SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-23309
LINC CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0850149
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
303 East Wacker Drive, Suite 1000,
Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 946-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At November 12, 1999, 5,265,050 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
LINC CAPITAL, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets -
September 30, 1999 (unaudited) and December 31, 1998.................. 3
Consolidated Statements of Operations -
Three and nine months ended September 30, 1999 and 1998 (unaudited). 4
Consolidated Statements of Cash Flows -
Three and nine months ended September 30, 1999 and 1998 (unaudited). 5
Notes to Consolidated Financial Statements (unaudited)................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk........... 19
PART II. OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K..................................... 20
SIGNATURES .................................................................. 20
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LINC Capital, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
September 30, December 31,
1999 1998
---- ----
ASSETS
Net investment in direct finance leases and loans..... $411,875 $164,770
Equipment held for rental and operating leases, net... 32,475 30,659
Accounts receivable................................... 10,386 7,593
Securitization retained interest...................... 478 17,026
Restricted cash....................................... 9,879 3,935
Other assets.......................................... 18,341 12,735
Goodwill.............................................. 15,518 10,738
Cash and cash equivalents............................. 9,125 1,428
-------- --------
Total assets $508,077 $248,884
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior credit facility and other senior notes payable. $95,090 $96,646
Recourse debt......................................... 3,942 8,017
Nonrecourse debt...................................... 330,922 68,616
Accounts payable...................................... 13,690 7,443
Accrued expenses...................................... 9,586 8,775
Customer holdbacks.................................... 6,057 10,328
Subordinated debentures............................... 5,962 5,694
Deferred income taxes................................. 454 1,924
-------- --------
Total liabilities $465,703 $207,443
======== ========
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 15,000,000 shares
authorized; 5,330,953 and 5,249,591 shares issued;
5,265,050 and 5,183,688 shares outstanding........... 5 5
Additional paid-in capital............................. 29,852 29,567
Deferred compensation from issuance of options......... (29) (124)
Stock note receivable.................................. (182) (182)
Treasury stock, at cost; 65,903 shares................. (287) (287)
Accumulated other comprehensive income (loss).......... 844 (34)
Retained earnings...................................... 12,171 12,496
------- -------
Total stockholders' equity $42,374 $41,441
------- -------
Total liabilities and stockholders' equity $508,077 $248,884
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30, September 30,
------------- -------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
REVENUES:
Sales of equipment............................................... $6,053 $8,425 $22,062 $23,225
Direct finance lease income...................................... 10,165 3,580 23,098 8,848
Interest income.................................................. 803 543 2,441 1,347
Rental and operating lease revenue............................... 2,918 2,274 8,295 6,988
Servicing fees and other income.................................. 1,411 1,366 5,359 2,481
Gain on sale of lease receivables................................ 648 3,251 1,003 6,839
Gain on equipment residual values................................ 275 678 838 1,465
Gain on equity participation rights.............................. 150 1,131 1,388 3,809
------ ------ ------ ------
Total revenues 22,423 21,248 64,484 55,002
------ ------ ------ ------
EXPENSES:
Cost of equipment sold........................................... $4,781 $6,861 $17,848 $18,958
Selling, general and administrative.............................. 6,097 5,685 17,658 13,473
Interest......................................................... 7,322 2,736 16,439 6,772
Depreciation of equipment under rental agreements
and operating leases........................................... 1,967 1,606 5,520 4,508
Goodwill amortization............................................ 143 102 566 169
Provision for credit losses...................................... 4,313 1,435 7,201 3,762
Restructuring charges............................................ 700 - - - 700 - - -
------ ------ ------ ------
Total expenses 25,323 18,425 65,932 47,642
------ ------ ------ ------
Earnings (loss) before income taxes.................................... (2,900) 2,823 (1,448) 7,360
Income tax expense (benefit)........................................... (1,529) 1,148 (1,123) 2,923
------ ----- ------ -----
Net earnings (loss).................................................... $(1,371) $1,675 $(325) $4,437
======= ====== ====== ======
Net earnings (loss) per common share:
Basic........................................................... $ (.26) $ .32 $ (.06) $ .86
Diluted......................................................... $ (.26) $ .31 $ (.06) $ .83
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LINC Capital, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
<CAPTION>
Three Months ended Nine Months ended
September 30, September 30,
------------- -------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
---- ---- ---- ----
Cash flows from operating activities:
Net earnings (loss).................................................... $(1,371) $1,675 $(325) $4,437
Adjustments to reconcile net earnings (loss) to net cash
provided by operations:
Depreciation and amortization............................... 2,327 1,835 6,802 4,999
Direct finance lease income................................. (10,165) (3,580) (23,098) (8,848)
Payments on direct finance leases........................... 48,912 18,407 107,318 46,643
Deferred income taxes....................................... (2,126) 367 (1,414) 1,388
Provision for credit losses................................. 4,313 1,435 7,201 3,762
Gain on sale of lease receivables........................... (648) (3,251) (1,003) (6,839)
Gain on equity participation rights......................... (150) (1,131) (1,388) (3,809)
Amortization of discount.................................... 93 78 268 226
Deferred compensation....................................... 4 11 (15) 36
Changes in assets and liabilities:
Increase in receivables..................................... (473) (897) (2,719) (2,535)
Increase in restricted cash................................. (2,453) (426) (5,944) (3,229)
Decrease (increase) in other assets......................... (5,625) 551 (6,360) (3,033)
Increase in accounts payable................................ 973 2,559 6,199 4,221
Increase in accrued expenses................................ 907 1,554 755 2,100
Decrease (increase) in customer holdbacks................... (2,853) 1,868 (4,271) 7,554
------ ----- ------ -----
Cash provided by operating activities.................................... 31,665 21,055 82,006 47,073
------ ------ ------ ------
Cash flows from investing activities:
Cost of equipment acquired for lease and rental.................... (68,733) (69,939) (266,337) (184,970)
Cash used in acquisitions, net of cash acquired.................... (2,545) - - - (4,042) (39,180)
Funding of securitization retained interest........................ - - - (3,454) - - - (17,767)
Receipts on securitization retained interest....................... 727 1,553 5,622 3,471
Fixed assets purchased............................................. (415) (312) (1,094) (780)
Proceeds from sale of investments.................................. 1,154 1,131 1,388 3,809
----- ----- ----- -----
Net cash used in investing activities (69,812) (71,021) (264,463) (235,417)
-------- -------- --------- ---------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
LINC Capital, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) - (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30, September 30,
1999 1998 1999 1998
------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in notes payable........................... (9,111) (5,000) (1,556) 44,650
Proceeds from recourse and nonrecourse debt........................ 257,597 - - - 436,132 4,697
Repayments of recourse and nonrecouse debt......................... (142,255) (7,357) (190,055) (19,834)
Proceeds from sales of lease receivables........................... 22,224 62,933 26,421 164,995
Repurchase of receivables from conduit facility,
net of securitization retained interest.......................... (81,183) - - - (81,183) - - -
Proceeds from stock notes receivable............................... - - - - - - - - - 329
Sale of stock...................................................... - - - - - - 395 - - -
----- ----- ------- -------
Net cash provided by financing activities................................ 47,272 50,576 190,154 194,837
------ ------ ------- -------
Net increase in cash..................................................... 9,125 610 7,697 6,493
Cash at beginning of period.............................................. - - - 5,883 1,428 - - -
----- ----- ----- -----
Cash at end of period.................................................... $9,125 $6,493 $9,125 $6,493
====== ====== ====== ======
Supplemental disclosures of cash flow information:
Interest paid...................................................... $7,174 $2,582 $16,355 $6,320
Income taxes paid.................................................. $185 $15 $754 $863
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
LINC Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(1) The Company
LINC Capital, Inc. (the "Company") is a finance company that provides
leasing, asset-based financing, and equipment rental and distribution services
to growing businesses. The Company's principal businesses are (i) the direct
origination of leases and accounts receivable and other asset-backed financing
to middle and late stage emerging growth companies primarily serving the
healthcare and information technology industries ("Select Growth Finance"), (ii)
the financing of leases generated by smaller equipment lessors ("Portfolio
Finance"), (iii) the rental, leasing and distribution of analytical instruments
and related equipment to companies serving the environmental, pharmaceutical and
biotechnology industries ("Instrument Rental and Distribution"), and (iv) the
originations of leases through programs established with manufacturers and
distributors ("Vendor Finance").
(2) Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial statements. Accordingly, the interim statements do not include all of
the information and disclosures required for annual financial statements. In the
opinion of the Company's management, all adjustments (consisting solely of
adjustments of a normal recurring nature) necessary for a fair presentation of
these interim results have been included. Inter-company accounts and
transactions have been eliminated. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998. The results for
the three-month and nine-month periods ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
Reclassifications
Certain reclassifications have been made in the 1998 financial statements
to conform to the 1999 presentation.
(3) Acquisitions
Effective January 1, 1999, the Company purchased all of the outstanding
common stock of Connor Capital Corporation, a lessor specializing in developing
captive finance programs for equipment vendors. Additionally, effective August
31, 1999, the Company acquired the assets of Internet Finance + Equipment, a
distributor and lessor of internet access equipment manufactured by several
companies. Both acquisitions have been accounted for using the purchase method
of accounting and the results of operations of the acquired businesses have been
included in the consolidated financial statements since the dates of the
acquisition. These acquisitions had no material impact on results of operations
for the three months or nine months ended September 30, 1999.
The consideration for the acquisitions included $4,946,000, in cash
payments, a portion of which is to be paid in November 1999, net of cash
acquired, and future contingent cash payments of up to $12,250,000. The fair
value of assets purchased and liabilities assumed in the acquisition were
$12,922,000 and $12,228,000, respectively.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
(4) Net Investment in Direct Finance Leases and Loans
Net investment in direct finance leases and loans is as follows:
September 30, December 31,
1999 1998
-----------------------
(In thousands)
Lease and loan contracts receivable
in installments................. $468,337 $191,278
Estimated residual value of leased
equipment ...................... 15,405 8,326
Initial direct costs..................... 6,533 2,447
Unearned lease income.................... (73,219) (34,294)
Broker fees.............................. 2,445 804
Allowance for doubtful receivables....... (7,626) (3,791)
------- ------
Net investment........................... $411,875 $164,770
======== ========
(5) Equipment Held for Rental and Operating Leases, Net
The net book value of equipment held for rental and operating leases
is as follows:
September 30, December 31,
1999 1998
-------------------------
(In thousands)
Equipment under operating leases............ $10,697 $13,905
Equipment under rental agreements........... 21,778 16,754
------ ------
Net book value.............................. $32,475 $30,659
======= =======
The book values presented in the above table are net of accumulated
depreciation of $12,258,000 and $8,058,000 at September 30, 1999 and December
31, 1998, respectively. Equipment under rental agreements is comprised primarily
of analytical instruments.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
(6) Loss Experience and Reserves
The following table sets forth delinquencies as a percentage of gross
remaining receivables on leases included in the Company's owned and managed
lease portfolio and net charge-offs for the periods indicated as a percentage of
the Company's remaining net investment in direct finance leases and loans.
Additionally, the table sets forth the allowance for doubtful receivables
provided, as well as holdback reserves on portfolios acquired, as of the ends of
the periods indicated.
September 30, December 31,
1999 1998
----------------------
(Dollars in thousands)
Select Growth Finance:
Gross Receivable Balance............. $84,152 $75,882
31 - 60 days past due............... 0.88% 3.07%
61 - 90 days past due............... 0.85% 0.07%
Over 90 days past due................ 0.92% 1.52%
Portfolio Finance:
Gross Receivable Balance............. $224,788 $175,885
31 - 60 days past due............... 2.87% 2.13%
61 - 90 days past due............... 1.35% 1.27%
Over 90 days past due................ 0.20% 0.20%
Rental and Distribution:
Gross Receivable Balance............. $10,289 $10,064
31 - 60 days past due............... 9.27% 8.88%
61 - 90 days past due............... - - - -
Over 90 days past due................ - - - -
Vendor Finance:
Gross Receivable Balance............. $188,617 $92,478
31 - 60 days past due............... 3.57% 3.37%
61 - 90 days past due............... 1.21% 0.61%
Over 90 days past due................ 1.03% 1.16%
Totals:
Gross Receivable Balance............. $507,846 $354,309
31 - 60 days past due............... 2.93% 2.85%
61 - 90 days past due............... 1.19% 0.81%
Over 90 days past due................ 0.63% 0.73%
Average net investment in leases and
loans owned and managed.......... $368,855 $242,757
Net charge-offs................................. 5,658 3,116
Annualized net charge-off percentage............ 2.05% 1.28%
Allowance for doubtful receivables included in:
Net investment in direct finance leases
and loans................................ $7,626 $3,791
Securitization retained interest........... 78 1,808
Holdback reserves on portfolios acquired... 2,784 6,104
----- -----
Total allowance and holdbacks................... $10,488 $11,703
======= =======
Recourse to Portfolio Finance customers
in addition to holdback reserves on
portfolios acquired $18,140 $10,407
======= =======
<PAGE>
LINC Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
(6) Loss Experience and Reserves (continued)
In addition to the allowance for doubtful receivables and holdback
reserves, in connection with its Portfolio Finance activities the Company has
recourse to certain of its Portfolio Finance customers. At September 30, 1999
and December 31, 1998 the aggregate amount of recourse was $18,140,000 and
$10,407,000, in support of gross remaining receivables totaling $167,887,000 and
$117,399,000, respectively.
(7) Debt
Notes Payable
Notes Payable to banks and others were as follows:
September 30, December 31,
1999 1998
-----------------------
(In thousands)
Senior credit facility....................... $92,000 $91,700
Other........................................ 3,090 4,946
----- -----
Total..................... $95,090 $96,646
======= =======
At September 30, 1999 and December 31, 1998, the Company had available a
senior credit facility in the amount of $155,000,000 of which $92,000,000, and
$91,700,000 was outstanding at September 30, 1999 and December 31, 1998
respectively. The weighted-average interest rate on the senior credit facility
at September 30, 1999 and December 31, 1998 was 7.18% and 6.58%, respectively.
In October 1999, the facility was amended and decreased to $117,000,000. The
facility, as amended, provides for interest at LIBOR plus 1.25% to 1.75% or, at
the Company's option, prime plus up to 0.25% or the CD rate or Fed Funds rate
plus 1.30% to 1.80% with the precise rate dependent on certain leverage tests.
Additionally, the amended facility calls for the Company to pay an up-front
commitment fee equal to 0.10% of the committed amount as well as a commitment
fee of 0.25% on the unused daily balance below 25% of the facility and 0.50% on
the unused daily balance above 25%. The facility is secured by substantially all
of the assets of the Company and is used by the Company to finance the
acquisition of equipment pending completion of permanent financing and for
normal working capital purposes. The facility matures January 31, 2000.
In connection with the acquisition of Monex Leasing, Ltd., the Company
issued a note payable to the former owner of the company. Such note bears
interest at 8% with principal payments over a three-year period. At September
30, 1999, $1,000,000 is outstanding. Additionally, the Company has notes payable
to a third party at an interest rate of 10% with various payment terms and
maturity dates.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
Recourse and Nonrecourse Debt
At September 30, 1999, the Company had a commercial paper conduit facility
available for funding of up to $289,000,000 in lease receivables. At September
30, 1999, $97,932,000 of this facility was utilized. Under this facility, the
Company transfers a pool of leases to a wholly-owned, bankruptcy remote, special
purpose subsidiary established for the purpose of purchasing the Company's
leases. This subsidiary simultaneously transfers its interest in the leases to a
bank conduit facility, which issues securities to investors. The securities are
collateralized by an undivided interest in the leases, the leased equipment, and
certain collateral accounts. A portion of the proceeds from the securitization
of leases is required to be held in a separate restricted account as collateral
for the leases transferred. This amount is recorded as restricted cash. The
weighted-average interest rate on the conduit securitization facility at
September 30, 1999 and December 31, 1998 was 6.08% and 5.63%, respectively.
During the nine months ended September 30, 1998, the Company recognized a
gain upon the sale of leases in securitizations equal to the excess of the net
proceeds from the sale, after deducting issuance expenses, over the cost basis
of the leases. Under gain-on-sale treatment, the Company reflected the
difference between the aggregate principal balance of the leases securitized and
proceeds received, net of an allowance for doubtful receivables, as the
securitization retained interest on the balance sheet. Effective October 1,
1998, the Company eliminated gain-on-sale treatment for securitized leases by
modifying the structure of its securitization facility such that it is
considered nonrecourse debt under generally accepted accounting principles.
Subsequent to eliminating gain-on-sale treatment, the Company recorded
nonrecourse debt equal to the cash received.
In July 1999, the Company completed a term securitization of $237 million.
$199 million of A-1 Certificates rated AAA by Standard and Poor's and Fitch
IBCA, Inc. and Aaa by Moody's Investor Service, Inc., $9 million of B-1
Certificates rated BBB by Fitch IBCA, Inc., and $12 million of B-2 Certificates
rated BB by Fitch IBCA, Inc., were issued in the private market. The C
Certificate of $17 million was retained by the Company. In connection with the
term securitization, the Company repurchased certain leases, which had
previously been financed in the conduit securitizaiton and removed from the
balance sheet. In accordance with generally accepted accounting principles,
$93,840,000, the amount of the repurchase price, was restored to the net
investment in leases and loans on the balance sheet. The proceeds from the term
securitization were recorded as nonrecourse debt. The weighted-average interest
rate on the term securitization facility at September 30, 1999 was 6.24%.
At September 30, 1999 and December 31, 1998, $296,249,000 and $44,676,000,
respectively, was recorded as nonrecourse debt under the term securitization and
the securitization conduit facility.
The Company also permanently finances leases with financial institutions,
on either a nonrecourse or partial recourse basis. In connection with these
financings, the Company receives a cash payment equal to the discounted value of
the future rentals less, in certain cases, a holdback or cash reserve. In the
event of default by a lessee under a lease which has been assigned to a lender
under these financings, the lender has recourse to the lessee and to the
underlying leased equipment but no recourse to the Company except to the extent
of the recourse portion of the financing, including any holdback or cash
reserve. Proceeds from the financing of leases are recorded as debt.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
(8) Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---------------------------------------------------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings (loss)
per share - net earnings (loss)................. $(1,371,000) $1,675,000 $(325,000) $4,437,000
----------- --------- --------- ----------
Denominator for basic earnings (loss) per share - weighted
average shares outstanding...................... 5,265,050 5,183,688 5,250,753 5,167,204
Effect of dilutive stock options............................ - - 166,062 - - 190,015
--------- --------- --------- ---------
Denominator for diluted earnings (loss) per share........... 5,265,050 5,349,750 5,250,753 5,357,219
--------- --------- --------- ---------
Net earnings (loss):
Basic earnings per share....................... $(.26) $.32 $(.06) $.86
===== ==== ===== ====
Diluted earnings per share..................... $(.26) $.31 $(.06) $.83
===== ==== ===== ====
</TABLE>
Stock options that could potentially dilute earnings per share in the
future were not included in the computation of diluted earnings per share for
the three and nine month periods ended September 30, 1999 because the effect
would be antidulitive.
(9) Comprehensive Income
The components of comprehensive income, net of related tax, for the nine
months ended September 30, 1999 and 1998 are as follows:
Nine months ended
September 30,
1999 1998
-------------------
(In thousands)
Net earnings (loss)............................. $(325) $4,437
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities... 607 (522)
Foreign currency translation adjustment 271 (116)
--- ----
Comprehensive income............................ $553 $3,799
==== ======
Accumulated other comprehensive income, net of tax, at September 30, 1999
and December 31, 1998 consists of unrealized gains on securities of $671,000 and
$64,000 and accumulated foreign currency translation adjustments of $173,000 and
$(98,000), respectively.
<PAGE>
LINC Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) - (Continued)
(10) Segment Information
The Company has four reportable segments: Select Growth Finance, Portfolio
Finance, Rental and Distribution, and Vendor Finance. The loss before income
taxes in the Vendor Finance segment for the three and nine months ended
September 30, 1999 includes a restructuring charge of $700,000 relating to the
consolidation of certain Vendor Finance functions. The following table presents
certain information by segment.
<TABLE>
<CAPTION>
Select Rental
Growth Portfolio and Vendor
(Dollars in thousands) Finance Finance Distribution Finance Corporate Consolidated
<S> <C> <C> <C> <C> <C> <C>
Three months ended September 30, 1999
Total revenues.......................... $3,691 $5,320 $8,338 $5,074 $ - $22,423
Depreciation and
amortization expense............... 84 588 1,235 203 - 2,110
Interest expense........................ 1,111 3,945 226 2,040 - 7,322
Earnings (loss) before income taxes..... (1,701) 268 621 (1,084) (1,004) (2,900)
Total assets............................ 68,857 215,848 39,557 178,250 5,565 508,077
Lease fundings.......................... $7,571 $11,569 $2,292 $46,865 $ - $68,297
--------------------------------------------------------------------------------
Three months ended September 30, 1998
Total revenues.......................... $4,179 $3,516 $10,373 $3,180 $ - $21,248
Depreciation and
amortization expense................ 186 271 1,164 87 - 1,708
Interest expense........................ 942 694 280 820 - 2,736
Earnings (loss) before income taxes..... 1,679 514 393 527 (290) 2,823
Total assets............................ 64,945 41,050 28,269 38,896 9,575 182,735
Lease fundings.......................... $13,031 $33,196 $1,022 $15,576 $ - $62,825
----------------------------------------------------------------------------------
Nine months ended September 30, 1999
Total revenues.......................... $10,181 $15,194 $28,103 $11,006 $ - $64,484
Depreciation and
amortization expense................ 281 1,667 3,522 616 - 6,086
Interest expense........................ 3,576 8,204 919 3,740 - 16,439
Earnings (loss) before income taxes..... (1,156) 2,547 1,138 (2,465) (1,512) (1,448)
Total assets............................ 68,857 215,848 39,557 178,250 5,565 508,077
Lease fundings.......................... $27,349 $110,937 $7,066 $117,166 $ - $262,518
-----------------------------------------------------------------------------------
Nine months ended September 30, 1998
Total revenues.......................... $10,783 $8,929 $28,739 $6,551 $ - $55,002
Depreciation and
amortization expense................ 281 1,228 3,041 127 - 4,677
Interest expense........................ 2,366 1,960 697 1,749 - 6,772
Earnings (loss) before income taxes..... 4,091 1,424 1,224 1,330 (709) 7,360
Total assets............................ 64,945 41,050 28,269 38,896 9,575 182,735
Lease fundings.......................... $38,763 $97,238 $4,540 $30,165 $ - $170,706
----------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months ended September 30, 1999
compared to Three Months ended September 30, 1998
Sales of equipment decreased to $6.1 million from $8.4 million and cost of
equipment sold decreased to $4.8 million from $6.9 million. Net margins on sales
of analytical instruments increased to 21.0% from 18.6% due to manufacturer
incentives received on equipment sold during the quarter.
Direct finance lease income increased to $10.2 million from $3.6 million as
a result of a substantially higher level of finance lease receivables
outstanding, arising from acquired portfolios and from internal lease
originations, and discontinuance of gain-on-sale accounting in October, 1998. In
addition, during the quarter ended September 30, 1999, $99.0 million in lease
receivables were repurchased from the Company's commercial paper conduit
facility in connection with a term securitization. Average finance lease
receivables outstanding and average unearned income, net of initial direct
costs, increased 258% and 194%, respectively.
Interest income increased to $0.8 million from $0.5 million, primarily due
to an increase in interest-bearing notes receivable held by the Company.
Rental and operating lease revenue increased to $2.9 million from $2.3
million primarily due to acquisitions of portfolios of operating leases made
during 1998 and increased rental utilization in the Company's Rental and
Distribution business unit.
Servicing fees and other income were $1.4 million in each period. Servicing
fees and other income consists primarily of fees received for servicing
securitized leases, fees received for servicing third party lease portfolios,
interim rents received by Select Growth Finance, and late fees. During the three
months ended September 30, 1999, the Company recorded other income of $0.5
million on the termination of interest rate swap and cap agreements. During the
three months ended September 30, 1998, the Company received $0.5 million of
deferred servicing fees relating to a third party lease portfolio serviced by
the Company.
Gain of the sale of lease receivables was $0.6 million for the quarter
ended September 30, 1999. This amount represented gains on lease receivables
sold to third parties. The $3.3 million gain in the quarter ended September 30,
1998 represented gains on securitized leases. Effective October 1, 1998, the
Company eliminated gain-on-sale treatment for securitized leases by modifying
the structure of its securitization facility such that it is considered
nonrecourse debt under generally accepted accounting principles. Accordingly, no
gain on sale of securitized receivables was recorded during the third quarter of
1999.
Gains on equipment residual values decreased to $0.3 million from $0.7
million. Gains on equipment residual values fluctuate based on the dollar volume
of the leases maturing in a given quarter.
During the third quarter of 1999, in connection with its Select Growth
leasing activities, the Company recognized a gain on certain equity
participation rights of $0.2 million, compared to a gain of $1.1 million for the
same period of 1998.
Selling, general and administrative expenses, net of initial direct costs
capitalized, increased to $6.1 million from $5.7 million. The increase resulted
primarily from two acquisitions completed in 1999 in the Company's Vendor
Finance business unit, senior and middle management personnel added to support
the Company's growth, and increased activity in the Company's other business
segments. The number of people employed, including employees of companies
acquired, increased 47% to 203 between September 30, 1998 and September 30,
1999.
Interest expense increased to $7.3 million from $2.7 million, due primarily
to increased borrowings resulting from growth in lease originations, lease
portfolios acquired, and discontinuance of gain-on-sale accounting. In addition,
during the quarter ended September 30, 1999, the Company repurchased $99.0
million in lease receivables previously sold to its commercial paper conduit
facility utilizing proceeds of the term securitization. Average finance lease
receivables outstanding increased 258%.
Depreciation of equipment increased to $2.0 million from $1.6 million as a
result of increased equipment held for operating leases. The average net book
value of equipment held for rental and operating leases increased approximately
29% over the prior year period.
Goodwill amortization increased due to five acquisitions completed since
February 1998.
The provision for credit losses increased to $4.3 million from $1.4 million
resulting from an additional provision of $3.1 million recorded for credit
losses in the Company's Select Growth portfolio. Lease originations for the
Company's Select Growth Finance activities, which have a higher average loss
expectancy than the Company's other leasing segments, were 11% and 21% of total
lease originations, excluding portfolios of acquired companies, for the quarters
ended September 30, 1999 and 1998, respectively. Total lease originations,
excluding portfolios of acquired companies, increased 9% over the prior year
period.
During the third quarter of 1999, the Company recorded a restructuring
charge of $0.7 million relating to the consolidation of certain Vendor Finance
functions. The charge primarily consists of personnel related expenses, such as
severance for terminated employees, recruiting expenses for replacement
personnel, and relocation costs, as well as write-offs of certain assets,
including leasehold improvements and furniture and fixtures.
For the third quarter of 1999, the Company recorded an income tax benefit
of $1.5 million on a pre-tax loss of $2.9 million. The 1999 income tax benefit
includes $0.4 million relating to the utilization of investment tax credits for
which no benefit had previously been recognized. The Company recorded income tax
expense of $1.1 million on pre-tax income of $2.8 million for the third quarter
of 1998.
Excluding the additional provision for credit losses of $3.1 million and
the restructuring charge of $0.7 million, net income for the third quarter of
1999 would have been $1.0 million, or $0.19 per share.
Nine Months ended September 30, 1999
compared to Nine Months ended September 30, 1998
Sales of equipment decreased to $22.1 million from $23.2 million and cost
of equipment sold decreased to $17.8 million from $19.0 million. Net margins
on sales of analytical instruments increased to 19.1% from 18.4% due primarily
to manufacturer incentives received on equipment sold during the first and third
quarter.
Direct finance lease income increased to $23.1 million from $8.8 million as
a result of a substantially higher level of finance lease receivables
outstanding, arising from acquired portfolios and from internal lease
originations, and discontinuance of gain-on-sale accounting in October, 1998. In
addition, during the quarter ended September 30, 1999, $99.0 million in lease
receivables were repurchased from the Company's commercial paper conduit
facility in connection with a term securitization. Average finance lease
receivables outstanding and unearned income, net of initial direct costs,
increased 260% and 198%, respectively.
Interest income increased to $2.4 million from $1.3 million primarily due
to an increase in interest-bearing notes receivable held by the Company.
Rental and operating lease revenue increased to $8.3 million from $7.0
million primarily due to acquisitions of portfolios of operating leases made
during 1998 and increased rental utilization in the Company's Rental and
Distribution business unit.
Servicing fees and other income increased to $5.4 million from $2.5
million. Servicing fees and other income primarily consists of fees received for
servicing securitized leases, fees received for servicing third party lease
portfolios, interim rents received by Select Growth Finance, and late fees. The
increase over the prior year period primarily relates to $1.2 million in
deferred incentive fees realized in connection with servicing of a portfolio
owned by a third party, $0.5 million realized on the termination of interest
rate swap and cap agreements, an increase in fees received in connection with
servicing securitized leases, and an increase in late fees collected by the
Company's Vendor Finance business unit.
Gain of the sale of lease receivables was $1.0 million for the nine months
ended September 30, 1999. This amount represented gains on lease receivables
sold to third parties. The $6.8 million gain for the nine months ended September
30, 1998 represented gains on securitized leases. Effective October 1, 1998, the
Company eliminated gain-on-sale treatment for securitized leases by modifying
the structure of its securitization facility such that it is considered
nonrecourse debt under generally accepted accounting principles. Accordingly, no
gain on sale of securitized receivables was recorded during 1999.
Gains on equipment residual values decreased to $0.8 million from $1.5
million. Gains on equipment residual values fluctuate based on the dollar volume
of the leases maturing in a given quarter.
During 1999, the Company recognized a gain of $1.4 million on certain
equity participation rights. For the same period of 1998, the value of equity
participation rights held by the Company increased and consequently the Company
elected to sell a portion of these equity participation rights, realizing a gain
of $3.8 million.
Selling, general and administrative expenses, net of initial direct costs
capitalized, increased to $17.7 million from $13.5 million. The increase
resulted primarily from five acquisitions completed since February 1998 in the
Company's Vendor Finance business unit, senior and middle management personnel
added to support the Company's growth, and increased activity in the Company's
other business segments. The number of people employed, including employees of
companies acquired, increased 47% to 203 between September 30, 1998 and
September 30, 1999.
Interest expense increased to $16.4 million from $6.8 million, due
primarily to increased borrowings resulting from growth in lease originations,
lease portfolios acquired, and discontinuance of gain-on-sale accounting. In
addition, during the quarter ended September 30, 1999, the Company repurchased
$99.0 million in lease receivables previously sold to its commercial paper
conduit facility utilizing proceeds of the term securitization. Average finance
lease receivables outstanding increased 260%.
Depreciation of equipment increased to $5.5 million from $4.5 million as a
result of increased equipment held for operating leases. The average net book
value of equipment held for rental and operating leases increased 36% over the
prior year period.
Goodwill amortization of $0.6 million increased from $0.2 million for the
same period in 1998 due to five acquisitions completed since February 1998.
The provision for credit losses increased to $7.2 million from $4.7 million
resulting from an additional provision of $3.1 million recorded for credit
losses in the Company's Select Growth portfolio. Lease originations for the
Company's Select Growth Finance activities, which have a higher average loss
expectancy than the Company's other leasing segments, were 10% and 23% of total
lease originations, excluding portfolios of acquired companies, for the nine
months ended September 30, 1999 and 1998, respectively. Total lease
originations, excluding portfolios of acquired companies, increased 54% over the
prior year period.
During the third quarter of 1999, the Company recorded a restructuring
charge of $0.7 million relating to consolidating additional Vendor Finance
functions. The charge primarily consists of personnel related expenses, such as
severance for terminated employees, recruiting expenses for replacement
personnel, and relocation costs, as well as write-offs of certain assets,
including leasehold improvements and furniture and fixtures.
For the nine months ended September 30, 1999, the Company recorded an
income tax benefit of $1.1 million on a pre-tax loss of $1.4 million. The 1999
income tax benefit includes $0.6 million relating to the utilization of
investment tax credits for which no benefit had previously been recognized. The
Company recorded income tax expense of $2.9 million on pre-tax income of $7.4
million for the nine months ended September 30, 1998.
Excluding the additional provision for credit losses of $3.1 million and
the restructuring charge of $0.7 million, net income for the nine months ended
September 30, 1999 would have been $2.0 million, or $0.39 per share.
Liquidity and Capital Resources
General
The Company's activities are capital intensive and require access to a
substantial amount of credit to fund new equipment leases. The Company has
financed its operations to date primarily through cash flow from operations,
borrowings under its senior credit facility, commercial paper conduit
facilities, term securitizations, other nonrecourse and recourse loans, and the
sale of equity. The Company will continue to require access to equity and
substantial amounts of debt to fund its activities. In October 1999, the Company
extended its senior credit facility through January 31, 2000, at which time the
outstanding balance under the credit facility becomes due. The Company continues
to seek subordinated debt or equity financing from private sources. The Company
has retained U.S. Bancorp Piper Jaffray Inc. to explore strategic options to
enhance future shareholder value.
Should the Company be unable to renew its senior credit facility or obtain
alternative credit facilities or financing having pricing, advance rates and
other terms comparable to its existing facilities, it would have a material
adverse effect on the Company's financial condition and results of operations.
There can be no assurance that the Company will be successful in obtaining
financing on favorable terms.
Cash Flow
Cash flows from operating and financing activities are generated primarily
from receipts on direct finance leases and rentals of analytical instruments,
gross profit on the sale of analytical instruments, realization of equipment
residual values, the financing of new lease originations and rental inventory
through credit facilities and securitizations. Cash flows from operating and
financing activities for the nine months ended September 30, 1999 and 1998 were
$259.5 million and $241.9 million, respectively. The period to period increase
results primarily from the increase in the volume of securitizations completed
in 1999, additional borrowings under the Company's credit facilities, and
payments received on direct finance leases.
Credit Facilities
The Company uses its secured revolving credit facility provided by a
syndicate of banks to fund the acquisition and origination of leases and the
purchase of analytical instruments. As of September 30, 1999, the Company had a
maximum of $155 million available for borrowing under this facility of which
$92.0 million was outstanding. In October 1999, the facility was amended and
decreased to $117,000,000, a level consistent with the Company's current lease
originations. The facility is secured by substantially all of the assets of the
Company and is used by the Company to finance the acquisition of equipment
pending completion of permanent financing and for normal working capital
purposes. The facility matures January 31, 2000.
Securitization Facilities
The Company has a commercial paper conduit facility in an amount of $289
million. The facility was increased from $225 million and expanded to include
new participants in May 1999. At September 30, 1999, $97.9 million of the
facility was utilized. The terms of the facility permit the financing of
substantially all of the leases originated in the Company's Portfolio Finance,
Vendor Finance, and Rental and Distribution activities as well as the majority
of the leases originated in the Company's Select Growth Finance activities.
In July 1999, the Company completed a term securitization of $237 million.
$199 million of A-1 Certificates rated AAA by Standard and Poors and Fitch
IBCA, Inc. and Aaa by Moody's Investor Service, Inc., $9 million of B-1
Certificates rated BBB by Fitch IBCA, Inc., and $12 million of B-2 Certificates
rated BB by Fitch IBCA, Inc., were issued in the private market. The C
Certificate of $17 million was retained by the Company.
Year 2000 Compliance
Year 2000 compliance refers to the ability of computer hardware and
software to respond to the problems posed by the fact that computer programs
have traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer systems will not be
able to differentiate between the year 2000 and 1900. Failure to address this
problem could result in system failures and the generation of erroneous data.
The Company's lease tracking information technology systems have been certified
or contractually guaranteed to be year 2000 compliant by the software vendors.
The Company's financial and accounts payable information systems and several
other systems, including voice mail and phone systems, which use dates
electronically, are year 2000 compliant. The Company completed comprehensive,
full system testing during the third quarter of 1999. The Company continues to
make inquiries of significant third parties, with which the Company conducts
business, to determine their year 2000 readiness. Based on responses to date,
the Company believes that these third parties, including parties to the
Company's credit facilities and its significant Portfolio Finance customers, are
year 2000 compliant or will be year 2000 compliant by the end of the year.
To date, year 2000 costs have been immaterial and the Company believes that
future costs will not have a material adverse effect on the Company's results of
operation or financial condition. However, there can be no assurance of
unforeseen problems in its own computer systems or computer systems of third
parties with which the Company conducts business. Such problems, depending on
the extent and nature, could materially and adversely affect the Company's
operations and financial condition. As part of the Company's routine back up
servicing capabilities, the Company has a contingency plan for system failures
for its significant Portfolio Finance customers. The Company believes it could
provide servicing of the lease portfolios purchased by the Company from its
significant Portfolio Finance customers on its own lease tracking systems if
their systems fail to meet the requirements of year 2000. Additionally, the
Company continues to assess the impact of year 2000 issues on its own systems
and those of significant third parties with which the Company conducts business
and will create additional contingency plans if considered warranted.
Note on Forward Looking Information
Certain statements in this Form 10-Q and in the future filings by the
Company with the Securities and Exchange Commission and in the Company's written
and oral statements made by or with the approval of an authorized executive
officer constitute "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, and the Company intends that such forwarding-looking statements be
subject to the safe harbors created thereby. The words and phrases "expects",
"intends", "believe", "will seek", and "will realize" and similar expressions as
they relate to the Company or its management are intended to identify such
forward-looking statements. These forwarding-looking statements reflect the
Company's current view with respect to future events and financial performance,
but are subject to many uncertainties and factors relating to the Company's
operations and business environment which may cause the actual results of the
Company to be materially different from results expressed or implied by such
forward-looking statements. Examples of such uncertainties, include, but are not
limited to, the volume of new leases originated, the backlog of unfunded leases
and the adequacy of financial resources. The Company undertakes no obligation to
publicly update or revise any forward-looking statements whether as a result of
new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes from the 1998 Annual Report on Form
10-K related to the Company's exposure to market risk from interest rates except
for the termination value of the interest rate swap and interest rate cap
agreements related to the Company's securitization facility. At December 31,
1998, termination of the $153.8 million interest rate swap and interest rate cap
agreements would have resulted in a charge to earnings of $1.1 million. At
September 30, 1999, termination of the $288.0 million interest rate swap and
interest rate cap agreements would have resulted in a credit to earnings of $0.1
million.
<PAGE>
Part II - OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K
Exhibits
Exhibit
Number Document Description
10.1(d) Amendment No. 9 to the Third Amended and Restated Loan Agreement,
among the Company, the various lending institutions named therein
and Fleet Bank, N. A., as Agent
10.14 Sale Agreement, among LINC Capital, Inc., as Seller, and LINC
Equipment Receivables One, LLC, as Purchaser
27.1 Financial Data Schedule
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LINC CAPITAL, INC.
Dated: November 12, 1999
By: /s/ Allen P. Palles
-------------------
Allen P. Palles
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Mark A. Arvin
-----------------
Mark A. Arvin
Senior Vice President, Finance
(Principal Accounting Officer)
AMENDMENT NO.9
TO
THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT, dated as of November 1, 1999 ("AMENDMENT NO. 9"), is by and
among LINC CAPITAL, INC. (formerly known as Scientific Leasing Inc.), a Delaware
corporation ("LCI"), Connor Capital Corporation (the "ACQUIRED SUBSIDIARY", and
together with each other Subsidiary of LCI which shall become a "Borrower" under
the Loan Agreement subsequent to the date hereof, each a "SUBSIDIARY BORROWER"),
the banks from time to time party thereto (each a "BANK" and collectively, the
"BANKS") and FLEET BANK, N.A. as agent for the Banks (in such capacity, together
with its successors in such capacity, the "AGENT").
W I T N E S S E T H:
WHEREAS, LCI, the Acquired Subsidiary, the Banks and the Agent are parties
to a Third Amended and Restated Loan Agreement dated as of July 22, 1997 (as
amended, supplemented, restated or otherwise modified from time to time,
including as amended hereby, the "LOAN AGREEMENT"); and
WHEREAS, the Borrowers (as hereinafter defined) have requested certain
further amendments to the Loan Agreement and; and
WHEREAS, capitalized terms used and not otherwise defined herein shall have
the meanings specified in the Loan Agreement;
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration the receipt of which is hereby acknowledged, LCI, the Acquired
Subsidiary (LCI together with the Acquired Subsidiary are herein sometimes
referred to individually as a "BORROWER" and collectively as the "BORROWERS"),
the Banks and the Agent agree as follows:
ARTICLE I. AMENDMENTS TO LOAN AGREEMENT.
This Amendment shall be deemed to be an amendment and supplement to the
Loan Agreement, and shall not be construed in any way as a replacement therefor.
All of the terms and provisions of this Amendment, including, without
limitation, the representations and warranties set forth herein, are hereby
incorporated by reference into the Loan Agreement as if such terms and
provisions were set forth in full therein. The Loan Agreement is hereby amended,
upon the satisfaction of the conditions precedent set forth in Section 4.1
hereof, in the following respects, with such amendments to become effective on
the date first above written except as otherwise indicated:
1.1 Section 1.1 of the Loan Agreement, "DEFINITIONS", is amended to add the
following new definition where alphabetically appropriate:
"AMENDMENT NO. 9" - Amendment No. 9 dated as of November 1, 1999, to
this Third Amended and Restated Loan Agreement.
1.2 Section 1.1 of the Loan Agreement, "DEFINITIONS", is amended to delete
the definitions of the terms "Payment Date", "Term Conversion Date" and "Term
Period" in their entirety and clause (i) of the definition of the term "Interest
Period". Sections 1.2(9), 2.1(b), 2.2(b), 2.8(b), 2.8(c), 2.26(a)(ii)(B) and
5.9(b) of the Loan Agreement are also deleted in their entirety. Any other
references to the "Term Conversion Date" or the "Term Period" in the Loan
Agreement shall also be deemed to be deleted in their entirety, including,
without limitation, the words "and following the Term Conversion Date" set forth
in Section 2.1(a) of the Loan Agreement.
1.3 Section 1.1 of the Loan Agreement, "DEFINITIONS", is amended to amend
the definition of the term "Post-Default Rate" to change the amount "2%" as it
appears throughout such definition to the amount "3%".
1.4 Section 1.2(2) of the Loan Agreement is hereby amended by adding the
following paragraph at the end thereof:
In addition, at no time shall the Post-Computation Amount included in
the Borrowing Base reflecting the Balance of Payments under Unfunded Eligible
Contracts exceed in the aggregate Twenty-One Million ($21,000,000)Dollars.
1.5 Section 2.10 (a) of the Loan Agreement is hereby amended to read in its
entirety as follows:
(a) Subject to Section 2.8(a) hereof, the Borrowers shall pay to the Agent for
the account of each Bank the principal of the Loans made by such Bank
outstanding at the close of business on the Commitment Termination Date (i)
in full, and (ii) in addition on other dates and in the amounts otherwise
required under Section 2.8(a) hereof.
1.6 The definition of "ADJUSTED TANGIBLE NET WORTH" in Section 1.1 is
hereby amended to add the words "after tax" after the word "goodwill".
1.7 The definition of "COMMITMENT TERMINATION DATE" in Section 1.1 is
hereby amended to read in its entirety as follows:
"Commitment Termination Date" - January 31, 2000.
<PAGE>
1.8 Section 6.9(c) is hereby deleted in its entirety.
1.9 Section 7.13, "CAPITAL EXPENDITURES", is amended to replace the amount
"One Million ($1,000,000) Dollars" with the amount "Two Million ($2,000,000)
Dollars".
1.10
(a) Commencing as of November 1, 1999 (the "Commitment Decrease Effective
Date"), the Total Commitment of the Banks shall be decreased from One
Hundred Fifty Five Million Dollars ($155,000,000) to One Hundred Seventeen
Million Dollars ($117,000,000). The amount of each Bank's Commitment as a
result of such amendment as of the Commitment Decrease Effective Date shall
be as set forth under the heading "New Commitment" set forth in SCHEDULE A
annexed to this Amendment No. 9, PROVIDED, HOWEVER, that nothing in this
Amendment No. 9 shall be deemed to decrease the Temporary Commitment.
(b) In order to evidence the Loans made by each of the Banks under its
Commitment as amended hereby, the Borrowers shall execute and deliver to
each of the Banks within ten (10) Business Days of the Commitment Decrease
Effective Date a new promissory note substantially in the form attached to
the Loan Agreement as Exhibit B-1, reflecting the Commitment of each Bank
respectively as amended hereby, dated the Commitment Decrease Effective
Date and otherwise duly completed (collectively, all of the above-
described promissory notes are defined as the "New Notes"). Upon execution
and delivery by the Borrowers of the New Notes, the Agent shall cause each
of the Notes being replaced by a New Note to be marked "Replaced by New
Note", and returned to the Borrowers.
(c) All references in the Loan Agreement, Loan Documents and all other
instruments, documents and agreements executed and delivered pursuant to
any of the foregoing, to "the ratable benefit of the Banks", "pro rata", or
terms of similar effect shall be deemed to refer to the ratable interests
of the Banks, as their respective pro rata interests shall be adjusted to
reflect the amendments to the Commitments of each of the Banks as set forth
on Schedule A annexed hereto.
(d) The Borrower agrees to pay to each Bank on the Commitment Decrease
Effective Date, in addition to any other fees otherwise due and payable
under the Loan Documents, an amendment fee (the "Amendment Fee") in
consideration of the agreement of the Banks to the terms hereof in an
amount equal to 0.10%(ten basis points) of such Bank's Commitment as of the
Commitment Decrease Effective Date, the receipt by all of the Banks of such
Amendment Fee to be a condition precedent to the effectiveness of this
Amendment No. 9.
(e) In order to reflect the foregoing, if necessary, the Banks shall, as of the
Commitment Decrease Effective Date, make appropriate adjustments among
themselves in order that the amount of Loans outstanding to the Borrowers
from each Bank under the Loan Agreement are in principal amounts, as of the
Commitment Decrease Effective Date, which are in the same proportion to the
outstanding principal amount of all Loans that each Bank's Commitment,
respectively, bears to the aggregate Commitments of all the Banks, after
giving effect to the amended amount of the Commitments; PROVIDED, HOWEVER,
that the foregoing adjustments shall not be made as of the Commitment
Decrease Effective Date in respect of Loans bearing interest at a rate
subject to an Interest Period outstanding immediately prior to the
Commitment Decrease Effective Date but such adjustments will be made on the
first day on which the foregoing adjustments can be made without incurring
"breakage costs" in respect of each respective Interest Period, so that the
foregoing adjustment shall be made as of the Commitment Decrease Effective
Date only in respect of borrowings from and after the Commitment Decrease
Effective Date or borrowings that are not subject to any Interest Period.
The Borrowers, the Banks and the Agent acknowledge that no prepayments
under the Loan Agreement shall be required in respect of the decrease in
the Total Commitment as provided herein since the total Loans and L/C
Obligations outstanding as of the Commitment Decrease Effective Date shall
be less than the Banks' Total Commitment as so decreased. The Borrowers
agree and consent to the terms of this Section 1.12.
ARTICLE II. WAIVERS
2.1. The Banks and the Agent hereby waive any breach of Section 6.9(a) of
the Loan Agreement solely for the calendar quarter ending September 30, 1999.
The waiver set forth in this Section 2.1 is applicable only to the specific
provision of the Loan Agreement, and for the time period, described in this
Section 2.1 and shall not constitute a waiver of any other or future breach of
any terms of the Loan Agreement.
2.2. The Banks and the Agent hereby waive any breach of Section 6.9(c) of
the Loan Agreement solely for the twelve-month period ending on the last day of
the calendar quarter ending on September 30, 1999. The waiver set forth in this
Section 2.2 is applicable only to the specific provision of the Loan Agreement,
and for the time period, described in this Section 2.2 and shall not constitute
a waiver of any other or future breach of any terms of the Loan Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES.
3.1 Each of the Borrowers represents and warrants to the Agent and the
Banks, as of the Effective Date, as follows:
(a) Each Borrower is duly organized and validly existing under the laws of its
state of organization and has the power to own its assets and to transact
the business in which it is presently engaged and in which it proposes to
be engaged.
(b) Each Borrower is in good standing in its state of incorporation and in each
state in which it is qualified to do business. There are no jurisdictions
in which the character of the properties owned by any Borrower or in which
the transaction of the business of any Borrower as now conducted requires
or will require such Borrower to qualify to do business, except
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the Collateral in the Borrowing Base or on the business,
operations, financial condition, or properties of any Borrower.
(c) Each Borrower has the power to execute and deliver this Amendment No. 9 and
the other Loan Documents contemplated hereby and to perform the Loan
Agreement as amended hereby and the other Loan Documents contemplated
hereby. No consent or approval of any Person (including, without
limitation, any stockholder of any Borrower), no consent or approval of any
landlord or mortgagee, no waiver of any Lien or right of distraint or other
similar right and no consent, license, approval, authorization or
declaration of any governmental authority, bureau or agency, is or will be
required in connection with the execution or delivery by any Borrower of
this Amendment No. 9 or any of the other Loan Documents contemplated
hereby.
(d) This Amendment No. 9 and each of the other Loan Documents contemplated
hereby has been duly executed and delivered by each Borrower party thereto
and each constitutes the valid and legally binding obligation of such
Borrower, enforceable in accordance with its terms, except that the remedy
of specific performance and other equitable remedies are subject to
judicial discretion and except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws, now or hereafter in effect, relating to or affecting the
enforcement of creditors' rights generally.
(e) The execution and delivery by the Borrowers of this Amendment and each of
the other Loan Documents contemplated hereby and the performance by the
Borrowers under each of the aforementioned documents does not and will not
violate any provision of law (including, without limitation, the Williams
Act, Sections 13 and 14 of the Securities and Exchange Act of 1934, and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and Regulations U, G
and X of the Board of Governors of the Federal Reserve System and the rules
and regulations promulgated thereunder) and does not and will not conflict
with or result in a breach of any order, writ, injunction, ordinance,
resolution, decree, or other similar document or instrument of any court or
governmental authority, bureau or agency, domestic or foreign, or any
certificate of incorporation or by-laws of or applicable to any Borrower or
create (with or without the giving of notice or lapse of time, or both) a
default under or breach of any agreement, instrument, document, bond, note
or indenture to which any Borrower is a party, or by which it is bound or
any of its properties or assets is affected, or result in the imposition of
any Lien of any nature whatsoever upon any of the properties or assets
owned by or used in connection with the business of LCI or any other Loan
Party, except for the Liens created and granted pursuant to the Security
Documents or otherwise permitted under the Loan Agreement.
(f) All of the properties and assets owned by each Borrower and each of the
Subsidiaries and all of the properties and assets owned by any other Loan
Party which properties or assets are covered by a Security Document
executed by such Loan Party are owned by each of them, respectively, free
and clear of any Lien of any nature whatsoever, except as provided for in
the Security Documents and as permitted by Section 7.2 of the Loan
Agreement. The Liens which have been created and granted by the Security
Documents constitute valid perfected Liens on the properties and assets
covered by such Security Documents, subject to no prior or equal Lien
except as permitted by Section 7.2 of the Loan Agreement.
(g) The Liens granted pursuant to the Security Documents secure, without
limitation, the Obligations under the Loan Agreement as amended by this
Amendment No. 9, whether or not so stated in the Security Documents. The
terms "Obligations" as used in the Security Documents (or any other term
used therein to refer to the Indebtedness, liabilities and obligations of
the Borrowers to the Banks or the Agent) include, without limitation,
Indebtedness, liabilities and obligations to the Banks and the Agent under
the Loan Agreement as amended by this Amendment No. 9.
<PAGE>
ARTICLE IV. CONDITIONS.
4.1 CONDITIONS. The amendments and waiver set forth in Articles I and II
above shall be subject to the fulfillment by the Borrowers, in a manner
satisfactory to the Agent, of all of the conditions precedent set forth in this
Section 4.1:
(a) The Borrowers and each of the Banks shall have executed and delivered to
the Agent this Amendment No. 9.
(b) (i) The representations and warranties contained in Article III of this
Amendment No. 9 and in each other agreement, instrument, certificate or
other writing delivered to the Agent or any Bank pursuant hereto or to the
Loan Agreement shall be correct on and as of the date hereof and on and as
of the Effective Date (after giving effect to the waivers included herein)
as though made on and as of such date, and (ii) no Default or Event of
Default shall have occurred and be continuing on the Effective Date; and
execution and delivery of this Amendment shall constitute confirmation by
the Borrowers of the truth and accuracy and satisfaction of the conditions
of this Section 4.1.
(c) The Agent shall have received copies of the resolutions of the board of
directors of the Borrowers, certified as true, correct and complete by an
officer thereof, authorizing the execution and delivery of this Amendment.
(d) The Agent shall have received in form and substance satisfactory to the
Agent a certificate of an authorized officer of each of the Borrowers
certifying the names and true signatures of the officer authorized to sign
this Amendment No. 9 and each of the other documents contemplated hereby
together with evidence of the incumbency of such authorized officer.
(e) If requested, the Agent shall have received an opinion, in form and
substance satisfactory to the Banks and the Agent, of Allen P. Palles, Esq.
or James Froberg, Esq., counsel to the Borrowers as to such matters
relating to this Amendment as the Agent and the Banks may reasonably
request.
(f) The Borrowers shall have (i) paid to each Bank, and each Bank shall have
received, the Amendment Fee, (ii) paid all fees and expenses of counsel to
the Agent incurred in connection herewith; and (iii) otherwise complied in
all respects with the terms hereof and of any other agreement, document,
instrument or other writing to be delivered by the Borrower in connection
herewith.
(g) All legal matters incident to this Amendment shall be reasonably
satisfactory to the Agent and counsel to the Agent.
ARTICLE V. MISCELLANEOUS.
5.1 The Loan Agreement and the other agreements to which the Borrowers are
a party delivered in connection herewith or with the Loan Agreement are, and
shall continue to be, in full force and effect, and are hereby ratified and
confirmed in all respects, except that on and after the effectiveness of this
Amendment (a) all references in the Loan Agreement to "this Agreement",
"hereto", "hereof", "hereunder" or words of like import referring to the Loan
Agreement shall mean the Loan Agreement as amended hereby, (b) all references in
the Loan Agreement, the Security Documents or any other agreement, instrument or
document executed and delivered in connection therewith to (i) the "Loan
Agreement", "thereto", "thereof", "thereunder" or words of like import referring
to the Loan Agreement shall mean the Loan Agreement as amended hereby, and (ii)
the "Loans" (or any other term or terms used in any of such documents to
describe or refer to Loans made by the Banks to the Borrowers under the Loan
Agreement) shall be deemed to refer to Loans made by the Banks to the Borrowers
pursuant to the Loan Agreement as amended hereby.
5.2 The Loan Agreement, the Security Documents and all agreements,
instruments and documents executed and delivered in connection with any of the
foregoing shall each be deemed amended hereby to the extent necessary, if any,
to give effect to the provisions of this Amendment No. 9. Except as so amended
hereby, the Loan Agreement and the other Loan Documents shall remain in full
force and effect in accordance with their respective terms. The execution and
delivery of this Amendment No. 9 by the Borrowers, the Banks and the Agent shall
not waive or be deemed to waive any default which has occurred or which may be
occurring in respect of the Loan Agreement, and each of the waivers granted
hereunder shall be effective only in the specific instance and for the purpose
for which given. All of the terms and provisions of this Amendment No. 9 are
hereby incorporated by reference into the Loan Agreement as if such terms and
provisions were set forth in full therein.
<PAGE>
5.3 The miscellaneous provisions under Article 10 of the Loan Agreement,
together with the definitions of all terms used therein, and all other Sections
of the Loan Agreement to which such Sections refer are hereby incorporated by
reference as if the provisions thereof were set forth in full herein.
5.4 This Amendment No. 9 may be executed in counterparts by the parties
hereto, and each such counterpart shall be considered an original, and all such
counterparts shall constitute one and the same instrument. Signatures
transmitted by facsimile shall be deemed as effective as manually executed
originals.
5.5 THIS AMENDMENT NO. 9 SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS), AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
No. 9 to Third Amended and Restated Loan Agreement to be duly executed as of the
date first above written.
LINC CAPITAL, INC. (formerly known
as SCIENTIFIC LEASING, INC.),
as Borrower
By:/s/ Allen P. Palles
-------------------
Name:Allen P. Palles
Title:Executive Vice President and
Chief Financial Officer
CONNOR CAPITAL CORPORATION,
as Borrower
By:/s/ Allen P. Palles
-------------------
Name: Allen P. Palles
FLEET BANK, N.A. (formerly NATWEST
BANK N.A.) as Agent and as a Bank
By: /s/ Anthony McKiernan
---------------------
Name: Anthony McKiernan
FIRST UNION NATIONAL BANK (formerly
known as CORESTATES BANK, N.A.)
By: /s/ Carmel Albano
-----------------
Name: Carmel Albano
LASALLE BANK NATIONAL ASSOCIATION
(formerly known as LASALLE NATIONAL BANK)
By: /s/ Henry Munez
---------------
Name: Henry Munez
[Signature Page to Amendment No. 9 Under
LINC Capital Third Amended and Restated Loan Agreement]
<PAGE>
BANK ONE, NA (formerly known as THE FIRST
NATIONAL BANK OF CHICAGO)
By: /s/ Andrew Heinecke
-------------------
Name: Andrew Heinecke
EUROPEAN AMERICAN BANK
By: /s/ Kenneth Austin
------------------
Name: Kenneth Austin
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Alison Mason
--------------------
Name: Alison Mason
KEY BANK NATIONAL ASSOCIATION
By: /s/ Scott Foye
--------------
Name: Scott Foye
NATIONAL CITY BANK
By: /s/ John Stinson
----------------
Name: John Stinson
[Signature Page to Amendment No. 9 Under
LINC Capital Third Amended and Restated Loan Agreement]
SALE AGREEMENT
among
LINC CAPITAL, INC.,
as Seller
and
LINC EQUIPMENT RECEIVABLES ONE, LLC,
as Purchaser
Dated as of July 29, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS; INTERPRETATION...................................... 1
SECTION 1.1 Definitions...................................... 1
SECTION 1.2 General Interpretive Principles.................. 2
ARTICLE 2. SALE OF ASSETS................................................... 2
SECTION 2.1 Sale and Contribution of Assets.................. 2
SECTION 2.2 Purchase Price................................... 3
SECTION 2.3 Conditions Precedent............................. 3
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND COVENANTS........................ 4
SECTION 3.1 Seller Representations, Warranties and Covenants
as to Seller................................... 4
SECTION 3.2 Seller Representations, Warranties and Covenants
as to Leases, Lease Receivables and Equipment.. 7
SECTION 3.3 Representations and Warranties Continue.......... 12
ARTICLE 4. ADDITIONAL COVENANTS............................................. 13
SECTION 4.1 ............................................... 13
ARTICLE 5. ADMINISTRATION AND PAYMENTS...................................... 15
SECTION 5.1 Collection of Lease Receivables.................. 15
SECTION 5.2 Prompt Remittance of Receipts.................... 15
SECTION 5.3 Shared Reserves; Shared Residuals................ 16
ARTICLE 6. REPURCHASE AND SUBSTITUTION OF LEASES AND
EQUIPMENT.................................................. 17
SECTION 6.1 Repurchase of Purchase or Renew Leases; Sales to
ReplacePrepaid Leases............................ 17
SECTION 6.2 Repurchase or Substitution of Defaulted Leases... 18
SECTION 6.3 Repurchase or Substitution of Non-conforming
Leases; Dilution; Northern Leases...............18
SECTION 6.4 Repurchase or Substitution of Leases............. 19
SECTION 6.5 Transfer Following Repurchase or Substitution.... 20
SECTION 6.6 Limitation on Substitutions...................... 20
ARTICLE 7. NOTICES.......................................................... 20
SECTION 7.1 Notices.......................................... 20
ARTICLE 8. TERMINATION...................................................... 21
SECTION 8.1 Termination...................................... 21
SECTION 8.2 Effect of Termination............................ 21
ARTICLE 9. MISCELLANEOUS PROVISIONS......................................... 21
SECTION 9.1 Amendment........................................ 21
SECTION 9.2 Governing Law.................................... 22
SECTION 9.3 Transfer of Assets to Trust...................... 22
SECTION 9.4 Severability of Provisions....................... 22
SECTION 9.5 Assignment....................................... 22
SECTION 9.6 Further Assurances............................... 22
SECTION 9.7 No Waiver; Cumulative Remedies................... 22
SECTION 9.8 Counterparts..................................... 22
SECTION 9.9 Binding Effect; Third-Party Beneficiaries........ 23
SECTION 9.10 Merger and Integration........................... 23
SECTION 9.11 True Sale........................................ 23
Exhibit A - Definitions
Exhibit B - Lease Schedule
Exhibit C - Schedule of Security Deposits
Exhibit D - Trade Names
<PAGE>
SALE AGREEMENT
THIS SALE AGREEMENT, dated as of July 29, 1999, is entered into among LINC
CAPITAL, INC. ("LINC"), a Delaware corporation (the "Seller"), and LINC
EQUIPMENT RECEIVABLES ONE, LLC, a Delaware limited liability company (herein,
the "Transferor"), as purchaser.
WITNESSETH
WHEREAS, the Seller desires to sell, transfer, assign, contribute and
otherwise convey all of its right, title and interest in and to the Leases
listed on the Lease Schedule attached hereto as Exhibit B and the related Lease
Receivables and Equipment to the Transferor upon the terms and conditions
hereinafter set forth; and
WHEREAS, it is contemplated that following such sale, transfer, assignment,
contribution and conveyance of the Leases listed on the Lease Schedule the
Servicer and certain Subservicers will administer and service the Leases and
manage and remarket the Equipment upon the expiration or other termination of
the terms of the Leases pursuant to the Pooling and Servicing Agreement dated as
of the date hereof (as amended or modified from time to time in accordance with
the provisions thereof, the "Pooling and Servicing Agreement") among the
Transferor, the Servicer and U. S. Bank Trust National Association, as Trustee;
and
WHEREAS, it is contemplated that following such sale, transfer, assignment,
contribution and conveyance, the Transferor will convey to the Trust, for the
benefit of the Certificateholders, its right, title and interest in and to the
Leases, the Lease Receivables, the Equipment and certain related rights and
interests acquired by the Transferor hereunder and all rights of the Transferor
under this Agreement, and the Seller agree that all representations, warranties,
covenants and agreements made by the Seller herein shall also be for the benefit
of the Trust and the Certificateholders;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS; INTERPRETATION
SECTION 1.1 Definitions. Whenever used in this Agreement, capitalized terms
shall have the meanings specified in Exhibit A hereto, which is incorporated
herein by this reference. The definitions of such terms are applicable to the
plural as well as the singular forms of such terms and to the masculine as well
as the feminine and neuter genders of such terms.
SECTION 1.2 General Interpretive Principles. For purposes of this Agreement
except as otherwise expressly provided or unless the context otherwise requires:
(a) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date hereof;
(b) references herein to "Articles," "Sections," "Subsections,"
"paragraphs," "clauses" and other subdivisions, or to "Exhibits" or "Schedules"
or other attachments, are to designated Articles, Sections, Subsections,
paragraphs, clauses and other subdivisions of, or Exhibits, Schedules or other
attachments to, this Agreement, and references in any Section or definition to
"Subsections," "paragraphs," clauses" and other subdivisions are to the
designated Subsections, paragraphs, clauses and other subdivisions of that
Section or definition;
(c) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision;
(d) the term "including" means "including without limitation," and
other forms of the verb "to include" have correlative meanings;
(e) except as otherwise provided in this Agreement, all interest rate
calculations and present value determinations will be made on the basis of a
360-day year and twelve 30-day months and will be carried out to at least seven
decimal places; and
(f) captions or headings are for convenience only and in no way define,
limit or describe the scope or intent of any provisions of sections of this
Agreement.
<PAGE>
ARTICLE 2. SALE OF ASSETS
SECTION 2.1 Sale and Contribution of Assets. (a) Conveyance. Subject to all
the terms and conditions of this Agreement, and in reliance upon the
representations, warranties and covenants set forth herein, the Seller hereby
sells or contributes to the Transferor (without recourse, except as provided in
Section 6.3) and the Transferor hereby purchases or accepts as a contribution
from the Seller, as of the Closing Date, all of the Seller's right, title and
interest in, to, and under (i) each of the Leases listed on the Lease Schedule
and the Lease Files relating to such Leases, (ii) the Lease Receivables and the
right to receive all other payments on or with respect to such Leases due or
becoming due on or after the Cut-Off Date, (iii) all guaranties of and other
agreements providing credit enhancement with respect to each such Lease to the
extent related to such Lease, (iv) all rights, powers, and remedies under or in
connection with each such Lease, whether arising under the terms of such Lease,
by statute, at law or in equity, or otherwise arising out of any default by the
Obligor under such Lease, including all rights to exercise any election or
option or to make any decision or determination or to give or receive any
notice, consent, approval or waiver thereunder, (v)(A) each item of Equipment
subject to any such Lease and owned by the Seller and (B) any security interest
of the Seller in any item of Equipment subject to any such Lease and not owned
by the Seller, including in the case of either of clauses (v)(A) or (v)(B), all
Residual Realizations with respect to all such Equipment other than Shared
Residual Proceeds, except to the extent such Shared Residual Proceeds are
payable to the Seller (or the Transferor or the Trustee, as assignee of the
Seller) pursuant to the applicable Shared Residual Agreement, (vi) any Casualty
Insurance Policy or Insurance Proceeds with respect to each such Lease, (vii)
the Originator Agreements, the Subservicing Agreements, the Vendor Agreements,
and all other agreements pursuant to which the Seller acquired any rights with
respect to the foregoing insofar, and only insofar, as such agreement relates to
the foregoing (and, in the case of the Shared Enhancement Agreements, subject to
the provisions of Section 5.3), and (viii) any and all income and proceeds of
any of the foregoing. The foregoing sale, transfer, assignment, contribution and
conveyance does not constitute and is not intended to result in an assumption by
the Transferor of any obligation (except for the obligation not to disturb an
Obligor 's right of quiet enjoyment) of the Seller or the Servicer in connection
with the Leases.
(b) Financing Statements. In connection with the sale and contribution
pursuant to Section 2.1(a), to the extent relating to any Leases subject to the
terms and conditions of this Agreement, the Seller agrees to record and file, at
its own expense, all requisite Financing Statements and other documents (and
thereafter timely continuation statements with respect to such Financing
Statements) in such manner and in such jurisdictions as are necessary to perfect
and to maintain the perfection of the sale and contribution of the Leases and
related Lease Receivables and interest in the Equipment from the Seller to the
Transferor (except that no such Financing Statements need be filed in any State
which is not one of the Filing States and no action will be taken to perfect the
Transferor's interest in Leased Vehicles) and to deliver a file-stamped copy of
such Financing Statements or other evidence of such filings to the Transferor.
(c) Seller Records. The Seller shall on the Closing Date, at its own
expense, cause its computer records to be marked to show that the Leases, Lease
Receivables, Equipment and other assets subject to this Section 2.1 have been
sold and contributed to the Transferor and then transferred to the Trust in
accordance with the Pooling and Servicing Agreement and, within 30 days after
the Closing Date or the applicable Transfer Date, as the case may be, shall
segregate the Lease Files from all other files held by the Seller on the
Seller's premises.
SECTION 2.2 Purchase Price. The purchase price to be paid by the Transferor
for a portion of the Leases and the related Lease Receivables and Equipment sold
to it pursuant to Section 2.1(a) shall be equal to the Initial Discounted
Present Value of such Leases. The remainder of the Leases and the related Lease
Receivables and Equipment shall be a contribution by the Seller to the capital
of the Transferor on the Closing Date. References herein and in the Pooling and
Servicing Agreement to sales by LINC hereunder shall include both sales and
contributions.
SECTION 2.3 Conditions Precedent. The obligation of the Transferor to
purchase the Leases, Lease Receivables and Equipment on the Closing Date shall
be subject to the satisfaction of the conditions set forth in the Placement
Agency Agreement and the issuance of the Certificates on such date.
<PAGE>
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.1 Seller Representations, Warranties and Covenants as to Seller.
The Seller hereby represents, warrants and covenants to the Transferor that:
(a) Organization and Good Standing. The Seller has been duly organized
and is validly existing and in good standing as a corporation under the laws of
the State of Delaware, with all requisite corporate power and authority and all
necessary licenses and permits to own and operate its properties and to transact
the business in which it is now engaged and to enter into and perform its
obligations under this Agreement and the transactions contemplated hereby, and
the Seller is duly qualified and authorized to do business and is in good
standing as a foreign corporation in each State of the United States where the
character of its properties or the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a material
adverse effect on the Seller.
(b) No Violation. The sale and contribution of the Leases and related
Lease Receivables and interests in the related Equipment sold and contributed by
the Seller pursuant to this Agreement, the performance of the Seller's
obligations under this Agreement and the consummation of the transactions by it
herein contemplated will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the creation
or imposition of any Lien upon any of the property or assets of the Seller or
any of its subsidiaries pursuant to the terms of, any indenture, mortgage, deed
of trust, loan agreement or other agreement (including the Leases) or instrument
to which it or any of its subsidiaries is a party or by which it or any of its
subsidiaries is bound or to which any part of its property or assets is subject,
nor will any such action result in any violation of the provisions of its
charter or bylaws or any statute or any injunction, writ, order, rule or
regulation of any court or governmental agency or body having jurisdiction over
it or any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with any court or any such regulatory
authority or other governmental agency or body (except for any required
compliance with federal and state securities laws with respect to the
Certificates to be issued by the Trust) is required for the sale and
contribution of the Leases and the Equipment hereunder or the consummation of
the other transactions contemplated by this Agreement.
(c) Binding Obligation. This Agreement has been duly authorized,
executed and delivered by the Seller and such authorization, execution and
delivery did not and will not require any stockholder approval or approval or
consent of any trustee or holders of any indebtedness of the Seller except as
have been duly obtained; and this Agreement is the valid and legally binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity.
(d) Place of Business. As of the date hereof, and at all times during
the four-month period preceding such date, the chief executive office and place
of business of the Seller is and has been located at the address listed in
Article 7, and the Seller does not have, and during such period did not have,
any other chief executive offices.
(e) Trade Names. Except as set forth on Exhibit D, as of the date of
this Agreement and at all times during the six-year period preceding such date,
the Seller's legal name has been as set forth in this Agreement and the Seller
has used no trade names, fictitious names or assumed names and is not doing, and
during such period has not done, business under any other name.
(f) No Proceedings. The Seller is not subject to any injunction, writ,
restraining order or other order of any nature and there is no action, suit,
proceeding or investigation pending, or, to the knowledge of the Seller,
threatened, against or affecting the Seller or any subsidiary of the Seller in
or before any court, governmental authority or agency or arbitration board or
tribunal, including any such action, suit, proceeding or investigation with
respect to any environmental or other liability resulting from the ownership or
use of any of the Equipment, which, individually or in the aggregate, materially
and adversely affects or will affect the properties, business or financial
condition of the Seller and its subsidiaries, as a whole, or materially and
adversely affects or will affect the payment of Lease Payments or any other
payment due under a Lease or the enforceability of any Lease, or the ability of
the Seller to perform its obligations under this Agreement. The Seller is not
and, by entering into this Agreement and performing the transactions
contemplated herein, will not be in default with respect to any injunction, writ
or order of any court, governmental authority or agency or arbitration board or
tribunal.
<PAGE>
(g) Taxes. All material tax returns required to be filed by the Seller
or any subsidiary of the Seller in any jurisdiction have been filed, and all
taxes, assessments, fees and other governmental charges upon the Seller or any
subsidiary of the Seller, or upon any of their respective properties, income or
franchises, shown to be due and payable on such returns have been paid. All such
tax returns were true and correct in all material respects, and neither the
Seller nor any subsidiary of the Seller knows of any proposed additional tax
assessment against it in any material amount nor of any basis therefor.
(h) No Violations of Law. The Seller:
(i) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject, and
(ii) is not in violation in any material respect of any
term of any agreement, charter document, by-law or other instrument to
which it is a party or by which it is bound,
which violation would materially adversely affect the business or financial
condition of the Seller and its subsidiaries, as a whole.
(i) Ordinary Business Purpose. The transactions by the Seller
contemplated by this Agreement are being consummated by the Seller in
furtherance of the Seller's ordinary business purposes and constitute a
practical and reasonable course of action by the Seller designed to improve the
financial position of the Seller, with no contemplation of insolvency and with
no intent to hinder, delay or defraud any of its present or future creditors.
The Seller has valid business reasons for selling and contributing the Leases
and the related Lease Receivables and Equipment to the Transferor rather than
securing a loan collateralized by the Leases and the related Lease Receivables
and Equipment. Neither as a result of the transactions contemplated by this
Agreement nor immediately before or after giving effect to any such transactions
was or will the Seller be insolvent or did or will the Seller have unreasonably
small capital for the conduct of its business and the payment of its anticipated
obligations.
(j) Assets and Liabilities.
(i) Both immediately before and after the sale and
contribution of the Leases and the related Lease Receivables and
Equipment contemplated by this Agreement, the present fair salable
value of the Seller's assets was and will be in excess of the amount
that was and will be required to pay the Seller's probable liabilities
as they then existed or will then exist and as they become absolute and
matured; and
(ii) both immediately before and after the sale and
contribution of the Leases and the related Lease Receivables and
Equipment contemplated by this Agreement, the sum of the Seller's
assets was and will be greater than the sum of the Seller's debts at
such time, valuing the Seller's assets at a fair salable value.
(k) Incurrence of Debts. Neither as a result of the transactions
contemplated by this Agreement nor otherwise does the Seller believe that it
will incur debts beyond its ability to pay or which would be prohibited by its
charter documents or by-laws. The Seller's assets and cash flow enable it to
meet its present obligations in the ordinary course of business as they become
due.
(l) Bulk Transfer Laws. No sale, transfer, assignment, contribution or
conveyance of Leases, the related Lease Receivables or Equipment by the Seller
to the Transferor contemplated by this Agreement will be subject to the bulk
transfer laws or any similar statutory provisions in effect at the time in any
applicable jurisdiction.
<PAGE>
(m) Transfer Taxes. No sale, transfer, assignment, contribution or
conveyance of Leases or related Lease Receivables or Equipment contemplated by
this Agreement is subject to or will result in any tax, fee or governmental
charge payable by the Seller or the Transferor to any federal, state or local
government ("Transfer Taxes"). In the event that the Seller or the Transferor
receives actual notice of any Transfer Taxes arising out of the transfer of any
Leases or Lease Receivables or Equipment, on written demand by the Transferor,
or upon the Seller otherwise being given notice thereof, the Seller shall pay,
and otherwise indemnify and hold harmless, on an after-tax basis, the
Transferor, the Trustee, the Trust and each Holder of the Certificates, as the
assignees of Transferor's rights hereunder, from and against any and all such
Transfer Taxes (it being understood that neither the Transferor, the
Certificateholders, the Trust nor the Trustee shall have any obligation to pay
such Transfer Taxes).
(n) Substantive Consolidation. The Seller shal at all times operate
and conduct its business affairs in such a manner that the Transferor would not
be substantively consolidated with the Seller in the event of a bankruptcy or
insolvency of the Seller.
(o) As of the Cut-Off Date, Leases representing at least 88% of the
aggregate Discounted Present Value of all Leases with Financed Residual Values
relate to Equipment located in the Filing States.
(p) The Discounted Present Value of all Leases with any one Obligor as
of the Cut-Off Date does not exceed 1.25% of the Initial Aggregate Discounted
Present Value.
SECTION 3.2 Seller Representations, Warranties and Covenants as to Leases,
Lease Receivables and Equipment. With respect solely to each Lease sold or
contributed by it hereunder, and the related Lease Receivables and Equipment,
the Seller hereby represents, warrants and covenants to the Transferor that:
(a) Title. Immediately prior to the sale or contribution to the
Transferor, the Seller was (and upon such transfer, the Transferor was or will
be, as the case may be) the legal owner of all right, title and interest in and
to such Lease (including the related Lease Receivables) and the related
Equipment, except that (1) with respect to the Equipment subject to Dollar Out
Leases, Required Purchase or Renew Leases, and Leases which are in form secured
loan agreements and other finance leases, the Seller may be deemed to have a
security interest in such Equipment rather than an ownership interest, (2) with
respect to the Shared Residual Leases, ownership of the related Equipment has
been retained by the related Contractual Third Party Originator (each of which
has granted the Seller a security interest in such Equipment) and (3) with
respect to Leased Vehicles, no actions will be taken with respect to the related
certificates of title (or similar documents). Immediately prior to the sale or
contribution to the Transferor, each Lease (including the related Lease
Receivables) and the Equipment subject to each Lease was or is, as the case may
be, free from any Lien or other right, title or interest of any Person,
including the manufacturer, supplier or any Obligor , subject, however, to (1)
the rights of the Obligors under the Leases in the Equipment, (2) with respect
to the Shared Residual Leases, the rights of the related Contractual Third Party
Originators under the related Originator Agreements and (3) certain inchoate
liens for taxes not yet payable and mechanics' liens for services or materials
supplied with respect to the Equipment and the payment of which is not yet
overdue; and the Seller shall defend the Transferor's title to the Leases
(including the Lease Receivables) and the Transferor's title (or, in the case of
Shared Residual Leases, Dollar Out Leases, Required Purchase or Renew Leases,
Leases for Leased Vehicles, and Leases which in form are secured loan agreements
and other finance leases, the Transferor's security interest) in the related
Equipment against all claims and demands of all Persons at any time claiming
through the Seller the same as, or any interest therein adverse to, that of the
Transferor.
(b) Lease Files. Within 30 days after the Closing Date or the
applicable Transfer Date, as the case may be, the Seller will segregate the
Lease Files from all other files held by the Seller on the Seller's premises.
(c) Legends. The Seller will cause (within 30 days after the Closing
Date or the applicable Transfer Date, as the case may be) all copies of such
Lease in its possession to be separately identified and distinguished from the
Seller's other leases by an appropriate legend clearly disclosing the fact that
such Lease (including the related Lease Receivables) and the related Equipment
have been sold and contributed to the Transferor and that such Lease (including
the related Lease Receivables) and related Equipment have been further assigned
by the Transferor to the Trustee, and any original copies of any Lease
subsequently coming into the possession of the Seller will be identified as
described in this Section 3.2(c).
<PAGE>
(d) No Lease Defaults. Such Lease is in full force and effect in
accordance with its terms and neither the Seller nor, to the Seller's knowledge,
any Obligor has done or failed to do anything that would or might permit any
such Obligor or the Seller to terminate such Lease or suspend or reduce any
payments or obligations due or to become due thereunder by reason of default by
the other party to such Lease; and (i) the Obligor thereunder (A) has made or
will make prior to the Closing Date, or (B) has made prior to the applicable
Transfer Date in the case of a Substitute Lease, at least one payment of Lease
Payments under such Lease in addition to any payment made at the time of signing
of such Lease, and (ii) such Lease is not a Defaulted Lease nor was any Lease
Payment more than 30 days delinquent as of the Measurement Date, or as of the
end of the calendar month immediately preceding the applicable Transfer Date in
the case of a Substitute Lease; provided, however, that Leases representing not
more than 2.75% of the aggregate Gross Contract Balance may be more than 30 days
but not more than 60 days past due as of the Measurement Date.
(e) Binding Obligation. Such Lease is a valid, binding and legally
enforceable obligation of each party thereto. All parties to each Lease had all
requisite authority and capacity to execute such Lease and no such Lease will
violate any applicable law or contravene any other agreement to which any such
party is subject.
(f) Equipment Financing Statements. The Seller (or the applicable Third
Party Originator) has filed Financing Statements against the Obligors in
accordance with the Seller's UCC filing policy as described in the Private
Placement Memorandum under the heading "Risk Factors--Certain Legal
Aspects--Financing Statements", and such Financing Statements filed by Third
Party Originators have been assigned to the Seller all in order to perfect the
Seller's security interest in any Equipment covered by such Financing Statements
which is deemed to be owned by the Obligor, and such Financing Statements have
not been terminated, released or assigned (except as contemplated by this
Agreement). Other than Financing Statements or other similar instruments of
registration under the law of any jurisdiction which (A) will be released or
assigned to the Transferor on or prior to the Closing Date, or, in the case of
any Substitute Lease, on or prior the Transfer Date therefor, (B) will be filed
pursuant hereto in order to perfect the interest of the Transferor in the
Leases, Lease Receivables and Equipment or (C) will be filed to perfect the
Trustee's rights therein under the Pooling and Servicing Agreement for the
benefit of the Certificateholders, there are no Financing Statements or
instruments on file, and the Seller has not and will not execute or authorize
there to be on file any Financing Statement or similar instrument, under the
laws of any jurisdiction relating to the Seller's interests in the Lease
Receivables, Leases or Equipment.
(g) Perfection. All filings and recordings required to perfect (i) the
title of the Transferor and the Trustee to such Lease and the related Lease
Receivables will be accomplished and in full force and effect on the Closing
Date and (ii) the title or security interest of the Transferor and the Trustee
in the related Equipment will be accomplished within 10 Business Days after the
Closing Date, except that (x) no actions (including the retitling of Leased
Vehicles) with respect to the perfection of the Transferor's security interest
in Leased Vehicles will be required to be taken (other than the filing of
Financing Statements otherwise required herein), and (y) no filings will be made
other than in the Filing States.
(h) Form of Lease. Such Lease is substantially in one of the forms
provided to the Transferor and Mayer, Brown & Platt, counsel to Prudential
Securities Incorporated, as placement agent for the initial placement of the
Class A Certificates, Class B-1 Certificates and the Class B-2 Certificates and
constitutes "chattel paper" within the meaning of the UCC as in effect in any
applicable jurisdiction.
(i) Accuracy of Lease Schedule. The Lease Schedule contains a complete
and correct statement of the Lease Payments (other than variable payments) under
such Lease and the Estimated Residual Value with respect to the related
Equipment.
(j) Hell or High Water Leases. Such Lease is and will be noncancellable
and the obligation of the Obligor to pay rent thereunder (as reflected on the
Lease Schedule) is and will be unconditional, without regard to any event
affecting the Equipment or any change in circumstance of such Obligor or any
other circumstance whatsoever, including by reason of the obsolescence of the
Equipment or any right or claim of setoff, counterclaim or other defense or
claim that any such Obligor may have against any Person except that certain
Leases may require or permit the Obligor thereunder to pay an accelerated
amount, not less than the Discounted Present Value of such Lease at the time of
payment, in the event of the loss or destruction of the Equipment thereunder.
(k) Selection Procedures. Such Lease has been entered into or acquired
by the Seller in the Seller's ordinary course of business and in accordance with
the Seller's regular credit approval process in effect at the time such Lease is
entered into or acquired as generally described in the Private Placement
Memorandum and no selection procedures adverse to the credit quality of the
Leases have been employed in selecting the Leases for sale and contribution
under this Agreement.
<PAGE>
(l) Insurance of Equipment. Such Lease requires the Obligor thereunder
to maintain at its sole cost and expense property damage insurance covering loss
or damage to the Equipment leased by such Obligor in an amount at least equal to
the Discounted Present Value of such Lease.
(m) Security Deposits. Exhibit C contains an accurate statement of
those Leases with respect to which the Obligor has been required to make
security deposits and the amount of such security deposits.
(n) Maintenance Requirements.Such Lease requires the Obligor thereunder
at its sole cost and expense to maintain the Equipment leased or financed
thereunder in good operating order, repair and condition (ordinary wear and tear
excepted), and the Seller is not aware of any breach of this requirement.
(o) Triple Net Lease. Such Lease requires the Obligor thereunder to pay
all fees, taxes, and other charges or liabilities arising with respect to the
Equipment leased or financed thereunder or the use thereof, to keep the
Equipment free and clear of any and all Liens, and to indemnify and hold
harmless the lessor thereunder and its assigns against the imposition of any
such fees, taxes, charges, liabilities and Liens.
(P) Subleasing. Such lease prohibits the subleasing or other transfer
of the equipment by the obligor to any other person without the prior written
consent of the lessor thereunder or its assigns and prohibits the relocation of
the equipment without the prior written consent of or notice to the lessor
thereunder or its assigns.
(q) Transferability. Such Lease permits transfers of such Lease by the
lessor or its assigns, including grants of security interests in and to the
Lease by the lessor or its assigns.
(r) Accessions Included. The Equipment leased or financed under such
Lease and transferred (or in which a security interest has been transferred) by
the Seller to the Transferor hereunder includes all replacement parts,
modifications, repairs, alterations, additions and accessories incorporated in
or affixed to the Equipment, whether before or after the commencement of the
Lease, which become the property of the lessor thereunder upon being so
incorporated or affixed.
(s) No Defenses. No facts or circumstances exist which reasonably could
give rise at any time in the future to any right of rescission, offset,
counterclaim or defense, including the defense of usury, to the obligations of
the Obligor under such Lease, including the obligation of such Obligor to pay
all amounts due with respect to such Lease, and neither the operation of any of
the terms of such Lease nor the exercise of any right thereunder will render
such Lease unenforceable in whole or in part or subject to any right of
rescission, offset, counterclaim or defense, including the defense of usury, and
no such right of rescission, offset, counterclaim or defense will have been
asserted with respect thereto.
(t) No Modifications. Such Lease has not been amended, altered or
modified in any respect and no provision of such Lease has been waived, except,
in each case, in writing, and copies of all such writings will be attached to
the Lease.
(u) No Release. The Obligor has not been released, in whole or in part,
from any of its obligations in respect of such Lease; such Lease has not been
satisfied, canceled or subordinated, in whole or in part, or rescinded, and no
Equipment covered by such Lease has been released from such Lease, in whole or
in part; and no instrument has been executed that would effect any such
satisfaction, release, cancellation, subordination or rescission.
(v) Transfer Not Unlawful. Such Lease was not originated in and is not
subject to the laws of any jurisdiction whose laws would make the transfer and
sale or contribution thereof under this Agreement unlawful.
(w) Fair Consideration. The consideration received and to be received
by the Seller in exchange for the sale of the Leases (including the related
Lease Receivables) and the Equipment hereunder is fair consideration having
value equivalent to or in excess of the value of the assets transferred by the
Seller.
(x) Originator Agreements. No material event of default has occurred
and is continuing under any Originator Agreement or Vendor Agreement. Except as
identified on Exhibit F to the Pooling and Servicing Agreement, there are no
other Originator Agreements.
(y) Eligible Leases. Such Lease is to an Obligor which (i) is located
at an address in the United States or Puerto Rico, (ii) is not an Affiliate of
the Transferor and (iii) is not an agency, a department, an instrumentality or a
political subdivision of the United States or of any state or local government
or any foreign government or an agency or instrumentality thereof.
<PAGE>
(z) No Substitutions; Acceleration Upon Default. Such Lease (i) does
not provide for the substitution, exchange or addition of any other items of
Equipment pursuant to such Lease that would result in any reduction or extension
of payments due under such Lease and (ii) permits the Seller to declare (subject
to any applicable grace, cure and notice periods) all payments thereunder to be
immediately due and payable if the Obligor is in default of such Lease.
(aa) Original Term. Such Lease has an original term of 72 months or
less; provided that Leases aggregating to no more than 5% of the Initial
Aggregate Discounted Present Value may have an original term of greater than 72
months and less than 87 months.
(bb) Discounted Present Value. Such Lease has a Discounted Present
Value not in excess of $400,000; provided that Leases representing no more than
7.25% of the Initial Aggregate Discounted Present Value may have a Discounted
Present Value in excess of $400,000.
(cc) Tax-Exempt. Such Lease is not a tax-exempt lease.
(dd) Duly Assigned. If such Lease was originated by Alan Acceptance
Corporation, such Lease is not a true lease and the UCC-1 financing statement,
if any, filed against the Obligor with respect to such Lease has been duly
assigned to the Seller.
(ee) Software. Such Lease does not relate solely to software; provided
that Leases representing no more than 2% of the Initial Aggregate Discounted
Present Value may relate solely to software.
(ff) Original. The Seller has possession of and will provide to the
Servicer the original of such Lease on the Closing Date or the applicable
Transfer Date, in the case of a Substitute Lease. As to such Lease, if more than
one original is executed, then either i) the Lease contains a provision stating
that only counterpart number one shall constitute "chattel paper" or
"collateral" within the meaning of the UCC as in effect in any applicable
jurisdiction, and counterpart number one will be held by the Servicer, or ii)
each and every counterpart will have been stamped or otherwise annotated to
reflect the respective interests of the Transferor and the Trust within 30 days
after the Closing Date or Transfer Date, as the case may be.
(gg) Financial Residual Value. If there is a Financial Residual Value
with respect to such Lease and such Lease is a FMV Lease or a Fixed Price Option
Lease, such Lease was originated by the Seller or an Affiliate of the Seller.
(hh) As of the Cut-Off Date and using an assumed Discount Factor equal
to 7.25%, the Discounted Present Value of Leases originated by the following
Third Party Originators or divisions or subsidiaries of LINC will not exceed the
following percentages of the Initial Aggregate Discounted Present Value:
Northern (23.41%), Golden Eagle (12.70%), LINC Spectra (12.97%), LINC Monex
(11%), LINC Quantum (3.44%), Select Growth (8.98%), LINC Comstock (9.77%),
Traditional (3.77%), Leasing Corporation of America (1.56%), Alan Acceptance
Corporation (3.5%), Cura Capital Corporation (0.45%), and Great American Leasing
Company, LLC (1.34%).
<PAGE>
SECTION 3.3 Representations and Warranties Continue.
The representations, warranties and covenants of the Seller set forth in
Section 3.2 with respect to each Lease and the related Lease Receivable and
Equipment conveyed by it shall continue so long as such Lease remains
outstanding or until repurchased or substituted for pursuant to Article 6. The
Seller shall be deemed to make such representations, warranties and covenants as
to each Substitute Lease, and the related Lease Receivables and Equipment at the
time of Substitution. Upon discovery by the Seller or the Transferor that any
such representation or warranty was incorrect as of the time made, the party
making such discovery shall give prompt notice to the other, the Servicer and
the Trustee.
ARTICLE 4. ADDITIONAL COVENANTS
SECTION 4.1 In addition to its covenants set forth in Sections 3.1 and 3.2,
the Seller hereby covenants and agrees with the Transferor as follows:
(a) Leases and Equipment.
(i) The Seller's copies of originals or duplicates of all
documents evidencing all Leases are and shall be kept by the Seller at,
and only at, the Seller's chief executive offices which are located at
the address listed below in Article 7. The Seller will not move such
offices or such documents or related records and books unless the
Seller shall have given to the Transferor and the Trustee not less than
30 days' written notice of its intention to do so, clearly describing
the new location, and the Seller will not move such offices out of the
United States in any event.
(ii) The Seller will duly perform all obligations on its part
to be fulfilled under or in connection with the Leases and the Seller
will do nothing to impair the rights of the Transferor or the Trustee
in the Leases, the Lease Receivables or the Equipment.
(iii) The Seller will at its own expense make, execute or
endorse, acknowledge, and file or deliver to the Transferor and the
Trustee from time to time such schedules, confirmatory assignments,
conveyances, reports and other reassurances or instruments and take
such further steps relating to the Leases, the Lease Receivables, the
Equipment and the rights covered by this Agreement as the Transferor or
the Trustee may request and reasonably require.
(iv) The Seller agrees to indemnify and hold harmless the
Transferor, the Trustee and the Trust (each an "Indemnified Party")
against any and all liabilities, losses, damages, penalties, costs and
expenses (including reasonable costs of defense and legal fees and
expenses) which may be incurred or suffered by such Indemnified Party
(except to the extent caused by gross negligence or willful misconduct
on the part of the Indemnified Party) as a result of claims, actions,
suits or judgments asserted or imposed against it and resulting from
any use, operation, maintenance, repair, storage or transportation of
any Equipment subject to a Lease sold or transferred by it hereunder
and any tort claims and any fines or penalties arising from any
violation of the laws or regulations of the United States or any state
or local government or governmental authority with respect to the
origination or acquisition of any Lease sold or transferred by it
hereunder; provided that the foregoing indemnity shall in no way be
deemed to impose on the Seller any obligation to make any payment with
respect to principal or interest on the Certificates or to reimburse
the Transferor, the Trustee or the Trust for any payments on account of
the Certificates or, except as provided in Sections 5.4 and 6.3, to
make any payment with respect to the Leases.
(b) Maintenance of Existence; Merger.
(i) The Seller will keep in full force and effect its
existence, rights and franchise as a corporation under the laws of its
jurisdiction of incorporation and will preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is necessary to protect the validity and enforceability
of any of the Leases or to permit performance of the Seller's duties
under this Agreement.
(ii) The Seller shall not consolidate with or merge into any
Person or convey, transfer or lease substantially all of its assets as
an entirety to any Person unless the Person formed by such
consolidation or into which the Seller has merged or the Person which
acquires by conveyance, transfer or lease substantially all the assets
of the Seller as an entirety (i) is organized under the laws of the
United States or a state thereof, (ii) has, after giving effect to such
merger, consolidation or transfer, a net worth at least equal to that
of the Seller immediately prior to such merger, consolidation or
transfer and any transaction in contemplation thereof, and (iii)
executes and delivers to the Transferor, the Servicer and the Trustee,
in form and substance reasonably satisfactory to each of them, (A) an
agreement which contains an assumption by such successor entity of the
due and punctual performance and observance of each covenant and
condition to be performed or observed by the Seller under this
Agreement and (B) an Opinion of Counsel (who shall not be an employee
of the Seller or any of its Affiliates) to the effect that such Person
is a corporation or other organization of the type described in the
foregoing clause (i) and has effectively assumed the obligations of the
Seller hereunder.
<PAGE>
(c) Inspection; Additional Information.
(i) The Seller will permit, on reasonable prior notice, the
representatives of the Transferor, the Servicer, the Trustee or any
Holder of the Certificates to examine all of the books of account,
records, reports and other papers of the Seller, to make copies and
extracts therefrom, and to discuss its affairs, finances and accounts
with its officers, employees and independent public accountants (and by
this provision the Seller authorizes said accountants to discuss the
finances and affairs of the Seller) all at such reasonable times and as
often as may be reasonably requested for the purpose of reviewing or
evaluating the financial condition or affairs of the Seller or the
Seller's performance of its duties and obligations hereunder. Any
expense incident to the exercise by the Trustee or any Holder of the
Certificates during the continuance of any default by the Seller in any
of its obligations hereunder shall be borne by the Seller.
(ii) The Seller will provide the Transferor, the Trustee and
each Holder, with reasonable promptness, any other data and information
which may be reasonably requested from time to time, including any
information required to be made available at any time to any
prospective transferee of any Certificates in order to satisfy the
requirements of Rule 144A under the 1933 Act.
(d) No Bankruptcy Petition Against the Transferor. The Seller will not,
prior to the date that is one year and one day after the payment in full of all
amounts owing on or with respect to the Certificates, institute against the
Transferor, or join any other Person in instituting against the Transferor, 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 4.1(d) shall survive the termination of this
Agreement.
(e) Accounting. The Seller will account for the transactions
contemplated by this Agreement on its books and records as a sale to the
Transferor of the Leases and related Lease Receivables and the Seller's right,
title and interest in the related Equipment.
(f) Modifications. The Seller will not agree to amend or otherwise
modify the Northern Agreement in any manner which would result in a decrease in
the amount of Specified Northern Insurance Premiums paid to the Trust (as
assignee of the Transferor) or an increase in the amount of the servicer fee
payable to Northern Leasing Systems, Inc., as collections servicer thereunder.
<PAGE>
ARTICLE 5. ADMINISTRATION AND PAYMENTS
SECTION 5.1 Collection of Lease Receivables.
(a) Collections. The Seller shall take all reasonable steps consistent
with its normal business practices and procedures to assist the Transferor, the
Servicer and the Trustee in collecting any amounts owing under or on account of
the Leases as and when due.
(b) Payments to Lockbox Facility. If i) the Insurer, in its sole
discretion, in accordance with the Insurance Agreement, delivers a notice
instructing the Seller to do so, or ii) an Event of Servicing Termination shall
have occurred and the Seller shall have been removed as Servicer , the Seller
shall take all steps necessary, including notifying Obligors, to cause the
Obligors to make all Lease Payments and any other payments due or to become due
under the Leases to the Lockbox Facility established pursuant to Section 5.1(b)
of the Pooling and Servicing Agreement.
SECTION 5.2 Prompt Remittance of Receipts. All amounts collected or
received by the Seller in respect of amounts due under or on account of each
Lease and the related Lease Receivables and Equipment which are payable after
the Cut-Off Date shall be held by the Seller in trust for the Transferor and the
Trustee and the Seller shall segregate such payment from its own property and
promptly (but in no event later than two Business Days following receipt)
deposit any amounts so collected or received to the Collection Account in
immediately available funds. Notwithstanding the foregoing, the Seller is not
required to remit to the Trustee Shared Residual Proceeds, except to the extent
such Shared Residual Proceeds are payable to the Seller (or the Transferor or
Trustee as assignee of the Seller) pursuant to the applicable Shared Residual
Agreement.
SECTION 5.3 Shared Reserves; Shared Residuals.
(a) Shared Reserves. The Seller holds the Shared Reserves pursuant to
the Shared Reserve Agreements and will continue to hold the Shared Reserves
pursuant to the Shared Reserve Agreements (which may include Shared Residual
Proceeds with respect to the Leases purchased under any Shared Reserve Agreement
which also is a Shared Residual Agreement), unless and until required to deposit
the same in a separate account in accordance with the provisions of the
applicable Shared Reserve Agreement. The Seller has assigned all of its rights
under the Shared Reserve Agreements insofar as such rights relate to the Shared
Reserve Leases being sold and contributed to the Transferor hereunder, and the
Transferor has assigned all of its rights under the Shared Reserve Agreements to
the Trust pursuant to the Pooling and Servicing Agreement. As a consequence of
such assignments, the Seller agrees that from and after the Closing Date, upon
the occurrence of any Shared Reserve Loss with respect to any Shared Reserve
Lease being sold to the Transferor hereunder (unless such Lease has been
repurchased or substituted), shall pay to the Trustee (by deposit to the
Collection Account) from the related Shared Reserves an amount equal to such
Shared Reserve Loss, or such lesser amount as shall be available in the related
Shared Reserves. It is understood that the amount of the Shared Reserves under
each Shared Reserve Agreement which will be available for any such payment will
depend on whether such reserves have previously been applied in accordance with
the applicable Shared Reserve Agreement to Shared Reserve Losses with respect to
leases not sold to the Transferor. The Seller agrees to apply the Shared
Reserves under each Shared Reserve Agreement to related Shared Reserve Losses in
the order incurred and not to discriminate against the Leases sold and
contributed to the Transferor hereunder in making such application. The Seller
further agrees not to amend any Shared Reserve Agreement in a manner adverse to
the Transferor or the Trust and to send to the Trustee a copy of any amendment
to any Shared Reserve Agreement promptly following the execution thereof.
<PAGE>
(b) Shared Residual Agreements. The Shared Residual Agreements provide
for certain sharing arrangements between the related Contractual Third Party
Originators and the Seller party thereto of residual proceeds (as more
particularly identified in each Shared Residual Agreement) of the Shared
Residual Leases and other leases subject to the Shared Residual Agreements (such
proceeds, the "Shared Residual Proceeds"). The Seller has assigned all of its
rights under the Shared Residual Agreements and all related Shared Residual
Proceeds insofar as such rights relate to the Shared Residual Leases being sold
and contributed to the Transferor hereunder, and the Transferor has assigned all
of its rights under the Shared Residual Agreements and all related Shared
Residual Proceeds to the Trust pursuant to the Pooling and Servicing Agreement.
As a consequence of such assignments, the Seller agrees that from and after the
Closing Date, upon the occurrence of any Shared Residual Loss with respect to
any Shared Residual Lease being sold and contributed by it to the Transferor
hereunder (unless such Lease has been repurchased or substituted), the Seller
shall pay to the Trustee (by deposit to the Collection Account) from the related
Shared Residual Proceeds an amount equal to such Shared Residual Loss, or such
lesser amount as shall be available pursuant to the related Shared Residual
Agreement. It is understood that the amount of the Shared Residual Proceeds
under each Shared Residual Agreement which will be available for any such
payment will depend on whether such proceeds have previously been applied in
accordance with the applicable Shared Residual Agreement to Shared Residual
Losses with respect to leases not sold to the Transferor. The Seller agrees to
apply any Shared Residual Proceeds under each Shared Residual Agreement to which
it is a party to Shared Residual Losses in the order incurred and not to
discriminate against the Leases sold and contributed to the Transferor hereunder
in making such application. The Seller further agrees not to amend any Shared
Residual Agreement in a manner adverse to the Transferor or the Trust and to
send to the Trustee a copy of any amendment to any Shared Residual Agreement
promptly following the execution thereof.
(c) Other Shared Enhancement Agreements. The Seller has assigned all of
its rights under each other Shared Enhancement Agreement to which it is a party
insofar as such rights relate to the Leases being sold and contributed to the
Transferor hereunder, and the Transferor has assigned all of its rights under
each such Shared Enhancement Agreement to the Trust pursuant to the Pooling and
Servicing Agreement. As a consequence of such assignments, the Seller agrees
that from and after the Closing Date, upon the occurrence of any loss (as
defined in such Shared Enhancement Agreement) or any other event which permits
the Seller to make drawings on, or otherwise have access to, the recourse or
other enhancement provided under such Shared Enhancement Agreement, with respect
to any Lease being sold and contributed to the Transferor hereunder (unless such
Lease has been repurchased or substituted), the Seller shall pay to the Trustee
(by deposit to the Collection Account) from the related enhancement an amount
equal to such amount as shall be available thereunder. The Seller agrees to
apply any such enhancement or protection as provided in the relevant Shared
Enhancement Agreement in the order in which losses or other compensable events
are incurred without discrimination against Leases sold to the Transferor
hereunder. The Seller further agrees not to amend any Shared Enhancement
Agreement in a manner adverse to the Transferor or the Trust and to send to the
Trustee a copy of any amendment to any Shared Enhancement Agreement promptly
following the execution thereof.
ARTICLE 6. REPURCHASE AND SUBSTITUTION OF LEASES AND EQUIPMENT
SECTION 6.1 Repurchase of Purchase or Renew Leases; Sales to Replace
Prepaid Leases.
(a) Seller Repurchase of Required Purchase or Renew Leases. The Seller
agrees to Repurchase any Required Purchase or Renew Lease and the related
Equipment sold by the Seller to the Transferor if the Obligor elects to renew
rather than purchase the related Equipment upon expiration of the original term
of such Required Purchase or Renew Lease.
(b) Seller Substitution for Prepaid Leases. The Seller agrees that if
it has an Eligible Lease available at the time of any prepayment of a Lease
pursuant to Section 5.1(b)(iv) of the Pooling and Servicing Agreement (other
than prepayment in connection with a casualty or the liquidation of a Defaulted
Lease), the Seller will sell to the Transferor, at the option of the Transferor,
for an amount equal to the Discounted Present Value thereof, such Eligible
Lease. Any such sale shall be subject to the same terms and conditions, and
occur at the same time, as Substitutions pursuant to Section 6.4(b).
<PAGE>
SECTION 6.2 Repurchase or Substitution of Defaulted Leases. On the
Determination Date following the calendar month in which any Lease first becomes
a Defaulted Lease, the Seller may, with the consent of the Transferor, but shall
have no obligation to either (a) Repurchase such Defaulted Lease and the related
Equipment or (b) Substitute a Substitute Lease and related equipment therefor.
SECTION 6.3 Repurchase or Substitution of Non-conforming Leases; Dilution;
Northern Leases.
(a) Non-conforming Leases. Upon discovery by the Seller or the
Transferor of a breach of any of the representations or warranties of the Seller
set forth in Section 3.2 that materially and adversely affects any Lease or the
related Equipment (as described in Section 7.3(c) of the Pooling and Servicing
Agreement), the party discovering such breach shall give prompt written notice
to the other party. Unless within thirty (30) days following the Seller's
discovery or its receipt of notice of breach, such breach shall have been waived
by the Transferor (with the consent of the Trustee) or cured in all material
respects the Seller shall provide a Substitute Lease and related equipment in
return for such Lease and the related Equipment; provided that if the Seller
shall not have an Eligible Lease available for Substitution, the Seller shall
Repurchase the related Lease and Equipment from the Transferor or the Trust. Any
such non-conforming Lease so repurchased or replaced shall not be deemed to be a
Defaulted Lease.
(b) Dilution. Upon discovery by the Seller or the Transferor that a
Lease has become subject to a right or claim of setoff, counterclaim or other
defense or claim by the Obligor thereunder against any Person, the party
discovering such event will give prompt written notice to the other parties.
Upon receipt of such notice, the Seller will provide a Substitute Lease and
related equipment in return for such Lease and the related Equipment, provided
that if the Seller shall not have an Eligible Lease available for such
Substitution, then the Seller will Repurchase such Lease and the related
Equipment from the Transferor or the Trust. Any such Lease so repurchased or
replaced shall not be deemed to be a Defaulted Lease.
(c) Certain Northern Leases. Upon discovery by the Seller or the
Transferor that an Obligor under a Northern Lease has provided evidence of its
own insurance and, consequently, will no longer pay Specified Northern Insurance
Premiums under such Northern Lease, the party discovering such event will give
prompt written notice to the other parties. Upon receipt of such notice, the
Seller will provide a Substitute Lease and related equipment in return for such
Northern Lease and the related Equipment; provided that if the Seller shall not
have an Eligible Lease available for such Substitution, the Seller will
Repurchase such Northern Lease and the related Equipment from the Transferor or
the Trust. Any such Lease so repurchased or replaced shall not be deemed to be a
Defaulted Lease.
(d) Limitation of Remedies. It is understood and agreed that the
obligation of the Seller pursuant to Section 6.3 to purchase or replace any
Lease as to which a breach has occurred and is continuing shall constitute the
sole remedies against the Seller for such breach available to the Trustee or the
Certificateholders (except for any indemnities provided under Section 4.1) for
any losses, claims, damages and liabilities arising from the inclusion of such
Lease in the Trust Property.
<PAGE>
SECTION 6.4 Repurchase or Substitution of Leases.
(a) Making of Repurchases. Any Repurchase of a Lease and Equipment
pursuant to this Article 6 shall be made by the Seller by payment to the
Transferor, for the deposit in the Collection Account, of the Repurchase Amount
in such manner as will ensure that the Trustee will have immediately available
funds therefor on the Determination Date prior to the next succeeding Payment
Date.
(b) Making of Substitutions. To the extent that the Seller elects or is
required to deliver a Substitute Lease for a Lease and related Equipment
pursuant to this Article 6, such Substitute Lease shall, on the date of such
Substitution, (i) have a Discounted Present Value at least as great as the
Discounted Present Value of the Deleted Lease (as calculated immediately prior
to the event or condition requiring the substitution of the Deleted Lease), (ii)
have Lease Payments at least equal in amount to and scheduled to be received in
the same months as the Lease Payments of the Deleted Lease, (iii) have a
residual value of the related Equipment at the scheduled termination of the
Substitute Lease no less than the Estimated Residual Value with respect to the
Deleted Lease and scheduled to be received no later than the residual value
respecting the Deleted Lease, (iv) in accordance with the Seller's standard
credit evaluation policies, be of equal or better credit quality than the
Deleted Lease at the time when such Deleted Lease was originated, (v) be a
Lease, with an Obligor and involving Equipment as to which each of the
representations in Section 3.2 is true as of the date of Substitution (and on
the date of Substitution the Seller shall be deemed to so represent), (vi) not
result in the Discounted Present Value of all Leases with any one Obligor
exceeding 1.25% of the Aggregate Discounted Present Value on the Payment Date
immediately following such Substitution, (vii) not be originated by Northern or
Golden Eagle if the related Deleted Lease was not originated by Northern or
Golden, and (viii) not be Required Purchase or Renew Lease or Lease of a Leased
Vehicle unless, in each case, the Deleted Lease was of such type. Upon any
Substitution, (x) a new Lease Schedule shall be prepared by the Seller or the
Servicer and delivered to the Transferor and the Trustee, indicating the
Substitution, together with a statement of the Seller that all of the conditions
precedent to such Substitution were met; and (y) the parties shall enter into
such agreements as shall be necessary to make the new Lease Schedule a part
hereof and the Seller and Servicer shall take whatever action may be necessary
to perfect the interests of the Transferor and the Trustee in the Substitute
Lease and, if the related Equipment is located in a Filing State, the related
Equipment. Any Substitution made in accordance with the terms hereof shall be
made on or before the next succeeding Determination Date.
(c) Repurchase Price. Any Lease repurchased pursuant to this Article 6
shall be at a repurchase price equal to the sum of (i) the Discounted Present
Value for such Lease as of the Payment Date next succeeding the date on which
the Repurchase is to be made plus (ii) all Lease Payments for such Lease
scheduled to be received by the Servicer through the Collection Period
immediately preceding such Payment Date which were not received from the Obligor
SECTION 6.5 Transfer Following Repurchase or Substitution. Upon any
Repurchase or Substitution, the Transferor shall transfer, or cause to be
transferred, to the Seller title to the Lease and Equipment so Repurchased or
Substituted.
SECTION 6.6 Limitation on Substitutions. The Aggregate Discounted Present
Value of all Defaulted Leases Repurchased by the Seller or for which the Seller
Substitutes other Leases pursuant to Section 6.2 (but not Section 6.3),
determined for each such Defaulted Lease as of the Payment Date immediately
following such Repurchase or Substitution, shall not exceed 10% of the Initial
Aggregate Discounted Present Value. The Aggregate Discounted Present Value of
all Leases for which the Seller Substitutes other Leases, determined for each
such Substitute Lease as of the Payment Date immediately following such
Substitution, shall not exceed 30% of the Initial Aggregate Discounted Present
Value.
<PAGE>
ARTICLE 7. NOTICES
SECTION 7.1 Notices.
(a) Any request, demand, authorization, direction, notice, consent,
waiver, or document provided or permitted by this Agreement to be made upon,
given or furnished to, or filed with, the Trustee, the Transferor, the Servicer,
the Insurer or each Rating Agency shall be sufficient for every purpose
hereunder if in writing, telecopied, mailed, by registered mail (return receipt
requested), hand delivered or sent by courier. Unless otherwise specifically
provided herein, no such request, demand, authorization, direction, notice,
consent, waiver, or document shall be effective until received and any provision
hereof requiring the making, giving, furnishing, or filing of the same on any
date shall be interpreted as requiring the same to be sent or delivered in
such fashion that it will be received on such date. Any such request, demand,
authorization, direction, notice, consent, waiver, or document shall be sent or
delivered to the following addresses:
(i) If to the Seller, at 303 East Wacker Drive, Suite 1000,
Chicago, IL 60601, Attention: Chief Financial Officer; Telecopier:(312)
938-4290.
(ii) All notices, demands or communications to the Transferor
shall be at the following address: 303 East Wacker Drive, Suite 1000,
Chicago, IL 60601 Attention: Chief Financial Officer; Telecopier: (312)
938-4290.
(b) Any party may alter the address to which communications are to be
sent by giving notice of such chang of address in conformity with the
provisions of this Section 7.1 for giving notice and by otherwise complying
with any applicable terms of this Agreement.
ARTICLE 8. TERMINATION
SECTION 8.1 Termination. The respective obligations and responsibilities of
the Seller and the Transferor created by this Agreement shall terminate upon the
termination of the Pooling and Servicing Agreement.
SECTION 8.2 Effect of Termination. No termination or rejection or failure
to assume the executory obligations of this Agreement in the bankruptcy of the
Seller or the Transferor shall be deemed to impair or affect the obligations,
including breaches of representations and warranties by the Seller or the
Transferor prior to the termination of this Agreement. Without limiting the
foregoing, prior to termination, neither the failure of the Seller to pay a
Repurchase Amount or deliver a Substitute Lease shall render such transfer or
obligation executory, nor shall the carrying out of the continuing duties of the
parties pursuant to Articles 3 and 4 or Section 9.6 of this Agreement render an
executed sale executory.
ARTICLE 9. MISCELLANEOUS PROVISIONS
SECTION 9.1 Amendment.
(a) Amendments. This Agreement may be amended from time to time by the
Seller and the Transferor, with the consent of the Trustee and the Insurer, and
the Trustee's consent to any amendment of this Agreement shall be at the
direction of the Requisite Holders. In addition, notwithstanding the foregoing,
the Trustee may consent to any amendment to this Agreement, without the consent
of any Holder, (i) to cure any ambiguity in this Agreement or any conflict
between the terms of this Agreement, the Pooling and Servicing Agreement and any
Related Document, (ii) to correct or supplement any provision herein or therein
that may be defective or inconsistent with any other provision herein or
therein, (iii) to add to the covenants, restrictions or obligations of the
Servicer, the Trust, the Trustee, the Insurer or the Transferor, and (iv) for
any other purpose, provided, however, that with respect to any amendment
pursuant to this clause (iv), (x) the Transferor delivers an Officers'
Certificate to the Trustee to the effect that such amendment will not adversely
affect in any material respect the interest of the Holders of the Class A
Certificates, the Class B-1 Certificates or the Class B-2 Certificates, and (y)
each Rating Agency shall have provided written confirmation that such amendment
will not result in a withdrawal or reduction of the then rating of any
Outstanding Class A Certificates, any Outstanding Class B-1 Certificates or any
Outstanding Class B-2 Certificates. The Trustee is entitled to obtain an Opinion
of Counsel to the effect set forth in clause (x) of the immediately preceding
sentence as a condition to the effectiveness of any amendment proposed to become
effective pursuant to clause (iv) of such preceding sentence.
(b) Notice of Amendments. Promptly after the execution of any such
amendment, the Transferor shall furnish, or cause the Trustee to furnish, either
a copy of such amendment or notice of the substance of such amendment (prepared
by the Transferor) to the Insurer, each Certificateholder and each Rating
Agency.
<PAGE>
SECTION 9.2 Governing Law. This Agreement and any amendment hereof pursuant
to Section 9.1 shall be construed in accordance with and governed by the
substantive laws of the State of Illinois (without regard to choice of law
principles) applicable to agreements made and to be performed therein and the
obligations, rights, and remedies of the parties under this Agreement shall be
determined in accordance with such laws.
SECTION 9.3 Transfer of Assets to Trust. The Seller understands that the
Transferor intends to transfer the Leases, the related Lease Receivables and
Equipment and its rights under this Agreement to the Trust pursuant to the
Pooling and Servicing Agreement and hereby consents to the assignment of all or
any portion of this Agreement by the Transferor to the Trust. The Seller agrees
that the Trustee may exercise the rights of the Transferor hereunder and shall
be entitled to all of the benefits of the Transferor hereunder to the extent
provided for in the Pooling and Servicing Agreement.
SECTION 9.4 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 severed 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.
SECTION 9.5 Assignment. Notwithstanding anything to the contrary contained
in this Agreement, this Agreement may not be assigned by the Seller, except as
provided in Section 4.1(b)(ii), without the prior written consent of the
Transferor and the Trustee and, except as provided in Section 9.3, this
Agreement may not be assigned by the Transferor without the prior written
consent of the Seller.
SECTION 9.6 Further Assurances. The Seller agrees to do such further acts
and things and to execute and deliver to the Transferor (or the Trustee as
assignee of the Transferor) such additional assignments, agreements, powers and
instruments as are required by the Transferor (or the Trustee, as applicable) to
carry into effect the purposes of this Agreement or to better assure and confirm
unto the Transferor (or the Trustee, as applicable) the rights, powers and
remedies hereunder.
SECTION 9.7 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Transferor or the Seller, 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 hereof 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 9.8 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 shall constitute one and the same
instrument.
SECTION 9.9 Binding Effect; Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns (including the Trust).
SECTION 9.10 Merger and Integration. 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 9.11 True Sale. It is the intention of the Seller and the
Transferor that each of the transfer of the Leases and the related Lease
Receivables and Equipment hereunder and the transfer of the Leases and the
related Lease Receivables and Equipment from LINC Receivables 1999 Corporation
to the Seller immediately prior to the transfer hereunder constitutes a true
sale and contribution or distribution of such assets conveying good title
thereto, free and clear of all Liens, from the Seller to the Transferor and from
LINC Receivables 1999 Corporation to the Seller, respectively, and that the
Leases and the related Lease Receivables and Equipment not be part of the
Seller's estate in the event of the insolvency or bankruptcy of the Seller or
part of LINC Receivable 1999 Corporation's estate in the event of the insolvency
or bankruptcy of LINC Receivables 1999 Corporation. However, in the event that,
notwithstanding the intent of the Seller and the Transferor, any Leases and the
related Lease Receivables and Equipment are held to be property of the Seller's
estate, or if for any reason this Agreement is held or deemed to create a
security interest in such assets, then (x) this Agreement shall also be deemed
to be a security agreement within the meaning of Article 9 of the UCC and (y)
each sale or contribution provided for in Section 2.1 or Article 6 shall be
deemed to be a grant (or a complete and present assignment) by the Seller to the
Transferor of a valid first priority security interest in all of the Seller's
right, title and interest in and to the Leases and the related Lease Receivables
and Equipment and proceeds thereof.
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, the Seller and the Transferor have caused this Sale
Agreement to be duly executed by their respective officers as of the day and
year first above written.
LINC CAPITAL, INC.
By:/s/ Marion Silverman
--------------------
Name: Marion Silverman
Title: Vice President
LINC EQUIPMENT RECEIVABLES
ONE, LLC
By:/s/ Marion Silverman
--------------------
Name: Marion Silverman
Title:Vice President
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0
0
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