, upon written request, will furnish the
Servicer with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust. In
no event shall the Trustee or the Servicer be liable for any liabilities, costs
or expenses of the Trust, the Noteholders or the Note Owners arising under any
tax law, including without limitation federal, state or local income or excise
taxes or any other tax imposed on or measured by income (or any interest or
penalty with respect thereto or arising from a failure to comply therewith).
Nothing in this Section 11.11 shall be construed as inconsistent with the
characterization of the Notes as indebtedness of the Transferor for purposes of
federal, state and local income or franchise taxes and any other tax imposed
upon or measured by income, as expressed in Section 3.13.
Section 11.12 Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under this Agreement or the Notes and the
Transferor Interest may be prosecuted and enforced by the Trustee without the
possession of any of the Notes and the Transferor Interest, or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Noteholders and the
<PAGE>
Holder of the Transferor Interest in respect of which such judgment has been
obtained.
Section 11.13 Suits for Enforcement. If a Servicer Default of
which a Responsible Officer of the Trustee has actual knowledge shall occur and
be continuing, the Trustee, in its discretion, may, subject to the provisions of
Section 10.1, proceed to protect and enforce its rights and the rights of the
Noteholders and the Holder of the Transferor Interest under this Agreement or
any Supplement by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or any Supplement or in aid of the execution of any power granted
in this Agreement or any Supplement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or such
Holders.
Section 11.14 Rights of Holders to Direct Trustee. Holders of
a principal amount of Notes aggregating more than 50% of the Aggregate Principal
Amount (or, with respect to any remedy, trust or power that does not relate to
all Series, 50% of the aggregate unpaid principal amount of the Notes of all
Series to which such remedy, trust or power relates) shall have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that, subject to Section 11.1, the Trustee shall
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability or be unduly prejudicial to
the rights of Noteholders not parties to such direction; and provided further
that nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction.
Section 11.15 Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(i) The Trustee is a banking corporation organized,
existing and in good standing under the laws of the State of New York;
(ii) The Trustee is an entity that satisfies the
eligibility requirements of Section 11.6;
(iii) The Trustee has full power, authority and right to
execute, deliver and perform this Agreement, and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Agreement; and
<PAGE>
(iv) This Agreement has been duly executed and delivered
by the Trustee.
Section 11.16 Maintenance of Office or Agency. The Trustee
will maintain at its expense in the Borough of Manhattan, The City of New York,
an office or offices or agency or agencies where notices and demands to or upon
the Trustee in respect of the Notes and this Agreement may be served. The
Trustee initially appoints its Corporate Trust Office as its office for such
purposes in New York. The Trustee will give prompt written notice to the
Servicer and to the Noteholders and the Holder of the Transferor Interest of any
change in the location of the Register or any such office or agency.
Section 11.17 Release of Collateral Trustee's Lien. Whenever
under this Agreement the Trustee retransfers Trust Assets to the Transferor, the
security interest in favor of the Collateral Trustee in such Included Leases and
the related Equipment will be automatically released upon such retransfer.
Whenever under this Agreement an Included Lease becomes an Expired Lease or an
Early Termination Lease, the security interest in favor of the Collateral
Trustee in such Included Lease will be automatically released upon such event.
Whenever under this Agreement the Servicer substitutes or replaces any unit of
Equipment as contemplated in Section 3.1 or any Included Lease and related
Equipment as contemplated in Section 2.7 or 2.8, the security interest in favor
of the Collateral Trustee in such unit of Equipment or Included Lease and
related Equipment, as applicable, will be automatically released upon such
event. In connection with any such release, the Collateral Trustee will execute
and deliver to the Trustee (with a copy to the Servicer) any assignments,
termination statements and any other releases and instruments as the Trustee or
the Servicer may request in order to effect such release.
Section 11.18 Requests for Agreement. A copy of this Agreement
may be obtained by any Holder by a request in writing to the Trustee addressed
to the Corporate Trust Office and will be provided at the expense of the
Transferor.
Section 11.19 Duties of Collateral Trustee.
(a) The Collateral Trustee, prior to the occurrence of a Pay
Out Event of which a Responsible Officer of the Collateral Trustee has actual
knowledge and after the curing of all Pay Out Events which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement, and no implied duties or covenants shall be read into
this Agreement against the Collateral Trustee. If a Responsible Officer of the
Collateral Trustee has received notice that a Pay Out Event has occurred (which
has not been cured or waived), the Collateral Trustee shall exercise such of the
rights and powers vested in it by this Agreement, and use the same degree of
care and skill in the exercise of such rights and powers, as a prudent
<PAGE>
person would exercise or use under the circumstances in the conduct of such
person's own affairs.
(b) In the absence of bad faith on its part, the Collateral
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Collateral Trustee and conforming to the requirements of this
Agreement; provided, however, that the Collateral Trustee shall examine the
certificates and opinions to determine whether or not they conform to any
applicable requirements of this Agreement.
(c) No provision of this Agreement shall be construed to
relieve the Collateral Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided, however,
that:
(i) the Collateral Trustee shall not be personally
liable for an error of judgment made in good faith by a Responsible
Officer or Responsible Officers of the Collateral Trustee, unless it
shall be proved that the Collateral Trustee was negligent in
ascertaining the pertinent facts;
(ii) the Collateral Trustee shall not be personally
liable with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with the direction of the
Holders of a principal amount of Notes aggregating more than 50% of the
Principal Amount of any Series relating to the time, method and place
of conducting any proceeding for any remedy available to the Collateral
Trustee, or exercising any trust or power conferred upon the Collateral
Trustee, under this Agreement; and
(iii) the Collateral Trustee shall not be charged with
knowledge of any Pay Out Event unless a Responsible Officer of the
Collateral Trustee obtains actual knowledge of such Pay Out Event.
(d) The Collateral Trustee shall not be required to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if there is reasonable ground for believing that the repayment of such funds or
indemnity against satisfactory to it such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall in
any event require the Collateral Trustee to perform, or be responsible for the
manner of performance of, any of the obligations of the Servicer under this
Agreement.
(e) Except for actions expressly authorized by this Agreement,
the Collateral Trustee shall take no action reasonably likely to impair the
interests of the Trust in the Trust Assets
<PAGE>
now existing or hereafter arising or to impair the value of any Included Lease.
Section 11.20 Certain Matters Affecting the Collateral
Trustee. Except as otherwise provided in Section 11.19:
(a) the Collateral Trustee may rely on and shall be
protected in acting on, or in refraining from acting in accordance
with, any resolution, Officer's Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented to it
pursuant to this Agreement by the proper party or parties;
(b) the Collateral Trustee may consult with counsel and
any advice from counsel or Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance
with such advice or Opinion of Counsel;
(c) the Collateral Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement, or
to institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Noteholders or
any Enhancement Provider, pursuant to the provisions of this Agreement,
unless such Holders or such Enhancement Provider shall have offered to
the Collateral Trustee security or indemnity satisfactory to it against
the costs, expenses and liabilities which may be incurred therein or
thereby; provided, however, that nothing contained herein shall relieve
the Collateral Trustee of the obligations, upon the occurrence of any
Pay Out Event (which has not been cured) of which a Responsible Officer
of the Collateral Trustee has actual knowledge, to exercise such of the
rights and powers vested in it by this Agreement or any Enhancement,
and to use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(d) the Collateral Trustee shall not be liable for any
action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(e) the Collateral Trustee shall not be bound to make any
investigation into the facts of matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or document, unless
requested in writing so to do by Holders of a principal amount of Notes
aggregating
<PAGE>
more than 50% of the Principal Amount of any Series, provided, however,
that if the payment within a reasonable time to the Collateral Trustee
of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation shall be, in the sole discretion of
the Collateral Trustee, not reasonably assured to the Collateral
Trustee by the security afforded to it by the terms of this Agreement,
the Collateral Trustee may require indemnity satisfactory to it against
such cost, expense or liability as a condition to so proceeding;
(f) the Collateral Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys or a custodian or nominee, and the
Collateral Trustee shall not be responsible for the supervision of or
any misconduct or negligence on the part of any such agent, attorney,
custodian or nominee appointed with due care by it hereunder;
(g) the Collateral Trustee shall not be required to make any
initial or periodic examination of any documents or records related to
the Included Leases or the related Equipment for the purpose of
establishing the presence or absence of defects, the compliance by the
Transferor with its representations and warranties or for any other
purpose; and
(h) the right of the Collateral Trustee to perform any
discretionary act enumerated in this Agreement or any Supplement shall
not be construed as a duty, and the Collateral Trustee shall not be
answerable for other than its negligence or willful misconduct in the
performance of any such act.
(i) in the event that the Collateral Trustee is the Paying
Agent, Transfer Agent or Registrar, the rights and protections afforded
to the Collateral Trustee hereunder shall also be afforded to the
Collateral Trustee acting in such other capacities.
Section 11.21 Collateral Trustee Not Liable for Recitals in
Notes. The Collateral Trustee assumes no responsibility for the correctness of
the recitals contained herein and in the Notes. Except as set forth in Section
11.32, the Collateral Trustee makes no representations as to the validity or
sufficiency of this Agreement or any Supplement or of the Notes and the
Transferor Interest or of any Lease or related document. The Collateral Trustee
shall not be accountable for the use or application by the Transferor of any of
the Notes or the Transferor Interest or of the proceeds thereof, or for the use
or application of any funds paid to the Transferor in respect of the Included
Leases or deposited in the Collection Account, the Excess Funding Account or any
other Series Account, or
<PAGE>
withdrawn from the Collection Account, by the Servicer. The Collateral Trustee
shall have no duty to conduct any affirmative investigation as to the occurrence
of any condition requiring the repurchase of any Lease by the Transferor
pursuant to this Agreement or any Supplement or the eligibility of any Lease for
purposes of this Agreement or any Supplement. The Collateral Trustee shall have
no responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection of
any security interest or lien granted to it hereunder or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Supplement.
Section 11.22 Collateral Trustee May Own Notes. The Collateral
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes, and may deal with the Transferor, the Servicer or any Enhancement
Provider, with the same rights as it would have if it were not the Collateral
Trustee.
Section 11.23 Servicer to Pay Collateral Trustee's Fees and
Expenses. The Servicer covenants and agrees to pay to the Collateral Trustee
from time to time, and the Collateral Trustee shall be entitled to receive,
compensation as agreed upon (which shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust) for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Collateral
Trustee, and, subject to Section 8.4, the Servicer will pay or reimburse the
Collateral Trustee (without reimbursement from any Series Account or otherwise)
upon its request for all reasonable expenses, disbursements and advances, if
any, incurred or made by the Collateral Trustee in accordance with any of the
provisions of this Agreement (including the fees and reasonable expenses of its
agents and counsel) except any such expense, disbursement or advance as may
arise from its negligence or bad faith and except as provided in the following
sentence.
The obligations of the Servicer under this Section 11.23 shall
survive the termination of the Trust and the resignation or removal of the
Collateral Trustee.
Whenever the Collateral Trustee incurs expenses after the
occurrence of an Insolvency Event with respect to the Transferor or Servicer,
the expenses are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or similar law.
Section 11.24 Eligibility Requirements for Collateral Trustee.
The Collateral Trustee hereunder shall at all times be a corporation organized
and doing business under the laws of the United States of America or any state
thereof authorized under
<PAGE>
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $100,000,000 and subject to supervision or examination by
Federal or state authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section 11.24,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In addition, no institution shall qualify as a Successor
Collateral Trustee hereunder unless its long-term debt obligations are rated at
least investment grade by each Rating Agency. In case at any time the Collateral
Trustee shall cease to be eligible in accordance with the provisions of this
Section 11.24, the Collateral Trustee shall resign immediately in the manner and
with the effect specified in Section 11.25.
Section 11.25 Resignation or Removal of Collateral Trustee.
(a) The Collateral Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Transferor and the
Servicer. Upon receiving such notice of resignation, the Transferor shall (i)
promptly appoint a successor collateral trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Collateral Trustee and one copy to the successor collateral trustee and (ii)
provide written notice to each Rating Agency of such resignation. If no
successor collateral trustee shall have been so appointed and have accepted
within 30 days after the giving of such notice of resignation, the resigning
Collateral Trustee may petition any court of competent jurisdiction for the
appointment of a successor collateral trustee.
(b) The Servicer may at any time remove the Collateral Trustee
and discharge it from the trust hereby created and appoint a successor
Collateral Trustee if (i) no Pay Out Event shall have occurred and be continuing
and (ii) the Rating Agency Condition shall have been satisfied with respect
thereto, by giving written notice thereof to the Collateral Trustee.
(c) If at any time the Collateral Trustee shall cease to be
eligible in accordance with the provisions of Section 11.24 and shall fail to
resign after written request therefor by the Transferor, or if at any time the
Collateral Trustee shall be legally unable to act, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Collateral Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Collateral Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Transferor may, but shall
not be required to, remove the Collateral Trustee and promptly appoint a
successor collateral trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Collateral
<PAGE>
Trustee so removed and one copy to the successor collateral trustee.
(d) Any resignation or removal of the Collateral Trustee and
appointment of a successor collateral trustee pursuant to any of the provisions
of this Section 11.25 shall not become effective until acceptance of appointment
by the successor collateral trustee as provided in Section 11.26.
Section 11.26 Successor Collateral Trustee. (a) Any
----------------------------
successor collateral trustee appointed as provided in Section
11.25 shall execute, acknowledge and deliver to the Transferor,
the Trustee and to its predecessor Collateral Trustee an
instrument accepting such appointment hereunder, and thereupon
the resignation or removal of the predecessor Collateral Trustee
shall become effective and such successor collateral trustee,
without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as
Collateral Trustee herein. The predecessor Collateral Trustee
shall deliver to the successor collateral trustee all documents
and statements held by it hereunder; and Transferor and the
predecessor Collateral Trustee shall execute and deliver such
instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the
successor collateral trustee all such rights, powers, duties and
obligations.
(b) No successor collateral trustee shall accept appointment
as provided in this Section 11.26 unless at the time of such acceptance such
successor collateral trustee shall be eligible under the provisions of Section
11.24.
(c) Upon acceptance of appointment by a successor collateral
trustee as provided in this Section 11.26, such successor collateral trustee
shall mail notice of such succession hereunder to all Noteholders and the Holder
of the Transferor Interest at their addresses as shown in the Register, and also
to each Rating Agency.
Section 11.27 Merger or Consolidation of Collateral Trustee.
Any Person into which the Collateral Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Collateral Trustee shall be a party, or
any Person succeeding to all or substantially all of the corporate trust
business of the Collateral Trustee, shall be the successor of the Collateral
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 11.24, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
<PAGE>
Section 11.28 Appointment of Co-Collateral Trustee or Separate
Collateral Trustee. (a) Notwithstanding any other provisions of this Agreement,
at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Collateral Trustee shall have the power and may execute and deliver all
instruments to appoint one or more Persons to act as a co-collateral trustee or
co-collateral trustees, or separate collateral trustee or separate collateral
trustees, of all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Noteholders and the Holder
of the Transferor Interest, such title to the Trust, or any part thereof, and,
subject to the other provisions of this Section 11.28, such powers, duties,
obligations, rights and trusts as the Collateral Trustee may consider necessary
or desirable. No co-collateral trustee or separate collateral trustee hereunder
shall be required to meet the terms of eligibility as a successor collateral
trustee under Section 11.24 and no notice to Noteholders and the Holder of the
Transferor Interest of the appointment of any co-collateral trustee or separate
collateral trustee shall be required under Section 11.26.
(b) Every separate collateral trustee and co-collateral
trustee shall, to the extent permitted by law, be appointed and act subject to
the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Collateral Trustee shall be conferred or imposed
upon and exercised or performed by the Collateral Trustee and such
separate collateral trustee or co-collateral trustee jointly (it being
understood that such separate collateral trustee or co-collateral
trustee is not authorized to act separately without the Collateral
Trustee joining in such act), except to the extent that under any laws
of any jurisdiction in which any particular act or acts are to be
performed (whether as Collateral Trustee hereunder or as successor to
the Servicer hereunder), the Collateral Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate collateral trustee or
co-collateral trustee, but solely at the direction of the Collateral
Trustee;
(ii) no collateral trustee hereunder shall be liable by
reason of any act or omission of any other collateral
trustee hereunder; and
(iii) the Collateral Trustee may at any time accept the
resignation of or remove any separate collateral trustee or
co-collateral trustee.
<PAGE>
(c) Any notice, request or other writing given to the
Collateral Trustee shall be deemed to have been given to each of the then
separate collateral trustees and co-collateral trustees, as effectively as if
given to each of them. Every instrument appointing any separate collateral
trustee or co-collateral trustee shall refer to this Agreement and the
conditions of this Article XI. Each separate collateral trustee and
co-collateral trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of appointment,
either jointly with the Collateral Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Collateral Trustee. Every such
instrument shall be filed with the Collateral Trustee and a copy thereof given
to the Servicer.
(d) Any separate collateral trustee or co-collateral trustee
may at any time constitute the Collateral Trustee its agent or attorney-in-fact
with full power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect of this Agreement on its behalf and in its name.
If any separate collateral trustee or co-collateral trustee shall die, become
incapable of acting, resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised by the Collateral
Trustee, to the extent permitted by law, without the appointment of a new or
successor collateral trustee.
Section 11.29 Collateral Trustee May Enforce Claims Without
Possession of Notes. All rights of action and claims under this Agreement or the
Notes may be prosecuted and enforced by the Collateral Trustee without the
possession of any of the Notes, or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Collateral Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Collateral Trustee, its agents and counsel, be
for the ratable benefit of the Noteholders in respect of which such judgment has
been obtained.
Section 11.30 Suits for Enforcement. If a Pay Out Event of
which a Responsible Officer of the Collateral Trustee has actual knowledge shall
occur and be continuing, the Collateral Trustee, in its discretion, may, subject
to the provisions of Article IX, proceed to protect and enforce its rights and
the rights of the Noteholders under this Agreement or any Supplement by a suit,
action or proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or any
Supplement or in aid of the execution of any power granted in this Agreement or
any Supplement or for the enforcement of any other legal, equitable or other
remedy as the Collateral Trustee,
<PAGE>
being advised by counsel, shall deem most effectual to protect and enforce any
of the rights of the Collateral Trustee or such Holders.
Section 11.31 Rights of Holders to Direct Collateral Trustee.
Holders of a principal amount of Notes aggregating more than 50% of the
Aggregate Principal Amount (or, with respect to any remedy, trust or power that
does not relate to all Series, 50% of the aggregate unpaid principal amount of
the Notes of all Series to which such remedy, trust or power relates) shall have
the right to direct the time, method, and place of conducting any proceeding for
any remedy available to the Collateral Trustee, or exercising any trust or power
conferred on the Collateral Trustee; provided, however, that, subject to Section
11.19, the Collateral Trustee shall have the right to decline to follow any such
direction if the Collateral Trustee being advised by counsel determines that the
action so directed may not lawfully be taken, or if the Collateral Trustee in
good faith shall, by a Responsible Officer or Responsible Officers of the
Collateral Trustee, determine that the proceedings so directed would be illegal
or involve it in personal liability or be unduly prejudicial to the rights of
Noteholders not parties to such direction; and provided further that nothing in
this Agreement shall impair the right of the Collateral Trustee to take any
action deemed proper by the Collateral Trustee and which is not inconsistent
with such direction.
Section 11.32 Representations and Warranties of
Collateral Trustee. The Collateral Trustee represents and
warrants that:
(i) The Collateral Trustee is a banking corporation
organized, existing and in good standing under the laws of the State of
New York;
(ii) The Collateral Trustee is an entity that satisfies
the eligibility requirements of Section 11.24;
(iii) The Collateral Trustee has full power, authority and
right to execute, deliver and perform this Agreement, and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Agreement; and
(iv) This Agreement has been duly executed and
delivered by the Collateral Trustee.
Section 11.33 Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Bankers Trust Company, not individually or personally but
solely (i) as Trustee of the Trust and (ii) as Collateral Trustee of the Trust,
in the exercise of the powers and authority conferred and vested in it, (b)
except with respect to Section 11.15 (with respect to the
<PAGE>
Trustee) and Section 11.32 (with respect to the Collateral Trustee) hereof the
representations, undertakings and agreements herein made on the part of the
Trust are made and intended not as personal representations, undertakings and
agreements by the Trustee or the Collateral Trustee, as applicable, but are made
and intended for the purpose of binding only the Trust, (c) nothing herein
contained shall be construed as creating any liability on the Trustee or the
Collateral Trustee, individually or personally, to perform any covenant of the
Trust either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties who are signatories to this Agreement and
by any Person claiming by, through or under such parties; provided, however,
that the Trustee or the Collateral Trustee, as applicable, shall be liable in
its individual capacity for its own willful misconduct or negligence and for any
tax assessed against it based on or measured by any fees, commission or
compensation received by it for acting as Trustee or Collateral Trustee, as
applicable, and (d) under no circumstances shall the Trustee or the Collateral
Trustee be personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this
Agreement.
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust. The respective obligations
and responsibilities of the Transferor, the Servicer, the Trustee and the
Collateral Trustee created hereby (other than the obligation of the Trustee to
make payments to Noteholders and the Holder of the Transferor Interest as
hereafter set forth) shall terminate, except with respect to the duties
described in Sections 7.4, 8.4 and 11.5 and subsections 2.4(c) and 12.3(b), upon
the earlier of (i) the day, if any, designated by the Transferor after the
Distribution Date following the date on which funds shall have been deposited in
the Distribution Account sufficient to pay the Aggregate Principal Amount plus
Note Interest accrued through such Distribution Date in full and (ii) the day on
which final payment is made under the Notes and the Transferor Interest (any
such day under either the preceding clause (i) or this clause (ii) is referred
to as a "Trust Termination Date"); but in no event later than the Final Trust
Termination Date.
Section 12.2 Optional Purchase and Final Trust
Termination Date of Notes.
(a) If so provided in any Supplement, the Transferor or the
Servicer may, but shall not be obligated to, repurchase Notes of the related
Series by depositing into the related Distribution Account, if any, on the
Transfer Date that is on or
<PAGE>
immediately preceding the Distribution Date specified in such Supplement, the
amount so specified therein; provided, however, that if the long-term unsecured
debt obligations of the Servicer are not rated at least Baa-3 by Moody's and
BBB- by Standard & Poor's at the time of such purchase, such purchase shall not
occur unless the Transferor shall deliver an Opinion of Counsel reasonably
acceptable to the Trustee that such purchase of Notes would not constitute a
fraudulent conveyance by the Transferor or the Servicer. On the Distribution
Date that is on or following the Transfer Date on which such deposit is made,
the Transferor shall be deemed, automatically and without requirement for any
act on the part of the Transferor, or of any other Person, to have acquired all
outstanding Notes and to have retired the Notes, thereby resulting in an
increase in the Transferor Amount. If so provided in any Supplement, the
Transferor may replace the Notes of such Series with a Replacement Series;
provided that the Transferor shall follow the procedures set forth in related
Supplement.
(b) The Principal Amount of each Series shall be due and
payable no later than the Series Termination Date with respect to such Series.
If on the Determination Date in the third month immediately preceding the month
in which such Series Termination Date occurs, the Adjusted Principal Amount with
respect to such Series would be greater than zero (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on the next Transfer Date
and the payment of principal on the Notes of such Series to be made on the
related Distribution Date pursuant to Article IV), the Servicer shall sell,
dispose of, or otherwise liquidate, in a commercially reasonable manner and on
commercially reasonable terms (which shall include the solicitation of
competitive bids from Persons who are not Affiliates of the Transferor), within
60 days of such Determination Date (a "Series Sale"), an amount of Included
Leases and related Equipment equal to (i) the Adjusted Principal Amount of such
Series determined as of the date of such sale, disposition or liquidation
provided, however, that the Servicer shall give the Transferor at least 15 days'
advance written notice of such sale, disposition or other liquidation.
Notwithstanding the foregoing, if after giving effect to any such sale,
disposition or liquidation and the application of the proceeds thereof, the
Asset Base would be less than the Aggregate Adjusted Principal Amount, the
Servicer shall sell, dispose of, or otherwise liquidate, in the manner specified
above, all Included Leases and related Equipment (a "Pool Sale"). The Transferor
shall have the option, exercisable at any time after the Servicer has obtained
an offer from any Person that is not an Affiliate of the Transferor and prior to
the consummation of any such sale, disposition or liquidation by giving notice
of the exercise thereof to the Servicer, to purchase such Leases for cash
(payable in immediately payable funds on the Series Termination Date) for the
lesser of (i) 100% of the Discounted Lease and Residual Balance of such Leases,
or (ii) the highest price offered therefor pursuant to such proposed sale,
<PAGE>
disposition or other liquidation. In the case of a Series Sale, the proceeds
received upon the sale, disposition or other liquidation of such Leases in an
amount up to (i) the Adjusted Principal Amount with respect to such Series on
the Series Termination Date, plus (ii) unpaid interest thereon at the Note Rate
for each Series as of the Series Termination Date with respect to such Series,
and shall be distributed to the Holders of the Notes of such Series in final
payment thereof pursuant to the terms of Section 12.3. Proceeds received in
excess of the amount to be deposited as aforesaid shall be treated as
Collections on the Included Leases and shall be allocated and deposited in
accordance with the provisions of Article IV. In the case of a Pool Sale, all
proceeds received shall be treated as Collections on the Included Leases and
shall be allocated and deposited in accordance with the provisions of Article
IV.
(c) The amount deposited pursuant to subsections 12.2(a) and
12.2(b) shall be paid to the Noteholders in the manner provided in Section 12.3.
Section 12.3 Final Distributions. (a) Written notice of any
termination, specifying the Distribution Date upon which the Noteholders may
surrender their Notes for payment of the final distribution and cancellation
(unless otherwise specified in a Supplement), shall be given (subject to at
least four Business Days' prior notice from the Servicer to the Trustee) by the
Trustee to Noteholders mailed not later than the fifth day of the month of such
final distribution specifying (a) the Distribution Date (which shall be the
Distribution Date in the month in which the deposit is made pursuant to
subsection 2.4(e), 12.1 or 12.2(a)) upon which final payment of the Notes will
be made upon presentation and surrender of Notes (unless otherwise specified in
a Supplement) at the office or offices therein designated, (b) the amount of any
such final payment and (c) that the Record Date otherwise applicable to such
Distribution Date is not applicable, payments being made only upon presentation
and surrender of the Notes at the office or offices therein specified (unless
otherwise specified in a Supplement). The Servicer's notice to the Trustee in
accordance with the preceding sentence shall be accompanied by an Officer's
Certificate setting forth the information specified in Section 3.5 covering the
period during the then current calendar year through the date of such notice.
The Trustee shall give such notice to the Transfer Agent and Registrar and the
Paying Agent at the time such notice is given to Noteholders.
(b) All funds on deposit in the related Distribution Account,
if any, in the case of a final payment, pursuant to Section 12.2 and, in the
case of a termination of the Trust, pursuant to Section 12.1 (and
notwithstanding such termination), shall continue to be held in trust for the
benefit of the Noteholders and the Holder of the Transferor Interest and the
Paying Agent or the Trustee shall pay such funds to the appropriate Noteholders
upon surrender of their Notes (unless
<PAGE>
otherwise specified in a Supplement). In the event that all of the Noteholders
shall not surrender their Notes for cancellation within six months after the
date specified in the above-mentioned written notice, the Trustee shall give a
second written notice to the remaining Noteholders to surrender their Notes for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Notes shall not have been surrendered
for cancellation, the Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Noteholders concerning
surrender of their Notes, and the cost thereof shall be paid out of the funds in
the Distribution Account held for the benefit of such Noteholders. The Trustee
and the Paying Agent shall pay to the Transferor upon request any monies held by
them for the payment of principal or interest which remains unclaimed for two
years. After payment to the Transferor, Noteholders entitled to the money must
look to the Transferor for payment as general creditors unless an applicable
abandoned property law designates another Person.
Section 12.4 Termination Rights of the Holder of the
Transferor Interest. Upon the termination of the Trust pursuant to Section 12.1
and the surrender of the Transferor Interest, the Trustee shall return to the
Holder of the Transferor Interest (without recourse, representation or warranty
(other than that the Trustee has not encumbered such Lease and the related
Equipment, except for the grant of a security interest therein to the Collateral
Trustee)) all right, title and interest of the Trust in, to and under the Trust
Assets, except for amounts held by the Trustee pursuant to subsection 12.3(b).
The Trustee shall execute and deliver such instruments of transfer, in each case
prepared by the Transferor and without recourse, representation or warranty as
shall be reasonably requested by the Holder of the Transferor Interest to vest
in the Holder of the Transferor Interest all right, title and interest which the
Trust had in the Trust Assets.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment. (a) This Agreement (including any
Supplement) may be amended from time to time by the Servicer, the Transferor,
the Trustee and the Collateral Trustee, without the consent of any of the
Noteholders and the Holder of the Transferor Interest, (i) to cure any
ambiguity, to revise any exhibits or Schedules, to correct or supplement any
provisions herein or thereon or (ii) to add any other provisions with respect to
matters or questions raised under this Agreement which shall not be inconsistent
with the provisions of this Agreement; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any of the Noteholders.
<PAGE>
(b) This Agreement (including any Supplement) may be amended
from time to time by the Servicer, the Transferor, the Trustee and the
Collateral Trustee, without the consent of any of the Noteholders and the Holder
of the Transferor Interest, to modify, eliminate or add to the provisions of
this Agreement to such extent as shall be necessary to effect the qualification
of this Agreement under the Trust Indenture Act of 1939, as amended (the "TIA"),
or under any similar federal statute hereafter enacted and to add to this
Agreement such other provisions as may be expressly required by the TIA.
(c) This Agreement (including any Supplement) may be amended
from time to time by the Servicer, the Transferor, the Trustee and the
Collateral Trustee, without the consent of any of the Noteholders and the Holder
of the Transferor Interest, to eliminate any restrictions on transferability
applicable to any Series, or class thereof, of Notes, to the extent that, in the
Opinion of Counsel, such restrictions are not necessary to comply with Section
7704 of the Code; provided, that prior to any such amendment, an Opinion of
Counsel provided by tax counsel and to that effect shall have been delivered to
the Trustee.
(d) This Agreement and any Supplement may also be amended from
time to time by the Servicer, the Transferor, the Trustee and the Collateral
Trustee with the consent of Noteholders aggregating more than 662/3% of the
Principal Amount of each and every Series adversely affected, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders of any Series then issued and outstanding; provided, however, that
no such amendment under this subsection shall(i) reduce in any manner the amount
of, or delay the timing of, distributions which are required to be made on any
Note of such Series without the consent of all of the related Noteholders; (ii)
change the definition of or the manner of calculating the Principal Amount, or
the Principal Percentage of such Series without the consent of the related
Noteholders or (iii) reduce the aforesaid percentage required to consent to any
such amendment, in each case without the consent of each Noteholder of all
Series affected.
(e) It shall not be necessary to obtain the consent of
Noteholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such
reasonable requirements as the Trustee may prescribe.
(f) Any Supplement executed and delivered pursuant to Section
6.12 and any amendments regarding the addition to or removal of Leases from the
Trust as provided in Sections 2.6 or 2.7, executed in accordance with the
provisions hereof, shall not
<PAGE>
be considered amendments to this Agreement for the purpose of
Section 13.1.
(g) In connection with any amendment, the Trustee may request,
in addition to the Opinion of Counsel required by subsection 13.2(d), an Opinion
of Counsel from the Transferor or the Servicer to the effect that the amendment
complies with all requirements of this Agreement. For the purposes of this
Section 13.1(g), such Opinion of Counsel may not be provided by internal
counsel. The Trustee may, but shall not be obligated to, enter into any
amendment which affects the Trustee's rights, duties or immunities under this
Agreement or otherwise.
Section 13.2 Protection of Right, Title and Interest to Trust.
(a) The Servicer shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the Holders' and the Trustee's right, title and interest to
the Trust Assets to be promptly recorded, registered and filed, and at all times
to be kept recorded, registered and filed, all in such manner and in such places
as may be required by law fully to preserve and protect the right, title and
interest of the Trustee hereunder to all property comprising the Trust Assets.
The Servicer shall deliver to the Trustee file-stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above, as
soon as available following such recording, registration or filing. The
Transferor shall cooperate fully with the Servicer in connection with the
obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this subsection 13.2(a).
(b) Within 30 days after the Transferor makes any change in
its name, identity or corporate structure which would make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9-402 of the UCC as in effect
in the state where such financing statement or continuation statement was filed,
the Transferor shall give the Trustee and the Rating Agencies notice of any such
change and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Trust's security interest in the
Trust Assets and the proceeds thereof.
(c) The Servicer will give the Trustee prompt written notice
of any relocation of any office from which it services Included Leases or keeps
the Lease Files or of its principal executive office and whether, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall file such financing statements or
amendments as may be necessary to continue the perfection of the Trust's
security interest in the Included Leases and the proceeds thereof. The Servicer
will at
<PAGE>
all times maintain each office from which it services Included Leases and its
principal executive office within the United States of America.
(d) The Servicer will deliver to the Trustee: (i)
upon the execution and delivery of each amendment of Articles I,
II, III or IV other than amendments pursuant to subsection
13.1(a), an Opinion of Counsel substantially in the form of
Exhibit I; and (ii) on or before April 15 of each year, beginning
- ---------
with April 15, 1996, an Opinion of Counsel, dated as of a date
during the preceding 90-day period, substantially in the form of
Exhibit J.
- ---------
Section 13.3 Limitation on Rights of Holders. (a)
-------------------------------
The death or incapacity of any Holder shall not operate to
terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Holder's legal representatives or heirs
to claim an accounting or to take any action or commence any
proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
(b) No Holder shall have any right to vote (except with
respect to the Noteholders as provided in Section 13.1) or in any manner
otherwise control the operation and management of the Trust, or the obligations
of the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Notes, be construed so as to constitute the Noteholders and the
Holder of the Transferor Interest from time to time as partners or members of an
association; nor shall any such Holder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision hereof.
(c) No Holder shall have any right by virtue of any provisions
of this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such Holder
previously shall have given notice to the Trustee, and unless the Holders of a
principal amount of Notes aggregating more than 50% of the Principal Amount of
any Series affected shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Holder with every other Holder and the Trustee, that no one or more Holders
shall have the right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Notes or the Transferor Interest,
or to obtain or
<PAGE>
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Agreement, except in the manner herein provided and
for the equal, ratable and common benefit of all Holders. For the protection and
enforcement of the provisions of this Section 13.3, each and every Holder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 13.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS, PROVIDED, HOWEVER, THAT THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE TRUSTEE AND THE COLLATERAL TRUSTEE SHALL BE DETERMINED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 13.5 Notices. All demands, notices and communications
hereunder shall be in writing (including by facsimile) and shall be deemed to
have been duly given if personally delivered (including by overnight courier)
at, mailed by registered mail, return receipt requested, to, or sent by
facsimile, with receipt confirmed and with a hard copy sent promptly, to (a) in
the case of the Servicer, to One Market Place, Suite 900, San Francisco,
California 94105 (facsimile # (415) 882-0860), Attn: _________ ____________,
Chief Financial Officer, (b) in the case of the Transferor, to One Market Place,
Suite 900, San Francisco, California 94105 (facsimile # (415) 882-0860), Attn:
____________________, with a copy to the Servicer, (c) in the case of the
Trustee or the Collateral Trustee, to the Corporate Trust Office (facsimile #
212-250- 6961), Attn: Corporate Market Services, (d) in the case of the
Enhancement Provider for a particular Series the address, if any, specified in
the Supplement relating to such Series, (e) in the case of Moody's, to Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attn: ABS
Monitoring Department, 4th Floor, and (f) in the case of Standard & Poor's, to
Standard & Poor's Ratings Group, 25 Broadway, New York, New York 10004,
Attention: Structured Finance Surveillance; or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party. Any notice required or permitted to be mailed to a Holder shall be given
by first class mail, postage prepaid, at the address of such Holder as shown in
the Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Holder receives such notice.
Section 13.6 Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of
<PAGE>
Page
the Notes and the Transferor Interest or rights of the Holders
thereof or any Enhancement Provider.
Section 13.7 Rule 144A Information. For so long as any of the
Notes of any Series or any Class are restricted securities within the meaning of
Rule 144(a)(3) under the Securities Act of 1933, as amended, each of the
Transferor, the Servicer, the Trustee and any Enhancement Provider agree to
cooperate with each other to provide to any Noteholders of such Series or Class
and to any prospective purchaser of Notes designated by such a Noteholder upon
the request of such Noteholder or prospective purchaser, any information
required to be provided to such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Act.
Section 13.8 Notes Nonassessable and Fully Paid. It is the
intention of the parties to this Agreement that the Notes and the Transferor
Interest shall not be liable for obligations of the Trust, that the interests in
the Trust Assets represented by the Notes and the Transferor Interest shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and that Notes upon authentication thereof by the Trustee pursuant
to Sections 2.1 and 6.2 are and shall be deemed fully paid.
Section 13.9 Further Assurances. The Transferor and the
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
relating to the Trust Assets for filing under the provisions of the UCC of any
applicable jurisdiction.
Section 13.10 No Waiver: Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee, the Collateral
Trustee or the Noteholders, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
Section 13.11 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
Section 13.12 Third-Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the
parties hereto, the Holders and, to the extent provided in any
<PAGE>
Supplement, the Enhancement Provider named therein, and their respective
successors and permitted assigns. Except as otherwise provided in this Agreement
or any Supplement, no other Person will have any right or obligation hereunder.
Section 13.13 Actions by Holders. (a) Wherever in this
Agreement a provision is made that an action may be taken or a notice, demand or
instruction given by Noteholders, such action, notice or instruction may be
taken or given by any Noteholder, unless such provision requires a specific
percentage of Noteholders.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Holder shall bind such Holder and every
subsequent Holder of such Note or the Transferor Interest, as the case may be,
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done or omitted to be done by the Trustee,
Transferor or the Servicer in reliance thereon, whether or not notation of such
action is made upon such Note or in the Register with respect to the Transferor
Interest, as the case may be.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement or any Supplement to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, when required, to the Transferor or the
Servicer. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Agreement or any
Supplement and conclusive in favor of the Trustee, Transferor and the Servicer,
if made in the manner provided in this Section.
(d) The fact and date of the execution by any Holder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
Section 13.14 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 13.15 No Bankruptcy Petition. Each of each Holder and
the Trustee, severally and not jointly, hereby covenants and agrees that, prior
to the date which is one (1) year and one (1) day after the payment in full of
all Notes, it will not institute against, or join any other Person in
<PAGE>
instituting against, the Transferor or the Trust any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States. Nothing
in this Section 13.15 shall preclude, or be deemed to estop, any Holder or the
Trustee from taking (to the extent such action is otherwise permitted to be
taken by such Person hereunder) or omitting to take any action prior to such
date in (i) any case or proceeding voluntarily filed or commenced by or on
behalf of the Transferor or the Trust under or pursuant to any such law or (ii)
any involuntary case or proceeding pertaining to the Transferor or the Trust
under or pursuant to any such law.
Section 13.16 Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
AFG CREDIT CORPORATION,
as Transferor
By:___________________________
Title:
AMERICAN FINANCE GROUP, INC.
as Servicer
By:___________________________
Title:
BANKERS TRUST COMPANY,
as Trustee
By:___________________________
Title:
BANKERS TRUST COMPANY,
as Collateral Trustee
By:___________________________
Title:
<PAGE>
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