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EXHIBIT 10.3
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SERVICING AGREEMENT
among
T & W FUNDING COMPANY I, L.L.C.
("Transferor")
and
T & W FINANCIAL CORPORATION
("Servicer")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
("Trustee" and "Back-up Servicer")
Dated as of February 1, 1997
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................................1
Section 1.01. Defined Terms...................................................................1
ARTICLE II SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS..................................3
Section 2.01. Representations and Warranties..................................................3
Section 2.02. Covenants.......................................................................5
ARTICLE III ADMINISTRATION AND SERVICING OF LEASE CONTRACTS.....................................5
Section 3.01. Responsibilities of Servicer....................................................5
Section 3.02. Servicer Standard of Care.......................................................8
Section 3.03. Servicer Remittances............................................................8
Section 3.04. Servicer Advances...............................................................9
Section 3.05. Financing Statements............................................................9
Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds.............................9
Section 3.07. Personal Property and Sales Taxes..............................................10
Section 3.08. No Offset......................................................................10
Section 3.09. Servicing Compensation.........................................................10
Section 3.10. Substitution or Purchase of Lease Contracts....................................10
Section 3.11. Titles.........................................................................11
Section 3.12. Errors and Omissions Insurance.................................................12
ARTICLE IV ACCOUNTINGS, STATEMENTS AND REPORTS................................................12
Section 4.01. Monthly Servicer's Reports.....................................................12
Section 4.02. Financial Statements; Certification as to Compliance; Notice of Default........12
Section 4.03. Annual Independent Accountants' Servicing Reports; Annual Federal
Tax Lien Search................................................................14
Section 4.04. Access to Certain Documentation and Information................................15
Section 4.05. Other Necessary Data...........................................................16
Section 4.06. Trustee to Cooperate...........................................................16
ARTICLE V THE SERVICER AND THE TRANSFEROR....................................................17
Section 5.01. Servicer Indemnification.......................................................17
Section 5.02. Corporate Existence; Reorganizations...........................................18
Section 5.03. Limitation on Liability of the Servicer and Others.............................18
Section 5.04. The Servicer Not to Resign.....................................................18
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Section 5.05. Transferor Indemnification.....................................................19
ARTICLE VI SERVICING TERMINATION..............................................................19
Section 6.01. Servicer Events of Default.....................................................19
Section 6.02. Back-up Servicer to Act; Taking of Bids; Appointment of Successor
Servicer.......................................................................22
Section 6.03. Notification to Certificateholders.............................................23
Section 6.04. Waiver of Past Defaults........................................................23
Section 6.05. Effects of Termination of Servicer.............................................24
Section 6.06. No Effect on Other Parties.....................................................24
ARTICLE VII THE BACK-UP SERVICER...............................................................24
Section 7.01. Representations of Back-up Servicer............................................24
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, Back-
up Servicer....................................................................25
Section 7.03. Back-up Servicer Resignation...................................................25
Section 7.04. Back-up Servicer Removal.......................................................26
Section 7.05. Oversight of Servicing.........................................................26
Section 7.06. Additional Back-up Servicer Duties.............................................27
Section 7.07. Back-up Servicer Compensation..................................................27
ARTICLE VIII MISCELLANEOUS PROVISIONS...........................................................27
Section 8.01. Termination of This Agreement..................................................27
Section 8.02. Amendments.....................................................................28
Section 8.03. Governing Law..................................................................29
Section 8.04. Notices........................................................................29
Section 8.05. Severability of Provisions.....................................................29
Section 8.06. Binding Effect.................................................................30
Section 8.07. Article Headings and Captions..................................................30
Section 8.08. Legal Holidays.................................................................30
Section 8.09. Assignment for Security for the Certificates...................................30
Section 8.10. No Servicing Assignment........................................................30
Section 8.11. Bond Insurer Default...........................................................30
Section 8.12. Counterparts...................................................................30
Section 8.13. Third Party Beneficiary........................................................30
EXHIBIT A -- Form of Monthly Servicer's Report...........................................................A-1
EXHIBIT B -- Servicer Disk Information...................................................................B-1
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This SERVICING AGREEMENT (as amended and supplemented from time to time,
(this "Agreement"), dated as of February 1, 1997, is entered into by and among
T & W Funding Company I, L.L.C. (herein, together with its permitted successors
and assigns, the "Transferor"), T & W Financial Corporation, as servicer and as
company (herein, together with its permitted successors and assigns, the
"Servicer" or "Company") and Norwest Minnesota National Association, as trustee
and as back-up servicer (herein, together with its permitted successors and
assigns, the "Trustee" or "Back-up Servicer").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and Security Agreement, dated as
of February 1, 1997 (the "Trust and Security Agreement"), with the Trustee, the
Back-up Servicer and the Servicer, pursuant to which a series of Certificates
will be issued.
The Transferor, T & W Financial Corporation (the "Company") and T & W
Funding Company V, L.L.C., and T & W Funding Company VI, L.L.C. (each, a
"Contributor," and, collectively, the "Contributors") have entered into a
Contribution Agreement dated as of February 1, 1997 (the "Contribution
Agreement"), providing for, among other things, the agreement by the Company and
the Contributors to repurchase certain Lease Assets that are being contributed
to the Transferor and conveyed to the Trust created pursuant to the Trust and
Security Agreement, for the benefit of the Certificateholders and the Bond
Insurer. As a precondition to the effectiveness of the Contribution Agreement,
the Contribution Agreement requires that the Servicer, the Transferor, the
Trustee and the Back-up Servicer enter into this Agreement to provide for the
servicing of the Lease Assets.
In addition, the Transferor is conveying to the Trust all of the
Transferor's rights derived under this Servicing Agreement and the Contribution
Agreement, and the Servicer agrees that all covenants and agreements made by the
Servicer herein with respect to the Lease Assets shall also be for the benefit
the Trustee, the Bond Insurer and the holders from time to time of the
Certificates. For its services under the Servicing Agreement, the Servicer will
receive a Servicer Fee as provided herein and in the Trust and Security
Agreement. For its services hereunder the Back-up Servicer will receive a
Back-up Servicer Fee as provided herein and in the Trust and Security Agreement.
ARTICLE I
DEFINITIONS
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Section 1.01. Defined Terms. Except as otherwise specified or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of this Agreement, and the definitions of such
terms are equally applicable both to the singular and plural forms of such terms
and to the masculine, feminine and neuter genders of such terms. Capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned to such terms in the Trust and Security Agreement or, if not defined
therein, in the Contribution Agreement.
"Back-up Servicer" shall initially mean Norwest Bank Minnesota, National
Association, a national banking association.
"Company" shall mean T & W Financial Corporation, a Washington
corporation.
"Contribution Agreement" shall mean the Contribution Agreement, dated as
of February 1, 1997, between the Company, the Contributors and the Transferor,
as amended and supplemented in accordance with its terms.
"Liquidated Lease Receivable" shall mean a Lease Receivable that has
been liquidated pursuant to Section 3.01(b) hereof.
"Local Bank" shall have the meaning specified in Section 3.03 hereof.
"Lock Box" shall have the meaning specified in Section 3.03 hereof.
"Local Bank Account" shall mean the account established in the name of
the Trustee pursuant to Section 3.03 hereof, into which account shall be
deposited payments related to the Lease Receivables.
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer pursuant to Section 4.01 hereof.
"Officer's Certificate" shall mean a certificate signed by the Chairman
of the Board, the Vice-Chairman of the Board, the President, a Vice President,
the Treasurer or the Secretary of the Servicer.
"Reported Company" shall mean T & W Financial Corporation and its
Affiliates on a combined basis, and if the initial Servicer is no longer acting
as Servicer, then any successor Servicer appointed pursuant to this Agreement.
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"Reported Company's Financial Statements" shall include the Reported
Company's audited consolidating balance sheet and income statement, consolidated
statement of sources and uses/applications of cash, consolidated statement of
change in financial position, auditors opinion letter regarding audited
financial statements, and all notes to the audited financial statements.
"Servicer" shall initially mean T & W Financial Corporation until a
successor Person shall have become the Servicer pursuant to the applicable
provisions of this Agreement, and thereafter "Servicer" shall mean such
successor Person.
"Servicer Advance" shall have the meaning set forth in Section 3.04
hereof.
"Servicer Default" shall mean any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of Default under
this Agreement.
"Servicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer State of Incorporation" means the State of Washington.
"Servicer Termination Notice" means the notice described in Section 6.01
hereof.
"Servicing Officer" shall mean those officers of the Servicer involved
in, or responsible for, the administration and servicing of the Lease Contracts,
as identified on the list of Servicing Officers furnished by the Servicer to the
Trustee, the Back-up Servicer, the Bond Insurer and the Certificateholders from
time to time.
"SIC Code" shall mean the Standard Industrial Classification Codes
established by the U.S. Office of Management and Budget as a guideline for
reporting business statistics.
"Substitution Criterion" shall have the meaning specified in the
Contribution Agreement.
"Trustee" shall initially mean Norwest Bank Minnesota, a national
banking association.
ARTICLE II
SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties, which shall survive the Closing Date:
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(a) Organization and Good Standing. The Servicer has been duly
incorporated and is validly existing in good standing as a corporation
under the laws of the Servicer State of Incorporation, with requisite
corporate power and authority to own its properties, perform its
obligations under this Agreement and to transact the business in which
it is now engaged or in which it proposes to engage.
(b) Authorization and Binding Obligation. Each of this
Agreement, the Trust and Security Agreement, and the Insurance Agreement
has been duly authorized, executed and delivered by the Servicer and
constitutes the valid and legally binding obligation of the Servicer
enforceable against the Servicer in accordance with its terms, subject
as to enforcement to any bankruptcy, insolvency, reorganization and
other similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a court of equity or law.
(c) No Violation. The entering into of this Agreement, the Trust
and Security Agreement, and the Insurance Agreement and the performance
by the Servicer of its obligations under this Agreement, the Trust and
Security Agreement and the Insurance Agreement and the consummation of
the transactions herein and therein 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, charge or encumbrance upon any of the property or assets of
the Servicer pursuant to the terms of any material indenture, mortgage,
deed of trust or other agreement or instrument to which it is a party or
by which it is bound or to which any of its property or assets is
subject, nor will such action result in any violation of the provisions
of its Certificate of Incorporation or By-laws, or any statute or any
order, rule or regulation of any court or any regulatory authority or
other 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 is required
for the Servicer to enter into this Agreement, the Trust and Security
Agreement and the Insurance Agreement.
(d) No Proceedings. There are no proceedings or investigations
pending, or to the knowledge of the Servicer, threatened against or
affecting the Servicer or any subsidiary in or before any court,
governmental authority or agency or arbitration board or tribunal,
including but not limited to any such proceeding or investigation with
respect to any environmental or other liability resulting from the
ownership or use of any of the Equipment or Leased Vehicles, which,
individually or in the aggregate, involve the possibility of materially
and adversely affecting the properties, business, prospects, profits or
condition (financial or otherwise) of the Servicer and its subsidiaries,
or the
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ability of the Servicer to perform its obligations under this Agreement,
the Trust and Security Agreement, or the Insurance Agreement. The
Servicer is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
(e) Approvals. The Servicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject,
(ii) has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property
or to the conduct of its business, and (iii) is not in violation in any
material respect of any term of any agreement, charter instrument, bylaw
or instrument to which it is a party or by which it may be bound, which
violation or failure to obtain materially adversely affect the business
or condition (financial or otherwise) of the Servicer and its
subsidiaries.
(f) Investment Company. The Servicer is not an investment
company which is required to register under the Investment Company Act
of 1940, as amended.
(g) Net Worth. As of the Closing Date, the Tangible Net Worth
Requirement is met.
Section 2.02. Covenants. (a) The Servicer covenants as to the Lease
Assets:
(i) The Servicer shall not release or assign any Lien in favor of
the Trustee on any item of Equipment or Leased Vehicle related to any
Lease Contract in whole or in part, except as permitted herein or in the
Trust and Security Agreement.
(ii) The Servicer will in all material respects duly fulfill all
obligations on the Servicer's part to be fulfilled under or in
connection with the Lease Assets. The Servicer will not amend, rescind,
cancel or modify any Lease Contract or term or provision thereof, except
as permitted herein or in the Trust and Security Agreement, and the
Servicer will not do anything that would materially impair the rights of
the Certificateholders, the Trustee or the Bond Insurer in the Lease
Assets, except as contemplated herein or in the Trust and Security
Agreement.
(iii) In performing its servicing duties hereunder, the Servicer
shall collect all payments required to be made by the Customers under
the Lease Contracts, enforce all material rights of the Transferor under
the Lease Contracts and defend the Equipment and Leased Vehicles against
all Persons, claims and demands whatsoever. The Servicer shall not
assign, sell, pledge or exchange or in any way encumber or otherwise
dispose of the
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Equipment or Leased Vehicles, except as permitted hereunder or in the
Trust and Security Agreement.
(b) The Servicer will deliver each of the accountings, statements
and reports described in Article IV hereof to each party as set forth therein.
ARTICLE III
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for the
benefit of the Certificateholders, the Bond Insurer and the Trustee, shall be
responsible for, and shall, in accordance with its customary servicing
procedure, pursue the managing, servicing, administering, enforcing and making
of collections on the Lease Contracts, the Equipment, the Leased Vehicles and
any Insurance Policies, the enforcement of the Trustee's security interest in
the Lease Contracts, Lease Receivables, Equipment and Leased Vehicles granted
pursuant to the Trust and Security Agreement, and the sale or the releasing of
the Equipment and Leased Vehicles upon the expiration or other termination of
the related Lease Contract (or repossession thereof without termination), each
in accordance with the standards and procedures set forth in this Agreement and
any related provisions of the Trust and Security Agreement and Contribution
Agreement. The Servicer's responsibilities shall include collecting and posting
of all payments, responding to inquiries of Customers, investigating
delinquencies, accounting for collections and furnishing monthly and annual
statements to the Back-up Servicer, the Trustee, the Bond Insurer, the Rating
Agencies and the Certificateholders with respect to payments, making Servicer
Advances, providing appropriate federal income tax information to the Trustee
for use in providing information to the Certificateholders or the Bond Insurer,
collecting and remitting sales and property taxes to taxing authorities, and
using its best efforts to maintain the perfected security interest of the
Trustee in the Trust Property. The Servicer (at its expense), acting alone or
through a subservicer, shall have full power and authority, acting at its sole
discretion, to do any and all things in connection with such managing,
servicing, administration, enforcement, collection and such sale of the
Equipment and Leased Vehicles that it may deem necessary or desirable, including
the prudent delegation of such responsibilities. Without limiting the generality
of the foregoing, the Servicer, in its own name or in the name of a subservicer,
shall, and is hereby authorized and empowered by the Trustee, subject to
Section 3.02 hereof, to execute and deliver (on behalf of itself, the
Certificateholders, the Trustee or any of them) any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Lease Contracts and the
Lease Contract Files. The Servicer, acting alone or through a subservicer, also
may, in its sole discretion, waive any late payment charge or penalty, or any
other fees that may be collected in the ordinary course of servicing any Lease
Contract. Notwithstanding the foregoing, neither the Servicer, nor any
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subservicer, shall, except pursuant to a judicial order from a court of
competent jurisdiction, or as otherwise expressly provided in this Agreement,
release or waive the right to collect the Scheduled Payments or any unpaid
balance on any Lease Contract. The Trustee shall, at the expense of the
Servicer, furnish the Servicer, or at the request of the Servicer, any
subservicer, with any powers of attorney and other documents necessary or
appropriate to enable the Servicer or subservicer to carry out its servicing and
administrative duties hereunder, and the Trustee shall not be responsible for
the Servicer's or subservicer's application thereof. Notwithstanding the
appointment by the Servicer of a subservicer hereunder, the Servicer shall
remain primarily liable for the full performance of its obligations hereunder.
(b) The Servicer (or a subservicer) shall conduct any Lease Contract
management, servicing, administration, collection or enforcement actions in the
following manner:
(i) The Servicer, as agent for and on behalf of the Transferor,
with respect to any Defaulted Lease Contract shall follow such practices
and procedures as are normal and consistent with the Servicer's
standards and procedures relating to its own lease contracts, lease
receivables, equipment and vehicles that are similar to the Lease
Contracts, Lease Receivables, the Equipment and Leased Vehicles,
including, without limitation, the taking of appropriate actions to
foreclose or otherwise liquidate any such Defaulted Lease Contract,
together with the related Equipment or Leased Vehicles, to collect any
Guaranty Amounts, Insurance Proceeds and Recoveries, and to enforce the
Transferor's rights under the Contribution Agreement. All Recoveries or
Residual Proceeds in respect of any such Lease Receivable and the
related Equipment or Leased Vehicles received by the Servicer shall be
remitted to the Trustee for deposit in the Collection Account pursuant
to Section 3.03(a) hereof;
(ii) The Servicer may xxx to enforce or collect upon Lease
Contracts as agent for the Transferor. If the Servicer elects to
commence a legal proceeding to enforce a Lease Contract, the act of
commencement shall be deemed to be an automatic assignment of the Lease
Contract to the Servicer for purposes of collection only. If, however,
in any enforcement suit or legal proceeding it is held that the Servicer
may not enforce a Lease Contract on the ground that it is not a real
party in interest or a holder entitled to enforce the Lease Contract,
then the Trustee on behalf of the Transferor shall, at the Servicer's
request and expense, take such steps as the Servicer deems necessary and
instructs the Trustee in writing to take to enforce the Lease Contract,
including bringing suit in its name or the name of the Transferor, as
beneficial owner of the Lease Contract, or the names of the
Certificateholders or the Bond Insurer, as third party beneficiaries
thereunder, and the Trustee shall be indemnified by the Servicer for any
such action taken;
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(iii) The Servicer shall exercise any rights of recourse against
third parties that exist with respect to any Lease Contract in
accordance with the Servicer's usual practice. In exercising recourse
rights, the Servicer is authorized on the Trustee's behalf to reassign
the Lease Contract to the person against whom recourse exists to the
extent necessary, and at the price set forth in the document creating
the recourse. The Servicer will not reduce or diminish such recourse
rights, except to the extent that it exercises such right;
(iv) The Servicer may not accept Substitute Lease Contracts that
do not comply with Section 3.10 hereof, Sections 3.03 and 3.04 of the
Contribution Agreement and Section 4.04 of the Trust and Security
Agreement;
(v) The Servicer may waive, modify or vary any terms of any Lease
Contract or consent to the postponement of strict compliance with any
such term if in the Servicer's reasonable and prudent determination such
waiver, modification or postponement is not materially adverse to the
Certificateholders or the Bond Insurer; provided, however, that (A) the
Servicer shall not forgive any payment of rent, and (B) the Servicer
shall not permit any modification with respect to any Lease Contract
that would decrease the Scheduled Payment, defer the payment of any
principal or interest or any Scheduled Payment, reduce the Implicit
Principal Balance (except in connection with actual payments
attributable to such Implicit Principal Balance), or prevent the
complete amortization of the Implicit Principal Balance from occurring
by the Calculation Date in the sixth month preceding the Stated
Maturity. The Servicer shall provide the Back-up Servicer, the Bond
Insurer and the Trustee with an amendment to the Lease Schedule
reflecting any modification of any Scheduled Payment;
(vi) The Servicer shall not consent to the termination of any
Lease Contract in connection with loss of or damage to the related
Equipment or Leased Vehicles unless the Customer has paid an amount not
less than the Purchase Price for such Lease Contract, or if less, the
maximum amount legally collectible under the related Lease Contract;
(vii) Upon termination of a Lease Contract after payment of the
last Scheduled Payment due thereunder or in the event that the Servicer
or any subservicer in the enforcement of any Lease Contract otherwise
(A) acquires title to any item of Equipment or Leased Vehicle with
respect to which title was held by the Customer or (B) reclaims
possession of Equipment or Leased Vehicle from the Customer, the
Servicer shall use its best efforts to sell or re-lease such item of
Equipment or Leased Vehicle promptly and consistent with the standard of
care set forth in Section 3.02 hereof. Any Recoveries or Residual
Proceeds related thereto shall be deposited in accordance with
Section 3.03(a) hereof; and
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(viii) Notwithstanding any provision to the contrary contained in
this Agreement, the Servicer or any subservicer shall exercise any right
under a Lease Contract to accelerate the unpaid Scheduled Payments, due
or to become due thereunder in such a manner as to maximize the net
proceeds available; provided, however, that the Servicer will not
accelerate any Scheduled Payment unless permitted to do so by the terms
of the Lease Contract or under applicable law.
Section 3.02. Servicer Standard of Care. In managing, administering,
servicing, enforcing and making collections on the Lease Contracts, Equipment
and Leased Vehicles pursuant to this Agreement, the Servicer will exercise that
degree of skill and care consistent with that which the Servicer customarily
exercises with respect to similar lease contracts, equipment and vehicles owned
by it, and in any event, in a prudent and commercially reasonable manner. The
Servicer shall punctually perform all of its obligations and agreements under
this Agreement and shall comply with all applicable federal and state laws and
regulations, shall maintain all State and federal licenses and franchises
necessary for it to perform its servicing responsibilities hereunder, and shall
not materially impair the rights of the Bond Insurer or the Certificateholders
in any Lease Contracts or payments thereunder.
Section 3.03. Servicer Remittances. (a) The Servicer, as agent of the
Transferor, shall remit to the Trustee for deposit in the Collection Account by
12:00 noon, Minneapolis time, on each Tuesday and Thursday that is a Business
Day, or if such day is not a Business Day, on the next Business Day thereafter,
the amounts described below that have been collected through 4:00 p.m.,
Minneapolis time, on the preceding Business Day, so long as such amounts exceed
$1,000:
(i) all payments made under the Lease Contract relating to the
Lease Receivables, including prepayments but excluding taxes, received
directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Purchase Price of any Lease Contract purchased by the
Company, any of the Contributors or the Transferor, to the extent
received by the Servicer;
(iv) all Guaranty Amounts;
(v) all Servicing Charges; and
(vi) all Insurance Proceeds.
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The Servicer shall hold in trust for the benefit of the
Certificateholders and the Bond Insurer any payment it receives relating to
items (i) through (vi) above until such time as the Servicer transfers any such
payment to the Trustee for deposit in the Collection Account.
(b) On each Business Day, the Servicer, under authority given to it
hereby by the Trustee, will collect from a post office box in the name of
Norwest Bank Minnesota, National Association, as Trustee (the "Lock Box"),
amounts representing payments sent by Customers and deposit such amounts in an
account (the "Local Bank Account") in a local bank (the "Local Bank"). The
Servicer will cause the Local Bank to deposit amounts in the Local Bank Account
in to the Collection Account in accordance with Section 3.03(a). The authority
given to the Servicer by the Trustee to collect checks from the Lock Box may be
revoked at any time by the Trustee, the Back-up Servicer or the Bond Insurer and
shall be revoked in the event that a Trigger Event has occurred and is
continuing.
Section 3.04. Servicer Advances. Not later than 10:00 a.m., Minneapolis
time, on the Determination Date prior to each Payment Date, the Servicer shall
make a Servicer Advance for each Lease Contract which is a Delinquent Lease
Contract on such date by remitting to the Trustee for deposit in the Collection
Account an amount equal to the Scheduled Payments, or portion thereof, which
were due in the prior Due Period but not received and deposited in the
Collection Account on or prior to such Determination Date; provided, however,
that the Servicer shall not be obligated to make any Servicer Advance pursuant
to this Section 3.04 that the Servicer determines in good faith and in
accordance with its customary servicing practices that is unlikely to be
eventually repaid from Scheduled Payments made by or on behalf of the related
Customer; further provided, that the Servicer may make a Servicer Advance with
respect to a Lease Contract once it has become a Defaulted Lease Contract if it
reasonably believes that such Servicer Advance will increase the Recoveries
available to the Trust. On each Determination Date, the Servicer shall deliver
to the Back-up Servicer, the Trustee and the Bond Insurer the Monthly Servicer's
Report listing the aggregate amount of Scheduled Payments not received for the
immediately prior Due Period, the amount of Servicer Advances, and the amounts
which it has determined in its sole discretion, and in accordance with its
customary servicing practices, are unlikely to be recoverable from the related
Customers.
Section 3.05. Financing Statements. The Servicer will make all Uniform
Commercial Code filings and recordings as may be required pursuant to the terms
of the Trust and Security Agreement. The Servicer shall, in accordance with its
customary servicing procedures and at its own expense, be responsible for taking
such steps as are necessary to maintain perfection of such security interests.
The Trustee hereby authorizes the Servicer to re-perfect or to cause the re-
perfection of such security interest on its behalf as Trustee, as necessary.
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Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds. The
Servicer shall have no duty or obligation to verify, monitor or enforce the
acquisition and/or maintenance of Insurance Policies by a Customer. Any
Insurance Proceeds shall be remitted to the Trustee for deposit in the
Collection Account pursuant to Section 3.03(a).
Section 3.07. Personal Property and Sales Taxes. The Servicer shall, on
behalf of the Transferor, pay or cause to be paid all personal property, sales
and use taxes on or with respect to the Equipment and Leased Vehicles, or the
acquisition or leasing or re-leasing thereof, as and when such taxes become due,
to the extent a Customer has paid amounts to the Servicer for such taxes. The
Servicer shall also cause to be filed in a timely manner any and all returns and
reports required in connection with the payment of such taxes.
Section 3.08. No Offset. Prior to the termination of this Agreement, the
obligations of the Servicer under this Agreement shall not be subject to any
defense, counterclaim or right of offset which the Servicer has or may have
against the Transferor, whether in respect of this Agreement, any Lease
Contract, Lease Receivable, Equipment, Leased Vehicle or otherwise.
Section 3.09. Servicing Compensation. (a) As compensation for the
performance of its obligations under this Agreement, the Servicer shall be
entitled to receive the Servicer Fee and the Additional Servicer Fee, if
applicable. The Servicer Fee shall be paid monthly, commencing on the Initial
Payment Date and terminating on the first to occur of (i) the receipt of the
last Scheduled Payment and related Residual Proceeds with respect to the last
remaining Lease Contract, (ii) the receipt of Recoveries and Insurance Proceeds
with respect to the last remaining Lease Contract, or (iii) the date on which
the Transferor or the Bond Insurer purchases the last remaining Lease Contract.
The Servicer Fee shall be paid by the Transferor to the Servicer at the times
and in the priority as set forth in the Trust and Security Agreement. The
Servicer shall pay all expenses incurred by it in connection with its servicing
activities hereunder, including, without limitation, payment of the fees and
disbursements of the Independent Accountants and payment of expenses incurred in
connection with distributions and reports to the Trustee, the Back-up Servicer,
the Bond Insurer, the Rating Agencies and Certificateholders and shall not be
entitled to reimbursement for such expenses; provided, however, that the
Servicer will be entitled to prompt reimbursement from the Transferor for
reasonable costs and expenses incurred by the Servicer (including reasonable
attorney's fees and out-of-pocket expenses) in connection with the realization,
attempted realization or enforcement of rights and remedies upon Defaulted Lease
Contracts, from amounts received as Recoveries from any Defaulted Lease
Contracts.
(b) In connection with any transfer of the servicing obligations to a
successor Servicer in accordance with Section 6.02 hereof, the Back-up Servicer
shall be entitled to reimbursement of Transition Costs as provided in
Section 6.02 hereof and in the Trust and Security Agreement.
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(c) The Servicer shall deposit in the Collection Account the amount of
any loss incurred in respect of any investment held therein immediately upon
realization of such loss, without any right to reimbursement therein from its
own funds.
Section 3.10. Substitution or Purchase of Lease Contracts. (a) The
Servicer shall not allow termination of a Lease Contract prior to the scheduled
expiration date or prepayment of any Lease Contract, unless the Transferor has
(i) pledged to the Trustee a Substitute Lease Contract and the related Equipment
or related Leased Vehicle and Lease Receivables under such Substitute Lease
Contract, and delivered to the Trustee the original executed counterpart of the
Substitute Lease Contract and the original Certificate of Title or
(ii) purchased such prepaid Lease Contract and the related Equipment or related
Leased Vehicle from the Trustee by remittance of the Purchase Price to the
Servicer for deposit in the Collection Account in accordance with
Section 3.03(a) hereof; provided, further, that purchases and substitutions of
Lease Contracts pursuant to this subparagraph (a) shall comply with the
requirements of Section 4.04 of the Trust and Security Agreement and the
criteria set forth in Section 3.04 of the Contribution Agreement.
(b) The Servicer shall permit the Transferor to (i) purchase any
Defaulted Lease Contract or Delinquent Lease Contract by remittance by the
Transferor to the Servicer for deposit in the Collection Account in accordance
with Section 3.03(a) hereof or (ii) substitute for any Defaulted Lease Contract
or Delinquent Lease Contract, a Substitute Lease Contract and the related
Equipment or related Leased Vehicle and Lease Receivables under such Substitute
Lease Contract, upon the delivery to the Trustee of the original executed
counterpart of the Substitute Lease Contract and the original Certificate of
Title or; provided that, purchases and substitutions of Lease Contracts pursuant
to this subparagraph (b) shall comply with the requirements of Section 4.04 of
the Trust and Security Agreement and the criteria set forth in Section 3.04 of
the Contribution Agreement.
(c) Notwithstanding any other provision contained in this Agreement, the
Servicer shall not, with respect to a Defaulted Lease Contract (i) negotiate or
enter into a new lease with the Customer relating to the Equipment or the Leased
Vehicle or the Customer's obligations under such Defaulted Lease Contract or
(ii) allow the Customer thereunder to resume its rights under such Defaulted
Lease Contract, unless the Transferor has repurchased or made a substitution for
such Defaulted Lease Contract in the manner set forth in subsection (b) hereof.
(d) In the event that the Company or any of the Contributors is
required, as a result of the breach by it of certain representations or
warranties, to repurchase or substitute a Lease Contract pursuant to
Section 3.03 of the Contribution Agreement, the Servicer shall permit such
repurchase or substitution in accordance with the terms of Sections 3.03 and
3.04 thereof.
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Section 3.11. Titles. (a) The Servicer shall submit or shall have caused
to be submitted an Application for Certificate of Title to the applicable
governmental authority for each Leased Vehicle no later than the Closing Date.
The Contributor shall deliver each original Certificate of Title to the Servicer
immediately upon receipt. If the new Certificate of Title is not received within
120 days after the Closing Date, the Servicer shall notify the relevant
Contributor, the Trustee and the Bond Insurer that such Certificate of Title has
not been obtained.
(b) Upon receipt of any Certificate of Title, the Servicer shall
promptly verify that the information contained in the Certificate of Title is
materially correct, and that the Transferor is named as owner and the Trustee is
shown as the lienholder of the Leased Vehicle covered thereby and forward such
Certificate of Title to the Trustee. If the Servicer determines that such
information is not correct, the Servicer shall promptly so advise the Trustee
and the Bond Insurer. Certificates of Title will be held by the Trustee. The
Servicer may assist the Customer in retitling a Leased Vehicle which has been
permanently moved or transported to a different state.
Section 3.12. Errors and Omissions Insurance. The Servicer agrees to
maintain with a responsible company errors and omissions coverage in an amount
customarily maintained by prudent equipment and vehicle lease servicers having
servicing portfolios of a similar size.
ARTICLE IV
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01. Monthly Servicer's Reports. No later than 10:00 a.m.,
Minneapolis time, on each Determination Date, the Servicer shall deliver to the
Transferor, the Back-up Servicer, the Trustee, the Bond Insurer, the
Certificateholders and the Rating Agencies the Monthly Servicer's Report in the
form attached as Exhibit A with respect to the activity in the immediately
preceding Due Period. In the course of preparing the Monthly Servicer's Report,
the Servicer shall seek direction from the Transferor as to remittance of the
funds to be paid pursuant to Section 12.02(d)(xiv) of the Trust and Security
Agreement. Lease Contracts which have been substituted for or purchased by the
Company, either of the Contributors, the Servicer or the Transferor shall be
identified by Customer lease number. On each Payment Date, the Servicer shall
deliver to the Back-up Servicer and the Bond Insurer a computer disk or tape in
a format acceptable to the Back-up Servicer and the Bond Insurer containing the
information described on Exhibit B hereto, as well as any additional information
reasonably requested by the Back-up Servicer or the Bond Insurer prior to such
Payment Date.
Section 4.02. Financial Statements; Certification as to Compliance;
Notice of Default. (a) The Servicer (and the Company if the initial Servicer is
no longer the Servicer) will deliver to
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the Trustee, the Bond Insurer, the Back-up Servicer, the Rating Agencies and to
the Certificateholders:
(i) within 120 days after the end of each fiscal year of the
Reported Company, four copies of the Reported Company's Financial
Statements, all in reasonable detail and accompanied by an opinion of
the Independent Accountants or a firm of independent certified public
accountants of recognized national standing stating that such financial
statements present fairly the financial condition of the Reported
Company (or, in the case of a successor Servicer, such successor
Servicer's financial condition) and have been prepared in accordance
with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur),
and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances;
(ii) with each set of Reported Company's Financial Statements
delivered pursuant to subsection (a)(i) above, the Servicer will deliver
an Officer's Certificate stating that such officer has reviewed the
relevant terms of the Trust and Security Agreement, the Contribution
Agreement, the Insurance Agreement and this Agreement and has made, or
caused to be made, under such officer's supervision, a review of the
transactions and conditions of the Reported Company during the period
covered by the Reported Company's Financial Statements then being
furnished, that the review has not disclosed the existence of any
Servicer Default or Servicer Event of Default or, if a Servicer Default
or a Servicer Event of Default exists, describing its nature and what
action the Servicer has taken and is taking with respect thereto, and
that on the basis of such review the officer signing such certificate is
of the opinion that during such period the Servicer has serviced the
Lease Contracts in compliance with the procedures hereof except as
disclosed in such certificate;
(iii) immediately upon becoming aware of the existence of any
condition or event which constitutes a Servicer Default or a Servicer
Event of Default, a written notice describing its nature and period of
existence and what action the Servicer is taking or proposes to take
with respect thereto;
(iv) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it or the
Transferor by any governmental authority or agency, or
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(B) any pending or proposed court or administrative
proceeding which involves or may involve the possibility of
materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the
Servicer or the Transferor,
a written notice specifying the nature of such investigation or
proceeding and what action the Servicer is taking or proposes to take
with respect thereto and evaluating its merits;
(v) with reasonable promptness any other data and information
which may be reasonably requested from time to time, including without
limitation 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 Securities Act of 1933, as amended;
and
(vi) quarterly, unaudited versions of the Reported Company's
consolidating balance sheet and income statement and consolidated
statement of sources and uses of cash.
(b) On or before each April 15, so long as the Certificates are
outstanding, the Servicer shall furnish to the Bond Insurer and the Trustee an
Officer's Certificate either stating that such action has been taken with
respect to the recording, filing, and rerecording and refiling of any financing
statements and continuation statements as necessary to maintain the interest of
the Trustee created by the Trust and Security Agreement with respect to the
Trust Property and reciting the details of such action or stating that no such
action is necessary to maintain such interest. Such Officer's Certificate shall
also describe the recording, filing, rerecording and refiling of any financing
statements and continuation statements that will be required to maintain the
interest of the Trustee in the Trust Property until the date such next Officer's
Certificate is due.
Section 4.03. Annual Independent Accountants' Servicing Reports; Annual
Federal Tax Lien Search. (a) Commencing with the 1997 fiscal year of the
Servicer, and each fiscal year thereafter, the Servicer, at its expense, shall
cause the Independent Accountant (who may also render and deliver other services
to the Servicer and its Affiliates) to prepare a statement to the Back-up
Servicer, the Trustee, the Certificateholders, the Bond Insurer and the Rating
Agencies, dated as of the close of such fiscal year, to the effect that the
Independent Accountant has examined the servicing procedures, manuals, guides
and records of the Servicer, and the accounts and records of the Servicer
relating to the Lease Contracts and the Lease Contract Files (which procedures,
manuals, guides and records shall be described in one or more schedules to such
statement), that such Independent Accountant has compared the information
contained in the Monthly Servicer's Reports delivered in the relevant period and
one-half of the Funding Reports
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delivered in the relevant period with information contained in the accounts and
records for such period, and that, on the basis of such examination and
comparison, nothing has come to the Independent Accountant's attention to
indicate that the Servicer has not, during the relevant period, serviced the
Lease Contracts in compliance with such servicing procedures, manual and guides
and in the same manner required by the Servicer's standards and with the same
degree of skill and care consistent with that which the Servicer customarily
exercises with respect to similar Lease Contracts owned by it and otherwise in
compliance with this Agreement, that such accounts and records have not been
maintained in accordance with Section 4.04 hereof, that the information
contained in the Monthly Servicer's Reports or in such Funding Reports does not
reconcile with the information contained in the accounts and records or that
such certificates, accounts and records have not been properly prepared and
maintained in all material respects or in accordance with the requirements of
this Agreement, except in each case for (a) such exceptions as the Independent
Accountant shall believe to be immaterial and (b) such other exceptions as shall
be set forth in such statement. If any discrepancy is found in any Funding
Report, then the Independent Accountants shall verify the information in all of
the Funding Reports delivered during the related fiscal year of the Servicer.
The Servicer shall deliver to the Back-up Servicer, the Trustee, the
Certificateholders, the Bond Insurer and the Rating Agencies a copy of any such
statement within 120 days of the close of the relevant fiscal year.
(b) Promptly after the end of the Servicer's fiscal year, the Servicer,
at its expense, shall cause a search of any and all federal tax liens against
the affiliated group of which the Company, the Contributors and the Transferor
are members within the meaning of Section 1504 of the Code (the "Affiliated
Group") as of the end of such fiscal year to be conducted and shall deliver to
the Back-up Servicer, the Trustee, the Certificateholders and the Bond Insurer
on or before January 31 of each year, commencing January 31, 1998, an officer's
certificate signed by a Servicing Officer (i) stating that there are no
outstanding federal tax liens filed against any member of the Affiliated Group
or (ii) listing the outstanding federal tax liens filed against any member of
such Affiliated Group. In the event any such certificate shall disclose any such
federal tax liens, the Servicer shall promptly thereafter, satisfy any such
federal tax liens.
(c) Promptly after the end of the Servicer's fiscal year, the Servicer,
at its expense, shall cause a third party acceptable to the Bond Insurer to
perform an operational review of the Servicer and to deliver written results of
such review to the Bond Insurer on or before December 31, of each year,
commencing December 31, 1997. Such review may be performed in conjunction with
the review undertaken by the Liquidity Agent under the Liquidity Agreement. The
scope of such review shall be acceptable to the Bond Insurer.
Section 4.04. Access to Certain Documentation and Information. (a) The
Servicer shall provide to the Back-up Servicer, the Bond Insurer, the Trustee,
or the Certificateholders and their duly authorized representatives, attorneys
or accountants access to any and all
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documentation regarding the Trust Property (including the Lease Schedule) that
the Servicer may possess, such access being afforded without charge but only
upon reasonable request and during normal business hours so as not to interfere
unreasonably with the Servicer's normal operations or customer or employee
relations, at offices of the Servicer designated by the Servicer.
(b) At all times during the term hereof, the Servicer shall keep
available at its principal executive office for inspection by the
Certificateholders, the Trustee, the Back-up Servicer and the Bond Insurer a
list of all Lease Contracts then held as a part of the Trust Property, together
with a reconciliation of such list to that set forth in the Lease Schedule and
each of the Monthly Servicer's Reports, indicating the cumulative addition and
removal of Lease Contracts from the Trust Property.
(c) The Servicer will maintain accounts and records as to each
respective Lease Contract serviced by the Servicer that are accurate and
sufficiently detailed as to permit (i) the reader thereof to know as of the most
recent Calculation Date the status of such Lease Contract, including any
payments, Insurance Proceeds, Residual Proceeds and Recoveries received or owing
(and the nature of each) thereon and (ii) the reconciliation between payments,
Insurance Proceeds, Residual Proceeds or Recoveries on (or with respect to) each
Lease Contract and the amounts from time to time deposited in the Collection
Account in respect of such Lease Contract.
(d) The Servicer will maintain all of its computerized accounts and
records so that, from and after the time of the acquisition of the Lease Assets
by the Transferor and the grant of the security interest in the Lease Contracts,
Lease Receivables, Equipment and Leased Vehicles to the Trustee, the Servicer's
accounts and records (including any back-up computer archives) that refer to any
Lease Contract, Lease Receivable, Equipment or Leased Vehicles indicate clearly
that the Lease Contracts, Lease Receivables, Equipment and Leased Vehicles are
owned by the Transferor and pledged to the Trustee for the benefit of the
Certificateholders and the Bond Insurer. Indication of the Trustee's interest in
a Lease Contract will be deleted from or modified on the Servicer's accounts and
records when, and only when, the Lease Contract has been paid in full, replaced
with a Substitute Lease Contract or purchased by the Company or the Transferor.
(e) Nothing in this Section 4.04 shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Customers, and the failure to provide information otherwise
required by this Section 4.04 as a result of such observance by the Servicer,
shall not constitute a breach of this Section 4.04.
(f) All information obtained by the Trustee, the Back-up Servicer, the
Bond Insurer or the Certificateholders regarding the Customers and the Lease
Contracts, whether upon
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exercise of its rights under this Section 4.04 or otherwise, shall be maintained
by the Trustee, the Back-up Servicer, the Bond Insurer or the
Certificateholders, as applicable, in confidence and shall not be disclosed to
any other Person, unless such disclosure shall not violate any applicable law or
regulation or any proprietary rights of the Company, the Contributors, the
Transferor or the Servicer or unless ordered by a court of appropriate
jurisdiction or so required by any regulatory body having appropriate
jurisdiction; provided that the Bond Insurer may make disclosures with respect
to any of the above matters to the Rating Agencies, reinsurers or any entity
having regulatory authority over the Bond Insurer and provided, further, that
the Trustee may provide any such information to any Certificateholder.
Section 4.05. Other Necessary Data. The Servicer shall, on request of
the Back-up Servicer, the Trustee or the Bond Insurer, on reasonable notice (i)
furnish the Back-up Servicer, the Trustee or the Bond Insurer such data
necessary for the administration of the Trust Property as can be reasonably
generated by the Servicer's existing data processing systems, and (ii) on and
after a Servicer Event of Default, provide the Trustee and the Back-up Servicer
with access to the Servicer's existing data processing systems.
Section 4.06. Trustee to Cooperate. Upon payment (including through
application of any prepayment) in full of any Lease Contract, the Servicer will
notify the Trustee on the next succeeding Determination Date by written
certification (which certificate shall include a statement to the effect that
all amounts received in connection with such payments in full which are required
to be deposited in the Collection Account pursuant to Section 3.03 hereof have
been so deposited) of a Servicing Officer and shall request delivery of the
Lease Contract to the Servicer in accordance with the applicable provisions.
Upon receipt of such delivery request, the Trustee shall within 60 days of such
request by the Servicer release such Lease Contract to the Servicer in
accordance with the applicable provisions. Upon release of such Lease Contract,
the Servicer is authorized to execute an instrument in satisfaction of such
Lease Contract and to do such other acts and execute such other documents as it
deems necessary to discharge the Customer thereunder and, if applicable, release
any security interest in the Equipment or Leased Vehicle related thereto. The
Servicer shall determine when a Lease Contract has been paid in full. Upon the
written request of a Servicing Officer and subject to the Trustee's rights to
indemnity contained herein and in the Trust and Security Agreement, the Trustee
shall perform such other acts as reasonably requested in writing by the Servicer
and otherwise cooperate with the Servicer in enforcement of the
Certificateholders' and the Bond Insurer's rights and remedies with respect to
Lease Contracts.
ARTICLE V
THE SERVICER AND THE TRANSFEROR
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Section 5.01. Servicer Indemnification. (a) The Servicer agrees (1) to
indemnify, defend, and hold harmless the Trustee, the Back-up Servicer, the Bond
Insurer and the Certificateholders from and against any and all costs, expenses,
losses, damages, claims and liabilities arising out of or resulting from the
use, ownership or operation by the Transferor or any Affiliate thereof of the
Equipment and Leased Vehicles;
(2) To indemnify, defend and hold harmless the Trustee, the Back-up
Servicer, the Bond Insurer and the Certificateholders from and against any taxes
that may at any time be asserted against the Trustee or the Certificateholders
with respect to the transactions contemplated herein, including, without
limitation, any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the
Certificateholders, not including any taxes asserted with respect to the
issuance and original sale of the Certificates or federal or other income taxes
arising out of distributions on the Certificates) and costs and expenses in
defending against the same;
(3) To indemnify, defend and hold harmless the Trustee, the Back-up
Servicer, the Bond Insurer and the Certificateholders from against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage or liability arose out of, or was
imposed upon the Trustee or the Certificateholders through the negligence,
willful misfeasance or bad faith of the Servicer in the performance of its
obligations and duties hereunder; and
(4) To indemnify, defend and hold harmless the Trustee, the Back-up
Servicer, the Bond Insurer and the Certificateholders from and against all
costs, expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the duties
contained herein, except to the extent that such cost, expense, loss, claim,
damage or liability shall be due to the willful misfeasance, bad faith or gross
negligence of such Person.
(b) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer has made any indemnity payments to the Bond
Insurer, the Trustee, the Back-up Servicer or the Certificateholders pursuant to
this Section and such party thereafter collects any of such amounts from others,
such party will promptly repay such amounts collected to the Servicer, without
interest. The provisions of this Section 5.01 shall survive any expiration or
termination of this Agreement.
Section 5.02. Corporate Existence; Reorganizations. (a) The Servicer
shall keep in full effect its existence and good standing as a corporation in
the Servicer State of Incorporation and will obtain and preserve its
qualification to do business as a foreign corporation in each
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jurisdiction in which such qualification is or shall be necessary to enable the
Servicer to perform its duties under this Agreement, except where the failure to
so qualify would not have a material adverse effect on the Trust Property or the
ability of the Servicer to perform its duties hereunder; provided, however, that
the Servicer may reincorporate in another state, if to do so would be in the
best interests of the Servicer and would not have a material adverse effect upon
the Certificateholders or the Bond Insurer.
(b) The Servicer shall not (i) (other than pursuant to one or more
additional lease financings) convey, transfer or lease substantially all of its
assets as an entirety to any Person, or (ii) merge or consolidate with another
Person, unless such Person or the merged or consolidated entity acquires
substantially all the assets of the Servicer as an entirety, is reasonably
acceptable to the Bond Insurer and executes and delivers to the Transferor, the
Bond Insurer, the Backup Servicer and the Trustee an agreement, in form and
substance reasonably satisfactory to the Transferor, the Bond Insurer, the
Backup Servicer and the Trustee, which contains an assumption by such Person or
entity of the due and punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this Agreement. The
Servicer shall provide prompt written notice of such event to the Rating
Agencies and the Bond Insurer.
Section 5.03. Limitation on Liability of the Servicer and Others. Except
as provided in Section 5.01, neither the Servicer nor any of the officers,
directors, employees or agents of the Servicer shall be under any liability for
any action taken or for refraining from the taking of any action in its capacity
as Servicer pursuant to this Agreement; provided, however, that this provision
shall not protect the Servicer or any such person against any liability which
would otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence (which includes negligence with respect to the duties of the Servicer
explicitly set forth in this Agreement) in the performance of its duties
hereunder. The Servicer and any officer, director, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person with respect to any matters arising
hereunder. No implied covenants or obligations shall be read into this Agreement
against the Servicer. In the event the Servicer performs any activities beyond
the requirements of this Agreement, the Servicer shall have the option but will
not be required to perform such activities in the future.
Section 5.04. The Servicer Not to Resign. (a) The Servicer shall not
resign from the duties and obligations hereby imposed on it except upon a
determination by its Board of Directors that by reason of change in applicable
legal requirements, with which the Servicer cannot reasonably comply, the
continued performance by the Servicer of its duties under this Agreement would
cause it to be in violation of such legal requirements, said determination to be
evidenced by a resolution from its Board of Directors to such effect,
accompanied by an Opinion of Counsel to such effect and reasonably satisfactory
to the Trustee and the Bond Insurer.
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(b) No such resignation shall become effective until a successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the duties and
obligations of the Servicer under this Agreement shall continue until this
Agreement shall have been terminated as provided in Section 8.01 hereof, and
shall survive the exercise by the Transferor or the Trustee of any right or
remedy under this Agreement, or the enforcement by the Transferor, the Bond
Insurer, the Trustee, the Back-up Servicer or the Certificateholders of any
provision of the Certificates or this Agreement.
Section 5.05. Transferor Indemnification. The Transferor shall indemnify
and hold harmless the Servicer (but solely from the amounts to be distributed as
set forth in Section 12.02(d)(xiv) of the Trust and Security Agreement) from and
against any loss, liability, expense, damage or injury suffered or sustained by
the Servicer, including but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs and expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim, which
arises out of the Servicer's activities hereunder; provided, however, that the
Transferor shall not indemnify the Servicer if the Servicer's activities
constituted fraud, willful misconduct, gross negligence (which includes
negligence with respect to the duties of the Servicer which are explicitly set
forth in this Agreement) or breach of fiduciary duty by the Servicer.
ARTICLE VI
SERVICING TERMINATION
Section 6.01. Servicer Events of Default. (a) Any of the following acts
or occurrences shall constitute a Servicer Event of Default:
(i) Any failure by the Servicer to deliver to the Trustee for
payment to the Certificateholders any proceeds or payments received from
a Customer or in respect of the Trust Property and when required to be
so delivered under the terms of the Trust and Security Agreement and
this Agreement that continues unremedied until 10:00 a.m., Minneapolis
time, on the second successive Business Day, provided, however, that the
Trustee, upon receiving actual knowledge of such failure, shall give the
Servicer prompt written, telecopied or telephonic notice of such
failure. Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the occurrence of
a Servicer Event of Default; or
(ii) Any failure by the Servicer to deliver a Monthly Servicer's
Report pursuant to Section 4.01 hereof that continues unremedied until
10:00 a.m., Minneapolis
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time, the following Business Day; provided, however, that if the
Servicer has not delivered the Monthly Servicer's Report by 12:00 noon,
Minneapolis time, on the Determination Date, the Trustee shall give the
Servicer notice of such failure. Notwithstanding the foregoing, any
failure by the Trustee to deliver such notice to the Servicer shall not
prohibit the occurrence of a Servicer Event of Default; or
(iii) Any failure by the Servicer to make a Servicer Advance
pursuant to Section 3.04 hereof or to deposit any Purchase Price
received by it that continues unremedied until 10:00 a.m., Minneapolis
time, the following Business Day; provided, however, that if the
Servicer has not made the Servicer Advance or deposited any Purchase
Price received by it by 12:00 noon, Minneapolis time, on the
Determination Date and the Trustee has received written notification
from the Servicer by way of the Monthly Servicer's Report or otherwise
that such Servicer Advance or Purchase Price is to be paid, the Trustee
shall give the Servicer prompt written, telecopied or telephonic notice
of such failure. Notwithstanding the foregoing, any failure by the
Trustee to deliver such notice to the Servicer shall not prevent the
occurrence of a Servicer Event of Default; or
(iv) Any failure by the Servicer to make remittances or deliver
notices pursuant to Section 3.03 hereof, that continues unremedied until
10:00 a.m., Minneapolis time, of the third successive Business Day; or
(v) Any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer, set forth in this Agreement or the Trust and Security
Agreement, as the case may be, or any representation or warranty of the
Servicer set forth in Section 2.01 of this Agreement shall prove to be
incorrect, which failure or breach (A) materially and adversely affects
the interest or rights of the Bond Insurer, the Trustee, the Back up
Servicer or the Certificateholders and (B) continues unremedied for a
period of 30 days after the date on which the Servicer becomes aware of
such failure or breach or written notice of such failure or breach,
requiring the situation giving rise to such breach or non-conformity to
be remedied, shall have been given to a Servicing Officer of the
Servicer by the Trustee, the Bond Insurer, the Transferor, or the
Back-up Servicer, or to a Servicing Officer of the Servicer, the Bond
Insurer and the Trustee by the Certificateholders; or
(vi) Any assignment by the Servicer to a delegate of its duties or
rights under this Agreement, except as specifically permitted hereunder,
or any attempt to make such an assignment; or
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(vii) The entry of a decree or order for relief by a court having
jurisdiction in respect of the Servicer or a petition against the
Servicer in an involuntary case under any federal bankruptcy laws, as
now or hereafter in effect, or any other present or future federal or
state bankruptcy, insolvency or similar law, or the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for the Servicer or for any substantial part of
its property, or the ordering of the winding up or liquidation of the
affairs of the Servicer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(viii) The commencement by the Servicer of a voluntary case under
any federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency,
reorganization or similar law, or the consent by the Servicer to the
appointment of or taking possession by a conservator, receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official in any insolvency, readjustment of debt, marshalling of assets
and liabilities, bankruptcy or similar proceedings of or relating to the
Servicer or relating to a substantial part of its property, or the
making by the Servicer of an assignment for the benefit of creditors, or
the failure by the Servicer generally to pay its debts as such debts
become due or if the Servicer shall admit in writing its inability to
pay its debts as they become due, or the taking of corporate action by
the Servicer in furtherance of any of the foregoing; or
(ix) The occurrence of a Trigger Event if the initial Servicer is
the Servicer.
(b) So long as a Servicer Event of Default shall not have been remedied
within the period set forth in (i), (ii), (iii), (iv), (v) or (vii) above, as
applicable, the Trustee, at the direction of the Bond Insurer shall, or if there
has been a Bond Insurer Default, the Trustee, the Transferor, or the Back-up
Servicer may, by notice (the "Servicer Termination Notice") then given in
writing to the Servicer and the Back-up Servicer, terminate all, but not less
than all, of the rights and obligations of the Servicer under this Agreement.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 6.01(a)(v) hereof for a period of 30 or more days shall not constitute a
Servicer Event of Default if such delay or failure could not have been prevented
by the exercise of reasonable diligence by the Servicer and such delay or
failure was caused by acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Servicer from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of this Agreement, and the Servicer shall
provide the Trustee, the Back-up Servicer, the Bond Insurer, the Transferor and
the Certificateholders with prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.
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(c) In the event of the occurrence of a Trigger Event, the Trustee
shall, at the direction of the Bond Insurer, or if there has been a Bond Insurer
Default, the Trustee, the Transferor, or the Back-up Servicer may, by Servicer
Termination Notice then given in writing to the Servicer and the Back-up
Servicer, terminate all but not less than all of the rights and obligations of
the Servicer under this Agreement.
(d) On or after the receipt by the Servicer of a Servicer Termination
Notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Certificates or the Lease Contracts or otherwise, shall pass
to and be vested in the successor Servicer appointed pursuant to Section 6.02
hereof, and, without termination, such successor Servicer is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer of
the Lease Contracts and related documents, or otherwise. The Servicer agrees to
cooperate with the Trustee, the Back-up Servicer and the successor Servicer in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the successor Servicer
for administration by it of all cash amounts that shall at the time be held by
the Servicer for deposit, or have been deposited by the Servicer, in the
Collection Account or thereafter received with respect to Lease Contracts. To
assist the successor Servicer in enforcing all rights under the Lease Contracts
and the Insurance Polices to the extent they relate to the Lease Contracts, the
outgoing Servicer, at its own expense, shall transfer its records (electronic
and otherwise) relating to such Lease Contracts to the successor Servicer in
such form as the successor Servicer may reasonably request and shall transfer
the related Lease Contracts (to the extent not held by the Trustee) and all
other records, correspondence and documents relating to the Lease Contracts that
it may possess to the successor Servicer in the manner and at such times as the
successor Servicer shall reasonably request. In addition to any other amounts
that are then payable to the Servicer under this Agreement, the Servicer shall
be entitled to receive reimbursements for any unreimbursed Servicer Advance made
during the period prior to the delivery of a Servicer Termination Notice
pursuant to this Section 6.01 which terminates the obligations and right of the
Servicer under this Agreement.
Section 6.02. Back-up Servicer to Act; Taking of Bids; Appointment of
Successor Servicer. (a)(i) Except as provided in Section 6.02(d) hereof, on and
after the time the Servicer receives a Servicer Termination Notice pursuant to
Section 6.01, the Back-up Servicer shall, unless prevented by law, automatically
and without further action be the successor Servicer. If the Back-up Servicer
cannot serve or, for some other reason does not serve, as successor Servicer,
another firm acceptable to the Bond Insurer shall be appointed.
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(ii) The successor Servicer shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement, and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the successor
Servicer (x) shall not be required to make any Servicer Advance if such Servicer
Advance would be prohibited by applicable law or if there exists any requirement
that additional capital be maintained by the Servicer by applicable regulatory
authority and (y) shall not be liable for any acts or omissions of the outgoing
Servicer or for any breach by the outgoing Servicer of any of its
representations and warranties contained herein or in any related document or
agreement. With the prior written consent of the Bond Insurer (which consent
shall not be unreasonably withheld), the successor Servicer may subcontract with
another firm to act as subservicer so long as the successor Servicer remains
fully responsible and accountable for performance of all obligations of the
Servicer on and after the time the Servicer receives the Servicer Termination
Notice. The successor Servicer shall be entitled to the Servicer Fee and any
Additional Servicer Fee, subject to the taking of bids as described in
subSection (b) below.
(b) Upon receipt of a Servicer Termination Notice, the Back-up Servicer
shall solicit written bids, with a copy to the Bond Insurer (such bids to
include a proposed servicer fee and servicing transfer costs) from not less than
three entities experienced in the servicing of lease contracts similar to the
Lease Contracts and that are not Affiliates of the Trustee, the Back-up
Servicer, the Servicer or the Transferor and are reasonably acceptable to the
Bond Insurer. The Transferor may also solicit additional bids from other such
entities. Any such written solicitation shall prominently indicate that any fees
and transfer costs in excess of the Servicer Fee shall be paid only pursuant to
Section 12.02(d) of the Trust and Security Agreement. The successor Servicer
shall act as Servicer hereunder and shall, subject to the availability of
sufficient funds in the Collection Account pursuant to Section 12.02 of the
Trust and Security Agreement, receive as compensation therefor a fee equal to
the greater of the Servicer Fee or the fee proposed in the bid so solicited
which provides for the lowest Servicer Fee, as reasonably determined by the Bond
Insurer.
(c) The Servicer, the Back-up Servicer, the Transferor, the Trustee and
such successor Servicer shall take such action, consistent with this Agreement,
as shall be necessary to effectuate any such succession. The Back-up Servicer
(or the Trustee if the Trustee has previously reimbursed the Back-up Servicer
therefor) shall be reimbursed for all Transition Costs incurred in connection
with the assumption of responsibilities of the successor Servicer, upon receipt
of documentation of such costs and expenses and in accordance with
Section 12.02(d)(viii) of the Trust and Security Agreement.
(d) Upon written notification to the Trustee that on any Determination
Date following the solicitation of bids provided for in Section 6.02(b) hereof,
the sum of the aggregate Implicit
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Principal Balance for all Lease Contracts less the principal amount of the
Certificates then outstanding is less than $50,000; then the Back-up Servicer
shall be relieved of its obligation under Section 6.02(a)(i) hereof, and the
Bond Insurer, or if there is a Bond Insurer Default, the Transferor shall
appoint a successor Servicer. In such event, the Bond Insurer shall be
reimbursed for any Transition Costs incurred solely pursuant to Section 6.02(b)
in the manner and to the extent provided for in Section 12.02(d)(viii) of the
Trust and Security Agreement.
Section 6.03. Notification to Certificateholders. The Servicer shall
promptly notify the Back-up Servicer, the Bond Insurer, the Transferor and the
Trustee of any Servicer Event of Default upon actual knowledge thereof by a
Servicing Officer. Upon any termination of, or appointment of a successor to,
the Servicer pursuant to this Article VI, the Trustee shall give prompt written
notice thereof to the Certificateholders.
Section 6.04. Waiver of Past Defaults. The Trustee shall, at the
direction of the Bond Insurer or at the direction of the Certificateholders,
with the written consent of the Bond Insurer, so long as there is no Bond
Insurer Default, and may, if a Bond Insurer Default is continuing, waive any
default by the Servicer in the performance of its obligations hereunder and its
consequences, other than a default with respect to required deposits and
payments in accordance with Article III or a default of the type set forth in
clause (vii) or (viii) of Section 6.01(a) hereof, which waiver shall require the
consent of the Certificateholders and the Bond Insurer. Upon any such waiver of
a past default, such default shall cease to exist, and any Servicer Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly waived.
Section 6.05. Effects of Termination of Servicer. (a) Upon the
appointment of the successor Servicer, the predecessor Servicer shall remit any
Scheduled Payments, Overdue Payments and any other payments or proceeds that it
may receive pursuant to any Lease Contract or otherwise to the successor
Servicer after such date of appointment.
(b) After the delivery of a Servicer Termination Notice, the outgoing
Servicer shall have no further obligations with respect to the management,
administration, servicing, enforcement, custody or collection of the Lease
Contracts and the successor Servicer shall have all of such obligations, except
that the outgoing Servicer will transmit or cause to be transmitted directly to
the successor Servicer, promptly on receipt and in the same form in which
received, any amounts held by the outgoing Servicer (properly endorsed where
required for the successor Servicer to collect them) received as payments upon
or otherwise in connection with the Lease Contracts. The outgoing Servicer's
indemnification obligations pursuant to Section 5.01 hereof will survive the
termination of the Servicer but will not extend to any acts or omissions of a
successor Servicer.
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Section 6.06. No Effect on Other Parties. Upon any termination of the
rights and powers of the Servicer pursuant to Section 6.01, or upon any
appointment of a successor Servicer, all the rights, powers, duties and
obligations of the other parties under this Agreement, the Trust and Security
Agreement, the Insurance Agreement and the Contribution Agreement shall remain
unaffected by such termination or appointment and shall remain in full force and
effect thereafter.
ARTICLE VII
THE BACK-UP SERVICER
Section 7.01. Representations of Back-up Servicer. The Back-up Servicer
makes the following representations and warranties:
(a) The Back-up Servicer has been duly organized and is validly
existing as a national banking association in good standing under the
laws of the United States of America, with power and authority to own
its properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted.
(b) The Back-up Servicer has the power and authority to execute
and deliver this Agreement, the Trust and Security Agreement and the
Insurance Agreement and to carry out its terms; and the execution,
delivery, and performance of this Agreement, the Trust and Security
Agreement and the Insurance Agreement shall have been duly authorized by
the Back-up Servicer by all necessary corporate action.
(c) This Agreement, the Trust and Security Agreement and the
Insurance Agreement shall constitute a legal, valid, and binding
obligation of the Back-up Servicer enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights in general and by general principles of
equity, regardless of whether such enforceability shall be considered in
a proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this
Agreement, the Trust and Security Agreement and the Insurance Agreement
and the fulfillment of the terms thereof shall not conflict with, result
in any breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles
of incorporation or by-laws of the Back-up Servicer, or any indenture,
agreement, or other instrument to which the Back-up Servicer is a party
or by which it shall be bound; nor result in the creation or imposition
of any lien upon any of its properties pursuant to the terms of any such
indenture, agreement, or other instrument; nor violate
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any law or any order, rule, or regulation applicable to the Back-up
Servicer of any court or of any Federal or state regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Back-up Servicer or its properties.
(e) There are no proceedings or investigations pending or, to
the Back-up Servicer's best knowledge, threatened before any court,
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Back-up Servicer or its
properties and in which the Back-up Servicer is named as a party or
target of investigation (i) asserting the invalidity of this Agreement,
the Trust and Security Agreement or the Insurance Agreement,
(ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, the Trust and Security Agreement or the
Insurance Agreement, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Back-up
Servicer of its obligations under, or the validity or enforceability of,
this Agreement, the Trust and Security Agreement or the Insurance
Agreement.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, Back-up Servicer. Any Person (a) into which the Back-up
Servicer may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Back-up Servicer shall be a party, or (c) which may
succeed to the properties and assets of the Back-up Servicer substantially as a
whole, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Back-up Servicer hereunder, shall
be the successor to the Back-up Servicer under this Agreement without further
act on the part of any of the parties to this Agreement. In the event that the
resulting entity does not meet the eligibility requirements for the Trustee set
forth in the Trust and Security Agreement, the Back-up Servicer, upon the
written request of the Bond Insurer, shall resign from its obligations and
duties under this Agreement.
Section 7.03. Back-up Servicer Resignation. The Back-up Servicer shall
not resign from its obligations and duties under this Agreement or the Insurance
Agreement except (i) as provided in Section 7.02 above, or (ii) upon
determination that the performance of its duties shall no longer be permissible
under applicable law (any such determination permitting the resignation of the
Back-up Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and the Bond Insurer).
Section 7.04. Back-up Servicer Removal. The Back-up Servicer may be
removed by the Bond Insurer or if a Bond Insurer Default has occurred and is
continuing, by the Holders of 66-2/3% in principal amount of the Outstanding
Certificates by notice to the Back-up Servicer, at any time if one of the
following events have occurred:
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(i) the Back-up Servicer shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Back-up
Servicer or of its property shall be appointed or any public officer
shall take charge or control of the Back-up Servicer or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation, or
(ii) a material breach by the Back-up Servicer of its duties,
obligations, representations or warranties in this Agreement.
Section 7.05. Oversight of Servicing. (a) Prior to each Payment Date,
the Back-up Servicer shall review the Monthly Servicer's Report related thereto
and shall determine the following:
(i) that such Monthly Servicer's Report is complete on its face;
and
(ii) that the amounts credited to and withdrawn from the
Collection Account, and the balance of such account, as set forth in the
records of the Trustee, are the same as the amount set forth in the
Monthly Servicer's Report.
(b) The Back-up Servicer shall, within 30 days of the receipt thereof,
load the computer disk or tape received from the Servicer pursuant to
Section 4.01 hereof, make sure such computer disk or tape is in readable form
and shall:
(i) calculate the Aggregate Implicit Principal Balance as of the
most recent Calculation Date;
(ii) calculate the Principal Distribution Amount for the most
recent Payment Date; and
(iii) calculate the Annualized Default Rate and the Delinquency
Rate for the related Due Period and compare such calculated amounts with
those set forth in the most recent Monthly Servicer's Report.
(c) In the event of any discrepancy between the information set forth in
subparagraphs (a) and (b) of this Section as calculated by the Servicer from
that determined or calculated by the Back-up Servicer, the Back-up Servicer
shall promptly notify the Servicer of such discrepancy. If within 30 days of
such notice being provided to the Servicer, the Back-up Servicer and the
Servicer are unable to resolve such discrepancy, the Back-up Servicer shall
promptly notify the Bond Insurer, the Rating Agencies and the Certificateholders
of such discrepancy.
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(d) Based solely on the information included in the Lease Schedule
delivered on the related Funding Date and the computer disks or tapes provided
pursuant to Section 4.01 hereof, the Back-up Servicer shall determine that any
Substitute Lease Contracts delivered under Section 3.10 satisfy the Substitution
Criterion.
(e) The Back-up Servicer will make a site visit to the offices of the
Servicer within 60 days of the end of each calendar year for the purpose of
reviewing the operations of the Servicer, commencing December 31, 1997. The
reasonable out-of-pocket costs and expenses of the Back-up Servicer incurred in
connection with this Agreement, including without limitation, the site visit
referred to in the preceding sentence will be reimbursed to the Back-up Servicer
by the Transferor or the Servicer.
(f) Other than as specifically set forth elsewhere in this Agreement,
the Back-up Servicer shall have no obligation to supervise, verify, monitor or
administer the performance of the Servicer and shall have no liability for any
action taken or omitted by the Servicer.
(g) The Back-up Servicer shall consult fully with the Servicer as may be
necessary from time to time to perform or carry out the Back-up Servicer's
obligations hereunder, including the obligation to succeed at any time to the
duties and obligations of the Servicer as servicer under Section 6.02 hereof.
Section 7.06. Additional Back-up Servicer Duties. In addition to its
other duties enumerated herein and in the Trust and Security Agreement, the
Back-up Servicer shall recalculate the information set forth in each Funding
Report within ten Business Days of each related Funding Date to verify (i) that
the condition set forth in Section 4.02(h) of the Trust and Security Agreement
has been satisfied, (ii) compliance with the concentration limits set forth in
subsections 3.01(b)(i), (ii), (iii) and (xii) of the Contribution Agreement and
(iii)_the Aggregate Implicit Principal Balance set forth in each Funding Report.
Section 7.07. Back-up Servicer Compensation. As compensation for the
performance of its obligations as Back-up Servicer under this Agreement the
Back-up Servicer shall be entitled to receive the Back-up Servicer Fee.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Termination of This Agreement. (a) Absent a termination
pursuant to Section 6.01 hereof, the respective duties and obligations of the
Servicer, the Transferor, the Back-up Servicer and the Trustee created by this
Agreement shall terminate upon the discharge
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of the Trust and Security Agreement in accordance with its terms; and the
respective duties and obligations of the Trustee shall terminate with respect to
the Trustee in the event the Trustee resigns or is replaced under Section 7.09
of the Trust and Security Agreement; provided, however, that no resignation or
removal of the Trustee and no appointment of a successor Trustee shall become
effective until the acceptance of appointment by the successor Trustee under
Section 7.10 of the Trust and Security Agreement. Upon the termination of this
Agreement pursuant to this Section 8.01(a), the Servicer shall pay all monies
with respect to the Lease Receivables, Equipment and Leased Vehicles held by the
Servicer and to which the Servicer is not entitled to the Transferor or upon the
Transferor's order.
(b) This Agreement shall not be automatically terminated as a result of
an Event of Default under the Trust and Security Agreement or any action taken
by the Trustee thereafter with respect thereto, and any liquidation or
preservation of the Trust Property by the Trustee thereafter shall be subject to
the rights of the Servicer to service the Lease Receivables and to collect
servicing compensation as provided hereunder.
Section 8.02. Amendments. (a) This Agreement may be amended from time to
time by the Transferor, the Servicer, the Back-up Servicer, and the Trustee,
with the consent of the Bond Insurer but without the consent of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein that may be inconsistent with any other provisions herein and
therein, as the case may be, or to add or amend any other provisions with
respect to matters or questions arising under this Agreement; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by the Servicer
and the Back-up Servicer, with the consent of the Trustee, the Bond Insurer and
the Certificateholders, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement, provided,
however, that no such amendment shall, without the consent of the
Certificateholders, (i) alter the priorities with which any allocation of funds
shall be made under this Agreement; (ii) permit the creation of any lien on the
Trust Property (other than the lien of the Trust and Security Agreement) or any
portion thereof or deprive any such Certificateholder of the benefit of this
Agreement with respect to the Trust Property or any portion thereof; or (iii)
modify this Section 8.02 or Sections 5.02 or 5.04 hereof.
(c) Promptly after the execution of any amendment, the Servicer shall
send to the Trustee, the Bond Insurer, the Certificateholders and each Rating
Agency a conformed copy of each such amendment.
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(d) It shall not be necessary, in any consent of Certificateholders
under this Section 8.02, for the Certificateholders to approve the particular
form of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consent and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.
(e) Any amendment or modification effected contrary to the provisions of
this Section 8.02 shall be void.
Section 8.03. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York without regard to
conflict of laws principles and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
Section 8.04. Notices. All demands, notices and communications hereunder
shall be in writing and shall be delivered via telecopy or overnight or
messenger delivery, or mailed by registered or certified United States mail,
postage prepaid, and addressed as follows:
(a) if to the Transferor, at 0000 Xxxxxxx Xxxxxxx Xxxx, Xxxxxx,
Xxxxxxxxxx 00000, Attention: President;
(b) if to the Servicer, at 0000 Xxxxxxx Xxxxxxx Xxxx, Xxxxxx,
Xxxxxxxxxx 00000, Attention: President;
(c) if to the Back-up Servicer, at 0xx Xxxxxx & Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Corporate Trust
Services/Asset-Backed Administration;
(d) if to the Trustee, at 0xx Xxxxxx & Xxxxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Corporate Trust
Services/Asset-Backed Administration;
(e) if to the Bond Insurer, at 000 Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx
00000, Attention: Insured Portfolio Management--Structured Finance
(IPM-SF) (telephone number (000) 000-0000 and facsimile number (914)
765-3810); and
(f) if to the Rating Agencies, at Standard & Poor's, 00
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 and Xxxxx'x Investor Service, 00
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: ABS Surveillance
Group.
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Any of the Persons in subclauses (a) through (f) above may change the
address for notices hereunder by giving notice of such change to the other
Persons.
All notices and demands shall be deemed to have been given either at the
time of the delivery thereof to any officer of the Person entitled to receive
such notices and demands at the address of such Person for notices hereunder, or
on the third day after the mailing thereof to such address, as the case may be.
Section 8.05. Severability of Provisions. If one or more of the
provisions of this Agreement shall be for any reason whatever held invalid, such
provisions shall be deemed severable from the remaining covenants and provisions
of this Agreement, and shall in no way affect the validity or enforceability of
such remaining provisions, the rights of any parties hereto, or the rights of
the Trustee, the Bond Insurer or the Certificateholders. To the extent permitted
by law, the parties hereto waive any provision of law which renders any
provision of this Agreement prohibited or unenforceable in any respect.
Section 8.06. Binding Effect. All provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto, and all such provisions shall inure to the benefit of the
Certificateholders and the Bond Insurer. This Agreement may not be modified
except by a writing signed by all parties hereto.
Section 8.07. Article Headings and Captions. The article headings and
captions in this Agreement are for convenience of reference only, and shall not
limit or otherwise affect the meaning hereof.
Section 8.08. Legal Holidays. In the case where the date on which any
action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment need
not be made on such date, but may be made on the next succeeding Business Day.
Section 8.09. Assignment for Security for the Certificates. The Servicer
and the Back-up Servicer understand that the Transferor will assign to and
grant to the Trustee a security interest in its right, title and interest to
this Agreement. The Servicer and the Back-up Servicer consent to such assignment
and grant and further agree that all representations, warranties, covenants and
agreements of the Servicer and the Back-up Servicer made herein shall also be
for the benefit of and inure to the Trustee, the Bond Insurer and the
Certificateholders.
Section 8.10. No Servicing Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 5.02 and 5.04 hereof,
this Agreement may not
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be assigned by the Transferor or the Servicer (except with respect to the
appointment of a subservicer) without the prior written consent of the Bond
Insurer and the Certificateholders.
Section 8.11. Bond Insurer Default. If a Bond Insurer Default occurs,
the Bond Insurer's right to consent hereunder and to direct the Trustee shall be
suspended until removed and, in such suspension, all provisions of this
Agreement wherein the Bond Insurer's consent or direction is required or
permitted, the consent or direction of the Certificateholders shall be required
or permitted.
Section 8.12. Counterparts. This Servicing Agreement may be executed in
one or more counterparts, all of which together shall constitute one original
document.
Section 8.13. Third Party Beneficiary. The Bond Insurer is an express
third party beneficiary to this Agreement.
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IN WITNESS WHEREOF, the Transferor, the Servicer, the Back-up Servicer and the
Trustee have caused this Servicing Agreement to be duly executed by their
respective officers thereunto duly authorized as of the date and year first
above written.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee and as Back-
up Servicer
By: /s/ XXXXXX X. XXXXXXXX
Name: Xxxxxx X. Xxxxxxxx
Title: Corporate Trust Officer
T & W FUNDING COMPANY I, L.L.C.,
Transferor
By: /s/ XXXXXXX X. PRICE
Name: Xxxxxxx X. Price
Title: President
T & W FINANCIAL CORPORATION,
Servicer
By: /s/ XXXXXX X. XXXXX
Name: Xxxxxx X. Xxxxx
Title: President
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EXHIBIT A
T & W FINANCIAL CORPORATION
MONTHLY SERVICER REPORT
To: Norwest Bank Minnesota, National Association,
as Back-up Servicer
MBIA Insurance Corporation
as the Bond Insurer
Dear Sirs:
In accordance with Section 4.01 of the Servicing Agreement, dated as of
February 1, 1997 (the "SV"), by and among T & W Financial Corporation as
Servicer, Norwest Bank Minnesota, National Association, as Back-up Servicer and
as Trustee, and T & W Funding Company I, L.L.C., as Transferor, this letter
constitutes the Monthly Servicer's Report for the Payment Date occurring on
______________. Unless otherwise expressly noted, all data contained herein has
been calculated as of the related Calculation Date and with respect to the
related Due Period. Reference is also made to the Trust and Security Agreement,
dated as of February 1, 1997, by and among the Transferor, the Trustee, the
Back-up Servicer and the Servicer (the "T&SA").
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DEPOSITS INTO COLLECTION ACCOUNT
Deposits by or on behalf of the Servicer:
-----------------------------------------
Scheduled and Overdue Payments Received
under the Lease Contracts directly by the Servicer $___________
Prepayments $___________
Residual Proceeds $___________
Recoveries $___________
Purchase Price received $___________
Guaranty Amounts $___________
Insurance Proceeds $___________
Servicer Advances $___________
Other amounts received by Servicer $___________
Total $___________
Transfers made by Trustee to the Collection Account
---------------------------------------------------
Collection Account Investment Earnings $___________
Total $___________
Amounts from other sources (e.g., Servicer reimbursement of
losses on eligible investments) $___________
Total deposited into the Collection Account (other than payments
from the Bond Insurer) $___________
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DISBURSEMENTS FROM COLLECTION ACCOUNT:
Prior to Payment of Principal and Interest due
----------------------------------------------
Servicer Fee $___________
Reinvestment Income (Collection Account) to Servicer $___________
Reimburse Servicer and Back-up Servicer pursuant to
Section 3.09 of SV (for costs associated with Defaulted Leases) $___________
Pay Servicer any tax amounts deposited in
Collection Account pursuant to Section 3.07 of SV $___________
Unreimbursed Servicer Advances now collected $___________
Non-recoverable Servicer Advances $___________
Trustee Fee $___________
Back-up Servicer Fee $___________
Bond Insurer Premium $___________
Back-up Servicer expenses approved by the Bond Insurer $___________
Total $___________
TOTAL BALANCE AVAILABLE FOR LENDER PAYMENTS $___________
Disbursements to Certificateholders
-----------------------------------
Interest Distribution Amount (current and overdue) $___________
Principal Distribution Amount $___________
Portion covered by Policy, (for every Payment Date before
Stated Maturity Date, only Interest due; for Stated Maturity
Date, Interest due plus Outstanding Principal Balance) $___________
Preference Claim received under the Policy
(Article 8 of T&SA) $___________
Additional principal after Trigger Event (Section 12.02(d)(ix) of T&SA) $___________
TOTAL BALANCE AVAILABLE FOR OTHER PAYMENTS $___________
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Other Disbursements
-------------------
Unpaid Bond Insurer amounts, if any $___________
Additional Servicer Fee, if any $___________
Successor Servicer and Trustee Transition Costs specified in 12.02(d)(viii) of
T&SA $___________
To the Servicer amounts specified in 12.02(d)(x) of T&SA $___________
To the Servicer any unreimbursed Servicer Advances $___________
To Bond Insurer, amounts specified in the Insurance Agreement $___________
To Back-Up Servicer, amounts specified in
12.02(d)(xii) of T&SA $___________
To the Transferor, any excess amount remaining
in the Collection Account $___________
Total deposited into the Collection Account,
including payments from Bond Insurer $___________
Total disbursed from Collection Account $___________
ENDING BALANCE IN THE COLLECTION ACCOUNT $___________
SERVICER ADVANCES
Amount of Scheduled Payments not received (includes both
Scheduled Payments on Delinquent Leases as well as leases
which have become Defaulted Leases in the current Monthly
Period) $__________
Cumulative unreimbursed Servicer Advances as of the previous Servicer
Remittance Date $__________
Plus Servicer Advances for the current Monthly Period $__________
Less Aggregate amount of Servicer Advance reimbursements for the current
Monthly Period $__________
Cumulative unreimbursed Servicer Advances $__________
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IMPLICIT PRINCIPAL BALANCE ADJUSTMENTS
IMPLICIT
PRINCIPAL
BALANCE # of Contracts
--------- --------------
Beginning Aggregate Implicit Principal Balance $_______________ _____
Less Amortization of Scheduled Payments $_______________ _____
Less Unamortized Implicit Principal balance of:
Defaulted Contracts $_______________ _____
Matured Contracts $_______________ _____
Casualty Contracts (to extent $_______________ _____
of Insurance Proceeds)
Plus IPB of Substitute Contracts transferred $_______________ _____
into the Trust
Less IPB of Substituted Contracts transferred $_______________ _____
out of the Trust
Less IPB of Contracts repurchased by the Company or $_______________ _____
Transferor or purchased by the Servicer during the
current Due Period
Other $_______________ _____
Plus increases for Funding IPB $_______________ _____
Aggregate Implicit Principal Balance Adjustment $_______________ _____
Ending Aggregate Implicit Principal Balance $_______________ _____
CERTIFICATES INFORMATION
Initial Certificates Balance $___________
Less Principal Payment $___________
Plus Funding Amount, if any $___________
Ending Certificates Balance $___________
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REQUIRED COLLATERALIZATION AMOUNT
Collateralization Percentage [__]%
A) Collateralization Percentage multiplied by
the Aggregate Implicit Principal Balance $___________
B) Implicit Principal Balance of the
three largest Customers $___________
C) one-half of the Collateralization Percentage multiplied
by the Initial Aggregate Implicit Principal Balance $___________
Required Collateralization Amount equals the
greater of A), B) or C) $___________
Actual overcollateralization amount:
(Implicit Principal Balance) minus
the Outstanding Certificates Amount $___________
TRIGGER EVENT CALCULATIONS:
Calculate Annualized Default Rate:
----------------------------------
# of days delinquent to declare Defaulted Lease: 180
Implicit Principal Balance of Defaulted Lease Contracts during
current Due Period (including repurchased and Substitute Contracts) $___________
Less Recoveries received during the current Due Period $___________
Less Residual Proceeds $___________
Total $___________
Current Month Annualized Default Rate ____%
Detail on Defaulted Contracts (excluding Repurchased or Substituted Contracts):
-------------------------------------------------------------------------------
IMPLICIT
PRINCIPAL
BALANCE Number
--------- ------
Servicer did not make Advance $______________ _______
Prior Advance Deemed Unrecoverable $______________ _______
180 days delinquent $______________ _______
Total Defaulted Contracts $______________ _______
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Calculate Delinquency Rate:
---------------------------
% OF AGGREGATE
-----------------------------------------------------
Implicit Implicit
Principal Principal Number of
Balance Balance Contracts
--------- --------- ---------
30-59 days delinquent $__________ _______% _________
60-89 days delinquent $__________ _______% _________
90-119 days delinquent $__________ _______% _________
120-149 days delinquent $__________ _______% _________
150-179 days delinquent $__________ _______% _________
Total $__________
Current Month Delinquency Rate _______%
Check Default and Delinquency Triggers:
---------------------------------------
Monthly
Sum of Period
Current & Prior to
Immediately Immediately Immediately
AVERAGE Preceding Current Preceding Preceding
PAST 3 MONTHS Monthly Pd. Monthly Pd. Monthly Pd. Monthly Pd.
------------- ----------- ----------- ----------- -----------
Annualized
Default Rate _______% _______% _______% _______% _______%
Delinquency
Rate _______% _______% _______% _______% _______%
Applicable Maximum Default Rate _______%
Applicable Maximum Delinquency Rate _______%
Tangible Net Worth: $____________
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DETAIL ON SUBSTITUTIONS AND PURCHASES:
Cumulative
IMPLICIT Implicit
PRINCIPAL Principal
BALANCE Balance
--------- ----------
Leases Terminated or
Prepaid and Substituted
per 4.04(d) of T&SA $__________ $__________ (Less Than $________)
Delinquent Lease Contracts,
Substituted or Purchased
per 4.04(d) of T&SA $__________ $__________ (Less Than $________)
Defaulted Lease Contracts,
Substituted or Purchased
per 4.04(d) of T&SA $__________ $__________ (Less Than $________)
TRANSITION COSTS:
Cumulative Transition Costs Paid to date
Pursuant to 12.02(d)(viii) of T&SA $__________
EXPLANATORY CERTIFICATES:_______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Contact:________________________________________________________________________
Phone:__________________________________________________________________________
The undersigned officer of the Servicer hereby certifies that the
information contained in this Monthly Servicer Report is true and accurate in
all respects.
T & W FINANCIAL CORPORATION
Servicer
By:
Name: Xxxxxxx X. Price
Title: President
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EXHIBIT B
SERVICER DISK INFORMATION
FIELDS:
1. Xxxx #
0. lesse
3. eqcat
4. state
5. siccode
6. Yrs in Bus
7. Start Dt
8. FinalDt
9. Nxt date
10. basepmt
11. rec bal
12. cur recv
13. resid
14. securityop
15. lease term
16. pay term
17. status
18. zip code
19. Mos Del
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